Magellan Aerospace Corporation announces financial results
TORONTO, Aug. 16 /CNW/ - Magellan Aerospace Corporation ("Magellan" or the "Corporation") released its financial results for the second quarter of 2010. All amounts are expressed in Canadian Dollars unless otherwise indicated. The results are summarized as follows:
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Three month period Six month period
ended June 30 ended June 30
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Expressed in
thousands of
dollars, except
per share
amounts 2010 2009 Change 2010 2009 Change
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Revenues $181,463 $177,323 2.3% $359,365 $356,611 0.8%
Gross Profit $ 22,310 $ 20,120 10.9% $ 42,738 $ 41,824 2.2%
Net Income $ 6,329 $ 5,349 18.3% $ 9,425 $ 13,272 (29.0)%
Net Income per
share
- Diluted $ 0.13 $ 0.12 8.3% $ 0.19 $ 0.37 (48.7)%
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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.
The Corporation has included certain measures in this news release,
including EBITDA, the terms for which are not defined under Canadian
generally accepted accounting principles. The Corporation defines EBITDA
as earnings before interest, dividends on preference shares, taxes,
depreciation and amortization and non-cash charges. The Corporation has
included these measures, including EBITDA, because it believes this
information is used by certain investors to assess financial performance
and 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 various jurisdictions. Although the
Corporation believes these measures are used by certain investors (and
the Corporation has included them for this reason), these measures may
not be comparable to similarly titled measures used by other companies.
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Overview
In the second quarter of 2010, the Corporation improved on its performance over the second quarter of 2009 in each of revenue, gross profit, net income and net income per share. Revenue and gross profit for the six month period ended June 30 2010 were also modestly ahead of those of the same period in 2009.
International projects to field new aircraft and engines in both the civil and defence aircraft and defence products demonstrated critical progress, during the second quarter of 2010, towards full scale production. The Boeing 787 program followed up its first flight in the fourth quarter of 2009 with successful tests of critical safety elements of the aircraft, and has accomplished a series of steps toward certification of the aircraft. The Airbus 350XWB program has made progress towards finalizing design, configuration, and production plans to meet re-scheduled first flights in 2012. The F-35 Joint Strike Fighter ("JSF") program has demonstrated a number of key successes in its test flying, and has established a revised low rate initial production plan that will bring the program to full scale production only 13 months beyond original planning dates. The Corporation's participation on the JSF program received additional support from the Government of Canada's announcement of 16 July, 2010, that the JSF F-35 aircraft has been selected for purchase by Canada. The Corporation has secured participation on each of these major programs. This will provide accelerating production rates over the next several years. In addition, the Corporation has specific repair, overhaul or spare parts participation in both civil and defence sectors.
The Corporation continues to achieve improved execution as new technology, equipment, and knowledge is generated across all operating sites. Operations are progressing towards the manufacturing and support of higher level core products, and moving out non-core work to local and emerging market sites. Business development and capture activities continue to focus on increasing the level of core activity within the operating sites, and adding value to the Corporation's key customers.
For additional information, please refer to the "Management's Discussion and Analysis" section of the Annual Report available on www.sedar.com.
Revenues
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Three month period Six month period
ended June 30 ended June 30
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Expressed in
thousands of
dollars 2010 2009 Change 2010 2009 Change
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Canada $103,756 $ 85,589 21.2% $202,540 $169,581 19.4%
United States 48,650 54,167 (10.2)% 94,716 108,740 (12.9)%
United Kingdom 29,057 37,567 (22.7)% 62,109 78,290 (20.7)%
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Total revenue $181,463 $177,323 2.3% $359,365 $356,611 0.8%
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Consolidated revenues for the second quarter of 2010 were $181.5 million, an increase of $4.1 million or 2.3% over the second quarter of 2009. Increased revenues in Canada in the second quarter of 2010 in comparison to the same period in 2009 resulted from revenues recorded on the Ghana electric power generation project as well as increased volumes on the JSF program. The decline of the U.S. dollar and the British Pound against the Canadian dollar, over the exchange rates prevailing in the second quarter of 2009, contributed, on a net basis, to a decrease of $22.1 million in revenues in the second quarter of 2010. In native currency, revenues in the United States increased over the second quarter of 2009 primarily as a result of increased volumes on new programs. Revenues in the United Kingdom in the second quarter of 2010 decreased over revenues in the same period in 2009, resulting from decreased customer demand.
