Magellan Aerospace Corporation Announces Financial Results

TORONTO, Aug. 12, 2013 /CNW/ - Magellan Aerospace Corporation ("Magellan" or the "Corporation") released its financial results for the second quarter of 2013.  All amounts are expressed in Canadian dollars unless otherwise indicated. The results are summarized as follows:

			Three month period ended June 30						Six month period ended June 30
Expressed in thousands of Canadian dollars, except per share amounts			2013		2012		Change		2013		2012		Change
Revenues			189,863		169,339		12.1%		375,156		356,186		5.3%
Gross Profit			28,770		22,536		27.7%		53,582		48,073		11.5%
Net Income			11,163		8,893		25.5%		19,178		20,404		(6.0)%
Net Income per Share - Diluted			0.19		0.15		26.7%		0.33		0.35		(5.7)%

This news release contains certain forward-looking statements that reflect the current views and/or expectations of the Corporation with respect to its performance, business and future events.  Such statements are subject to a number of risks, uncertainties and assumptions, which may cause actual results to be materially different from those expressed or implied.  The Corporation assumes no future obligation to update these forward-looking statements except as required by law. 

This news release presents certain non-IFRS financial measures to assist readers in understanding the Corporation's performance. Non-IFRS financial measures are measures that either exclude or include amounts that are not excluded or included in the most directly comparable measures calculated and presented in accordance with Generally Accepted Accounting Principles ("GAAP"). Throughout this news release, reference is made to EBITDA (defined as net income before interest, income taxes, depreciation and amortization), which the Corporation considers to be an indicative measure of operating performance and a metric to evaluate profitability. EBITDA is not generally accepted earnings measures and should not be considered as an alternative to net income (loss) or cash flows as determined in accordance with IFRS. As there is no standardized method of calculating this measure, the Corporation's EBITDA may not be directly comparable with similarly titled measures used by other companies.

Overview
A summary of Magellan's business and significant updates

Magellan is a diversified supplier of components to the aerospace industry and in certain circumstances for power generation projects. Through its wholly owned subsidiaries, Magellan designs, engineers, and manufactures aeroengine and aerostructure components for aerospace markets, advanced products for defence and space markets, and complementary specialty products.  The Corporation also supports the aftermarket through supply of spare parts as well as performing repair and overhaul services and supplies in certain circumstances parts and equipment for power generation projects.

The Corporation's strategy has been to focus on several core competencies within the aerospace industry.  These include precision machining of a wide variety of aerospace material, composites, complex high technology magnesium and aluminum alloy castings, repair and overhaul technologies and design of structures.  The Corporation is now seeking to leverage these core competencies by achieving growth in applications where these abilities are critical in meeting customer needs.

Business Update

In the second quarter of 2013 Magellan once again attended the Paris Air Show.  Attendance at major air shows such as this enables Magellan to refine its strategies based on meetings with senior executives of major customers and suppliers and to benchmark itself against its global competition.

During this show, Magellan announced the signing of a Memorandum of Agreement ("MOA") with BAE systems for horizontal tail assemblies on the F-35 Lightening II program.  This MOA contractually confirms previous announcements that Magellan will be eligible to produce more than 1,000 sets of horizontal tails for the Conventional Take Off and Landing variant of the F-35 program over the next twenty years.

The commercial aerospace market growth continues in contrast to a reduction of activity in the defence aerospace market due to the decline in global defence spending.  Also Magellan is experiencing a reduction in defence revenue as a result of sequestration in the United States; however, its growing commercial aerospace business is helping to offset any overall negative effect on the Corporation's business.

New entries in the commercial aircraft market and demands from low-cost airlines on their aircraft suppliers are causing major aircraft manufacturers to aggressively approach suppliers such as Magellan for concessions to help them reduce their suppliers' costs.  Magellan is responding to these requests by leveraging its demonstrated successes in the Corporation's overall performance to customer requirements, driven largely by the implementation of the Magellan Operating System™.  Complementing these efforts, the Corporation is reducing costs by improving efficiencies supported by investments in new technologies and by developing a supply base in emerging markets.  In that regard, in July 2013, the Corporation closed an investment of 50% in a parts supplier based in India.  This investment provides the Corporation with access to a lower cost parts supplier and is the second aerospace contractor in which the Corporation has invested in India.

