MAGELLAN 2024 ANNUAL REPORT
1
LETTER TO SHAREHOLDERS
Magellan ended 2024 with $942.4 million in revenue, an increase of 7.1% when compared to $879.6 million of revenue in
2023. Net income in 2024 was $35.5 million, an improvement from 2023 net income of $9.2 million.
This past year, the aerospace industry experienced improved stability following years of turbulence. Companies that have
successfully adapted to shifting conditions have emerged more responsive and agile in making critical business decisions.
Despite this positive momentum, persistent challenges remained in 2024. Supply chain delays, labor shortages, and
market disruptions—such as the machinist strike at Boeing in the latter half of the year—continued to affect the industry’s
ability to fully capitalize on the pent-up demand in both the defense and commercial market sectors.
As previously noted, one of Magellan’s key priorities has been improving the commercial terms of its contract portfolio. Our
Business Development and Commercial teams have worked diligently with customers and suppliers to mitigate inflationary
pressures and supply chain disruptions affecting key agreements. The result of the dedicated effort over two years has left
the Corporation with only a small number of agreements remaining to be rejuvenated in 2025.
With a strengthened business climate and a revitalized strategic plan, our executive leadership team remains committed to
leveraging Magellan’s core strengths and capabilities for sustained growth. We continue to assess market trends, customer
and competitor strategies, and emerging technologies to enhance our competitive position and seize new business
opportunities in all areas of the business.
Magellan remains on track to advance new capital programs and facility expansions across our global operations. These
initiatives underscore our commitment to innovation, operational excellence, and supporting business growth and new orders.
The aerospace industry saw record-breaking aircraft orders and backlogs at Boeing and Airbus in 2024, driven by increasing
demand for domestic and international commercial passenger travel. Additionally, the global need for defense fleet modernization
continues to fuel strong demand for new aircraft. Growth in the defense sector remains a near certainty as nations prioritize
defense readiness and fleet upgrades in their annual budgets.
As we step into 2025, there is cautious optimism that the industry issues of the past few years are behind us, paving the
way for a stronger year—contingent, of course, on potential new challenges, such as United States trade tariffs.
We have successfully navigated a prolonged and challenging period in our industry, and we take great pride in the resolve
and adaptability demonstrated by our employees. On behalf of Magellan’s Board of Directors and management team, we
extend our sincere gratitude to our employees and shareholders for their continued support as we as we confidently move
forward toward a stronger future.
Phillip C. Underwood
President and Chief Executive Officer
March 7, 2025
Magellan ended 2024 with a 7.1 Percent
revenue increase compared to 2023,
reaching $942.4 million.
MAGELLAN 2024 ANNUAL REPORT
MANAGEMENT’S DISCUSSION AND ANALYSIS
December 31, 2024
2
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, 2024 and 2023 prepared in accordance with
International Financial Reporting Standards and International Accounting Standards and Interpretations (collectively “IFRS”),
and the Annual Information Form for the year ended December 31, 2024 (available on SEDAR+ at www.sedarplus.ca). This
MD&A provides a review of the significant developments that have impacted the Corporation’s performance during the year
ended December 31, 2024, relative to the year ended December 31, 2023. The information contained in this report is as at
March 7, 2025. 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,” “2024 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 2024 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. 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 2024 events
Magellan is a diversified supplier of components to the aerospace industry. Through its wholly owned subsidiaries, controlled
entity and joint venture, 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.
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.
MAGELLAN 2024 ANNUAL REPORT
MANAGEMENT’S DISCUSSION AND ANALYSIS
December 31, 2024
3
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.
The Industry and the Supply Chain
Industry wide travel in 2024 has recovered, with both domestic and international revenue passenger kilometers, on a combined
basis, exceeding pre-COVID 19 pandemic levels, Magellan’s 2024 financial results and operations continue to be influenced
by persistent challenges, including supply chain delays, labour shortages, labour disruptions and higher input prices for goods
and services, but these challenges are stabilizing. Magellan continues to manage these impacts and strives to mitigate their
effect on Magellan’s operations.
In 2024, 65% of revenues were derived from commercial markets (2023–63%, 2022–62%) while 35% of revenues related to
defence markets (2023–37%, 2022–38%).
2024 and Recent Updates
On February 28, 2024, Magellan announced an agreement between Magellan Aerospace (UK) Limited and Airbus to continue
to supply major structural wing components for Airbus’ single aisle family of aircraft. The high-strength, lightweight components
will be delivered from Magellan’s leading-edge long bed machining centre in our Wrexham facility from January 2024. The
agreement focuses on the production of precision-machined wing spars for use on the A320 family of aircraft. Wing spars
are large, machined components that provide support and strength to the wing structure. Magellan will expand its industry-
leading long bed machining capability at the Wrexham facility to ensure continued delivery of quality products that meet the
expectations of the customer.
On May 7, 2024, Magellan announced that it would provide Black Brant vehicles and hardware to Peraton in support of the
NASA Sounding Rocket Program. Under the terms of the five-year agreement Magellan will supply NASA’s annual requirements
and could generate revenues up to a maximum of $75 million.
On May 24, 2024, Magellan renewed its normal course issuer bid (“2024 NCIB”) which allows the Corporation to purchase for
cancellation up to 2,857,469 of its common shares during the 12-month period commencing May 28, 2024 and ending May
27, 2025 through facilities of the Toronto Stock Exchange (“TSX”) or other alternative Canadian trading systems.
On July 25, 2024, Magellan announced the signing of a Memorandum of Understanding (“MOU”) with Aequs Private Limited
(“Aequs”) to explore the development of a business plan for a jointly owned engine maintenance, repair and overhaul (“MRO”)
business in the Aequs Special Economic Zone, at Belagavi in Karnataka, India. Under the terms of this MOU, Magellan and
Aequs will work together to evaluate the market for business, commercial and military aircraft engine MRO services, to develop
a comprehensive business plan that expands our existing partnership into the MRO sector through this exciting new project.
On August 12, 2024, Magellan announced the signing of significant long-term agreements with Pratt & Whitney, an RTX
business. These important contracts renew existing agreements and cover the supply of complex castings used on a number
of legacy and new engine programs. Magellan’s Haley, Ontario facility and its Glendale, Arizona facility will produce the
castings.
On October 10, 2024 Magellan, along with the University of Manitoba (“UM”), the Canadian Department of National Defence’s
science and technology organization, Defence Research and Development Canada (“DRDC”), and the United Kingdom’s
Defence Science and Technology Laboratory (“DSTL”) announced a new space domain awareness microsatellite. The Little
MAGELLAN 2024 ANNUAL REPORT
MANAGEMENT’S DISCUSSION AND ANALYSIS
December 31, 2024
4
Innovator in Space Situational Awareness (“LISSA”) satellite is a $0.9 million contract option with DRDC to add a companion
nanosatellite to the Redwing mission being built by Magellan. LISSA will be integrated with the Redwing satellite and will be
deployed from Redwing sometime after launch, once the two spacecraft have achieved an orbit at the designated altitude.
Labour Matters
The Corporation employs 3,723 employees; of these, approximately 1,358 are unionized and are covered by collective
bargaining agreements. 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
The Corporation has a multi-currency global operating credit facility provided by a syndicate of lenders to Magellan for a
maximum aggregate amount of $75 million (the “2023 Credit Facility”). The 2023 Credit Facility also includes a $75 million
uncommitted accordion provision, which provides Magellan with the option to increase the maximum aggregate amount of the
credit to $150 million. The 2023 Credit Facility expires on June 30, 2025.
2. OUTLOOK
The outlook for Magellan’s business in 2025
Commercial Aerospace Market
The International Air Transport Association (“IATA”) reported that industry-wide travel had increased by 8.6% year-on-year
(“YoY”) by December 2024, concluding a record-breaking year. Domestic traffic grew by 5.5% YoY, with China and India leading
the growth at 12.3% and 6.0% YoY respectively. International travel grew by 10.6% YoY by December 2024 with Asia Pacific and
European carriers contributing to most of the net increase in traffic. IATA stated that “looking to 2025, there is every indication
that demand for travel will continue to grow, albeit at a moderated pace of 8.0% that is more aligned with historical averages.”
During 2024, the aerospace manufacturing industry continued to tackle persistent challenges, as supply chain delays, labor
shortages, labor disruptions and market interruptions affected the industry’s ability to fully capitalize on the pent-up demand.
Encouragingly, by the end of the year, there were signs that things were beginning to stabilize, especially as engine deliveries
were improving and Boeing restarted production.
Boeing and Airbus both closed 2024 with record order backlogs. Airbus closed with a backlog of 8,658 aircraft after securing
gross orders for 878 aircraft, while Boeing closed with a backlog of 6,245 aircraft after securing orders for 569 aircraft.
