The Globe and Mail

Go to the Globe and Mail homepage

Jump to main navigationJump to main content

Press release from CNW Group

Magellan Aerospace Corporation Announces Financial Results

Monday, August 13, 2012

Magellan Aerospace Corporation Announces Financial Results18:00 EDT Monday, August 13, 2012TORONTO, Aug. 13, 2012 /CNW/ - Magellan Aerospace Corporation ("Magellan" or the "Corporation") released its financial results for the second quarter of 2012.  All amounts are expressed in Canadian Dollars unless otherwise indicated. The results are summarized as follows:                        Three month period ended  Six month period ended          June 30        June 30Expressed in thousands of dollars, except per share amounts   2012  2011  Change  2012  2011  ChangeRevenues   169,461  185,990  (8.9)%  356,453  356,477  ─%Gross Profit   23,005  21,096  9.1%  49,012  44,855  9.3%Net Income   9,206  4,895  88.1%  21,030  12,117  73.6%Net Income per Share - Diluted   0.16  0.10  60.0%  0.36  0.25  44.0%EBITDA   21,627  18,449  17.2%  45,119  41,186  9.6%EBITDA per Share - Diluted   0.37  0.32  15.6%  0.78  0.71  9.9%This news release contains certain forward-looking statements that reflect the current views and/or expectations of the Corporation with respect to its performance, business and future events.  Such statements are subject to a number of risks, uncertainties and assumptions, which may cause actual results to be materially different from those expressed or implied.  The Corporation assumes no future obligation to update these forward-looking statements except as required by law.The Corporation has included certain measures in this news release, including EBITDA, the terms for which are not defined under International Financial Reporting Standards.  The Corporation defines EBITDA as earnings before interest, dividends on preference shares, taxes, depreciation and amortization and non-cash charges.  The Corporation has included these measures, including EBITDA, because it believes this information is used by certain investors to assess financial performance and EBITDA is a useful supplemental measure as it provides an indication of the results generated by the Corporation's principal business activities prior to consideration of how these activities are financed and how the results are taxed in various jurisdictions.  Although the Corporation believes these measures are used by certain investors (and the Corporation has included them for this reason), these measures may not be comparable to similarly titled measures used by other companies.OVERVIEWMagellan is a diversified supplier of components to the aerospace industry and in certain circumstances for power generation projects. Through its wholly owned subsidiaries, Magellan designs, engineers, and manufactures aeroengine and aerostructure components for aerospace markets, advanced products for military and space markets, and complementary specialty products.  The Corporation also supports the aftermarket through supply of spare parts as well as performing repair and overhaul services and supplies in certain circumstances parts and equipment for power generation projects.The Corporation's strategy has been to focus on several core competencies within the aerospace industry.  These include precision machining of a wide variety of aerospace material, composites, complex high technology magnesium and aluminum alloy castings, repair and overhaul technologies and design of structures.  The Corporation is now seeking to leverage these core competencies by achieving growth in applications where these abilities are critical in meeting customer needs.BUSINESS UPDATEResults for the second quarter of 2012 improved over those reported in the second quarter of 2011.  Revenues reflected a decrease primarily as a result of the timing of revenues in the power generation project segment.Business development activity increased during the quarter as the Corporation continues to leverage its core expertise to develop integrated solutions for its customers.  This was demonstrated by recent contract awards that seamlessly utilize the capabilities of two or more Magellan operating units to offer a higher value-added product to the customer.At the recent Farnborough International Air Show, Magellan met with major customers and received favourable reaction to its re-branding campaign and to the strategic direction of the Corporation.  The Corporation also announced at the show, a contract extension agreement worth £370 million with Airbus, covering aluminum and titanium wing structure components for use on A320, A330, and A380 aircraft.  