Gross Profit
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Three month period Six month period
ended June 30 ended June 30
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Expressed in
thousands of
dollars 2010 2009 Change 2010 2009 Change
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Gross profit $ 22,310 $ 20,120 10.9% $ 42,738 $ 41,824 2.2%
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Percentage
of revenue 12.3% 11.3% 11.9% 11.7%
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Gross profit of $22.3 million (12.3% of revenues) was reported for the second quarter of 2010 compared to $20.1 million (11.3% of revenues) during the same period in 2009. Gross profit, as a percentage of revenues, increased in part, as a result of favourable product mix and the recognition of investment tax credits earned in the quarter in the amount of $1.4 million. Offsetting the increased margins realized in the second quarter of 2010 over the second quarter of 2009 was the weakening of the U.S. dollar and British Pound. Had the U.S. dollar and the British Pound exchange rates versus the Canadian dollar in the second quarter of 2010 remained the same as in the second quarter of 2009, gross profit would have been approximately $6.6 million higher for the second quarter of 2010.
Administrative and General Expenses
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Three month period Six month period
ended June 30 ended June 30
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Expressed in
thousands of
dollars 2010 2009 2010 2009
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Administrative and
general expenses $ 9,877 $ 12,035 $ 19,566 $ 22,801
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Percentage of
revenue 5.4% 6.8% 5.4% 6.4%
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Administrative and general expenses were $9.9 million (5.4% of revenues) in the second quarter of 2010 compared to $12.0 million (6.8% of revenues) in the second quarter of 2009. Reduction in administrative and general expenses in the second quarter of 2010 resulted from the absence of a one-time charge of $0.6 million incurred in the second quarter of 2009 for a bad debt provision and the effect on translation of the weakening U.S. dollar and the British Pound exchange rates against the Canadian dollar.
Other
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Three month period Six month period
ended June 30 ended June 30
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Expressed in thousands
of dollars 2010 2009 2010 2009
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Foreign exchange
(gain) loss $ (865) $ (3,529) $ 620 $ (5,502)
Plant and program
closure recoveries (820) - (820) -
Loss on sale of
capital assets 121 - 118 9
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Other $ (1,564) $ (3,529) $ (82) $ (5,493)
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Other income of $1.6 million in the second quarter of 2010 consisted of realized and unrealized foreign exchange gains (largely on the Corporation's currency contracts) and a reversal of a portion of a provision that was recorded for a pension obligation on a pension plan that is in the process of being wound-up. Other income in the second quarter of 2009 resulted from a foreign exchange gain of $3.5 million.
Interest Expense
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Three month period Six month period
ended June 30 ended June 30
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Expressed in thousands
of dollars 2010 2009 2010 2009
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Interest on bank
indebtedness and
long-term debt $ 3,652 $ 3,219 $ 7,647 $ 6,213
Convertible debenture
interest 1,003 1,350 1,989 1,786
Accretion charge for
convertible debt 151 330 297 398
Discount on sale of
accounts receivable 89 723 222 1,500
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Total interest expense $ 4,895 $ 5,622 $ 10,155 $ 9,897
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Interest expense of $4.9 million in the second quarter of 2010 was lower than the second quarter of 2009 amount of $5.6 million. Convertible debenture interest and the accretion expense in relation to the convertible debentures were lower in the second quarter of 2010 than the comparative quarter in 2009 due to the premium paid in the second quarter of 2009 on the redemption of the convertible debentures on April 30, 2009. Lower discount expense on the sale of accounts receivable resulted from decreased amounts of accounts receivables sold in the second quarter of 2010 when compared to the same quarter of 2009. Higher interest rate spreads on bank indebtedness in the second quarter of 2010 when compared to the same quarter of 2009 resulted in higher interest charges.
Provision for Income Taxes
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Three month period Six month period
ended June 30 ended June 30
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Expressed in thousands
of dollars 2010 2009 2010 2009
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Provision for current
income taxes $ 1,234 $ 233 $ 992 $ 402
Expense of future
income taxes 1,219 410 2,362 945
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Total expense of
income taxes $ 2,453 $ 643 $ 3,354 $ 1,347
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Effective Tax Rate 27.9% 10.7% 26.2% 9.2%
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The Corporation recorded an income tax expense of $2.5 million for the second quarter of 2010, compared to an income tax expense of $0.6 million for the second quarter of 2009. The change in effective tax rates is a result of a changing mix of income across the different jurisdictions in which the Corporation operates. The reduction of future tax assets derived from temporary differences in Canada also contributed to the higher effective tax rate.
Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA)
In addition to the primary measures of earnings and earnings per share in accordance with GAAP, the Corporation includes certain measures in this news release, including EBITDA (earnings before interest expense, dividends on preference shares, income taxes, depreciation, amortization and certain non-cash charges). The Corporation has provided these measures because it believes this information is used by certain investors to assess financial performance and 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 GAAP, but EBITDA is not a recognized measure under GAAP, 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 earnings as determined in accordance with GAAP or as an alternative to cash provided by or used in operations.
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Three-month period Six-month period
ended June 30 ended June 30
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Expressed in thousands
of dollars 2010 2009 2010 2009
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Net income $ 6,329 $ 5,349 $ 9,425 $ 13,272
Interest 4,895 5,622 10,155 9,897
Dividends on
preference shares 320 - 320 -
Taxes 2,453 643 3,354 1,347
Stock based
compensation 137 173 307 405
Depreciation and
amortization 9,383 9,118 18,305 18,417
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EBITDA $ 23,517 $ 20,905 $ 41,866 $ 43,338
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EBITDA for the second quarter of 2010 was $23.5 million, compared to $20.9 million in the second quarter of 2009. As previously discussed, increased gross profit and a reduction in administrative and general expenses resulted in increased EBITDA for the current quarter.
Liquidity and Capital Resources
Cash Flow from Operations
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Three-month period Six-month period
ended June 30 ended June 30
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Expressed in thousands
of dollars 2010 2009 2010 2009
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Increase in accounts
receivable $ (2,032) $ (20,168) $ (9,648) $ (40,184)
Decrease in
inventories 5,880 7,729 10,103 10,559
(Increase) decrease in
prepaid expenses and
other (3,136) (6,475) 9,602 (6,077)
Increase (decrease) in
accounts payable 1,215 (4,558) (8,162) (17,113)
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Changes to non-cash
working capital
balances 1,927 (23,472) 1,895 (52,815)
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Cash provided (used in)
by operating
activities $ 16,904 $ (6,268) $ 29,401 $ (17,328)
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In the quarter ended June 30, 2010, the Corporation generated $16.9 million of cash from its operations, compared to cash used by operations of $6.3 million in the second quarter of 2009. Cash was generated mainly by an increase in net income and through the decrease in inventory offset by increases in accounts receivable and prepaid expenses and decreased accounts payable.
Investing Activities
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Three-month period Six-month period
ended June 30 ended June 30
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Expressed in thousands
of dollars 2010 2009 2010 2009
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Purchase of capital
assets (2,849) (7,824) (5,174) (13,169)
Proceeds of disposals
of capital assets 35 88 136 232
(Increase) in other
assets (4,200) (1,821) (6,662) (2,269)
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Cash used in investing
activities $ (7,014) $ (9,557) $ (11,700) $ (15,206)
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In the second quarter of 2010, the Corporation invested $2.9 million in capital assets to upgrade and enhance its capabilities for current and future programs. In addition, the Corporation advanced $4.0 million in deposits on capital equipment funded largely through government loans and grants.
Financing Activities
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Three-month period Six-month period
ended June 30 ended June 30
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Expressed in thousands
of dollars 2010 2009 2010 2009
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Decrease in bank
indebtedness $ (5,522) $ (16,666) $ (13,520) $ (2,624)
Decrease in long-term
debt (4,632) (864) (5,684) (1,411)
Increase in long-term
debt 5,197 15,000 5,197 15,000
Decrease in convertible
debentures - (20,950) - (20,950)
Increase in convertible
debentures - 39,667 - 39,667
(Increase) decrease in
long-term liabilities 24 (172) 71 (272)
Issue of Common Shares - - - 8
Redemption of
Preference shares (4,000) - (4,000) -
Dividends on Preference
Shares - - (400) -
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Cash (used in) provided
by financing
activities $ (8,933) $ 16,015 $ (18,336) $ 29,418
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On March 26, 2010, the Corporation amended its operating credit facility 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 $105.0 million plus a US dollar limit of $70.0 million, with a maturity date of May 21, 2011. The facility is extendable for unlimited one-year renewal periods by the agreement of the Corporation and the lenders and continues to be guaranteed by the Chairman of the Board of the Corporation. On March 26, 2010 the annual standby guarantee fee provided by the Corporation in consideration for this guarantee was reduced from 1.35% to 1.15% (2009 - 1.35%) of the guaranteed amount.
