TORONTO, Nov. 13 /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 November 13, 2006, the Corporation released its financial results for
the third quarter of 2006. The results are summarized as follows:
<<
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(Expressed in Three-months Nine-months
thousands, ended September 30 ended September 30
except per -----------------------------------------------------------
share amounts) 2006 2005 Change 2006 2005 Change
-------------------------------------------------------------------------
Revenues $143,548 $134,613 6.6% $430,546 $425,719 1.1%
-------------------------------------------------------------------------
Net income
(loss) $ 221 $ (614) - $ (6,104) $ (2,582) -
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Net earnings
(loss) per
share $ 0.00 $ (0.01) - $ (0.07) $ (0.03) -
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EBITDA(x) $ 10,940 $ 9,117 20.0% $ 29,994 $ 28,742 4.4%
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EBITDA(x)
per share $ 0.12 $ 0.10 20.0% $ 0.33 $ 0.32 3.1%
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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 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
------------------------------------
The third quarter results for Magellan continue to demonstrate the
improvement that is being experienced in demand in the aerospace industry, but
also the pressures that are present because of increased material costs and
the strengthening Canadian dollar.
Conditions in the commercial airline industry remain strong. In the past
quarter, a decline in fuel costs occurred at the same time that load factors
and yield were improving, and, as a result, most airlines are reporting
quarterly profits. Orders for new aircraft, while not matching 2005 record
levels, remain very strong. Recent orders have also been made for regional jet
aircraft. Boeing has reported that their 787 Dreamliner aircraft remains on
schedule for its first flight in 2007 and first deliveries to airlines in
2008. However, Airbus, in September, announced further significant delays on
its A380 aircraft and delayed plans for its A350 aircraft.
Demand for business aircraft also remains robust. The recent annual
convention of the National Business Aviation Association in Florida saw
several new business jet models displayed and numerous orders announced. The
current congestion at major airports and more stringent security on commercial
airlines are two factors which are helping to drive demand.
Conditions in the defence sector are being impacted by the war in Iraq.
The United States Department of Defence has concentrated its spending on a
smaller number of programs, reducing the demand for spare parts for older
aircraft models. There have, however, been additional orders for F-18
aircraft, for which Magellan manufactures components for both the engine and
fuselage, and the Joint Strike Fighter program continues to move ahead on
schedule. Magellan has been selected to manufacture several components for
this aircraft.
Magellan remains focussed on improving its operations through the
rejuvenation plans at four of its facilities. These plans included
reorganization of the shop floor and the purchase of new machinery to make
current operations more efficient. Work on these initiatives has been ongoing
through the third quarter of 2006 and has largely been completed at its
casting facility and remains in process at the remaining three operations. The
Corporation expects to see improvements to operations beginning in the fourth
quarter of 2006.
In the second quarter of 2006, Magellan recorded an impairment charge on
assets at the Corporation's New York City facility, where real estate was
being prepared for sale. The Corporation sold real estate in the third quarter
of 2006 for proceeds of $3.1 million, and recorded a gain of $2.1 million on
this transaction in this quarter. Further real estate sales transactions are
being pursued.
Revenues
--------
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Three-months Nine-months
ended September 30 ended September 30
(Expressed in -----------------------------------------------------------
thousands) 2006 2005 Change 2006 2005 Change
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Canada $ 67,140 $ 62,102 8.1% $204,343 $207,086 -1.3%
United States 47,730 46,259 3.2% 140,959 135,230 4.2%
United Kingdom 28,678 26,252 9.2% 85,244 83,403 2.2%
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Total Revenue $143,548 $134,613 6.6% $430,546 $425,719 1.1%
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Consolidated revenues for the third quarter of 2006 were $143.6 million,
an increase of $8.9 million, or 6.6%, from the third quarter of 2005. The
impact of foreign exchange rates muted underlying growth in the volume of
shipments. Had foreign exchange rates from the third quarter of 2005 been in
effect in the third quarter of 2006, revenues would have been approximately
$3.0 million higher in Canada, approximately $3.5 million higher in the United
States and approximately $0.6 million higher in the United Kingdom, reflecting
a year over year growth rate of 11.5%.
Revenues generated by commercial product sales in the third quarter of
2006 represented 67.5% (65.9% in 2005) of total revenues while defence product
sales comprised the remaining 32.5% (34.1% in 2005) of revenues.
