TORONTO, Aug. 14 /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 August 14, 2006, the Corporation released its financial results for
the second quarter of 2006. The results are summarized as follows:
<<
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(Expressed in Three-months ended Six-months ended
thousands, June 30 June 30
except per -----------------------------------------------------------
share amounts) 2006 2005 Change 2006 2005 Change
-------------------------------------------------------------------------
Revenues $149,977 $146,166 2.6% $286,999 $291,106 -1.4%
-------------------------------------------------------------------------
Net loss $ (5,666) $ (289) - $ (6,324) $ (1,968) -
-------------------------------------------------------------------------
Net loss per
share $ (0.07) $ (0.00) - $ (0.08) $ (0.02) -
-------------------------------------------------------------------------
EBITDA(x) $ 9,340 $ 11,026 -15.3% $ 19,059 $ 19,625 -2.9%
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EBITDA(x) per
share $ 0.10 $ 0.12 -16.7% $ 0.21 $ 0.22 -4.5%
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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 and depreciation and
amortization. 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
------------------------------------
Results for the second quarter of 2006 are reflective of the difficult
environment in which the Corporation is operating. Improvements in many of its
underlying operations are being made, but rising commodity prices and the
impact of strengthening Canadian dollar has more than offset these
efficiencies. Investments and activities designed to improve processes at the
Corporation's North American casting facilities as well as its manufacturing
facilities in the United Kingdom have increased throughput at these
facilities, and are expected to improve profitability in the next six to
twelve months.
The Corporation has undertaken a plan of rationalization and
modernization of its facilities in New York City. Over the next six months,
the Corporation will pursue the option of selling the surplus real estate. In
order to prepare the surplus real estate for sale, machinery and equipment
will be disposed of for minimal proceeds. Accordingly, a non-cash amortization
charge of $5.3 million ($0.04 per share on an after tax basis) has been
recorded in the financial statements.
Conditions in the commercial aerospace sector, which has the most
significant influence on the Corporation's operations, continue to improve
slowly. Many airlines are reporting steadily increasing load factors, and
several airlines in the United States have begun to report operating profits
after several years of operating losses, in spite of record high fuel prices.
Airlines outside of the United States are faring better, and orders for new
aircraft are coming from these areas in significant numbers.
Demand for aerospace components continues to increase in the commercial
and business jet sectors, as the prime manufacturers increase the build rates
for their products. Demand is steady within the defence sector, with many new
opportunities being presented to the Corporation for work on the Joint Strike
Fighter Program. Other new defence procurement in Canada, the United States
and the United Kingdom offer additional openings for new business.
Recently announced delays by Airbus on its A380 aircraft program, and a
redesign effort on its new A350 candidate aircraft for the mid-size,
long-range civil airliner market will have an impact on Magellan's revenues,
as Magellan supplies engine, wing and undercarriage components for the A380
aircraft and engineering services on the A350.
<<
Revenues
--------
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Three-months ended Six-months ended
June 30 June 30
(Expressed in -----------------------------------------------------------
thousands) 2006 2005 Change 2006 2005 Change
-------------------------------------------------------------------------
Canada $ 72,285 $ 71,865 0.6% $137,203 $144,984 -5.4%
United States 48,985 45,405 7.9% 93,229 88,971 4.8%
United Kingdom 28,707 28,896 -0.7% 56,567 57,151 -1.0%
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Total Revenue $149,977 $146,166 2.6% $286,999 $291,106 -1.4%
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Consolidated revenues for the second quarter of 2006 were $150.0 million,
an increase of $3.8 million, or 2.6%, from the second quarter of 2005. Volumes
of underlying shipments increased across all divisions, however the
strengthening of the Canadian dollar again muted the impact on reported
revenues, because significant amounts of revenue are denominated in United
States dollars. Had exchange rates experienced in the second quarter of 2005
been in effect in the second quarter of 2006, reported revenues would have
been higher by approximately $13.9 million ($5.0 million in Canada,
$5.3 million in the United States and $3.6 million in the United Kingdom) and
quarter over quarter growth would have been approximately 12.0%. Demand for
aerospace components has been strong, especially in the commercial sector, as
prime manufacturers increase build rates for aircraft and engines.
