ANNUAL REPORT
2021
commercial
aircraft
build rates
increasing
in 2022.
Throughout the pandemic, Magellan focused its
efforts on cost containment and was successful
in negotiating new strategic programs and key
contract renewals during this period, including
2021. We look forward to continuing this success
in 2022.
While the COVID-19 pandemic has had a dramatic
impact on our industry, it is important to recognize
the impact it has had on individuals and in
particular on global health care workers. Magellan
also recognizes the impact the pandemic has
had on its employees and their families. We thank
them for their strength and dedication in the face
of uncertainty.
Finally, on behalf of the board and management of
Magellan, I would like to thank all our shareholders
for their ongoing support.
Phillip C. Underwood
President and Chief Executive Officer
March 17, 2022
LETTER TO SHAREHOLDERS
The global air travel industry has experienced
unprecedented volatility over the last two years
due to the COVID-19 pandemic. While there
is no doubt the industry will recover from this
crisis, some suggest there may have been a
permanent change in the percentage of people
traveling for business verses pleasure. Aviation
and aerospace leaders believe the pandemic
has demonstrated that today’s communication
tools can be effective, cost saving alternatives
to business travel. However, experts still believe
that the key drivers of commercial aircraft demand
remain fundamentally unchanged from those
recognized prior to the pandemic.
The past year has proven that air travel demand
is resilient when governments reopen borders
and when there is confidence in the safety of air
travel. Based on 2021 passenger travel data,
domestic air travel is forecast to recover to pre-
crisis levels in 2023, while international air travel
is expected to lag by approximately one year.
Aircraft manufacturers have already begun
increasing single aisle build rates in response
to improving travel demand and currently plan
single aisle production to be at pre-pandemic
rates by late 2023. Considering that the wide
body market was already softening prior to the
pandemic, only marginal recovery is expected
in this segment within the present decade.
Although there were positive signs of recovery
for Magellan in 2021, there were also certain
program delays and associated rate reductions
that adversely impacted revenue recovery.
Magellan ended 2021 with $688.4M in revenue,
which was down by 7.5% from 2020, and down
32.3% compared to the 2019 pre-pandemic year.
With commercial aircraft build rates increasing
in 2022, the main challenge will be to navigate
pandemic related supply chain disruptions,
material shortages and the competition for
human resources.
1
MAGELLAN 2021 ANNUAL REPORT
This Management’s Discussion and Analysis (“MD&A”) of the financial condition and results of operations of Magellan
Aerospace Corporation (“Magellan” or the “Corporation”) should be read in conjunction with the audited consolidated financial
statements and the notes thereto for the years ended December 31, 2021 and 2020 prepared in accordance with International
Financial Reporting Standards (“IFRS”), and the Annual Information Form for the year ended December 31, 2021, (available on
SEDAR at www.sedar.com). This MD&A provides a review of the significant developments that have impacted the Corporation’s
performance during the year ended December 31, 2021 relative to the year ended December 31, 2020. The information
contained in this report is as at March 17, 2022. All financial references are in Canadian dollars unless otherwise noted.
The MD&A contains forward-looking information that represents the Corporation’s internal projections, expectations, estimates
or beliefs concerning, among other things, future operating results and various components thereof or the Corporation’s future
economic performance. These statements relate to future events or future performance. All statements other than statements
of historical facts may be forward-looking statements. In particular and without limitation there are forward-looking statements
under the heading “Overview,” “2021 and Recent Updates,” “Outlook,” “Results of Operations,” “Liquidity and Capital
Resources,” “Risk Factors,” “Critical Accounting Estimates” and “Future Changes in Accounting Policies.” In some cases,
forward-looking statements can be identified by terminology such as “may,” “will,” “should,” “could,” “expects,” “forecasts,”
“believes,” “projects,” “plans,” “anticipates,” and similar expressions. The projections, estimates and beliefs contained in such
forward-looking statements are based on management’s assumptions relating to the production performance of Magellan’s
assets and competition throughout the aerospace industry in 2021 and continuation of the current regulatory and tax regimes
in the jurisdictions in which the Corporation operates, and necessarily involve known and unknown risks and uncertainties,
including the business risks discussed in this MD&A, which may cause actual performance and financial results in future
periods to differ materially from any projections of future performance or results expressed or implied by such forward-looking
statements. Accordingly, readers are cautioned that events or circumstances could cause results to differ materially from those
predicted. In particular, the Corporation has not adjusted or revised any forward-looking statements in this report to account for
the potential disruption to its business from the novel coronavirus outbreak, the full impact from which is not immediately known
or quantifiable. Except as required by law, the Corporation does not undertake to update any forward-looking information in this
document whether as to new information, future events or otherwise.
The MD&A presents certain non-IFRS financial measures to assist readers in understanding the Corporation’s performance.
Non-IFRS financial measures are measures that either exclude or include amounts that are not excluded or included in the
most directly comparable measures calculated and presented in accordance with Generally Accepted Accounting Principles
(“GAAP”). Throughout this discussion, reference is made to EBITDA (defined as earnings before interest, income taxes,
depreciation and amortization) and Adjusted EBITDA (earnings before interest expense, income taxes, depreciation and
amortization, goodwill impairment and restructuring), which the Corporation considers to be an indicative measure of operating
performance and a metric to evaluate profitability. EBITDA and Adjusted EBITDA are not generally accepted earnings measures
and should not be considered as alternative measures to net income (loss) or cash flows as determined in accordance with
IFRS. As there is no standardized method of calculating this measure, the Corporation’s EBITDA and Adjusted EBITDA may
not be directly comparable with similarly titled measures used by other companies. Reconciliations of EBITDA and Adjusted
EBITDA to net income (loss) reported in accordance with IFRS are included in this MD&A.
1. OVERVIEW
A summary of Magellan’s business and significant 2021 events
Magellan is a diversified supplier of components to the aerospace industry. Through its wholly owned subsidiaries, controlled
entity and joint venture, Magellan designs, engineers and manufactures aeroengine and aerostructure components for
aerospace markets, including 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.
Magellan operates substantially all of its activities in one reportable segment, Aerospace, which is viewed as one segment by
the chief operating decision-makers for the purpose of resource allocations, assessing performance and strategic planning. The
Aerospace segment includes the design, development, manufacture, repair and overhaul and sale of systems and components
for defence and civil aviation. The Corporation supplies both the commercial and defence sectors of the Aerospace segment.
In the commercial sector, the Corporation is active in the large commercial jet, business jet, regional aircraft, and helicopter
markets. On the defence side, the Corporation provides parts and services for major military aircraft.
2
MAGELLAN 2021 ANNUAL REPORT MANAGEMENT’S DISCUSSION AND ANALYSIS December 31, 2021 Within the Aerospace segment, the Corporation has two major product groupings: aerostructures and aeroengines. Aerostructure
and aeroengine products are used both in new aircraft and for spares and replacement parts.
Within the aerostructures product grouping, the Corporation supplies international customers by producing components
using conventional and high-speed automated machining centres. Capabilities include precision casting of airframe-mounted
components. Management believes that Magellan’s dedication to technological innovation combined with low cost sourcing
from emerging markets will position the Corporation to capture targeted complex assembly programs.
Within the aeroengines product grouping, the Corporation manufactures complex castings, fabricated and machined gas
turbine engine components, both static and rotating, integrated nacelle components, flow path and engine exhaust systems for
the world’s leading aeroengine manufacturers. The Corporation also performs repair and overhaul services for jet engines and
related components.
Impact of COVID-19
The COVID-19 pandemic has had and continues to have a significant impact on the global economy, our customers’ businesses
and on the Corporation’s operations, financial and operating results and planning ability. To attempt to mitigate the spread of the
pandemic, there have been extraordinary and wide-ranging actions taken by international, federal, provincial and local public
health and governmental authorities to contain and combat the outbreak of COVID-19 around the world. These actions include
quarantines and “stay-at-home” orders, social distancing measures and travel restrictions, among others. Although from time
to time there has been an easing of restrictions in certain jurisdictions, some of these restrictions have been reinstated in other
jurisdictions.
In addition, the reopening of businesses and economies in certain countries is creating a variety of new challenges, including,
for example, higher prices for goods and services, limited availability of products, disruptions to supply chains and labour
shortages. During the second half of 2021, certain facilities of the Corporation began to experience supply chain disruptions
and labour shortages, which have negatively impacted their production of goods resulting in lower absorption of manufacturing
costs and, in some cases, delays in shipments to customers. We are taking actions to manage the potential impacts of these
matters and we will continue to assess the actual and expected impacts and the need for further actions.
In response to the COVID-19 impacts on our businesses, the Corporation has been and continues to adjust production schedules
to accommodate changes in demand. The Corporation has also been taking measures to align its cost structure including
headcount reductions and re-balancing workforce, restructuring businesses, eliminating all non-essential travel, entertaining
and other discretionary spending, reducing capital expenditures, and applying for government subsidies, such as Canada
Emergency Wage Subsidy (“CEWS”) for its Canadian employees. Magellan continues to monitor ongoing developments and
mitigate risks related to the COVID-19 pandemic and the impact on Magellan’s operations, supply chain, and most importantly
the health and safety of its employees.
In 2021, 52% of revenues were derived from commercial markets (2020– 54%, 2019– 68%) while 48% of revenues related to
defence markets (2020 – 46%, 2019– 32%).
2021 and Recent Updates
On January 14, 2021, the Corporation announced that Raytheon Missiles & Defense (“Raytheon”) awarded the Corporation a
contract for the supply of complex missile fin components. These heat-tolerant surface control assemblies will be manufactured
at Magellan’s facility in Middletown, Ohio, with deliveries continuing through 2024. The value of this agreement is approximately
$61.4 million. Magellan has participated in the Standard Missile (“SM”) program for more than 20 years, supplying dorsal fins for
various configurations, including the SM-3 and SM-6. These defensive missiles provide area defence to the U.S. Military against
theater ballistic missiles, aircraft and cruise missiles.
On March 16, 2021, the Corporation announced that it had renewed for five additional years its agreement with Avio Aero, a GE
Aviation Company, for the supply of magnesium and aluminum castings. The castings will be produced primarily at Magellan’s
Haley, Ontario facility, with several also being produced at its Glendale, Arizona facility.
On March 31, 2021, Magellan announced an agreement with Boeing on a contract extension for the supply of landing gear kits
and other complex structural components for the 737, 767, and 777 airplanes. Magellan has made significant investments in
3
MAGELLAN 2021 ANNUAL REPORT MANAGEMENT’S DISCUSSION AND ANALYSIS December 31, 2021 manufacturing technology and personnel at all its facilities substantially improving our global competitiveness. Magellan’s solution
for Boeing employs a vertical integration strategy utilizing its global resources located in Kitchener, New York City, and India.
On June 21, 2021, the Corporation announced a contract extension between Magellan Aerospace (UK) Limited and Airbus SAS
(“Airbus”) for the supply of aluminum and titanium structural wing components from Magellan UK’s facilities located throughout
Europe and India. This contract renewal is comprised of precision machined details and assemblies for use on the A320 and
A330 aircraft.
On February 9, 2022, Magellan announced it had been awarded a contract from MDA Ltd. (“MDA”) to provide spacecraft
avionics for their next Earth observation mission named CHORUS. The new spacecraft builds on MDA’s RADARSAT heritage
and will continue the work of RADARSAT-2, which remains operational serving its worldwide customer base. The avionics
subsystems for CHORUS will be developed at Magellan’s Winnipeg facility, home of western Canada’s Advanced Satellite
Integration Facility. Magellan has expertise in the development of satellite buses and spacecraft avionics. For MDA’s CHORUS
mission, Magellan will be responsible for the design, manufacture, test, and delivery of the bus avionics system for the C-band
Synthetic Aperture Radar satellite. The bus avionics include the satellite bus power control and distribution, communications,
attitude control, orbit determination, and on-board telemetry data collection. Key avionics deliverables include Magellan’s Power
Control Unit and Command and Data Handling Unit.
Labour Matters
The Corporation employs 3,400 employees; of these, approximately 1,400 are unionized and are covered by 16 collective
bargaining agreements as of December 31, 2021. The Corporation maintains constructive relationships with its unions and
strives to achieve mutually beneficial relationships while maintaining cost competitiveness when negotiating extensions of
expiry dates or renewals of the collective agreements. The Corporation is currently in negotiations regarding a number of such
extensions or renewals and it expects all negotiations will result in extensions of expiry dates, renewals of the agreements or
some other mutually satisfactory agreement as applicable.
Financing Matters
On June 30, 2021, the Corporation extended its Bank Credit Facility Agreement (“Agreement”) with a syndicate of lenders for
an additional two-year period expiring on June 30, 2023. The Agreement provides for a multi-currency global operating credit
facility to be available to Magellan in a maximum aggregate amount of $75 million. The Agreement also includes a $75 million
uncommitted accordion provision, which provides Magellan with the option to increase the size of the operating credit facility
to $150 million. Extensions of the Agreement are subject to mutual consent of the syndicate of lenders and the Corporation.
2. OUTLOOK
The outlook for Magellan’s business in 2022
The COVID-19 pandemic has made it extremely challenging for airlines to forecast near or medium-term commercial air travel
demand. At the end of 2021, the rapidly spreading Omicron variant triggered a new series of government restrictions around
the globe and caused widespread disruptions for most major airlines. Notwithstanding the added impact of significant weather
events, airlines were forced to cancel flights due to shortages of pilots and employees who became sick or were quarantined
due to the virus. Despite a discouraging end to the year for airlines, commercial air travel still showed improvement over the
previous 2020 year.
The International Air Transport Association (“IATA”) reported that despite Omicron disruptions, global revenue passenger
kilometers (“RPK’s”) reached 55% of December 2019 levels by the end of 2021. For reference, RPK’s were at 38% of 2019
levels at December 2020. IATA’s 2021 data indicated that domestic air travel reached 78% of pre-COVID levels in 2021,
while international travel reached only 42%. Industry experts currently predict that global domestic air travel will return to pre-
pandemic levels in 2023, while international air travel will follow by approximately twelve to fifteen months.
4
MAGELLAN 2021 ANNUAL REPORT MANAGEMENT’S DISCUSSION AND ANALYSIS December 31, 2021 Aircraft manufacturers are already increasing single aisle aircraft build rates in response to improving commercial air travel
volumes. These build rates are expected to return to pre-pandemic levels late in 2023. Considering the impact of the pandemic
on what was already a softening wide body market, forecasters predict a marginal recovery in corresponding build rates
through 2030.
Airbus and Boeing delivered 611 aircraft and 340 aircraft, respectively in 2021. Airbus’ gross order intake totaled 773 aircraft
and with cancellations of 264 aircraft, they ended the year with net orders of 509 aircraft. Boeing booked 909 gross aircraft
orders and received cancellations for 430 aircraft, resulting in netted 479 aircraft orders in 2021. Airbus ended 2021 with total
unfilled orders of 7,082 aircraft versus 7,184 aircraft at December 31, 2020, while Boeing ended with 5,136 aircraft unfilled orders
in 2021 compared to 4,997 aircraft in 2020.
Airbus increased A320 build rates from 40 aircraft per month to 45 aircraft per month in 2021. Airbus began 2022 at a rate of
49 aircraft per month with a plan to reach 54 aircraft per month in the fourth quarter of 2022. Airbus expects to ramp up from 59
aircraft to 66 aircraft per month in 2023, which is delayed by three years from their original pre-pandemic forecast. At the close
of 2021, the A330 build rate was at 2.2 aircraft per month and is forecasted to reach 2.8 aircraft per month late in 2022. The A350
build rate plan continues at 5 aircraft per month until the latter part of 2022 when 6 aircraft per month is planned. Airbus’ A220
rate is planned to reach 5.4 to 6.6 aircraft per month in 2022, 6.6 to 9.8 aircraft in 2023, and ramp up to 14 aircraft per month by
mid of 2025, which advances this rate by 6 months from previous forecasts.
In a fourth quarter 2021 report, Boeing stated that they were engaged in discussions with the Federal Aviation Administration
regarding actions required to resume deliveries of their 787 aircraft after a series of quality issues forced them to pause deliveries.
Boeing disclosed that they had an inventory of 110 undelivered 787 aircraft at the end of 2021, and that they would continue
building at 2 aircraft per month until deliveries resume. Boeing’s 737 build rate increased from 17 aircraft per month in 2021
to 24 aircraft per month beginning January 2022. Boeing is planning 31 aircraft per month by the second half of 2022 and 52
aircraft per month by the second half of 2023. Boeing’s 777 aircraft build rate is expected to remain at 2 aircraft per month and
is planned to increase to 3 aircraft per month by 2023, and then 3.5 aircraft per month by 2024. The launch of the 777-8 freighter
version is expected to further delay the entry-into-service of the 777X passenger variant and correspondingly impact build rates.
The defence industry remains considerably more insulated from the global impact of COVID-19 than the commercial aerospace
industry. Experts are confident that most major defense spending nations will remain committed to strengthening their military
budgets, despite the pandemic’s economic impact on fiscal deficits. Certain European countries including the United Kingdom
have recommitted or increased defence spending during the COVID-19 crisis, further removing a degree of near-term budget
uncertainty. In the U.S., the President’s budget proposal requested a fiscal year 2022 budget for national defense that was up
2% year over year.
In 2021, Lockheed Martin delivered 142 F-35 aircraft, which was up from 123 aircraft in 2020 and which exceeded their plan
to deliver between 133 and 139 aircraft. Lockheed Martin’s production plans include 151 to 153 aircraft delivered in 2022, and
a peak rate of 156 aircraft delivered annually from 2023 onward. During 2021, the F-35 gained two new customers as it was
chosen by Switzerland and Finland in their respective fighter competitions. The F-35 remains in contention for Canada’s Future
Fighter program along with Saab’s Grippen. In December 2021, an announcement was made that Boeing’s F/A-18 Super
Hornet was eliminated from the competition. Canada’s final selection is expected in 2022.
The Corporation believes there will be no immediate impact on defence aircraft procurement as a result of the recent conflict
between Ukraine and Russia. With the conflict being in early stages, the extent and potential magnitude of impact on global
defence markets is still being assessed by the industry.
Aerospace and defence manufacturers have undergone a challenging period since the global pandemic began in early 2020.
As commercial passenger air travel volumes recover, there is improving confidence in the near to medium term outlook for the
industry. Experts are hopeful the horizon is becoming clearer and that aerospace and defence manufacturers can look forward
to switching from mitigation plans to growth management.
5
MAGELLAN 2021 ANNUAL REPORT MANAGEMENT’S DISCUSSION AND ANALYSIS December 31, 2021 3. SELECTED ANNUAL INFORMATION
A summary of selected annual financial information for 2021, 2020 and 2019
Expressed in millions of dollars, except per share information Exp
Revenues
Net (loss) income in the year
Net (loss) income per common share – Basic and Diluted
EBITDA1
EBITDA1 per common share – Basic and Diluted
Adjusted EBITDA1
Adjusted EBITDA1 per common share – Basic and Diluted
Total assets
Total non-current liabilities
2021
688.4
(1.0)
(0.02)
56.7
0.98
58.8
1.02
1,003.8
104.3
2020
744.4
3.3
0.06
75.9
1.31
100.4
1.73
1,072.6
121.9
2019
1,016.2
67.4
1.16
145.2
2.49
145.2
2.49
1,141.2
125.2
1 EBITDA and Adjusted EBITDA are not IFRS financial measures. Please see Section 5 the “Reconciliation of Net Income to EBITDA and Adjusted
EBITDA” section for more information.
The COVID-19 pandemic has continued to disrupt global health and the economy in 2021 and has created an
indeterminate period of volatility in the markets in which Magellan operates. Revenues for the year ended December 31, 2021,
decreased from both 2020 and 2019 levels. The decrease in revenues from 2020 was primarily attributable to volume decreases
in wide-body aircraft, casting and proprietary products, production delays and unfavourable foreign exchange impact due to
the weakening of the United States dollar relative to the Canadian dollar and British pound, offset in part by the volume recovery
for single aisle aircraft. Net income decreased in 2021 from 2020 mainly due to lower gross margin as a result of volumes
decreases, production inefficiencies, unfavourable product mix, higher material and manufacturing costs, and lower CEWS
benefits recognized, offset in part by lower administrative and general expenses, and lower restructuring charges in the year. In
2020, the Corporation recorded a goodwill impairment of $12.0 million.
During 2021 and 2020, the Corporation paid quarterly dividends on common shares of $0.105 per share for the four quarters,
amounting to $24.2 million and $24.4 million, respectively, in total for the year.
4. RESULTS OF OPERATIONS
A discussion of Magellan’s operating results for 2021 and 2020
Consolidated revenues for the year ended December 31, 2021 were $688.4 million, a 7.5% decrease from the $744.4 million
achieved last year. Gross profit and net loss were $48.3 million and $1.0 million for the year ended December 31, 2021,
respectively, in comparison to gross profit of $96.5 million and net income of $3.3 million for the year ended December 31, 2020.
Consolidated Revenues
Twelve-months ended December 31, expressed in thousands of dollars
Canada
United States
Europe
Total revenues
2021
315,803
174,260
198,295
688,358
2020
338,883
202,284
203,247
744,414
Change
(6.8%)
(13.9%)
(2.4%)
(7.5%)
Revenue in Canada decreased 6.8% in 2021 compared to the prior year mainly due to work stoppage at the Corporation’s Haley
facility during the second quarter of 2021, volume decrease for wide-body aircraft and proprietary products, and unfavourable
foreign exchange impact driven by the weakening of the United States dollar relative to the Canadian dollar.