Gross Profit
------------
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Three-months Nine-months
ended September 30 ended September 30
(Expressed in -----------------------------------------------------------
thousands) 2006 2005 Change 2006 2005 Change
-------------------------------------------------------------------------
Gross profit $ 13,052 $ 13,465 -3.1% $ 40,479 $ 42,873 -5.6%
-------------------------------------------------------------------------
Percentage of
revenue 9.1% 10.0% 9.4% 10.1%
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Gross profit was $13.1 million, or 9.1% of revenues for the three-month
period ended September 30, 2006, compared to $13.5 million, or 10.0% of
revenues, in the same period in 2005. The decline in gross profit, as a
percentage of revenue, in the third quarter of 2006 compared to the same
period in 2005 is due to the impact of foreign exchange rates and the absence
of hedging benefits, offset by changing product mix and operational
efficiencies. The impact of changing foreign exchange rates and hedging
benefits in the three months ended September 30, 2006 at the gross margin
level was approximately $2.9 million when compared to the same period in 2005.
As mentioned above, major initiatives at four facilities are being undertaken
to improve operating efficiencies at these locations. The benefit of these
initiatives will be realized over the next several quarters.
Administrative and General Expenses
-----------------------------------
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Three-months ended Nine-months ended
September 30 September 30
-------------------------------------------
(Expressed in thousands) 2006 2005 2006 2005
-------------------------------------------------------------------------
Administrative and general
expenses $ 9,999 $ 11,552 $ 30,259 $ 33,763
Gain on sale of capital assets (301) - (301) (1,442)
Foreign exchange gain (297) (1,899) (579) (1,336)
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Total administrative and
general expenses $ 9,401 $ 9,653 $ 29,379 $ 30,985
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Percentage of revenue 6.6% 7.2% 6.8% 7.3%
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Reported administrative and general expenses were $9.4 million, or 6.6% of
revenues in the third quarter of 2006 compared to $9.7 million, or 7.2% of
revenues in the same period of 2005. Included in administrative and general
expenses in the three months ended September 30, 2006 are gains on the sale of
assets of $0.3 million and a foreign exchange gain of $0.3 million.
Administrative and general expenses for the three-month period ended
September 30, 2005 included a foreign exchange gain of $1.9 million.
Administrative and general expenses, after adjusting for these items,
represent 7.0% of revenues in the three month period ended September 30, 2006
compared to 8.6% of revenues in the same period in 2005.
Interest Expense
----------------
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Three-months ended Nine-months ended
September 30 September 30
-------------------------------------------
(Expressed in thousands) 2006 2005 2006 2005
-------------------------------------------------------------------------
Interest on bank indebtedness
and long-term debt $ 2,162 $ 2,399 $ 7,174 $ 8,783
Convertible debenture interest 1,487 1,487 4,462 4,462
Accretion charge for
convertible debt 573 460 1,719 1,380
Discount on sale of accounts
receivable 975 457 2,910 1,308
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Total interest expense $ 5,197 $ 4,803 $ 16,265 $ 15,933
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Interest expense in the third quarter of 2006 was $5.2 million,
$0.4 million higher than the third quarter of 2005. The higher expense is
largely due to higher discounts on the sale of accounts receivable, which
reflect higher amounts of accounts receivable sold.
Provision for (Recovery of) Income Taxes
----------------------------------------
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Three-months ended Nine-months ended
September 30 September 30
-------------------------------------------
(Expressed in thousands) 2006 2005 2006 2005
-------------------------------------------------------------------------
Provision for current income
taxes $ (100) $ 155 $ 83 $ 420
(Recovery of) provision for
future income taxes 428 (532) (2,350) (1,883)
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Total provision for (recovery
of) income taxes $ 328 $ (377) $ (2,267) $ (1,463)
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Effective Tax Rate 59.7% 38.0% 27.1% 36.2%
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A provision for income taxes expense of $0.3 million was recorded in the
third quarter of 2006, compared to a recovery of income taxes of $0.4 million
for the third 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. Permanent differences in taxable income have a greater
effect on the effective tax rate at low levels of income.
Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA)
-----------------------------------------------------------------------
-------------------------------------------------------------------------
Three-months ended Nine-months ended
September 30 September 30
-------------------------------------------
(Expressed in thousands) 2006 2005 2006 2005
-------------------------------------------------------------------------
Net income (loss) $ 221 $ (614) $ (6,104) $ (2,582)
Interest 5,197 4,803 16,265 15,933
Taxes 328 (377) (2,267) (1,463)
Amortization charge (note 2) - - 5,301 -
Depreciation and amortization 5,194 5,305 16,799 16,854
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EBITDA $ 10,940 $ 9,117 $ 29,994 $ 28,742
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-------------------------------------------------------------------------
EBITDA for the third quarter of 2006 was $10.9 million, an increase of
$1.8 million from the third quarter of 2005. Income includes pre-tax gains on
the disposal of capital assets of $2.4 million. Excluding these gains, EBITDA
for the third quarter of 2006 was $8.5 million, which is a decrease of
$0.6 million from the same period in 2005.