Additionally, in this quarter, Magellan continued its dialogue with key customers to explore new business opportunities in space and communications, Wire Strike and the Power Generation business.

Results of Operations
A discussion of Magellan's operating results for second quarter ended June 30, 2013

The Corporation reported higher revenue in its Aerospace segment and lower revenue in its Power Generation Project segment in the second quarter of 2013 when compared to the second quarter of 2012. Gross profit and net income for the second quarter of 2013 were $28.8 million and $11.2 million, respectively, an increase from the second quarter of 2012 gross profit of $22.5 million and net income of $8.9 million.

Consolidated Revenue

Overall, the Corporation's consolidated revenues grew by 12.1% when compared to the second quarter of 2012.

	Three month period ended June 30						Six month period ended June 30
Expressed in thousands of dollars		2013		2012		Change		2013		2012		Change
Aerospace		189,863		162,834		16.6%		371,678		328,826		13.0%
Power Generation Project		─		6,505		(100.0)%		3,478		27,360		(87.3)%
Total revenues		189,863		169,339		12.1%		375,156		356,186		5.3%

Consolidated revenues of $189.9 million for the second quarter ended June 30, 2013 were higher than $169.3 million in the second quarter of 2012.  Higher volumes of production contributed to increased revenues in the Aerospace segment offset by the lower revenues earned in the Power Generation Project segment.   As the Corporation moves through 2013, revenues earned from the Power Generation Project will continue to decrease on a year over year basis and are expected to be significantly lower than 2012 unless the Corporation receives further contracts in this area.

Aerospace Segment

Revenues for the Aerospace segment were as follows:

	Three month period						Six month period
	ended June 30						ended June 30
Expressed in thousands of dollars		2013		2012		Change		2013		2012		Change
Canada		73,388		71,790		2.2%		146,774		147,512		(0.1)%
United States		60,395		51,162		18.0%		118,048		100,692		17.2%
Europe		56,080		39,882		40.6%		106,856		80,622		32.5%
Total revenues		189,863		162,834		16.6%		371,678		328,826		13.0%

Consolidated Aerospace revenues for the second quarter of 2013 of $189.9 million were 16.6% higher than revenues of $162.8 million in the second quarter of 2012.   Revenues in Canada in the second quarter of 2013 increased 2.2% from the same period in 2012.  The increase was mainly attributed to increased volumes on proprietary products, partially offset by the decline in volumes in the defence market.  Revenues increased by 18.0% in the United States in the second quarter of 2013 in comparison to the second quarter of 2012 primarily due to increased volumes on several of the Corporation's commercial aircraft programs and the movement of the stronger US dollar in comparison to the CDN dollar during the same periods in 2013 and 2012.  The business acquisition of John Huddleston Engineering Limited ("JHE") in the third quarter of 2012 and higher volumes of production on the Airbus statement of work contributed to a healthy 40.6% quarter-over-quarter increase in revenues in Europe in the second quarter of 2013 over revenues in the same period in 2012.

Power Generation Project Segment

Revenues for the Power Generation Project segment were as follows:

	Three month period						Six month period
	ended June 30						ended June 30
Expressed in thousands of dollars		2013		2012		Change		2013		2012		Change
Power Generation Project		─		6,505		(100.0)%		3,478		27,360		(87.3)%
Total revenues		─		6,505		(100.0)%		3,478		27,360		(87.3)%

The Ghana Power Generation Project (the "Project") was substantially completed as at March 31, 2013.  Additional revenues may be recorded as the Corporation continues to support the commercial operation of the Project; however, it is expected that revenues from the Power Generation Project segment will decrease on a year over year basis unless the Corporation receives further contracts in this area.

