TORONTO, May 9 /CNW/ - Magellan Aerospace Corporation ("Magellan" or the "Corporation") released its financial results for the first quarter of 2008. All amounts are expressed in Canadian dollars unless otherwise indicated. The results are summarized as follows:
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Three-months ended
March 31
(Expressed in thousands, --------------------------------------
except per share amounts) 2008 2007 Change
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Revenues $ 161,095 $ 144,055 11.8 %
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Gross Profit $ 17,321 $ 15,249 13.6 %
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Net income (loss) $ 2,051 $ (1,747)
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Net income (loss) per share $ 0.02 $ (0.02)
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EBITDA(x) $ 15,491 $ 9,513 62.8 %
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EBITDA(x) per share $ 0.17 $ 0.11 54.5 %
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This press release contains certain forward-looking statements that
reflect the current views and/or expectations of the Corporation with
respect to its performance, business and future events. Such statements
are subject to a number of risks, uncertainties and assumptions, which
may cause actual results to be materially different from those expressed
or implied. The Corporation assumes no future obligation to update these
forward-looking statements.
(x)The Corporation has included certain measures in this press release,
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 may not be comparable to similarly titled
measures used by other companies.
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The first quarter of 2008 showed improvement over previous periods, and was consistent with the performance expected by Magellan management. Continued growth in all sectors of the aerospace industry, and relative stability in foreign exchange rates that impact Magellan, allowed Magellan to increase revenue and profit in spite of temporary slowdowns in selected pre-production programs.
Two of our major customers, Airbus and Boeing, continue to enjoy strong order books for their high-volume single-aisle families (A320 and B737 respectively), and also for their respective pre-production twin-aisle A350XWB and B787 Dreamliner models. Business aircraft and helicopters are experiencing a robust global market, particularly at the high end of offerings, generating opportunities for the introduction of new aircraft and engines into the marketplace. In the defence sector, progress continues on new programs, such as the Joint Strike Fighter, while more mature programs continue to win new orders, and generate aftermarket support requirements in both airframe and engines.
Magellan continued to make progress with its key 2008 initiatives during the quarter. Investment in certain operations to accommodate new programs, and to provide greater efficiencies on existing work, continued in the first quarter of 2008. Focus on core activities continued to off load less optimum work to the supply base, creating capacity for expansion as the new programs move towards full rate production.
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
March 31
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(Expressed in thousands) 2008 2007 Change
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Canada $ 72,979 $ 64,642 12.9 %
United States 54,282 48,063 12.9 %
United Kingdom 33,834 31,350 7.9 %
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Total Revenue $ 161,095 $ 144,055 11.8 %
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Consolidated revenues for the first quarter of 2008 were $161.1 million, an increase of $17.0 million or 11.8% over the first quarter of 2007. This was achieved despite the decline in the average U.S. dollar exchange rate versus the Canadian dollar experienced during the first quarter of 2008 that, when compared to the first quarter of 2007, had a negative impact on revenue. If the average exchange rates experienced in the comparable period in 2007 remained constant in 2008, revenues for the first quarter would have been $176.6 million ($15.5 million higher) and would have represented an increase of 22.6% over the first quarter of 2007. Sales in Canada increased by 12.9% as Magellan recorded increased sales in its proprietary products. Increased sales in both Canada and the United States can be attributed to Magellan's increased participation on the Boeing and Airbus family of parts. The acquisition of Verdict Aerospace Components Ltd. ("Verdict") contributed to the increased sales in the United Kingdom. Sales in the United Kingdom, excluding the effect of the acquisition of Verdict, in native currency for the first quarter increased 14.6% over the comparative quarter in the prior year as the production of parts for the Airbus family of products increased in the quarter.
Gross Profit
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Three-months ended
March 31
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(Expressed in thousands) 2008 2007 Change
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Gross profit $ 17,321 $ 15,249 13.6 %
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Percentage of revenue 10.8 % 10.6 %
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Gross profits of $17.3 million (10.8% of revenues) were reported for the first quarter of 2008 compared to $15.2 million (10.6% of revenues) during the same period in 2007. Gross profit, as a percentage of sales, improved over the first quarter of 2007. Improved efficiencies and price adjustments contributed to the increase in margins for the first quarter of 2008, however, the decline in the value of the U.S. dollar versus the Canadian dollar during the first quarter of 2008, when compared to the first quarter of 2007, continued to mask the total impact of the improvements made by the Corporation. Had exchange rates remained the same as in the first quarter of 2007, gross margins would have been approximately $3.8 million higher for the first quarter of 2008 at approximately 12.0% of revenues.