Boeing’s order backlog was bolstered significantly in December, after receiving a major order from Pegasus Airlines for up
to 200 of their 737-10 MAX aircraft, consisting of 100 firm orders plus 100 order options. In that same month, Boeing began
staging the restart of aircraft production following the end of the machinists strike in November. Boeing issued a revised
production schedule, which indicated that the 737-production rate would reach 38 aircraft per month by May 2025, followed
by an increase to 57 aircraft per month by 2027. Increases beyond 38 aircraft per month remains subject to FAA directives.
Build rate for the 777 is at 3 aircraft per month with flight-testing of the new 777-9 model back under way. The 787 build rate
returned to 5 aircraft per month from a temporary reduction to 3 aircraft per month in 2024 and the 767 is running at 3 aircraft
per month. Boeing delivered 348 aircraft in 2024 which was a reduction from their 2023 deliveries of 528 aircraft.
Airbus delivered 766 aircraft in 2024 which was down from their original target of 800 aircraft, however still higher than 2023
deliveries of 735 aircraft. Their A320 single aisle production rate did not reach 61 aircraft per month as planned, however
forecasts suggest it will be at 57 to 60 aircraft per month within the first half of 2025 and then 68 aircraft per month by year-
end. Build rate for the A220 is at 8 aircraft per month, and is expected to increase to 14 aircraft per month by 2026. The
A330 build rate is at 4 aircraft per month while the A350 build rate is at 6 aircraft per month.
MAGELLAN 2024 ANNUAL REPORT
MANAGEMENT’S DISCUSSION AND ANALYSIS
December 31, 2024
5
Defence Aerospace Market
In the defence market, the outlook remains unchanged with a strong demand continuing to provide manufacturers with secure
order books for the foreseeable future. Rising geopolitical tensions have brought considerable attention to defence readiness
and has therefore prompted countries to increase their defence expenditures. European defence spending continues on a steep
incline, particularly as NATO appears to be concluding that the 2% of GDP target for defence spending is likely not sufficient
considering the current environment. In all, the projected revenues associated with global defence aircraft production is forecast
to increase by over 50% over the period from 2023 to 2032 according to the AeroDynamic Advisory group. The group reported
that fighters and rotorcraft make up the majority of global military output, however trainers and bombers have the fastest year
over year growth rates. Specifically the trainer/light attack segment is projected to grow at an 11% CAGR from 2024 to 2032. The
fighter market continues to be especially strong as aging fleets and aircraft utilization drive growth while the outlook for legacy
aircraft remains strong in the short term.
Lockheed’s F-35 Lightning II fighter aircraft itself represents 40% of total fighter production and deliveries. The global fleet of
F-35 Lightning II fighters now exceeds 1,100 aircraft, as order bookings continue for the industry’s largest defence program. In
November, Romania joined the F-35 Lightning II program, by signing a Letter of Offer and Acceptance for 32 fighters. Also in
December 2024, the Pentagon and Lockheed agreed in principle upon a price for the next 145 F-35 fighters to be completed by
June 2027. In 2024, Lockheed delivered 110 fighters to the U.S. and its partners.
As global military forces advance technologically with new fighter aircraft, there is a rise in demand for skilled and trained pilots,
leading to an overall increase in the demand for advanced training equipment and aircraft to train on. Leading platforms in this
segment are Boeing/Saab’s T-7A Red Hawk and Korean Aerospace Industries’ T-50 Golden Eagle with both aircraft utilizing GE
F404 engines.
Market Outlook Conclusion
The global need for defense fleet modernization continues to fuel strong demand for new aircraft. Growth in this sector is expected
to remain strong as nations prioritize defense readiness and fleet upgrades in their annual budgets. In the commercial market,
Boeing and Airbus reported record order backlogs in 2024, driven by increasing demand for domestic and international commercial
passenger travel. Although having been reforecast several times, peak single aisle aircraft build rates are still projected to reach
unprecedented levels, possibly exceeding 130 aircraft per month combined between Boeing and Airbus. There is cautious
optimism that the industry may be finally stabilizing, paving the way for an expected stronger year in 2025—contingent, of course,
on potential new challenges, such as U.S. trade tariffs.
3. SELECTED ANNUAL INFORMATION
A summary of selected annual financial information for 2024, 2023 and 2022
Expressed in millions of dollars, except per share information Exp
2024
2023
2022
Revenues
942.4
879.6
764.6
Net income (loss) for the year
35.5
9.2
(21.7)
Net income (loss) per common share—Basic and Diluted
0.62
0.16
(0.38)
EBITDA1
96.7
71.2
31.6
EBITDA1 per common share—Basic and Diluted
1.69
1.24
0.55
Adjusted EBITDA1
96.7
73.0
35.5
Adjusted EBITDA1 per common share—Basic and Diluted
1.69
1.27
0.62
Total assets
1,146.3
1,032.3
1,010.9
Total non–current liabilities
105.7
92.0
97.6
1EBITDA 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.
MAGELLAN 2024 ANNUAL REPORT
MANAGEMENT’S DISCUSSION AND ANALYSIS
December 31, 2024
6
For 2024, aerospace activity had recovered but supply chain shortages and inflationary pressures which began
in 2021 continued to have an impact on the Corporation’s results albeit less so than 2023 as impacts began to
stabilize. Revenues for the year ended December 31, 2024, increased from both 2023 and 2022 levels. The increase
in revenues from 2023 was primarily attributable to pricing increases, increased volumes in single aisle, wide body
and casting products and favorable foreign exchange impacts. Net income increased in 2024 from 2023 mainly due
to higher gross profit attributable to volume and price increases and lower other expenses offset in part by higher
material and manufacturing costs.
During 2024 and 2023, the Corporation paid dividends on common shares amounting to $5.7 million in each year.
4. RESULTS OF OPERATIONS
A discussion of Magellan’s operating results for 2024 and 2023
Consolidated revenues for the year ended December 31, 2024 were $942.4 million, a 7.1% increase from the $879.6 million
achieved in 2023. Gross profit and net income were $107.9 million and $35.5 million for the year ended December 31, 2024,
respectively, in comparison to gross profit of $89.0 million and net income of $9.2 million for the year ended December 31, 2023.
Consolidated Revenues
Twelve–months ended December 31, expressed in thousands of dollars
2024
2023
Change
Canada
357,769
364,275
(1.8)%
United States
262,645
234,234
12.1%
Europe
321,954
281,108
14.5%
Total revenues
942,368
879,617
7.1%
Revenue in Canada decreased 1.8% in 2024 compared to the prior year mainly due to lower casting product revenues as a
result of labour disruptions.
Revenue in the United States in 2024 was 12.1% higher than 2023 mainly due to higher casting product revenues, increased
aircraft engine shaft revenues and favourable foreign exchange impacts resulting from the strengthening of the United States
dollar relative to the Canadian dollar.
European revenue in 2024 increased 14.5% compared to the prior year primarily driven by higher revenues for single aisle
and wide body aircraft parts and net favourable foreign exchange impact resulting from the strengthening of the British Pound
relative to the Canadian dollar.
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 2023 remained constant in 2024, consolidated
revenues for 2024 would have been lower by 1.3%.
Gross Profit
Twelve–months ended December 31, expressed in thousands of dollars
2024
2023
Change
Gross profit
107,889
88,991
21.2%
Percentage of revenue
11.4%
10.1%
Gross profit was $107.9 million in 2024, $18.9 million higher than the $89.0 million of gross profit in 2023. Gross profit as a
percentage of revenues of 11.4% for 2024 increased from the 10.1% recorded in 2023. The increase in profitability is mainly
the result of volume increases, contract rehabilitations on certain programs and favourable product mix, offset in part by price
increases on purchased materials and supplies.
MAGELLAN 2024 ANNUAL REPORT
MANAGEMENT’S DISCUSSION AND ANALYSIS
December 31, 2024
7
Administrative and General Expenses
Twelve–months ended December 31, expressed in thousands of dollars
2024
2023
Change
Administrative and general expenses
56,935
57,296
(0.1)%
Percentage of revenue
6.0%
6.5%
Administrative and general expenses as a percentage of revenue were 6.0% in 2024 as compared to 6.5% in 2023. Administrative
and general expenses of $56.9 million in 2024 were $0.4 million or 0.1% lower than $57.3 million in the prior year due to lower
salary and benefit costs.
Restructuring
Twelve–months ended December 31, expressed in thousands of dollars
2024
2023
Workforce reduction
−
458
Closure costs
−
1,280
Restructuring
−
1,738
During 2023, the Corporation incurred $1.2 million of restructuring costs related to the closure of its Bournemouth manufacturing
facilities in the United Kingdom in implementing its previously announced restructuring plan to reorganize its European operations.
