TORONTO, April 2 /CNW/ - Magellan Aerospace Corporation (the "Corporation" or "Magellan") is listed on the Toronto Stock Exchange under the symbol MAL. The Corporation is a diversified supplier of components to the aerospace industry. Through its network of facilities throughout North America and the United Kingdom, Magellan supplies leading aircraft manufacturers, airlines and defence agencies throughout the world.
Financial Results
-----------------
On April 2, 2007, the Corporation released its financial results for the fourth quarter of 2006. The results are summarized as follows:
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(Expressed in Three-months ended Twelve-months ended
thousands, December 31 December 31
except per ----------------------------------------------------------
share amounts) 2006 2005 Change 2006 2005 Change
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Revenues $ 144,677 $ 142,764 1.4% $ 575,223 $ 568,483 1.2%
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Net loss $ (1,276) $ (3,494) - $ (7,380) $ (6,076) -
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Net loss per
share $ (0.02) $ (0.05) - $ (0.10) $ (0.08) -
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EBITDA(x) $ 10,181 $ 8,886 14.6% $ 40,869 $ 38,068 7.4%
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EBITDA(x)
per share $ 0.11 $ 0.10 10% $ 0.45 $ 0.42 7.1%
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This quarterly statement 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.
(x) The Corporation has included certain measures in this quarterly
statement, including EBITDA, the terms for which are not defined
under Canadian generally accepted accounting principles. The
Corporation defines EBITDA as earnings before interest, 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 are unlikely to be comparable to
similarly titled measures used by other companies.
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Management's Discussion and Analysis
------------------------------------
During the fourth quarter of 2006, trends in the aerospace industry continued to show strong demand for aircrafts and increased profitability for many airline companies and airplane producers. These positive trends in the industry have contributed to Magellan's increased sales volume as production rates increase for programs currently in production, and increased activity on other programs will result in revenues in the future from original equipment manufactures (OEMs) for both aerostructure and aeroengine components.
The A380 program suffered well-publicized delays at Airbus in 2006, continuing into 2007. Magellan has exposure to the program and the impact in 2006 was primarily delayed revenue, with the cumulative reduction in 2006 revenue to these delays being approximately $20 million. Magellan expects that these revenues will be restored over the next few years.
While results for the fourth quarter of 2006 were disappointing, Magellan continues its effort to improve efficiencies in operations through the implementation of cost reduction initiatives, improvement of manufacturing techniques and the reorganization and rejuvenation of its facilities. Work on these initiatives has been ongoing through the fourth quarter of 2006 and the Corporation expects to see the benefit of these improvements in 2007 and beyond.
The unsatisfactory financial results combined with added investment in programs that are not yet in full production have put strain on the Corporation's working capital in the period. On March 30, 2007, the Corporation renewed its operating credit facility and the maximum amount available under the operating credit facility was increased by $20 million to $175 million. In addition, the Corporation borrowed $15 million by way of a secured promissory note from a corporation with a common director.
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-months ended Twelve-months ended
December 31 December 31
(Expressed in ----------------------------------------------------------
thousands) 2006 2005 Change 2006 2005 Change
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Canada $ 68,962 $ 70,445 -2.1% $ 273,305 $ 277,530 -1.5%
United States 45,638 48,581 -6.1% 186,597 183,811 1.5%
United Kingdom 30,077 23,738 26.7% 115,321 107,142 7.6%
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Total Revenue $ 144,677 $ 142,764 1.4% $ 575,223 $ 568,483 1.2%
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Consolidated revenues for the fourth quarter of 2006 were $144.7 million, an increase of $1.9 million or 1.4% over the same period in 2005. The decline in the value of the US dollar versus the Canadian dollar continued to have a negative impact on revenue of $0.9 million during the fourth quarter and a 2006 yearly impact of $31.5 million. If the average exchange rate experienced in 2005 had remained constant in 2006 revenues for the fourth quarter of 2006 and the year ended December 31, 2006 would have been $145.6 million and $606.7 million, respectively.