Liquidity and Capital Resources
-------------------------------
Cash Flow from Operations
-------------------------
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Three-months ended Nine-months ended
September 30 September 30
-------------------------------------------
(Expressed in thousands) 2006 2005 2006 2005
-------------------------------------------------------------------------
Decrease (increase) in
accounts receivable $ 8,831 $ 25,812 $ 9,367 $ (1,081)
Decrease (increase) in
inventories 4,229 (2,825) (15,157) (10,433)
Decrease (increase) in prepaid
expenses and other 3,220 (673) 1,391 (1,075)
Decrease in accounts payable (18,341) (8,188) (11,192) (10,577)
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Changes to non-cash working
capital balances $ (2,061) $ 14,126 $ (15,591) $ (23,166)
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Cash provided by (used in)
operating activities $ 1,659 $ 18,935 $ (1,458) $ (10,399)
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In the quarter ended September 30, 2006, the Corporation generated
$1.7 million of cash from operating activities, compared to generating
$18.9 million of cash from operating activities in the third quarter of 2005.
Lower amounts of cash were generated in the third quarter of 2006 compared to
the same period in 2005 because of a smaller decrease in accounts receivable
and a larger decrease in accounts payable.
Investing Activities
--------------------
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Three-months ended Nine-months ended
September 30 September 30
-------------------------------------------
(Expressed in thousands) 2006 2005 2006 2005
-------------------------------------------------------------------------
Purchase of capital assets $ (6,047) (4,639) $ (20,190) $ (11,588)
Proceeds from disposals of
capital assets 3,634 23 3,969 3,746
Decrease (increase) in other
assets 949 (7,978) (1,640) (8,759)
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Cash used in investing
activities $ (1,464) $ (12,594) $ (17,861) $ (16,601)
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In the third quarter of 2006, the Corporation invested $6.0 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
$3.6 million.
Financing Activities
--------------------
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Three-months ended Nine-months ended
September 30 September 30
-------------------------------------------
(Expressed in thousands) 2006 2005 2006 2005
-------------------------------------------------------------------------
Increase (decrease) in bank
indebtedness $ 7,051 $ (917) $ 27,529 $ 61,724
Advance (repayment) of
long-term debt 378 (1,927) 4,950 (49,739)
Increase (decrease) in
long-term liabilities 340 2,899 (7,697) (5,255)
Issue of Common Shares 14 72 40 114
Issue of Preference Shares - - - 19,925
Dividends on Preference Shares (400) - (1,200) -
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Cash provided by financing
activities $ 7,383 $ 127 $ 23,622 $ 26,769
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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 has
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%. The credit facility is fully
guaranteed by N. Murray Edwards, Chairman of the Board of Directors.
Outlook
-------
Recent events at Airbus Industries have caused a certain amount of
uncertainty on the A380 program as well as the launch of the A350 XWB, but
Boeing and business jet manufacturers are all reporting record order intake
for commercial aircraft. Announcements by the Canadian Department of National
Defence for Boeing C17 cargo aircraft and Boeing CH47 heavy lift helicopters
will also present offset opportunities for Magellan operations in Canada. With
the 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. Changes
include rationalizing real estate needs, and increasing investment in new
equipment to boost productivity and increase capacity at several operating
locations, to meet future demand from increased rates on current aircraft and
engine build programs. This will position the Corporation to provide supply on
major new programs under development such as the Boeing 787 Dreamliner, the
Airbus A350 XWB, and the Joint Strike Fighter and the associated engine
programs.
The Board is pleased to announce that, effective January 1, 2007, Richard
A. Neill will be appointed Vice-Chairman of Magellan Aerospace Corporation,
and will continue to provide strategic direction for the Corporation. As such,
he will be stepping down from his role as President and Chief Executive
Officer. Also on January 1, 2007, Jim Butyniec will be appointed President and
Chief Operating Officer, completing the leadership transition that has been
taking place over the past year.