This significant contract complements the new A350 XWB contracts that Magellan has been awarded and secures Magellan as a supplier on every Airbus commercial program. Additionally, in the second quarter of 2012, the Corporation announced a significant ten year contract extension with Boeing. Based on current market forecasts it is expected that this contract in support of the full family of Boeing airliners will support annual revenues exceeding $80 million.Magellan is an industry partner in the global F-35 Lightning II aircraft program.  At a recent production readiness review for the Horizontal Tail Program with BAE, Lockheed Martin, and the US Government, Magellan was recognized for successfully transitioning the program production and assembly activities into a new Advanced Composite Manufacturing Centre as well as for the quality of production.  As of June 30, 2012 the multi-role fighter had conducted 595 test flights in 2012 versus a plan of 445 and for the 18th consecutive month, the test program remained ahead of plan.  Concerns with the development of the F-35 Program are in decline and the production readiness of the supply chain is increasing due to the steady progression in achieving key program milestones.Magellan will achieve a major milestone this summer with the completion of the Critical Design Review for the RADARSAT Constellation Mission ("RCM") contract with MacDonald, Dettwiler and Associates Ltd.  The $130 million RCM contract is a three-satellite constellation of radar-imaging, earth observation satellites that will undergo manufacturing, assembly, integration and testing at Magellan commencing in early 2013 through to 2015.Magellan expects to complete the installation and commissioning of a 132 megawatt electric power generation plant in the Republic of Ghana by the end of 2012.  The work is being performed under contract with Canadian Commercial Corporation.The diversity of the Corporation's markets and customer base is expected to assist the Corporation in managing and mitigating the effects of economic uncertainties.For additional information, please refer to the "Management's Discussion and Analysis" section of the Corporation's 2011 Annual Report available on www.sedar.com.ANALYSIS OF OPERATING RESULTS FOR THE SECOND QUARTER ENDED JUNE 30, 2012The Corporation reported higher revenue in its aerospace segment and lower revenue in its power generation project segment in the second quarter of 2012 when compared to the second quarter of 2011. Gross profit and net income for the second quarter of 2012 were $23.0 million and $9.2 million, respectively, an increase from the second quarter of 2011 gross profit of $21.1 million and from the second quarter of 2011 net income of $4.9 million.Consolidated RevenueOverall, the Corporation's revenues decreased when compared to the second quarter of 2011.                            Three month period  Six month period      ended June 30  ended June 30Expressed in thousands of dollars     2012  2011  Change  2012  2011  ChangeAerospace     162,956  143,711  13.4%  329,093  298,326  10.3%Power Generation Project     6,505  42,279  (84.6)%  27,360  58,151  (53.0)%Total revenues     169,461  185,990  (8.9)%  356,453  356,477  -%Consolidated revenues for the second quarter ended June 30, 2012 decreased 8.9% to $169.5 million from $186.0 million in the second quarter of 2011 due mainly to higher volumes in the aerospace segment offset by the lower revenues earned in the power generation project segment.   As the Corporation moves through 2012, revenue from the power generation project will continue to decrease on a year over year basis unless the Corporation receives further contracts in this area.Aerospace SegmentRevenues for the Aerospace segment were as follows:                            Three month period  Six month period      ended June 30  ended June 30Expressed in thousands of dollars     2012  2011  Change  2012  2011  ChangeCanada     71,912  64,293  11.9%  147,779  136,662  8.1%United States     51,162  47,005  8.8%  100,692  94,027  7.1%United Kingdom     39,882  32,413  23.0%  80,622  67,637  19.2%Total revenues     162,956  143,711  13.4%  329,093  298,326  10.3%Consolidated aerospace revenues for the second quarter of 2012 of $163.0 million were 13.4% higher than revenues of $143.7 million in the second quarter of 2011.   