Gross Profit
------------
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Three-months ended Twelve-months ended
December 31 December 31
(Expressed in ----------------------------------------------------------
thousands) 2006 2005 Change 2006 2005 Change
-------------------------------------------------------------------------
Gross profit $ 10,792 $ 13,577 -20.5% $ 51,271 $ 56,450 -9.2%
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Percentage of
revenue 7.5% 9.5% 8.9% 9.9%
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Gross profit for the fourth quarter of 2006 was $10.8 million or 7.5% of revenues, compared to $13.6 million or 9.5% of revenues in the same period of last year. Gross margins for the quarter did not achieve expected levels of improvement. During the second half of 2006 the Corporation rationalized and modernized four of its manufacturing facilities in order to streamline production and increase capacity. The benefit of these efforts combined with further steps taken to improve manufacturing techniques and implement other cost reduction initiatives should have a positive impact on results commencing in 2007.
Administrative and General Expenses
-----------------------------------
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Three-months ended Twelve-months ended
December 31 December 31
-------------------------------------------
(Expressed in thousands) 2006 2005 2006 2005
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Administrative and
general expenses $ 10,598 $ 12,347 $ 40,856 $ 46,110
Net loss (gain) on sale
of capital assets 539 - 238 (1,442)
Foreign exchange gain (3,851) (288) (4,429) (1,624)
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Total administrative and
general expenses $ 7,286 $ 12,059 $ 36,665 $ 43,044
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Percentage of revenue 5.0% 8.5% 6.4% 7.6%
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Total administrative and general expenses were $7.3 million in the fourth quarter of 2006. Included in total administration and general expenses are a foreign exchange gain of $3.9 million and a loss on the sale of assets of $0.5 million. Without these two items, administrative and general expenses were $10.6 million or 7.3% of revenues in the fourth quarter of 2006 compared to $12.3 million or 8.6% of revenues in the same period in 2005. This represents a decrease of $1.7 million from the fourth quarter of 2006 to 2005.
Interest Expense
----------------
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Three-months ended Twelve-months ended
December 31 December 31
-------------------------------------------
(Expressed in thousands) 2006 2005 2006 2005
-------------------------------------------------------------------------
Interest on bank indebtedness
and long-term debt $ 3,408 $ 2,894 $ 10,442 $ 11,172
Convertible debenture interest 1,488 1,488 5,950 5,950
Accretion charge for
convertible debt 570 831 2,289 2,211
Discount on sale of accounts
receivable 643 388 3,693 2,201
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Total interest expense $ 6,109 $ 5,601 $ 22,374 $ 21,534
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Interest expense in the fourth quarter of 2006 was $6.1 million, $0.5 million higher than in the fourth quarter of 2005. The higher expense is due to higher discounts on the sale of accounts receivable resulting from higher amounts of accounts receivable sold and is also due to higher interest on bank indebtedness and long term debt. In addition, there were higher amounts of long term debt and bank indebtedness in the fourth quarter of 2006 as compared to the fourth quarter of 2005.
Provision for (Recovery of) Income Taxes
----------------------------------------
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Three-months ended Twelve-months ended
December 31 December 31
-------------------------------------------
(Expressed in thousands) 2006 2005 2006 2005
-------------------------------------------------------------------------
Provision for current
income taxes $ 181 $ 268 $ 264 $ 688
Recovery of future income
taxes (757) (857) (3,107) (2,740)
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Total recovery of income
taxes $ (576) $ (589) $ (2,843) $ (2,052)
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Effective Tax Rate 31.1% 14.4% 27.8% 25.2%
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A recovery of income taxes of $0.6 million was recorded in the fourth quarter of 2006 and 2005. The overall tax rate is a blended rate across the three countries in which the Corporation operates. At lower levels of income, non-deductible expenses such as accretion on convertible debenture and stock option charges have larger effects on the effective tax rate.
