Magellan Aerospace Corporation announces financial results



    TORONTO, Aug. 12 /CNW/ - Magellan Aerospace Corporation ("Magellan" or
the "Corporation") released its financial results for the second quarter of
2008. All amounts are expressed in Canadian dollars unless otherwise
indicated.

    
    The results are summarized as follows
    -------------------------------------------------------------------------
    (Expressed in
     thousands,        Three-months ended             Six-months ended
     except per              June 30                       June 30
     share        -----------------------------------------------------------
     amounts)         2008      2007    Change      2008      2007    Change
    -------------------------------------------------------------------------
    Revenues      $172,108  $150,283     14.5%  $333,203  $294,338     13.2%
    -------------------------------------------------------------------------
    Gross Profit  $ 17,824  $ 16,213      9.9%  $ 35,145  $ 31,462     11.7%
    -------------------------------------------------------------------------
    Net Income
     (Loss)       $    783  $ (1,734)        -  $  2,834  $ (3,481)        -
    -------------------------------------------------------------------------
    Net Income
     (Loss) per
     share        $   0.02  $  (0.12)        -  $   0.11  $  (0.24)        -
    -------------------------------------------------------------------------
    EBITDA(*)     $ 13,758  $  9,230     49.1%  $ 29,249  $ 18,743     56.1%
    -------------------------------------------------------------------------
    EBITDA(*) per
     share        $   0.76  $   0.51     49.0%  $   1.61  $   1.03     56.3%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    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.

    (*)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.
    -------------------------------------------------------------------------
    

    In the second quarter of 2008, the Corporation generated an increase in
revenue through new program introductions and pricing initiatives, and
maintained gross profit growth, in spite of new program start-up costs,
through efficiencies in operations and administration.
    Improvements continue in EBITDA, demonstrating improved fundamentals in
the Corporation's operations and commercial activities, marked by growth
across all three geographic regions, and growth in spite of currency exchange
fluctuations and some product mix impacts in the second quarter.
    On June 24, 2008 the Corporation amended and restated its credit
agreement with its existing lenders. Under the terms of the amended and
restated agreement, the maximum amount available under the operating credit
facility was increased by $20 million to a Canadian limit of $95 million and a
US limit of $90 million with a maturity date of May 23, 2009. The facility is
extendible for unlimited one-year renewal periods, subject to mutual consent
of the syndicate of lenders and the Corporation, and continues to be
guaranteed by the Chairman of the Corporation. The amended and restated
agreement eliminated all of the financial performance covenants except for a
fixed charge coverage ratio. Magellan used a portion of the additional credit
facility capacity to retire the $15,000,000 bridge loan, due July 31, 2008.
    For additional information, please refer to the "Management's Discussion
and Analysis" section of the Annual Report available on www.sedar.com.

    
    Revenues
    --------

    -------------------------------------------------------------------------
                       Three-months ended             Six-months ended
                             June 30                       June 30
    (Expressed in ----------------------------- -----------------------------
     thousands)       2008      2007    Change      2008      2007    Change
    -------------------------------------------------------------------------
    Canada        $ 79,002  $ 73,139      8.0%  $151,981  $137,781     10.3%
    United States   59,064    47,251     25.0%   113,346    95,314     18.9%
    United
     Kingdom        34,042    29,893     13.9%    67,876    61,243     10.8%
    -------------------------------------------------------------------------
    Total
     revenue      $172,108  $150,283     14.5%  $333,203  $294,338     13.2%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Consolidated revenues for the second quarter of 2008 were $172.1 million,
an increase of $21.8 million or 14.5% over the second quarter of 2007.
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
from the second quarter of 2007. The acquisition of Verdict Aerospace
Components Ltd. ("Verdict") contributed in part 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 second quarter increased
14.3% over the comparative quarter in the prior year as the production of
parts for Airbus increased in the quarter.

    
    Gross Profit
    ------------

    -------------------------------------------------------------------------
                       Three-months ended             Six-months ended
                             June 30                       June 30
    (Expressed in ----------------------------- -----------------------------
     thousands)       2008      2007    Change      2008      2007    Change
    -------------------------------------------------------------------------
    Gross profit  $ 17,824  $ 16,213      9.9%  $ 35,145  $ 31,462     11.7%
    -------------------------------------------------------------------------
    Percentage of
     revenue         10.4%     10.8%            $  10.5%     10.7%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Gross profits of $17.8 million (10.4% of revenues) were reported for the
second quarter of 2008 compared to $16.2 million (10.8% of revenues) during
the same period in 2007. Gross profit, as a percentage of sales, declined over
the second quarter of 2007 due to a change in product mix. The decline in the
value of the U.S. dollar versus the Canadian dollar during the second quarter
of 2008, when compared to the second 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 second quarter of 2007, gross margins would have
been approximately $2.5 million higher in the second quarter of 2008 at
approximately 10.8% of revenues.