An additional $0.5 million was incurred in 2023 for other workforce reduction and restructuring efforts.
Other
Twelve–months ended December 31, expressed in thousands of dollars
2024
2023
Foreign exchange (gain) loss
(2,682)
4,865
Loss on disposal of property, plant and equipment
218
17
Gain on disposal of investment properties
−
(20)
(Gain) loss on pension settlement
(203)
433
Other
1,655
39
Other
(1,012)
5,334
Included in other is a foreign exchange gain of $2.7 million in 2024 compared to a loss of $4.9 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.
Other also includes pension settlement gains of $0.2 million [2023 – loss of $0.4 million] relating to the settlement of various pension
obligations in conjunction with the purchase of group annuity contracts related to the Corporation’s defined benefit pension plans.
Interest Expense
Twelve–months ended December 31, expressed in thousands of dollars
2024
2023
Interest on bank indebtedness and long-term debt
1,541
1,237
Accretion charge on long-term debt and borrowings
770
843
Accretion charge for lease liabilities
1,580
1,378
Discount on sale of trade receivables
289
231
Interest expense
4,180
3,689
Total interest costs of $4.2 million for 2024 increased by $0.5 million from $3.7 million in 2023 primarily due to higher interest
charges on bank indebtedness and long-term debt from higher interest rates on higher principal amounts borrowed and
higher lease accretion charges.
MAGELLAN 2024 ANNUAL REPORT
MANAGEMENT’S DISCUSSION AND ANALYSIS
December 31, 2024
8
Income Taxes
Twelve–months ended December 31, expressed in thousands of dollars
2024
2023
Current income tax expense
16,665
11,974
Deferred income tax recovery
(4,365)
(287)
Income tax expense
12,300
11,687
Effective tax rate
25.7%
55.8%
The Corporation recorded an income tax expense of $12.3 million in 2024 on pre-tax income of $47.8 million, representing
an effective tax rate of 25.7%, compared to an income tax expense of $11.7 million on pre-tax income of $20.9 million,
representing an effective tax rate of 55.8% in 2023.
During 2024 and 2023, the Corporation recognized investment tax credits totaling $1.1 million and $1.9 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
the change 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
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
2024
2023
Net income
35,486
9,247
Add back:
Interest
4,180
3,689
Taxes
12,300
11,687
Depreciation and amortization
44,717
46,622
EBITDA
96,683
71,245
Add back:
Restructuring
−
1,738
Adjusted EBITDA
96,683
72,983
Adjusted EBITDA increased $23.7 million or 32.5% to $96.7 million for the year ended 2024, compared to $73.0 million in
2023 mainly as a result of the gross margin improvements and reduced other expenses.
MAGELLAN 2024 ANNUAL REPORT
MANAGEMENT’S DISCUSSION AND ANALYSIS
December 31, 2024
9
6. SELECTED QUARTERLY FINANCIAL INFORMATION
A summary view of Magellan’s quarterly financial performance
Expressed in millions of dollars except per share information
X
2024 x
X
X
2023
X
Mar 31
Jun 30
Sep 30
Dec 31
Mar 31
Jun 30
Sep 30
Dec 31
Revenues
235.2
242.9
223.5
240.7
223.4
219.7
213.0
223.5
Income before taxes
9.2
9.9
9.3
19.4
5.7
6.1
4.7
4.4
Net income (loss)
6.3
7.5
5.8
15.9
3.9
1.9
3.7
(0.3)
Net income (loss) per common share
Basic and Diluted
0.11
0.13
0.10
0.28
0.07
0.03
0.06
(0.00)
EBITDA1
21.7
21.9
21.5
31.6
18.3
19.3
17.7
15.9
Adjusted EBITDA1
21.7
21.9
21.5
31.6
18.6
19.5
18.5
16.4
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 1.3990 in the fourth quarter of 2024 and a low of 1.3412 in the third quarter of 2023. The
average quarterly exchange rate of the British pound relative to the Canadian dollar reached a high of 1.7922 in the fourth quarter
of 2024 and hit a low of 1.6429 in the first quarter of 2023. The average quarterly exchange rate of the British pound relative to
the United States dollar reached a high of 1.3011 in the third quarter of 2024 and hit a low of 1.2154 in the first quarter of 2023.
Had exchange rates remained at levels experienced in 2023, reported revenues in 2024 would have been lower in the second,
third and fourth quarters of 2024 by $2.1 million, $2.8 million and $7.9 million, respectively, and there would have been a nominal
impact on the first quarter of 2024.
The Corporation’s results in 2023 continued to be impacted by supply chain disruptions for material supplies and inflation in
materials, supplies, utilities and labour. These impacts, which continued into 2024, have stabilized and are having a smaller
impact. Movements in foreign exchange rates in the fourth quarter of 2024, contract negotiations and volume increases have
positively impacted net income in the quarter.
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 2024, $99.3 million of cash was provided by operations, $35.1 million was used in investing activities and $17.6 million was
used in financing activities.
MAGELLAN 2024 ANNUAL REPORT
MANAGEMENT’S DISCUSSION AND ANALYSIS
December 31, 2024
10
Cash Flow from Operating Activities
Twelve–months ended December 31, expressed in thousands of dollars
2024
2023
Decrease (increase) in account receivables
8,141
(41,962)
Increase in contract assets
(10,204)
(4,120)
Increase in inventories
(12,753)
(32,020)
Increase in prepaid expenses and other
(737)
(382)
(Decrease) increase in accounts payable, accrued liabilities and provisions
(11,048)
9,502
Increase (decrease) in contract liabilities
46,097
(8,242)
Net change in non-cash working capital items
19,496
(77,224)
Net cash provided by (used in) operating activities
99,287
(17,300)
The Corporation provided $99.3 million of cash in 2024 from operating activities, compared to $17.3 million used in the prior
year. Changes in non-cash working capital items provided cash of $19.5 million in 2024 as compared to $77.2 million used in
the prior year. The favourable movement of non-cash working capital balances was largely attributable to decreases in accounts
receivable from timing of customer payments, lower increases in inventories due to timing of production and shipment, and
increases in contract liabilities due to timing of collection of funds offset in part by decreases in accounts payable, accrued
liabilities and provisions primarily driven by timing of supplier payments.
Cash Flow from Investing Activities
Twelve–months ended December 31, expressed in thousands of dollars
2024
2023
Purchase of property, plant and equipment
(36,096)
(19,166)
Proceeds from disposal of property, plant and equipment
47
212
Proceeds from disposal of investment properties
−
354
Decrease (increase) in intangibles and other assets
948
(5,094)
Net cash used in investing activities
(35,101)
(23,694)
Investing activities for 2024 used $35.1 million of cash compared to $23.7 million in the prior year, an increase of $11.4 million.
The increase in cash usage was primarily due to higher levels of investment in property, plant and equipment offset largely by
decreases in intangible asset spend and decreases 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
2024
2023
(Decrease) increase in bank indebtedness
(4,372)
22,674
Decrease in long-term debt
(720)
(2,136)
Lease liability payments
(6,076)
(5,637)
Increase in borrowings subject to specific conditions, net
9
691
Decrease in long-term liabilities and provisions
(53)
(16)
Common share repurchases
(689)
(1,622)
Common share dividends
(5,715)
(5,734)
Net cash (used in) provided by financing activities
(17,616)
8,220
Financing activities used $17.6 million of cash in 2024 compared to providing $8.2 million in 2023. The increase in cash usage
was primarily due to decreases in bank indebtedness.
Contractual Obligations
As at December 31, 2024, expressed in thousands of dollars
Less than
1 year
1–3 Years
4–5 Years
After 5
Years
Total
Bank indebtedness
19,857
–
–
–
19,857
Long-term debt
2,863
–
–
–
2,863
Lease liabilities
6,488
13,518
12,244
13,248
45,498
Borrowings subject to specific conditions
1,391
3,022
3,598
25,660
33,671
Other long-term liabilities
22
7,528
176
3,423
11,149
Total Contractual Obligations
30,621
24,068
16,018
42,331
113,038
MAGELLAN 2024 ANNUAL REPORT
MANAGEMENT’S DISCUSSION AND ANALYSIS
December 31, 2024
11
MANAGEMENT’S DISCUSSION AND ANALYSIS
December 31, 202
On June 14, 2023, the Corporation extended its 2023 Credit Facility with a syndicate of lenders for an additional two-year period
expiring on June 30, 2025. The 2023 Credit Facility provides for a multi-currency global operating credit facility to be available
to Magellan in a maximum aggregate amount of $75 million. The 2023 Credit Facility 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 2023 Credit Facility are subject to mutual consent of the syndicate of lenders and the Corporation.