Revenue in the United States in 2021 was 13.9% lower than 2020 primarily driven by volume decreases for wide-body aircrafts,
production delays and unfavourable foreign exchange impact due to the weakening of the United State dollar relative to the
Canadian dollar, offset in part by volume increases for single aisle aircraft, specifically the Boeing 737 MAX as aircraft build
rates increased.
6
MAGELLAN 2021 ANNUAL REPORT MANAGEMENT’S DISCUSSION AND ANALYSIS December 31, 2021
European revenue in 2021 decreased 2.4% compared to the corresponding year in 2020 primarily due to unfavourable foreign
exchange impact as the United States dollar weakened relative to the British pound, partially offset by build rate recovery for
single aisle aircraft.
Consolidated revenues are impacted by the fluctuation of the United States dollar and British pound against the Canadian dollar
when the Corporation translates its foreign operations to Canadian dollars. Further, the fluctuation of the British pound relative
to the United States dollar impacts the performance of the Corporation’s European operations. If the average exchange rates
for both the United States dollar and British pound experienced in 2020 remained constant in 2021, consolidated revenues for
2021 would have been higher by 4.6%.
Gross Profit
Twelve-months ended December 31, expressed in thousands of dollars
Gross profit
Percentage of revenue
2021
48,330
7.0%
2020
96,491
13.0%
Change
(49.9%)
x
Gross profit was $48.3 million in 2021, $48.2 million lower than 2020 of $96.5 million. Gross profit, as a percentage of revenues
was 7.0%, a decrease of 6.0% from 13.0% recorded in 2020. Decrease in gross profit was primarily driven by continued
lower post pandemic volumes, unfavourable product mix, higher material and manufacturing costs, and lower subsidies
mainly from Canada Emergency Wage Subsidy (“CEWS”) program, offset in part by volume increases and new businesses
in certain programs. The implementation of the Corporation’s plan to restructure its European operations in the year resulted
in higher operating costs as programs were transitioned within internal facilities. In addition, during the second half of 2021,
certain facilities of the Corporation began to experience supply chain disruptions and labour shortages, which have negatively
impacted their production of goods and, thus, resulted in lower absorption of manufacturing costs.
Administrative and General Expenses
Twelve-months ended December 31, expressed in thousands of dollars
Administrative and general expenses
Percentage of revenue
2021
44,559
6.5%
2020
52,075
7.0%
Change
(14.4%)
x
Administrative and general expenses as a percentage of revenue were 6.5% in 2021 as compared to 7.0% in 2020. Administrative
and general expenses of $44.6 million in 2021 were $7.5 million or 14.4% lower than $52.1 million in the prior year mainly due
to lower salary and related expenses and lower discretionary spending across the majority of the expense categories to align
with current business volumes.
Restructuring
Twelve-months ended December 31, expressed in thousands of dollars
Workforce reduction
Closure costs
Impairment of property, plant and equipment
Restructuring
2021
–
2,182
–
2,182
2020
6,916
3,236
2,385
12,537
During 2021, the Corporation incurred $2.2 million closure costs as compared to $5.6 million related to the closure of its
Bournemouth manufacturing facilities in the United Kingdom in implementing the restructuring plan announced in the fourth
quarter of 2020 to reorganize its European operations. In 2020, the Corporation also incurred, as part of its cost reduction efforts
in response to COVID-19, workforce reduction costs of $6.9 million related to terminations of employment, primarily in Europe.
Goodwill Impairment
Twelve-months ended December 31, expressed in thousands of dollars
Goodwill impairment
Goodwill impairment
2021
–
–
2020
12,046
12,046
7
MAGELLAN 2021 ANNUAL REPORT MANAGEMENT’S DISCUSSION AND ANALYSIS December 31, 2021
In 2020, the Corporation recorded a goodwill impairment charge of $12.0 million due to the projected slow recovery of the
aerospace market and the resulting depressed customer demand for products and services provided by one of the Corporation’s
cash generating units (“CGU”). There was no impairment recorded in 2021.
Other
Twelve-months ended December 31, expressed in thousands of dollars
Foreign exchange (gain) loss
Loss on disposal of property, plant and equipment
Gain on disposal of investment properties
Other
Other
2021
(2,548)
336
(608)
(355)
(3,175)
2020
1,138
117
–
(172)
1,083
Included in other is a foreign exchange gain of $2.5 million in 2021 compared to a loss of $1.1 million in the prior year. The movements
in balances denominated in foreign currencies and the fluctuations of the foreign exchange rates impact the net foreign exchange
gain or loss recorded during the year. In addition, a $0.6 million gain was recorded relating to the disposal of investment properties.
Interest Expense
Twelve-months ended December 31, expressed in thousands of dollars
Interest on bank indebtedness and long-term debt
Accretion charge on long-term debt and borrowings
Accretion charge for lease liabilities
Discount on sale of trade receivables
Interest expense
2021
43
787
1,817
248
2,895
2020
305
1,103
2,026
924
4,358
Total interest costs of $2.9 million for 2021 decreased by $1.5 million from $4.4 million in 2020, primarily due to lower accretion
charge on long-term debt as principal amounts decreased and lower discount on sale of accounts receivables due to lower
volume of receivables sold in the year.
Income Taxes
Twelve-months ended December 31, expressed in thousands of dollars
Current income tax expense
Deferred income tax expense
Income tax expense
Effective tax rate
2021
8,898
(6,052)
2,846
152.3%
2020
7,140
3,939
11,079
77.0%
The Corporation recorded an income tax expense of $2.8 million in 2021 on pre-tax income of $1.9 million, representing an
effective tax rate of 152.3%, compared to an income tax expense of $11.1 million on pre-tax income of $14.4 million, representing
an effective tax rate of 77.0% in 2020.
During 2021 and 2020, the Corporation recognized investment tax credits totaling $1.6 million and $1.5 million, respectively, as a
reduction of cost of revenues, as the Corporation has determined that it will be able to benefit from these investment tax credits. The
change in effective tax rate and current and deferred income tax expenses year over year was primarily due to changes in the mix
of income and loss across the different jurisdictions in which the Corporation operates and the reversal of temporary differences.
5. RECONCILIATION OF NET INCOME TO EBITDA AND ADJUSTED EBITDA
A description and reconciliation of certain non-IFRS measures used by management
In addition to the primary measures of earnings and earnings per share (basic and diluted) in accordance with IFRS, the
Corporation includes EBITDA (earnings before interest, income taxes and depreciation and amortization) and Adjusted EBITDA
(earnings before interest, income taxes, depreciation and amortization, goodwill impairment and restructuring) in this MD&A.
The Corporation has provided this measure because it believes this information is used by certain investors to assess financial
performance and that EBITDA and Adjusted EBITDA are useful supplemental measures as they provide an indication of the
8
MAGELLAN 2021 ANNUAL REPORT MANAGEMENT’S DISCUSSION AND ANALYSIS December 31, 2021
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 component of this measure is calculated in accordance with
IFRS, but EBITDA and Adjusted EBITDA are not recognized measures under IFRS, and the Corporation’s method of calculation
may not be comparable with that of other companies. Accordingly, EBITDA and Adjusted EBITDA should not be used as
alternatives to net income as determined in accordance with IFRS or as alternatives to cash provided by or used in operations.
Twelve-months ended December 31, expressed in thousands of dollars
Net (loss) income
Interest
Taxes
Depreciation and amortization
EBITDA
Add back:
Restructuring
Goodwill impairment
Adjusted EBITDA
2021
(977)
2,895
2,846
51,892
56,656
2,182
–
58,838
2020
3,313
4,358
11,079
57,103
75,853
12,537
12,046
100,436
Adjusted EBITDA decreased $41.6 million or 41.4% to $58.8 million for the year ended 2021, compared to $100.4 million in
2020 mainly as a result of lower net income driven largely by volume reductions and higher production costs, lower interest and
taxes, depreciation and amortization expenses, restructuring expenses and impairment charge. In addition, during the second
half of 2021, certain facilities of the Corporation began to experience supply chain disruptions and labour shortages, which
negatively impacted their production of goods and, thus, resulted in lower absorption of manufacturing costs leading to lower
Adjusted EBITDA.
6. SELECTED QUARTERLY FINANCIAL INFORMATION
A summary view of Magellan’s quarterly financial performance
Expressed in millions of dollars except per share information
X
Revenues
Income (loss) before taxes
Net income (loss)
Net income (loss) per common share
Basic and Diluted
EBITDA1
Adjusted EBITDA1
Mar 31
176.3
5.2
3.3
0.06
19.2
19.3
X
Jun 30
167.6
1.6
1.1
0.02
14.9
15.6
Sep 30
166.4
1.3
0.5
0.01
16.1
16.7
2021ix
Dec 31
178.0
(6.2)
(5.8)
(0.10)
6.5
7.3
X
X
Mar 31
238.8
25.8
20.1
0.34
41.5
41.5
Jun 30
162.2
10.0
6.1
0.10
24.8
25.5
Sep 30
163.4
2.2
0.0
0.00
16.3
21.8
2020i
Dec 31
180.1
(23.6)
(22.9)
(0.40)
(6.8)
11.5
1 EBITDA and Adjusted EBITDA are not IFRS financial measures. Please see Section 5 the “Reconciliation of Net Income to EBITDA and Adjusted
EBITDA” section for more information.
Revenues and net income in the quarter were impacted by the movements of the Canadian dollar relative to the United States
dollar and British pound, when the Corporation translates its foreign operations to Canadian dollars. Further, the movements
in the United States dollar relative to the British pound impact the Corporation’s United States dollar exposures in its European
operations. During the periods reported, the average quarterly exchange rate of the United States dollar relative to the Canadian
dollar fluctuated between a high of 1.3859 in the second quarter of 2020 and a low of 1.2280 in the second quarter of 2021. The
average quarterly exchange rate of the British pound relative to the Canadian dollar reached a high of 1.7461 in the first quarter
of 2021 and hit a low of 1.6991 in the fourth quarter of 2021. The average quarterly exchange rate of the British pound relative to
the United States dollar reached a high of 1.3974 in the second quarter of 2021 and hit a low of 1.2388 in the second quarter of
2020. Had exchange rates remained at levels experienced in 2020, reported revenues in 2021 would have been higher by $6.7
million, $15.4 million, $6.4 million and $6.1 million for the first, second, third and fourth quarters of 2021, respectively.
Commencing in the second quarter of 2020, the Corporation’s results were negatively impacted by COVID-19 pandemic driven
volume decreases in a number of commercial programs. However, starting with the second quarter of 2021, there were some
positive signs of revenue recovery as certain commercial program aircraft build rates had started to increase. The Corporation
9
MAGELLAN 2021 ANNUAL REPORT MANAGEMENT’S DISCUSSION AND ANALYSIS December 31, 2021 applied and recognized the CEWS subsidy of $8.6 million, $10.4 million and $1.0 million in the second, third and fourth quarters
of 2020, respectively, and $3.9 million and $3.8 million in the second and fourth quarters of 2021, and reduced the expense
that the subsidy offsets.
During the third quarter of 2020, Magellan implemented cost savings initiatives designed to reduce operating costs by re-
balancing its workforce and recognized severance costs of $5.6 million. A $3.4 million cost recovery was recorded against cost
of revenues as a result of the cancellation of the Airbus A320neo program in the third quarter of 2020. In the fourth quarter of
2020, the Corporation committed to a plan to restructure its manufacturing divisions in Europe due to decreased demand as a
result of a deterioration in economic conditions stemming from COVID-19 and recognized a $5.6 million restructuring charge,
including a $2.4 million impairment loss related to assets made obsolete as a result of the plan. Further, a $12.0 million goodwill
impairment charge was recorded in the fourth quarter of 2020.
7. LIQUIDITY AND CAPITAL RESOURCES
A discussion of Magellan’s cash flow, liquidity, credit facilities and other disclosures
The Corporation’s liquidity needs can be met through a variety of sources including cash on hand, cash provided by operations,
short-term borrowings from its credit facility and accounts receivables securitization program, and long-term debt and equity
capacity. Principal uses of cash are to fund liabilities as they become due, finance capital expenditures, fund debt repayments,
repurchase common shares, pay dividends and provide flexibility for new investment opportunities. Based on current funds
available and expected cash flow from operating activities, management believes that the Corporation has sufficient funds
available to meet its liquidity requirements at any point in time. However, if cash from operating activities is lower than expected
or capital costs for projects exceed current estimates, or if the Corporation incurs major unanticipated expenses, it may be
required to seek additional capital in the form of debt or equity or a combination of both.
In 2021, $12.5 million of cash was generated by operations, $20.8 million was used in investing activities and $73.0 million was
used in financing activities.
Cash Flow from Operating Activities
Twelve-months ended December 31, expressed in thousands of dollars
(Increase) decrease in account receivables
Decrease in contract assets
Decrease (increase) in inventories
Decrease in prepaid expenses and other
Increase (decrease) in accounts payable, accrued liabilities and provisions
Net change in non-cash working capital items
Net cash provided by operating activities
2021
(50,347)
3,895
3,234
2,224
7,237
(33,757)
12,526
2020
64,398
7,336
(16,803)
8,299
(41,475)
21,755
105,970
The Corporation generated $12.5 million in 2021 from operating activities, compared to $106.0 million in the prior year. Changes
in non-cash working capital items used cash of $33.8 million in 2021 as compared to $21.8 million generated in the prior year.
The unfavourable movement of non-cash working capital balances was largely attributable to increases in accounts receivables
from lower volume of receivables sold and timing of customer payments, decreases in contract assets due to lower production
and timing of payments, and decreases in prepaid expenses and other due to timing of purchases, offset in part by decreases
in inventories due to timing of production and shipment, and material purchases, and increases in accounts payable, accrued
liabilities and provisions primarily driven by timing of material purchases and supplier and milestone payments.
Cash Flow from Investing Activities
Twelve-months ended December 31, expressed in thousands of dollars
Purchase of property, plant and equipment
Proceeds from disposal of property, plant and equipment
Proceeds from disposal of investment properties
Increase in intangibles and other assets
Net cash used in investing activities
10
2021
(17,675)
509
1,000
(4,638)
(20,804)
2020
(24,575)
177
–
(1,417)
(25,815)
MAGELLAN 2021 ANNUAL REPORT MANAGEMENT’S DISCUSSION AND ANALYSIS December 31, 2021 MANAGEMENT’S DISCUSSION AND ANALYSIS
December 31, 2021
Investing activities for 2021 used $20.8 million compared to $25.8 million in the prior year, a decrease of $5.0 million primarily
due to lower levels of investment in property, plant and equipment and disposal of investment properties offset in part by
increases in long-term receivables and deposits recorded in other assets.
Cash Flow from Financing Activities
Twelve-months ended December 31, expressed in thousands of dollars
(Decrease) increase in debt due within one year
Decrease in long-term debt
Lease liability payments
Increase (decrease) in long-term liabilities and provisions
(Decrease) increase in borrowings, net
Share repurchase
Common share dividend
Net cash used in financing activities
2021
(39,441)
(1,516)
(6,707)
6
(1,104)
–
(24,247)
(73,009)
2020
285
(754)
(6,970)
(545)
37
(3,407)
(24,372)
(35,726)
The Corporation used $73.0 million in 2021 primarily for the repayment of debt due within one year as the Corporation wound
down its accounts receivable securitization program, and the payment of common share dividends. Usage of funds also related
to payment of lease liabilities and long-term debt.
Contractual Obligations
As at December 31, 2021, expressed in thousands of dollars
Long-term debt
Lease liabilities
Other long-term liabilities
Borrowings subject to specific conditions
Total Contractual Obligations
Less than
1 year
4,552
5,734
140
1,327
11,753
1-3 Years
2,878
10,781
232
1,424
15,315
4-5 Years
–
6,969
236
1,650
8,855
After 5
Years
–
22,448
679
21,027
44,154
Total
7,430
45,932
1,287
25,428
80,077
On June 30, 2021, the Corporation extended its Bank Credit Facility Agreement (“Agreement”) with a syndicate of lenders for
an additional two-year period expiring on June 30, 2023. The Agreement provides for a multi-currency global operating credit
facility to be available to Magellan in a maximum aggregate amount of $75 million. The Agreement also includes a $75 million
uncommitted accordion provision, which provides Magellan with the option to increase the size of the operating credit facility
to $150 million. Extensions of the Agreement are subject to mutual consent of the syndicate of lenders and the Corporation.
As at December 31, 2021, the Corporation had made contractual commitments to purchase $4.9 million of capital assets. In
addition, the Corporation had purchase commitments, largely for materials required for the normal course of operations, of
$313.1 million as at December 31, 2021. The Corporation plans to fund all of these commitments with operating cash flow and
the existing credit facility.
Outstanding Share Information
The authorized capital of the Corporation consists of an unlimited number of preference shares, issuable in series, and an
unlimited number of common shares. As at March 17, 2022, 57,729,106 common shares were outstanding and no preference
shares were outstanding. More information on the Corporation’s share capital is provided in note 20 of the Corporation’s
consolidated financial statements for the year ended December 31, 2021.
For the year ended December 31, 2021 and 2020, the Corporation paid quarterly dividends on its common shares of $0.105
per common share, representing an aggregate dividend payment of $24.2 million and $24.4 million, respectively.
In the first quarter of 2022, the Corporation declared dividends of $0.105 per common share payable on March 31, 2022, to
shareholders of record at the close of business on March 29, 2022.
11
MAGELLAN 2021 ANNUAL REPORT MANAGEMENT’S DISCUSSION AND ANALYSIS December 31, 2021
Normal Course Issuer Bid
On May 25, 2020, the Toronto Stock Exchange (“TSX”) accepted the Corporation’s application to commence a normal
course issuer bid (“NCIB”) which allowed the Corporation to repurchase through the facilities of the TSX and alternative
Canadian trading platforms up to 2,910,450 common shares. The program commenced on May 27, 2020 and ended on
May 26, 2021. On May 27, 2021, the Corporation’s application was re-approved for an NCIB to purchase up to 2,886,455 common
shares, over a 12-month period commencing May 27, 2021 and ending May 26, 2022. During the year ended December 31, 2021,
the Corporation had not purchased common shares for cancellation under the program. During the year ended December 31, 2020,
479,895 shares were purchased for cancellation for $3,407 at a volume weighted average price paid of $7.10 per share respectively.
8. FINANCIAL INSTRUMENTS
A summary of Magellan’s financial instruments
Derivative Contracts
The Corporation operates internationally, which gives rise to a risk that its income, cash flows and shareholders’ equity may be
adversely impacted by fluctuations in foreign exchange rates. Currency risk arises because the amount of the local currency
receivable or payable for transactions denominated in foreign currencies may vary due to changes in exchange rates and
because the non-Canadian dollar denominated financial statements of the Corporation’s subsidiaries may vary on consolidation
into the reporting currency of Canadian dollars. The Corporation from time to time may use derivative financial instruments to
help manage foreign exchange risk with the objective of reducing transaction exposures and the resulting volatility of the
Corporation’s earnings. The Corporation does not trade in derivatives for speculative purposes. Under these contracts, the
Corporation is obligated to purchase specified amounts at predetermined dates and exchange rates. These contracts are
matched with anticipated cash flows in United States dollars. The counterparties to the foreign currency contracts are all major
financial institutions with high credit ratings. As at December 31, 2021, foreign exchange contracts of US$6.7 million and £9.5
million were outstanding with an immaterial fair value.
Off-Balance Sheet Arrangements
The Corporation does not have any off-balance sheet arrangements that have or reasonably are likely to have a material
effect on its financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital
expenditures or capital resources. As a result, the Corporation is not exposed materially to any financing, liquidity, market or
credit risk that could arise if it had engaged in these arrangements.
9. RELATED PARTY TRANSACTIONS
A summary of Magellan’s transactions with related parties
During the year, the Corporation incurred consulting and cost recovery fees of $0.2 million [2020 - $0.2 million] payable to a
corporation controlled by the Chairman of the Board of Directors of the Corporation.
10. RISK FACTORS
A summary of risks and uncertainties facing Magellan
The Corporation’s performance may be affected by a number of risks and uncertainties. Magellan’s senior management identifies
key risks and has processes in place to help monitor, manage, and mitigate these risks. Additional risks and uncertainties not
presently known by the Corporation, or that the Corporation does not currently anticipate, may be material and may impair the
Corporation’s performance.
The following risks and uncertainties apply to the Corporation. Information relating to additional risks and uncertainties are set
forth in the Corporation’s Annual Information Form on SEDAR at www.sedar.com.
12
MAGELLAN 2021 ANNUAL REPORT MANAGEMENT’S DISCUSSION AND ANALYSIS December 31, 2021
The impact of the COVID-19 pandemic continues to create considerable uncertainty for the Corporation’s operations.
Magellan’s global operations continue to expose the Corporation to risks associated with the COVID-19 pandemic. Authorities
around the world have implemented measures to try and reduce the spread of the virus and such measures have impacted
and continue to impact Magellan, its business partners, and stakeholders. The extent of the impact of COVID-19 remains
uncertain and will continue to depend on numerous evolving factors across jurisdictions and markets that the Corporation is not
able to accurately predict. This includes the duration and scope of the pandemic, the emergence and spread of new variants
of the virus, including the Omicron variant, the development and availability of effective treatments and vaccines, the speed at
which vaccines are administered, the efficacy of vaccines against the virus and evolving strains or variants of the virus. Also,
global economic conditions during and after the pandemic, government actions that have been taken, or may be taken in the
future, in response to the pandemic, and changes in the aerospace market conditions in response to the pandemic, creates
considerable uncertainty for the Corporation, some of which may be more than just temporary.