    
    Administrative and General Expenses
    -----------------------------------

    -------------------------------------------------------------------------
                                  Three-months ended       Six-months ended
                                        June 30                 June 30
                              -----------------------------------------------
    (Expressed in thousands)        2008        2007        2008        2007
    -------------------------------------------------------------------------
    Administrative and
     general expenses         $   11,133  $   11,011  $   20,694  $   22,536
    Foreign exchange loss/
     (gain)                          534       2,154      (1,056)      2,523
    (Gain) loss on sale of
     capital assets               (1,634)         (4)     (1,634)         19
    -------------------------------------------------------------------------
    Total administrative and
     general expenses         $   10,033  $   13,161  $   18,004  $   25,078
    -------------------------------------------------------------------------
    Percentage of revenue           5.8%        8.8%        5.4%        8.5%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Administrative and general expenses were $10.0 million (5.8% of revenues)
in the second quarter of 2008 compared to $13.2 million (8.8% of revenues) in
the same period of 2007. Administrative and general expenses before foreign
exchange and the gain on the sale of capital assets were $11.1 million (6.5%
of revenues) in the second quarter of 2008 compared to $11.0 million (7.3% of
revenues) in the second quarter of 2007.

    
    Interest Expense
    ----------------

    -------------------------------------------------------------------------
                                  Three-months ended       Six-months ended
                                        June 30                 June 30
                              -----------------------------------------------
    (Expressed in thousands)        2008        2007        2008        2007
    -------------------------------------------------------------------------
    Interest on bank
     indebtedness and other
     long-term debt           $    3,788  $    3,074  $    7,195  $    5,862
    Convertible debenture
     interest                        444       1,487       1,249       2,975
    Accretion charge for
     convertible debt                 64         590         306       1,174
    Discount on sale of
     accounts receivable           1,187       1,021       2,268       1,835
    -------------------------------------------------------------------------
    Total interest expense    $    5,483  $    6,172  $   11,018  $   11,846
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Interest expense in the second quarter of 2008 was $5.5 million, $0.7
million lower than the second quarter of 2007. Interest and accretion expense
in relation to the convertible debentures were lower in the second 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
    ----------------------------------------

    -------------------------------------------------------------------------
                                  Three-months ended       Six-months ended
                                        June 30                 June 30
                              -----------------------------------------------
    (Expressed in thousands)        2008        2007        2008        2007
    -------------------------------------------------------------------------
    Provision for current
     income taxes             $      208  $      844  $      208  $      933
    Expense (recovery) of
     future income taxes           1,317      (2,230)      3,081      (2,914)
    -------------------------------------------------------------------------
    Total expense (recovery)
     of income taxes          $    1,525  $   (1,386) $    3,289  $   (1,981)
    -------------------------------------------------------------------------
    Effective Tax Rate             66.1%       44.4%       53.7%       36.3%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    The Corporation recorded an income tax expense of $1.5 million for the
second quarter of 2008, compared to an income tax recovery of $1.4 million for
the second quarter of 2007. The effective rate of income tax expense was 66.1%
in the second quarter of 2008 compared with a recovery of income taxes rate of
44.4% in the second quarter of 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 and due to the unrecorded tax benefits derived from
timing differences in Canada. 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)
    -----------------------------------------------------------------------

    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 earnings as
determined in accordance with GAAP or as an alternative to cash provided by or
used in operations.