As at December 31, 2024, the Corporation had made contractual commitments to purchase $30.9 million of capital assets
[2023 - $8.4 million]. In addition, the Corporation had purchase commitments, largely for materials required for the normal course
of operations, of $427.6 million as at December 31, 2024 [2023 - $379.8 million]. 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 7, 2025, 57,138,580 common shares were outstanding and no preference
shares were outstanding. More information on the Corporation’s share capital is provided in note 21 of the Corporation’s
consolidated financial statements for the year ended December 31, 2024.
For each year ending December 31, 2024 and 2023, the Corporation paid dividends on its common shares of $5.7 million.
Quarterly dividend payments were $0.025 per share in both 2024 and 2023.
In the first quarter of 2025, the Corporation declared dividends of $0.025 per common share payable on March 31, 2025, to
shareholders of record at the close of business on March 19, 2025.
Normal Course Issuer Bid
On May 25, 2022, the Corporation announced that the TSX had accepted the Corporation’s notice of intention to make a normal
course issuer bid (the “2022 NCIB”). The 2022 NCIB allowed for the purchase of up to 2,886,455 common shares, over a
twelve-month period commencing May 27, 2022 and ending May 26, 2023. On May 25, 2023, the Corporation’s second NCIB
application was approved (the “2023 NCIB”). The 2023 NCIB allows for the purchase of up to 2,868,106 common shares over
a twelve-month period commencing May 27, 2023 and ending May 26, 2024. On May 24, 2024, the Corporation’s third NCIB
application was approved (the “2024 NCIB”). The 2024 NCIB allows the Corporation to purchase up to 2,857,469 common
shares over a twelve-month period commencing May 28, 2024 and ending May 27, 2025.
During the year ended December 31, 2024, 92,217 shares were purchased for cancellation for $689 at a volume weighted
average price paid of $7.47 per common share. During the year ended December 31, 2023, 214,937 shares were purchased
for cancellation for $1,622 at a volume weighted average price paid of $7.55 per common share.
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. The Corporation has applied IFRS 9 on a prospective basis for hedge accounting.
The Corporation’s qualifying hedging relationships as at December 31, 2024 qualified for hedge accounting in accordance
with IFRS 9 and were therefore regarded as continuing hedging relationships. As the critical terms of the hedging instruments
match those of their corresponding hedged items, all hedging relationships continue to be effective under IFRS 9’s effectiveness
MAGELLAN 2024 ANNUAL REPORT
MANAGEMENT’S DISCUSSION AND ANALYSIS
December 31, 2024
12
assessment requirements. As at December 31, 2024, the Corporation entered into forward foreign exchange contracts to
purchase US dollars of $4.0 million and British pounds of £23.5 million over a period of one month commencing December 2024
at exchange rates of $1.4360 and $1.7972 Canadian dollars, respectively. 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, and British pounds.
The Corporation conversely entered into foreign currency collar contracts as follows:
Maturity
Notional
amount
Floor
Ceiling
Carrying
value
Line item in the statement of financial position
June 2025
US$10.8 million
1.2500
1.3245
$1.2 million
Accounts payable, accrued liabilities and provisions
June 2025
US$10.8 million
1.2500
1.3300
$1.1 million
Accounts payable, accrued liabilities and provisions
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 [2023 – $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
Magellan operates in a dynamic and rapidly changing environment and industry, which exposes the Corporation to numerous
risk factors. The Corporation’s senior management identifies key risks and has processes in place to help monitor, manage,
and mitigate these risks. Additional information about the Corporation, including risks and uncertainties about Magellan’s
business, is provided in the Corporation’s Annual Information Form dated March 7, 2025 which is available on SEDAR+ at
www.sedarplus.ca.
11. SIGNIFICANT ACCOUNTING ESTIMATES
A description of accounting estimates that are significant to determining Magellan’s financial results
The preparation of consolidated financial statements requires management to make significant 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. By their nature, estimates are subject
to measurement uncertainty and changes in such estimates in future years could be material. The Corporation reviews its
estimates and assumptions on an ongoing basis, uses the most current information available and exercises careful judgement
in making these estimates and assumptions.
The significant estimates and judgements utilized in preparing the Corporation’s consolidated financial statements impact 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.
MAGELLAN 2024 ANNUAL REPORT
MANAGEMENT’S DISCUSSION AND ANALYSIS
December 31, 2024
13
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 23 to the
consolidated financial statements.
Impairment of goodwill and non-financial assets
In determining whether a long-lived asset is impaired, the Company has to exercise judgement and make estimates in assessing
(1) whether an event or indicator has occurred that may affect the asset value; (2) whether the carrying value of an asset can
be supported by the recoverable amount (which in the case of value-in-use is the net present value of future cash flows of
the continued use of the asset); and (3) the appropriate key assumptions to be applied in estimating the recoverable amount
including cash flow projections and an appropriate discount rate.
The recoverable amounts of goodwill, intangible assets and property, plant and equipment are 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 recoverable amount, 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 recoverable amount of the assets being evaluated and 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.
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.
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.
MAGELLAN 2024 ANNUAL REPORT
MANAGEMENT’S DISCUSSION AND ANALYSIS
December 31, 2024
14
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.
12. CHANGES IN ACCOUNTING POLICIES
A description of accounting standards adopted in 2024
The following amendments to accounting standards were adopted by the Corporation in the current year. The implementation
of these amendments to the standards did not have a significant impact on the Corporation’s consolidated financial statements.
Amendments to IAS 1—Presentation of Financial Statements, clarifying the requirements for classifying liabilities as current or
non-current. The amendments help to determine whether, in the consolidated statements of financial position, debt and other
liabilities with an uncertain settlement date should be classified as current (due or potentially due to be settled within one year)
or non-current. These amendments also clarify that only covenants with which an entity is obliged to comply with on or before
the reporting date will affect a liability’s classification as current or non-current. Further, disclosure is required for any information
that enables users of financial statements to comprehend the possibility that non-current liabilities with covenants may become
payable within twelve months.
Amendments to IFRS 16—Lease Liability in a Sale and Leaseback, specifying the requirements that a seller-lessee uses in
measuring the lease liability arising in a sale and leaseback transaction, to ensure the seller-lessee does not recognize any
amount of the gain or loss that relates to the right of use it retains.
Amendments to IAS 7 and IFRS 7—Supplier Finance Arrangements, requiring specific disclosure to be presented to enhance
current disclosure requirements, which are intended to assist users of the financial statements in understanding the effects of
supplier finance arrangements on an entity’s liabilities, cash flows and exposure to liquidity risk.
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, 2024 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
incorrect under varying conditions and circumstances; (ii) the impact of isolated errors; and (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, 2024, 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
MAGELLAN 2024 ANNUAL REPORT
MANAGEMENT’S DISCUSSION AND ANALYSIS
December 31, 2024
15
the Corporation’s design and operating disclosure controls and procedures and internal control over financial reporting were
effective as of December 31, 2024.
No changes were made in the Corporation’s internal control over financial reporting during the year ended December 31, 2024,
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.sedarplus.ca.
MAGELLAN 2024 ANNUAL REPORT
16
MANAGEMENT’S REPORT
December 31, 2024
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 7, 2025
Elena M. Milantoni
Chief Financial Officer
17
MAGELLAN 2024 ANNUAL REPORT
INDEPENDENT AUDITORS’ REPORT
December 31, 2024
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, 2024 and 2023, and the consolidated statements of
comprehensive income, changes in equity and cash flows for the years then ended, and notes to the consolidated financial statements,
including material accounting policy information.
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, 2024 and 2023, and its consolidated financial performance and its consolidated cash flows
for the years then ended in accordance with International Financial Reporting Standards and International Accounting Standards as
issued by the International Accounting Standards Board (IASB) and Interpretations (collectively IFRS Accounting Standards).
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 other 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 judgment, were of most significance in our audit of the consolidated financial
statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements
as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Impairment Assessment
Description of the key audit matter
The Group has long-lived assets which includes property, plant and equipment, right-of-use assets and definite-life intangible assets
totaling $440 million which are subject to impairment testing whenever events or changes in circumstances indicate their carrying
amounts may not be recoverable. The Group also has goodwill and indefinite-life intangible assets of $33 million that are required to
be tested for impairment on an annual basis or more frequently if events or changes in circumstances indicate their carrying amounts
may not be recoverable. Refer to Notes 8, 9 and 11 to the consolidated financial statements for details.
In carrying out the impairment assessments, significant judgements are required to estimate the recoverable amounts, being the
higher of the fair value less costs of disposal and value in use. The estimation of recoverable amounts involves complex and subjective
estimates based on management’s judgement of key variables and market conditions. Significant assumptions included forecasted
cash flows and discount rates.