Revenues in Canada in the second quarter of 2012 increased 11.9% from the same period in 2011. The Corporation's revenue in the second quarter of 2012 was impacted negatively by approximately $5.5 million due to a work stoppage at the Corporation's Haley location and was impacted negatively in the second quarter of 2011 by approximately $12 million due to a work stoppage at the Corporation's Winnipeg location.  Revenues increased by 8.8% in the United States in the second quarter of 2012 in comparison to the second quarter of 2011, primarily due to volume increases on several of the Corporation's single and double aisle aircraft programs and the movement of the stronger US dollar in comparison to the CDN dollar during the same periods in 2012 and 2011.  Revenues in the United Kingdom in the second quarter of 2012 increased by 23.0% over revenues in the same period in 2011 as the Airbus statement of work continues to increase in volume on both new and existing programs.Power Generation Project SegmentRevenues for the Power Generation Project segment were as follows:             Three month period   Six month period      ended June 30   ended June 30Expressed in thousands of dollars     2012   2011   Change   2012   2011   ChangePower Generation Project     6,505   42,279   (84.6)%   27,360   58,151   (53.0)%Total revenues     6,505   42,279   (84.6)%   27,360   58,151   (53.0)%The Corporation's progress achieved on the Ghana electric power generation project in the second quarter of 2012 decreased in comparison to the progress made in the previous year's same quarter as the project approaches the estimated completion date in the fourth quarter of 2012.  In addition, the Corporation recognized revenue in the second quarter of 2011 on additional work which was over and above the initial contract that had previously been recorded in inventory.  As the Corporation moves through 2012, revenue from the Power Generation Project will decrease on a year over year basis unless the Corporation receives further contracts in this area.Gross Profit                            Three month period  Six month period      ended June 30  ended June 30Expressed in thousands of dollars     2012  2011  Change  2012  2011  ChangeGross profit     23,005  21,096  9.1%  49,012  44,855  9.3%Percentage of revenues     13.6%  11.4%     13.8%  12.6%   Gross profit of $23.0 million (13.6% of revenues) was reported for the second quarter of 2012 compared to $21.1 million (11.4% of revenues) during the same period in 2011.  Gross profit in the most recent quarter of 2012 increased over the same period in 2011 due to the change in mix of revenue between the different segments of the Corporation and the recognition of an impairment reversal of $1.5 million in the second quarter of 2012.  The Corporation earned lower gross profits in the second quarter of 2012 and 2011 as a result of the work stoppages at the Corporation's Haley and Winnipeg locations respectively. Administrative and General Expenses                                 Three month period   Six month period      ended June 30   ended June 30Expressed in thousands of dollars     2012   2011   Change   2012   2011   ChangeAdministrative and general expenses     9,221   9,593   (3.9)%   19,149   18,836   1.7%Percentage of revenues     5.4%   5.2%       5.4%   5.3%    Administrative and general expenses were $9.2 million (5.4% of revenues) in the second quarter of 2012 compared to $9.6 million (5.2% of revenues) in the second quarter of 2011.Other                        Three month period   Six month period      ended June 30   ended June 30Expressed in thousands of dollars     2012  2011   2012   2011Foreign exchange loss (gain)     142  514   (37)   393Loss on disposal of property, plant and equipment     8  8   11   30Total other     150  522   (26)   423Other loss of $0.2 million and $0.5 million in the second quarter of 2012 and 2011 respectively, consisted of realized and unrealized foreign exchange losses and losses on the disposal of property, plant and equipment.Interest Expense                         Three month period   Six month period      ended June 30   ended June 30Expressed in thousands of dollars     2012  2011   2012   2011Interest on bank indebtedness and long-term debt     1,953  2,489   3,923   5,410Convertible debenture interest     16  1,000   66   1,986Accretion charge for convertible debt, borrowings and long-term debt     190  187   340   390Discount on sale of accounts receivable     156  192   295   344Total interest expense     2,315  3,868   4,624   8,130Interest expense of $2.3 million in the second quarter of 2012 was lower than the second quarter of 2011 amount of $3.9 million, as interest on bank indebtedness and long-term debt decreased as principal amounts outstanding during the second quarter of 2012 were lower than those in the second quarter of 2011.  