EBITDA
------
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Three-months ended Twelve-months ended
December 31 December 31
-------------------------------------------
(Expressed in thousands) 2006 2005 2006 2005
-------------------------------------------------------------------------
Net loss for the period $ (1,276) $ (3,494) $ (7,380) $ (6,076)
Interest 6,109 5,601 22,374 21,534
Taxes (576) (589) (2,843) (2,052)
Stock based compensation 255 180 945 620
Amortization charge (note 2) - - 5,301 -
Depreciation and amortization 5,669 7,188 22,472 24,042
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EBITDA $ 10,181 $ 8,886 $ 40,869 $ 38,068
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EBITDA for the fourth quarter of 2006 improved by $1.3 million from the fourth quarter of 2005 despite a number of factors affecting results such as the decline of the US dollar versus the Canadian dollar and the facility rationalization charges.
Cash Flow from Operating Activities
-----------------------------------
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Three-months ended Twelve-months ended
December 31 December 31
-------------------------------------------
(Expressed in thousands) 2006 2005 2006 2005
-------------------------------------------------------------------------
(Increase) decrease in
accounts receivable $ (3,161) $ 6,090 $ 6,206 $ 5,009
Decrease (increase) in
inventories 5,166 9,874 (9,991) (559)
Increase in prepaid expenses
and other (1,997) (681) (606) (1,756)
Increase (decrease) in
accounts payable 2,853 11,013 (8,170) 436
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Net change in non-cash
working capital items $ 2,861 $ 26,296 $ (12,561) $ 3,130
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Cash provided by operating
activities $ 4,057 $ 30,144 $ 2,599 $ 19,808
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In the fourth quarter of 2006, the Corporation generated $4.0 million of cash from operations, compared to $30 million of cash generated in the same period of 2005. Lower cash amounts were generated in the fourth quarter of 2006 compared to the same period in 2005 because of increases in accounts receivable, prepaid expenses and other, and lower increases in accounts payable.
Cash Flow from Investing Activities
-----------------------------------
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Three-months ended Twelve-months ended
December 31 December 31
-------------------------------------------
(Expressed in thousands) 2006 2005 2006 2005
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Purchase of capital assets (10,782) (7,597) (30,972) (19,185)
Proceeds from disposals of
capital assets 5,739 - 9,708 3,746
(Increase) decrease in
other assets (359) (3,853) (1,999) (12,612)
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Cash used in investing
activities $ (5,402) $ (11,450) $ (23,263) $ (28,051)
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In the fourth quarter of 2006, the Corporation invested $11.0 million in capital assets to upgrade its facilities and enhance its capabilities. This was partially funded by proceeds from the sale of capital assets of $5.7 million.
Cash Flow from Financing Activities
-----------------------------------
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Three-months ended Twelve-months ended
December 31 December 31
-------------------------------------------
(Expressed in thousands) 2006 2005 2006 2005
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Increase (decrease) in bank
indebtedness $ 609 $ (10,898) $ 28,138 $ 50,826
Advance (repayment) of
long-term debt 506 (537) 5,456 (50,276)
Decrease in long-term
liabilities (2,285) (7,225) (9,982) (12,480)
Dividends on Preference Shares (400) (1,080) (1,600) (1,080)
Issue of Common Shares 10 57 50 84
Issue of Preference Shares - - - 19,949
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Cash (used in) provided by
financing activities $ (1,560) $ (19,683) $ 22,062 $ 7,023
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The Corporation renewed its operating credit facility, on March 30, 2007, with its existing lenders. Under the terms of the renewed agreement, the maximum amount available under the operating credit facility was increased by $20 million to $175 million with a maturity date of May 24, 2008. The facility is extendable for unlimited one-year renewal periods and continues to be fully guaranteed by the Chairman of the Board of the Corporation.
On March 30, 2007, the Corporation borrowed $15 million by way of a secured promissory note from a corporation with a common director. This note is due July 1, 2008 and bears interest at a rate of 9% per annum. The note is collateralized and subordinated to the bank credit facility.