COVID-19 affects many of the risk factors enumerated further below and more specifically may cause:
—
—
—
—
—
—
Operation disruptions delaying deliveries and causing financial losses as a result of COVID-19, resulting from temporary
closures of the facilities of the Corporation or its Corporation’s business partners or the inability of a significant portion of
the Corporation’s business partners’ workforce to work because of illness, absenteeism, quarantine, vaccine mandates, or
travel or other government restrictions;
Supply shortages, labor shortages, including strike or work stoppages, or transport capacity constraints (i.e. reduced
availability of air or other commercial transport, port congestion, availability of truck drivers, and border restrictions or
closures), any of which can impact operations. Any sustained interruption in the Corporation’s or the Corporation’s business
partners’ operations, distribution network or supply chain or any significant continuous shortage of raw materials, or supply
shortages can negatively impact the Corporation’s operations;
Operational inefficiencies and additional costs brought on by the effect of the pandemic and related mitigation methods
on the workforce such as costs related to expanded benefits and frontline incentives, the provision of personal protective
equipment and increased sanitation;
Closure or reduction of production of customers, delaying deliveries;
Financial duress for suppliers or customers, related to disruption to the supply chain, potentially causing key inputs to be
unavailable or more costly or receivables uncollectible or subject to longer payment cycles;
Production rate cuts by Airbus, Boeing and other OEMs as a result of global reduction in the demand for commercial
aerospace products;
— Deferral of marketing, business development, and bid activities; and
— Diversion of management attention.
Safety is one of the Corporation’s main priorities, thus several measures have been put in place in order to mitigate these risks,
including:
—
A Steering committee to coordinate emergency response procedures with local management teams at of the Corporation’s
facilities;
— Continued restrictions on all travel;
—
Health protocols at each location in order to mitigate transmission, including but not limited to:
Issuance of personal protective equipment;
Initiating production shifts;
– Physical distancing measures;
–
–
– Quarantine policies;
– Sanitation and hygiene reinforcement;
– Compelling most employees to work from home, where possible.
—
—
Communication with customers and suppliers in order to better forecast disruptions in demand and secure the supply
chain; and
Scrutiny of credit assessments, review of overdue accounts, and provisioning of inventory.
13
MAGELLAN 2021 ANNUAL REPORT MANAGEMENT’S DISCUSSION AND ANALYSIS December 31, 2021
Factors that have an adverse impact on the aerospace industry may adversely affect the Corporation’s results of operations.
The Corporation’s gross profit is derived from the aerospace industry. The Corporation’s aerospace operations are focused
on engineering and manufacturing aircraft components for new manufactured aircraft, and selling spare parts and performing
repair and overhaul services on existing aircraft and aircraft components. Therefore, the Corporation’s business is directly
affected by economic factors and other trends that affect the Corporation’s customers in the aerospace industry, including
possible changes in sourcing strategies by aircraft operators and OEMs, decreased demand for air travel or projected market
growth that may not materialize or be sustainable or the grounding of specific aircraft models by regulatory authorities. Since
fuel prices are a significant cost factor for aircraft operators, any sizeable price increases can affect their operating margins
and reduce their ability to finance capital expenditures. Constraints in the credit market may reduce the ability of airlines and
others to purchase new aircraft, negatively affecting the demand for the Corporation’s products. When these economic and
other factors adversely affect the aerospace industry, they tend to reduce the overall customer demand for the Corporation’s
products and services, which decreases the Corporation’s operating income.
Economic and other factors both internal and external to the aerospace industry might affect the aerospace industry and
may have an adverse impact on the Corporation’s results of operations. More specifically, a number of additional external risk
factors may include the financial condition of the airline industry, commercial aerospace customers and government aerospace
customers; government policies related to import and export restrictions and business acquisitions; changing priorities and
possible spending cuts by government agencies; government support for export sales; world trade policies; increased
competition from other businesses, including new entrants in market segments in which the Corporation competes. In addition,
acts of terrorism, natural disasters, and global health risks including new pandemics, political instability or the outbreak of
war or continued hostilities in certain regions of the world could adversely affect global travel and result in lower orders or the
rescheduling or cancellation of part of the existing order backlog for some of the Corporation’s products.
The Corporation faces risks from downturns in the domestic and global economies.
Potential loss due to unfavourable economic conditions, such as a macroeconomic downturn in key markets, could result in
potential buyers postponing the purchase of the Corporation’s products or services, lower order intake, order cancellations
or deferral of deliveries, lower availability of customer financing, downward pressure on selling prices, increased inventory
levels, decreased level of customer advances, slower collection of receivables, reduction in production activities, discontinued
production of certain products, termination of employees and adverse impacts on the Corporation’s suppliers.
The Corporation cannot predict the depth or duration of downturns in the domestic and global economies nor the effects on
markets that the Corporation serves, particularly the airline industry. The Corporation’s ability to increase or maintain its revenues
and operating results may be impaired as a result of negative general global economic conditions including, without limitation,
interest rates, general levels of economic activity, fluctuations in the market prices of securities, participation by other investors
in the financial markets, economic uncertainty, national and international political circumstances, natural disasters, public health
crises, such as the COVID-19 pandemic and other events outside of our control. Also, even as government restrictions are
relaxed and economies gradually, partially, or fully reopen in the Corporation’s jurisdictions and markets, the ongoing economic
impacts and health concerns associated with the COVID-19 pandemic may continue to affect the Corporation’s operations for
a timeframe that is uncertain. The economic impact could be severe to global economies depending on the duration of the
pandemic, the likelihood and scope of any subsequent waves of COVID-19 and the continued measures put in place to contain
the virus. Also, there are significant uncertainties of the economic impacts that the recent conflict between Ukraine and Russia,
with the conflict being in its early stages will have on global economies. The economic uncertainties of such events render
estimates of future revenues and expenditures more difficult to formulate. The future direction of the overall domestic and global
economies could have a significant impact on the Corporation’s overall financial performance and may impact the value of its
common shares.
Cancellations, reductions or delays in customer orders may adversely affect the Corporation’s results of operations.
The Corporation’s overall operating results are affected by many factors, including the timing of orders from large customers and
the timing of expenditures to manufacture parts and purchase inventory in anticipation of future sales of products and services.
A large portion of the Corporation’s operating expenses is relatively fixed. As several of the Corporation’s operating locations
14
MAGELLAN 2021 ANNUAL REPORT MANAGEMENT’S DISCUSSION AND ANALYSIS December 31, 2021 typically do not obtain long-term purchase orders or commitments from customers, the Corporation must anticipate the future
volume of orders based upon the historic purchasing patterns of customers and upon discussions with customers as to their
anticipated future requirements. These historic patterns may be disrupted by many factors, including grounding of specific
aircraft models by regulatory authorities, changing economic conditions, inventory adjustments, work stoppages or labour
disruptions and the impacts of COVID-19. Cancellations, reductions or delays in orders by a customer or group of customers
could have a material adverse effect on the Corporation’s business, financial condition and results of operations.
The conflict between Russia and Ukraine and any restrictive actions that may be taken by the U.S. and/or other countries in
response thereto, such as sanctions or export controls.
The recent escalated conflict between Russia and the Ukraine (“Conflict”) has resulted in sanctions imposed upon Russia by
NATO and Western countries which are expected to impact world economic markets and particular areas of the aerospace
industry. The extent and potential magnitude of economic impacts on the aerospace industry as a result of the imposed
sanctions is still being assessed by the industry. The impact of changes in world economic markets and the follow-on effects
on the aerospace industry is a primary concern. While it is expected there will be no immediate impact upon defence aircraft
procurement, the Corporation cannot predict the outcome of the Conflict and thus the impact on the Corporation remains
uncertain. The Corporation, through certain of its customers, participates on certain commercial aircraft programs that are
manufactured by Russian companies, and the Corporation indirectly supplies components for aircraft engines which are sold
to Russian aircraft manufacturers. Magellan also purchases raw materials from OEM designated suppliers that are situated in
Russia. The short and long-term implications of the Conflict are difficult to predict at this time.
11. CRITICAL ACCOUNTING ESTIMATES
A description of accounting estimates that are critical to determining Magellan’s financial results
The preparation of consolidated financial statements requires management to make critical judgements, estimates and
assumptions that affect the reported amounts of certain assets and liabilities at the date of the consolidated financial statements
and the reported amount of revenues and expenses recorded during the reporting period. The critical estimates and judgements
utilized in preparing the Corporation’s consolidated financial statements affect the assessment of net recoverable amounts, net
realizable values and fair values, depreciation and amortization rates and useful lives, value of intangible assets, ability to utilize
tax losses and other tax measurements, determination of functional currency, determination of the degree of control that exists
in determining the corresponding accounting basis, and the selection of accounting policies. Any changes in estimates and
assumptions could have a material impact on the Corporation’s future income and/or the amounts reported in its statement
of financial position. The Corporation reviews its estimates and assumptions on an ongoing basis and uses the most current
information available and exercises careful judgement in making these estimates and assumptions.
The outbreak of the novel strain of coronavirus “COVID-19” resulted in governments worldwide enacting emergency measures
to combat the spread of the virus. These measures, which include the implementation of travel bans, self-imposed quarantine
periods and social distancing, have caused a material disruption to businesses globally resulting in an economic slowdown
and decreased demand in the aerospace industry. The introduction of vaccines has led to optimism; however, the situation
continues to evolve (including the prevalence of virus variants). The duration and full financial effect of the COVID-19 pandemic
is unknown at this time, as is the efficacy of the government and central bank interventions, the Corporation’s business continuity
plan and other mitigating measures.
In addition, the recent escalation in Conflict and the resulting imposition of sanctions and counter sanctions have disrupted
supply chains and caused instability in the global economy. The short and long-term implications of the Conflict are difficult to
predict at this time. The ongoing Conflict could result in the imposition of future economic sanctions, which may have a greater
adverse effect on economic markets and could result in an even greater impact related to global supply and pricing of electricity
and materials.
15
MAGELLAN 2021 ANNUAL REPORT MANAGEMENT’S DISCUSSION AND ANALYSIS December 31, 2021 Any estimate of the length and severity of these developments is therefore subject to significant uncertainty, and accordingly
estimates of the extent to which the COVID-19 pandemic and Conflict may materially and adversely affect the Corporation’s
operations, financial results and condition in future periods are also subject to significant uncertainty. Therefore, uncertainty
about judgements, estimates and assumptions made by management during the preparation of the Corporation’s consolidated
financial statements related to potential impacts of the COVID-19 pandemic and Conflict on revenue, expenses, assets, liabilities,
and note disclosures could result in a material adjustment to the carrying value of the asset or liability affected.
The main assumptions and estimates that were used in preparing the Corporation’s consolidated financial statements relate to:
Financial instruments
The valuation of the Corporation’s derivative instruments and certain other financial instruments requires estimation of the fair
value of each instrument at the reporting date. Details of the basis on which fair value is estimated are provided in note 22 to
the consolidated financial statements.
Impairments
The recoverable amount of goodwill, intangible assets and property, plant and equipment is based on estimates and assumptions
regarding the expected market outlook and cash flows from each CGU or group of CGUs.
In order to estimate the fair value of indefinite-lived intangible assets and goodwill resulting from business combinations, the
Corporation typically estimates future revenue, considers market factors and estimates future cash flows. Based on these
key assumptions, judgements and estimates, the Corporation determines whether to record an impairment charge to reduce
the value of the asset carried on the consolidated statements of financial position to its estimated fair value. Assumptions,
judgements and estimates about future values are complex and often subjective. They can be affected by a variety of factors,
including external factors such as industry and economic trends, and internal factors such as changes in the Corporation’s
business strategy or internal forecasts. Although the Corporation believes the assumptions, judgements and estimates made in
the past have been reasonable and appropriate, different assumptions, judgements and estimates could materially affect the
Corporation’s reported financial results.
Deferred taxes
Income taxes are determined based on estimates of the Corporation’s current income taxes and estimates of deferred income
taxes resulting from temporary differences. Deferred tax assets are assessed to determine the likelihood that they will be
realized from future taxable income before they expire.
Government assistance
Investment tax credits and scientific research and experimental development tax credits are determined based on estimates of
the Corporation’s current year expenditures on qualifying programs. The investment tax credits are assessed to determine the
likelihood that they will be applied against federal income taxes.
Capitalization of development costs
When capitalizing development costs the Corporation must assess the technical and commercial feasibility of the projects
and estimate the useful lives of resulting products. Determining whether future economic benefits will flow from the assets and
therefore the estimates and assumptions associated with these calculations are instrumental in (i) deciding whether project
costs can be capitalized, and (ii) accurately calculating the useful life of the projects for the Corporation.
Leases
The Corporation determines the lease term as the non-cancellable term of the lease, together with any periods covered by an
option to extend or terminate the lease. The lease term is estimated by considering the facts and circumstances that can create
an economic incentive to exercise an extension option, or not exercise the termination option. Both qualitative and quantitative
assumptions are considered when deriving the value of the economic incentive.
The Corporation makes judgements in determining whether a contract contains an identified asset. The identified asset should
be physically distinct or represent substantially all of the capacity of the asset, and should provide the Corporation with the right
to substantially all of the economic benefits from the use of the asset.
16
MAGELLAN 2021 ANNUAL REPORT MANAGEMENT’S DISCUSSION AND ANALYSIS December 31, 2021 Judgements are made by the Corporation in determining the incremental borrowing rate used to measure the lease liability for
each lease contract, including an estimate of the asset-specific security impact. The incremental borrowing rate should reflect
the interest rate that the Corporation would have to pay to borrow at a similar term and with a similar security.
Income (loss) on completion of contracts
To estimate income (loss) on completion, the Corporation takes into account factors inherent to the contract by using historical
and/or forecast data.
Repayable government grants
The forecast repayment of grants received from government authorities is based on future sales. As the forecast repayments
are closely related to forecasts of future sales set out in business plans prepared by the operating divisions, the estimates and
assumptions underlying these business plans are instrumental in determining the timing of these repayments.
Employee benefits
The Corporation considers a number of factors in developing the pension assumptions, including an evaluation of relevant
discount rates, plan asset allocations, mortality, expected changes in wages and retirement benefits, analysis of current market
conditions, economic benefits available and input from actuaries and other consultants. Costs of the programs are based on
actuarially determined amounts and are accrued over the period from the date of hire to the full eligibility date of employees who
are expected to qualify for these benefits.
12. CHANGES IN ACCOUNTING POLICIES
A description of accounting standards adopted in 2021
The Corporation has adopted the following new and amended standards in 2021.
Interbank Offered Rate (“IBOR”) Reform
In August 2020, the IASB published amendments to IFRS 9, Financial Instruments, IAS 39, Financial Instruments: Recognition
and Measurement, IFRS 7, Financial Instruments: Disclosures, IFRS 4, Insurance Contracts and IFRS 16, Leases.
The amendments address issues that arise from implementation of IBOR reform, where IBORs are replaced with alternative
benchmark rates. For financial instruments at amortized cost, the amendments introduce a practical expedient such that if a
change in the contractual cash flows is as a result of IBOR reform and occurs on an economically equivalent basis, the change
will be accounted for by updating the effective interest rate with no immediate gain or loss recognized. The amendments also
provide additional temporary relief from applying specific IAS 39, hedge accounting requirements to hedging relationships
affected by IBOR reform. The adoption did not have a material impact on the Corporation’s financial results.
13. CONTROLS AND PROCEDURES
A description of Magellan’s disclosure controls and internal controls over financial reporting
Based on the current Canadian Securities Administrators (the “CSA”) rules under National Instrument 52-109 Certification of
Disclosure in Issuers’ Annual and Interim Filings, the Chief Executive Officer and Chief Financial Officer are required to certify as
at December 31, 2021 that they are responsible for establishing and maintaining, and have assessed the design and operating
effectiveness of disclosure controls and procedures and internal control over financial reporting.
Management does not expect disclosure controls and procedures and internal control over financial reporting to prevent
all errors, misstatements or fraud. In addition, internal control over financial reporting that management has designed and
established may be circumvented and rendered ineffective as a result of unauthorized acts of individuals through collusion or
management override. A system of control, no matter how well conceived and operated, can provide only reasonable, but not
absolute, assurance that control objectives are met. Due to the inherent limitations in a system of control, there is no absolute
assurance that all controls issues, which may result in errors, misstatements, or fraud, can be prevented or detected. The
inherent limitations include, amongst other things: (i) management’s assumptions and judgements could ultimately prove to be
17
MAGELLAN 2021 ANNUAL REPORT MANAGEMENT’S DISCUSSION AND ANALYSIS December 31, 2021 incorrect under varying conditions and circumstances; (ii) the impact of isolated errors; (iii) assumptions about the likelihood of
future events.
In preparation for this certification, Magellan has dedicated resources in place to document and evaluate the design and
operating effectiveness of disclosure controls and procedures and internal control over financial reporting. As of December
31, 2021, an evaluation was carried out, under the supervision of the President and Chief Executive Officer and the Chief
Financial Officer, of the effectiveness of the Corporation’s disclosure controls and internal controls over financial reporting, as
those terms are defined in National Instrument 52-109. Based on that evaluation, the Corporation’s management concluded that
the Corporation’s design and operating disclosure controls and procedures and internal control over financial reporting were
effective as of December 31, 2021.
No changes were made in the Corporation’s internal control over financial reporting during the year ended December 31, 2021,
that have materially affected, or are reasonably likely to materially affect, the Corporation’s internal control over financial reporting.
Additional information relating to Magellan Aerospace Corporation, including the Corporation’s Annual Information Form is on
SEDAR at www.sedar.com.
18
MAGELLAN 2021 ANNUAL REPORT MANAGEMENT’S DISCUSSION AND ANALYSIS December 31, 2021 MANAGEMENT’S REPORT
December 31, 2021
To the shareholders of Magellan Aerospace Corporation
The consolidated financial statements of Magellan Aerospace Corporation were prepared by management in accordance with
International Financial Reporting Standards. The financial and operating information presented in this annual report is consistent with
that shown in the consolidated financial statements.
Management maintains a system of internal controls to provide reasonable assurance that all assets are safeguarded and to facilitate
the preparation of relevant, reliable and timely financial information. External auditors appointed by the shareholders have examined the
consolidated financial statements. The Audit Committee, consisting of non-management directors, has reviewed these consolidated
financial statements with management and the auditors and has reported to the Board of Directors. The Board of Directors approved
the consolidated financial statements.
Phillip C. Underwood
President and Chief Executive Officer
March 17, 2022
Elena M. Milantoni
Chief Financial Officer
19
MAGELLAN 2021 ANNUAL REPORT INDEPENDENT AUDITORS’ REPORT
December 31, 2021
To the Shareholders of
Magellan Aerospace Corporation
Opinion
We have audited the consolidated financial statements of Magellan Aerospace Corporation and its subsidiaries (the Group), which
comprise the consolidated statements of financial position as at December 31, 2021 and 2020, and the consolidated statements of (loss)
income and comprehensive income (loss), consolidated statements of changes in equity and consolidated statements of cash flows
for the years then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies.
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial
position of the Group as at December 31, 2021 and 2020, and its consolidated financial performance and its consolidated cash flows
for the years then ended in accordance with International Financial Reporting Standards (IFRS).
Basis for opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those
standards are further described in the Auditor’s responsibilities for the audit of the consolidated financial statements section of our
report. We are independent of the Group in accordance with the ethical requirements that are relevant to our audit of the consolidated
financial statements in Canada, and we have fulfilled our ethical responsibilities in accordance with these requirements. We believe
that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in the audit of the consolidated
financial statements of the current period. These matters were addressed in the context of the audit of the consolidated financial
statements as a whole, and in forming the auditor’s opinion thereon, and we do not provide a separate opinion on these matters. For
each matter below, our description of how our audit addressed the matter is provided in that context.
We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the consolidated financial statements
section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed
to respond to our assessment of the risks of material misstatement of the financial statements. The results of our audit procedures,
including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying
consolidated financial statements.
20
MAGELLAN 2021 ANNUAL REPORT Key Audit Matter
Recognition of revenues on over time contracts
How our audit addressed the key audit matter
As detailed in Note 24 of the consolidated financial statements, a
significant portion of the Group’s revenues are derived from over
time contracts, specifically $307 million. The Group recognizes
revenue for over time contracts using the input method, which
recognizes revenue as performance of the contract progresses,
measured by reference to the proportion of total expected costs
to complete the contracts. The level of total expected costs to be
incurred on each contract is estimated by the Group and includes
certain significant judgements for those contracts open greater
than one year that can have a material impact on the amount of
revenue recognized in a reporting period as contracts run over
several accounting periods. These significant judgements include
those related to estimated future labour, materials and overhead
costs for long-term contracts open at year-end. These judgements
are subjective in nature and dependent on the complexity and
status of the related contract as of the period end date.
We evaluated the contract judgements and estimates made by
the Group in relation to the estimated costs to be incurred. For a
sample of long-term contracts open at year-end, we performed
the following audit procedures, among others:
— Evaluated contractual arrangements, including pricing
and billing terms, change orders and terms and conditions
impacting revenue recognition, if any;
— Obtained an understanding of the projects’ performance
throughout the year and at year-end through inquiries with
project managers from the contract project team;
Evaluated the reasonableness of management’s assumptions
for estimated costs to complete by comparing the key inputs
in the initial budget with actual costs, and assessed trends
based on our knowledge of similar projects;
—
— Evaluated the reasonableness of management’s historical
assumptions of estimated costs to complete by comparing
previous cost estimation forecasts to actual results;
— Obtained management’s calculation for estimated costs to
complete, and agreed the costs to subsequently executed
purchase orders or external price quotes; and
Evaluated the appropriateness of accumulated costs related
to claims and unapproved change orders that can result in
additional charges or changes to contract revenues.