Also reduced interest rates on the long-term debt and lower interest rate spreads on bank indebtedness contributed to the reduction in interest expense in the current quarter when compared to the second quarter of 2011.  Interest expense on convertible debentures decreased as the full amount of the $40,000 principal amount outstanding at the end of the second quarter of 2011 was converted by the end of the second quarter of 2012.Provision for Income Taxes                        Three month period   Six month period      ended June 30   ended June 30Expressed in thousands of dollars     2012  2011   2012   2011Expense of current income taxes     872  2   1,785   25Expense of deferred income taxes     1,241  2,146   2,450   5,014Total expense of income taxes     2,113  2,148   4,235   5,039Effective tax rate     18.7%  30.5%   16.8%   29.4%The Corporation recorded an income tax expense of $2.1 million in both the second quarter of 2012 and 2011.  The change in effective tax rates quarter over quarter is a result of a changing mix of income across the different jurisdictions in which the Corporation operates and the inclusion of $1.8 million as a reduction in deferred income tax, due to the recognition of previously unrecognized deferred tax assets, which will not be a recurring event in all future periods.SELECTED QUARTERLY FINANCIAL INFORMATION                                  2012     2011           2010   Expressed in millions of dollars,except per share amounts     Jun 30  Mar 31  Dec 31  Sep 30  Jun 30  Mar 31  Dec 31  Sep 30Revenues     169.5  187.0  173.3  161.6  186.0    170.5    187.9  184.7                            Income before income taxes     11.3  13.9  13.8  10.4  7.0  10.1  19.0  8.9                            Net Income     9.2  11.8  16.7  8.6  4.9  7.2  15.4  8.0                            Net Income per share                             Basic     0.16  0.21  0.90  0.47  0.27  0.40  0.85  0.44  Diluted     0.16  0.20  0.31  0.17  0.10  0.14  0.29  0.16                            EBITDA     21.7  23.5  29.6  20.8  18.5  22.7  32.5  22.3Revenues and net income reported in the quarterly information was impacted by the fluctuations in the Canadian dollar exchange rate in comparison to the US dollar and British Pound.  The US dollar/Canadian dollar exchange rate in the second quarter of 2012 fluctuated reaching a low of 0.9810 and a high of 1.0416.  During the second quarter of 2012, the British Pound relative to the Canadian dollar fluctuated reaching a low of 1.5773 and a high of 1.6189. Had exchange rates remained at levels experienced in the second quarter of 2011, reported revenues in the second quarter of 2012 would have been lower by $5.62 million. Income before income taxes was higher in the second quarter of 2012 than the same quarter in 2011 in large part due to $1.5 million less interest expense and higher gross profit earned in the second quarter of 2012 than in the same period in 2011.  Net income for the fourth quarter of 2010 and 2011 of $15.4 million and $16.7 million respectively was higher than other quarterly net income disclosed in the table above. In the fourth quarter of each year the Corporation recognized a reversal of previous impairment losses against intangible assets relating to various civil aircraft programs.  In addition a portion of previously unrecognized deferred tax assets were recognized in the fourth quarter of each year as the Corporation determined that it will be able to benefit from these assets.EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION (EBITDA)In addition to the primary measures of earnings and earnings per share (basic and diluted) in accordance with IFRS, the Corporation includes certain measures in this news release, including EBITDA (earnings before interest expense, dividends on preference shares, income taxes, depreciation, amortization and certain non-cash charges). The Corporation has provided these measures because it believes this information is used by certain investors to assess financial performance and EBITDA is a useful supplemental measure as it provides an indication of the results generated by the Corporation's principal business activities prior to consideration of how these activities are financed and how the results are taxed in the various jurisdictions.  