In 2004, the Corporation entered into a five-year accounts receivable securitization program with a securitization trust (the "Trust"). Subsequent to December 31, 2006, the Trust suspended its securitization program with the Corporation. The Corporation does not expect to incur any costs to extinguish this program and is actively pursuing other opportunities for accounts receivable securitization.
Outlook
-------
Magellan is looking forward to a series of positive milestones in 2007 as new programs move from engineering and develop to production. The F35 Joint Strike Fighter program will enter low rate production, and this will include the delivery of key components on the airframe, engine and vertical lift assemblies. In addition, 2007 will see Magellan convert current Letters of Intent and Memoranda of Understanding commitments into contracts for major composite assemblies on the F35 airframe. The Boeing B787 will enter into production in the third quarter, with Magellan supplying landing gear component assemblies. It is also hoped that deliveries of A380 components will resume as Airbus prepares for deliveries of the aircraft in 2008. All indications are that the strength of the business aircraft sector, where Magellan is a key supplier to many of the engine programs, will continue to grow.
In the first half of 2007, Magellan will complete its remaining rejuvenation projects at the plants, and will continue to grow its Strategic Sourcing. By taking advantage of efficiencies generated and lower costs from outsourcing, Magellan strives to remain globally competitive.
It has been a long, tough and grinding five years. We thank our shareholders for their infinite patience during this period and thank our employees for their unfailing attention to the job at hand. We are hopeful that 2007 will show that the effort was worthwhile.
(signed) (signed)
Richard A. Neill James S. Butyniec
Vice Chairman President and Chief Operating Officer
April 2, 2007
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MAGELLAN AEROSPACE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
(unaudited)
Three-months ended Twelve-months ended
(Expressed in thousands December 31 December 31
of dollars, except -------------------------------------------
per share amounts) 2006 2005 2006 2005
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Revenues $ 144,677 $ 142,764 $ 575,223 $ 568,483
Cost of revenues 133,885 129,187 523,952 512,033
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Gross profit 10,792 13,577 51,271 56,450
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Administrative and general
expenses 7,286 12,059 36,665 43,044
Facility rationalization
(note 2) (751) - 2,455 -
Interest 6,109 5,601 22,374 21,534
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12,644 17,660 61,494 64,578
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Loss before income taxes (1,852) (4,083) (10,223) (8,128)
Provision for (recovery of)
income taxes
- Current 181 268 264 688
- Future (757) (857) (3,107) (2,740)
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(576) (589) (2,843) (2,052)
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Net loss for the period (1,276) (3,494) (7,380) (6,076)
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Retained earnings, beginning
of period 99,715 111,593 107,019 114,175
Dividends on Preference
Shares (400) (1,080) (1,600) (1,080)
Net loss for the period (1,276) (3,494) (7,380) (6,076)
Retained earnings, end
of period $ 98,039 $ 107,019 $ 98,039 $ 107,019
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Earnings per share
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Basic $ (0.02) $ (0.05) $ (0.10) $ (0.08)
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Diluted $ (0.02) $ (0.05) $ (0.10) $ (0.08)
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MAGELLAN AEROSPACE CORPORATION
CONSOLIDATED BALANCE SHEETS AS AT DECEMBER 31,
(unaudited)
(Expressed in thousands of dollars) 2006 2005
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ASSETS
Current
Cash $ 9,896 $ 7,426
Accounts receivable 58,066 62,862
Inventories 276,462 263,413
Prepaid expenses and other 10,396 9,343
Future income tax assets 5,914 3,518
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Total current assets 360,734 346,562
Capital assets 265,078 264,899
Other 52,680 51,644
Future income tax assets 5,829 2,004
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Total assets $ 684,321 $ 665,109
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Bank indebtedness (note 4) $ 142,457 $ 113,824
Accounts payable and accrued charges 128,066 122,978
Current portion of long-term debt 2,039 2,201
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Total current liabilities 272,562 239,003
Long-term debt 15,902 9,608