Revenues generated by commercial product sales in the second quarter of
2006 represented 66.8% (64.8% in 2005) of total revenues while defence product
sales comprised the remaining 33.2% (35.2% in 2005) of revenues.
Gross Profit
------------
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Three-months ended Six-months ended
June 30 June 30
(Expressed in -----------------------------------------------------------
thousands) 2006 2005 Change 2006 2005 Change
-------------------------------------------------------------------------
Gross profit $ 13,132 $ 14,954 -12.2% $ 27,428 $ 29,408 -6.7%
Percentage of
revenue 8.8% 10.2% 9.6% 10.1%
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Gross profits of $13.1 million (8.8% of revenues) were reported for the
second quarter of 2006 compared to $15.0 million (10.2% of revenues) during
the same period in 2005. Gross profits, as a percentage of revenue, declined
due to the strengthening Canadian dollar, increasing material prices, and
additional costs associated with increasing manufacturing rates. The impact of
the strengthening Canadian dollar in the second quarter of 2006, when measured
against foreign exchange rates experienced in the second quarter of 2005 was
approximately $2.6 million. Magellan has responded by increasing prices where
permitted to reflect higher material costs and the stronger Canadian dollar,
and is adjusting its manufacturing processes to accommodate the higher rates
more effectively.
Administrative and General Expenses
-----------------------------------
-------------------------------------------------------------------------
Three-months ended Six-months ended
June 30 June 30
-------------------------------------------
(Expressed in thousands) 2006 2005 2006 2005
-------------------------------------------------------------------------
Administrative and general
expenses $ 10,007 $ 11,368 $ 20,256 $ 22,010
Gain on sale of capital assets - (1,723) - (1,442)
Foreign exchange loss / (gain) - 452 (282) 764
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Total administrative and
general expenses $ 10,007 $ 10,097 $ 19,974 $ 21,332
-------------------------------------------------------------------------
Percentage of revenue 6.7% 6.9% 7.0% 7.3%
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-------------------------------------------------------------------------
Administrative and general expenses were $10.0 million, or 6.7% of
revenues in the second quarter of 2006 compared to $10.1 million, or 6.9% of
revenues in the same period of 2005. After adjusting for a gain on the
disposal of capital assets in the second quarter of 2005, administrative and
general expenses have decreased approximately 12.0% in the second quarter of
2006 compared to the same period in 2005 despite increased revenues.
Interest Expense
----------------
-------------------------------------------------------------------------
Three-months ended Six-months ended
June 30 June 30
-------------------------------------------
(Expressed in thousands) 2006 2005 2006 2005
-------------------------------------------------------------------------
Interest on bank indebtedness
and long-term debt $ 3,015 $ 3,024 $ 5,040 $ 6,384
Convertible debenture interest 1,462 1,487 2,950 2,975
Accretion charge for
convertible debt 573 460 1,146 920
Discount on sale of accounts
receivable 1,027 357 1,937 851
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Total interest expense $ 6,077 $ 5,328 $ 11,073 $ 11,130
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-------------------------------------------------------------------------
Interest expense in the second quarter of 2006 was $6.1 million,
$0.8 million higher than the second quarter of 2005, due to higher discounts
on sales of accounts receivable. Discounts on sale of accounts receivable
increased due to an increase in the amount of accounts receivable sold as well
as higher discount rates (which are based on BA's and LIBOR) being incurred.
Provision for (Recovery of) Income Taxes
----------------------------------------
-------------------------------------------------------------------------
Three-months ended Six-months ended
June 30 June 30
-------------------------------------------
(Expressed in thousands) 2006 2005 2006 2005
-------------------------------------------------------------------------
Provision for current income
taxes $ 90 $ 140 $ 182 $ 265
Recovery of future income
taxes (2,677) (322) (2,778) (1,351)
-------------------------------------------------------------------------
Total recovery of income
taxes $ (2,587) $ (182) $ (2,596) $ (1,086)
-------------------------------------------------------------------------
Effective Tax Rate 31.3% 38.6% 29.1% 35.6%
-------------------------------------------------------------------------
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There was a recovery of income taxes of $2.6 million for the second
quarter of 2006, compared to an income tax recovery of $0.2 million for the
second quarter of 2005. The change in effective tax rates is a result of a
changing mix of income across the different jurisdictions in which Magellan
operates.
Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA)
-----------------------------------------------------------------------
-------------------------------------------------------------------------
Three-months ended Six-months ended
June 30 June 30
-------------------------------------------
(Expressed in thousands) 2006 2005 2006 2005
-------------------------------------------------------------------------
Net loss $ (5,666) $ (289) $ (6,324) $ (1,968)
Interest 6,077 5,328 11,073 11,130
Taxes (2,587) (182) (2,596) (1,086)
Amortization charge 5,301 - 5,301 -
Depreciation and amortization 6,215 6,169 11,605 11,549
-------------------------------------------------------------------------
EBITDA $ 9,340 $ 11,026 $ 19,059 $ 19,625
-------------------------------------------------------------------------
-------------------------------------------------------------------------
EBITDA for the second quarter of 2006 was $9.3 million, a decrease of $1.7
million from the second quarter of 2005, due to a decrease in pre-tax income
due to lower margins as discussed previously and higher interest costs offset
by lower administrative expenses.
Liquidity and Capital Resources
-------------------------------
Cash Flow from Operations
-------------------------
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Three-months ended Six-months ended
June 30 June 30
-------------------------------------------
(Expressed in thousands) 2006 2005 2006 2005
-------------------------------------------------------------------------
Decrease (increase) in
accounts receivable $ 5,099 $ (4,974) $ 536 $ (26,893)
Increase in inventories (3,429) (3,329) (19,386) (7,608)
Decrease (increase) in prepaid
expenses and other 898 (322) (1,829) (402)
(Decrease) increase in
accounts payable (2,932) (2,542) 8,178 (2,389)
-------------------------------------------------------------------------
Changes to non-cash working
capital balances $ (364) $ (11,167) $ (12,501) $ (37,292)
-------------------------------------------------------------------------
Cash provided by (used in)
operating activities $ 3,637 $ (6,682) $ (3,116) $ (29,334)
-------------------------------------------------------------------------
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In the quarter ended June 30, 2006, the Corporation generated $3.6 million
of cash in its operations, compared to a use of $6.7 million in operations in
the second quarter of 2005. Cash was generated due to lower accounts
receivable and prepaid expenses, offset by increases to inventory and lower
accounts payable balances. Inventories rose in response to increasing demand
from the Corporation's customers.
Investing Activities
--------------------
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Three-months ended Six-months ended
June 30 June 30
-------------------------------------------
(Expressed in thousands) 2006 2005 2006 2005
-------------------------------------------------------------------------
Purchase of capital assets $ (11,084) $ (3,492) $ (14,143) $ (6,949)
Proceeds of disposals of
capital assets 239 3,192 335 3,723
Increase in other assets (1,711) (510) (2,589) (781)
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Cash used in investing
activities $ (12,556) $ (810) $ (16,397) $ (4,007)
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In the second quarter of 2006, the Corporation invested $11.1 million in
capital assets to upgrade its facilities and enhance its capabilities. This
amount includes $4.3 million for real estate in the United Kingdom acquired on
exercise of an option obtained in the acquisition of assets from Moores
(Wallisdown) Limited in April, 2004. Proceeds of $0.2 million were received in
the second quarter of 2006 on the sale of machinery and equipment.