Each of the components of this measure are calculated in accordance with IFRS, but EBITDA is not a recognized measure under IFRS, and the Corporation's method of calculation may not be comparable with that of other companies. Accordingly, EBITDA should not be used as an alternative to net earnings as determined in accordance with IFRS or as an alternative to cash provided by or used in operations.                        Three month period   Six month period      ended June 30   ended June 30Expressed in thousands of dollars     2012  2011   2012   2011Net income     9,206  4,895   21,030   12,117Interest     2,315  3,868   4,624   8,130Dividends on preference shares     ─  70   ─   310Taxes     2,113  2,148   4,235   5,039Stock-based compensation     (3)  19   3   57Depreciation and amortization     8,016  7,449   15,227   15,533EBITDA     21,647  18,449   45,119   41,186EBITDA for the second quarter of 2012 was $21.7 million, compared to $18.4 million in the second quarter of 2011.  As previously discussed, increased gross profit and decreased interest expense resulted in increased EBITDA for the current quarter.LIQUIDITY AND CAPITAL RESOURCESThe Corporation's liquidity needs can be met through a variety of sources including cash on hand, cash provided by operations, short-term borrowings from its credit facility and accounts receivable securitization program, and long-term debt and equity capacity.  Principal uses of cash are for operational requirements and capital expenditures.  Based on current funds available and expected cash flow from operating activities, management believes that the Corporation has sufficient funds available to meet its liquidity requirements at any point in time.  However, if cash from operating activities is lower than expected or capital projects exceed current estimates, or if the Corporation incurs major unanticipated expenses, it may be required to seek additional capital in the form of debt or equity or a combination of both.Cash Flow from Operations                     Three month period   Six month period    ended June 30   ended June 30Expressed in thousands of dollars   2012   2011   2012   2011Decrease (increase) in accounts receivable   1,456   (7,296)   (22,466)   (18,503)(Increase) decrease in inventories   (5,330)   33,815   (15,623)   28,588Decrease (increase) in prepaid expenses and other   276   (3,133)   (969)   (5,652)(Decrease) increase in accounts payable, accrued liabilities and provisions   (7,518)   (17,128)   14,618   (5,028)Changes to non-cash working capital balances   (11,116)   6,258   (24,440)   (595)Cash provided by operating activities   3,728   18,635   8,790   28,524                 In the quarter ended June 30, 2012, the Corporation generated $3.7 million of cash from its operations, compared to cash generated by operations of $18.6 million in the second quarter of 2011.  Cash was generated mainly by an increase in net income and decrease in accounts receivable and prepaid expenses offset by increases in inventories and decreases in accounts payable, accrued liabilities and provisions.Investing Activities                         Three month period   Six month period      ended June 30   ended June 30Expressed in thousands of dollars     2012   2011   2012   2011Purchase of property, plant and equipment     (8,512)   (8,840)   (12,496)   (14,270)Proceeds of disposals of property plant and equipment     39   ─   42   136Increase in intangibles and other assets     (3,075)   (3,106)   (8,112)   (6,923)Cash used in investing activities     (11,548)   (11,946)   (20,566)   (21,057)                   In the second quarter of 2012, the Corporation invested $8.5 million in property, plant and equipment to upgrade and enhance capabilities for current and future programs and $3.1 million in intangibles and other assets, largely related to deposits placed on new property, plant and equipment to be acquired over the next two years.Financing Activities                         Three month period   Six month period      ended June 30   ended June 30Expressed in thousands of dollars     2012   2011   2012   2011Increase (decrease) in bank indebtedness     1,788   9,233   (3,903)   8,810Increase in debt due within one year     1,751   3,023   17,502   6,781Decrease in long-term debt     (3,662)   (6,186)   (5,858)   (8,368)Increase in long-term debt     ─   822   ─   1,989Increase (decrease) in long-term liabilities and provisions     10   (1,121)   158   (1,458)Increase in borrowings     820   902   1,002   1,618Redemption of preference shares     ─   (12,000)   ─   (12,000)Cash provided by (used in) financing activities     707   (5,327)   8,901   (2,628)                   In 2011 the Corporation amended its credit agreement with its existing