Gross Profit

	Three month period						Six month period
	ended June 30						ended June 30
Expressed in thousands of dollars		2013		2012		Change		2013		2012		Change
Gross profit		28,770		22,536		27.7%		53,582		48,073		11.5%
Percentage of revenues		15.2%		13.3%				14.3%		13.5%

Gross profit of $28.8 million (15.2% of revenues) was reported for the second quarter of 2013 compared to $22.5 million (13.3% of revenues) during the same period in 2012.  Gross profit in the second quarter of 2013 increased over the same period in 2012 as gross profit in the second quarter of 2012 was affected by a work stoppage at the Corporation's Haley location, and in the second quarter of 2013 the Corporation experienced positive changes in its product mix.

Administrative and General Expenses

	Three month period					Six month period
	ended June 30					ended June 30
Expressed in thousands of dollars		2013		2012	Change		2013		2012	Change
Administrative and general expenses		11,329		9,231	22.7%		22,064		19,092	15.6%
Percentage of revenues		6.0%		5.5%			5.9%		5.4%

Administrative and general expenses were $11.3 million (6.0% of revenues) in the second quarter of 2013 compared to $9.2 million (5.5% of revenues) in the second quarter of 2012.  The increase is partially a result of the acquisition of JHE in August 2012, which increased general and administrative expenses by approximately $0.5 million for the three months ended June 30, 2013 versus the same period in 2012 and partially due to a growth in the Corporation's administrative support services.

Other

	Three month period				Six month period
	ended June 30				ended June 30
Expressed in thousands of dollars		2013		2012		2013		2012
Foreign exchange (gain) loss		(22)		100		926		(46)
Loss on disposal of property, plant and equipment		182		8		214		11
Total other		160		108		1,140		(35)

Other expense of $0.2 million in the second quarter of 2013 consisted of realized and unrealized foreign exchange gains and losses on the disposal of property, plant and equipment.

Interest Expense

	Three month period					Six month period
	ended June 30					ended June 30
Expressed in thousands of dollars			2013		2012		2013		2012
Interest on bank indebtedness and long-term debt			1,737		1,938		3,547		3,894
Accretion charge for borrowings and long-term debt			(176)		206		(22)		406
Discount on sale of accounts receivable			171		156		331		295
Total interest expense			1,732		2,300		3,856		4,595

Interest expense of $1.7 million in the second quarter of 2013 was lower than the second quarter of 2012 amount of $2.3 million, as interest on bank indebtedness and long-term debt decreased mainly due to lower principal amounts outstanding during the second quarter of 2013 than those in the second quarter of 2012.  Increased long-term bond rates resulted in a recovery of previously recorded accretion expense in the second quarter of 2013 when compared to the same quarter in the prior year.

Provision for Income Taxes

	Three month period						Six month period
	ended June 30						ended June 30
Expressed in thousands of dollars			2013		2012			2013		2012
Expense of current income taxes			1,337		872			2,541		1,785
Expense of deferred income taxes			3,049		1,132			4,803		2,232
Total expense of income taxes			4,386		2,004			7,344		4,017
Effective tax rate			28.2%		18.4%			27.7%		16.4%

The Corporation recorded an income tax expense of $4.4 million in the second quarter of 2013 as compared to an income tax expense of $2.0 million in the second quarter of 2012.  The change in effective tax rates quarter over quarter is a result of a changing mix of income across the different jurisdictions in which the Corporation operates and the reduction in deferred income tax in the second quarter of 2012, due to the recognition of previously unrecognized deferred tax assets, which did not recur in the second quarter of 2013.

Selected Quarterly Financial Information
A summary view of Magellan's quarterly financial performance

		2013				2012^1								2011
Expressed in millions of dollars, except per share amounts		Jun 30		Mar 31		Dec 31		Sep 30		Jun 30		Mar 31		Dec 31		Sep 30
Revenues		189.9		185.3		186.4		161.4		169.3		186.8		173.3		161.6
Income before taxes		15.5		11.0		18.0		18.0		10.9		13.5		13.8		10.4
Net Income		11.2		8.0		21.8		14.9		8.9		11.5		16.6		8.6
Net Income per share
	Basic	0.19		0.14		0.37		0.26		0.15		0.20		0.90		0.47
	Diluted	0.19		0.14		0.37		0.26		0.15		0.20		0.31		0.17
EBITDA		25.6		21.3		28.6		27.7		21.2		23.0		29.6		20.8

¹Certain 2012 figures have been restated due to the implementation of IFRS 11, Joint Arrangements and revised IAS 19, Employee Benefits. See the "Changes in Accounting Policies" section on page 9 of this report.

