Magellan Aerospace Corporation announces financial results



    TORONTO, May 12 /CNW/ - Magellan Aerospace Corporation ("Magellan" of the
"Corporation") released its financial results for the first quarter of 2009.
All amount are expressed in Canadian dollars unless otherwise indicated. The
results are summarized as follows:

    
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                                                   Three-months ended
                                                        March 31
    (Expressed in thousands,               ----------------------------------
     except per share amounts)                2009        2008      Change
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    Revenues                               $ 179,288   $ 161,095      11.3 %
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    Gross Profit                           $  21,704   $  17,321      25.3 %
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    Net Income                             $   7,923   $   2,051     286.3 %
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    Net Income per share                   $    0.41   $    0.09     355.5 %
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    This press release contains certain forward-looking statements that
    reflect the current views and/or expectations of the Corporation with
    respect to its performance, business and future events. Such statements
    are subject to a number of risks, uncertainties and assumptions, which
    may cause actual results to be materially different from those expressed
    or implied. The Corporation assumes no future obligation to update these
    forward-looking statements.

    The Corporation has included certain measures in this quarterly
    statement, including EBITDA, the terms for which are not defined under
    Canadian generally accepted accounting principles. The Corporation
    defines EBITDA as earnings before interest, taxes, 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 first quarter of 2009, the Corporation continued the steadily
improved performance demonstrated in 2008, generating increased revenues and
gross profit over the first quarter 2008. Net income for the first quarter of
2009 was also better than first quarter 2008. Revenues in the first quarter of
2009 benefited in part from the strengthening of the United States dollar in
relation to the Canadian dollar, but this benefit was partially offset by the
lower value of the British Pound to the Canadian dollar. The favourable
results reported also benefited from increased efficiencies in production, and
improved cost control across the Corporation.
    At the same time, the Corporation has experienced decreased production
expectations on certain product lines, and expects this to continue through
2009 and into 2010 due to the current economic environment. To date, these
decreases have occurred primarily in the business aviation sector, but
management believes that production reductions for twin-aisle civil aircraft
may also occur late in 2009 for 2010 production. The Corporation has received
continuing orders on current legacy work, and increasingly on new programs as
the production rates accelerate over the next several years.
    The Corporation achieved improvements in operating efficiency as new
technology and methodologies reached operational status at its operating
sites, and through continued transfer of non-core work packages to emerging
market sites. This has the added benefit of generating capacity in its
facilities for additional complex core work. The Corporation's jointly owned
treatments facility in India, which completed construction in the fourth
quarter of 2008, has begun receiving customer certifications that allow
operations to proceed.
    For additional information, please refer to the "Management's Discussion
and Analysis" section of the Annual Report available on www.sedar.com.

    
    Revenues
    --------

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                                                   Three-months ended
                                                        March 31
                                           ----------------------------------
    (Expressed in thousands)                  2009        2008      Change
    -------------------------------------------------------------------------
    Canada                                 $  83,992   $  72,979      15.1 %
    United States                             54,573      54,282       0.1 %
    United Kingdom                            40,723      33,834      20.4 %
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    Total revenue                          $ 179,288   $ 161,095      11.3 %
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    Consolidated revenues for the first quarter of 2009 were $179.3 million,
an increase of $18.2 million or 11.3% over the first quarter of 2008.
Increased revenues in both Canada and the United States when compared to the
same period in 2008 can largely be attributed to the appreciation of the U.S.
dollar exchange rate versus the Canadian dollar. In native currency, revenues
in the United States declined from the first quarter of 2008 primarily as a
result of the reduced requirements stemming from the late 2008 strike at one
of the Corporation's major customer. Revenues in the United Kingdom increased
over revenues in the same period in 2008, despite the decline in the British
Pound exchange rate versus the Canadian dollar. Revenues in the United Kingdom
in native currency increased by 34% due to increased production activity
surrounding the Airbus family of parts. The appreciation of the U.S. dollar
and the decline of the British Pound against the Canadian dollar, over the
exchange rates prevailing in the first quarter of 2008, contributed, on a net
basis, an increase of $15.9 million in revenues.