lenders and extended the loan [originally $65.0 million] due on July 1, 2011 (the "Original Loan") to Edco Capital Corporation ("Edco"), which is wholly owned by the Chairman of the Board of the Corporation, in order to provide loan facilities for a two year period. Under the terms of the amended operating credit agreement, the Corporation and the lenders have agreed that the maximum available under the operating credit facility was amended to a Canadian dollar limit of $125.0 million plus a US dollar limit of $50.0 million [previously a Canadian dollar limit of $105.0 million plus a US dollar limit of $70.0 million] and the maturity date was extended to April 29, 2013 and continued to be fully guaranteed until April 29, 2013 by the Chairman of the Board of the Corporation, in consideration of the payment by the Corporation of an annual fee payable monthly equal to 0.63% [previously 1.15%] of the gross amount of the operating credit facility. The operating credit facility is extendible for unlimited future one year renewal periods, subject to mutual consent of the syndicate of lenders and the Corporation.The terms of the amended operating credit facility permit the Corporation to (i) repay, in whole or in part, the Original Loan outstanding from Edco and (ii) retract all [approximately $12.0 million] of the Corporation's 8.0% Cumulative Redeemable First Preference Shares Series A (the "Preference Shares) on or after April 30, 2011, together with payment of all accrued and unpaid dividends on the shares to be retracted provided there is no current default or event of default under the operating credit facility and after the repayment of the loan and the payment of the retraction amount the Corporation has at least $25.0 million in availability under the operating credit facility.  As a result, the Corporation retracted all the remaining Preference Shares during the second quarter of 2011 in the amount of $12.0 million.The extension and restatement of the Original Loan [outstanding as at June 30, 2012 in the principal amount of $30.0 million] resulted in a decrease in the interest rate on the Original Loan from 11% per annum to 7.5% per annum commencing July 1, 2011 and the extension of the loan to July 1, 2013 in consideration of the payment on July 1, 2011 of a fee to Edco equal to 1% of the principal amount outstanding on such date.  The Corporation has the right to repay the secured subordinated loan at any time without penalty.On December 31, 2011, the Chairman of the Board of the Corporation exercised his conversion rights under the debenture agreement and $38.0 million principal amount of the 10% convertible debentures ("Convertible Debentures"), the entire amount then held by the Chairman, were converted into 38,000,000 common shares of the Corporation.  On April 30, 2012, the remaining $2.0 million principal amount of the Convertible Debentures were exercised and converted into 2,000,000 common shares.SHARE DATAAs at July 31, 2012, the Corporation had 58,209,001 common shares outstanding. The dilutive weighted average number of common shares outstanding, resulting from the potential common shares issuable on the conversion of the convertible debentures, for the six month period ending June 30, 2012 was 58,209,001.RISKS AND UNCERTAINTIESThe Corporation manages a number of risks in each of its businesses in order to achieve an acceptable level of risk without hindering the ability to maximize returns. Management has procedures to help identify and manage significant operational and financial risks.For more information in relation to the risks inherent in Magellan's business, reference is made to the information under "Risk Factors" in the Corporation's Management's Discussion and Analysis for the year ended December 31, 2011 and to the information under "Risks Inherent in Magellan's Business" in the Corporation's Annual Information Form for the year ended December 31, 2011, which has been filed with SEDAR (www.sedar.com).OUTLOOKThe Corporation exhibited at the 2012 Farnborough International Airshow held from July 9th to 15th in Farnborough, England.  The number of commercial aircraft orders announced at the show were higher than at the Paris Air Show the previous year, although slightly more conservative as there was a higher percentage of letters of intents and memorandums of understandings versus firm orders.  