TORONTO, March 27, 2013 /CNW/ - Magellan Aerospace Corporation ("Magellan" or the "Corporation") released its financial results for the fourth quarter of 2012. All amounts are expressed in Canadian dollars unless otherwise indicated. The results are summarized as follows: Three month period ended Twelve month period ended December 31 December 31 Expressed in 2012 2011 Change 2012 2011 Change thousands of Canadian dollars, except per share amounts Revenues 186,561 173,290 7.7% 704,579 691,410 1.9% Gross 30,649 30,106 1.8% 100,692 97,410 3.4% Profit Net 22,098 16,646 32.8% 58,295 37,413 55.8% Income Net 0.38 0.31 22.6% 1.00 0.73 37.0% Income per Share - Diluted _____________________________________________________________________ |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 and gross profit, the terms for which are not | |defined under International Financial Reporting Standards. The | |Corporation defines EBITDA as net income before interest, dividends | |on preference shares, income taxes, stock-based compensation 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 may not be comparable to similarly titled measures used by | |other companies. | |_____________________________________________________________________| OVERVIEW Magellan 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 UPDATE With 70% of 2012 revenues coming from the commercial aircraft market, Magellan continues to be well positioned to take advantage of the current up cycle in this market segment. The year 2012 benefited from increased single and twin aisle production rates at Boeing and Airbus. Long term agreements secured with both Boeing and Airbus during 2012 confirmed Magellan's participation in key commercial aerospace programs and will serve to further augment the Corporation's strong positioning in this sector for the next decade. While the defence market as a whole is contracting, Magellan is pleased that the Joint Strike Fighter ("JSF") Program achieved a number of key milestones over the course of 2012. Lockheed Martin delivered 30 aircraft in 2012, compared with 13 aircraft in 2011. The flight test program finished 9% ahead of plan for the year, which placed it at almost one third complete. Production orders Lots 5 and Lot 6 were confirmed for partnering countries in the period as well as orders for international customers. While the potential effects of the Budget Control Act and sequestration on the JSF program are unknown thus far, they are expected to be minimal in the near term. Magellan is anticipating moderate growth of JSF revenues over the next few years. The power generation project segment provides specialty products complementary to the Corporation's principal business. The Corporation's sole project at present for the power generation project segment is a 132 megawatt thermal electric power generation plant in the Republic of Ghana. The work is being performed under contract with Canadian Commercial Corporation and is expected to be completed at the end of the first quarter of 2013. Installed capacity for electric power generation continues to lag current requirements in most developing nations with annual growth in demand often exceeding 10%. While interest in additional and complimentary opportunities remains high, at this time the Corporation does not have any additional committed projects. Space products and services are expanding increasingly into everyday human activity, a circumstance that has protected the industry during a global recession, and will continue to propel the growth of the sector for the foreseeable future. The Space Report 2011 reported that the global space economy reached an estimated $276 billion in 2010 with the majority of the 7.7% growth occurring in the commercial sector. Like the aerospace sector the global space market is seeing the effect of rising activities in this market by non-North American and European nations like China, India, and areas across Asia, the Middle East and Africa. Recognizing this, the Government of Canada's Aerospace Space Review, published in November 2012 stated that, "advancing the national interest through space-based activity and fostering a competitive Canadian space industry will require resolve, clear priorities that are set at the highest levels, and effective plans and programs to translate these priorities