—
We also assessed the adequacy of the related disclosures in the
consolidated financial statements.
21
MAGELLAN 2021 ANNUAL REPORT INDEPENDENT AUDITORS’ REPORT December 31, 2021 Key Audit Matter
Recoverability of Goodwill
How our audit addressed the key audit matter
As detailed in Note 10 of the consolidated financial statements,
the Group has a goodwill balance of $22 million. The Group
holds a significant amount of goodwill relating to the United
Kingdom and United States of America acquisitions. As
described in Note 1 of the consolidated financial statements,
the Group uses a discounted cash flow model to determine the
recoverable amount for each impairment test on each of the two
cash-generating units (“CGUs”) which contain goodwill. The
estimated recoverable amounts are subjective due to the inherent
uncertainty involved in forecasting and discounting future cash
flows, more specifically surrounding future sales, growth rates,
future operating expenditures, and discount rates.
We evaluated the estimates made by the Group in relation
to the recoverability of goodwill. We considered the Group’s
procedures used to develop the forecasts of each CGU’s
discounted cash flow model compared to the requirements within
IAS 36, Impairment of Assets. We performed the following audit
procedures to evaluate those cash flows, among others:
— Compared the prior year expected future cash flows to the
actual results to assess the Group’s budgeting process;
— Compared assumptions on the future sales and growth
rates in the forecasts to publicly available information such
as trends in the Aerospace & Defense industry and publicly
available information from the Group’s key customers;
— Reviewed available signed contracts to corroborate future
—
sales forecasts;
Assessed reasonableness of expenditures by performing an
analysis of the forecasted future operating expenditures as
compared to actual expenditures incurred and feasibility of
any cost reduction plans to be implemented; and
— To the extent available subsequent to year-end, determined
whether actual product sales patterns aligned with estimates
used by management to establish the forecast.
With the assistance of our valuations specialists, we evaluated
the Company’s impairment models, valuation methodology, and
certain significant assumptions, including the pre-tax discount
rates by comparing to externally derived data, such as bond
yields and inflation statistics.
We also assessed the adequacy of the related disclosures in the
consolidated financial statements.
22
MAGELLAN 2021 ANNUAL REPORT INDEPENDENT AUDITORS’ REPORT December 31, 2021 Other information
Management is responsible for the other information. The other information comprises:
— Management’s Discussion and Analysis
— The information, other than the consolidated financial statements and our auditor’s report thereon, in the Annual Report.
Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of
assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other information, and
in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our
knowledge obtained in the audit or otherwise appears to be materially misstated.
We obtained Management’s Discussion & Analysis and the Annual Report prior to the date of this auditor’s report. If, based
on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to
report that fact in this auditor’s report. We have nothing to report in this regard.
Responsibilities of management and those charged with governance for the consolidated financial statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance
with IFRS, and for such internal control as management determines is necessary to enable the preparation of consolidated
financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the Group’s ability to continue as
a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting
unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Group’s financial reporting process.
Auditor’s responsibilities for the audit of the consolidated financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable
assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally
accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or
error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the eco-
nomic decisions of users taken on the basis of these consolidated financial statements.
As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgement
and maintain professional skepticism throughout the audit. We also:
— Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or
error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and ap-
propriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher
than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the
override of internal control.
— Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control.
— Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related
disclosures made by management.
— Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit
evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on
the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw
attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s
report. However, future events or conditions may cause the Group to cease to continue as a going concern.
23
MAGELLAN 2021 ANNUAL REPORT INDEPENDENT AUDITORS’ REPORT December 31, 2021 — Evaluate the overall presentation, structure, and content of the consolidated financial statements, including the disclosures,
and whether the consolidated financial statements represent the underlying transactions and events in a manner that
achieves fair presentation.
— Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within
the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision
and performance of the group audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the
audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements
regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to
bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most signifi-
cance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these
matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare
circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of
doing so would reasonably be expected to outweigh the public interest benefits of such communication.
The engagement partner on the audit resulting in this independent auditor’s report is Ashraf Zineldin.
Toronto, Canada
March 17, 2022
24
MAGELLAN 2021 ANNUAL REPORT INDEPENDENT AUDITORS’ REPORT December 31, 2021 CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
Expressed in thousands of Canadian dollars
Notes
December 31
2021
December 31
2020
3
4
5
6
x
x
7
8
9
10
10
11, 23
19
x
x
5, 13
14,15, 22
x
14
15
16, 22
17, 23
19
x
20
29
x
x
x
32,482
164,234
66,337
208,577
9,664
481,294
396,845
34,389
1,659
47,772
21,792
11,587
8,480
522,524
1,003,818
123,382
10,266
133,648
2,755
30,644
24,101
7,223
39,623
104,346
252,342
2,044
13,565
479,965
14,531
762,447
3,377
1,003,818
113,938
114,404
70,388
213,120
12,915
524,765
420,340
40,098
2,127
55,155
21,982
7,301
834
547,837
1,072,602
114,706
50,098
164,804
4,865
35,222
24,984
21,539
35,309
121,919
252,342
2,044
13,565
492,681
21,870
782,502
3,377
1,072,602
Current assets
Cash
Trade and other receivables
Contract assets
Inventories
Prepaid expenses and other
Non-current assets
Property, plant and equipment
Right-of-use assets
Investment properties
Intangible assets
Goodwill
Other assets
Deferred tax assets
Total assets
Current liabilities
Accounts payable, accrued liabilities and provisions
Debt due within one year
Non-current liabilities
Long-term debt
Lease liabilities
Borrowings subject to specific conditions
Other long-term liabilities and provisions
Deferred tax liabilities
Equity
Share capital
Contributed surplus
Other paid in capital
Retained earnings
Accumulated other comprehensive income
Equity attributable to equity holders of the Corporation
Non-controlling interest
Total liabilities and equity
See accompanying notes to the consolidated financial statements
x
x
x
x
25
MAGELLAN 2021 ANNUAL REPORT
CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE (LOSS) INCOME
Expressed in thousands of Canadian dollars, except per share amounts
Notes
Years ended December 31
2020
2021
Revenues
Cost of revenues
Gross profit
Administrative and general expenses
Restructuring
Goodwill impairment
Other
Income before interest and income taxes
Interest
Income before income taxes
Income taxes
Current
Deferred
Net (loss) income
Other comprehensive income (loss)
Other comprehensive loss that may be reclassified to
profit and loss in subsequent periods:
Foreign currency translation
Items not to be reclassified to profit and loss in
subsequent periods:
Actuarial income (loss) on defined benefit pension plans, net of tax
Comprehensive income (loss)
Net (loss) income per share
Basic
Diluted
See accompanying notes to the consolidated financial statements
XX
24
25
26
27
10, 27
11
X
28
X
19
19
X
29
19, 23
X
20
20
688,358
640,028
48,330
44,559
2,182
–
(3,175)
4,764
2,895
1,869
8,898
(6,052)
2,846
(977)
744,414
647,923
96,491
52,075
12,537
12,046
1,083
18,750
4,358
14,392
7,140
3,939
11,079
3,313
(7,339)
(3,669)
12,508
4,192
(0.02)
(0.02)
(1,862)
(2,218)
0.06
0.06
26
MAGELLAN 2021 ANNUAL REPORT
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Expressed in thousands of
Canadian dollars X
Sharei
capitali
Contributed
surplus
Other
paid in
capital
Retainedix
earningsix
Foreignx
currencyx
translationx
Non-
controlling
interest
Totalx
Totali
equityi
Attributable to equity holders of the Corporation
–
–
–
–
3,377 815,876
3,313
(5,531)
(3,407)
(24,372)
3,377 785,879
(977)
5,169
(24,247)
3,377 765,824
–
–
–
December 31, 2019
Net income
Other comprehensive loss
Common share repurchase
Common share dividend
December 31, 2020
Net loss
Other comprehensive income (loss)
Common share dividend
December 31, 2021
See accompanying notes to the consolidated financial statements
254,440
–
–
(2,098)
–
252,342
–
–
–
252,342
2,044
–
–
–
–
2,044
–
–
–
2,044
13,565
–
–
–
–
13,565
–
–
–
13,565
516,911
3,313
(1,862)
(1,309)
(24,372)
492,681
(977)
12,508
(24,247)
479,965
25,539
–
(3,669)
–
–
21,870
–
(7,339)
–
14,531
812,499
3,313
(5,531)
(3,407)
(24,372)
782,502
(977)
5,169
(24,247)
762,447
27
MAGELLAN 2021 ANNUAL REPORT
Notes
Years ended December 31
2020
2021
(977)
3,313
7, 8, 10
10, 27
7
27
23
28
19
11
31
x
7
7
x
x
18
14, 18
15, 18
17, 18
16, 18
20
20
20
X
X
51,892
–
336
(608)
–
585
2,604
(7,555)
6
(33,757)
12,526
(17,675)
509
1,000
(4,638)
(20,804)
(39,441)
(1,516)
(6,707)
6
(1,104)
–
(24,247)
(73,009)
(81,287)
113,938
(169)
32,482
57,103
12,046
117
–
5,227
(282)
3,129
3,545
17
21,755
105,970
(24,575)
177
–
(1,417)
(25,815)
285
(754)
(6,970)
(545)
37
(3,407)
(24,372)
(35,726)
44,429
69,637
(128)
113,938
CONSOLIDATED STATEMENTS OF CASH FLOWS
Expressed in thousands of Canadian dollars X
Cash flow from operating activities
Net (loss) income
Amortization/depreciation of intangible assets, right-of-use
assets and property, plant and equipment
Impairment of goodwill
Loss on disposal of property, plant and equipment
Gain on disposal of investment properties
Restructuring
Increase (decrease) in defined benefit plans
Accretion of financial liabilities
Deferred taxes
Loss on investment in joint venture
Change in non-cash working capital
Net cash provided by operating activities
Cash flow from investing activities
Purchase of property, plant and equipment
Proceeds from disposal of property, plant and equipment
Proceeds from disposal of investment properties
Increase in intangible and other assets
Net cash used in investing activities
Cash flow from financing activities
(Decrease) increase in debt due within one year
Decrease in long-term debt
Lease liability payments
Increase (decrease) in long-term liabilities and provisions
(Decrease) increase in borrowings, net
Share repurchase
Common share dividend
Net cash used in financing activities
(Decrease) increase in cash during the year
Cash at beginning of the year
Effect of exchange rate differences
Cash at end of the year
See accompanying notes to the consolidated financial statements
28
MAGELLAN 2021 ANNUAL REPORT
1. SIGNIFICANT ACCOUNTING POLICIES
Description of Business
Magellan Aerospace Corporation (the “Corporation” or “Magellan”) is a publicly listed company incorporated in Ontario, Canada
under the Ontario Business Corporations Act and its shares are listed on the Toronto Stock Exchange. The registered and head
office of the Corporation is located at 3160 Derry Road East, Mississauga, Ontario, Canada, L4T 1A9.
The Corporation is a diversified supplier of components to the aerospace industry. Through its wholly owned subsidiaries,
Magellan engineers and manufactures aeroengine and aerostructure components for aerospace markets, including advanced
products for defence and space markets, and complementary specialty products. The Corporation also supports the aftermarket
through the supply of spare parts as well as through repair and overhaul services.
Statement of Compliance
These consolidated financial statements are prepared under International Financial Reporting Standards (“IFRS”) as issued by
the International Accounting Standards Board (“IASB”).
These consolidated financial statements were authorized for issuance by the Board of Directors of the Corporation on
March 17, 2022.
Basis of Presentation
The consolidated financial statements have been prepared on the historical cost basis except for certain financial instruments,
which are measured at fair value. These consolidated financial statements have been prepared using IFRS principles applicable
to a going concern, which contemplate the realization of assets and settlement of liabilities in the normal course of business as
they come due. All amounts are presented in Canadian dollars, unless otherwise indicated.
The Corporation’s significant accounting policies are set out below. These accounting policies have been applied consistently
to all periods presented in these consolidated financial statements and by all entities.
Basis of Consolidation
The consolidated financial statements of the Corporation include the assets and liabilities, and the results of operations and
cash flows of the Corporation and its subsidiaries and the Corporation’s interest in its joint ventures. The consolidated financial
statements of entities have a reporting date of December 31. Entities over which the Corporation has control are accounted
for as subsidiaries. Control is achieved when the Corporation is exposed, or has rights, to variable returns from its involvement
with the entity and has the ability to affect those returns through its power over the entity. Where the Corporation has the ability
to exercise joint control, the entities are accounted for as joint ventures and are incorporated into the consolidated financial
statements using the equity method of accounting. Interests acquired in entities are consolidated from the date the Corporation
acquires control and interests sold are de-consolidated from the date control ceases. Wholly owned operating subsidiaries of
the Corporation are:
– Magellan Aerospace Limited
– Magellan Aerospace (UK) Limited
– Magellan Aerospace USA, Inc.
The effects of intragroup transactions are eliminated. Trade receivables and accounts payable as well as expenses and income
between the consolidated entities are netted. Internal sales are transacted on the basis of market prices and intragroup profits
and losses are eliminated.
Determination of Fair Value
Fair value is determined based on the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. Fair value is measured using the assumptions that market
participants would use when pricing an asset or liability. Fair value is determined by using quoted prices in active markets for
identical or similar assets or liabilities. When quoted prices in active markets are not available, fair value is determined using
valuation techniques that maximize the use of observable inputs.
29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unless otherwise stated, all amounts are in thousands of Canadian dollars) MAGELLAN 2021 ANNUAL REPORT When observable valuation inputs are not available, significant judgement is required to determine fair value by assessing the
valuation techniques and valuation inputs. The use of alternative valuation techniques or valuation inputs may result in a different
fair value.
Foreign Currency Translation
The consolidated financial statements are presented in Canadian dollars, which is the Corporation’s functional currency.
Foreign currency denominated monetary assets and liabilities are translated at the rates of exchange at the statement of
financial position date. Foreign currency transactions are translated into the functional currency using the exchange rates
prevailing at that date, whereas non-monetary items measured at historic cost, are translated using the exchange rate prevailing
on the transaction date. Translation gains and losses resulting from the settlement of such transactions and from the translation
of monetary assets and liabilities denominated in foreign currencies are recognized in income.
Assets and liabilities of foreign operations that have a functional currency different from the presentation currency are translated
using the closing exchange rate prevailing at the reporting date and revenues and expenses at average exchange rates during
the period. Translation gains and losses on currency translation are recognized as a separate component of equity in other
accumulated comprehensive income and do not have any impact on the net (loss) income for the year.
Segment Reporting
Management has determined the operating segments based on information regularly reviewed for the purposes of decision
making, allocating resources and assessing performance by the Corporation’s chief operating decision makers. The Corporation
evaluates the financial performance of its operating segments primarily based on net income before interest and income taxes.
Revenue Recognition
Revenue is primarily comprised of sales of goods and rendering of services and recognized when control of the goods or
services are transferred to the customer at an amount that reflects the consideration to which the Corporation expects to be
entitled in exchange for those goods or services. The Corporation’s revenue recognition methodology is determined on a
contract-by-contract basis.
Performance Obligation
A performance obligation is a contractual promise with a customer to transfer a distinct good or service and is the unit of
account for revenue recognition.
The Corporation accounts for a contract with customers when it has approval and commitment from both parties, each party’s
rights have been identified, payment terms are defined, the contract has commercial substance and collection is probable. The
Corporation is the principal in its revenue arrangements because it typically controls the goods or services before transferring
them to the customer.
A contract transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the
performance obligation is satisfied. The transaction price includes, among other things and when applicable, an estimate of
variable consideration to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue
recognized will not occur at the time when the uncertainty associated with the variable consideration is resolved. Variable
consideration is usually derived from sales incentives, in the form of discounts or volume rebates. The estimation of variable
consideration is largely based on the assessment of the Corporation’s historical, current and forecasted information that is
reasonably available.
For contracts with multiple performance obligations, the contract transaction price, including variable consideration when
applicable, is allocated based on the estimated relative stand-alone price of the promised goods or services underlying each
performance obligation. The Corporation generally uses the expected cost plus a margin approach to estimate the stand-alone
selling price of each performance obligation when a stand-alone selling price is not directly observable.
The Corporation’s performance obligations are satisfied over time or at a point in time.
30
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unless otherwise stated, all amounts are in thousands of Canadian dollars) MAGELLAN 2021 ANNUAL REPORT Revenues from sale of goods are recognized over time when the Corporation’s performance does not create an asset with
alternative use and the Corporation has an enforceable right to payment for performance completed to date. The Corporation
recognizes revenue over time using the cost-to-cost input method, which recognizes revenue as performance of the contract
progresses. Contracts that do not meet the criteria for over time recognition are recognized at a point in time when the goods
are dispatched or made available to the customer. The sale of consignment products are recognized on notification that the
product has been used.
Revenues from rendering services are recognized over time as customers simultaneously receive and consume the benefits
provided by the Corporation. The Corporation recognizes revenues for repair and overhaul services using the cost-to-cost input
method as the basis for measuring the progress on the contract.
Other revenues are recognized at a point in time or over time as performance obligations are satisfied, depending on the nature
of the contract.
The Corporation typically provides warranties for general repairs of defects that existed at the time of sale, as required by law.
These assurance-type warranties are not separate performance obligations and are accounted for under IAS 37, Provisions,
Contingent Liabilities and Contingent Assets.
Contract Balances
Contract assets include unbilled amounts when over time method of revenue recognition is utilized and revenue recognized
exceeds the amount billed to the customer, and right to payment is not just subject to the passage of time. Amounts may not
exceed their net realizable value. Contract assets are generally classified as current.
Contract liabilities consist of advance payments and deferred revenue. Contract assets and liabilities are reported in a net
position on a contract-by-contract basis at the end of each reporting period. Advance payments are classified as current or
non-current based on the timing of when revenue is expected to be recognized. The current portion of contract liabilities is
included in accounts payable and accrued liabilities and provisions and the non-current portion is included in other long-term
liabilities and provisions in the consolidated statement of financial position.
Cost of Revenues
Cost of revenues consists of production-related manufacturing costs of products sold, development services paid, and the cost
of products purchased for resale. In addition to the direct material cost and production costs, it also comprises systematically
allocated overheads, including depreciation of production-related property, plant and equipment, and intangible assets, write-
downs on inventories and an appropriate portion of production-related administrative overheads.
Government Grants
Government grants are recognized at their fair value in the period when there is reasonable assurance that the conditions
attached to the grant will be met and that the grant will be received. Grants are recognized as income over the periods
necessary to match them with the related costs that they are intended to compensate. Grants relating to expenditure on
property, plant and equipment and on intangible assets are deducted from the carrying amount of the asset. The grant is
therefore recognized as income over the life of the depreciable asset by way of a reduced depreciation charge. Repayable
grants are treated as sources of financing and are recognized in borrowings subject to specific conditions in the consolidated
statements of financial position. Repayments made are recorded as a reduction of the liability.
Government Assistance
Government assistance is comprised of investment tax credits and scientific research and experimental development tax
credits. These credits are recognized when there is reasonable assurance of their recovery using the cost reduction method.
Investment tax credits are subject to the customary approvals by the pertinent tax authorities. Adjustments required, if any, are
reflected in the year when such assessments are received.
Employee Benefits
Defined benefit plans
The Corporation’s obligation in respect of defined benefit plans is determined periodically by independent actuaries using the
projected unit credit method in accordance with IAS 19, Employee Benefits. Actuarial gains and losses are recognized in full
31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unless otherwise stated, all amounts are in thousands of Canadian dollars) MAGELLAN 2021 ANNUAL REPORT in the period in which they occur, and are recognized in other comprehensive income and immediately transferred to retained
earnings. Past service cost is recognized immediately to the extent the benefits are already vested, or otherwise is recognized
on a straight-line basis over the average period until the benefits become vested. Curtailments due to the significant reduction
of the expected years of future services of current employees or the elimination of the accrual of defined benefits for some or
all of the future services for a significant number of employees are recognized immediately as a gain or loss in the consolidated
statements of (loss) income.
The defined benefit surplus or deficit represents the fair value of the plan assets less the present value of the defined benefit
obligations. The recognition of a surplus has been limited to the present value of any economic benefits available in the form of
reductions in future contributions to the plan, based on the plan’s current funded status, the most recently filed actuarial report,
and applicable pension legislation. Where a past service minimum funding requirement exists in a plan, an additional liability
could arise for a plan, depending on the economic benefit available. A deficit is generally recognized in full.
Defined contribution plans
Obligations for contributions to defined contribution plans are recognized as an expense in the consolidated statements of
(loss) income as incurred.
Share-based compensation
The fair value of awards made under share-based compensation plans is measured at the grant date and allocated over the
vesting period, based on the best available estimate of the number of share options expected to vest, in the consolidated
statements of (loss) income with a corresponding increase in equity. The fair value is measured using an appropriate valuation
model taking into account the terms and conditions of the individual plans. The amount recognized as an expense is adjusted
to reflect the actual awards vesting except where any change in the awards vesting relates only to market-based criteria not
being achieved.
The cost of cash-settled transactions is measured initially at fair value at the grant date using a binomial model, taking into
account the terms and conditions upon which the share awards were granted. This fair value is expensed over the period until
the vesting date with recognition of a corresponding liability. The liability is remeasured to fair value at each reporting date up
to and including the settlement date, with changes in fair value recognized in the consolidated statements of (loss) income.