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

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                                                   Three-months ended
                                                        March 31
                                           ----------------------------------
    (Expressed in thousands)                  2009        2008      Change
    -------------------------------------------------------------------------
    Gross profit                           $  21,704   $  17,321      25.3 %
    -------------------------------------------------------------------------
    Percentage of revenue                     12.1 %      10.8 %
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    Gross profit of $21.7 million (12.1% of revenues) was reported for the
first quarter of 2009 compared to $17.3 million (10.8% of revenues) during the
same period in 2008. Gross profit, as a percentage of revenues, increased as a
result of the appreciation of the U.S. dollar exchange rate versus the
Canadian dollar in the quarter, the realization of price increases over the
same period in 2008 as well as changes in product mix. Increased margins in
the first quarter of 2009 over the first quarter of 2008 were offset by the
reduced requirements at several plants due to the late 2008 strike at one of
the Corporation's major customers as well as the decline in the average
British Pound exchange rate versus the Canadian dollar. Had the U.S. and
British Pound exchange rates remained the same as in the first quarter of
2008, gross margin would have been approximately $4.7 million lower for the
first quarter of 2009.

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

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                                                         Three-months ended
                                                              March 31
                                                       ----------------------
    (Expressed in thousands)                              2009        2008
    -------------------------------------------------------------------------
    Administrative and general expenses                $  10,775   $   9,561
    Foreign exchange gain                                 (1,973)     (1,590)
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    Total administrative and general expenses          $   8,802   $   7,971
    -------------------------------------------------------------------------
    Percentage of revenue                                  4.9 %       5.0 %
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    Total administrative and general expenses were $8.8 million (4.9% of
revenues) in the first quarter of 2009 compared to $8.0 million (5.0% of
revenues) in the same period of 2008. Administrative and general expenses
before foreign exchange were $10.8 million (6.0% of revenues) in the first
quarter of 2009, consistent with the first quarter of 2008 at $9.6 million
(5.9% of revenues).

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

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                                                         Three-months ended
                                                              March 31
                                                       ----------------------
    (Expressed in thousands)                              2009        2008
    -------------------------------------------------------------------------
    Interest on bank indebtedness and
     other long-term debt                              $   2,994   $   3,407
    Convertible debenture interest                           436         805
    Accretion charge for convertible debt                     68         242
    Discount on sale of accounts receivable                  777       1,081
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    Total interest expense                             $   4,275   $   5,535
    -------------------------------------------------------------------------
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    Interest expense of $4.3 million in the first quarter of 2009 was lower
than the first quarter of 2008 amount of $5.5 million. Accretion expense in
relation to the convertible debentures was lower in the first quarter of 2009
than the comparative quarter in 2008 due to a lower principal amount of
convertible debentures outstanding. Lower discount expense on the sale of
accounts receivable resulted from decreased amounts of accounts receivables
sold in the first quarter of 2009 when compared to the same quarter of 2008.
Lower interest rates in the first quarter of 2009 when compared to the same
quarter of 2008 also resulted in lower interest charges on the bank
indebtedness.

    
    Provision for Income Taxes
    --------------------------

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                                                         Three-months ended
                                                              March 31
                                                       ----------------------
    (Expressed in thousands)                              2009        2008
    -------------------------------------------------------------------------
    Provision for current income taxes                 $     169   $       -
    Expense of future income taxes                           535       1,764
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    Total expense of income taxes                      $     704   $   1,764
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    Effective Tax Rate                                     8.2 %      46.2 %
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    The Corporation recorded an income tax expense of $0.7 million for the
first quarter of 2009, compared to an income tax expense of $1.8 million for
the first quarter of 2008. The change in effective tax rates is a result of a
changing mix of income across the different jurisdictions in which the
Corporation operates. The recognition of previous unrecorded future tax assets
derived from temporary differences in Canada also contributed to the lower
effective tax rate.