Administrative and General Expenses
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Three-months ended
March 31
(Expressed in ----------------------------------------------------
thousands) 2008 2007 Change % Change
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Administrative and
general expenses $ 9,561 $ 11,548 $ (1,987) (17.2) %
Foreign exchange
(gain)/loss (1,590) 369 (1,959) -
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Total
administrative
and general
expenses $ 7,971 $ 11,917 $ (3,946) (33.1) %
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Percentage of
revenue 5.0 % 8.3 %
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Administrative and general expenses were $8.0 million (5.0% of revenues) in the first quarter of 2008 compared to $11.9 million (8.3% of revenues) in the same period of 2007. Administrative and general expenses before foreign exchange were $9.6 million (5.9% of revenues) in the first quarter of 2008 compared to $11.5 million (8.0% of revenues) in the first quarter of 2007 which includes approximately $2.0 million of expenses incurred to review certain claims made by a former employee.
Interest Expense
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Three-months ended
March 31
(Expressed in ----------------------------------------------------
thousands) 2008 2007 Change % Change
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Interest on bank
indebtedness and
long-term debt $ 3,407 $ 2,788 $ 619 22.2 %
Convertible
debenture
interest 805 1,488 (683) (45.9) %
Accretion charge
for convertible
debt 242 584 (342) (58.6) %
Discount on sale
of accounts
receivable 1,081 814 267 32.8 %
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Total interest
expense $ 5,535 $ 5,674 $ (139) (2.5) %
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Interest expense in the first quarter of 2008 was $5.5 million, $0.1 million lower than the first quarter of 2007. Interest and accretion expense in relation to the convertible debentures were lower in the first quarter of 2008 than the comparative quarter in 2007 due to a lower principal amount of convertible debentures outstanding which was offset by higher interest paid on an increased debt level in the current quarter in comparison to the same quarter of 2007.
Provision for (recovery of) Income Taxes
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Three-months ended
March 31
(Expressed in ----------------------------------------------------
thousands) 2008 2007 Change % Change
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Provision for
current income
taxes $ - $ 90 $ (90) (100.0) %
Provision for
(recovery of)
future income
taxes 1,764 (685) 2,449 357.5 %
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Total provision
for (recovery of)
income taxes $ 1,764 $ (595) $ 2,359 396.5 %
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Effective Tax Rate 46.2 % 25.4 %
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The Corporation recorded an income tax expense of $1.8 million for the first quarter of 2008, compared to an income tax recovery of $0.6 million for the first quarter of 2007. The effective rate of recovery of income taxes was 46.2% in the first quarter of 2008 compared with 25.4% in 2007. The change in effective tax rates is a result of a changing mix of income across the different jurisdictions in which the Corporation 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)
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In addition to the primary measures of earnings and earnings per share in accordance with GAAP, the Corporation includes certain measures in this press release, including EBITDA (earnings before interest expense, income taxes, depreciation, amortization and certain non-cash charges). The Corporation has provided these measures because it believes this information is used by certain investors to assess financial performance and EBITDA is a useful supplemental measure as it provides an indication of the results generated by the Corporation's principal business activities prior to consideration of how these activities are financed and how the results are taxed in the various jurisdictions. Each of the components of this measure are calculated in accordance with GAAP, but EBITDA is not a recognized measure under GAAP, and our method of calculation may not be comparable with that of other companies. Accordingly, EBITDA should not be used as an alternative to net income as determined in accordance with GAAP or as an alternative to cash provided by or used in operations.
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Three-months ended
March 31
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(Expressed in thousands) 2008 2007 Change
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Net income (loss) for the period $ 2,051 $ (1,747) $ 3,798
Interest 5,535 5,674 (139)
Taxes 1,764 (595) 2,359
Stock based compensation 318 255 63
Depreciation and amortization 5,823 5,926 (103)
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EBITDA $ 15,491 $ 9,513 $ 5,978
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EBITDA for the first quarter of 2008 was $15.5 million, compared to $9.5 million in the first quarter of 2007. Higher gross profit in the first quarter of 2008 compared to 2007 and lower administrative and general expenses contributed to the increase in EBITDA for the current quarter.