Taxation
The tax charge for the period consists of both current and deferred income tax. Taxation is recognized as a charge or credit in
the consolidated statements of (loss) income except to the extent that it relates to items recognized directly to equity in which
case the related tax is also recognized in equity.
Current income tax is the expected tax payable on the taxable income for the year and any adjustment to tax payable in respect
of previous years.
Deferred tax assets and liabilities are established using the balance sheet liability method, providing for temporary differences
between the carrying amounts of the assets and liabilities for financial reporting purposes and the amounts used for taxation
purposes. Deferred tax liabilities are generally recognized for all taxable temporary differences and deferred tax assets are
recognized to the extent that it is probable that taxable profits will be available against which deductible timing differences can
be utilized.
Deferred tax liabilities are not recognized for temporary differences arising on investment in subsidiaries where the Corporation
is able to control the timing of the reversal of the temporary difference and it is probable that the temporary difference will not
reverse in the foreseeable future. Deferred income tax is calculated at the enacted or substantively enacted tax rates that are
expected to apply in the period when the liability is settled or the asset is realized.
Deferred income tax assets and liabilities are only offset where they arise within the same entity and tax jurisdiction.
Deferred income tax assets and liabilities are presented as non-current.
32
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unless otherwise stated, all amounts are in thousands of Canadian dollars) MAGELLAN 2021 ANNUAL REPORT Net Income per Share
Net income per share is calculated based on the profit for the financial year and the weighted average number of common
shares outstanding during the year. Diluted net income per share is calculated using the profit for the financial year adjusted
for the effect of any dilutive instruments and the weighted average diluted number of shares (ignoring any potential common
shares issued which would be anti-dilutive) during the year.
Inventories
Inventory is stated at the lower of average cost and net realizable value.
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.
Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the
estimated costs necessary to make the sale. Inventories are written down to net realizable value when the cost of inventories is
estimated to be unrecoverable due to obsolescence, damage or declining selling prices. When circumstances that previously
caused inventories to be written down below cost no longer exist, the amount of the write-down previously recorded is reversed.
Property, Plant and Equipment
Property, plant and equipment are stated at cost, less accumulated depreciation and any impairment in value. Cost includes
the purchase price (after deducting trade discounts and rebates), any directly attributable costs of bringing the asset to the
location and condition necessary for it to be capable of operating in the manner intended by management, and the estimate
of the present value of the costs of dismantling and removing the item and restoring the site. Subsequent costs are included in
the assets carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic
benefits associated with the item will flow to the Corporation and the cost of the item can be measured reliably. The carrying
amount of the replaced part is derecognized. The cost of the day-to-day servicing of property, plant and equipment are
recognized in the consolidated statements of (loss) income as incurred.
Depreciation is calculated using the straight-line method to allocate the cost of property, plant and equipment to their residual
values over their estimated useful lives.
Scheduled depreciation is based on the following useful lives:
Assets
Buildings
Machinery and equipment
Tooling
Leasehold improvements
in years
40
10-20
5-7
term of lease
The residual values, useful lives and depreciation methods pertaining to property, plant and equipment are regularly assessed
for relevance, at least at every statement of financial position date, and adjustments are made when necessary. An asset’s
carrying value is written down to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable
amount. These impairment losses are recognized in the consolidated statements of (loss) income. Following the recognition of
an impairment loss, the depreciation charge applicable to the asset is adjusted prospectively in order to systematically allocate
the revised carrying amount, net of any residual value, over the remaining useful life.
Investment Properties
Investment property is property held to earn rental income and/or for capital appreciation rather than for the purpose of the
Corporation’s operating activities. Investment property assets are carried at cost less accumulated depreciation and any
recognized impairment in value. The depreciation policies for investment property are consistent with those described for
property, plant and equipment.
Intangible Assets
Externally acquired and internally generated intangible assets are recognized only if they meet strict criteria, relating in
particular to technical feasibility, probability that a future economic benefit associated with the asset will flow to the entity and
the cost of the asset can be measured reliably. Expenditure on research activities is recognized as an expense in the period
in which it is incurred.
33
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unless otherwise stated, all amounts are in thousands of Canadian dollars) MAGELLAN 2021 ANNUAL REPORT Intangible assets with a finite useful life are stated at cost and amortized on a unit of production basis. Gains or losses arising
from de-recognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying
amount of the asset, and are recognized in the consolidated statements of (loss) income when the asset is de-recognized.
Leases
At inception of a contract, the Corporation assesses whether the contract is, or contains, a lease. A contract is a lease if the
contract conveys the right to control the use of an identified asset. Leases with a term of twelve months or less are not recorded
by the Corporation on the consolidated statements of financial position.
Lessee accounting
The Corporation records a right-of-use asset and a lease liability at the lease commencement date based on the present value
of the future lease payments over the lease term.
The lease payments are discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined,
the Corporation’s incremental borrowing rate. After the commencement date, the lease liability shall be remeasured to reflect
changes to the lease payments. Variable lease payments that depend on an index or a rate are included in the measurement
of the lease liability when information is available. The right-of-use asset is typically depreciated on a straight-line basis over the
lease term, unless the Corporation expects to obtain ownership of the leased asset at the end of the lease.
Certain of the Corporation’s leases contain extension or renewal options. At lease commencement, the Corporation assesses
whether it will be reasonably certain to exercise any of the extension options based on its expected economic return from the
lease. The Corporation periodically reassesses whether it will be reasonably certain to exercise the options and accounts for
any changes at the date of reassessment.
Lessor accounting
When the Corporation acts as a lessor, it assesses at lease inception whether the lease transfers to the lessee substantially
all of the risks and rewards incidental to ownership of the underlying asset. If it does, the lease is a finance lease, if not, it is an
operating lease.
Business Combinations and Goodwill
The Corporation accounts for business combinations using the acquisition method, under which the acquirer measures the
cost of the business combination as the total of the fair values, at the date of exchange, of the assets transferred, liabilities
incurred and equity instruments issued by the acquirer in exchange for control of the acquiree. Goodwill is measured as the
fair value of the consideration transferred, including the recognized amount of any non-controlling interest in the acquiree,
less the net recognized amount (generally the fair value) of the identifiable assets and liabilities assumed, measured as at the
acquisition date. The primary items that generate goodwill include the value of the synergies between the acquired company
and the Corporation and the value of the acquired assembled workforce, neither of which qualifies for recognition as an
intangible asset. Goodwill is assigned to one or more cash-generating units (“CGU”) on the date of acquisition. Acquisition-
related expenses and post-acquisition restructuring costs are recognized separately from the business combination and are
expensed as incurred.
Impairment of Non-Financial Assets
The carrying amounts of the Corporation’s non-financial assets, other than inventories and deferred tax assets, are reviewed at
each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset or
its CGUs recoverable amount is estimated. For the purpose of impairment testing, assets that cannot be tested individually are
grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent
of the cash inflows of other assets or CGUs. Non-financial assets that have an indefinite useful life such as goodwill and certain
intangible assets, are not subject to amortization and are therefore tested annually for impairment or more frequently if events
or changes in circumstances indicate that the asset might be impaired.
An impairment loss is recognized if the carrying amount of an asset or its CGU exceeds its estimated recoverable amount.
The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. In assessing
value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects
current market assessments of the time value of money and the risks specific to the asset or CGU. For the purposes of goodwill
impairment testing, goodwill acquired in a business combination is allocated to the CGU, or the group of CGUs, that is expected
34
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unless otherwise stated, all amounts are in thousands of Canadian dollars) MAGELLAN 2021 ANNUAL REPORT to benefit from the synergies of the combination. Each CGU or group of CGUs to which goodwill is allocated must represent
the lowest level at which the goodwill is monitored for internal management purposes and must not be, before allocating the
goodwill, larger than an operating segment.
The Corporation’s corporate assets do not generate separate cash inflows and are utilized by more than one CGU. Corporate
assets are allocated to CGUs on a reasonable and consistent basis and tested for impairment as part of the testing of the CGU
to which the corporate asset is allocated.
Impairment losses are recognized in net income. Impairment losses recognized in respect of CGUs are allocated first to
reduce the carrying amount of any goodwill allocated to the CGUs, and then to reduce the carrying amounts of the other
assets in the CGU or group of CGUs on a pro rata basis of the carrying amount of each asset of the CGU that is subject to
the impairment test.
An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognized in prior
periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment
loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss
is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been
determined, net of depreciation or amortization, if no impairment loss had been recognized.
Financial Instruments
The Corporation recognizes financial assets and financial liabilities (“financial instruments”) on the date the Corporation
becomes a party to the contractual provisions of the instruments. A financial asset is derecognized either when the Corporation
has transferred substantially all the risks and rewards of ownership of the financial asset or when cash flows expire. A financial
liability is derecognized when the obligation specified in the contract is discharged, canceled or expired.
The Corporation’s financial instruments include cash and cash equivalents, trade and other receivables, accounts payable and
accrued liabilities, lease liabilities, bank indebtedness, long-term debt, borrowings subject to specific conditions, and other
non-derivative and derivative financial assets and liabilities.
The classifications of financial instruments are typically determined at the time of initial recognition and are recognized at fair
value, plus attributable transaction costs where applicable. Subsequent to initial recognition, financial instruments are classified
and measured as described below.
Financial assets at fair value through profit or loss
Cash and cash equivalents and derivatives instruments are classified as financial assets at fair value through profit or loss
and are measured at fair value. Cash equivalents are short-term investments with initial maturities of three months or less. The
Corporation manages its foreign currency and interest rate exposures through the use of derivative financial instruments. The
Corporation’s policy is not to utilize derivative instruments for trading or speculative purposes. The Corporation’s derivative
contracts are not designated as hedges and as a result are presented on the consolidated statements of financial position as
financial assets when the fair value is positive and as financial liabilities when the fair value is negative. The unrealized gains or
losses related to changes in fair value are reported in other expense (income) on the consolidated statements of (loss) income.
Transaction costs incurred to acquire financial instruments are included in the underlying balance.
Financial instruments carried at amortized cost
Financial instruments in this category include trade and other receivables, accounts payable and accrued liabilities, bank
indebtedness, borrowing subject to specific conditions, lease liabilities and long-term debt. Financial instruments are
recorded initially at fair value and, in the case of financial assets and liabilities carried at amortized cost, adjusted for directly
attributable transaction costs. Trade and other receivables include originated non-derivative financial assets with fixed or
determined payments that are not quoted in an active market and are subsequently measured at amortized cost and is
computed using the effective interest method less any allowance for impairment. Accounts payables and accrued liabilities,
bank indebtedness, borrowing subject to specific conditions, finance lease liabilities and long-term debt are subsequently
measured at amortized cost using the effective interest rate method. Amortized cost is calculated by taking into account
any discount or premium on acquisition and fees. The effective interest rate accretion is included as finance costs in the
consolidated statements of (loss) income.
35
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unless otherwise stated, all amounts are in thousands of Canadian dollars) MAGELLAN 2021 ANNUAL REPORT Impairment
The expected credit loss impairment model applies to financial assets carried at amortized costs. The model uses a dual
measurement approach, under which the loss allowance is measured as either 12 month expected credit losses or at the
lifetime expected credit losses. The Corporation applies the simplified approach and records lifetime expected losses on
accounts receivables and contract assets based on historical credit loss experience, adjusted for forward-looking factors
specific to the debtors and the economic environment. If in a subsequent year, the amount of the estimated impairment loss
increases or decreases due to an event occurring after the impairment was recognized, the previously recognized impairment
loss is increased or decreased by adjusting the carrying value of the financial assets. If a past write-off is later recovered, the
recovery is recognized in the consolidated statements of (loss) income.
Provisions
A provision is recognized when there is a present legal or constructive obligation, as a result of a past event, which is more likely
than not to result in an outflow of economic benefits and where a reliable estimate of the amount of the obligation can be made.
If the effect is material, the provision is determined by discounting the expected future cash flows at a pre-tax risk-free rate and,
where appropriate, the risks specific to the liability. A provision for onerous contracts is recognized when the expected benefits
to be derived from the contracts are less than the related unavoidable costs of meeting its obligations under the contract. Such
provisions are recorded as write-downs of work-in-progress for that portion of the work which has already been completed, and
as liability provisions for the remainder.
Share Capital
Common shares are classified as equity. Transaction costs directly attributable to the issue of common shares are recognized
as a deduction from equity, net of any income taxes.
Estimates, Assumptions and Judgements
The preparation of consolidated financial statements requires management to make critical judgements, estimates and
assumptions that affect the reported amounts of certain assets and liabilities at the date of the consolidated financial statements
and the reported amount of revenues and expenses recorded during the reporting period. The critical estimates and judgements
utilized in preparing the Corporation’s consolidated financial statements affect the assessment of net recoverable amounts, net
realizable values and fair values, depreciation and amortization rates and useful lives, value of intangible assets, ability to utilize
tax losses and other tax measurements, determination of functional currency, determination of the degree of control that exists
in determining the corresponding accounting basis, and the selection of accounting policies. Any changes in estimates and
assumptions could have a material impact on the Corporation’s future income and/or the amounts reported in its statement
of financial position. The Corporation reviews its estimates and assumptions on an ongoing basis and uses the most current
information available and exercises careful judgement in making these estimates and assumptions.
The outbreak of the novel strain of coronavirus “COVID-19” resulted in governments worldwide enacting emergency measures
to combat the spread of the virus. These measures, which include the implementation of travel bans, self-imposed quarantine
periods and social distancing, have caused a material disruption to businesses globally resulting in an economic slowdown
and decreased demand in the aerospace industry. The introduction of vaccines has led to optimism; however, the situation
continues to evolve (including the prevalence of virus variants). The duration and full financial effect of the COVID-19 pandemic
is unknown at this time, as is the efficacy of the government and central bank interventions, the Corporation’s business continuity
plan and other mitigating measures.
In addition, the recent escalation in conflict between Russia and Ukraine (“Conflict”) and the resulting imposition of sanctions
and counter sanctions have disrupted supply chains and caused instability in the global economy. The short and long-term
implications of the Conflict are difficult to predict at this time. The ongoing Conflict could result in the imposition of future
economic sanctions, which may have a greater adverse effect on economic markets and could result in an even greater impact
related to global supply and pricing of electricity and materials.
36
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unless otherwise stated, all amounts are in thousands of Canadian dollars) MAGELLAN 2021 ANNUAL REPORT Any estimate of the length and severity of these developments is therefore subject to significant uncertainty, and accordingly
estimates of the extent to which the COVID-19 pandemic and Conflict may materially and adversely affect the Corporation’s
operations, financial results and condition in future periods are also subject to significant uncertainty. Therefore, uncertainty
about judgements, estimates and assumptions made by management during the preparation of the Corporation’s consolidated
financial statements related to potential impacts of the COVID-19 pandemic and Conflict on revenue, expenses, assets, liabilities,
and note disclosures could result in a material adjustment to the carrying value of the asset or liability affected.
The main assumptions and estimates that were used in preparing the Corporation’s consolidated financial statements relate to:
Financial instruments
The valuation of the Corporation’s derivative instruments and certain other financial instruments requires estimation of the fair
value of each instrument at the reporting date. Details of the basis on which fair value is estimated are provided in note 22 to
the consolidated financial statements.
Impairments
The recoverable amount of goodwill, intangible assets and property, plant and equipment is based on estimates and assumptions
regarding the expected market outlook and cash flows from each CGU or group of CGUs.
In order to estimate the fair value of indefinite-lived intangible assets and goodwill resulting from business combinations, the
Corporation typically estimates future revenue, considers market factors and estimates future cash flows. Based on these
key assumptions, judgements and estimates, the Corporation determines whether to record an impairment charge to reduce
the value of the asset carried on the consolidated statements of financial position to its estimated fair value. Assumptions,
judgements and estimates about future values are complex and often subjective. They can be affected by a variety of factors,
including external factors such as industry and economic trends, and internal factors such as changes in the Corporation’s
business strategy or internal forecasts. Although the Corporation believes the assumptions, judgements and estimates made in
the past have been reasonable and appropriate, different assumptions, judgements and estimates could materially affect the
Corporation’s reported financial results.
Deferred taxes
Income taxes are determined based on estimates of the Corporation’s current income taxes and estimates of deferred income
taxes resulting from temporary differences. Deferred tax assets are assessed to determine the likelihood that they will be
realized from future taxable income before they expire.
Government assistance
Investment tax credits and scientific research and experimental development tax credits are determined based on estimates of
the Corporation’s current year expenditures on qualifying programs. The investment tax credits are assessed to determine the
likelihood that they will be applied against federal income taxes.
Capitalization of development costs
When capitalizing development costs the Corporation must assess the technical and commercial feasibility of the projects
and estimate the useful lives of resulting products. Determining whether future economic benefits will flow from the assets and
therefore the estimates and assumptions associated with these calculations are instrumental in (i) deciding whether project
costs can be capitalized, and (ii) accurately calculating the useful life of the projects for the Corporation.
Leases
The Corporation determines the lease term as the non-cancellable term of the lease, together with any periods covered by an
option to extend or terminate the lease. The lease term is estimated by considering the facts and circumstances that can create
an economic incentive to exercise an extension option, or not exercise the termination option. Both qualitative and quantitative
assumptions are considered when deriving the value of the economic incentive.
The Corporation makes judgements in determining whether a contract contains an identified asset. The identified asset should
be physically distinct or represent substantially all of the capacity of the asset, and should provide the Corporation with the right
to substantially all of the economic benefits from the use of the asset.
37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unless otherwise stated, all amounts are in thousands of Canadian dollars) MAGELLAN 2021 ANNUAL REPORT Judgements are made by the Corporation in determining the incremental borrowing rate used to measure the lease liability for
each lease contract, including an estimate of the asset-specific security impact. The incremental borrowing rate should reflect
the interest rate that the Corporation would have to pay to borrow at a similar term and with a similar security.
Income (loss) on completion of contracts
To estimate income (loss) on completion, the Corporation takes into account factors inherent to the contract by using historical
and/or forecast data.
Repayable government grants
The forecast repayment of grants received from government authorities is based on future sales. As the forecast repayments
are closely related to forecasts of future sales set out in business plans prepared by the operating divisions, the estimates and
assumptions underlying these business plans are instrumental in determining the timing of these repayments.
Employee benefits
The Corporation considers a number of factors in developing the pension assumptions, including an evaluation of relevant
discount rates, plan asset allocations, mortality, expected changes in wages and retirement benefits, analysis of current market
conditions, economic benefits available and input from actuaries and other consultants. Costs of the programs are based on
actuarially determined amounts and are accrued over the period from the date of hire to the full eligibility date of employees who
are expected to qualify for these benefits.
2. NEW AND AMENDED INTERNATIONAL FINANCIAL REPORATING STANDARDS
New and Amended International Financial Reporting Standards Adopted in 2021
The Corporation has adopted the following new and amended standards in the current year.
Interbank Offered Rate (“IBOR”) Reform
In August 2020, the IASB published amendments to IFRS 9, Financial Instruments, IAS 39, Financial Instruments: Recognition
and Measurement, IFRS 7, Financial Instruments: Disclosures, IFRS 4, Insurance Contracts and IFRS 16, Leases.
The amendments address issues that arise from implementation of IBOR reform, where IBORs are replaced with alternative
benchmark rates. For financial instruments at amortized cost, the amendments introduce a practical expedient such that if a
change in the contractual cash flows is as a result of IBOR reform and occurs on an economically equivalent basis, the change
will be accounted for by updating the effective interest rate with no immediate gain or loss recognized. The amendments also
provide additional temporary relief from applying specific IAS 39, hedge accounting requirements to hedging relationships
affected by IBOR reform. The adoption did not have a material impact on the Corporation’s financial results.
New and Amended International Financial Reporting Standards to be Adopted in 2022 or Later
The following new standards and amendments to existing standards were issued by the IASB and are expected to be adopted
by the Corporation in 2022 or later.
Amendments to IAS 1 Presentation of Financial Statements
In January 2020, the IASB issued amendments to IAS 1, Presentation of Financial Statements (the “amendments”) to clarify the
requirements for classifying liabilities as current or non-current. More specifically, the amendments specify that the conditions
which exist at the end of the reporting period are those which will be used to determine if a right to defer settlement of a
liability exists; management expectations about events after the balance sheet date, for example on whether a covenant will
be breached, or whether early settlement will take place, are not relevant; and the amendments clarify the situations that are
considered settlement of a liability. The new guidance will be effective for annual periods starting on or after January 1, 2023.
The Corporation does not expect these amendments will have an impact on the Corporation’s consolidated financial statements.
38
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unless otherwise stated, all amounts are in thousands of Canadian dollars) MAGELLAN 2021 ANNUAL REPORT Amendments to IAS 16 Property, Plant and Equipment
In May 2020, the IASB issued amendments to IAS 16, Property, Plant and Equipment – Proceeds before Intended Use, regarding
proceeds from selling items produced while bringing an asset into the location and condition necessary for it to be capable of
operating in the manner intended by management. The amendments are effective for annual reporting periods beginning on
or after January 1, 2022. The Corporation is currently assessing the potential impact on its consolidated financial statements.
Amendments to IAS 37 Provisions, Contingent Liabilities and Contingent Assets
In May 2020, the IASB issued amendments to IAS 37, Provisions, Contingent Liabilities and Contingent Assets, clarifying the
standard regarding costs a company should include as the cost of fulfilling a contract when assessing whether a contract is
onerous. The amendments are effective for annual reporting periods beginning on or after January 1, 2022. The Corporation is
currently assessing the potential impact on its consolidated financial statements.