into practice". In order to support Canada's national efforts, the report issued eight clear recommendations, crafted to define the concrete goals, predictable funding, and orderly implementation required to help Canada's Space sector thrive. This stabilization of direction is expected to assure that the ongoing funding for Canadian space programs is sustained. For additional information, please refer to the "Management's Discussion and Analysis" section of the Corporation's 2012 Annual Report that will be available shortly on www.sedar.com. ANALYSIS OF OPERATING RESULTS FOR THE FOURTH QUARTER ENDED DECEMBER 31, 2012 The Corporation reported higher revenue in the fourth quarter of 2012 than the fourth quarter of 2011, primarily as a result of higher revenues in the aerospace segment. Gross profit and net income for the fourth quarter of 2012 were $30.7 million and $22.1 million, respectively, an increase from the fourth quarter of 2011 gross profit of $30.1 million and an increase from the fourth quarter of 2011 net income of $16.6 million. Consolidated Revenue Overall, the Corporation's revenues increased when compared to the fourth quarter of 2011. Three month period Twelve month period ended December 31 ended December 31 Expressed in 2012 2011 Change 2012 2011 Change thousands of Canadian dollars Aerospace 178,524 162,583 9.8% $ 659,301 $ 609,942 8.1% Power 8,037 10,707 (24.9)% 45,278 81,468 (44.4)% Generation Project Total revenues 186,561 173,290 7.7% 704,579 691,410 1.9% Consolidated sales for the fourth quarter ended December 31, 2012 increased 7.7% to $186.6 million from $173.3 million in the fourth quarter of 2011, due mainly to increased revenues earned in the aerospace segment partially offset by decreased revenues earned in the power generation project segment. As the Corporation moves into 2013, revenues earned on the current power generation project are expected to be completed and the Corporation does not anticipate additional revenues from this segment unless the Corporation receives further contracts in this area. Aerospace Segment Revenues for the Aerospace segment were as follows: Three month period Twelve month period ended December 31 ended December 31 Expressed in 2012 2011 Change 2012 2011 Change thousands of Canadian dollars Canada $ 80,112 $ 79,845 0.3% $ 292,754 $ 284,385 2.9% United States 49,665 47,434 4.7% 199,917 187,658 6.5% Europe 48,747 35,304 38.1% 166,630 137,899 20.8% Total revenues 178,524 162,583 9.8% 659,301 609,942 8.1% Consolidated aerospace revenues for the fourth quarter of 2012 of $178.5 million were 9.8% higher than revenues of $162.6 million in the fourth quarter of 2011. Revenues in Canada in the fourth quarter of 2012 remained consistent with those from the same period in 2011. Revenues in the United States in the fourth quarter of 2012 increased slightly from the fourth quarter of 2011 as production rates on single aisle aircraft continue to increase. Revenues in Europe in the fourth quarter of 2012 increased over revenues in the same period in 2011 mainly as a result of higher customer demand in 2012 on both single aisle and wide body aircraft when compared to 2011. The increase in Europe revenues can also be partially attributed to the contribution of revenue from John Huddleston Engineering Limited ("JHE"), a company acquired in the third quarter of 2012. Power Generation Project Segment Revenues for the Power Generation Project segment were as follows: Three month period Twelve month period ended December 31 ended December 31 Expressed in 2012 2011 Change 2012 2011 Change thousands of Canadian dollars Power Generation $ 8,037 $ 10,707 (24.9)% $ 45,278 $ 81,468 (44.4)% Project Total revenues 8,037 10,707 (24.9)% 45,278 81,468 (44.4)% Decreased revenues in the fourth quarter of 2012 over the same period in 2011 represents the Corporation's activity level on the Ghana electric power generation project in the period in comparison to the activity level made in the previous comparable quarter, as the project moves to final completion. As the Corporation moves into 2013, revenue from the power generation project segment will decrease on a year over year basis unless the Corporation receives further contracts in this area. Gross Profit Three month period Twelve month period ended December 31 ended December 31 Expressed in 