MacDonald Dettwiler Tied Up in Hubble’s Fate

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WASHINGTON – MacDonald Dettwiler’s space businesses posted gains in 2004, but the potential loss of a contract to help repair NASA’s Hubble Space Telescope has company officials concerned about future revenue.

MacDonald, Dettwiler and Associates Ltd., based in Richmond, British Columbia, had been counting on the Hubble program and other NASA robotics work to improve revenue in its Information Systems segment, which also includes the company’s satellite imagery work, said Daniel Friedmann, the company’s president and chief executive officer .

But the expected growth could be hampered if NASA abandons the proposed rescue mission.

In January, NASA awarded MacDonald Dettwiler subsidiary MD Robotics Group a $154 million contract for work on a proposed Hubble repair mission. MD Robotics, based in Brampton, Ontario, supplies robotic arms for the space shuttle orbiter and international space station.

Under the Hubble contract, the company is developing a robotic grapple arm and a double-armed dexterous robot that would be used to install new orbit stabilization hardware and perhaps replace scientific instruments aboard the space telescope.

However, NASA announced in early February it would not try to save Hubble and would instead concentrate on de orbiting the telescope after it goes dark. The proposed $16.45 billion NASA budget for 2006 does not include funding for the Hubble repair mission as the agency focuses instead on returning to the Moon.

MacDonald Dettwiler is continuing work on the Hubble servicing mission, with the first design review with NASA scheduled for March, Friedmann said in a Feb. 22 telephone conference to discuss the company’s 2004 financial performance. But the company has scaled back its revenue expectations for the contract as it waits for the 2006 NASA budget debate to play out in Congress, he said.

“The contract is signed for the whole amount, but it has just been prudent to include work through March,” Friedmann said. “The government already had decided they can cancel the contract at any milestone. We have included revenue through the first milestone and after that we will see what happens.”

Neither Friedmann nor NASA Goddard spokeswoman Susan Hendrix would disclose how much the agency has paid MacDonald Dettwiler to date.

NASA’s decision to cancel the proposed Hubble servicing mission faces significant political opposition. In 2005, Congress directed NASA to find $291 million in its budget to fund some type of repair mission, and some lawmakers are vowing again this year to restore the servicing mission in the 2006 budget.

“The debate on whether this program should continue in the next fiscal year will continue,” Friedmann said. “When that debate will conclude and how it will conclude I can’t guess at this point.”

Anil Wirasekara, MacDonald Dettwiler’s chief financial officer, said the company is leaving only the funded portion of its Hubble repair contract on the company’s backlog. The company’s backlog stood at 902.6 million Canadian dollars ($730.6 million) at the end of 2004, but including the full value of the Hubble deal would have pushed that figure to more than 1 billion Canadian dollars, he said.

If the contract for the Hubble repair mission is not canceled, revenue growth in Information Systems should be between 10 and 12 percent in 2005, Friedmann said. Without Hubble, it would remain in the high single digits, he said.

“We have been saying this area has been turning around for the last year and it has turned around,” Friedmann said. “Our backlog is very strong, and we won lot of strategic contracts over the last year. Over the next year we will be demonstrating our ability to perform on those contracts. My overall characterization of Information Systems is that it is very healthy and very strong and looking better than it’s looked in a long time.”

In 2004, revenue in the Information Systems segment grew 7 percent to 316 million Canadian dollars, the company said. Growth was hampered by the start of work on three long-term contracts, which increased startup costs in the segment and have not yet begun to produce revenue, Wirasekara said.

The company also continues to work through delays on the Radarsat-2 radar imaging satellite and the launch of the spacecraft has now slipped into early 2006, Friedmann said.

EMS Technologies Inc. is building the radar antenna for the spacecraft under a subcontract from MacDonald Dettwiler and fell behind schedule in manufacturing the 512 transmit-and-receive modules for the antenna.

“Some of the stuff we are under contract to deliver ahead of schedule, some on schedule and some will be delivered as quickly as we possibly can,” Graeme Maag, a spokesman for EMS’s Montreal-based Space & Technology division, said. “We expect to have the whole thing out the door by mid-second quarter, and we are working furiously to get to that delivery date.”

Overall, MacDonald Dettwiler earned 52.5 million Canadian dollars in 2004 on revenue of 751.4 million Canadian dollars, compared to a profit of 42.2 million Canadian dollars on revenue of 626.5 million Canadian dollars in 2003. Wirasekara credited the improvements to cost cutting and improved efficiencies in operations.

The company’s Information Products segment, which provides legal and property information to customers in the United States, Canada and the United Kingdom, contributed revenue of 453.3 million Canadian dollars in 2004, a 31 percent increase over 2003.