Amendments to IAS 8 – Definition of Accounting Estimates,
In February 2021, the IASB issued amendments to IAS 8, in which it introduces a new definition of ‘accounting estimates’. The
amendments clarify the distinction between changes in accounting estimates and changes in accounting policies and the
correction of errors. Also, they clarify how entities use measurement techniques and inputs to develop accounting estimates.
The amendments are effective for annual reporting periods beginning on or after January 1, 2023. The Corporation is currently
assessing the potential impact on its consolidated financial statements.
Amendments to IAS 1 and IFRS Practice Statement 2 – Disclosure of Accounting Policies
In February 2021, the IASB issued amendments to IAS 1, Presentation of Financial Statements and IFRS Practice Statement 2,
Making Materiality Judgements (the PS), in which it provides guidance and examples to help entities apply materiality judgements
to accounting policy disclosures. The amendments are effective for annual reporting periods beginning on or after January 1, 2023.
The Corporation is currently assessing the potential impact on its consolidated financial statements.
Deferred Tax related to Assets and Liabilities arising from a Single Transaction – Amendments to IAS 12
In May 2021, the IASB issued amendments to IAS 12, Income Taxes (“IAS 12”), which narrow the scope of the initial recognition
exception under IAS 12, so that it no longer applies to transactions that give rise to equal taxable and deductible temporary
differences. The amendments are effective for annual reporting periods beginning on or after January 1, 2023. The Corporation
is currently assessing the potential impact on its consolidated financial statements.
3.
CASH AND CASH EQUIVALENTS
Cash on hand
Short-term deposits
X
X
December 31
2021
15,821
16,661
32,482
December 31
2020
46,024
67,914
113,938
Bank balances and short-term deposits comprise of cash held by the Corporation on a short-term basis with original maturity
of one month or less. The carrying amount of these assets approximates their fair value.
39
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unless otherwise stated, all amounts are in thousands of Canadian dollars) MAGELLAN 2021 ANNUAL REPORT 4. TRADE AND OTHER RECEIVABLES
X
Trade receivables
Less allowance for doubtful accounts
Net trade receivables
Other receivables
X
Aging of trade receivables:
December 31
2021
140,715
461
140,254
23,980
164,234
December 31
2020
101,443
535
100,908
13,496
114,404
X
December 31, 2020
December 31, 2021
Current
91,467
129,988
Less than
90 days
5,670
8,335
91-181
days
1,842
725
182-365
days
215
358
More than
365 days
2,249
1,309
Total
101,443
140,715
5. CONTRACT BALANCES
X
Contract assets
Contract liabilities [note 13]
Net contract balances
December 31
2021
December 31
2020
66,337
(17,704)
48,633
70,388
(16,528)
53,860
Contract assets relate to the Corporation’s right to consideration for performance completed under the contract and not invoiced.
The contract assets are transferred to trade and other receivables when the right to consideration becomes unconditional.
Contract liabilities relate to payments received in advance of performance under the contract. Contract liabilities are recognized
as revenue when the Corporation performs under the contract. Contract liabilities are included in accounts payable, accrued
liabilities and provision on the consolidated statement of financial position.
Revenue recognized in the period from:
X
Amounts included in contract liabilities at the beginning of the year
2021
16,528
2020
10,605
6.
INVENTORIES
X
At December 31, 2020
At December 31, 2021
Raw
materials
80,502
62,527
Work in
progress
99,000
105,058
Finished
goods
33,618
40,992
Total
213,120
208,577
The cost of inventories recognized as expense and included in cost of sales for the year ended December 31, 2021 amounted
to $630,386 [2020 – $639,561].
During the year ended December 31, 2021, the Corporation recorded an impairment expense related to the write-down of
inventory in the amount of $3,032 [2020 – $4,102]. The Corporation also recorded reversals of previous write-downs of inventory
in the amount of $774 [2020 – $221] due to the sale of inventory previously provided for. The carrying amount of inventory
recorded at net realizable value was $33,985 as at December 31, 2021 [2020 – $27,070], with the remaining inventory recorded
at cost.
40
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unless otherwise stated, all amounts are in thousands of Canadian dollars) MAGELLAN 2021 ANNUAL REPORT
7. PROPERTY, PLANT AND EQUIPMENT
Cost
At December 31, 2019
Additions
Disposals and other
Foreign currency translation
At December 31, 2020
Additions
Disposals and other
Foreign currency translation
At December 31, 2021
Accumulated depreciation and impairment
At December 31, 2019
Depreciation and impairment [note 27]
Disposal and other
Foreign currency translation
At December 31, 2020
Depreciation
Disposal and other
Foreign currency translation
At December 31, 2021
Net book value
At December 31, 2020
At December 31, 2021
X
LandI
BuildingsI
Machineryi
andi
equipmenti
Toolingi
TotalI
21,433
–
–
(500)
20,933
3,061
–
(142)
23,852
–
–
–
–
–
–
–
–
–
143,897
1,157
(5,870)
(1,199)
137,985
1,089
(33)
(929)
138,112
(60,643)
(4,699)
5,847
523
(58,972)
(4,669)
9
166
(63,466)
679,641
23,051
161
(5,064)
697,789
10,971
(4,205)
(4,555)
700,000
(352,429)
(34,991)
557
3,561
(383,302)
(31,061)
4,214
1,734
(408,415)
55,123
367
(23)
(929)
54,538
2,554
59
(173)
56,978
(47,920)
(1,575)
–
864
(48,631)
(1,778)
34
159
(50,216)
900,094
24,575
(5,732)
(7,692)
911,245
17,675
(4,179)
(5,799)
918,942
(460,992)
(41,265)
6,404
4,948
(490,905)
(37,508)
4,257
2,059
(522,097)
20,933
23,852
79,013
74,646
314,487
291,585
5,907
6,762
420,340
396,845
Included in the above are assets under construction in the amount of $12,241 [December 31, 2020 – $18,705], which as at
December 31, 2021 are not amortized.
8. RIGHT-OF-USE ASSETS
At January 1, 2020
Additions
Depreciation, disposals and other
Foreign currency translation
At December 31, 2020
Additions
Depreciation, disposals and other
Foreign currency translation
At December 31, 2021
Machinery,i
equipment andi
otheri
1,086
555
(279)
(4)
1,358
–ii
(464)
(28)
866
Buildingsi
43,606
–
(5,038)
172
38,740
–
(4,637)
(580)
33,523
Totali
44,692
555
(5,317)
168
40,098
–ii
(5,101)
(608)
34,389
x
41
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unless otherwise stated, all amounts are in thousands of Canadian dollars) MAGELLAN 2021 ANNUAL REPORT
9.
INVESTMENT PROPERTIES
At December 31, 2020
At December 31, 2021
x
Accumulatedi
depreciation,i
disposal,i
and impairmenti
(7,179)
(6,994)
Cost
9,306
8,653
Net
book value
2,127
1,659
The Corporation’s investment properties consist of land and building. Depreciation expense recognized in relation to the
buildings in 2021 was $33 [2020 – $31]. The Corporation recorded rental income from investment properties of $530 in 2021
[2020 – $600].
The fair value of the Corporation’s investment properties was $24,385 [2020 – $21,938] at December 31, 2021. The fair value was
determined through the use of the market comparable approach and discounted cash flows approach which are categorized
as a Level 3 in the fair value hierarchy. In 2021, the Corporation obtained opinions from external valuators, with experience in the
real estate market, on $24,000 of the total fair values of the Corporation’s investment properties.
10. INTANGIBLE ASSETS AND GOODWILL
Cost
At December 31, 2019
Additions
Foreign currency translation
At December 31, 2020
Additions
Disposal and other
Foreign currency translation
At December 31, 2021
Amortization and impairment
At December 31, 2019
Amortization and impairment
Foreign currency translation
At December 31, 2020
Amortization
Disposal and other
Foreign currency translation
At December 31, 2021
Net book value
At December 31, 2020
At December 31, 2021
Technologyi
rightsi
Developmenti
costsi
Otheri
intangiblesi
X
Totali
intangiblei
assetsi
Goodwilli
Totali
intangiblei
assets andi
goodwilli
45,172
–
(37)
45,135
–
–
(7)
45,128
(35,089)
(1,651)
31
(36,709)
(1,799)
–
5
(38,503)
131,059
1,282
(419)
131,922
1,124
(1,957)
(570)
130,519
(107,487)
(8,134)
433
(115,188)
(4,189)
682
476
(118,219)
45,004
1,184
212
46,400
1,245
–
(587)
47,058
(13,286)
(3,072)
(47)
(16,405)
(2,006)
–
200
(18,211)
221,235
2,466
(244)
223,457
2,369
(1,957)
(1,164)
222,705
(155,862)
(12,857)
417
(168,302)
(7,994)
682
681
(174,933)
34,137
–
12
34,149
–
–
(365)
33,784
–
(12,046)
(121)
(12,167)
–
–
175
(11,992)
255,372
2,466
(232)
257,606
2,369
(1,957)
(1,529)
256,489
(155,862)
(24,903)
296
(180,469)
(7,994)
682
856
(186,925)
8,426
6,625
16,734
12,300
29,995
28,847
55,155
47,772
21,982
21,792
77,137
69,564
Technology rights relate to an agreement which permits the Corporation to manufacture aerospace engine components and
share in the revenue generated by the final sale of the engine.
The Corporation has certain programs that meet the criteria for deferral and amortization of development costs. Development
costs are capitalized for clearly defined, technically feasible technologies which management intends to produce and promote
to an identified future market, and for which resources exist or are expected to be available to complete the project. The
42
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unless otherwise stated, all amounts are in thousands of Canadian dollars) MAGELLAN 2021 ANNUAL REPORT
Corporation records amortization in arriving at the carrying value of deferred development costs once the development activities
have been completed and sales of the related product have commenced. The Corporation estimates the intangible assets to
be amortized over a period up to 20 years based on units of production.
Other intangibles relate to application software, customer lists, brands and technical processes. Application software will be
amortized over a 10 year period, customer lists will be amortized over a 5 year period and technical processes will be amortized
over a 15 year period. Brands of $8,953 (£5,226) with indefinite useful lives assets are not subject to amortization.
As described in note 1, the carrying values of goodwill and intangible assets with indefinite lives are tested for impairment
annually. The Corporation’s impairment test for goodwill and intangible assets with indefinite useful lives was based on the
recoverable amount determined on its value in use. The key assumptions used to determine the recoverable amount are
discussed below.
In the assessment of impairment, management used industry guidance, historical data and past experience as the key
assumptions in the determination of the recoverable amount of the two CGUs. The value in use was determined based on the
present value of the estimated free cash flows for the two CGUs. The cash flow projections, covering a five-year period plus a
terminal year, were based on financial projections approved by management using assumptions that reflect the Corporation’s
most likely planned course of action, given management’s judgement of the most probable set of economic conditions. The
COVID-19 pandemic and its impact on the economy are expected to last several years. These projections are inherently
uncertain and continually evolving in an unpredictable manner which present many variables and contingencies for modeling.
A discount rate of 11.4% [2020 – 11%] and 9% [2020 – 9%] per annum was used for the two CGUs, respectively, based on
management’s best estimate of the Corporation’s weighted average cost of capital adjusted for the risks facing the CGU.
Annual growth rate of 2% [2020 – 2%] and 3% [2020 – 3%] was used in the terminal year given the businesses’ anticipated
growth. The Corporation completed the annual impairment test on October 1, 2021 and determined the recoverable amount for
the two CGUs were higher than the carrying value. If the discount rate for the CGUs increased by 1%, the recoverable amount
for both CGUs would be less than the carrying value. In 2020, the Corporation recorded a goodwill impairment loss of $12,046
in the consolidated statements of (loss) income.
11. INVESTMENTS IN JOINT VENTURES
The Corporation has interests in a number of individually non-material joint ventures. The Corporation’s joint ventures are private
entities that are not listed on any public exchange. All operations are continuing. To support the activities of certain joint ventures,
the Corporation and the other investors in the joint ventures have agreed to make additional contributions, in proportion to their
interests, to make up any losses, if required. In addition, profits of the joint ventures are not distributed until the parties to the
arrangement provide consent for distribution. The Corporation has no share of any contingent liabilities or capital commitments
in its joint ventures as at December 31, 2021 and December 31, 2020.
Balance, beginning of the year
Share of total comprehensive loss
Balance, end of the year
12. BANK INDEBTEDNESS
X
December 31i
2021i
2,459
(6)
2,453
December 31ii
2020ii
2,476
(17)
2,459
The Corporation has a multi-currency operating credit facility with a syndicate of banks, with a Canadian dollar limit of $75,000.
Extensions of the facility are subject to mutual consent of the syndicate of lenders and the Corporation. The credit agreement
also includes a $75,000 uncommitted accordion provision which will provide the Corporation with the option to increase the size
of the operating credit facility. On June 30, 2021 the Corporation extended its credit facility for an additional two-year period
expiring on June 30, 2023. As at December 31, 2021, the Corporation was debt-free under its credit facility. Bank indebtedness
bears interest at the bankers’ acceptance or LIBOR rates plus 1.00%. At December 31, 2021, the Corporation had letters of
43
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unless otherwise stated, all amounts are in thousands of Canadian dollars) MAGELLAN 2021 ANNUAL REPORT
credit outstanding totalling $4,143 [2020 – $4,535] such that $70,857 [2020 – $70,465] was unused and available. A fixed and
floating charge debenture on accounts receivable, inventories and property, plant and equipment is pledged as collateral for
the operating credit facility.
13. ACCOUNTS PAYABLE, ACCRUED LIABILITIES AND PROVISIONS
Accounts payables
Accrued liabilities
Contract liabilities [note 5]
Provisions [note 17]
X
14. LONG-TERM DEBT
X
Property mortgage [a]
Other loans [b]
Less current portion
X
X
December 31
2021
52,101
51,276
17,704
2,301
123,382
December 31
2020
45,171
47,834
16,528
5,173
114,706
December 31
2021
–
7,307
7,307
4,552
2,755
December 31
2020
134
8,659
8,793
3,928
4,865
[a] Property mortgage of financing relating to land acquired in 2006 was repaid in June 2021.
[b] Other loans include loans of $4,894 [2020 – $7,025] provided by governmental authorities (“Government Loans”) that bear
interest of approximately 0.875% [2020 – 1.5%]. The Government Loans mature in April 2024 with accrued interest and principal
repayable monthly.
Included in other loans is a bank loan used to finance capital expenditures, which is subject to annual renewal and expires on
May 31, 2022. As at December 31, 2021, the bank loan was $2,413 (US$1,903) [2020 – $1,634 (US$1,283)], bearing interest
at LIBOR plus 2.50%, which was 2.66% [2020 – 2.80%]. Land, machinery and equipment are pledged as collateral for the
bank loan.
44
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unless otherwise stated, all amounts are in thousands of Canadian dollars) MAGELLAN 2021 ANNUAL REPORT
15. LEASE LIABILITIES
The majority of the Corporation’s leases relate to the rental of land and buildings. Summary of activities related to the Corporation’s
lease liabilities:
X
At January 1, 2020
Additions
Interest on lease liabilities
Payments
Foreign exchange and other
At December 31, 2020
Additions
Interest on lease liabilities
Payments
Foreign exchange and other
At December 31, 2021
Less current portion
X
Contractual undiscounted cash flows for lease obligations:
X
Less than one year
One to five years
Over five years
X
Lease liabilities
46,064
555
2,026
(6,970)
136
41,811
–
1,817
(6,707)
(563)
36,358
5,714
30,644
December 31
2021
5,734
17,750
22,448
45,932
Expenses for short-term leases and leases of low-dollar value items are not material. There are no variable lease payments
which are not included in the measurement of lease obligations. All extension options have been considered in the measurement
of lease obligations.
16. BORROWINGS SUBJECT TO SPECIFIC CONDITIONS
The Corporation has received proceeds related to the development of its technologies and processes from Canadian
government agencies. The contributions have been deducted in calculating the Corporation’s investment in intangible assets,
property plant and equipment or from the expense to which they relate. These amounts, plus, in certain cases, an implied return
on the investment, are repayable as future royalty payments. The Corporation has included in borrowings subject to specific
conditions the estimated amount of repayments based on future estimated sales in relation to the contributions received. During
2021, the Corporation received nil government proceeds [2020 – $46] and repaid $1,104 [2020 – nil].
45
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unless otherwise stated, all amounts are in thousands of Canadian dollars) MAGELLAN 2021 ANNUAL REPORT
17. OTHER LONG-TERM LIABILITIES AND PROVISIONS
Net defined benefit plan deficits [note 23]
Provisions
Other
Less current portion included in accounts payable,
accrued liabilities and provisions
X
Movements in provisions:
At December 31, 2019
Additional provisions [note 27]
Amount used
Unused amounts reversed
Unwind of discount
Foreign currency translation
At December 31, 2020
Additional provisions [note 27]
Amount used
Unused amounts reversed
Unwind of discount
Foreign currency translation
At December 31, 2021
X
December 31
2021
–
4,973
4,551
9,524
December 31i
2020i
14,509
7,803
4,400
26,712
2,301
7,223
5,173
21,539
X
Warrantyi
1,036
1,128
(1,169)
(5)
–
(1)
989
609
(615)
(51)
–
(1)
931
Environmental i
2,657
–
–
(10)
9
–
2,656
–
–
–
102
–
2,758
Otheri
provisionsi
1,606
2,975
(287)
(148)
–
12
4,158
243
(3,035)
(43)
–
(39)
1,284
Totali
5,299
4,103
(1,456)
(163)
9
11
7,803
852
(3,650)
(94)
102
(40)
4,973
Warranty
During the normal course of its business, the Corporation assumes the cost of certain components under warranties offered
on its products. This provision for a warranty is based on historical data associated with similar products and is recorded as a
current liability. Nevertheless, conditions may change and a significant amount may need to be recorded.
Environmental
Provisions for environment liabilities have been recorded for costs related to site restoration obligations. Due to the long-term
nature of the liability, the related long-term portion of the liability is included in long-term liabilities.
Other
This category of provisions includes provisions related to legal, onerous contracts, and other liabilities. The provisions are based
on the Corporation’s best estimate of the amount of the expenditure required to address the matters.
18. CHANGES IN LIABILITIES ARISING FROM FINANCING ACTIVITIES
X
Debt due within one year
Long-term debt
Long-term liabilities and provisions
Borrowings subject to specific conditions
Lease liabilities
Total
December 31
2020
43,509
4,865
21,539
26,110
41,811
137,834
Cash flowsi
(39,441)
(1,516)
6
(1,104)
(6,707)
(48,762)
Foreigni
exchangei
(161)
(3)
(450)
–i
(563)
(1,177)
Otheri
645
(591)
(13,872)
422
1,817
(11,579)
December 31
2021
4,552
2,755
7,223
25,428
36,358
76,316
46
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unless otherwise stated, all amounts are in thousands of Canadian dollars) MAGELLAN 2021 ANNUAL REPORT
The “Other” column includes the effect of reclassification of non-current portion of interest bearing loans, borrowings and
deferred revenues, allocation of borrowing subject to specific conditions to the related assets and expenses, changes in
defined benefit plans, the effect of interest accretion on interest bearing loans and borrowings, and lease liabilities.
19. INCOME TAXES
Major components of income tax expense:
X
Current income tax expense
Current tax expense for the year
Current tax expense for prior years
X
Deferred income tax expense
Origination and reversal of temporary differences
Impact of tax law changes
X
Total income tax expense
2021
10,550
(1,652)
8,898
(6,637)
585
(6,052)
2,846
2020
4,706
2,434
7,140
3,348
591
3,939
11,079
The Corporation’s consolidated effective tax rate for the year ended December 31, 2021 was 152.3% [2020 – 77.0%]. The
difference in the effective tax rates compared to the Corporation’s statutory income tax rates were mainly caused by the
following:
X
Income before income taxes
Income taxes based on the applicable tax rate of 25.8% in 2021 and 2020
Adjustment to income taxes resulting from:
xxAdjustments in respect of prior years
xxPermanent differences and other
xxIncome tax rates differentials on income of foreign operations
xxChanges in income tax rates
xxUnrecognized tax losses and temporary differences
Income tax expense
2021
1,869
482
(1,136)
(1,853)
1,770
590
2,993
2,846
2020
14,392
3,714
2,434
260
3,016
940
715
11,079
Changes in the deferred tax components are adjusted through deferred income tax expense except for $1,622 [2020 – $1,481]
of investment tax credits which is adjusted through cost of revenues and $4,360 [2020 – $603] for employee future benefits
which is adjusted through other comprehensive income.
Major components of deferred tax assets and liabilities:
Operating loss carry forwards
Investment tax credits
Employee future benefits
Property, plant and equipment and intangibles
Other
Deferred tax liabilities
X
December 31i
2021i
19,018
2,448
(123)
(55,596)
3,110
(31,143)
December 31i
2020i
11,443
4,349
4,186
(57,517)
3,064
(34,475)
47
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unless otherwise stated, all amounts are in thousands of Canadian dollars) MAGELLAN 2021 ANNUAL REPORT
For the purposes of the above table, deferred tax assets are shown net of offsetting deferred tax liabilities where these occur in
the same entity and jurisdiction, as follows:
Deferred tax assets
Deferred tax liabilities
X
December 31i
2021i
8,480
(39,623)
December 31i
2020i
834
(35,309)
The temporary difference associated with investments in subsidiaries and joint ventures, for which a deferred tax liability has
not been recognized aggregates to $745,761 [2020 – $743,946].
20. SHARE CAPITAL
The authorized capital of the Corporation consists of an unlimited number of preference shares, issuable in series, of which
none are outstanding, and an unlimited number of common shares, with no par value.