2012 2011 Change 2012 2011 Change thousands of Canadian dollars Gross profit $ 30,649 $ 30,106 1.8% $ 100,692 $ 97,410 3.4% Percentage of 16.4% 17.4% 14.3% 14.1% revenues Gross profit of $30.6 million (16.4% of revenues) was reported for the fourth quarter of 2012 compared to $30.1 million (17.4% of revenues) during the same period in 2011. Gross profit in the most recent quarter of 2012, as a percentage of revenues, decreased over the same period in 2011, as the Corporation recorded a reversal of impairment on intangible assets in the fourth quarter of 2011 of $1.8 million in comparison to a net impairment charge of $1.3 million in the fourth quarter of 2012. Also during the fourth quarter of 2012, the Corporation recorded additional investment tax credits ("ITC's") of $7.0 million when compared to the same quarter in the prior year, which directly increased gross profit in the fourth quarter of 2012 by such amount. The additional ITC's of $7.0 million relates to activities of prior periods in which these tax benefits had not been recognized. Additional costs incurred in the quarter for the Ghana electric power generation project also reduced gross profit in the fourth quarter of 2012, when compared to the fourth quarter of 2011. Administrative and General Expenses Three month period Twelve month period ended December 31 ended December 31 Expressed in thousands 2012 2011 Change 2012 2011 Change of Canadian dollars Administrative and 9,948 10,618 (6.3)% 39,203 38,264 2.5% general expenses Percentage of revenues 5.3% 6.1% 5.6% 5.5% Administrative and general expenses were $9.9 million (5.3% of revenues) in the fourth quarter of 2012 compared to $10.6 million (6.1% of revenues) in the fourth quarter of 2011. Other Three month period Twelve month period ended December 31 ended December 31 Expressed in thousands of 2012 2011 2012 2011 Canadian dollars Foreign exchange (gain) loss (259) 200 (623) 238 Loss on disposal of property, 285 81 363 198 plant and equipment Total other 26 281 (260) 436 Other expense of $0.03 million in the fourth quarter of 2012 consisted of realized and unrealized foreign exchange gains offset by losses on the sale of property, plant and equipment. Gain on Bargain Purchase Three month period Twelve month period ended December 31 ended December 31 Expressed in thousands of 2012 2011 2012 2011 Canadian dollars Gain on bargain purchase ─ ─ (9,597) ─ Gain on bargain purchase ─ ─ (9,597) ─ On August 31, 2012, the Corporation purchased all of the issued and outstanding shares of the capital stock of JHE. As a result of such purchase, the Corporation recognized a gain on bargain purchase in 2012 of $9.6 million on such acquisition of JHE as the consideration paid for the identifiable tangible assets acquired was lower than the fair value, as determined by an independent valuation specialist. Interest Expense Three month period Twelve month period ended December 31 ended December 31 Expressed in thousands of 2012 2011 2012 2011 Canadian dollars Interest on bank indebtedness 2,154 1,910 7,982 9,397 and long-term debt Convertible debenture interest ─ 1,008 66 4,000 Accretion charge for convertible (112) 2,376 541 3,155 debenture, borrowings and long-term debt Discount on sale of accounts 196 86 648 447 receivable Interest expense 2,238 5,380 9,237 16,999 Interest expense of $2.2 million in the fourth quarter of 2012 was lower than the fourth quarter of 2011 amount of $5.4 million, largely due to the elimination of interest and accretion on convertible debentures which were not outstanding in the fourth quarter of 2012. Interest on bank indebtedness and long-term debt increased as the expense in 2012 includes interest costs incurred by JHE, a company the Corporation acquired in the third quarter of 2012. Negative accretion charge for the quarter resulted from changes in discount rates in the period. The increase in the discount on sale of accounts receivable in the fourth quarter of 2012 over the same period in 2011 resulted from an increased amount of receivables sold in the fourth quarter of 2012 when compared to the fourth quarter of 2011. Income Taxes Three month period Twelve month period ended December 31 ended December 31 Expressed in thousands of 2012 2011 2012 2011 Canadian dollars Expense (recovery) of current 373 (856) 2,925 280 income taxes (Recovery) expense