The terms of the amended operating credit facility permit the Corporation to (i) repay the $65.0 million secured subordinated loan from Edco Capital Corporation (the "Original Loan") in whole or in part and (ii) retract up to 20% ($4 million) of the Corporation's 8% cumulative redeemable first preference shares series A (the "Preference Shares") on each of April 30 and October 31 (or the next business day if that day is not a business day) of each year starting with April 30, 2010, together with accrued and unpaid dividends on the shares to be retracted provided there is no current default or event of default under the operating credit facility and after the repayment of the Original Loan and the payment of the retraction amount the Corporation has at least $25.0 million in availability under the operating credit facility. Any permitted retraction amount not used on any prior date can be carried forward to future retraction dates. As a result, subject to such limitation under the operating credit facility and to applicable laws, the Corporation will retract on each of April 30 and October 31, beginning April 30, 2010, any Preference Shares tendered for retraction up to the permitted percentage of Preference Shares.
During the second quarter of 2010 the Corporation repaid $4.0 million of the Original Loan.
On April 30, 2010, the Corporation completed the retraction of approximately 20% or 399,994 of its 2,000,000 Preference Shares as was permissible under the amended operating credit facility. Effective as of the Retraction Date, the holders of these Preference Shares ceased to be holders of these Preference Shares and were entitled to receive the retraction price of $10.00 for each Preference Share held plus accrued and unpaid dividends on the shares to be retracted. As at June 30, 2010, the Preference Shares have been reclassified from shareholders' equity to current liabilities ($8.0 million) and long-term liabilities ($8.0 million). Dividends accrued on the Preference Shares during the quarter have been reclassified from a charge to retained earnings to an expense on the income statement.
Share Data
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As at July 31, 2010, the Corporation had 18,209,001 common shares outstanding, 1,600,006 outstanding First Preference Shares Series A convertible into 1,066,670 common shares and $40.0 million convertible debentures convertible into 40,000,000 common shares. The dilutive weighted average number of common shares outstanding, resulting from the potential common shares issuable on the conversion of the convertible debentures, for the three and six month periods ending June 30, 2010 was 58,209,001.
Risks and Uncertainties
-----------------------
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 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 "Company Overview" in Management's Discussion and Analysis for the year ended December 31, 2009 and to the information under "Risks Inherent in Magellan's Business" in the Annual Information Form for the year ended December 31, 2009, which will be filed with SEDAR (www.sedar.com).
Changes in Accounting Policies
------------------------------
Sections 1582, Business Combinations, 1601, Consolidated Financial Statements, and 1602, Non-controlling Interests
In January 2009, the CICA issued Sections 1582, "Business Combinations", 1601, "Consolidated Financial Statements", and 1602, "Non-controlling Interests".
Section 1582 will be converged with IFRS 3, "Business Combinations". Section 1602 will be converged with the requirements of IAS 27, "Consolidated and Separate Financial Statements", for non-controlling interests. Section 1601 carries forward the requirements of Section 1600, "Consolidated Financial Statements", other than those relating to non-controlling interests.
Section 1582 applies to acquisitions made from January 1, 2011 in which the acquirer obtains control of one or more businesses. The term "business" is more broadly defined than in the existing standard. Most assets acquired and liabilities assumed, including contingent liabilities that are considered to be "improbable", will be measured at fair value. Any interest in the acquiree owned prior to obtaining control will be remeasured at fair value at the acquisition date, eliminating the need for guidance on step acquisitions. A bargain purchase will result in recognition of a gain. Acquisition costs must be expensed.
Under Section 1602, any non-controlling interest will be recognized as a separate component of shareholders' equity. Net income will be calculated without deduction for the non-controlling interest. Rather, net income will be allocated between the controlling and non-controlling interests.
The Corporation has adopted these standards as of January 1, 2010 and the adoption of these standards did not have an impact on the Corporation's consolidated financial statements.
Future Changes in Accounting Policies
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The Corporation will adopt the following accounting standards recently issued by the CICA:
Multiple Deliverable Revenue Arrangements
In January 2010, the CICA issued EIC-175, Multiple Deliverable Revenue Arrangements ("EIC-175"). EIC-175, which replaces EIC-142, Revenue Arrangements with Multiple Deliverables, addresses some aspects of the accounting by a vendor for arrangements under which it will perform multiple revenue-generating activities. These new standards are effective for the Corporation's interim and annual consolidated financial statements commencing on January 1, 2011 with earlier adoption permitted as of the beginning of a fiscal year. The Corporation is assessing the impact of the new standards on its consolidated financial statements.