Financing Activities
--------------------
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Three-months ended Six-months ended
June 30 June 30
-------------------------------------------
(Expressed in thousands) 2006 2005 2006 2005
-------------------------------------------------------------------------
Increase in bank indebtedness $ 11,758 $ 35,006 $ 20,478 $ 62,641
Increase / (repayment) of
long-term debt 4,689 (43,372) 4,572 (47,812)
Decrease in long-term
liabilities (8,112) (7,106) (8,037) (8,154)
Issue of Common Shares 12 15 26 42
Issue of Preference Shares - 19,925 - 19,925
Dividends on Preference Shares (400) - (800) -
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Cash provided by financing
activities $ 7,947 $ 4,468 $ 16,239 $ 26,642
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The Corporation renewed its bank credit agreement with its existing
lenders on May 2, 2006. Under the terms of the renewed agreement, Magellan
will have an operating credit facility, expiring on May 26, 2007, and
extendable for unlimited one-year renewal options, with a maximum credit
facility of $155.0 million. Amounts drawn under this facility bear interest at
the bankers' acceptance or LIBOR rates plus 0.875 percent. The credit facility
is fully guaranteed by N. Murray Edwards, Chairman of the Board of Directors.
Outlook
-------
With continuing demand for commercial and business jet aircraft, as well
as several new defence opportunities, the Corporation is modifying its
operations to improve profitability and participate in the long-term growth of
the aerospace industry. Changes include increasing investment in new equipment
to boost productivity and efficiency and increase capacity at several
operating locations, to meet future demand from increased rates on current
aircraft and engine build programs, as well as position the Corporation to
provide supply on major new programs under development such as the Boeing 787
Dreamliner, the A350 XWB, and the Joint Strike Fighter.
On behalf of the Board
(signed) (signed)
N. Murray Edwards Richard A. Neill
Chairman President and Chief Executive Officer
August 11, 2006
------------------------------------------------------------------------
MAGELLAN AEROSPACE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
AND RETAINED EARNINGS
(unaudited) Three-months ended Six-months ended
(Expressed in thousands of June 30 June 30
dollars, except per share -------------------------------------------
amounts) 2006 2005 2006 2005
-------------------------------------------------------------------------
Revenues $ 149,977 $ 146,166 $ 286,999 $ 291,106
Cost of revenues 136,845 131,212 259,571 261,698
-------------------------------------------------------------------------
Gross profit 13,132 14,954 27,428 29,408
-------------------------------------------------------------------------
Administrative and general
expenses 10,007 10,097 19,974 21,332
Amortization charge (note 2) 5,301 - 5,301 -
Interest 6,077 5,328 11,073 11,130
-------------------------------------------------------------------------
21,385 15,425 36,348 32,462
-------------------------------------------------------------------------
Loss before income taxes (8,253) (471) (8,920) (3,054)
Provision for (recovery of)
income taxes
- Current 90 140 182 265
- Future (2,677) (322) (2,778) (1,351)
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(2,587) (182) (2,596) (1,086)
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Net loss for the period (5,666) (289) (6,324) (1,968)
-------------------------------------------------------------------------
Retained earnings, beginning
of the period 105,961 113,426 107,019 115,105
Dividends (400) - (800) -
Net loss for the period (5,666) (289) (6,324) (1,968)
Retained earnings,
end of period $ 99,895 $ 113,137 $ 99,895 $ 113,137
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Loss per share
-------------------------------------------------------------------------
Basic $ (0.07) $ (0.00) $ (0.08) $ (0.02)
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Diluted $ (0.07) $ (0.00) $ (0.08) $ (0.02)
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MAGELLAN AEROSPACE CORPORATION
CONSOLIDATED BALANCE SHEETS
(unaudited) As at As at
June 30 December 31
(Expressed in thousands of dollars) 2006 2005
-------------------------------------------------------------------------
ASSETS
Current
Cash $ 3,793 $ 7,426
Accounts receivable 62,000 62,862
Inventories (note 3) 283,735 268,590
Prepaid expenses and other 11,147 9,343
Future income tax assets 4,559 3,518
-------------------------------------------------------------------------
Total current assets 365,234 351,739
Capital assets 254,948 264,899
Other 48,835 46,467
Future income tax assets 49,666 50,752
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Total assets $ 718,683 $ 713,857
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Bank indebtedness (note 4) $ 130,729 $ 113,824
Accounts payable and accrued charges 130,542 122,978
Current portion of long-term debt 2,561 2,201
-------------------------------------------------------------------------
Total current liabilities 263,832 239,003
Long-term debt 13,921 9,608