    
    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 MD&A,
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.

    
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                                                         Three-months ended
                                                              March 31
                                                       ----------------------
    (Expressed in thousands)                              2009        2008
    -------------------------------------------------------------------------
    Net income                                         $   7,923   $   2,051
    Interest                                               4,275       5,535
    Taxes                                                    704       1,764
    Stock based compensation                                 232         318
    Depreciation and amortization                          9,299       5,823
    -------------------------------------------------------------------------
    EBITDA                                             $  22,433   $  15,491
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    EBITDA for the first quarter of 2009 was $22.4 million, compared to $15.5
million in the first quarter of 2008. Growth in revenues and higher gross
profit in the first quarter of 2009 compared to 2008 contributed to the
increase in EBITDA for the current quarter.

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

    Cash Flow from Operations
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                                                         Three-months ended
                                                              March 31
                                                       ----------------------
    (Expressed in thousands)                              2009        2008
    -------------------------------------------------------------------------
    Increase in accounts receivable                    $ (20,016)  $  (5,347)
    Decrease (increase) in inventories                     2,830     (11,238)
    Decrease in prepaid expenses and other                   398         340
    (Decrease) increase in accounts payable              (12,555)      1,086
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    Changes to non-cash working capital balances       $ (29,343)  $ (15,159)
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    Cash used in operating activities                  $ (11,060)  $  (5,744)
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    In the quarter ended March 31, 2009, the Corporation used $11.1 million
of cash in its operations, compared to $5.7 million in the first quarter of
2008. Cash was used by increased accounts receivable and decreased accounts
payable, offset by a decrease in inventory. The increase in accounts
receivable resulted from increased sales in the first quarter of 2009 when
compared to the same quarter in 2008 as well as a decrease in the amount of
accounts receivable sold under the securitization facility at the end of the
first quarter of 2009.

    
    Investing Activities
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                                                         Three-months ended
                                                              March 31
                                                       ----------------------
    (Expressed in thousands)                              2009        2008
    -------------------------------------------------------------------------
    Acquisition of Verdict                             $       -   $  (4,240)
    Purchase of capital assets                            (5,345)     (4,641)
    Proceeds of disposals of capital assets                  144         145
    Increase in other assets                                (448)     (1,582)
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    Cash used in investing activities                  $  (5,649)  $ (10,318)
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    In the first quarter of 2009, the Corporation invested $5.3 million in
capital assets to upgrade and enhance its capabilities for current and future
programs.

    Financing Activities
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                                                         Three-months ended
                                                              March 31
                                                       ----------------------
    (Expressed in thousands)                              2009        2008
    -------------------------------------------------------------------------
    Increase in bank indebtedness                      $  14,042   $  14,335
    Increase in loan payable                                   -      15,000
    Decrease in long-term debt                              (547)    (15,612)
    Increase in long-term debt                                 -      50,000
    Decrease in convertible debentures                         -     (69,985)
    Increase in convertible debentures                         -      20,778
    Decrease in long-term liabilities                       (100)       (429)
    Issue of Common Shares                                     8          23
    Dividends on Preference Shares                             -        (400)
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    Cash provided by financing activities              $  13,403   $  13,710
    -------------------------------------------------------------------------
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    As previously announced, the Corporation amended its operating credit
facility with its existing lenders on April 30, 2009. Under the terms of the
amended agreement, the maximum amount available under the operating credit
facility was decreased to a Canadian dollar limit of $90 million plus a US
dollar limit of $85 million, with a maturity date of May 22, 2010. 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 Board of the Corporation. An annual standby guarantee fee in
2009 of 1.35% (2008 - 1.35%) of the guaranteed amount will be provided by the
Corporation in consideration for this guarantee.
    On April 30, 2009, the Corporation completed the following previously
announced financing arrangements:

    
    (a) the purchase by Mr. Edwards, the Chairman of the Board of the
        Corporation, directly or indirectly, of $40.0 million principal
        amount of a new issue of 10% Convertible Secured Subordinated
        Debentures (the "New Convertible Debentures") with a three year term
        by private placement; and

    (b) the extension and restatement of a previous secured subordinated loan
        from Edco Capital Corporation ("Edco"), which is wholly owned by
        Mr. Edwards, to the Corporation to increase the principal amount from
        $50.0 million to $65.0 million and to extend the maturity date of the
        loan to July 1, 2010 in consideration for the payment of a one time
        fee to Edco equal to 1% of the principal amount of $50.0 million
        outstanding and an increase in the interest rate on the loan from 10%
        to 12% per annum payable monthly in arrears.

        (together the "2009 Financing Arrangements")
    

    As a result of a requirement under a change of control provision in the
previously issued 8.5% convertible unsecured debentures due January 31, 2010
(the "2008 Debentures"), the Corporation was required to make an offer to
purchase the 2008 Debentures at a price of 102.5% of the principal amount plus
accrued and unpaid interest utilizing the proceeds of the 2009 Financing
Arrangements. Such 2008 Debentures are outstanding in the principal amount of
$20.95 million of which $17.5 million of the principal amount is held by Mr.
Edwards and Mr. Moeller, a director of the Corporation, holds $0.65 million.
The offer to purchase will be open and the 2008 Debentures tendered under the
offer may be taken up and paid for by Magellan from time to time until May 21,
2009 unless the offer is extended.
    Pursuant to a similar change of control definition in the Preference
Shares' terms, the Corporation is required to retract its outstanding
Preference Shares at a price of $10.00 per share plus accrued and unpaid
dividends, unless such retraction contravenes any instrument of indebtedness
of the Corporation or the terms of the Ontario Business Corporations Act (the
"OBCA"). Dividends for the first quarter of 2009 have not been declared and
remain cumulative as at March 31, 2009. The Corporation does not currently
expect to retract the Preference Shares as it is prohibited from doing so by
the terms of its operating credit facility and any default in the operating
credit facility would result in the Corporation being unable to pay its
liabilities as they become due and constitute a contravention of the OBCA.
Accordingly, the preference shares continue to be classified as equity
instruments.

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

    As at April 30, 2009, the Corporation had 18,209,001 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 that 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 quarter ended March 31, 2009 and
to the information under "Risks Inherent in Magellan's Business" in the Annual
Information Form, which is filed with SEDAR (www.sedar.com).

    
    Changes in Accounting Policies
    ------------------------------
    

    On January 1, 2009, the Corporation adopted CICA Handbook 3064, "Goodwill
and Intangible Assets". This new section replaces the existing standards for
"Goodwill and Other Intangible Assets" (CICA Handbook Section 3062) and
"Research and Development Costs" (CICA Handbook Section 3450). The new
standard (i) states that upon their initial identification, intangible assets
are to be recognized as assets only if they meet the definition of an
intangible asset and the recognition criteria; (ii) provides guidance on the
recognition of internally generated intangible assets including research and
development costs; and (iii) carries forward the current requirements of
Section 3062 for subsequent measurement and disclosure of intangible assets
and goodwill. The adoption of this new section did not have a material impact
on the Corporation's consolidated financial statements.
    On January 20, 2009, the Emerging Issues Committee ("EIC") of Canada's
Accounting Standards Board (the "AcSB") issued EIC Abstract 173, which
establishes that an entity's own credit risk and the credit risk of the
counterparty should be taken into account in determining the fair value of
financial assets and liabilities, including derivative instruments. The
Corporation adopted this EIC on January 20, 2009 and applied the EIC
retrospectively, without restatement of prior years to all financial assets
and financial liabilities measured at fair value. The adoption of this new EIC
did not have a material impact on its consolidated financial statements.