INDEPENDENT AUDITORS’ REPORT
December 31, 2024
18
MAGELLAN 2024 ANNUAL REPORT
INDEPENDENT AUDITORS’ REPORT
How the key audit matter was addressed in the audit
Our audit procedures included, but were not limited to, the following:
— Evaluating comparable market transactions that support the fair value less costs of disposal of the long-lived assets.
— Assessing discount rates used by management against discount rate ranges independently developed from publicly available
data sets, along with the consideration of comparable company metrics.
— Assessing management’s assumptions about revenue growth rate forecasts, expected margin realization rates and terminal
growth rates in light of historical results and projected future economic and market conditions.
— Challenging management’s assumptions and performing additional sensitivity and stress tests for cash generating units where
the impairment assessments were more sensitive to changes in estimated inputs.
— Reviewing the disclosures on the assumptions and the outcomes of the impairment testing and the sensitivity analysis presented
in the consolidated financial statements.
— Involving our valuation specialists in review of the modelling approach used by management, testing significant assumptions
such as discount and growth rates, and assessing the underlying data used by the Group in its models for completeness.
Recognition of revenues on over time contracts
Description of the key audit matter
The Group has approximately $367 million of revenue recognized over time for the year ended December 31, 2024 as disclosed in
Note 25 to the consolidated financial statements. The Group uses the input method to recognize revenue over time, wherein revenue
is recognized based on actual costs incurred over the total estimated costs to complete the contracts. The Group estimates the level
of total expected costs for each contract, which includes significant judgements for contracts open for more than one year that can
have a material impact on the revenue recognized in a reporting period as contracts span multiple accounting periods. For long-term
contracts open at year-end, the Group makes subjective judgements related to estimated future labour, materials, and overhead costs.
These judgements depend on the complexity and status of the related contract as of the period-end date.
How the key audit matter was addressed in the audit
Our audit approach involved evaluating the revenue recognized over time and challenging judgements and estimates
made by the Group in relation to the estimated costs to be incurred. Our audit procedures included, but were not limited
to, the following:
— Evaluating contractual arrangements and obtaining an understanding of the projects’ performance throughout the year and
at year-end through inquiries with project managers from the contract project team.
— Assessing management’s assumptions on estimated costs to complete, by comparing the key inputs in the cost estimation
forecasts to actual results.
— Evaluating the appropriateness of accumulated costs related to claims and unapproved change orders that can result in
additional charges or changes to contract revenues.
— Challenging management’s assumptions and performing additional sensitivity and stress tests for judgements and
estimates made.
Other Information
Management is responsible for the other information. The other information comprises:
— The information, other than the consolidated financial statements and our auditor’s report thereon, included in the
2024 Annual Report, and
— The information included in the Management’s Discussion and Analysis.
Our opinion on the consolidated financial statements does not cover the other information and we do not and will 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 identified
above 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 the Management’s Discussion and Analysis and 2024 Annual Report prior to the date of this auditor’s report. If,
based on the work we have performed on this other information, 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.
INDEPENDENT AUDITORS’ REPORT
December 31, 2024
19
MAGELLAN 2024 ANNUAL REPORT
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 Accounting Standards, 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
economic 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
judgment 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 appropriate 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.
— 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.
20
MAGELLAN 2024 ANNUAL REPORT
INDEPENDENT AUDITORS’ REPORT
December 31, 2024
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 significance
in the audit of the consolidated 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 Daniel Hlavacek.
BDO Canada LLP
Chartered Professional Accountants, Licensed Public Accountants
Toronto, Canada
March 7, 2025
21
MAGELLAN 2024 ANNUAL REPORT
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
December 31
December 31
Expressed in thousands of Canadian dollars
Notes
2024
2023
Current assets
Cash
4
56,437
8,709
Trade and other receivables
5
208,430
211,364
Contract assets
6
82,416
69,052
Inventories
7
284,082
258,448
Prepaid expenses and other
x
11,733
10,441
x
x
643,098
558,014
Non-current assets
Property, plant and equipment
8
377,563
359,722
Right-of-use assets
9
35,817
26,857
Investment properties
10
6,839
6,632
Intangible assets
11
36,248
37,402
Goodwill
11
23,948
22,159
Other assets
12, 24
14,102
13,126
Deferred tax assets
20
8,639
8,376
x
503,156
474,274
Total assets
1,146,254
1,032,288
Current liabilities
Bank indebtedness
13
19,857
22,749
Accounts payable, accrued liabilities and provisions
14, 18
139,921
142,713
Contract liabilities
6
67,220
27,960
Debt due within one year
15,16, 17
10,742
9,439
Debt due within one year
237,740
202,861
Non-current liabilities
Lease liabilities
16
31,613
24,314
Borrowings subject to specific conditions
17, 23
24,213
24,166
Other long-term liabilities and provisions
18
13,840
6,089
Deferred tax liabilities
20
36,031
37,441
i
20
105,697
92,010
Equity
Share capital
21
249,762
250,147
Contributed surplus
2,044
2,044
Other paid in capital
13,565
13,565
Retained earnings
480,638
446,952
Accumulated other comprehensive income
31
53,431
21,332
Equity attributable to equity holders of the Corporation
x
799,440
734,040
Non-controlling interest
x
3,377
3,377
Total liabilities and equity
x
1,146,254
1,032,288
See accompanying notes to the consolidated financial statements
22
MAGELLAN 2024 ANNUAL REPORT
Expressed in thousands of Canadian dollars, except per share amounts
Notes
2024
2023
Revenues
25
942,368
879,617
Cost of revenues
26
834,479
790,626
Gross profit
107,889
88,991
Administrative and general expenses
27
56,935
57,296
Restructuring
28
–
1,738
Other
29
(1,012)
5,334
Income before interest and income taxes
51,966
24,623
Interest expense
30
4,180
3,689
Income before income taxes
47,786
20,934
Income tax expense (recovery):
Current
20
16,665
11,974
Deferred
20
(4,365)
(287)
XX
12,300
11,687
Net income
35,486
9,247
Other comprehensive income (loss):
Other comprehensive income (loss) that may be reclassified to
profit and loss in subsequent periods:
Foreign currency translation
31
32,678
420
Unrealized gain (loss) on foreign currency contract hedges, net of tax
20, 23
(579)
2,251
Items not to be reclassified to profit and loss in
subsequent periods:
Actuarial income on defined benefit pension plans, net of tax
20, 24
4,219
1,125
Comprehensive income
71,804
13,043
Net income per share
Basic
21
0.62
0.16
Diluted
21
0.62
0.16
See accompanying notes to the consolidated financial statements
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
Years ended December 31
23
MAGELLAN 2024 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
Totalx
Non-
controlling
interest
Total i
equity i
December 31, 2022
251,104
2,044
13,565
442,979
18,661
728,353
3,377
731,730
Net income
–
–
–
9,247
–
9,247
–
9,247
Other comprehensive income
–
–
–
1,125
2,671
3,796
–
3,796
Common share repurchases
(957)
–
–
(665)
–
(1,622)
–
(1,622)
Common share dividends
–
–
–
(5,734)
–
(5,734)
–
(5,734)
December 31, 2023
250,147
2,044
13,565
446,952
21,332
734,040
3,377
737,417
Net income
–
–
–
35,486
–
35,486
–
35,486
Other comprehensive income
–
–
–
4,219
32,099
36,318
–
36,318
Common share repurchases
(385)
–
–
(304)
–
(689)
–
(689)
Common share dividends
–
–
–
(5,715)
–
(5,715)
–
(5,715)
December 31, 2024
249,762
2,044
13,565
480,638
53,431
799,440
3,377
802,817
Attributable to equity holders of the Corporation
See accompanying notes to the consolidated financial statements
24
MAGELLAN 2024 ANNUAL REPORT
CONSOLIDATED STATEMENTS OF CASH FLOWS
Expressed in thousands of Canadian dollars X
Notes
2024
2023
Cash flow from operating activities
Net income
35,486
9,247
Amortization / depreciation of intangible assets, right-of-use
assets and property, plant and equipment
8, 9,10, 11
44,717
46,622
Impairment of intangibles
11
–
555
Impairment of property, plant and equipment
8
–
600
Loss on disposal of property, plant and equipment
8
218
17
Gain on disposal of investment properties
–
(20)
Increase in defined benefit plans
24
2,255
2,130
Accretion of financial liabilities
30
2,347
2,221
Deferred taxes
20
(4,365)
(1,378)
Income on investments in joint ventures
12
(908)
(363)
Other
41
293
Changes to non-cash working capital
33
19,496
(77,224)
Net cash provided by (used in) operating activities
r
99,287
(17,300)
Cash flow from investing activities
Purchase of property, plant and equipment
8
(36,096)
(19,166)
Proceeds from disposal of property, plant and equipment
8
47
212
Proceeds from disposal of investment properties
–
354
Decrease (increase) in intangible and other assets
r
948
(5,094)
Net cash used in investing activities
r
(35,101)
(23,694)
Cash flow from financing activities
(Decrease) increase in bank indebtedness
13, 19
(4,372)
22,674
Decrease in debt
15, 19
(720)
(2,136)
Lease liability payments
16, 19
(6,076)
(5,637)
Increase in borrowings subject to specific conditions, net
17, 19
9
691
Decrease in long-term liabilities and provisions
18, 19
(53)
(16)
Share repurchases
21
(689)
(1,622)
Common share dividends
21
(5,715)
(5,734)
Net cash (used in) provided by financing activities
20
(17,616)
8,220
Increase (decrease) in cash during the year
46,570
(32,774)
Cash at beginning of the year
8,709
40,940
Effect of exchange rate differences
X
1,158
543
Cash at end of the year
X
56,437
8,709
See accompanying notes to the consolidated financial statements
Years ended December 31
25
MAGELLAN 2024 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unless otherwise stated, all amounts are in thousands of Canadian dollars)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unless otherwise stated, all amounts are in thousands of Canadian dollars)
1.