The Corporation reported its highest quarterly revenues in the second quarter of 2013.  Revenues and net income reported in the quarterly information was impacted by the fluctuations in the Canadian dollar exchange rate in comparison to the US dollar and British Pound.  The US dollar/Canadian dollar exchange rate in the second quarter of 2013 fluctuated reaching a low of 1.0030 and a high of 1.0515.  During the second quarter of 2013, the British Pound relative to the Canadian dollar fluctuated reaching a low of 1.5328 and a high of 1.6209. The movement of exchange rates between the second quarter of 2013 and the second quarter of 2012 had minimal impact on revenues in the second quarter of 2013.   Net income in the third quarter of 2012 was higher than the first two quarters of 2012 as the Corporation recognized an after tax gain on bargain purchase of $7.4 million on the acquisition of JHE as the consideration paid was lower than the fair value of the identifiable tangible assets acquired at the time of purchase.   Net income for the fourth quarter of 2012 and 2011 of $21.8 million and $16.6 million respectively was higher than other quarterly net income disclosed in the table above. In the fourth quarter of 2011 the Corporation recognized a reversal of previous impairment losses against intangible assets relating to various commercial aircraft programs.  In addition, in both the fourth quarter of 2011 and 2012 the Corporation recognized previously unrecognized investment tax credits and other deferred tax assets as the Corporation determined that it will be able to benefit from these assets.

Reconciliation of Net Income to EBITDA
A description and reconciliation of certain non-IFRS measures used by management

In addition to the primary measures of earnings and earnings per share (basic and diluted) in accordance with IFRS, the Corporation includes certain measures in this quarterly statement, including EBITDA (earnings before interest expense, income taxes and depreciation and amortization). The Corporation has provided this measure because it believes this information is used by certain investors to assess financial performance and that EBITDA is a useful supplemental measure as it provides an indication of the results generated by the Corporation's principal business activities prior to consideration of how these activities are financed and how the results are taxed in the various jurisdictions.  Each of the components of this measure are calculated in accordance with IFRS, but EBITDA is not a recognized measure under IFRS, and the Corporation's method of calculation may not be comparable with that of other companies. Accordingly, EBITDA should not be used as an alternative to net income as determined in accordance with IFRS or as an alternative to cash provided by or used in operations.

	Three month period					Six month period
	ended June 30					ended June 30
Expressed in thousands of dollars			2013		2012		2013		2012
Net income			11,163		8,893		19,178		20,404
Interest			1,732		2,300		3,856		4,595
Taxes			4,386		2,004		7,344		4,017
Depreciation and amortization			8,311		7,996		16,485		15,185
EBITDA			25,592		21,193		46,863		44,201

EBITDA for the second quarter of 2013 was $25.6 million, compared to $21.2 million in the second quarter of 2012, an increase of 20.8% on a year-over-year basis.  Increased revenues and gross profits resulted in increased EBITDA for the current quarter when compared to the same period in 2012.

Liquidity and Capital Resources
A discussion of Magellan's cash flow, liquidity, credit facilities and other disclosures

The Corporation's liquidity needs can be met through a variety of sources including cash on hand, cash provided by operations, short-term borrowings from its credit facility and accounts receivable securitization program, and long-term debt and equity capacity.  Principal uses of cash are for operational requirements and capital expenditures.  Based on current funds available and expected cash flow from operating activities, management believes that the Corporation has sufficient funds available to meet its liquidity requirements at any point in time.  However, if cash from operating activities is lower than expected or capital projects exceed current estimates, or if the Corporation incurs major unanticipated expenses, it may be required to seek additional capital in the form of debt or equity or a combination of both.