Common shares
Issued and fully paid:
Outstanding at December 31, 2020
Outstanding at December 31, 2021
Net (loss) income per share
X
Net (loss) Income
Weighted average number of shares
Basic and diluted net (loss) income per share
Number
57,729,106
57,729,106
2021
(977)
57,729,106
(0.02)
Amount
252,342
252,342
2020
3,313
58,056,420
0.06
Dividends declared
On March 31, 2021, June 30, 2021, September 30, 2021 and December 31, 2021, the Corporation paid quarterly dividends of
$0.105 per common share, amounting to $24,247.
For the year ended December 31, 2020, the Corporation declared and paid dividends on its common shares on March 31, 2020,
June 30, 2020, September 30, 2020 and December 31, 2020 of $0.105 per share amounting to $24,372.
Subsequent to December 31, 2021, the Corporation declared dividends to holders of its common shares in the amount of
$0.105 per common share payable on March 31, 2021, for shareholders of record at the close of business on March 29, 2022.
Normal Course Issuer Bid
On May 25, 2020, the Toronto Stock Exchange (“TSX”) accepted the Corporation’s application to commence a normal course
issuer bid (“NCIB”) which allowed the Corporation to repurchase through the facilities of the TSX and alternative Canadian
trading platforms up to 2,910,450 common shares. The program commenced on May 27, 2020 and ended on May 26, 2021.
On May 27, 2021, the Corporation’s application was re-approved for a NCIB to purchase up to 2,886,455 common shares,
over a 12-month period commencing May 27, 2021 and ending May 26, 2022. During the year ended December 31, 2021,
the Corporation had not purchased common shares for cancellation under the program. During the year ended
December 31, 2020, 479,895 shares were purchased for cancellation for $3,407 at a volume weighted average price paid
of $7.10 per share respectively.
48
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unless otherwise stated, all amounts are in thousands of Canadian dollars) MAGELLAN 2021 ANNUAL REPORT
21. STOCK– BASED COMPENSATION PLAN
The Corporation has an incentive stock option plan, which provides for the granting of options for the benefit of employees
and directors. The options include a cash option feature that allows option holders to elect to receive an amount in cash equal
to the intrinsic value, being the excess market price of the common share over the exercise price of the option, instead of
exercising the option and acquiring the common shares. Options are granted at an exercise price equal to the market price of
the Corporation’s common shares at the time of granting. Options normally have a life of five years with vesting at 20.0% at the
end of the first, second, third, fourth and fifth years from the date of the grant. In addition, certain business unit income tests
must be met in order for the option holder’s entitlement to fully vest. As at December 31, 2021 and December 31, 2020, there
were no options granted and outstanding. The maximum number of options for common shares that is available to be granted
under this plan is 1,673,341.
The Corporation has a deferred share unit plan (“DSU Plan”) for certain executive officers (“Officers”) which provides a structure
for Officers to accumulate equity-like holdings in the Corporation. The DSU Plan allows certain Officers to participate in the
growth of the Corporation by providing a deferred payment based on the value of a common share at the time of redemption.
Each Officer receives deferred share units (“Units”) based on their annual management incentive compensation. The Units
are issued based on the Corporation’s common share price at the time of issue. A third of the Units are vested and paid upon
issuance and the remaining Units are vested and paid out equally on the anniversary date of issuance in the following two year
periods or upon retiring. The cash value is equal to the common share price at the date of redemption, adjusted by any dividends
paid on the common shares. For Units granted subsequent to May 1, 2016, a Total Shareholder Return (“TSR”) performance
element was introduced to reinforce the connection between remuneration and the interests of Shareholders, by motivating and
rewarding participants for improving the long-term value of the Corporation. One third of the cash payment of the Units awarded
for calendar 2016 and calendar years thereafter is made May 1 of the first calendar year following the date of the grant of the
Units, another one third of cash payment is made May 1 of the second calendar year following the date of grant of the Units,
and the remaining one third cash payment is made May 1 of the third calendar year following the date of grant of the Units. The
number of Units that will actually vest ranges from 0% to 200% of the award remuneration granted and will be determined by the
Corporation’s three year TSR relative to a comparator group. The value each Officer ultimately receives would be determined by
the number of Units earned, multiplied by the fair market value of the common share at the end of the performance period. As at
December 31, 2021, 81,512 Units were outstanding at an accrued value of $547 [December 31, 2020 – $431]. The Corporation
recorded compensation expense in relation to the DSU Plan during the year of $115 [2020 reversal – $238].
22. FINANCIAL INSTRUMENTS
Categories of financial instruments
Financial instruments are classified into one of the following categories: financial assets/financial liabilities at fair value through
profit or loss, and financial assets/financial liabilities at amortized costs.
All financial instruments, including derivatives, are included on the consolidated statement of financial position, which are
measured at fair value except for financial assets and liabilities measured at amortized costs.
The carrying values of the Corporation’s financial instruments are classified as follows:
Financial assets
at fair value
through profit
or loss 1
113,938
32,482
X
Financial
assets at
amortized
cost 2
114,404
164,234
Financial
liabilities at
fair value
through
profit of loss
–
–
Total
financial
assets
228,342
196,716
Financial
liabilities at
amortized
cost 3
229,875
191,148
Total
financial
liabilities
229,875
191,148
December 31, 2020
December 31, 2021
1 Includes cash and cash equivalents and restricted cash
2 Includes trade receivables and other receivables
3 Includes bank indebtedness, accounts payable and accrued liabilities, long-term debt, lease liabilities, and borrowings subject to specific conditions
49
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unless otherwise stated, all amounts are in thousands of Canadian dollars) MAGELLAN 2021 ANNUAL REPORT
The Corporation has exposure to the following risks from its use of financial instruments:
– Market risk
– Credit risk
– Liquidity risk
Market risk
Market risk is the risk that changes in the market prices, such as foreign exchange rates and interest rates, will affect the
Corporation’s income or the value of its holdings of financial instruments. The Corporation’s policy is not to utilize derivative
financial instruments for trading or speculative purposes. The Corporation may utilize derivative instruments in the management
of its foreign currency and interest rate exposures.
The Corporation thoroughly examines the various financial instrument risks to which it is exposed and assesses the impact and
likelihood of those risks. These risks may include currency risk, interest rate risk, credit risk and liquidity risk. Where material,
these risks are reviewed and monitored by the Board of Directors of the Corporation.
Currency risk
The Corporation operates internationally, which gives rise to a risk that its income, cash flows and shareholders’ equity may be
adversely impacted by fluctuations in foreign exchange rates. Currency risk arises because the amount of the local currency
receivable or payable for transactions denominated in foreign currencies may vary due to changes in exchange rate (“transaction
exposures”) and because the non-Canadian dollar denominated financial statements of the Corporation’s subsidiaries may vary
on consolidation into the reporting currency of Canadian dollars (“translation exposures”). The Corporation may use derivative
financial instruments to manage foreign exchange risk with the objective of minimizing transaction exposures and the resulting
volatility of the Corporation’s net income.
The most significant transaction exposures arise in the Canadian operations where significant portions of the revenues are
transacted in US dollars. As a result, the Corporation may experience transaction exposures because of the volatility in the
exchange rate between the Canadian and US dollar. Based on the Corporation’s current US denominated net inflows as of
December 31, 2021, fluctuations of +/- 1% would, everything else being equal, have an effect on net income for the year ended
December 31, 2021 of approximately +/- $289. The Corporation may experience translation exposures on the consolidation of
its US and European subsidiaries. Fluctuations of +/- 1% in the US dollar and British pound would, everything else being equal,
have an effect on other comprehensive income of approximately $4,745.
Interest rate risk
The Corporation is exposed to interest rate risk in its floating rate bank indebtedness. As at December 31, 2021, $7,307 of the
Corporation’s total debt portfolio is subject to movements in floating interest rates. In addition, a portion of the Corporation’s
trade receivables securitization programs are exposed to interest rate fluctuations. The objective of the Corporation’s interest
rate management activities is to minimize the volatility of the Corporation’s income. The Corporation monitors its exposure to
interest rates and has not entered into any derivative contracts to manage this risk. A fluctuation in interest rates of 100 basis
points (1%) would have impacted the amount of interest charged to net income during the year ended December 31, 2021 by
approximately +/- $125.
Credit risk
Credit risk arises from cash and cash equivalents held with banks and financial institutions as well as credit exposure to clients,
including outstanding trade receivables. The maximum exposure to credit risk is equal to the carrying value of the financial
assets. The objective of managing credit risk is to prevent losses in financial assets. The Corporation is also exposed to credit
risk from the potential default by any of its counterparties on its foreign exchange forward contracts. The Corporation mitigates
this credit risk by dealing with counterparties who are major financial institutions that the Corporation anticipates will satisfy their
obligations under the contracts.
The Corporation, in the normal course of business, is exposed to credit risk from its customers, substantially all of which are in
the aerospace industry. The Corporation sells the majority of its products to large international organizations with strong credit
ratings. Therefore, the Corporation is not exposed to significant credit risk and overall the Corporation’s credit risk has not
changed significantly from the prior year.
50
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unless otherwise stated, all amounts are in thousands of Canadian dollars) MAGELLAN 2021 ANNUAL REPORT
The carrying amount of trade receivables is reduced through the use of an allowance account and the amount of the loss is
recognized in the consolidated statements of (loss) income within administrative and general expenses. When a receivable
balance is considered uncollectible, it is written off against the allowance for doubtful accounts. Subsequent recoveries of
amounts previously written off are credited against administrative and general expenses.
Derecognition of financial assets
The Corporation sells a portion of its trade receivables through securitization programs or factoring transactions. During 2021,
the Corporation sold receivables to various financial institutions in the amount of $42,783 [2020 – $221,264] for a discount of
$163 [2020 – $924] representing an annualized interest rate of 1.44% [2020 – 1.84%].
As at December 31, 2021, trade receivables include receivables sold and financed through securitization transactions of nil
[2020 – $39,581] which do not meet the IFRS 9 derecognition requirements as the Corporation continues to be exposed to credit
risk. These receivables are recognized in the consolidated statement of financial position even though they have been legally
sold with a corresponding financial liability recorded in debt due within one year.
Liquidity risk
The Corporation’s objective in managing liquidity risk is to ensure that there are sufficient committed loan facilities in order to
meet its liquidity requirements at any point in time. The Corporation has in place a planning and budgeting process to help
determine the funds required to support the Corporation’s normal operating requirements on an ongoing basis, taking into
account its anticipated cash flows from operations and its operating facility capacity. The primary sources of liquidity are the
operating credit facility, trade receivables securitization program and cash provided by operations. Based on current funds
available and expected cash flow from operating activities, management believes that the Corporation has sufficient funds
available to meet its liquidity requirements at any point in time. However, if cash from operating activities is lower than expected
or capital costs for projects exceed current estimates, or if the Corporation incurs major unanticipated expenses, it may be
required to seek additional capital in the form of debt or equity or a combination of both.
Contractual maturity analysis
Contractual maturity of the Corporation’s financial liabilities (including both interest and principal cash flows):
Long-term debt1
Other long-term liabilities
Borrowings subject to specific conditions
X
Interest payments
Total
Year 1
4,552
140
1,327
6,019
100
6,119
Year 2
2,160
112
637
2,909
17
2,926
Year 3
718
120
787
1,625
1
1,626
Year 4
–
116
844
960
–
960
Year 5 Thereafter
–
679
21,027
21,706
–
21,706
–
120
806
926
–
926
Total
7,430
1,287
25,428
34,145
118
34,263
Fair values
The Corporation has determined the estimated fair values of its financial instruments based on appropriate valuation
methodologies; however, considerable judgement is required to develop these estimates. Accordingly, these estimated
fair values are not necessarily indicative of the amounts the Corporation could realize in a current market exchange. The
estimated fair value amounts can be materially affected by the use of different assumptions or methodologies. The methods
and assumptions used to estimate the fair value of financial instruments are described as follows:
Cash and cash equivalents, trade receivables, and accounts payable and accrued liabilities
Due to the short period to maturity of these instruments, the carrying values as presented in the consolidated statements of
financial position are reasonable estimates of their fair values.
Foreign exchange contracts
The Corporation enters into forward foreign exchange contracts to mitigate future cash flow exposures in US dollars and British
pounds. Under these contracts, the Corporation is obliged to purchase specific amounts at predetermined dates and exchange
rates. These contracts are matched with anticipated operational cash flows in US dollars, British pounds and Euros.
51
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unless otherwise stated, all amounts are in thousands of Canadian dollars) MAGELLAN 2021 ANNUAL REPORT As at December 31, 2021, the Corporation had forward foreign exchange contracts outstanding in the amount of $6,650 US
dollars and £9,490 British pounds, of which the fair value is determined to be immaterial and categorized within Level 2 of the
fair value hierarchy. There were no outstanding forward foreign exchange contracts as at December 31, 2020.
Long-term debt
As at December 31, 2021, the carrying amount of the Corporation’s long-term debt of $7,307 [2020 – $8,973] approximates its
fair value. The fair value was determined by discounting the expected future cash flow based on current rate for debt with similar
terms and maturities, and is categorized as Level 2 in the fair value hierarchy.
Borrowings subject to specific conditions
As at December 31, 2021, the Corporation has recognized $25,428 [2020 – $26,110] as the amount repayable to Canadian
government agencies. The contributions are repayable as future royalty payments; a liability is recorded for the amounts received
that will be repaid based on future estimated sales. The fair value was determined by discounting the expected future royalty
payments based on prevailing market rate for borrowings with similar terms and maturities, and is categorized as Level 2 in the
fair value hierarchy.
Collateral
As at December 31, 2021, the carrying amount of all of the financial assets that the Corporation has pledged as collateral for its
long-term debt facilities was $7,307 [2020 – 48,374].
Fair value hierarchy
The Corporation’s financial assets and liabilities recorded at fair value on the consolidated statement of financial position have
been categorized into three categories based on a fair value hierarchy. Fair value of assets and liabilities included in Level 1
are determined by reference to quoted prices in active markets for identical assets and liabilities. Assets and liabilities in Level
2 include valuations using inputs other than the quoted prices for which all significant inputs are based on observable market
data, either directly or indirectly. Level 3 valuations are based on inputs that are not based on observable market data.
The fair value hierarchy requires the use of observable market inputs whenever such inputs exist. A financial instrument is
classified to the lowest level of the hierarchy for which a significant input has been considered in measuring fair value.
23. EMPLOYEE FUTURE BENEFITS
The Corporation provides retirement benefits through a variety of arrangements comprised principally of defined benefit and
defined contribution plans that cover a substantial portion of employees in accordance with local regulations and practices. The
most significant plans in terms of the benefits accrued to date by participants are career average and final average earnings
plans and around 100% of the obligations accrued to date come from defined benefit plans in Canada.
Defined Benefit Plans
Canada
The Canadian defined benefit plans comprise of both career average and final average earnings plans which provide benefits
to members in the form of a guaranteed level of pension payable for life. A majority of the plans are currently closed to
new entrants. The level of pensions in the defined benefit plans depends on the member’s length of service and salary
at retirement age for final average earnings plans and salary during employment for career average plans. The defined
benefit pension plans require contributions to be made to a separate trustee-administered fund which is governed by the
Corporation. The Corporation is responsible for the administration of the plans’ assets and for the definition of the investment
strategy. The Corporation reviews the level of funding in the defined benefit pension plans on an annual basis as required
by local government legislation. Such review includes the asset-liability matching strategy and investment risk management
policy. Actuarial valuations are required at least every three years. Depending on the jurisdiction and the funded status of the
plan, actuarial valuations may be required annually. The most recent actuarial valuations for the various pension plans were
completed as at December 31, 2020, January 1, 2020 and December 31, 2019.
52
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unless otherwise stated, all amounts are in thousands of Canadian dollars) MAGELLAN 2021 ANNUAL REPORT Contributions are determined by the appointed actuary and cover the going-concern normal costs and deficits (established
under the assumption that the plan will continue to be in force) or solvency deficits (established under the assumption that
the plan stops its operations and is being liquidated), as prescribed by laws and actuarial practices. Under the laws in effect,
minimum contributions are required to amortize the going-concern deficits over a period of fifteen years and solvency deficits
over a period of five years. Temporary solvency relief measures are in place that allow for the amortization of solvency deficits
over a period of up to ten years.
US
The US defined benefit plan provides benefits to members in the form of a guaranteed level of pension payable for life at
retirement, and is currently closed to future accrual of benefits. The benefit payments are from a trustee-administered fund
and plan assets held in trusts are governed by Internal Revenue Service (“IRS”) regulations. Responsibility for governance
of the plan, including investment decisions and contribution schedules, is also governed by IRS Regulations and lies with the
Corporation. Actuarial valuations are required annually. Contributions are determined by appointed actuaries and cover normal
cost and deficits as prescribed by law. Funding deficits are generally amortized over a period of seven years. The US defined
benefit plan was fully wound up in 2020.
Investment Policy
The overall investment policy and strategy for the defined benefit pension plans is guided by the objective of achieving
an investment return which, together with contributions, ensures that there will be sufficient assets to pay pension benefits
as they fall due while also mitigating the risks of the plans. See below for more information about the Corporation’s risk
management initiatives.
The target asset allocation is determined based on expected economic and market conditions, the maturity profile of the plans’
liabilities, the funded status of the respective plans and the plan stakeholders’ tolerance to risk. Generally, the Corporation aims
to have a portfolio mix of a combined 5% in money market securities, 20% in non-traditional equities, 30% in fixed income
instruments and 45% in equity for the Canadian defined benefit plans and a portfolio mix of a combined 5% in cash, 20% in
fixed income instruments, 60% in equity and 15% in alternative assets for the US defined benefit plan. As the plans mature and
the funded status improves through cash contributions and anticipated excess equity returns, the Corporation intends to reduce
the level of investment risk by investing in more fixed-income assets that better match the liabilities.
Risk Management
The Corporation’s pension plans are exposed to various risks, including equity, interest rate, inflation, liquidity and longevity
risks. Several risk strategies and policies have been put in place to mitigate the impact these risks could have on the funded
status of defined benefit plans and on the future level of contributions by the Corporation. The following is a description of key
risks together with the mitigation measures in place to address them.
Equity risk
Equity risk is the risk that results from fluctuations in equity prices. This risk is managed by maintaining diversification of portfolios
across geographies, industry sectors and investment strategies.
Interest rate risk
Interest rate risk is the risk that results from fluctuations in the fair value of plan assets and liabilities due to movements in interest
rates. This risk is managed by reducing the mismatch between the duration of plan assets and the duration of pension obligation.
This is accomplished by having a portion of the portfolio invested in long-term bonds. A decrease in corporate and/or government
bond yields will increase plan liabilities, which will be partially offset by an increase in the value of the plans’ bond holdings.
Liquidity risk
Liquidity risk is the risk stemming from holding assets which cannot be readily converted to cash when needed for the payment
of benefits or to rebalance the portfolios. Liquidity risk is managed through investment in government bonds and equity futures.
Longevity risk
Longevity risk is the risk that increasing life expectancy results in longer-than-expected benefit payments resulting in an increase
in the plans’ liabilities. This risk is mitigated by using the most recent mortality tables to set the level of contributions.
53
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unless otherwise stated, all amounts are in thousands of Canadian dollars) MAGELLAN 2021 ANNUAL REPORT NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unless otherwise stated, all amounts are in thousands of Canadian dollars)
The Corporation obtains actuarial valuations for its accrued benefit obligations and the fair value of plan assets for accounting
purposes under IFRS as at December 31 of each year. In addition, the Corporation estimates movements in its accrued benefit
liabilities at the end of each interim reporting period, based upon movements in discount rates and the rates of return on plan
assets, as well as any significant changes to the plans. Adjustments are also made for payments made and benefits earned.
Defined Contribution Plans
The Corporation’s management, administrative and certain unionized employees may participate in defined contribution pension
plans. The Corporation contributes an amount expressed as a percentage of employees’ contributions with such percentage
varying by group.
The Corporation’s expenses for defined contribution plans amounted to $6,421 for the year ended December 31, 2021
[2020 – $7,312].
Other Benefit Plan
The Corporation has another benefit plan in the US which includes retiree medical benefits that contribute to the health care
coverage of certain employees and their beneficiaries after retirement. The other benefit plan is currently closed to new
entrants. The post-retirement benefits cover all types of medical expenses including, but not limited to, cost of doctor visits,
hospitalization, surgery and pharmaceuticals. The other benefit plan also provides for post-employment life insurance and
compensated absences for eligible current employees, including vacation to be taken before retirement, if certain age and
service requirements are met. The retirees contribute to the costs of the post-retirement medical benefits. The plan is not
pre-funded and costs are incurred as amounts are paid.