NATURE OF OPERATIONS AND BASIS OF PRESENTATION
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 (“TSX”). 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,
controlled entity and joint venture, 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.
Basis of Presentation
These consolidated financial statements are prepared in accordance with International Financial Reporting Standards and
International Accounting Standards and Interpretations (collectively IFRS Accounting Standards), as issued by the International
Accounting Standards Board (“IASB”) and were approved by the Board of Directors of the Corporation on March 7, 2025.
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 material 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. The Corporation
also has a 75% interest in an operating subsidiary named Magellan Aerospace (Tumkur) Private Limited. This subsidiary
is fully consolidated and a non-controlling interest is recognized for the 25% interest which is not owned. 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. The
material 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.
26
MAGELLAN 2024 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unless otherwise stated, all amounts are in thousands of Canadian dollars)
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 income (loss) 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 (loss) 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.
27
MAGELLAN 2024 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unless otherwise stated, all amounts are in thousands of Canadian dollars)
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 non-current portion of contract liabilities,
if applicable, is included in other long-term liabilities and provisions in the consolidated statement of financial position.
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 applicable 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 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 income (loss).
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.
28
MAGELLAN 2024 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unless otherwise stated, all amounts are in thousands of Canadian dollars)
Defined contribution plans
Obligations for contributions to defined contribution plans are recognized as an expense in the consolidated statements
of income (loss) 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 income (loss) 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
income (loss).
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 income (loss) 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.
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.
29
MAGELLAN 2024 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unless otherwise stated, all amounts are in thousands of Canadian dollars)
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 income (loss) 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
In Years
Buildings
40
Machinery and equipment
10-20
Tooling
5-7
Leasehold improvements
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 income (loss).
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.
Intangible assets with a finite useful life are stated at cost and amortized on a unit of production basis or straight-line basis
as appropriate. 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
income (loss) 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.
30
MAGELLAN 2024 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unless otherwise stated, all amounts are in thousands of Canadian dollars)
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 is 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 assumed 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 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.
31
MAGELLAN 2024 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unless otherwise stated, all amounts are in thousands of Canadian dollars)
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, contract assets
and liabilities, 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 instruments at fair value
Cash and cash equivalents are classified as financial assets at fair value through profit or loss, derivative instruments
are classified as either financial assets or financial liabilities at fair value through comprehensive income 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.
Where permissible, the Corporation accounts for these financial instruments as hedges, which ensures that counterbalancing
gains and losses are recognized in income in the same period. With hedge accounting, changes in the fair value of the
derivative financial instruments designated as cash flow hedges are recorded in other comprehensive income (loss) until
the variability of cash flows relating to the hedged asset or liability is recognized in income (loss). Hedging instruments are
reviewed on a regular basis to ensure hedges are still effective and that hedge accounting continues to be appropriate.
When the hedge instrument no longer meets the criteria for hedge accounting or derivatives are not designated in a
hedging relationship, they are classified as held-for-trading and changes in fair value are immediately recognized in profit
or loss. 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, contract assets and liabilities, 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
payable 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 income (loss).
32
MAGELLAN 2024 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unless otherwise stated, all amounts are in thousands of Canadian dollars)
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 receivable 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 income (loss).
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 contract are less than the related unavoidable costs of meeting the 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.
Comparative Numbers
Certain classifications of the comparative figures have been changed to conform to those used in the current period.
2.
SIGNIFICANT ESTIMATES AND JUDGEMENTS
The preparation of consolidated financial statements requires management to make significant 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. By their nature,
estimates are subject to measurement uncertainty and changes in such estimates in future years could be material. The
Corporation reviews its estimates and assumptions on an ongoing basis, uses the most current information available and
exercises careful judgement in making these estimates and assumptions.
The significant estimates and judgements utilized in preparing the Corporation’s consolidated financial statements impact
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.
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
23 to the consolidated financial statements.
Impairment of goodwill and non-financial assets
In determining whether a long-lived asset is impaired, the Corporation has to exercise judgement and make estimates in
assessing (1) whether an event or indicator has occurred that may affect the asset value; (2) whether the carrying value of
an asset can be supported by the recoverable amount (which in the case of value-in-use is the net present value of future
cash flows of the continued use of the asset); and (3) the appropriate key assumptions to be applied in estimating the
recoverable amount including cash flow projections and an appropriate discount rate.
33
MAGELLAN 2024 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unless otherwise stated, all amounts are in thousands of Canadian dollars)
The recoverable amounts of goodwill, intangible assets and property, plant and equipment are 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 recoverable amount, 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 recoverable amount of the assets being evaluated and
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.
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.
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.
34
MAGELLAN 2024 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unless otherwise stated, all amounts are in thousands of Canadian dollars)
3.
NEW AND AMENDED INTERNATIONAL FINANCIAL REPORTING STANDARDS
New and Amended International Financial Reporting Standards Adopted in 2024
The following amendments to accounting standards were adopted by the Corporation in the current year. The implementation
of these amendments to the standards did not have a significant impact on the Corporation’s consolidated financial statements.
–
Amendments to IAS 1—Presentation of Financial Statements, clarifying the requirements for classifying liabilities
as current or non-current. The amendments help to determine whether, in the consolidated statements of financial
position, debt and other liabilities with an uncertain settlement date should be classified as current (due or potentially
due to be settled within one year) or non-current. These amendments also clarify that only covenants with which an
entity is obliged to comply with on or before the reporting date will affect a liability’s classification as current or non-
current. Further, disclosure is required for any information that enables users of financial statements to comprehend
the possibility that non-current liabilities with covenants may become payable within twelve months.
–
Amendments to IFRS 16—Lease Liability in a Sale and Leaseback, specifying the requirements that a seller-lessee
uses in measuring the lease liability arising in a sale and leaseback transaction, to ensure the seller-lessee does not
recognize any amount of the gain or loss that relates to the right of use it retains.
–
Amendments to IAS 7 and IFRS 7—Supplier Finance Arrangements, requiring specific disclosure to be presented to
enhance current disclosure requirements, which are intended to assist users of the financial statements in understanding
the effects of supplier finance arrangements on an entity’s liabilities, cash flows and exposure to liquidity risk.
New and Amended International Financial Reporting Standards to be Adopted in 2025 or Later
The following new standard and amendment to existing standard were issued by the IASB. Certain other new standards,
amendments and interpretations to existing standards may have been issued but are not expected to have a material impact
to the Corporation’s consolidated financial statements. The Corporation is in the process of reviewing these amendments
to determine the impact on the consolidated financial statements.
–
IFRS 18, Presentation and Disclosure in Financial Statements replaces IAS 1, Presentation of Financial Statements.
IFRS 18 introduces three sets of new requirements to improve an entity’s reporting of financial performance and
give investors a better basis for analyzing and comparing entities. The new standard is effective for annual reporting
periods beginning on or after January 1, 2027, with earlier application permitted.
–
Amendments to IFRS 9, Financial Instruments and IFRS 7, Financial Instruments: Disclosures, clarifying both the
classification of financial assets linked to environmental, social, and governance features as well as the timing in which
a financial asset or financial liability is derecognized when using electronic payment systems. The new standard is
effective for annual reporting periods beginning on or after January 1, 2026.
4.
CASH AND CASH EQUIVALENTS
X
December 31
2024
December 31
2023
Cash on hand
25,194
3,154
Short-term deposits
31,243
5,555
X
56,437
8,709
Cash and cash equivalents consist of bank balances and short-term deposits held by the Corporation on a short-term
basis with original maturities of three months or less. The carrying amount of these assets approximates their fair value.