    
    -------------------------------------------------------------------------
                                  Three-months ended       Six-months ended
                                        June 30                 June 30
                              -----------------------------------------------
    (Expressed in thousands)        2008        2007        2008        2007
    -------------------------------------------------------------------------
    Net income (loss)         $      783  $   (1,734) $    2,834  $   (3,481)
    Interest                       5,483       6,172      11,018      11,846
    Taxes                          1,525      (1,386)      3,289      (1,981)
    Stock based compensation         295         395         613         650
    Depreciation and
     amortization                  5,672       5,783      11,495      11,709
    -------------------------------------------------------------------------
    EBITDA                    $   13,758  $    9,230  $   29,249  $   18,743
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    EBITDA for the second quarter of 2008 was $13.8 million, compared to
$9.2 million in the second quarter of 2007. Growth in revenues, higher gross
profit and lower administrative and general expenses in the second quarter of
2008 compared to 2007 contributed to the increase in EBITDA for the current
quarter.

    
    Liquidity and Capital Resources
    -------------------------------

    Cash Flow from Operations
    -------------------------

    -------------------------------------------------------------------------
                                  Three-months ended       Six-months ended
                                        June 30                 June 30
                              -----------------------------------------------
    (Expressed in thousands)        2008        2007        2008        2007
    -------------------------------------------------------------------------
    Decrease (increase) in
     accounts receivable      $    3,111  $    7,599  $   (2,236) $   (5,010)
    Increase in inventories       (7,752)     (5,995)    (18,990)    (23,335)
    Increase in prepaid
     expenses and other             (652)     (7,627)       (312)     (8,441)
    Increase in accounts payable   4,518      12,960       5,604      13,060
    -------------------------------------------------------------------------
    Changes to non-cash
     working capital
     balances                 $     (775) $    6,937  $  (15,934) $  (23,726)
    -------------------------------------------------------------------------
    Cash provided by (used
     in) operating
     activities               $    3,793  $    9,027  $   (1,951) $  (19,318)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    In the quarter ended June 30, 2008, the Corporation generated $3.8
million of cash in its operations, compared to $9.0 million in the second
quarter of 2007. Cash was generated by decreased accounts receivable and
increased accounts payable offset by an increase in inventories. Production
inventories rose in response to increasing demand from the Corporation's
customers.

    
    Investing Activities
    --------------------

    -------------------------------------------------------------------------
                                  Three-months ended       Six-months ended
                                        June 30                 June 30
                              -----------------------------------------------
    (Expressed in thousands)        2008        2007        2008        2007
    -------------------------------------------------------------------------
    Acquisition of Verdict    $        -  $        -  $   (4,240) $        -
    Purchase of capital
     assets                       (4,696)     (3,259)     (9,337)    (10,345)
    Proceeds of disposals of
     capital assets                2,639          79       2,784         353
    Decrease (increase) in
     other assets                    142          67      (1,440)      1,084
    -------------------------------------------------------------------------
    Cash used in investing
     activities               $   (1,915) $   (3,113) $  (12,233) $   (8,908)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    In the second quarter of 2008, the Corporation invested $4.7 million in
capital assets to upgrade and enhance its capabilities for current and future
programs.

    
    Financing Activities
    --------------------
    -------------------------------------------------------------------------
                                  Three-months ended       Six-months ended
                                        June 30                 June 30
                              -----------------------------------------------
    (Expressed in thousands)        2008        2007        2008        2007
    -------------------------------------------------------------------------
    Increase in bank
     indebtedness             $   13,352  $    1,149  $   27,687  $   20,957
    Decrease in loan payable     (15,000)          -     (15,000)          -
    Increase in loan payable           -           -      15,000           -
    (Decrease) increase of
     long-term debt                 (850)       (580)    (16,462)     13,826
    Increase in long-term debt         -           -      50,000           -
    Decrease in convertible
     debentures                        -           -     (69,985)          -
    Increase in convertible
     debentures                        -           -      20,778           -
    Decrease in long-term
     liabilities                    (334)     (6,993)       (763)     (9,597)
    Issue of Common Shares            20          21          43          39
    Dividends on Preference
     Shares                         (400)       (400)       (800)       (800)
    -------------------------------------------------------------------------
    Cash (used in) provided
     by financing activities  $   (3,212) $   (6,803) $   10,498   $  24,425
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    The Corporation amended its operating credit facility with its existing
lenders on June 24, 2008. Under the terms of the amended agreement, the
maximum amount available under the operating credit facility was increased by
$20 million to a Canadian dollar limit of $95 million plus a US dollar limit
of $90 million, with a maturity date of May 23, 2009. The facility is
extendable for unlimited one-year renewal periods by the agreement of the
Corporation and the lenders and continues to be guaranteed by the Chairman of
the Corporation. An annual standby guarantee fee in 2008 of 1.0% (2007 - 0.1%)
of the guaranteed amount was provided by the Corporation in consideration for
this guarantee. This standby fee was increased to 1.35% on June 24, 2008 in
consideration for providing additional security for the Corporation's
obligations. Due to this guarantee, interest is charged at the bankers'
acceptance or LIBOR rates plus 1.0%, compared to the rate of bankers'
acceptance or LIBOR rates plus 4.5% that was charged in 2005 prior to the
guarantee being provided. The net annual savings to the Corporation is
approximately $4.25 million assuming an average of $170.0 million borrowed
under the operating capacity.
    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. This
loan was repaid on January 30, 2008.
    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 (Note 4 - Refinancing).
    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 was repayable on July 31, 2008. The
Corporation repaid the Bridge Loan on June 24, 2008.