of deferred (4,034) (1,963) 889 3,708 income taxes Total (recovery) expense of (3,661) (2,819) 3,814 3,988 income taxes Effective tax rate (19.9)% (20.4)% 6.1% 9.6% The Corporation recorded an income tax recovery of $3.7 million in the fourth quarter of 2012, compared to an income tax recovery of $2.8 million for the fourth quarter of 2011. The Corporation recognized deferred tax assets in Canada of $5.8 million in the fourth quarter of 2012 and $0.6 million in the fourth quarter of 2011 due to a reduction of the deferred income tax expense as the benefit from previously unrecorded loss carry forwards and other deferred tax assets of the Corporation were assessed as recoverable. The change in effective tax rates is also a result of a changing mix of income across the different jurisdictions in which the Corporation operates. SELECTED QUARTERLY FINANCIAL INFORMATION Expressed in 2012 2011 millions of Canadian dollars except per share information Mar 31 Jun 30 Sep 30 Dec 31 Mar 31 Jun 30 Sep 30 Dec 31 Revenues 187.0 169.5 161.6 186.5 170.5 186.0 161.6 173.3 Income before 14.0 11.3 18.4 18.4 10.1 7.0 10.4 13.8 taxes Net income 11.8 9.2 15.2 22.1 7.2 4.9 8.6 16.6 Net income per common share Basic 0.21 0.16 0.26 0.38 0.40 0.27 0.47 0.90 Diluted 0.20 0.16 0.26 0.38 0.14 0.10 0.17 0.31 EBITDA 23.5 21.7 28.1 29.1 22.7 18.5 20.8 29.6 Revenues 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 2012 fluctuated reaching a low of 0.9675 and a high of 1.0413. During 2012, the US dollar relative to the Canadian dollar moved from an exchange rate of 1.0170 at the start of the 2012 calendar year to an exchange rate of 0.9949 by December 31, 2012. The British Pound/Canadian dollar exchange rate in 2012 fluctuated reaching a low of 1.5515 and a high of 1.6162. During 2012, the British Pound relative to the Canadian dollar moved from an exchange rate of 1.5799 at the start of the 2012 calendar year to an exchange rate of 1.6178 by December 31, 2012. Had exchange rates remained at levels experienced in 2011, reported revenues in 2012 would have been lower by $1.2 million in the first quarter, $5.6 million in the second quarter and $3.3 million in the third quarter and $1.7 million higher in the fourth quarter. Net income in the third quarter of 2012 was higher than each of the first two quarters of 2012 as the Corporation recognized an after tax gain on bargain purchase of $7.4 million on the acquisition of JHE as the consideration paid was lower than the fair value of the identifiable tangible assets acquired at the time of purchase. Net income for the fourth quarter of 2011 and 2012 of $16.6 million and $22.1 million respectively were higher than most other quarterly net income disclosed in the table above. In the fourth quarter of 2011 the Corporation recognized a reversal of previous impairment losses against intangible assets relating to various civil aircraft programs and in both the fourth quarter of 2011 and 2012 the Corporation recognized previously unrecognized investment tax credits as discussed above in the "Gross Profit" section, and recognized other deferred tax assets as discussed above in the "Income Taxes" section 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 (as net income before interest, dividends on preference shares, income taxes, stock-based compensation and depreciation and amortization). 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 Twelve month period ended December 31 ended December 31 Expressed in thousands of 2012 2011 2012 2011 Canadian dollars Net income 22,098 16,646 58,295 37,413 Interest 2,238 5,380 9,237 16,999 Dividends on preference shares ─ ─ ─ 310 Taxes (3,661) (2,819) 3,814 3,988 Stock-based compensation ─ 18 3 68 Depreciation and amortization 8,386 10,411 31,029 32,835 EBITDA 29,061 29,636 102,378 91,613 EBITDA for the fourth quarter of 2012 was $29.1 million compared to $29.6 million in the fourth quarter of 2011. EBITDA for the twelve month period ended December 31, 2012 includes a $9.6 million gain on bargain purchase on the acquisition of JHE and approximately $10.4 million (versus approximately $5.2 million in fiscal 2011) of investment tax credits recognized as a reduction of cost of revenues, both of which are not likely to recur in future periods. LIQUIDITY AND CAPITAL RESOURCES Cash Flow from Operating Activities Three