Magellan Aerospace Corporation (“Magellan” or the “Corporation”) released its financial results for the third quarter of 2016. All amounts are expressed in Canadian dollars unless otherwise indicated. The results are summarized as follows:
1. Overview
A summary of Magellan’s business and significant updates
Magellan is a diversified supplier of components to the aerospace industry and in certain circumstances for power generation projects. Through its wholly owned subsidiaries, Magellan designs, engineers, and manufactures aeroengine and aerostructure components for aerospace markets, advanced products for defence and space markets, and complementary specialty products. The Corporation also supports the aftermarket through supply of spare parts as well as performing repair and overhaul services, and supplies in certain circumstances parts and equipment for power generation projects.
The Corporation’s strategy has been to focus on several core competencies within the aerospace industry. These include precision machining of a wide variety of aerospace material, composites, complex high technology magnesium and aluminum alloy castings, repair and overhaul technologies and design of structures. The Corporation is now seeking to leverage these core competencies by achieving growth in applications where these abilities are critical in meeting customer needs.
Business Update
On October 12, 2016, the Corporation announced that it showcased, at the Helitech 2016 helicopter show in Amsterdam, an expanded product capability as offered by Euravia Engineering and Supply Co. LTD, a Magellan Aerospace company. Euravia is now providing total engine support for the Rolls-Royce 250 engine and growing its operation through its new expansion facility, Euravia North America, located in Phoenix, Arizona.
On October 13, 2016, Magellan and the Boeing Company announced the signing of new long term contracts for the supply of complex titanium machined components for the 777X program and the signing of an extension to the existing 787 Dreamliner program statement of work. The components are to be manufactured at Magellan’s Kitchener, ON and New York, NY facilities.
On October 27, 2016, Magellan announced that it will be producing F-35 Lightning II horizontal tail assemblies under an agreement with BAE Systems. The agreement is the continuation of annual contract awards made to Magellan by BAE Systems for F-35 assemblies, valued at more than CDN $70 million over a two year period.
For additional information, please refer to the “Management’s Discussion and Analysis” section of the Corporation’s 2015 Annual Report available on www.sedar.com.
2. Results of Operations
A discussion of Magellan’s operating results for third quarter ended September 30, 2016
The Corporation operates substantially all of its activities in one reportable segment, Aerospace, which includes the design, development, manufacture, repair and overhaul and sale of systems and components for defence and civil aviation. The Corporation continues to provide services to the Power Generation segment, however the Corporation has removed the disclosure of this segment as the activity in relation to these services was not material in the current quarter and, at present, it is not expected to be material in future periods.
The Corporation reported revenue of $238.0 million in the third quarter of 2016 as compared to $236.2 million in the third quarter of 2015. Gross profit and net income for the third quarter of 2016 were $38.9 million and $18.8 million, respectively, decreased from the gross profit of $39.9 million and increased from the net income of $18.5 million for the third quarter of 2015.