35
MAGELLAN 2024 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unless otherwise stated, all amounts are in thousands of Canadian dollars)
5.
TRADE AND OTHER RECEIVABLES
X
December 31
2024
December 31xx
2023xx
Trade receivables
188,292
182,927
Less allowance for doubtful accounts
(411)
(380)
Net trade receivables
187,881
182,547
Other receivables
20,549
28,817
X
208,430
211,364
Aging of trade receivables:
X
Current
Less than
90 days
91-181
days
182-365
days
More than
365 days
Total
December 31, 2023
166,480
13,649
930
1,019
849
182,927
December 31, 2024
173,556
12,445
1,041
454
796
188,292
6.
CONTRACT BALANCES
X
December 31
2024
December 31
2023
Contract assets
82,416
69,052
Contract liabilities
(67,220)
(27,960)
Net contract balances
15,196
41,092
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.
Revenue recognized in the period from:
X
2024
2023
Amounts included in contract liabilities at the beginning of the year
24,558
27,876
7.
INVENTORIES
X
Raw
materials
Work in
progress
Finished
goods
Total
At December 31, 2023
75,725
150,011
32,712
258,448
At December 31, 2024
74,674
173,439
35,969
284,082
The cost of inventories recognized as expense and included in cost of sales for the year ended December 31, 2024 amounted
to $842,015 [2023–$793,878].
During the year ended December 31, 2024, the Corporation recorded an impairment expense related to the write-down
of inventory in the amount of $2,921 [2023–$4,354]. The Corporation also recorded reversals of previous write-downs of
inventory in the amount of $1,056 [2023–$624] due to the sale of inventory previously provided for. The carrying amount
of inventory recorded at net realizable value was $46,638 as at December 31, 2024 [2023–$41,526], with the remaining
inventory recorded at cost.
36
MAGELLAN 2024 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unless otherwise stated, all amounts are in thousands of Canadian dollars)
8.
PROPERTY, PLANT AND EQUIPMENT
X
LandI
Buildings I
Machinery i
and i
equipment i
Toolingi
Total I
Cost
At December 31, 2022
24,462
146,346
717,257
60,954
949,019
Additions
1,911
–
17,466
806
20,183
Transfers to investment properties
(2,762)
(4,254)
–
–
(7,016)
Disposals and other
–
203
(9,307)
14
(9,090)
Foreign currency translation
(172)
(486)
(3,272)
(1,166)
(5,096)
At December 31, 2023
23,439
141,809
722,144
60,608
948,000
Additions
404
10,366
23,851
826
35,447
Disposals and other
–
(430)
(3,470)
(277)
(4,177)
Foreign currency translation
1,017
5,994
37,670
4,294
48,975
At December 31, 2024
24,860
157,739
780,195
65,451
1,028,245
Accumulated depreciation and impairment
At December 31, 2022
–
(69,963)
(440,593)
(54,379)
(564,935)
Depreciation and impairment
–
(4,769)
(31,083)
(1,175)
(37,027)
Transfers to investment properties
–
1,578
–
–
1,578
Disposal and other
–
(3)
7,339
2
7,338
Foreign currency translation
–
555
3,113
1,100
4,768
At December 31, 2023
–
(72,602)
(461,224)
(54,452)
(588,278)
Depreciation
–
(4,184)
(29,480)
(1,142)
(34,806)
Disposal and other
–
242
3,399
–
3,641
Foreign currency translation
–
(2,938)
(24,233)
(4,068)
(31,239)
At December 31, 2024
–
(79,482)
(511,538)
(59,662)
(650,682)
Net book value
At December 31, 2023
23,439
69,207
260,920
6,156
359,722
At December 31, 2024
24,860
78,257
268,657
5,789
377,563
Included in the above are assets under construction in the amount of $22,320 [December 31, 2023–$11,563], which as at
December 31, 2024 are not amortized.
In 2023, the closure and repurposing of the manufacturing facilities at the Corporation’s Bournemouth facility changed the
use of the property to an investment property earning rental income. The property, consisting of land and buildings, was
reclassified from property, plant and equipment to investment properties at its cost less accumulated depreciation net
carrying value of $5,438.
As part of its assessment of indicators of impairment in 2024, the Corporation determined that indicators of impairment
were present at certain CGU’s and impairment assessments were conducted. The recoverable amount for each CGU
was determined as the higher of value-in-use (“VIU”) or fair value less costs to sell (“FVLCS”). No impairment has been
recognized from the Corporation’s testing at the CGU level.
Included in the depreciation and impairment amount for 2023 are impairment charges of $600. The charges relate to
impairment indicators identified for specific programs at one of the Corporation’s facilities. The impairment was measured
using a VIU approach.
37
MAGELLAN 2024 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unless otherwise stated, all amounts are in thousands of Canadian dollars)
9.
RIGHT-OF-USE ASSETS
x
Buildings i
Machinery, i
equipment and i
other i
Total i
At December 31, 2022
30,331
494
30,825
Additions
27
337
364
Depreciation, disposals and other
(3,900)
(277)
(4,177)
Foreign currency translation
(167)
12
(155)
At December 31, 2023
26,291
566
26,857
Additions
11,913
149
12,062
Depreciation, disposals and other
(4,190)
(208)
(4,398)
Foreign currency translation
1,276
20
1,296
At December 31, 2024
35,290
527
35,817
10. INVESTMENT PROPERTIES
x
Cost
Accumulatedi
depreciation,i
disposal,i
and impairmenti
Net
book value
At December 31, 2023
15,264
(8,632)
6,632
At December 31, 2024
15,762
(8,923)
6,839
The Corporation’s investment properties consist of land and buildings. Depreciation expense recognized in relation to the
buildings in 2024 was $172 [2023–$118]. The Corporation recorded rental income from investment properties of $964 in
2024 [2023–$687].
The fair value of the Corporation’s investment properties at December 31, 2024 was $29,257 [December 31, 2023—
$29,360]. 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 2024, the Corporation obtained opinions
from external valuators, with experience in the real estate market, on $29,257 of the total fair values of the Corporation’s
investment properties.
38
MAGELLAN 2024 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unless otherwise stated, all amounts are in thousands of Canadian dollars)
11. INTANGIBLE ASSETS AND GOODWILL
X
Technologyi
rightsi
Developmenti
costsi
Otheri
intangiblesi
Totali
intangiblei
assetsi
Goodwilli
Totali
intangiblei
assets andi
goodwilli
Cost
At December 31, 2022
45,256
130,763
48,609
224,628
33,607
258,235
Additions
–
141
1,562
1,703
–
1,703
Disposals and other
–
(1,178)
–
(1,178)
–
(1,178)
Foreign currency translation
(48)
(104)
358
206
338
544
At December 31, 2023
45,208
129,622
50,529
225,359
33,945
259,304
Additions
–
85
2,833
2,918
–
2,918
Foreign currency translation
174
5,138
2,631
7,943
2,623
10,566
At December 31, 2024
45,382
134,845
55,993
236,220
36,568
272,788
Amortization and impairment
At December 31, 2022
(40,079)
(122,903)
(20,223)
(183,205)
(11,426)
(194,631)
Amortization and impairment
(1,178)
(2,269)
(2,421)
(5,868)
–
(5,868)
Disposals and other
–
1,178
–
1,178
–
1,178
Foreign currency translation
43
137
(242)
(62)
(360)
(422)
At December 31, 2023
(41,214)
(123,857)
(22,886)
(187,957)
(11,786)
(199,743)
Amortization
(984)
(1,570)
(2,832)
(5,386)
–
(5,386)
Foreign currency translation
(159)
(5,090)
(1,380)
(6,629)
(834)
(7,463)
At December 31, 2024
(42,357)
(130,517)
(27,098)
(199,972)
(12,620)
(212,592)
Net book value
At December 31, 2023
3,994
5,765
27,643
37,402
22,159
59,561
At December 31, 2024
3,025
4,328
28,895
36,248
23,948
60,196
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 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.
Included in the amortization and impairment amount for 2023 for development costs is impairment charges of $555. The
charges relate to impairment indicators identified for specific programs at one of the Corporation’s facilities. The impairment
was measured using a VIU approach.
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. Brand intangibles of $9,422 (£5,226) [2023–$8,799 (£5,226)] with indefinite useful lives
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 using a measurement date of October 1st. The Corporation’s goodwill
amount is allocated between two CGU’s in amounts of $10,006 [2023–$9,344] and $13,942 [2023–$12,815] respectively.
The key assumptions used to determine the recoverable amount are discussed below.