On behalf of the Board
(signed) (signed)
N. Murray Edwards Richard A. Neill
Chairman President and Chief Executive Officer
November 13, 2006
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MAGELLAN AEROSPACE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
(unaudited) Three-months ended Nine-months ended
(Expressed in thousands of September 30 September 30
dollars, except per share -------------------------------------------
amounts) 2006 2005 2006 2005
-------------------------------------------------------------------------
Revenues $ 143,548 $ 134,613 $ 430,546 $ 425,719
Cost of revenues 130,496 121,148 390,067 382,846
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Gross profit 13,052 13,465 40,479 42,873
-------------------------------------------------------------------------
Administrative and general
expenses 9,401 9,653 29,379 30,985
Facility rationalization
(note 2) (2,095) - 3,206 -
Interest 5,197 4,803 16,265 15,933
-------------------------------------------------------------------------
12,503 14,456 48,850 46,918
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Income (loss) before income
taxes 549 (991) (8,371) (4,045)
Provision for (recovery of)
income taxes
- Current (100) 155 83 420
- Future 428 (532) (2,350) (1,883)
-------------------------------------------------------------------------
328 (377) (2,267) (1,463)
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Net profit/(loss) for the
period 221 (614) (6,104) (2,582)
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Retained earnings,
beginning of period 99,894 113,137 107,019 115,105
Dividends (400) - (1,200) -
Net profit (loss) for the
period 221 (614) (6,104) (2,582)
Retained earnings, end of
period $ 99,715 $ 112,523 $ 99,715 $ 112,523
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Earnings per share
-------------------------------------------------------------------------
Basic $ 0.00 $ (0.01) $ (0.07) $ (0.03)
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Diluted $ 0.00 $ (0.01) $ (0.07) $ (0.03)
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MAGELLAN AEROSPACE CORPORATION
CONSOLIDATED BALANCE SHEETS
(unaudited) As at As at
September 30 December 31
(Expressed in thousands of dollars) 2006 2005
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ASSETS
Current
Cash $ 11,820 $ 7,426
Accounts receivable 53,137 62,862
Inventories (note 3) 279,953 268,590
Prepaid expenses and other 8,011 9,343
Future income tax assets 3,457 3,518
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Total current assets 356,378 351,739
Capital assets 255,267 264,899
Other 47,332 46,467
Future income tax assets 48,357 50,752
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Total assets $ 707,334 $ 713,857
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Bank indebtedness (note 4) $ 137,808 $ 113,824
Accounts payable and accrued charges 112,243 122,978
Current portion of long-term debt 2,162 2,201
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Total current liabilities 252,213 239,003
Long-term debt 14,712 9,608
Future income tax liabilities 70,863 77,301
Convertible debentures 66,860 65,141
Other long-term liabilities 4,968 15,061
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Total liabilities 409,616 406,114
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Shareholders' equity
Capital stock (note 5) 234,098 234,058
Contributed surplus 1,543 854
Other paid-in capital 11,100 11,100
Retained earnings 99,715 107,019
Foreign exchange translation (note 8) (48,738) (45,288)
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Total shareholders' equity 297,718 307,743
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Total liabilities and shareholders' equity $ 707,334 $ 713,857
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MAGELLAN AEROSPACE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited) Three-months ended Nine-months ended
September 30 September 30
(Expressed in thousands of -------------------------------------------
dollars) 2006 2005 2006 2005
-------------------------------------------------------------------------
OPERATING ACTIVITIES
Income (loss) for the period $ 221 $ (614) $ (6,014) $ (2,582)
Add (deduct) items not
affecting cash
Depreciation and
amortization 5,194 5,305 16,799 16,854
Gain on sale of capital
assets (2,095) - (2,095) (1,442)
Amortization charge (note 2) - - 5,301 -
Stock option charge 255 190 690 440
Accretion of convertible
debentures 573 460 1,719 1,380
Future income taxes
(recoveries) (428) (532) (2,267) (1,883)
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3,720 4,809 14,133 12,767
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Net change in non-cash working
capital items relating to
operating activities (2,061) 14,126 (15,591) (23,166)
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Cash provided by (used in)
operating activities 1,659 18,935 (1,458) (10,399)
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INVESTING ACTIVITIES
Purchase of capital assets (6,047) (4,639) (20,190) (11,588)
Proceeds from disposal of
capital assets 3,634 23 3,969 3,746
Decrease (increase) in other
assets 949 (7,978) (1,640) (8,759)
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Cash used in investing
activities (1,464) (12,594) (17,861) (16,601)
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FINANCING ACTIVITIES
Increase (decrease) in bank
indebtedness 7,051 (917) 27,529 61,724
Advance (repayment) of
long-term debt 378 (1,927) 4,950 (49,739)
Increase (decrease) in
long-term liabilities 340 2,899 (7,697) (5,255)
Issue of Common Shares 14 72 40 114
Issue of Preference Shares - - - 19,925
Dividends on Preference Shares (400) - (1,200) -
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Cash provided by financing
activities 7,383 127 23,622 26,769
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Effect of exchange rate
changes on cash 449 (5) 91 (205)
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Increase (decrease) in cash 8,027 6,463 4,394 (436)
Cash, beginning of period 3,793 2,149 7,426 9,048
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Cash, end of period $ 11,820 $ 8,612 $ 11,820 $ 8,612
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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. FACILITY RATIONALIZATION
The Corporation has undertaken a plan of rationalization and
modernization of its facilities in New York City. The Corporation's plan
is to sell surplus real estate and invest the proceeds in new
manufacturing equipment. In order to prepare the surplus real estate for
sale, machinery and equipment has been disposed of for minimal proceeds.