International Financial Reporting Standards
In February 2009, Canada's Accounting Standards Board ("AcSB") confirmed that Canadian GAAP, as used by publicly accountable enterprises, will be converged with International Financial Reporting Standards ("IFRS") effective January 1, 2011. The transition from Canadian GAAP to IFRS will be applicable to the Corporation for the first quarter of 2011 where current and comparative financial information will be prepared in accordance with IFRS.
IFRS Transition Plan
--------------------
The Corporation commenced its IFRS conversion efforts during 2009. The transition project consists of four elements: planning and awareness rising; assessment; design; and implementation. Resources have been deployed and project management and governance practices are implemented to ensure a timely transition to IFRS. The progresses made to date are as follows:
Planning and awareness raising - As part of planning, the Corporation completed a high level assessment of the major differences between Canadian GAAP and IFRS. Key differences were identified which assisted in the development of the project plan as well as prioritization of issues that would have significant impact to the Corporation. With the assistance of external consultants, the Corporation has conducted sessions to raise awareness in its efforts to transition to IFRS. Throughout 2010, several training sessions were conducted at the business unit level in order to increase awareness and knowledge of the transition to IFRS. Training sessions will continue as IFRS accounting policies are developed and the conversion process continues. Investor relations are involved in the conversion project to ensure that the stakeholders' queries during the time leading up to the conversion are addressed. The Corporation will continue to provide updates on the project progress throughout the conversion period to allow stakeholders to assess the impact of the conversion on our financial performance.
Assessment and design - Detailed evaluation of the differences on recognition, measurement and disclosures between Canadian GAAP and IFRS was initiated in 2009 and continues in 2010. The impact to systems, processes, internal control over financial reporting ("ICFR") and disclosure controls and procedures ("DC&P"), and other business activities have been incorporated into the detailed analysis. Efforts to design solutions for the transition to IFRS are ongoing in 2010. The Corporation is determining the changes that are necessary to information technology and data systems including how to accumulate the data necessary for the fiscal 2010 comparatives. As a result of the transition to IFRS, we anticipate that the adoption of IFRS accounting standards will have an impact on processes, procedures and controls due to the fact that IFRS requires more judgement with respect to various accounting treatments. Although impacts are anticipated, to date, we have not made changes nor have made any decisions to make changes that materially affect, or are reasonably likely to materially affect the Corporation's ICFR in fiscal 2010.
Implementation - During the implementation phase leading up to the transition date, new IFRS updates are monitored and any changes that are relevant to the Corporation are identified and addressed. The Corporation is continuing the activities related to selecting and finalizing IFRS 1 and accounting policy choices and approval of these choices by senior management and review by the Audit Committee of the Board of Directors will be completed during the fourth quarter of 2010. Implementation of the accounting policy choices and required modifications to internal procedures controls and systems will be made. This will translate into a training program that will include an accounting manual available to our employees and new internal financial reporting policies and controls, which will be monitored by management throughout the implementation phase which is expected to continue into the early part of 2011.
Results of the Detailed GAAP Assessment
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While IFRS uses a conceptual framework similar to Canadian GAAP, there are significant differences on recognition, measurement and disclosures. In the period leading up to the changeover, the AcSB will continue to issue accounting standards that are converged with IFRS, thus mitigating the impact of the transition to IFRS at the changeover date. The International Accounting Standard Board will also continue to issue new accounting standards during the conversion period, and as a result, the final impact of IFRS on the Corporation's financial results will only be measured once all the IFRS applicable at the conversion date are known. Preliminary analysis of some of the impacts of transition to IFRS on specific areas is detailed in the 2009 Management Discussion and Analysis. The preliminary analysis should not be regarded as a complete list of changes that will result from transition to IFRS. It is intended to highlight those areas the Corporation believes to be most significant; however, the analysis of possible changes is still in process and not all decisions have been made where choices of accounting policies are available.
The transition status is currently on track with the conversion schedule which calls for initial reporting under IFRS starting for the interim periods and the year ending December 31, 2011. Future disclosures will continue to report updated progress as well as any additional impacts identified on the Corporation's financial reporting and changes to systems and processes as they are determined.