    
    Future Changes in Accounting Policies
    -------------------------------------

    Sections 1582, "Business Combinations", 1601, "Consolidated Financial
    Statements", and 1602, "Non-controlling Interests".
    

    In January 2009, the CICA issued Sections 1582, "Business Combinations",
1601, "Consolidated Financial Statements", and 1602, "Non-controlling
Interests".
    Section 1582 will be converged with IFRS 3, "Business Combinations".
Section 1602 will be converged with the requirements of IAS 27, "Consolidated
and Separate Financial Statements", for non-controlling interests. Section
1601 carries forward the requirements of Section 1600, "Consolidated Financial
Statements", other than those relating to non-controlling interests.
    Section 1582 applies to acquisitions made from January 1, 2011 in which
the acquirer obtains control of one or more businesses. The term "business" is
more broadly defined than in the existing standard. Most assets acquired and
liabilities assumed, including contingent liabilities that are considered to
be "improbable", will be measured at fair value. Any interest in the acquiree
owned prior to obtaining control will be remeasured at fair value at the
acquisition date, eliminating the need for guidance on step acquisitions. A
bargain purchase will result in recognition of a gain. Acquisition costs must
be expensed.
    Under Section 1602, any non-controlling interest will be recognized as a
separate component of shareholders' equity. Net income will be calculated
without deduction for the non-controlling interest. Rather, net income will be
allocated between the controlling and non-controlling interests.
    The new standards will become effective in 2011. The Corporation is
currently evaluating the impact of the adoption of these new standards on its
consolidated financial statements.

    International Financial Reporting Standards

    In February 2008, AcSB confirmed that Canadian GAAP, as used by publicly
accountable enterprises, will be converged with International Financial
Reporting Standards ("IFRS") effective January 1, 2011. While IFRS uses a
conceptual framework similar to Canadian GAAP, there are significant
differences on recognition, measurement and disclosures. The transition from
Canadian GAAP to IFRS will be applicable to the Corporation for the first
quarter of 2011 where current and comparative financial information will be
prepared in accordance with IFRS. In the period leading up to the changeover,
the AcSB will continue to issue accounting standards that are converged with
IFRS, thus mitigating the impact of the transition to IFRS at the changeover
date. The International Accounting Standard Board will also continue to issue
new accounting standards during the conversion period, and as a result, the
final impact of IFRS on the Corporation's financial results will only be
measured once all the IFRS applicable at the conversation date are known.
    The Corporation commenced its IFRS conversion efforts during 2008. The
transition project consists of several elements: planning; awareness raising
and training; assessment; design; and implementation. With the assistance of
external consultants, the Corporation has conducted sessions to raise
awareness in its efforts to transition to IFRS. As part of planning, the
Corporation completed a high level assessment of the major differences between
Canadian GAAP and IFRS. During 2009, work will be initiated relating to
assessment and design. This will involve detailed evaluation of the
differences on recognition, measurement and disclosures between Canadian GAAP
and IFRS, and design of solutions for the conversion to IFRS. The assessment
and design will also entail establishment of issue-specific work teams to
focus on generating alternatives and making recommendations in identified
areas related to IFRS recognition, measurement and disclosures. The
Corporation will establish a communications plan, develop staff training
programs, and evaluate the impacts of the IFRS transition on other business
activities.