Cash Flow from Operations

	Three month period					Six month period
	ended June 30					ended June 30
Expressed in thousands of dollars		2013		2012			2013		2012
(Increase) decrease in accounts receivable		(1,113)		1,462			(22,647)		(22,432)
Increase in inventories		(6,624)		(5,321)			(7,464)		(15,616)
(Increase) decrease in prepaid expenses and other		(231)		279			(2,263)		(962)
Increase (decrease) in accounts payable, accrued liabilities and provisions		4,366		(7,538)			6,018		14,613
Changes to non-cash working capital balances		(3,602)		(11,118)			(26,356)		(24,397)
Cash provided by operating activities		17,747		3,706			11,749		8,791

In the quarter ended June 30, 2013, the Corporation generated $17.7 million in cash in its operations, compared to $3.7 million generated in the second quarter of 2012.  Cash was generated mainly by an increase in net income and in accounts payable, accrued liabilities and provisions, offset by increases in accounts receivable and inventories.

Investing Activities

	Three month period					Six month period
	ended June 30					ended June 30
Expressed in thousands of dollars			2013		2012		2013		2012
Purchase of property, plant and equipment			(4,217)		(8,481)		(8,318)		(12,463)
Proceeds of disposals of property plant and equipment			81		39		127		42
Increase in intangibles and other assets			(1,731)		(3,025)		(4,443)		(8,191)
Cash used in investing activities			(5,867)		(11,467)		(12,634)		(20,612)

In the second quarter of 2013, the Corporation invested $4.2 million in property, plant and equipment to upgrade and enhance capabilities for current and future programs and $1.7 million in intangibles and other assets, largely related to deposits placed on new property, plant and equipment to be acquired.

Financing Activities

	Three month period					Six month period
	ended June 30					ended June 30
Expressed in thousands of dollars			2013		2012		2013		2012
(Decrease) increase in bank indebtedness			(11,342)		1,788		(4,861)		(3,903)
Increase in debt due within one year			280		1,751		779		17,502
Decrease in long-term debt			(2,914)		(3,675)		(5,349)		(5,799)
(Decrease) increase in long-term liabilities and provisions			(78)		10		(119)		158
Increase in borrowings			268		820		586		1,002
Cash provided by financing activities			(13,786)		694		(8,964)		8,960

On December 21, 2012, the Corporation amended its operating credit agreement with its existing lenders. Under the terms of the amended agreement, the maximum amount available under the operating credit facility was decreased to a Canadian dollar limit of $115.0 million (down from $125.0 million) plus a US dollar limit of $35.0 million (down from US $50.0 million), with a maturity date of December 21, 2014. The Bank Facility Agreement also includes a Cdn$50 million uncommitted accordion provision which will provide Magellan with the option to increase the size of the operating credit facility to $200 million.  The facility is extendible for unlimited future one year renewal periods, subject to mutual consent of the syndicate of lenders and the Corporation. The operating credit facility continues to be fully guaranteed until December 21, 2014 by the Chairman of the Board of the Corporation in consideration of the continued payment by the Corporation of an annual fee, payable monthly, equal to 0.50% (down from 0.63%) of the loan amount.

On December 21, 2012, the Corporation also extended the 7.5% loan payable ("Original Loan") to Edco Capital Corporation ("Edco"), a corporation controlled by the Chairman of the Board of the Corporation to January 1, 2015 in consideration of the payment of a fee to Edco equal to 0.75% of the principal amount outstanding at the time of extension.  The Corporation has the right to repay the Original Loan at any time without penalty.

The terms of the amended operating credit agreement continue to permit the Corporation to repay, in whole or in part, the Original Loan from Edco provided there is no current default or event of default under the operating credit facility and after the repayment of the loan the Corporation has at least $25.0 million in availability under the operating credit facility.

Outstanding Share Information
The authorized capital of the Corporation consists of an unlimited number of Preference Shares, issuable in series, and an unlimited number of common shares. As at May 8, 2013, 58,209,001 common shares were outstanding.