month period Twelve month period ended December 31 ended December 31 Expressed in thousands of 2012 2011 2012 2011 Canadian dollars Increase in accounts (7,373) (2,460) (20,114) (10,908) receivable Decrease (increase) in 7,839 (1,752) (17,310) 24,704 inventories Decrease (increase) in 592 3,812 (1,792) 6,559 prepaid expenses and other Increase (decrease) in 5,742 (1,273) 13,861 (32,881) accounts payable, accrued liabilities and provisions Changes to non-cash working 6,800 (1,673) (25,355) (12,526) capital balances Cash provided by operating 22,564 21,858 35,890 51,444 activities In the quarter ended December 31, 2012, the Corporation generated $22.6 million of cash from its operations, compared to cash generated by operations of $21.9 million in the fourth quarter of 2011. Investing Activities Three month period Twelve month period ended December 31 ended December 31 Expressed in thousands of 2012 2011 2012 2011 Canadian dollars Acquisition of JHE ─ ─ (13,641) ─ Purchase of property, plant (11,190) (33,423) (33,829) (59,260) & equipment Proceeds from disposals of 120 168 187 514 property, plant & equipment Decrease (increase) in 2,896 17,393 (6,654) 10,381 other assets Cash used in investing (8,174) (15,862) (53,937) (48,365) activities In the fourth quarter of 2012, the Corporation invested $11.2 million in property, plant and equipment to upgrade and enhance capabilities for current and future programs. Financing Activities Three month period Twelve month period ended December 31 ended December 31 Expressed in thousands of 2012 2011 2012 2011 Canadian dollars (Decrease) increase in bank (18,381) (7,092) (7,812) 2,704 indebtedness Increase (decrease) in debt 3,083 (12,725) 20,604 (3,617) due within one year Decrease in long-term debt (1,416) (2,937) (8,849) (17,221) Increase in long-term debt 6,334 15,802 6,334 21,011 Increase in long-term 164 1,079 497 824 liabilities and provisions Increase in borrowings 761 3,315 3,223 6,353 Redemption of preference ─ ─ ─ (12,000) shares Cash (used in) provided by (9,455) (2,558) 13,997 (1,946) financing activities On December 21, 2012, the Corporation amended its operating credit agreement with its existing lenders. Under the terms of the amended agreement, the maximum amount available under the operating credit facility was decreased to a Canadian dollar limit of $115.0 million (down from $125.0 million) plus a US dollar limit of $35.0 million (down from US $50.0 million), with a maturity date of December 21, 2014. The Bank Facility Agreement also includes a Cdn$50 million uncommitted accordion provision which will provide Magellan with the option to increase the size of the operating credit facility to $200 million. The facility is extendible for unlimited future one year renewal periods, subject to mutual consent of the syndicate of lenders and the Corporation. The operating credit facility continues to be fully guaranteed until December 21, 2014 by Mr. Edwards in consideration of the continued payment by the Corporation of an annual fee, payable monthly, equal to 0.50% (down from 0.63%) of the loan amount. On December 21, 2012, the Corporation also extended the 7.5% loan payable ("Original Loan") to Edco Capital Corporation ("Edco"), a corporation controlled by the Chairman of the Board of the Corporation to January 1, 2015 in consideration of the payment of a fee to Edco equal to 0.75% of the principal amount outstanding at the time of extension. The Corporation has the right to repay the Original Loan at any time without penalty. The terms of the amended operating credit agreement continue to permit the Corporation to repay, in whole or in part, the Original Loan from Edco provided there is no current default or event of default under the operating credit facility and after the repayment of the loan the Corporation has at least $25.0 million in availability under the operating credit facility. As at December 31, 2011, the Corporation had retracted all outstanding Preference Shares Series A and reduced the outstanding principal amount of the Original Loan to $33.5 million. During 2012, the Corporation repaid the Original Loan by an additional $3.5 million resulting in an outstanding principal amount of $30.0 million as at December 31, 2012. On December 31, 2011, the Chairman of the Board exercised his conversion rights under the