Liquidity and Capital Resources
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Cash Flow from Operations
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Three-months ended
March 31
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(Expressed in thousands) 2008 2007 Change
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Increase in accounts receivable $ (5,347) $ (12,609) $ 7,262
Increase in inventories (11,238) (17,340) 6,102
Increase/(decrease) in prepaid
expenses and other 340 (814) 1,154
Increase in accounts payable 1,086 101 985
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Net change in non-cash working
capital items $ (15,159) $ (30,662) $ 15,503
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Cash used in operating activities $ (5,744) $ (28,345) $ 22,601
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In the quarter ended March 31, 2008, the Corporation used $5.7 million of cash in its operations, compared to $28.3 million in the first quarter of 2007. Cash was primarily used by increased levels of accounts receivable and inventories partially offset by an increase in accounts payable. Production inventories rose in response to increasing demand from the Corporation's customers.
Investing Activities
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Three-months ended
March 31
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(Expressed in thousands) 2008 2007 Change
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Acquisition of Verdict $ (4,240) $ - $ (4,240)
Purchase of capital assets (4,641) (7,086) 2,445
Proceeds from disposals of
capital assets 145 274 (129)
(Decrease)/increase in
other assets (1,582) 1,017 (2,599)
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Cash used in investing activities $ (10,318) $ (5,795) $ (4,523)
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In the first quarter of 2008, the Corporation invested $4.2 million, in the United Kingdom, for the acquisition of Verdict and $4.6 million in capital assets to upgrade and enhance its capabilities for current and future programs.
Financing Activities
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Three-months ended
March 31
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(Expressed in thousands) 2008 2007 Change
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Increase in bank indebtedness $ 14,335 $ 19,808 $ (5,473)
Increase in loan payable 15,000 - 15,000
Increase in long-term debt 34,388 14,406 19,982
Decrease in convertible debentures (49,207) - (49,207)
Decrease in long-term liabilities (429) (2,604) 2,175
Issuance of Common Shares 23 18 5
Dividends on Preference Shares (400) (400) -
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Cash provided by financing
activities $ 13,710 $ 31,228 $ (17,518)
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The Corporation amended its operating credit facility with its existing lenders on March 30, 2007. Under the terms of the amended agreement, the maximum amount available under the operating credit facility is a Canadian dollar limit of $75 million plus a US dollar limit of $90 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. An annual fee in 2008 of 1.0% (2007 - 0.01%) of the guaranteed amount is provided by the Corporation in consideration for this guarantee. Due to this guarantee, interest is charged at the bankers' acceptance or LIBOR rates plus 0.875%, compared to the rate charged prior to the guarantee of bankers' acceptance or LIBOR rates plus 4.5%. The net annual savings to the Corporation is approximately $5.3 million assuming an average of $150.0 million borrowed under the operating capacity. The Corporation is currently in negotiations with the credit facility syndicate to amend and extend the current operating credit facility to May 25, 2009. To date the negotiations have been positive with respect to extending the term of the operating credit facility.
On March 30, 2007, the Corporation borrowed $15.0 million by way of a promissory note from a corporation wholly owned by a common director. This loan was due July 1, 2008 and bore interest at a rate of 9% per annum, which was lower than rates provided by the Corporation's financial advisors for similar instruments. This loan was repaid on January 30, 2008.
Effective January 1, 2008, the Corporation was required to adopt CICA Handbook Section 3031, "Inventories" that resulted in adjustments to the opening inventory, capital assets, other assets and retained earnings. As a result of the required adoption of this new standard, the Corporation, as at March 31, 2008, was not in compliance with respect to the financial covenant ratios of current assets to current liabilities and of tangible net worth. Subsequent to March 31, 2008, the Corporation received a waiver with respect to these covenants.
On January 30, 2008, the Corporation closed a private placement of an aggregate of $21.0 million 8.5% convertible unsecured subordinated debentures, due January 31, 2010 (the "New Debentures") the proceeds of which were used to fund, in part, the repayment of the $70.0 million principal amount of outstanding 8.5% unsecured subordinated debentures (the "Existing Debentures") which matured on January 31, 2008.