    
    Outlook
    -------
    

    The Corporation expects that the positive sales trend in 2008 will be
tempered in the aerospace industry in 2009. It is anticipated that business
aircraft will experience a continued decline in use and orders through 2009,
and that civil airliners, especially the larger models, will be produced at
lower volumes during 2010. Airlines in the United States have benefited in
2008 and early 2009 from capacity reductions and additional revenue streams
implemented in early 2008. Most are expected to be profitable in 2009, and it
is hoped that new orders will be placed for new, fuel-efficient aircraft for
delivery in 2010-2011 and beyond.
    Defence spending is forecasted to be stable in both new aerospace
equipment and in the aftermarket. The transition from legacy programs to new
replacement programs is underway in the United States and Europe, and the
Corporation expects to gain new work in key new programs commencing in 2009.
The new work fits within the core areas of the Corporation, will introduce
newer technologies, and will have extensive production runs.
    The Corporation has beneficial exposure to the anticipated growth sectors
of the global aerospace industry. It has captured opportunities on new civil
and defence programs, has continued to modernize its facilities and updated
its capabilities, and has taken measures to hopefully address contingencies
that may arise during the economic uncertainty of 2009 and 2010.

    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
which is filed with SEDAR (www.sedar.com).



    
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    MAGELLAN AEROSPACE CORPORATION
    CONSOLIDATED STATEMENTS OF OPERATIONS
    (unaudited)
                                                         Three-months ended
                                                              March 31
    (Expressed in thousands of dollars,                ----------------------
     except per share amounts)                            2009        2008
    -------------------------------------------------------------------------
    Revenues                                           $ 179,288   $ 161,095
    Cost of revenues                                     157,584     143,774
    -------------------------------------------------------------------------
    Gross Profit                                          21,704      17,321
    -------------------------------------------------------------------------

    Administrative and general expenses                    8,802       7,971
    Interest                                               4,275       5,535
    -------------------------------------------------------------------------
                                                          13,077      13,506
    -------------------------------------------------------------------------
    Income before income taxes                             8,627       3,815

    Provision for income taxes
      Current                                                169           -
      Future                                                 535       1,764
    -------------------------------------------------------------------------
                                                             704       1,764
    -------------------------------------------------------------------------
    Net income                                             7,923       2,051
    -------------------------------------------------------------------------
    Net income per share
    -------------------------------------------------------------------------
      Basic and Diluted                                     0.41        0.09
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



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    MAGELLAN AEROSPACE CORPORATION
    CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
    (unaudited)
                                                         Three-months ended
                                                              March 31
                                                       ----------------------
    (Expressed in thousands of dollars)                   2009        2008
    -------------------------------------------------------------------------

    Retained Earnings, beginning of period                59,752      82,747
    Effect of change in accounting policy                      -      32,156
    -------------------------------------------------------------------------
    Adjusted retained earnings, beginning of period       59,752      50,591
    Dividends                                                  -        (400)
    Net income                                             7,923       2,051
    -------------------------------------------------------------------------
    Retained Earnings, end of period                   $  67,675   $  52,242
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



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    MAGELLAN AEROSPACE CORPORATION
    CONSOLIDATED STATEMENTS OF
    COMPREHENSIVE INCOME
    (unaudited)
                                                         Three-months ended
                                                              March 31
                                                       ----------------------
    (Expressed in thousands of dollars)                   2009        2008
    -------------------------------------------------------------------------
    Net income                                         $   7,923   $   2,051
    Other comprehensive income:
    Unrealized gain on translation of financial
     statements of self-sustaining foreign operations      4,915       5,298
    -------------------------------------------------------------------------
    Comprehensive income                               $  12,838   $   7,349
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



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    MAGELLAN AEROSPACE CORPORATION
    CONSOLIDATED BALANCE SHEETS
    (unaudited)                                           As at      As at
                                                        March 31  December 31
                                                          2009        2008
    (Expressed in thousands of dollars)
    -------------------------------------------------------------------------
    ASSETS
    Current
    Cash                                               $   2,066   $   5,362
    Accounts receivable                                   89,590      67,435
    Inventories                                          178,184     178,474
    Prepaid expenses and other                            10,563      10,717
    Future income tax assets                               4,085       5,097
    -------------------------------------------------------------------------
    Total current assets                                 284,488     267,085