Accordingly, a non-cash amortization charge of $5.3 million ($0.04 per
share on an after tax basis) was recorded in the financial statements in
the second quarter of 2006. One real estate transaction has been
completed and a gain of $2.1 million has been recorded in the third
quarter of 2006. Further real estate remains to be marketed.
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
negotiating a favourable outcome, the final result is not determinable at
the present time. If the Corporation does not successfully negotiate a
pricing increase 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 the negotiating process is complete and
amendments are finalized.
4. BANK INDEBTEDNESS
Bank indebtedness as at September 30, 2006 of $137,808 (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 September 30, 2006).
Included in the amount outstanding at September 30, 2006 is US$82,325
(December 31, 2005 - US$71,000). At September 30, 2006, the Corporation
had drawn $137,808 under the operating credit, had issued letters of
credit totalling $1,997 and had cash available of $11,820 such that
$27,015 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 September 30, 2006:
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Outstanding Exercisable
-------------------------------------------------------------------------
Common Shares 90,806,558
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Common Share stock options 4,334,900 516,900
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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 nine-month periods ended September 30, 2006 was
90,803,773 and 90,799,272 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 nine-month periods ended September 30, 2006 was $255 and
$690 respectively (2005 - $190 and $440 respectively). In the nine-month
period ended September 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:
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Risk-free interest rate 3.1%
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Expected volatility 35.0%
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Expected average life of options 4 years
-------------------------------------------------------------------------
Expected dividend yield 0.0%
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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 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:
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As at September 30, 2006
-------------------------------------------
Canada US UK Total
-------------------------------------------
-------------------------------------------
Capital assets $ 121,931 $ 113,094 $ 20,242 $ 255,267
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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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Nine-months ended September 30
-------------------------------------------
2006
-------------------------------------------
Canada US UK Total
-------------------------------------------
-------------------------------------------
Revenue
Domestic $ 70,539 $ 115,676 $ 80,420 $ 266,635
Export 133,804 25,283 4,824 $ 163,911
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Total revenue $ 204,343 $ 140,959 $ 85,244 $ 430,546
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Nine-months ended September 30
-------------------------------------------
2005
-------------------------------------------
Canada US UK Total
-------------------------------------------
-------------------------------------------
Revenue
Domestic $ 72,920 $ 107,341 $ 80,058 $ 260,319
Export 134,166 27,889 3,345 $ 165,400
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Total revenue $ 207,086 $ 135,230 $ 83,403 $ 425,719
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The major customers for the Corporation for the three-month and nine-
month periods ended September 30, 2006 are as follows:
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Three-months ended Nine-months ended
September 30 September 30
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2006 2005 2006 2005
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Major Customers
Canadian operations
- Number of customers 3 2 4 2
- Percentage of total
Canadian revenue 37% 21% 46% 22%
US operations
- Number of customers 3 3 3 3
- Percentage of total US
revenue 56% 53% 58% 56%
UK operations
- Number of customers 1 1 1 1
- Percentage of total UK
revenue 97% 85% 83% 70%
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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 (loss) of $920 and $(3,450) for the three-month and
nine-month periods ended September 30, 2006 respectively (2005 - $(8,830)
and $(8,122)), which is reflected as foreign exchange translation on the
consolidated balance sheets and has no impact on net income.
9. SUPPLEMENTARY INFORMATION
Foreign exchange gains on the conversion of foreign currency denominated
working capital balances and debt for the three-month and nine-month
periods ended September 30, 2006 was $297 and $579 respectively (2005 -
gain of $1,899 and $1,336).
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