Future income tax liabilities 20,785 28,553
Convertible debentures 67,430 65,141
Other long-term liabilities 2,748 15,061
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Total liabilities 379,427 357,366
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Shareholders' equity
Capital stock (note 5) 234,171 234,058
Contributed surplus 1,799 854
Other paid-in capital 11,100 11,100
Retained earnings 98,039 107,019
Foreign exchange translation (note 8) (40,215) (45,288)
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Total shareholders' equity 304,894 307,743
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Total liabilities and shareholders' equity $ 684,321 $ 665,109
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MAGELLAN AEROSPACE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Three-months ended Twelve-months ended
December 31 December 31
(Expressed in thousands -------------------------------------------
of dollars) 2006 2005 2006 2005
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OPERATING ACTIVITIES
Net loss for the period $ (1,276) $ (3,494) $ (7,380) $ (6,076)
Add (deduct) items not
affecting cash
Depreciation and
amortization 5,669 7,188 22,472 24,042
Gain on sale of capital
assets (3,328) - (5,423) (1,442)
Amortization charge (note 2) - - 5,301 -
Stock based compensation 255 180 945 620
Issuance of Common Shares
to the directors 63 - 63 63
Accretion of convertible
debentures 570 831 2,289 2,211
Future income taxes
recoveries (757) (857) (3,107) (2,740)
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1,196 3,848 15,160 16,678
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Net change in non-cash working
capital items relating to
operating activities 2,861 26,296 (12,561) 3,130
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Cash provided by operating
activities 4,057 30,144 2,599 19,808
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INVESTING ACTIVITIES
Purchase of capital assets (10,782) (7,597) (30,972) (19,185)
Proceeds from disposal of
capital assets 5,739 - 9,708 3,746
(Increase) decrease in
other assets (359) (3,853) (1,999) (12,612)
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Cash used in investing
activities (5,402) (11,450) (23,263) (28,051)
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FINANCING ACTIVITIES
Increase (decrease) increase
in bank indebtedness 609 (10,898) 28,138 50,826
Increase (decrease) of
long-term debt 506 (537) 5,456 (50,276)
Decrease in long-term
liabilities (2,285) (7,225) (9,982) (12,480)
Dividends on Preference Shares (400) (1,080) (1,600) (1,080)
Issue of Common Shares 10 57 50 84
Issue of Preference Shares - - - 19,949
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Cash (used in) provided by
financing activities (1,560) (19,683) 22,062 7,023
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Effect of exchange rate
changes on cash 981 (197) 1,072 (402)
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(Decrease) increase in cash (1,924) (1,186) 2,470 (1,622)
Cash, beginning of period 11,820 8,612 7,426 9,048
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Cash, end of period $ 9,896 $ 7,426 $ 9,896 $ 7,426
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NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of dollars except share and per share data)
1. ACCOUNTING POLICIES
Basis of presentation
The accompanying un-audited consolidated financial statements have been
prepared by the Corporation in accordance with accounting principles
generally accepted in Canada on a basis consistent with those followed in
the most recent audited consolidated financial statements. These
un-audited consolidated financial statements do not include all the
information and footnotes required by generally accepted accounting
principles for annual financial statements and therefore should be read
in conjunction with the audited consolidated financial statements and
notes included in the Corporation's Annual Report for the year ended
December 31, 2006. The Corporation's external auditors have not reviewed
these financial statements.
2. FACILITY RATIONALIZATION
During 2006, the Corporation undertook a program to rationalize and
modernize four of its facilities. As part of this rationalization
program, the Corporation sold portions of its surplus real estate and
realized gains on the sales. To prepare this real estate for sale,
machinery and equipment was disposed of for minimal proceeds.
Accordingly, a non-cash amortization charge was recorded in the
consolidated financial statements.
Costs were also incurred to relocate machinery and equipment either to
within the same facility or to new locations. As these are one-time
amounts, and significantly large, they have been disclosed separately in
the Consolidated Statements of Operations.