    Capital assets, net                                  281,141     277,207
    Technology rights                                     32,077      32,567
    Deferred development costs                            68,264      69,225
    Other assets                                          15,816      15,970
    Future income tax assets                               9,505       8,643
    -------------------------------------------------------------------------
    Total long-term assets                               406,803     403,612
    -------------------------------------------------------------------------
    Total assets                                       $ 691,291   $ 670,697
    -------------------------------------------------------------------------

    LIABILITIES AND SHAREHOLDERS' EQUITY
    Current
    Bank indebtedness                                  $ 195,016   $ 177,766
    Accounts payable and accrued charges                 114,323     125,116
    Current portion of long-term debt                      2,508      52,321
    -------------------------------------------------------------------------
    Total current liabilities                            311,847     355,203

    Long-term debt                                        61,159      11,803
    Future income tax liabilities                         12,649      11,392
    Convertible debentures                                20,634      20,544
    Other long-term liabilities                            8,116       7,947
    -------------------------------------------------------------------------
    Total long-term liabilities                          102,558      51,686
    -------------------------------------------------------------------------

    Shareholders' equity
    Capital stock                                        234,389     234,381
    Contributed surplus                                    4,223       3,991
    Other paid in capital                                 11,645      11,645
    Retained earnings                                     67,675      59,752
    Accumulated other comprehensive loss                 (41,046)    (45,961)
    -------------------------------------------------------------------------
    Total shareholders' equity                           276,886     263,808
    -------------------------------------------------------------------------
    Total liabilities and shareholders' equity         $ 691,291   $ 670,697
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    -------------------------------------------------------------------------
    MAGELLAN AEROSPACE CORPORATION
    CONSOLIDATED STATEMENTS OF CASH FLOWS
    (unaudited)
                                                         Three-months ended
                                                              March 31
                                                       ----------------------
    (Expressed in thousands of dollars)                   2009        2008
    -------------------------------------------------------------------------
    OPERATING ACTIVITIES
    Net income                                         $   7,923   $   2,051
    Add (deduct) items not affecting cash
      Depreciation and amortization                        9,299       5,823
      Net loss on sale of capital asset                        9           -
      Employee future benefits                               149        (858)
      Deferred revenue                                        68          75
      Stock based compensation                               232         318
      Accretion of convertible debentures                     68         242
      Future income tax expense                              535       1,764
    -------------------------------------------------------------------------
                                                          18,283       9,415
    -------------------------------------------------------------------------
    Net change in non-cash working capital
     items relating to operating activities              (29,343)    (15,159)
    -------------------------------------------------------------------------
    Cash used in operating activities                    (11,060)     (5,744)
    -------------------------------------------------------------------------

    INVESTING ACTIVITIES
    Acquisition of Verdict                                     -      (4,240)
    Purchase of capital assets                            (5,345)     (4,641)
    Proceeds from disposal of capital assets                 144         145
    Increase in other assets                                (448)     (1,582)
    -------------------------------------------------------------------------
    Cash used in investing activities                     (5,649)    (10,318)
    -------------------------------------------------------------------------

    FINANCING ACTIVITIES
    Increase in bank indebtedness                         14,042      14,335
    Increase in loan payable                                   -      15,000
    Decrease in long-term debt                              (547)    (15,612)
    Increase in long-term debt                                 -      50,000
    Decrease in convertible debentures                         -     (69,985)
    Increase in convertible debentures                         -      20,778
    Decrease in long-term liabilities                       (100)       (429)
    Issuance of Common Shares                                  8          23
    Dividends on Preference Shares                             -        (400)
    -------------------------------------------------------------------------
    Cash provided by financing activities                 13,403      13,710

    Effect of exchange rate changes on cash                   10         323
    -------------------------------------------------------------------------

    Net decrease in cash                                  (3,296)     (2,029)
    Cash, beginning of period                              5,362       4,884
    -------------------------------------------------------------------------
    Cash, end of period                                $   2,066   $   2,855
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    %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


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