Financial Instruments
A summary of Magellan's financial instruments

Derivative Contracts
The Corporation operates internationally, which gives rise to a risk that its income, cash flows and shareholders' equity may be adversely impacted by fluctuations in foreign exchange rates.  Currency risk arises because the amount of the local currency receivable or payable for transactions denominated in foreign currencies may vary due to changes in exchange rates and because the non-Canadian dollar denominated financial statements of the Corporation's subsidiaries may vary on consolidation into the reporting currency of Canadian dollars.

The Corporation uses derivative financial instruments to help manage foreign exchange risk with the objective of reducing transaction exposures and the resulting volatility of the Corporation's earnings. The Corporation does not trade in derivatives for speculative purposes.  Under these contracts the Corporation is obligated to purchase specified amounts at predetermined dates and exchange rates.  These contracts are matched with anticipated cash flows in US dollars.

The counterparties to the foreign currency contracts are all major financial institutions with high credit ratings.     As at June 30, 2013 the Corporation had foreign exchange contracts outstanding as follows:

Foreign exchange forward contracts		Amount		Rate
Maturity - less than 1 year - US Dollar		18,750		1.0150
Maturity - less than 1 year - US Dollar		7,500		1.0425

The fair values of the Corporation's foreign exchange forward contracts are based on the current market values of similar contracts with the same remaining duration as if the contract had been entered into on June 30, 2013.

The mark-to-market on these financial instruments as at June 30, 2013 was an unrecognized loss of $0.8 million which has been recorded in other expenses in the period.

Off Balance Sheet Arrangements
The Corporation does not have any off-balance sheet arrangements that have or reasonably are likely to have a material effect on its financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources. As a result, the Corporation is not exposed materially to any financing, liquidity, market or credit risk that could arise if it had engaged in these arrangements.

Dividend

On August 8^th 2013, the Corporation announced that its Board of Directors had declared an initial quarterly cash dividend on its common shares of $0.03 (three cents) per common share. The dividend will be payable September 30, 2013 to shareholders of record at the close of business on September 12, 2013.

This is the first dividend paid by Magellan Aerospace on its common shares and is reflective of the Board of Directors confidence in Magellan's current business operations.

Risk Factors
A summary of risks and uncertainties facing Magellan

The Corporation manages a number of risks in each of its businesses in order to achieve an acceptable level of risk without hindering the ability to maximize returns. Management has procedures to help identify and manage significant operational and financial risks.

For more information in relation to the risks inherent in Magellan's business, reference is made to the information under "Risk Factors" in the Corporation's Management's Discussion and Analysis for the year ended December 31, 2012 and to the information under "Risks Inherent in Magellan's Business" in the Corporation's Annual Information Form for the year ended December 31, 2012, which have been filed with SEDAR at www.sedar.com.

Outlook
The outlook for Magellan's business in 2013

During the recent Paris Air Show held in June, both Boeing and Airbus confirmed the continuing strength of the commercial aerospace market.  They released their twenty-year aircraft market forecasts which predict approximately 34,000 new airplanes to be delivered between 2012 and 2031.  Of these, 68% are narrow-bodies, and 24% twin aisle aircraft.  Boeing suggests that 41% will be replacement aircraft with 59% growth aircraft.  Supporting the strength in narrow-bodies, Boeing increased its 737 build rate to 38 per month (from 35 per month) as planned in the second quarter of 2013 and Airbus is sustaining its A320 rate at 42 aircraft per month.  With an approved battery resolution in place, Boeing continues a 7 aircraft per month 787 build rate and maintains it will reach 10 per month by the end of 2013.  Airbus is planning to increase A330 production rates to 11 per month (from 9 per month) in the second quarter of 2014 with the A380 production rates returning to 2.7 per month.  The A350XWB is currently at 0.8 per month with a plan to reach 13 per month in 2017 when in full production.

Global competition within the commercial aircraft market is causing major OEM's to apply pressure on the supply chain to cut costs. This message is reverberating down from air-frame manufacturers, through major aerostructures suppliers to engine manufacturers.  Magellan anticipates increased leverage being applied by OEM's as they take a "One Company" consolidated approach to their supply chain partners.   This consolidated company view, combined with cost pressures in the market place, continues to present challenges to the supply chain.