    Share Data and Share Consolidation
    ----------------------------------

    As at July 31, 2008, the Corporation had 18,185,055 common shares
outstanding and 2,000,000 outstanding First Preference Shares Series A.
    At the Corporation's Annual General and Special Meeting, the
Corporation's shareholders approved 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, which was effective May 21,
2008.

    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 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 "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:

    
    -------------------------------------------------------------------------
                                        Reported,                   Restated,
                                           as at     Impact of         as at
                                     December 31,   accounting     January 1,
                                            2007       changes          2008
    -------------------------------------------------------------------------
    Assets
    Inventories                        $ 274,011     $(118,171)    $ 155,840
    Capital assets                       245,727        10,852       256,579
    Other assets                          55,707        67,471       123,178
    -------------------------------------------------------------------------
                                       $ 575,445     $ (39,848)    $ 535,597
    -------------------------------------------------------------------------
    Liabilities
    Future income tax liabilities      $  16,799     $  (7,692)    $   9,107
    -------------------------------------------------------------------------
    Shareholders' equity               $ 265,927     $ (32,156)    $ 233,771
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    On January 1, 2008, 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.
    Section 3064, Goodwill and Other Intangible Assets, will replace Handbook
Section 3062, Goodwill and Other Intangible Assets. This new standard will be
effective for fiscal years beginning on or after October 1, 2008 and the
Corporation will adopt it on January 1, 2009. It establishes standards for the
recognition, measurement, presentation and disclosure of goodwill subsequent
to its initial recognition and of intangible assets by profit-oriented
enterprises. Standards concerning goodwill are unchanged from the standards
included in the previous Section 3062. The Corporation is currently evaluating
the impact of the adoption of this new Section on its financial statements.

    Outlook
    -------

    The outlook for the aerospace industry has been affected by the rise in
fuel prices and energy costs. In the civil sector both Boeing and Airbus
continue to win orders for new aircraft boosting backlogs, which are at record
levels. However, the financial difficulties now being experienced by airlines
has caused consolidation of routes, proposed mergers in airlines and
retirement of older aircraft. On the positive side, the demand for more fuel
efficient aircraft is encouraging and new models are being developed.
Bombardier announced the launch of the new C series aircraft. On the defence
side, new programs are continuing with all required funds fully committed.
There is some pressure on finances also caused by the fuel price increases but
so far governments have been able to both absorb and fund new activity. This
is particularly true for the JSF and F18E/F programs.
    Defence and Space sector work continues to provide additional opportunity
for Magellan, and the Corporation has been successful in targeting a number of
programs that require its core capabilities. The international, US-led, Joint
Strike Fighter (JSF) program, and NASA's Orion space shuttle replacement
program lead the way for Magellan. The JSF program, including the F-35
aircraft in three variants, and the F135 and F136 engines, represent important
opportunities for Magellan. The program is expected to grow through low-rate
production over the next several years, and enter full rate production in
2013. Magellan is well-advanced in its development and initial production work
on the program, and expects to continue rapid progress towards production.
    The combination of existing high-volume civil aircraft work within
Magellan, and the ramp-up of new aircraft programs being introduced, is
expected to grow Magellan's civil aerospace activities over the next decade.
The Corporation also expects that defence work will grow throughout the
foreseeable future, and will maintain the desired balance for Magellan between
the civil and defence sectors.

    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).