The Corporation recognized total defined benefit costs related to its defined and other benefit plans as follows:
X
X
X
Current service cost
Net interest cost on net defined benefit liability
Other
Total defined benefit cost recognized in net income
Defined benefiti
plansi
2,139
321
440
2,900
2021
Other benefiti
plani
–
21
–
21
X
Defined benefiti
plansi
2,499
344
294
3,137
2020
Other benefiti
plani
–
31
–
31
The re-measurement components recognized in the statement of other comprehensive income for the Corporation’s defined
benefit plans comprise the following:
X
X
2021
X
Actuarial (gains) losses
Return on pension assets (excluding amounts in
xxnet interest on defined benefit schemes)
Based on adjustment of liability assumptions
Due to liability experience adjustment
Change in effect of asset ceiling
Total defined benefit (gains) loss recognized in the
xxstatement of other comprehensive income
Defined benefiti
plansi
Other benefiti
plani
Defined benefiti
plansi
(13,706)
(9,064)
(1,545)
7,218
(17,097)
–
–
229
–
229
(10,718)
12,305
(261)
653
1,979
2020
Other benefiti
plani
–
–
486
–
486
54
MAGELLAN 2021 ANNUAL REPORT The following tables show the changes in the fair value of plan assets and the defined benefit obligation as recognized in the
consolidated financial statements for the Corporation’s benefit plans:
Changes in benefit plan assets of the Corporation’s benefit plans
X
X
Fair value, beginning of year
Interest income on plan assets
Actual return on assets (excluding interest income
xxon plan assets)
Employer contributions
Employee contributions
Benefit payments
Plan settlement
Administration costs
Exchange differences
End of year
Changes in effect of asset ceiling
X
X
Effect of asset ceiling, beginning of year
Interest on effect of asset ceiling
Change in effect of asset ceiling during the period
End of year
X
Defined benefiti
plansi
124,715
2,958
X 2021
Other benefiti
plani
–
–
X
Defined benefiti
plansi
119,316
3,612
2020
Other benefiti
plani
–
–
13,706
2,321
182
(7,759)
–
(606)
–
135,517
–
289
146
(435)
–
–
–
–
10,718
3,160
177
(10,306)
(1,362)
(427)
(173)
124,715
–
419
125
(544)
–
–
–
–
X
2021
X
2020
Defined benefiti
plansi
653
16
7,218
7,887
Other benefiti
plani
–
–
–
–
Defined benefiti
plansi
–
–
653
653
Other benefiti
plani
–
–
–
–
Changes in the benefit plan obligations of the Corporation’s benefit plans
X
X
Beginning of year
Current service cost
Interest cost
Employee contributions
Actuarial (gains) losses in other comprehensive
income from:
xxChanges in demographic assumptions
xxChanges in financial assumptions
xxExperience adjustments
Benefit payments
Plan settlement
Exchange difference
End of year
X
2021
X
2020
Defined benefiti
plansi
138,233
2,139
3,263
182
Other benefiti
plani
1,082
–
21
146
Defined benefiti
plansi
131,316
2,499
3,956
177
Other benefiti
plani
1,009
–
31
125
–
–
229
(435)
–
(5)
1,038
(662)
12,965
(261)
(10,306)
(1,494)
43
138,233
–
–
486
(544)
–
(25)
1,082
194
(9,424)
(1,545)
(7,759)
–
–
125,283
55
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unless otherwise stated, all amounts are in thousands of Canadian dollars) MAGELLAN 2021 ANNUAL REPORT
Reconciliation of funded status of benefit plans to amounts recorded in the consolidated financial statements
X
Fair value of plan assets
Accrued benefit obligation
Irrecoverable surplus (effect of asset ceiling)
Net defined benefit liability
– Included in other long-term liabilities
and provisions
– Included in other assets
X
2021
X
Defined benefiti
plansi
135,517
(125,283)
(7,887)
2,347
–
Other benefiti
plani
–
(1,038)
–
(1,038)
(1,038)
X
Defined benefiti
plansi
124,715
(138,233)
(653)
(14,171)
(14,509)
2020
Other benefiti
plani
–
(1,082)
–
(1,082)
(1,082)
2,347
–
338
–
The Corporation expects to contribute approximately $1,737 in 2022 to all its defined benefit plans in accordance with normal
funding policy. Because of market driven changes that the Corporation cannot predict, the Corporation could be required to
make contributions in the future that differ significantly from its estimates.
Significant assumptions and sensitivity analysis
The significant actuarial assumptions adopted in measuring the Corporation’s accrued benefit obligations represent
management’s best estimates reflecting the long-term nature of employee future benefits and are as follows [weighted-average
assumptions as at December 31]:
X
Discount rate
Rate of compensation increase
Mortality Table
xxCanadian defined benefit plans
X
X
Defined benefiti
plansi
2.9%
2.0%/3.0%
2021 X
Other benefiti
plani
2.4%
–
Defined benefiti
plansi
2.4%
2.0%/3.0%
2020
Oter benefti
plani
2.0%
–
Club Vita Canada’s
2019 VitaCurves projected with
CPM-B improvement scale
Club Vita Canada’s
2016 / 2019 VitaCurves, projected with
improvement scale CPM-B
xxOther benefit plan
SOA Pri-2012 Blue Collar Mortality
Table with projection Scale MP-2021
MP-2014 mortality tables with
MP-2020 projections (with blue collar
adjustment)
x
x
x
The discount rate assumption used in determining the obligations for pension and other benefit plans was selected based on
a review of current market interest rates of high-quality, fixed rate debt securities adjusted to reflect the duration of expected
future cash outflows for pension benefit payments. At December 31, 2021, a 1.0% decrease in the discount rate used (all other
assumptions remaining unchanged) could result in a $16,352 increase in the pension benefit obligation with a corresponding
charge recognized in other comprehensive income in the year.
The Corporation funds health care benefit costs, shown under other benefit plan, on a pay as you go basis. For measurement
purposes, a 6.0% annual rate of increase in the per capita cost of covered health care and dental benefits was assumed for
2022. The impact of applying a one-percentage-point increase or decrease in the assumed health care and dental benefit trend
rates as at December 31, 2022 was nominal.
56
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unless otherwise stated, all amounts are in thousands of Canadian dollars) MAGELLAN 2021 ANNUAL REPORT
Assets
The weighted average asset allocations of the defined benefit plans at the measurement date, by asset category:
X
Equity investments
Fixed income investments
Other investments
X
Defined benefit pension liability term
X
Defined benefits schedule for disbursement within 12 months
Defined benefits schedule for disbursement within 2-5 years
Defined benefits schedule for disbursement after 5 years or more
24. SEGMENTED INFORMATION
2021
85%
14%
1%
100%
2020
83%
16%
1%
100%
Total
6,548
30,130
33,059
Operating segments are defined as components of the Corporation for which separate financial information is available that
is evaluated regularly by the chief operating decision maker in allocating resources and assessing performance. The chief
operating decision maker of the Corporation is the President and Chief Executive Officer. The Corporation operates substantially
all of its activities in one reportable segment, Aerospace, which include the design, development, manufacture, repair and
overhaul, and sale of systems and components for defence and civil aviation. The Corporation evaluated the performance of
its operating segments primarily based on net income before interest and income tax expense. The Corporation accounts for
intersegment and related party sales and transfers, if any, at the exchange amount.
The Corporation’s primary sources of revenue:
X
Sale of goods
Services
X
Timing of revenue recognition based on transfer of control:
X
At a point of time
Over time
X
2021
553,185
135,173
688,358
2021
381,367
306,991
688,358
2020
605,958
138,456
744,414
2020
450,959
293,455
744,414
The following table presents the aggregate amount of the revenues expected to be realized in the future from partially or
fully unsatisfied performance obligations as at December 31, 2021 and 2020 as the Corporation performs under contracts at
delivery or recognized over time. The amounts disclosed below represent the value of firm orders only. Such orders may be
subject to future modifications that might impact the amount and/or timing of revenue recognition. The amounts disclosed below
do not include constrained variable consideration, unexercised options or letters of intent.
Revenues expected to be recognized in:
X
Less than 24 months
Thereafter
2021
523,472
76,118
2020
535,781
79,342
Revenues from the Corporation’s three largest customers accounted for 45.3% of total sales for the year ended December 31, 2021
[December 31, 2020 – two largest customers accounted for 32.2% of total sales].
57
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unless otherwise stated, all amounts are in thousands of Canadian dollars) MAGELLAN 2021 ANNUAL REPORT
Geographic segments:
X
Revenues
Export revenues1
X
X
X
Canada
315,805
241,935
X
United
States
174,260
23,678
2021X
X
Europe
198,293
33,305
Total
688,358
298,918
Canada
338,883
241,228
1 Export revenue is attributed to countries based on the location of the customers
X
X
X
X
Canada
X
United
States
2021X
X
Europe
Total
Canada
X
United
States
202,284
32,780
X
United
States
Europe
203,247
57,869
2020
Total
744,414
331,877
2020
Europe
Totali
Property, plant and
xxequipment, right-of-use
xxassets, intangible assets
xxand goodwill
176,635
163,527
160,636
500,798
188,220
179,668
169,687
537,575i
25. COST OF REVENUES
X
Operating expenses
Amortization
Investment tax credits
Impairment of inventories
X
26. ADMINISTRATIVE AND GENERAL EXPENSES
X
Salaries, wages and benefits
Administration and office expenses
Professional services
Amortization
X
27. SPECIAL ITEMS
2021
589,737
48,881
(1,622)
3,032
640,028
2021
25,262
14,142
2,144
3,011
44,559
2020
591,360
54,163
(1,481)
3,881
647,923
2020
30,637
15,848
2,650
2,940
52,075
Special items are those items that in management’s view are to be separately disclosed by virtue of their size or incidence to
enable a full understanding of the Corporation’s financial performance.
Impairment [note 10]
During 2020, in light of the COVID-19 pandemic and the state of the aerospace industry, management used a discounted
cash flow model to assess the recoverability of goodwill at the Corporation’s CGUs. The unprecedented drop in air travel due
to the COVID-19 pandemic has adversely affected the Corporation’s customers. Therefore, the demand for products and
services provided by the Corporation’s CGUs is expected to be depressed for a period of time. As a result of the assessment,
the Corporation recorded a $12,046 impairment charge against goodwill in 2020. There was no impairment recorded in 2021.
Workforce Reduction and Restructuring
In 2020, as a result of COVID-19, Magellan undertook a workforce reduction achieved through layoffs, terminations of employment,
early retirements and special leaves. A workforce reduction cost of $6,916 was recorded related to these measures.
58
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unless otherwise stated, all amounts are in thousands of Canadian dollars) MAGELLAN 2021 ANNUAL REPORT
The Corporation also committed to a plan to restructure its manufacturing divisions in Europe due to a decrease in demand
as a result of a deterioration in economic conditions stemming from COVID-19. Following the announcement of the plan, the
Corporation recognised a restructuring provision of $2,817 (£1,621) as at December 31, 2020 related to downsizing the employee
base and engaging in other actions designed to reduce the cost structure and improve productivity. Asset impairment charges
were also incurred for those assets made obsolete as a result of this plan. The closure costs recorded represent estimated
expenses required to restructure operations and moving costs incurred. Restructuring liabilities have been grouped within
current accounts payable, accrued liabilities and provisions on the consolidated statement of financial position.
Costs associated with the workforce reduction and plant closure are summarized in the table below:
X
Workforce reduction
Closure costs
Impairment of property, plant and equipment [note 7]
X
2021
–
2,182
–
2,182
2020
6,916
3,236
2,385
12,537
Canada Emergency Wage Subsidy
In April 2020, the Government of Canada announced the Canada Emergency Wage Subsidy (“CEWS”) in order to help
employers retain and/or return Canadian-based employees to payrolls in response to challenges posed by the COVID-19
pandemic. The program was redesigned in July 2020 and extended until October 2021.
Magellan determined that it met the employer eligibility criteria and applied for the CEWS. In 2021, the Corporation has recorded
and received a total gross subsidy under the CEWS program of $7,659 [2020 – $20,037], with $7,123 [2020 – $18,690], recorded
as a reduction to operating expenses in cost of revenues and $536 [2020 – $1,347], recorded as a reduction of salaries, wages
and benefits in administrative and general expenses.
28. INTEREST EXPENSE
X
Interest on bank indebtedness and long-term debt
Accretion charge on long-term debt and borrowings
Accretion on lease liabilities
Discount on sale of trade receivables
X
29. OTHER COMPREHENSIVE INCOME
2021
43
787
1,817
248
2,895
2020
305
1,103
2,026
924
4,358
Other comprehensive income includes unrealized foreign currency translation gains and losses, which arise on the translation
to Canadian dollars of assets and liabilities of the Corporation’s foreign operations and net actuarial losses on defined benefit
pension plans, net of tax. The Corporation recorded unrealized currency translation loss for the year ended December 31, 2021
of $7,339 [2020 – $3,669] and net actuarial gain on defined benefit plans of $12,508 [2020 – net actuarial loss of $1,862]. These
gains and losses are reflected in the consolidated statements of financial position and had no impact on net income for the year.
59
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unless otherwise stated, all amounts are in thousands of Canadian dollars) MAGELLAN 2021 ANNUAL REPORT 30. RELATED PARTY DISCLOSURE
Transactions with related parties
During the year, the Corporation incurred consulting and cost recovery fees of $200 [2020 – $200] payable to a corporation
controlled by the Chairman of the Board of Directors of the Corporation.
Key management personnel
Key management includes members of the Board of Directors of the Corporation and executive officers, as they have the
collective authority and responsibility for planning, directing and controlling the activities of the Corporation. The compensation
expense for key management for services is as follows:
X
Short-term benefits
Post-employments benefits
Share-based payments
X
2021
2,887
136
–
3,023
2020
2,776
156
36
2,968
Short-term benefits include cash payments for base salaries, bonuses and other short-term cash payments. Post-employment
benefits include the Corporation’s contribution pension plan and pension adjustment for defined benefit plan. Share-based
payments include amounts paid to Officers under the DSU Plan.
31. SUPPLEMENTARY CASH FLOW INFORMATION
X
Net change in non-cash working capital
Trade receivables
Contract assets
Inventories
Prepaid expenses and other
Accounts payable, accrued liabilities and provisions
X
Interest paid
Income taxes paid
32. ADDITIONAL FINANCIAL INFORMATION
2021
2020
(50,347)
3,895
3,234
2,224
7,237
(33,757)
505
13,832
64,398
7,336
(16,803)
8,299
(41,475)
21,755
1,074
2,233
Included in other expenses is a foreign exchange gain of $2,548 [2020 – $1,138 foreign exchange loss] on the conversion
of foreign currency denominated working capital balances and debt.
33. MANAGEMENT OF CAPITAL
The Corporation’s objective is to maintain a capital base sufficient to maintain investor, creditor and market confidence and to
sustain future development of the business. Management defines capital as the Corporation’s shareholders’ equity and interest
bearing debt.
As at December 31, 2021, total managed capital was $ 769,754 [2020 – $830,876], comprised of shareholders’ equity attributable
to equity holders of the Corporation of $762,447 [2020 – $782,502] and interest-bearing debt of $7,307 [2020 – 48,374].
60
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unless otherwise stated, all amounts are in thousands of Canadian dollars) MAGELLAN 2021 ANNUAL REPORT
The Corporation manages its capital structure and makes adjustments to it in light of economic conditions, the risk characteristics
of the underlying assets and the Corporation’s working capital requirements. In order to maintain or adjust its capital structure,
the Corporation, upon approval from its Board of Directors, may issue or repay long-term debt, issue shares, repurchase shares
through the normal course issuer bid, pay dividends or undertake other activities as deemed appropriate under the specific
circumstances. The Board of Directors reviews and approves any material transactions out of the ordinary course of business,
including proposals on acquisitions or other major investments or divestitures, as well as capital and operating budgets. Based
on current funds available and expected cash flow from operating activities, management believes that the Corporation has
sufficient funds available to meet its liquidity requirements at any point in time. However, if cash from operating activities is lower
than expected or capital costs for projects exceed current estimates, or if the Corporation incurs major unanticipated expenses,
it may be required to seek additional capital in the form of debt or equity or a combination of both. There were no changes in the
Corporation’s approach to capital management during the year.
The Corporation must adhere to covenants in its operating credit facility. As at December 31, 2021, the Corporation was in
compliance with these covenants.
34. CONTINGENT LIABILITIES AND COMMITMENTS
In the ordinary course of business activities, the Corporation may be contingently liable for litigation and claims with, among
others, customers, suppliers and former employees. Management believes that adequate provisions have been recorded in
the accounts where required. Although, it is not possible to accurately estimate the extent of the potential costs and losses, if
any, management believes, but can provide no assurance, that the ultimate resolution of such contingencies would not have a
material adverse effect on the financial position of the Corporation.
As at December 31, 2021, capital commitments in respect of purchase of property, plant and equipment totalled $4,948, all of
which had been ordered. There were no other material capital commitments at the end of the year.
61
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unless otherwise stated, all amounts are in thousands of Canadian dollars) MAGELLAN 2021 ANNUAL REPORT BOARD OF DIRECTORS AND EXECUTIVE OFFICERS
EXECUTIVE OFFICERS
BOARD OF DIRECTORS
COMMITTEES OF THE BOARD
(1) Audit Committee
Chairman:
Bruce W. Gowan
(2) Governance and
Nominating Committee
Chairman:
Bruce W. Gowan
(3) Human Resources and
Compensation Committee
Chairman:
Steven Somerville
(4) Environmental and Health &
Safety Committee
Chairman:
Beth M. Budd Bandler
(5) Pension Committee
Chairman:
Steven Somerville
N. Murray Edwards
Chairman
Phillip C. Underwood
President and
Chief Executive Officer
Elena M. Milantoni
Chief Financial Officer and
Corporate Secretary
Haydn R. Martin
Vice President,
Business Development,
Marketing and Contracts
Jim G. Powell
Vice President,
North American Operations
Jo-Ann C. Ball
Vice President,
Human Resources
Karen Yoshiki-Gravelsins
Vice President,
Corporate Stewardship and
Operational Excellence
Ian Roberts
Vice President,
Information Technology, and
Transformation
N. Murray Edwards (5)
Chairman
Magellan Aerospace Corporation
Mississauga, Ontario
Phillip C. Underwood
President and Chief Executive Officer
Magellan Aerospace Corporation
Mississauga, Ontario
Beth M. Budd Bandler (2, 3, 4)
President
Beth Bandler Professional Corporation
Dundas, Ontario
Bruce W. Gowan (1, 2, 3)
Corporate Director
Huntsville, Ontario
Larry G. Moeller (4)
President
Kimball Capital Corporation
Calgary, Alberta
Steven Somerville (1, 2, 3, 5)
President
Kerr Industries Limited
Oshawa, Ontario
James P. Veitch (1, 4, 5)
Director, Secretary/Treasurer
Private Consultancy Company
Alberta, Canada
62
MAGELLAN 2021 ANNUAL REPORT OPERATING FACILITIES DIRECTORY & SHAREHOLDER INFORMATION
CANADA
660 Berry Street,
Winnipeg, Manitoba R3H 0S5
Tel: 204 775 8331
3160 Derry Road East,
Mississauga, Ontario L4T 1A9
Tel: 905 673 3250
634 Magnesium Road,
Haley, Ontario K0J 1Y0
Tel: 613 432 8841
975 Wilson Avenue,
Kitchener, Ontario N2C 1J1
Tel: 519 893 7575
UNITED STATES
97–11 50th Avenue,
New York, New York 11368
Tel: 718 699 4000
25 Aero Road,
Bohemia, New York 11716
Tel: 631 589 2440
165 Field Street,
West Babylon, New York 11704
Tel: 631 694 1818
20 Computer Drive,
Haverhill, Massachusetts 01832
Tel: 978 774 6000
2320 Wedekind Drive,
Middletown, Ohio 45042
Tel: 513 422 2751
5170 West Bethany Road,
Glendale, Arizona 85301
Tel: 623 931 0010
5401 West Luke Avenue,
Glendale, Arizona 85311
Tel: 623 939 9441
FRANCE
ZAC des Florides
Boulevard Jean-Loup Chrétien
13700 Marignane
Tel: 33 4 42 10 80 80
UNITED KINGDOM
Davy Way, Llay Industrial Estate,
Llay, Wrexham LL12 0PG
Tel: 01978 856600
Miners Road, Llay Industrial Estate,
Llay, Wrexham LL12 0PJ
Tel: 01978 856798
Rackery Lane,
Llay, Wrexham LL12 0PB
Tel: 01978 852101
510 Wallisdown Road,
Bournemouth, Dorset BH11 8QN
Tel: 01202 512405
11 Tullykevin Road
Greyabbey, County Down
BT22 2QE
Tel: 02842 758231
Amy Johnson Way
Blackpool Business Park,
Blackpool, FY4 2RP
Tel: 01253 345466
Colne Road, Kelbrook
Lancashire, BB18 6SN
Tel: 01282 844480
POLAND
Wojska Polskiego 3
39–300 Mielec
Tel: 017 773 8970
INDIA
Plot No. 69 to 81 of Aerospace
SEZ Sector
Hitech Defence and Aerospace Park
Devanahalli
Bengaluru 562 110
Tel: 91 080 68281200
Plot #120, Antharasanahalli
KIADB Industrial Area, Tumkuru
Karnataka 572106
Tel: 91 081 62212132
CORPORATE OFFICE
Magellan Aerospace Corporation
3160 Derry Road East
Mississauga, Ontario, Canada
L4T 1A9
Tel: 905 677 1889
Fax: 905 677 5658
www.magellan.aero
For investor information:
ir@magellan.aero
AUDITORS
Ernst & Young LLP
Toronto, Ontario
TRANSFER AGENT
Computershare Investor Services Inc.
Toronto, Ontario
Tel: 1 800 564 6253
e-mail: service@computershare.com
www.computershare.com
STOCK LISTING
Toronto Stock Exchange — TSX
Common Shares — MAL
ANNUAL MEETING
The Annual Meeting of the
Shareholders of Magellan Aerospace
Corporation will be held on
Tuesday, May 3, 2022, at
2:00 p.m. at Sheraton Gateway Hotel,
Toronto International Airport,
6320 Silver Dart Drive,
Mississauga, Ontario, L5P 1C4
63
MAGELLAN 2021 ANNUAL REPORT