The business jet market is currently experiencing a modest growth in the large cabin segment while the small and medium cabin segments have experienced declines in both 2012 and 2013.  The current aggregate forecast from various sources indicates that even with flat economic indicators in 2013, the market could see 10% growth in 2014, which would be the first overall growth in this sector since 2008.

A decade of growth in defence spending combined with an unprecedented positive trend in the commercial aerospace market resulted in 2012 being a strong year for top aerospace and defence OEM's.  Now as defence budgets are being reduced, industry results may be more challenging going forward.  In Europe, industry experts say that consolidation will be necessary to eliminate the inevitable higher costs that the industry historically incurs as a result of underutilized capacity.  However, given the positive financial performance to date, there doesn't seem to be any urgency yet to make such moves.

On the defence side, the industry is facing a multi-year downturn in United States defence spending, the extent of which has yet to be quantified.  Defence OEM's have already cut production rates on certain programs for the fiscal year 2013.  If Congress does not change the existing laws, sequestration is expected to precipitate an across the board cut of 15% to 20% in fiscal year 2014.  If a cap reduction is agreed then certain programs may be affected disproportionately.  The industry is looking to see if Congress will pass a deficit reduction package prior to the beginning of fiscal year 2014, which would be in the October 2013 timeframe.

The Corporation remains confident that the aircraft program and content balance it has in place will help to insulate Magellan from the continuing downturn in defence spending.

Magellan anticipates positive results going forward from their ongoing discussions with key customers in the space and communications segment of its business and its current activities in its proprietary products division, specifically in the future opportunities being developed in the Wire Strike market.

Additional Information

Additional information relating to Magellan Aerospace Corporation, including the Corporation's annual information form, can be found on the SEDAR web site at www.sedar.com.

Forward Looking Statements

This news release contains certain forward-looking statements that reflect the current views and/or expectations of the Corporation with respect to its performance, business and future events.  Such statements are subject to a number of uncertainties and assumptions, which may cause actual results to be materially different from those expressed or implied. These forward looking statements can be identified by the words such as "anticipate", "continue", "estimate", "forecast", "may", "project", "could", "plan", "intend", "should", "believe" and similar words suggesting future events or future performance. In particular there are forward looking statements contained under the headings: "Overview" which outlines certain expectations for future operations and "Outlook" which outlines certain expectations for the future. These statements assume the continuation of the current regulatory and legal environment; the continuation of trends for passenger airliner and defence production and are subject to the risks contained herein and outlined in our annual information form.  The Corporation assumes no future obligation to update these forward-looking statements except as required by law.

MAGELLAN AEROSPACE CORPORATION
CONSOLIDATED INTERIM STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(unaudited)			Three month period ended June 30				Six month period  ended June 30
(expressed in thousands of Canadian dollars, except per share amounts)			2013		2012		2013		2012
Revenues			189,863		169,339		375,156		356,186
Cost of revenues			161,093		146,803		321,574		308,113
Gross profit			28,770		22,536		53,582		48,073
Administrative and general expenses			11,329		9,231		22,064		19,092
Other			160		108		1,140		(35)
			17,281		13,197		30,378		29,016
Interest			1,732		2,300		3,856		4,595
Income before income taxes			15,549		10,897		26,522		24,421
Income taxes
	Current		1,337		872		2,541		1,785
	Deferred		3,049		1,132		4,803		2,232
			4,386		2,004		7,344		4,017
Net income			11,163		8,893		19,178		20,404
Other comprehensive income
	Other comprehensive income to be reclassified to
	profit and loss in subsequent periods:
	Foreign currency translation		6,804		2,489		6,420		674
	Items not to be reclassified to profit and loss in
	subsequent periods:
	Actuarial gain on defined benefit pension plan, net of tax		9,498		─		9,498		─
Total comprehensive income, net of tax			27,465		11,382		35,096		21,078
Net income per share
	Basic		0.19		0.15		0.33		0.36
	Diluted		0.19		0.15		0.33		0.35