    
    -------------------------------------------------------------------------
    MAGELLAN AEROSPACE CORPORATION

    CONSOLIDATED STATEMENTS OF OPERATIONS
    AND RETAINED EARNINGS

    (unaudited)                   Three-months ended        Six-months ended
                                         June 30                 June 30
                              -----------------------------------------------
    (Expressed in thousands of
     dollars, except per share
     amounts)                       2008        2007        2008        2007
    -------------------------------------------------------------------------
    Revenues                  $  172,108  $  150,283  $  333,203  $  294,338
    Cost of revenues             154,284     134,070     298,058     262,876
    -------------------------------------------------------------------------
    Gross Profit                  17,824      16,213      35,145      31,462
    -------------------------------------------------------------------------

    Administrative and
     general expenses             10,033      13,161      18,004      25,078
    Interest                       5,483       6,172      11,018      11,846
    -------------------------------------------------------------------------
                                  15,516      19,333      29,022      36,924
    -------------------------------------------------------------------------
    Income (loss) before
     income taxes                  2,308      (3,120)      6,123      (5,462)

    Provision for (recovery
     of) income taxes
      Current                        208         844         208         933
      Future                       1,317      (2,230)      3,081      (2,914)
    -------------------------------------------------------------------------
                                   1,525      (1,386)      3,289      (1,981)
    -------------------------------------------------------------------------
    Net income (loss) for
     the period                      783      (1,734)      2,834      (3,481)
    -------------------------------------------------------------------------

    Retained Earnings,
     beginning of the period      52,242      95,892      82,747      98,039
    Effect of change in
     accounting policy                 -           -      32,156           -
    -------------------------------------------------------------------------
    Adjusted retained earnings,
     beginning of period          52,242      95,892      50,591      98,039
    Dividends                       (400)       (400)       (800)       (800)
    Net income (loss)
     for the period                  783      (1,734)      2,834      (3,481)
    -------------------------------------------------------------------------
    Retained Earnings,
     end of the period        $   52,625  $   93,758  $   52,625  $   93,758
    -------------------------------------------------------------------------
    Earnings (loss) per share
    -------------------------------------------------------------------------
      Basic and Diluted             0.02       (0.12)       0.11       (0.24)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    -------------------------------------------------------------------------
    MAGELLAN AEROSPACE CORPORATION

    CONSOLIDATED STATEMENTS OF
    COMPREHENSIVE (LOSS) INCOME

    (unaudited)                   Three-months ended        Six-months ended
                                         June 30                 June 30
                              -----------------------------------------------
    (Expressed in thousands
     of dollars)                    2008        2007        2008        2007
    -------------------------------------------------------------------------
    Net income (loss)
     for the period           $      783  $   (1,734) $    2,834  $   (3,481)
    Other comprehensive
     (loss) income:
    Unrealized (loss) gain
     on translation of
     financial statements
     of self-sustaining
     foreign operations             (998)    (12,115)      4,300     (13,266)
    -------------------------------------------------------------------------
    Comprehensive (loss)
     income                   $     (215) $  (13,849) $    7,134  $  (16,747)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    -------------------------------------------------------------------------
    MAGELLAN AEROSPACE CORPORATION

    CONSOLIDATED BALANCE SHEETS

    (unaudited)                                          As at         As at
                                                       June 30   December 31

                                                          2008          2007
    (Expressed in thousands of dollars)
    -------------------------------------------------------------------------
    ASSETS
    Current
    Cash                                            $    1,462    $    4,884
    Accounts receivable                                 41,182        35,659
    Inventories                                        180,627       274,011
    Prepaid expenses and other                          13,671        13,127
    Future income tax assets                             6,153         6,264
    -------------------------------------------------------------------------
    Total current assets                               243,095       333,945

    Capital assets                                     261,375       245,727
    Other assets                                       126,650        55,707
    Future income tax assets                            13,463        14,064
    -------------------------------------------------------------------------
    Total assets                                    $  644,583    $  649,443
    -------------------------------------------------------------------------

    LIABILITIES AND SHAREHOLDERS' EQUITY
    Current
    Bank indebtedness                               $  171,025    $  139,748
    Accounts payable and accrued charges               127,934       119,881
    Convertible debentures                                   -        13,834
    Current portion of long-term debt                    1,918         2,099
    -------------------------------------------------------------------------
    Total current liabilities                          300,877       275,562

    Long-term debt                                      63,203        27,839
    Future income tax liabilities                       11,936        16,799
    Convertible debentures                              20,371        55,950
    Other long-term liabilities                          6,890         7,366
    -------------------------------------------------------------------------
    Total liabilities                                  403,277       383,516
    -------------------------------------------------------------------------