On January 30, 2008, in order to fund the remaining balance of approximately $50.0 million on the maturity of the Existing Debentures, a corporation controlled by the Chairman of the Board, provided a loan of $50.0 million (the "Original Loan") and a $15.0 million bridge loan (the "Bridge Loan") to the Corporation. All of the funds from the Bridge Loan and approximately $35.0 million of the funds from the Original Loan were used to repay the balance of the Existing Debentures and the $15.0 million additional funds from the Original Loan was provided to the Corporation to retire $15.0 million of subordinated debt due to a company with a common director, who is also the owner of all of the shares of such lender. Both the Original Loan and the Bridge Loan bear interest at a rate of 10% per annum calculated and payable monthly and are collateralized and subordinated to the Corporation's existing bank credit facility. The Original Loan is repayable on July 1, 2009 and the Bridge Loan is repayable on July 31, 2008. In addition, in consideration for the provision of additional security for the Corporation's obligations under its existing secured credit facility, the Corporation has increased the standby guarantee fee payable to the Chairman of the Board from 0.1% per annum to 1% per annum of the principal amount guaranteed. Due to this guarantee, interest is charged at the bankers' acceptance or LIBOR rates plus 0.875%, compared to the rate charged prior to the guarantee of bankers' acceptance or LIBOR rates plus 4.5%. The net annual savings to the Corporation is approximately $5.3 million assuming an average of $150.0 million borrowed under the operating capacity.
Share Data and Proposed Share Consolidation
-------------------------------------------
As at April 30, 2008, the Corporation had 90,903,646 common shares outstanding and 2,000,000 outstanding First Preference Shares Series A.
At the Corporation's Annual General and Special Meeting, the Board of Directors of Magellan has determined to propose a consolidation of Magellan's issued and outstanding common shares on the basis of one new common share for each five common shares presently issued and outstanding.
Risks and Uncertainties
-----------------------
The Corporation's performance may be affected by a number of risks and uncertainties. Magellan's senior management identifies key risks and has processes in place to monitor, manage, and mitigate these risks. Additional risks and uncertainties not presently known by the Corporation, or that the Corporation does not currently anticipate will be material may impair the Corporation's performance.
For more information in relation to the risks inherent in Magellan's business, reference is made to the information under "Company Overview" in Management's Discussion and Analysis for the year ended December 31, 2007 and to the information under "Risks Inherent in Magellan's Business" in the Annual Information Form dated March 28, 2008, which are filed on SEDAR at www.sedar.com.
Changes in Accounting Policies
------------------------------
Effective January 1, 2008, the Corporation was required to adopt Canadian Institute of Chartered Accounts ("CICA"): Handbook Section 3031 "Inventories", which replaces Section 3030 "Inventories". The Corporation adopted this new section retrospectively, without restatement of prior periods. This new section provides revised guidance on the determination of cost and its subsequent recognition as an expense, including any write-down to net realizable value. It also provides revised guidance on the cost methodologies that are to be used to assign costs to inventories and expands the disclosure requirements to increase transparency.
As a result of these required changes in accounting policies, the Corporation was required to adopt the unit cost method for inventory related to its long-term contracts in replacement of the long-term average cost method. The unit cost method is the prescribed cost method under which the actual production costs are charged to each unit produced and recognized to income as the unit is sold. The Corporation previously accounted for the cost of production inventory using the long-term average cost which reflected higher unit costs at the early phase of a program and lower unit costs at the end of the program (the learning curve concept). As a result, learning curve balances of $39,848 and a future income tax recovery of $7,692 were charged to retained earnings on adoption of Section 3031 effective January 1, 2008. This new section also prescribed that certain development costs and program tooling costs may no longer be classified as inventory. As a result, $67,471 of deferred development costs related to long-term contracts have been reclassified to other assets and $10,852 of program tooling costs have been reclassified to capital assets effective January 1, 2008.
As at January 1, 2008, the effect of these accounting changes, required under Section 3031, on the Corporation's consolidated balance sheet is as follows:
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Reported, Restated,
as at Impact of as at
December 31, accounting January 1,
2007 changes 2008
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Assets
Inventories $ 274,011 $ (118,171) $ 155,840
Capital assets 245,727 10,852 256,579
Other assets 55,707 67,471 123,178
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$ 575,445 $ (39,848) $ 535,597
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Liabilities
Future income tax liabilities $ 16,799 $ (7,692) $ 9,107
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Shareholders' equity $ 265,927 $ (32,156) $ 233,771
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During the quarter, the Corporation adopted three new presentation and disclosure standards that were issued by the Canadian Institute of Chartered Accountants: Handbook Section 1535, Capital Disclosures ("Section 1535"), Handbook Section 3862, Financial Instruments - Disclosures ("Section 3862") and Handbook Section 3863, Financial Instruments - Presentation ("Section 3863").