Future income tax liabilities 74,370 77,301
Convertible debentures 66,287 65,141
Other long-term liabilities 3,563 15,061
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Total liabilities 421,973 406,114
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Shareholders' equity
Capital stock (note 5) 234,084 234,058
Contributed surplus 1,289 854
Other paid in capital 11,100 11,100
Retained earnings 99,895 107,019
Foreign exchange translation (note 8) (49,658) (45,288)
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Total shareholders' equity 296,710 307,743
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Total liabilities and shareholders' equity $ 718,683 $ 713,857
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MAGELLAN AEROSPACE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited) Three-months ended Six-months ended
June 30 June 30
-------------------------------------------
(Expressed in thousands
of dollars) 2006 2005 2006 2005
-------------------------------------------------------------------------
OPERATING ACTIVITIES
Loss for the period $ (5,666) $ (289) $ (6,324) $ (1,968)
Add (deduct) items not
affecting cash
Depreciation and amortization 6,215 6,169 11,605 11,549
Gain on sale of capital
assets - (1,723) - (1,442)
Amortization charge (note 2) 5,301 - 5,301 -
Stock option charge 255 190 435 250
Accretion of convertible
debentures 573 460 1,146 920
Future income taxes
recoveries (2,677) (322) (2,778) (1,351)
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4,001 4,485 9,385 7,958
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Net change in non-cash working
capital items relating to
operating activities (364) (11,167) (12,501) (37,292)
-------------------------------------------------------------------------
Cash provided by (used in)
operating activities 3,637 (6,682) (3,116) (29,334)
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INVESTING ACTIVITIES
Purchase of capital assets (11,084) (3,492) (14,143) (6,949)
Proceeds from disposal of
capital assets 239 3,192 335 3,723
Increase in other assets (1,711) (510) (2,589) (781)
-------------------------------------------------------------------------
Cash used in investing
activities (12,556) (810) (16,397) (4,007)
-------------------------------------------------------------------------
FINANCING ACTIVITIES
Increase in bank indebtedness 11,758 35,006 20,478 62,641
Increase (repayment) of
long-term debt 4,689 (43,372) 4,572 (47,812)
Decrease in long-term
liabilities (8,112) (7,106) (8,037) (8,154)
Issue of Common Shares 12 15 26 42
Issue of Preference Shares - 19,925 - 19,925
Dividends on Preference Shares (400) - (800) -
-------------------------------------------------------------------------
Cash provided by financing
activities 7,947 4,468 16,239 26,642
-------------------------------------------------------------------------
Effect of exchange rate
changes on cash (337) (22) (359) (200)
-------------------------------------------------------------------------
Decrease in cash (1,309) (3,046) (3,633) (6,899)
Cash, beginning of period 5,102 5,195 7,426 9,048
-------------------------------------------------------------------------
Cash, end of period $ 3,793 $ 2,149 $ 3,793 $ 2,149
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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 unaudited 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
unaudited 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, 2005. The Corporation's external auditors have not reviewed
these financial statements.
2. AMORTIZATION CHARGE
The Corporation has undertaken a plan of rationalization and
modernization of its facilities in New York City. Over the next six
months, the Corporation will pursue the option of selling the surplus
real estate. In order to prepare the surplus real estate for sale,
machinery and equipment will be disposed of for minimal proceeds.
Accordingly, a non-cash amortization charge of $5.3 million ($0.04 per
share on an after tax basis) has been recorded in the financial
statements.
3. INVENTORIES
The Corporation is currently negotiating with one of its customers over
amendments to pricing with respect to an existing long-term contract.
While it is probable that the Corporation will be successful in
negotiations, the final result is not determinable at the present time.
If the negotiations are not successful or the final terms vary from what
the Corporation expects, the Corporation may be required to record a loss
provision on this contract. The amount of such a provision, if any,
cannot be reasonably estimated until such amendments are finalized.
4. BANK INDEBTEDNESS
Bank indebtedness as at June 30, 2006 of $130,729 (December 31, 2005 -
$113,824) is payable on demand and bears interest at the bankers'
acceptance or LIBOR rates, plus 0.875% (5.8% at June 30, 2006). Included
in the amount outstanding at June 30, 2006 is US$79,537 (December 31,
2005 - US$71,000). At June 30, 2006, the Corporation had drawn $130,729
under the operating credit and had issued letters of credit totalling
$1,993 such that $22,595 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 is paid in consideration for the guarantee.