Airlines appear to be balancing the requirement to make fleets more fuel efficient with the need to conserve cash amid the economic uncertainty in Europe and concerns that the US economy will continue to struggle. It must be noted as well, that new fuel efficient aircraft are making older aircraft obsolete and the percentage of parked fleet, which will likely be re-deployed, is now down 6.6% year over year.Boeing announced commercial aircraft orders and commitments at Farnborough for 396 aircraft worth $37 billion and Airbus 115 aircraft for $16.9 billion.  Boeing also released their 20-year commercial aircraft forecast predicting that the current world fleet is expected to double in size by 2031.Players in the US defence industry are intensely focused on the potential outcome of "sequestration" where US$54.5 billion in automatic spending cuts are required in January 2013 as a part of the US government's actions to reduce annual budget deficits of more than US$1 trillion. Defense OEM's have been rallying Congress through their Aerospace Industries Association to recognize the significant impact this will have on an industry that has already been trimmed.  Given this uncertainty the industry has been conservative in its research and development, hiring and capital investments.In the business jet market, a leading indicator of market health is the number of pre-owned aircraft available for sale as percentage of the total in-service fleet.  In July this percentage level was down to 12% which is the lowest in the past four years and an improvement over the 17% level reported in 2009.  While it has been suggested there may be a new norm established for the business jet market following this recession, such a reduced percentage level traditionally has been a signal that the market is expected to rebound.Global helicopter production is forecasted to steadily increase for the next decade with 2015 production rates projected to be as high as the peak 2007-2008 years.  This growth will come primarily from commercial and para-public markets in the short term as defence markets remain tempered.Finally, the 2011 Space Foundation report benchmarked the global space market at $276 billion in 2010 and continuing growth is driven by commercial space products and services.The Corporation is confident that its current core business base in commercial, defence, proprietary products, space and power generation remains well positioned in the marketplace.ADDITIONAL INFORMATIONAdditional information relating to Magellan Aerospace Corporation, including the Corporation's annual information form, can be found on the SEDAR web site at www.sedar.com.FORWARD LOOKING STATEMENTSThis news release contains certain forward-looking statements that reflect the current views and/or expectations of the Corporation with respect to its performance, business and future events.  Such statements are subject to a number of uncertainties and assumptions, which may cause actual results to be materially different from those expressed or implied. These forward looking statements can be identified by the words such as "anticipate", "continue", "estimate", "forecast", "may", "project", "could", "plan", "intend", "should", "believe" and similar words suggesting future events or future performance. In particular there are forward looking statements contained under the headings: "Overview" which outlines certain expectations for future operations and "Outlook" which outlines certain expectations for the future. These statements assume the continuation of the current regulatory and legal environment; the continuation of trends for passenger airliner and defence production and are subject to the risks contained herein and outlined in our annual information form.  The Corporation assumes no future obligation to update these forward-looking statements except as required by law.MAGELLAN AEROSPACE CORPORATIONCONSOLIDATED INTERIM STATEMENTS OF INCOME AND COMPREHENSIVE INCOME                     Three month period endedJune 30   Six month period endedJune 30(unaudited)(expressed in thousands of Canadian dollars, except per share amounts)   2012  2011   2012   2011                Revenues   169,461  185,990   356,453   356,477Cost of revenues   146,456  164,894   307,441   311,622Gross profit   23,005  21,096   49,012   44,855                Administrative and general expenses   9,221  9,593   19,149   18,836Other   150  522   (26)   423Dividends on preference shares   ─  70   ─   310    13,634  10,911   29,889   25,286                Interest   2,315  3,868   4,624   8,130Income before income taxes   11,319  7,043   25,265   17,156                Income taxes                 Current   872  2   1,785   25  Deferred   1,241  2,146   2,450   5,014    2,113  2,148   4,235   5,039Net income    