Section 1535 requires the disclosure of both qualitative and quantitative information that enables users of financial statements to evaluate (i) an entity's objectives, policies and processes for managing capital; (ii) quantitative data about what the entity regards as capital; (iii) whether the entity has complied with any capital requirements; and (iv) if it has not complied, the consequences of such non-compliance.
Sections 3862 and 3863 replace Handbook Section 3861, Financial Instruments - Disclosure and Presentation, revising and enhancing its disclosure requirements and carrying forward unchanged its presentation requirements for financial instruments. Sections 3862 and 3863 place increased emphasis on disclosures about the nature and extent of risks arising from financial instruments and how the entity manages those risks.
CICA Handbook Section 1400, General Accounting was amended to include the requirement to assess and disclose uncertainties about the Corporation's ability to continue as a going concern. The new requirements came into effect for the Corporation's fiscal year beginning January 1, 2008. The amended standard did not have an impact on the valuation or classification of the Corporation's unaudited interim consolidated financial statements.
Future Changes in Accounting Policies
-------------------------------------
In February 2008, the Accounting Standards Board confirmed that Canadian generally accepted accounting principles for publicly accountable enterprises will be converged with International Financial Reporting Standards ("IFRS") effective in calendar year 2011, with early adoption allowed starting in calendar year 2009. The conversion to IFRS will be required, for the Corporation, for interim and annual financial statements beginning on January 1, 2011. IFRS uses a conceptual framework similar to Canadian generally accepted accounting principles, but there are significant differences on recognition, measurement and disclosures. The Corporation is currently evaluating the impact of the adoption of IFRS on its Consolidated Financial Statements.
Outlook
-------
The almost universally strong demand across most sectors of the aerospace marketplace experienced in the first quarter of 2008 will hopefully continue through the end of this decade, and the resulting demand is projected to continue for another five years to dissipate the record high backlogs. Some programs have suffered temporary delays and setbacks, but the impacts will be softened by the overall strength of demand, and the more gradual ramp-up requirements that result. The Boeing 787 program is expected to proceed on a somewhat less aggressive schedule through 2008, and reach forecasted rates in 2009 and 2010.
Consolidation in the airline sector, especially amongst the major airlines, is expected to continue at a modest rate, will become more global in nature, and will generally strengthen the whole sector. This strengthening will in turn hopefully allow the re-equipping of airline fleets, especially in those airlines hard hit by the aftermath of the events of September 11, 2001 and the related economic slow down. The high price of fuel has negatively impacted profitability in airlines, but concurrently will drive the introduction of new, more fuel-efficient aircraft on an urgent basis.
Despite numerous challenges discussed above, Magellan management is hopeful that Magellan has positioned itself well for the continuing strength of the marketplace, has established the relationships with customers and suppliers required for success, and that its performance will continue to show improvement through 2008 and beyond.
Magellan Aerospace Corporation is one of the world's most integrated and comprehensive aerospace industry suppliers. Magellan designs, engineers, and manufactures aeroengine and aerostructure assemblies and components for aerospace markets, advanced products for military and space markets, and complementary specialty products. Magellan is a public company whose shares trade on the Toronto Stock Exchange (TSX:MAL), with operating units throughout Canada, the United States and the United Kingdom.
This release should be read in conjunction with the Corporation's audited financial statements and accompanying notes, Management's Discussion and Analysis contained in the Corporation's Annual Report, the Annual Information Form and with the Corporation's unaudited quarterly financial statements and accompanying notes and the quarterly Management's Discussion and Analysis filed with SEDAR (www.sedar.com).