debenture agreement and $38.0 million principal amount of the 10% convertible secured subordinated debentures ("Convertible Debentures") were converted into 38,000,000 common shares of the Corporation. On April 30, 2012, an additional $2.0 million of the Convertible Debentures were converted into 2,000,000 common shares of the Corporation. DERIVATIVE CONTRACTS The Corporation operates internationally, which gives rise to a risk that its income, cash flows and shareholders' equity may be adversely impacted by fluctuations in foreign exchange rates. Currency risk arises because the amount of the local currency receivable or payable for transactions denominated in foreign currencies may vary due to changes in exchange rates and because the non-Canadian dollar denominated financial statements of the Corporation's subsidiaries may vary on consolidation into the reporting currency of Canadian dollars. The Corporation uses derivative financial instruments to help manage foreign exchange risk with the objective of reducing transaction exposures and the resulting volatility of the Corporation's earnings. The Corporation does not trade in derivatives for speculative purposes. Under these contracts the Corporation is obligated to purchase specified amounts at predetermined dates and exchange rates. These contracts are matched with anticipated cash flows in US dollars. The counterparties to the foreign currency contracts are all major financial institutions with high credit ratings. The Corporation had no foreign exchange contracts outstanding as at December 31, 2012. SHARE DATA The authorized capital of the Corporation consists of an unlimited number of Preference Shares, issuable in series, and an unlimited number of common shares. As at March 22, 2013, 58,209,001 common shares were outstanding. RISKS AND UNCERTAINTIES The 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, 2012 and to the information under "Risks Inherent in Magellan's Business" in the Corporation's Annual Information Form for the year ended December 31, 2012, which have been filed with SEDAR at www.sedar.com. OUTLOOK Over the next number of years the global commercial aerospace market is expected to reach record levels of production based on the need to replace older aircraft with new more fuel efficient models and on passenger travel growth in Asia and the Middle East. In contrast, the global defence market is in decline as the pressure to realize budget cuts is at the forefront of most government agendas. The global defence market is expected to see a decline due to decreased spending in the US and European markets. With the US representing 50% of global defence procurement any growth in other countries is unable to effectively offset the potential reductions. Uncertainty in the US defence market is perpetuated by the unknowns of sequestration. In the absence of absolute directives, the US Department of Defense recently issued a memo suggesting that budgets focus primarily on readiness and urgent operational needs. It also suggested the cutting of future units, freezing civilian hiring and canceling certain maintenance activities. All procurement programs are expected to see reduced buys in the magnitude of 10 to 15%. European markets are similarly facing the challenge of reallocating expenditures as a consequence of the current financial and budgetary crisis. As the Western defence industry reacts to the shrinking market new competitive pressures will emerge as the focus shifts towards South American, Middle East and Asian markets. In contrast to defence, the global commercial aerospace market is in a strong up cycle. Backlogs are expected to continue growing, as airlines update their fleets with new fuel-efficient aircraft in order to stay competitive. Boeing and Airbus delivered 601 and 588 aircraft respectively in 2012, as compared with 477 and 534 aircraft delivered in 2011. Production rates for 2013 are forecasted to increase again to 665 and 641 respectively. The 737 program is increasing to 38 per month in the second quarter of 2013 and the A320 is running at 42 per month. The B787 program will no doubt experience some delay due to the recent battery issues, however, firm orders of just under 800 aircraft should see Boeing ramp from 5 per month to 7 per month in 2013 and then to 10 per month in 