5. CAPITAL STOCK
The following table summarizes information on share capital and related
matters as at June 30, 2006:
-------------------------------------------------------------------------
Outstanding Exercisable
-------------------------------------------------------------------------
Common shares 90,801,101
-------------------------------------------------------------------------
Common shares stock options 4,334,900 413,850
-------------------------------------------------------------------------
Preferred shares 2,000,000
-------------------------------------------------------------------------
-------------------------------------------------------------------------
The weighted average number of common shares outstanding during the
three-month and six-month periods ended June 30, 2006 was 90,799,200 and
90,796,962 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 1,015,803. 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 20.0% 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 six-month periods ended June 30, 2006 was $255 and $435
respectively (2005 - $190 and $250 respectively). In the six-month period
ended June 30, 2006, there were 1,514,000 stock options issued at an
exercise price of $3.08. The fair value of these options was $1.13.
The fair value of stock options is estimated at the date of grant using
the Black-Scholes pricing model with the following weighted average
assumptions:
-------------------------------------------------------------------------
Risk-free interest rate 3.1%
-------------------------------------------------------------------------
Expected volatility 35.0%
-------------------------------------------------------------------------
Expected average life of options 4 years
-------------------------------------------------------------------------
Expected dividend yield 0.0%
-------------------------------------------------------------------------
-------------------------------------------------------------------------
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 black-out 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 chief operating decision maker, for the purposes
of resource allocations and assessing performance, views the Corporation
as a single operating segment.
Capital assets are based on the country in which they are located.
Domestic and foreign capital assets consist of:
-------------------------------------------------------------------------
As at June 30, 2006
-------------------------------------------
Canada US UK Total
-------------------------------------------
Capital assets $ 122,273 $ 113,805 $ 18,870 $ 254,948
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
As at December 31, 2005
-------------------------------------------
Canada US UK Total
-------------------------------------------
Capital Assets $ 126,181 $ 125,783 $ 12,935 $ 264,899
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Revenue is attributable to countries based on the location of the
customers. Domestic and foreign revenues consist of:
-------------------------------------------------------------------------
Six-months ended June 30
-------------------------------------------
2006
-------------------------------------------
Canada US UK Total
-------------------------------------------
Revenue
Domestic $ 49,335 $ 75,985 $ 52,921 $ 178,241
Export 87,868 17,244 3,646 108,758
-------------------------------------------------------------------------
Total revenue $ 137,203 $ 93,229 $ 56,567 $ 286,999
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Six-months ended June 30
-------------------------------------------
2005
-------------------------------------------
Canada US UK Total
-------------------------------------------
Revenue
Domestic $ 51,064 $ 71,582 $ 54,377 $ 177,023
Export 93,920 17,389 2,774 114,083
-------------------------------------------------------------------------
Total revenue $ 144,984 $ 88,971 $ 57,151 $ 291,106
-------------------------------------------------------------------------
-------------------------------------------------------------------------
The major customers for the Corporation for the three-month and six-month
periods ended June 30, 2006 are as follows:
-------------------------------------------------------------------------
Three-months ended Six-months ended
June 30 June 30
-------------------------------------------
2006 2005 2006 2005
-------------------------------------------------------------------------
Major Customers
Canadian operations
- Number of customers 3 2 4 2
- Percentage of total
Canadian revenue 36% 25% 45% 24%
US operations
- Number of customers 3 3 3 3
- Percentage of total
US revenue 56% 60% 59% 58%
UK operations
- Number of customers 1 1 1 1
- Percentage of total
UK revenue 67% 77% 76% 62%
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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 losses of $5,240 and $4,370 for the three-month and six-month
periods ended June 30, 2006 respectively (2005 - gains of $493 and $708),
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 six-month
periods ended June 30, 2006 was nil and $282 respectively (2005 - losses
of $452 and $764).
>>