9,206  4,895   21,030   12,117                Other comprehensive income (loss)                 Foreign currency translation   2,474  (7)   660   (3,387)Comprehensive income   11,680  4,888   21,690   8,730                Net income per share                 Basic   0.16  0.27   0.37   0.67  Diluted   0.16  0.10   0.36   0.25                               MAGELLAN AEROSPACE CORPORATIONCONSOLIDATED INTERIM STATEMENTS OF FINANCIAL POSITION               (unaudited)           June 30 December 31(expressed in thousands of Canadian dollars)             2012   2011                     Current assets              Cash           23,756 26,520Trade and other receivables           129,419 106,480Inventories           143,388 127,473Prepaid expenses and other           6,323 5,326            302,886 265,799Non-current assets                    Property, plant and equipment           291,473 289,744Investment properties           2,962 3,041Intangible assets           64,517 66,134Other assets           15,843 8,660Deferred tax assets           31,111 28,360            405,906 395,939Total assets           708,792 661,738               Current liabilities                        Bank indebtedness                 116,952     ─Accounts payable and accrued liabilities and provisions           121,041 106,022Debt due within one year           27,863 12,513            265,856 118,535Non-current liabilities                        Bank indebtedness           ─ 120,674Long-term debt           76,156 81,768Borrowings subject to specific conditions           20,052 18,847Other long-term liabilities and provisions           27,756 29,131Deferred tax liabilities           12,584 10,088            136,548 260,508               Equity                        Share capital           254,440 252,440Contributed surplus           2,044 2,041Other paid in capital           13,565 13,565Retained earnings           41,922 20,892Accumulated other comprehensive loss           (5,583) (6,243)            306,388 282,695Total liabilities and equity           708,792 661,738                             MAGELLAN AEROSPACE CORPORATIONCONSOLIDATED INTERIM STATEMENTS OF CASH FLOW                       Three month period endedJune 30   Six month period endedJune 30(unaudited)(expressed in thousands of Canadian dollars)     2012  2011   2012  2011                 Cash flow from operating activities                 Net income     9,206  4,895   21,030  12,117 Amortization/depreciation of intangible assets and property, plant and equipment     8,016  7,449   15,227  15,533 Loss on disposal of property, plant and equipment     8  8   11  30 Impairment reversal     (1,543)  ─   (1,543)  ─ Decrease in defined benefit plans     (402)  (540)   (1,527)  (1,232) Stock-based compensation     (3)  19   3  57 Accretion     190  187   340  391 Deferred taxes     (628)  359   (311)  2,223 (Decrease) increase in working capital     (11,116)  6,258   (24,440)  (595)Net cash provided by operating activities     3,728  18,635   8,790  28,524                 Cash flow from investing activities                 Purchase of property, plant and equipment     (8,512)  (8,840)   (12,496)  (14,270) Proceeds from disposal of property, plant and equipment     39  ─   42  136 Increase in other assets     (3,075)  (3,106)   (8,112)  (6,923)Net cash used in investing activities     (11,548)  (11,946)   (20,566)  (21,057)                 Cash flow from financing activities                 Increase (decrease) in bank indebtedness     1,788  9,233   (3,903)  8,810 Increase in debt due within one year     1,751  3,023   17,502  6,781 Decrease in long-term debt     (3,662)  (6,186)   (5,858)  (8,368) Increase in long-term debt     ─  822   ─  1,989 Increase (decrease) in long-term liabilities and provisions     10  (1,121)   158  (1,458) Increase in borrowings     820  902   1,002  1,618 Redemption of preference shares     ─  (12,000)   −  (12,000)Net cash provided by (used in) financing activities     707  (5,327)   8,901  (2,628)                 (Decrease) increase in cash during the period     (7,113)  1,362   (2,875)  4,839Cash at beginning of the period     30,533  27,974   26,520  24,952Effect of exchange rate differences     336  (129)   111  (584)Cash at end of the period     23,756  29,207   23,756  29,207  SOURCE: Magellan Aerospace CorporationFor further information: James S. Butyniec President and Chief Executive Officer T: (905) 677-1889 ext. 233 E: jim.butyniec@magellan.aero John B. Dekker Chief Financial Officer & Corporate Secretary T: (905) 677-1889 ext. 224 E: john.dekker@magellan.aero