2014. Airbus has the A330 rate planned to ramp up from 9 per month to 11 per month by the fourth quarter of 2014 and the A380 to increase from 3 per month to 3.5 per month. Prospects exist for regional aircraft market growth with the greatest opportunity to come from Asia/Pacific, Latin America and the Middle East regions. In the near term, two regional segments are expected to be particularly dynamic, the first being the 70 seat turboprop segment and the second the 90 to 120 seat jet market. The first segment has continued to grow due to persistently high fuel prices and the need for larger aircraft to accommodate increasing passenger traffic. Although the Bombardier Q400 is currently suffering a lower order backlog of less than one year, ATR is increasing 72-Series annual production to 80 aircraft in 2013 to satisfy an almost three year backlog. This market is better positioned to grow considering new scope clause agreements between regional airlines and pilots unions. Regional airlines will be replacing their older 35 to 50 seat, in-service fleet with larger turboprop or regional jet aircraft. The 90 to 120 seat regional jet segment is somewhat limited by pilot scope clause agreements, however some predict that the market is poised for growth as Asia/Pacific regions could overtake Europe as the second largest market for regional aircraft. With the 50 seat segment disappearing, this will force airlines to replace this older in-service fleet (52% of the total) with larger turboprops and regional jets. As well, an American/US Air merger is expected to result in additional new orders as the airline adds seats to its regional fleet. Of course there are new fuel-efficient platforms entering this segment such as the Bombardier C-Series, the Mitsubishi MRJ, the Irkuit MS-21 that will increase market competition. Forecast International describes the current business jet market as "sluggish" and "struggling to recover from the wake of the global and financial collapse". The industry is frustrated that recovery has not yet happened despite that all key indicators continue to point in the right direction. Current forecasts suggest that the market is expected to pick up somewhat in the second half of 2013 as equity markets stabilize and corporate profits continue to grow. A positive sign in the market is that Bombardier reported net orders of 343 business jets in 2012 versus 191 in fiscal year 2011. The medium to large cabin jets continue to be more resilient than light jets during this cycle as buyers of the latter are much more sensitive to the economic environment. China is in the process of liberalizing its air space which could lead the growth in business jet aircraft due to the increasing number of wealthy individuals in that country. The Middle East is expected to follow the same pattern. Overall, recovery in this market is expected to be gradual in its year-to-year growth. Finally, the global helicopter market has experienced some contraction because its largest segment, that of defence at 72% of the total, is being trimmed. The combination of the Iraq/Afghanistan withdrawal and US sequestration budget cuts will cause further contraction before recovery can be expected. Prior to this reversal, the industry was experiencing good growth and was anticipating a strong five year period to follow. Where North America dominated the industry to date, rise in military spending and economic growth amongst BRIC (Brazil, Russia, India & China) nations is expected to drive future industry growth. ADDITIONAL INFORMATION Additional 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 STATEMENTS 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 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 CORPORATION ICONSOLIDATED INTERIM STATEMENTS OF INCOME AND COMPREHENSIVE INCOME Three month period Twelve month period ended December 31 ended December 31 (unaudited) (expressed in thousands of Canadian dollars, except per share amounts) 2012 2011 2012 2011 Revenues 186,561 173,290 704,579 691,410 Cost of revenues 155,912 143,184 603,887 594,000 Gross profit 30,649 30,106 100,692 97,410 Administrative and general expenses 9,948 10,618 39,203 38,264 Other 26 281 (260) 436 Gain on bargain purchase ─ ─ (9,597) ─ Dividends on preference shares ─ ─ ─ 310 20,675 19,207 71,346 58,400 Interest 2,238 5,380 