    Shareholders' equity
    Capital stock                                      234,353       234,310
    Contributed surplus                                  3,862         3,249
    Other paid in capital                               11,645        11,100
    Retained earnings                                   52,625        82,747
    Accumulated other comprehensive loss               (61,179)      (65,479)
    -------------------------------------------------------------------------
    Total shareholders' equity                         241,306       265,927
    -------------------------------------------------------------------------
    Total liabilities and shareholders' equity      $  644,583  $    649,443
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    -------------------------------------------------------------------------
    MAGELLAN AEROSPACE CORPORATION

    STATEMENT OF CASH FLOWS

    (unaudited)                   Three-months ended        Six-months ended
                                         June 30                 June 30
    -------------------------------------------------------------------------
    (Expressed in thousands
     of dollars)                    2008        2007        2008        2007
    -------------------------------------------------------------------------
    OPERATING ACTIVITIES
    Net income (loss) for
     the period               $      783  $   (1,734) $    2,834  $   (3,481)
    Add (deduct) items not
     affecting cash
      Depreciation and
       amortization                5,672       5,783      11,495      11,709
      Net (gain) loss on sale
       of capital asset           (1,634)         (4)     (1,634)         19
      Employee future benefits    (2,009)       (710)     (2,867)     (2,749)
      Deferred revenue                80           -         155           -
      Stock based compensation       295         395         613         650
      Accretion of
       convertible debentures         64         590         306       1,174
      Future income tax
       expense (recovery)          1,317      (2,230)      3,081      (2,914)
    -------------------------------------------------------------------------
                                   4,568       2,090      13,983       4,408
    -------------------------------------------------------------------------
    Net change in non-cash
     working capital items
     relating to operating
     activities                     (775)      6,937     (15,934)    (23,726)
    -------------------------------------------------------------------------
    Cash generated (used in)
     by operating activities       3,793       9,027      (1,951)    (19,318)
    -------------------------------------------------------------------------

    INVESTING ACTIVITIES
    Acquisition of Verdict             -           -      (4,240)          -
    Purchase of capital assets    (4,696)     (3,259)     (9,337)    (10,345)
    Proceeds from disposal of
     capital assets                2,639          79       2,784         353
    Decrease (increase) in
     other assets                    142          67      (1,440)      1,084
    -------------------------------------------------------------------------
    Cash used in investing
     activities                   (1,915)     (3,113)    (12,233)     (8,908)
    -------------------------------------------------------------------------

    FINANCING ACTIVITIES
    Increase in bank
     indebtedness                 13,352       1,149      27,687      20,957
    Decrease in loan payable     (15,000)          -     (15,000)          -
    Increase in loan payable           -           -      15,000           -
    (Decrease) increase in
     long-term debt                 (850)       (580)    (16,462)     13,826
    Increase in long-term debt         -           -      50,000           -
    Decrease in convertible
     debentures                        -           -     (69,985)          -
    Increase in convertible
     debentures                        -           -      20,778           -
    Decrease in long-term
     liabilities                    (334)     (6,993)       (763)     (9,597)
    Issuance of Common Shares         20          21          43          39
    Dividends on Preference
     Shares                         (400)       (400)       (800)       (800)
    -------------------------------------------------------------------------
    Cash (used in) provided by
     financing activities         (3,212)     (6,803)     10,498      24,425
    -------------------------------------------------------------------------

    Effect of exchange rate
     changes on cash                 (59)       (907)        264        (676)
    -------------------------------------------------------------------------

    Net decrease in cash
     during the period            (1,393)     (1,796)     (3,422)     (4,477)
    Cash, beginning of period      2,855       7,215       4,884       9,896
    -------------------------------------------------------------------------
    Cash, end of period       $    1,462  $    5,419  $    1,462  $    5,419
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    %SEDAR: 00002367E




For further information:

For further information: James S. Butyniec, President and Chief
Executive Officer, T: (905) 677-1889 ext. 233, E: jim.butyniec@magellan.aero;
John B. Dekker, Vice President Finance & Corporate Secretary, T: (905)
677-1889 ext. 224, E: john.dekker@magellan.aero


Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

CNW Membership

Fill out a CNW membership form or contact us at 1 (877) 269-7890

Learn about CNW services

Request more information about CNW products and services or call us at 1 (877) 269-7890