MAGELLAN AEROSPACE CORPORATION
CONSOLIDATED INTERIM STATEMENTS OF FINANCIAL POSITION
(unaudited)			June 30		December 31		January 1
(expressed in thousands of Canadian dollars)			2013		2012		2012
Current assets
Cash			12,770		22,423		26,502
Trade and other receivables			159,984		134,214		106,392
Inventories			157,549		147,329		127,434
Prepaid expenses and other			10,113		7,843		5,297
			340,416		311,809		265,625
Non-current assets
Property, plant and equipment			316,565		315,484		288,763
Investment properties			2,815		2,875		3,041
Intangible assets			57,412		60,701		66,134
Other assets			17,499		13,097		8,783
Deferred tax assets			47,263		51,040		28,360
			441,554		443,197		395,081
Total assets			781,970		755,006		660,706
Current liabilities
Accounts payable and accrued liabilities and provisions			129,698		121,161		105,551
Debt due within one year			33,569		32,256		12,297
			163,267		153,417		117,848
Non-current liabilities
Bank indebtedness			108,964		112,666		120,674
Long-term debt			75,966		79,857		81,423
Borrowings subject to specific conditions			20,493		20,768		18,847
Other long-term liabilities and provisions			26,325		39,003		29,131
Deferred tax liabilities			17,325		14,761		10,088
			249,073		267,055		260,163
Equity
Share capital			254,440		254,440		252,440
Contributed surplus			2,044		2,044		2,041
Other paid in capital			13,565		13,565		13,565
Retained earnings			100,358		71,682		20,747
Accumulated other comprehensive loss			(777)		(7,197)		(6,098)
			369,630		334,534		282,695
Total liabilities and equity			781,970		755,006		660,706

MAGELLAN AEROSPACE CORPORATION
CONSOLIDATED INTERIM STATEMENTS OF CASH FLOW
			Three month period ended June 30				Six month period ended June 30
(unaudited) (expressed in thousands of Canadian dollars)			2013		2012		2013		2012
Cash flow from operating activities
	Net income		11,163		8,893		19,178		20,404
	Amortization/depreciation of intangible assets and property, plant and equipment		8,311		7,996		16,485		15,185
	Loss on disposal of property, plant and equipment		182		8		214		11
	Impairment reversal		─		(1,543)		─		(1,543)
	(Decrease) increase in defined benefit plans		(283)		20		(301)		(683)
	Stock-based compensation		─		(3)		─		3
	Accretion		(176)		190		(23)		340
	Deferred taxes		2,122		(737)		2,522		(529)
	Loss on investment in joint venture		30		─		30		─
	Decrease in working capital		(3,602)		(11,118)		(26,356)		(24,397)
Net cash provided by operating activities			17,747		3,706		11,749		8,791
Cash flow from investing activities
	Purchase of property, plant and equipment		(4,217)		(8,481)		(8,318)		(12,463)
	Proceeds from disposal of property, plant and equipment		81		39		127		42
	Increase in other assets		(1,731)		(3,025)		(4,443)		(8,191)
Net cash used in investing activities			(5,867)		(11,467)		(12,634)		(20,612)
Cash flow from financing activities
	(Decrease) increase in bank indebtedness		(11,342)		1,788		(4,861)		(3,903)
	Increase in debt due within one year		280		1,751		779		17,502
	Decrease in long-term debt		(2,914)		(3,675)		(5,349)		(5,799)
	(Decrease) increase in long-term liabilities and provisions		(78)		10		(119)		158
	Increase in borrowings		268		820		586		1,002
Net cash (used in) provided by financing activities			(13,786)		694		(8,964)		8,960
Decrease in cash during the period			(1,906)		(7,067)		(9,849)		(2,861)
Cash at beginning of the period			14,346		30,483		22,423		26,502
Effect of exchange rate differences			330		336		196		111
Cash at end of the period			12,770		23,752		12,770		23,752

 

SOURCE: Magellan Aerospace Corporation

James S. Butyniec 
President and Chief Executive Officer 
T: [phone] ext. 233 
E: [email protected]  

John B. Dekker
Chief Financial Officer & Corporate Secretary
T: [phone] ext. 224
E: [email protected]