9,237 16,999 Income before income taxes 18,437 13,827 62,109 41,401 Income taxes Current 373 (856) 2,925 280 Deferred (4,034) (1,963) 889 3,708 (3,661) (2,819) 3,814 3,988 Net income 22,098 16,646 58,295 37,413 Other comprehensive (loss) income Foreign currency translation (2,743) (5,601) (1,116) 4,149 Actuarial loss on defined benefit pension plans (7,361) (17,530) (7,361) (17,530) Comprehensive income (loss) 11,994 (6,485) 49,818 24,032 Net income per share Basic 0.38 0.90 1.01 2.04 Diluted 0.38 0.31 1.00 0.73 MAGELLAN AEROSPACE CORPORATION CONSOLIDATED INTERIM STATEMENTS OF FINANCIAL POSITION December 31 December 31 (unaudited) (expressed in thousands of Canadian dollars) 2012 2011 Current assets Cash 22,431 26,520 Trade and other receivables 134,361 106,480 Inventories 147,382 127,473 Prepaid expenses and other 7,879 5,326 312,053 265,799 Non-current assets Property, plant and equipment 316,441 289,744 Investment properties 2,875 3,041 Intangible assets 60,701 66,134 Other assets 12,697 8,660 Deferred tax assets 51,040 28,360 443,754 395,939 Total assets 755,807 661,738 Current liabilities Accounts payable, accrued liabilities and provisions 121,644 106,022 Debt due within one year 32,425 12,513 154,069 118,535 Non-current liabilities Bank indebtedness 112,666 120,674 Long-term debt 80,024 81,768 Deferred tax liabilities 14,761 10,088 Borrowings subject to specific conditions 20,768 18,847 Other long-term liabilities and provisions 39,003 29,131 267,222 260,508 Equity Share capital 254,440 252,440 Contributed surplus 2,044 2,041 Other paid in capital 13,565 13,565 Retained earnings 71,826 20,892 Accumulated other comprehensive loss (7,359) (6,243) 334,516 282,695 Total liabilities and equity 755,807 661,738 MAGELLAN AEROSPACE CORPORATION CONSOLIDATED INTERIM STATEMENTS OF CASH FLOW Three month period Twelve month period ended December 31 ended December 31 (unaudited) (expressed in thousands of Canadian dollars) 2012 2011 2012 2011 Cash flow from operating activities Net income 22,098 16,646 58,295 37,413 Amortization/depreciation of intangible assets and property, plant and equipment 8,386 10,411 31,029 32,835 Net loss on disposal of assets 352 39 430 198 Decrease in defined benefit plans (1,591) (564) (4,767) (3,979) Impairment reversal, net 1,273 (1,847) (270) (1,847) Gain on bargain purchase — — (9,597) — Stock-based compensation — 18 3 68 Accretion (112) 2,566 541 3,155 Deferred taxes (14,642) (3,738) (14,419) (3,873) Decrease (increase) in working capital 6,800 (1,673) (25,355) (12,526) Net cash provided by operating activities 22,564 21,858 35,890 51,444 Cash flow from investing activities Acquisition of JHE — — (13,641) — Purchase of property, plant and equipment (11,190) (33,423) (33,829) (59,260) Proceeds from disposal of property, plant and equipment 120 168 187 514 Decrease (increase) in other assets 2,896 17,393 (6,654) 10,381 Net cash used in investing activities (8,174) (15,862) (53,937) (48,365) Cash flow from financing activities (Decrease) Increase in bank indebtedness (18,381) (7,092) (7,812) 2,704 Increase (decrease) in debt due within one year 3,083 (12,725) 20,604 (3,617) Decrease in long-term debt (1,416) (2,937) (8,849) (17,221) Increase in long-term debt 6,334 15,802 6,334 21,011 Increase in long-term liabilities and provisions 164 1,079 497 824 Increase in borrowings 761 3,315 3,223 6,353 Redemption of preference shares ─ — ─ (12,000) Net cash (used in) provided by financing activities (9,455) (2,558) 13,997 (1,946) Increase (decrease) in cash during the period 4,935 3,438 (4,050) 1,133 Cash at beginning of the period 17,104 23,898 26,520 24,952 Effect of exchange rate differences 392 (816) (39) 435 Cash at end of the period 22,431 26,520 22,431 26,520 James S. Butyniec President and Chief Executive Officer T: (905) 677-1889 ext. 233 E:firstname.lastname@example.org John B. Dekker Chief Financial Officer & Corporate Secretary T: (905) 677-1889 ext. 224 E:email@example.com SOURCE: Magellan Aerospace Corporation To view this news release in HTML formatting, please use the following URL: http://www.newswire.ca/en/releases/archive/March2013/27/c8665.html CO: Magellan Aerospace Corporation ST: Ontario NI: ARO ERN -0- Mar/27/2013 12:15 GMT
Magellan Aerospace Corporation announces financial results
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