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2006
Amortization charge $5,301
Equipment relocation costs 2,815
Less gain on sale of surplus real estate (5,661)
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Facility rationalization costs 2,455
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3. INVENTORIES
Due to the long-term contractual periods of the Corporation's contracts,
the Corporation may be in negotiation with its customers over amendments
to pricing or other terms. Management's assessment of the recoverability
of amounts capitalized in inventory may be based on judgements with
respect to the outcome of these negotiations. If the negotiations are not
successful or the final terms differ from what the Corporation expects,
the Corporation may be required to record a loss provision on this
contract. The amount of such provision, if any, cannot be reasonably
estimated until such amendments are finalized.
4. BANK INDEBTEDNESS
The Corporation has an operating credit facility of $155,000 with a
syndicate of banks. Bank indebtedness as at December 31, 2006 of $142,457
(December 31, 2005 - $113,824) is payable on demand and bears interest at
the bankers' acceptance or LIBOR rates, plus 0.875% (5.9% at December 31,
2006). Included in the amount outstanding at December 31, 2006 is
US$82,325 (December 31, 2005 - US$71,000). At December 31, 2006, the
Corporation had drawn $142,457 under the operating credit and had issued
letters of credit totalling $1,967 such that $10,576 was unused and
available. A fixed and floating charge debenture on certain of the
Corporation's assets is pledged as collateral for the operating loan. The
credit facility is fully guaranteed by the Chairman of the Board of
Directors. An annual fee of $155 (2005 - $155) is paid in consideration
for the guarantee.
The Corporation renewed its operating credit facility on March 30, 2007
as described in note 10.
5. CAPITAL STOCK
The following table summarizes information on share capital and related
matters as at December 31, 2006:
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Outstanding Exercisable
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Common Shares 90,833,556
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Common Share stock options 3,919,600 753,050
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Preference Shares 2,000,000
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The weighted average number of Common Shares outstanding during the
three-month and twelve-month periods ended December 31, 2006 was
90,814,518 and 90,803,403 respectively.
6. STOCK-BASED COMPENSATION PLAN
The Corporation has an incentive stock option plan, which provides for
the granting of options for the benefit of employees and directors. The
maximum number of options for Common Shares that remain to be granted
under this plan is 1,431,103. Options are granted at an exercise price
that will be the market price of the Corporation's Common Shares at the
time of granting. Options normally have a life of five years with vesting
at 20% at the end of the first, second, third, fourth and fifth years
from the date of the grant. In addition, certain business unit income
tests must be met in order for the option holder's entitlement to fully
vest.
The Corporation accounts for stock options issued after January 1, 2003
using the fair value method. Compensation expense recorded during the
three-month and twelve-month periods ended December 31, 2006 was $255 and
$945 respectively (2005 - $180 and $620 respectively). In the
twelve-month period ended December 31, 2006, there were 1,514,000 stock
options issued at an exercise price of $3.08. The fair value of these
options was $1.40.
The fair value of stock options is estimated at the date of grant using
the Black-Scholes option pricing model with the following weighted
average assumptions:
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Risk-free interest rate 4.0%
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Expected volatility 46%
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Expected life of the options 5 years
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Expected dividend yield 0%
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The Black-Scholes option pricing model used by the Corporation to
determine fair values was developed for use in estimating the fair value
of freely traded options, which are fully transferable and have no
vesting restrictions. The Corporation's employee stock options are not
transferable, cannot be traded and are subject to vesting restrictions
and exercise restrictions under the Corporation's blackout policy, which
would tend to reduce the fair value of the Corporation's stock options.
Changes to the subjective input assumptions used in the model can cause a
significant variation in the estimate of the fair value of the options.
For the stock options issued prior to January 1, 2003 the Corporation
follows the intrinsic value method, which does not give rise to
compensation expense. Under Canadian generally accepted accounting
principles, the Corporation is required to disclose compensation expense
as if the Corporation had elected to follow the fair value method for
such options.