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MAGELLAN AEROSPACE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
AND RETAINED EARNINGS
(unaudited)
Three-months ended
March 31
------------------------
(Expressed in thousands of dollars,
except per share amounts) 2008 2007
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Revenues $ 161,095 $ 144,055
Cost of revenues 143,774 128,806
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Gross profit 17,321 15,249
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Administrative and general expenses 7,971 11,917
Interest 5,535 5,674
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13,506 17,591
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Income (loss) before income taxes 3,815 (2,342)
Provision for (recovery of) income taxes
- Current - 90
- Future 1,764 (685)
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1,764 (595)
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Net income (loss) for the period 2,051 (1,747)
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Retained earnings, beginning of period 82,747 98,039
Effect of change in accounting policy 32,156 -
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Adjusted retained earnings,
beginning of period 50,591 98,039
Dividends on preference shares (400) (400)
Net income (loss) for the period 2,051 (1,747)
Retained earnings, end of period $ 52,242 $ 95,892
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Income (loss) per common share
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Basic and Diluted $ 0.02 $ (0.02)
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MAGELLAN AEROSPACE CORPORATION
CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME (LOSS)
(unaudited)
Three-months ended
March 31
------------------------
(Expressed in thousands of dollars) 2008 2007
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Net income (loss) $ 2,051 $ (1,747)
Other comprehensive income (loss):
Unrealized gain (loss) on translation
of financial statements of self-sustaining
foreign operations 5,298 (1,151)
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Comprehensive income (loss) $ 7,349 $ (2,898)
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MAGELLAN AEROSPACE CORPORATION
CONSOLIDATED BALANCE SHEETS
(unaudited) As at As at
March 31 December 31
2008 2007
(Expressed in thousands of dollars)
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ASSETS
Current
Cash $ 2,855 $ 4,884
Accounts receivable 44,634 35,659
Inventories 172,625 274,011
Prepaid expenses and other 13,058 13,127
Future income tax assets 6,071 6,264
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Total current assets 239,243 333,945
Capital assets 263,849 245,727
Other assets 126,252 55,707
Future income tax assets 13,752 14,064
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Total assets $ 643,096 $ 649,443
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Bank indebtedness $ 158,305 $ 139,748
Accounts payable and accrued charges 124,360 119,881
Convertible debentures - 13,834
Loan payable 15,000 -
Current portion of long-term debt 2,301 2,099
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Total current liabilities 299,966 275,562
Long-term debt 63,745 27,839
Future income tax liabilities 10,316 16,799
Convertible debentures 20,287 55,950
Other long-term liabilities 7,175 7,366
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Total liabilities 401,489 383,516
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Shareholders' equity
Capital stock 234,334 234,310
Contributed surplus 3,567 3,249
Other paid in capital 11,645 11,100
Retained earnings 52,242 82,747
Accumulated other comprehensive loss (60,181) (65,479)
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Total shareholders' equity 241,607 265,927
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Total liabilities and shareholders' equity $ 643,096 $ 649,443
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MAGELLAN AEROSPACE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Three-months ended
March 31
------------------------
(Expressed in thousands of dollars) 2008 2007
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OPERATING ACTIVITIES
Net income (loss) for the period $ 2,051 $ (1,747)
Add (deduct) items not affecting cash
Depreciation and amortization 5,823 5,926
Net loss on sale of capital asset - 23
Employee future benefits (858) (2,039)
Deferred revenue 75 -
Stock based compensation 318 255
Accretion of convertible debentures 242 584
Future income taxes recoveries 1,764 (685)
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9,415 2,317
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Net change in non-cash working capital
items relating to operating activities (15,159) (30,662)
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Cash used by operating activities (5,744) (28,345)
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INVESTING ACTIVITIES
Acquisition of Verdict (4,240) -
Purchase of capital assets (4,641) (7,086)
Proceeds from disposal of capital assets 145 274
(Decrease)/increase in other assets (1,582) 1,017
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Cash used in investing activities (10,318) (5,795)
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FINANCING ACTIVITIES
Increase in bank indebtedness 14,335 19,808
Increase in loan payable 15,000 -
Increase in long-term debt 34,388 14,406
Decrease in convertible debentures (49,207) -
Decrease in long-term liabilities (429) (2,604)
Issuance of Common Shares 23 18
Dividends on Preference Shares (400) (400)
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Cash provided by financing activities 13,710 31,228
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Effect of exchange rate changes on cash 323 231
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Net decrease in cash during the period (2,029) (2,681)
Cash, beginning of period 4,884 9,896
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Cash, end of period $ 2,855 $ 7,215
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%SEDAR: 00002367E