Outlook
-------
The economic outlook for the global aerospace market showed additional signs of stabilization in the second quarter of 2010 and a return to growth in most sectors and geographic regions. Generally, the North American aerospace market ranges from stable business and regional aircraft to growing airliner production and strong defence production. Isolated problem areas and weak economic growth across certain areas in the United States and Europe pose risks to this growth. However, there are a number of measures that indicate on both the global and local level that the industry is growing. Many airlines have returned to profitability in the passenger subsector, and increasingly in freight hauling. They are consolidating for strength rather than survival, and the marketplace is supportive of those who are seen to provide value, whether through price or service. Globally, soft spots remain, but on balance, the large global airlines are leading the growth.
As there is a strong link between the health of economies and the health of airlines, the growth in the global passenger and freight activity is encouraging, and more so for the manufacturing industries that depend on this growth. Demand for new aircraft in the civil airline sector remains stronger than previously expected, fed variously by pent up demand in the developed world, and strong new demand in emerging economies around the world. Growth is intensified by the ecological pressures that require lighter, cleaner and more economical aircraft and engines. Production increases have already been announced in 2010, for implementation in late 2010 and 2011. Further rate increases have been announced in the third quarter of 2010 extending to 2012. Order rates are also returning to more traditional levels, following slowness during the global economic crisis.
Defence has continued to be strong in North America and southern Asia, and will continue to expand in the aerospace sector as present military requirements demand more flexibility in aerospace capabilities. This trend should expand globally through the attraction of new aircraft, engines and systems developed to enhance capabilities. Restoration and upgrade of utility aircraft and helicopters to replenish resources after heavy use over the past decade is opening opportunities in these areas. Large new programs include the JSF program, the new United States Air Force aerial refuelling tanker program, a number of new helicopter programs of upgrade and replacement, and associated engine developments
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 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.
Magellan Aerospace Corporation is one of the world's most integrated and comprehensive aerospace industry suppliers. Magellan designs, engineers, and manufactures aeroengine and aerostructure assemblies and components for aerospace markets, advanced products for military and space markets, and complementary specialty products. Magellan is a public company whose shares trade on the Toronto Stock Exchange (TSX: MAL), with operating units throughout Canada, the United States, the United Kingdom and India.
This release should be read in conjunction with the Corporation's 2009 audited financial statements and accompanying notes, Management's Discussion and Analysis contained in the Corporation's 2009 Annual Report and the Annual Information Form which will be filed with SEDAR (www.sedar.com).
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MAGELLAN AEROSPACE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
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Three month period Six month period
ended June 30 ended June 30
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Expressed in thousands
of dollars, except per
share amounts 2010 2009 2010 2009
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Revenues $ 181,463 $ 177,323 $ 359,365 $ 356,611
Cost of revenues 159,153 157,203 316,627 314,787
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Gross Profit 22,310 20,120 42,738 41,824
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Administrative and
general expenses 9,877 12,035 19,566 22,801
Other (1,564) (3,529) (82) (5,493)
Dividends on
preference shares 320 - 320 -
Interest 4,895 5,622 10,155 9,897
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13,528 14,128 29,959 27,205
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Income before income
taxes 8,782 5,992 12,779 14,619
Provision for income
taxes
Current 1,234 233 992 402
Future 1,219 410 2,362 945
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2,453 643 3,354 1,347
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Net income $ 6,329 $ 5,349 $ 9,425 $ 13,272
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Net income per share
Basic 0.35 0.27 0.50 0.69
Diluted 0.13 0.12 0.19 0.37
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MAGELLAN AEROSPACE CORPORATION
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
(unaudited)
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Three month period Six month period
ended June 30 ended June 30
-------------------------------------------------------------------------
Expressed in thousands
of dollars amounts 2010 2009 2010 2009
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Retained earnings,
beginning of the
period $ 86,833 67,675 $ 84,137 $ 59,752
Dividends - - (400) -
Net income 6,329 5,349 9,425 13,272
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Retained earnings, end
of the period $ 93,162 $ 73,024 $ 93,162 $ 73,024
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MAGELLAN AEROSPACE CORPORATION
CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME (LOSS)
(unaudited)
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Three month period Six month period
ended June 30 ended June 30
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Expressed in thousands
of dollars amounts 2010 2009 2010 2009
-------------------------------------------------------------------------
Net income $ 6,329 $ 5,349 $ 9,425 $ 13,272
Other comprehensive
income (loss):
Unrealized gain (loss)
on translation of
financial statements
of self-sustaining
foreign operations 6,525 (7,719) (1,385) (2,804)
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Comprehensive income
(loss) $ 12,854 $ (2,370) $ 8,040 $ 10,468
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MAGELLAN AEROSPACE CORPORATION
CONSOLIDATED BALANCE SHEETS
(unaudited)
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As at As at
June 30 December 31
Expressed in thousands of dollars amounts 2010 2009
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ASSETS
Current
Cash $ 21,657 $ 22,641
Accounts receivable 92,322 82,850
Inventories 136,521 147,248
Prepaid expenses and other 28,683 38,458
Future income tax assets 4,819 3,958
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Total current assets 284,002 295,155
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Capital assets 247,520 254,700
Technology rights 27,374 29,158
Deferred development costs 56,212 59,510
Other assets 31,906 24,909
Future income tax assets 16,469 17,186
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Total long-term assets 379,481 385,463
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Total assets $ 663,483 $ 680,618
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Bank indebtedness $ 127,696 $ 140,590
Accounts payable and accrued charges 127,212 135,373
Preference shares 8,000 -
Current portion of long-term debt 2,245 2,321
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Total current liabilities 265,153 278,284
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Long-term debt 73,398 73,716
Convertible debentures 38,531 38,182
Future income tax liabilities 11,090 10,281
Preference shares 8,000 -
Other long-term liabilities 8,961 9,803
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Total long-term liabilities 139,980 131,982
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Shareholders' equity
Capital stock 214,440 234,389
Contributed surplus 5,015 4,708
Other paid in capital 13,565 13,565
Retained earnings 93,162 84,137
Accumulated other comprehensive loss (67,832) (66,447)
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Total shareholders' equity 258,350 270,352
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Total liabilities and shareholders' equity $ 663,483 $ 680,618
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MAGELLAN AEROSPACE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
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Three month period Six month period
Ended June 30 Ended June 30
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Expressed in thousands
of dollars amounts 2010 2009 2010 2009
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OPERATING ACTIVITIES
Net income $ 6,329 $ 5,349 $ 9,425 $ 13,272
Add (deduct) items
not affecting cash
Depreciation and
amortization 9,383 9,118 18,305 18,417
Net loss on sale of
capital asset 121 - 118 9
Employee future
benefits (936) 1,672 (1,663) 1,821
Deferred revenue 44 152 116 220
Stock based
compensation 137 173 307 405
Accretion of
convertible
debentures 151 330 297 398
Future income taxes (252) 410 601 945
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14,977 17,204 27,506 35,487
Net change in non-cash
working capital items
relating to operating
activities 1,927 (23,472) 1,895 (52,815)
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Cash provided by (used
in) operating
activities 16,904 (6,268) 29,401 (17,328)
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INVESTING ACTIVITIES
Purchase of capital
assets (2,849) (7,824) (5,174) (13,169)
Proceeds from disposal
of capital assets 35 88 136 232
Increase in other
assets (4,200) (1,821) (6,662) (2,269)
Cash used in investing
activities (7,014) (9,557) (11,700) (15,206)
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FINANCING ACTIVITIES
Decrease in bank
indebtedness (5,522) (16,666) (13,520) (2,624)
Decrease in long-term
debt (4,632) (864) (5,684) (1,411)
Increase in long-term
debt 5,197 15,000 5,197 15,000
Decrease in convertible
debentures - (20,950) - (20,950)
Increase in convertible
debentures - 39,667 - 39,667
Increase (decrease) in
long-term liabilities 24 (172) 71 (272)
Issuance of common
shares - - - 8
Redemption of
preference shares (4,000) - (4,000) -
Dividends on
preference shares - - (400) -
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Cash (used in) provided
by financing
activities (8,933) 16,015 (18,336) 29,418
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Effect of exchange
rate changes on cash 722 122 (349) 132
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Net increase (decrease)
in cash during the
period 1,679 312 (984) (2,984)
Cash, beginning of
period 19,978 2,066 22,641 5,362
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Cash, end of period $ 21,657 $ 2,378 $ 21,657 $ 2,378
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%SEDAR: 00002367E
For further information: James S. Butyniec, President and Chief Executive Officer, T: (905) 677-1889 ext. 233, E: [email protected]; John B. Dekker, Vice President Finance & Corporate Secretary, T: (905) 677-1889 ext. 224, E: [email protected]
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