7. SEGMENTED INFORMATION
The Corporation is organized and managed as a single business segment,
being aerospace, and the Corporation is viewed as a single operating
segment by the chief operating decision maker for the purposes of
resource allocations and assessing performance.
Capital assets are based on the country in which they are located.
Domestic and foreign capital assets consist of:
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As at December 31, 2006
-----------------------------------------------
Canada US UK Total
-----------------------------------------------
Capital assets $ 122,082 $ 120,553 $ 22,443 $ 265,078
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As at December 31, 2005
-----------------------------------------------
Canada US UK Total
-----------------------------------------------
Capital assets $ 126,181 $ 125,783 $ 12,935 $ 264,899
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Revenue is attributable to countries based on the location of the
customers. Domestic and foreign revenues consist of:
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Twelve-months ended December 31
-----------------------------------------------
2006
-----------------------------------------------
Canada US UK Total
-----------------------------------------------
Revenue
Domestic $ 96,496 $ 153,176 $ 109,998 $ 359,670
Export 176,809 33,421 5,323 $ 215,553
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Total revenue $ 273,305 $ 186,597 $ 115,321 $ 575,223
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Twelve-months ended December 31
-----------------------------------------------
2005
-----------------------------------------------
Canada US UK Total
-----------------------------------------------
Revenue
Domestic $ 96,100 $ 148,693 $ 101,493 $ 346,286
Export 181,430 35,118 5,649 222,197
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Total revenue $ 277,530 $ 183,811 $ 107,142 $ 568,483
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The major customers for the Corporation for the three-month and
twelve-month periods ended December 31 are as follows:
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Three-months ended Twelve-months ended
December 31 December 31
--------------------------------------------
2006 2005 2006 2005
-------------------------------------------------------------------------
Major Customers
Canadian operations
- Number of customers 3 4 3 4
- Percentage of total
Canadian revenue 32% 46% 35% 41%
US operations
- Number of customers 3 4 3 3
- Percentage of total
US revenue 54% 57% 58% 57%
UK operations
- Number of customers 1 1 1 1
- Percentage of total
UK revenue 73% 84% 80% 80%
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8. FOREIGN EXCHANGE TRANSLATION
Unrealized translation adjustments, which arise on the translation to
Canadian dollars of assets and liabilities of the Corporation's
self-sustaining foreign operations, resulted in unrealized currency
translation gain of $8,523 and $5,073 for the three-month and
twelve-month periods ended December 31, 2006 respectively (2005 - losses
of $(1,338) and $(9,460)), which is reflected as foreign exchange
translation on the consolidated balance sheets and has no impact on net
income.
9. SUPPLEMENTARY INFORMATION
Foreign exchange gain on the conversion of foreign currency denominated
working capital balances and debt for the three-month and twelve-month
periods ended December 31, 2006 was $3,850 and $4,429 respectively
(2005 - gain of $288 and $1,624).
10. SUBSEQUENT EVENTS
In 2004, the Corporation entered into a five-year accounts receivable
securitization program with the Trust. Subsequent to December 31, 2006,
the Trust suspended its securitization program with the Corporation. The
Corporation does not expect to incur any costs to extinguish this program
and is actively pursuing other opportunities for accounts receivable
securitization.
The Corporation renewed its operating credit facility, on March 30, 2007,
with its existing lenders. Under the terms of the renewed agreement, the
maximum amount available under the operating credit facility was
increased by $20,000 to $175,000 with a maturity date of May 24, 2008.
The facility is extendable for unlimited one-year renewal periods and
continues to be fully guaranteed by the Chairman of the Board of the
Corporation.
On March 30, 2007, the Corporation borrowed $15,000 by way of a secured
promissory note from a corporation with a common director. This note is
due July 1, 2008 and bears interest at a rate of 9% per annum. The note
is collateralized and subordinated to the bank credit facility.