39
MAGELLAN 2024 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unless otherwise stated, all amounts are in thousands of Canadian dollars)
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 VIU 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. These projections are inherently uncertain and continually evolving in an unpredictable manner which present
many variables and contingencies for modeling. Discount rates of 11.4% [2023–11.7%] and 10.5% [2023–10.5%] per
annum were 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 rates of 2% [2023–2%] and 3% [2023–3%]
were used in the terminal year given the businesses’ anticipated growth. The Corporation determined that the recoverable
amounts for the two CGUs were higher than the carrying value. If the discount rate for the CGUs increased by 1%, the
recoverable amount for one of the CGUs would be less than the carrying value.
12. INVESTMENTS IN JOINT VENTURES
The Corporation’s joint venture is a private entity that is not listed on any public exchange. All operations are continuing. To
support the activities of the joint venture, the Corporation and the other investor in the joint venture have agreed to make
additional contributions, in proportion to their interests, to make up any losses, if required. In addition, profits of the joint
venture 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 venture as at December 31, 2024 and December 31, 2023.
X
December 31i
2024i
December 31ii
2023ii
Balance, beginning of the year
3,085
2,722
Share of total comprehensive income
908
363
Balance, end of the year
3,993
3,085
13. BANK INDEBTEDNESS
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 14, 2023 the Corporation extended its credit facility for an additional
two-year period expiring on June 30, 2025. Indebtedness under the facility bears interest at bankers’ acceptance or
adjusted Secured Overnight Financing Rate (“SOFR”) rates plus 1.00%. A fixed and floating charge debenture on accounts
receivable, inventories and property, plant and equipment is pledged as collateral for the operating credit facility.
As at December 31, 2024, the Corporation had drawn $23,714 under the operating credit facility [December 31 2023–$26,310],
including letters of credit totalling $3,857 [December 31, 2023–$3,561] such that $51,286 [December 31, 2023–$48,690] was
available to be drawn on.
14. ACCOUNTS PAYABLE, ACCRUED LIABILITIES AND PROVISIONS
X
December 31
2024
December 31
2023
Accounts payable
58,984
65,978
Accrued liabilities
75,339
72,855
Provisions [note 18]
5,598
3,880
X
139,921
142,713
40
MAGELLAN 2024 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unless otherwise stated, all amounts are in thousands of Canadian dollars)
15. LONG-TERM DEBT
X
December 31
2024
December 31
2023
Other loans
2,863
3,348
2,863
3,348
Less: current portion
(2,863)
(3,348)
−
−
Other loans include a loan of $Nil [2023–$716] provided by governmental authorities (“Government Loan”) that bore interest
of approximately 5.375% [2023–5.375%]. The Government Loan matured in April 2024 and was repaid in full.
Also included in other loans is a bank loan of $2,863 (USD$1,990) [2023–$2,632 (USD$1,990)] used to finance capital
expenditures. The bank loan expires on October 31, 2025 and bears interest at SOFR plus 3.00% for a rate of 8.38%
[2023–8.38%]. Land, machinery and equipment were pledged as collateral for the bank loan.
16. LEASE LIABILITIES
The majority of the Corporation’s leases relate to the rental of land and buildings. A continuity summary of the Corporation’s
lease liabilities is as follows:
2024
2023
Lease liabilities—at January 1
29,129
33,240
Additions
12,062
373
Accretion on lease liabilities
1,580
1,378
Payments
(6,076)
(5,637)
Foreign exchange and other
1,406
(225)
Lease liabilities—at December 31
38,101
29,129
Less: current portion
(6,488)
(4,815)
31,613
24,314
Contractual undiscounted cash flows for lease obligations:
X
December 31
2024
Less than one year
6,729
One to five years
25,521
Over five years
13,248
X
45,498
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. Extension options have been considered in the measurement
of lease obligations using management’s best estimate.
41
MAGELLAN 2024 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unless otherwise stated, all amounts are in thousands of Canadian dollars)
17. 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 2024, the Corporation received $1,285 of government proceeds [2023–$2,028] and repaid
$1,276 [2023–$1,337]. A summary of the Corporation’s borrowings subject to specific conditions is as follows:
X
2024
2023
Borrowings subject to specific conditions—at December 31
25,604
25,442
Less: current portion
(1,391)
(1,276)
24,213
24,166
18. OTHER LONG-TERM LIABILITIES AND PROVISIONS
X
December 31
2024
December 31
2023
Provisions
8,311
6,402
Other
11,127
3,567
19,438
9,969
Less current portion included in accounts payable,
accrued liabilities and provisions
(5,598)
(3,880)
X
13,840
6,089
Movements in provisions:
X
Warrantyi
Environmental i
Otheri
provisionsi
Total i
At December 31, 2022
1,065
2,560
1,075
4,700
Additional provisions [note 28]
1,472
1,017
1,056
3,545
Amount used
(885)
–
(813)
(1,698)
Unused amounts reversed
–
–
(243)
(243)
Unwind of discount
–
81
–
81
Foreign currency translation
(3)
4
16
17
At December 31, 2023
1,649
3,662
1,091
6,402
Additional provisions
1,555
1,644
95
3,294
Amount used
(1,268)
(164)
–
(1,432)
Unused amounts reversed
(315)
–
–
(315)
Unwind of discount
–
179
–
179
Foreign currency translation
27
150
6
183
At December 31, 2024
1,648
5,471
1,192
8,311
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.
42
MAGELLAN 2024 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unless otherwise stated, all amounts are in thousands of Canadian dollars)
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.
19. CHANGES IN LIABILITIES ARISING FROM FINANCING ACTIVITIES
X
December 31
2023
Cash flowsi
Foreigni
exchangei
Otheri
December 31
2024
Bank indebtedness
22,749
(4,372)
1,480
–
19,857
Long-term debt
3,348
(720)
231
4
2,863
Lease liabilities
29,129
(6,076)
1,411
13,637
38,101
Borrowings subject to specific conditions
25,442
9
–i
153
25,604
Long-term liabilities and provisions
6,089
(53)
641
7,163
13,840
Total
86,757
(11,212)
3,763
20,957
100,265
The “Other” column includes the effect of allocation of borrowing subject to specific conditions to the related assets and
expenses, the effect of interest accretion on interest bearing loans, borrowings and lease liabilities and the effect of new
leases and reassessments of existing leases in the current period.
20. INCOME TAXES
Major components of income tax expense:
X
2024
2023
Current income tax expense (recovery)
Current tax expense for the year
16,992
10,075
Current tax expense (recovery) for prior years
(327)
1,899
X
16,665
11,974
Deferred income tax expense (recovery)
Origination and reversal of temporary differences
(3,956)
(526)
Impact of tax law changes
(409)
239
X
(4,365)
(287)
Total income tax expense
12,300
11,687
The Corporation’s consolidated effective tax rate for the year ended December 31, 2024 was 25.7% [2023–55.8%]. The
difference in the effective tax rates compared to the Corporation’s statutory income tax rates were mainly caused by the
following:
X
2024
2023
Income before income taxes
47,786
20,934
Income taxes based on the applicable tax rate of 25.8% in 2024 and 2023
12,329
5,401
Adjustment to income taxes resulting from:
Adjustments in respect of prior years
(804)
3,674
Permanent differences and other
546
(359)
Income tax rate differentials on income of foreign operations
(517)
253
Changes in income tax rates
108
(11)
Unrecognized tax losses and temporary differences
638
2,729
Income tax expense
12,300
11,687
43
MAGELLAN 2024 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unless otherwise stated, all amounts are in thousands of Canadian dollars)
Changes in the deferred tax components are adjusted through deferred income tax expense except for $(184) [2023–$782]
for foreign exchange hedges which is adjusted through other comprehensive income and $1,481 [2023–$440] for employee
future benefits which is adjusted through other comprehensive income.
Major components of deferred tax assets and liabilities:
X
December 31
2024
December 31
2023
Operating loss carry forwards
11,002
11,011
Investment tax credits
844
895
Employee future benefits
(1,247)
(320)
Property, plant and equipment and intangibles
(54,776)
(55,939)
Other
16,785
15,288
Deferred tax liabilities
(27,392)
(29,065)
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:
X
December 31
2024
December 31
2023
Deferred tax assets
8,639
8,376
Deferred tax liabilities
(36,031)
(37,441)
The temporary difference associated with investments in subsidiaries and joint ventures, for which a deferred tax liability
has not been recognized aggregates to $772,181 [2023–$735,866]. Operating losses incurred by the Corporation’s United
Kingdom subsidiary for which a deferred tax asset has not been recognized were $53,348 [2023–$42,145].
21. 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
Number
Amount
Issued and fully paid:
Outstanding at December 31, 2023
57,231,197
250,147
Outstanding at December 31, 2024
57,138,980
249,762
Net income (loss) per share
X
2024
2023
Net income
35,486
9,247
Weighted average number of shares
57,162,634
57,354,610
Basic and diluted net income per share
0.62
0.16
Dividends declared
For the year ended December 31, 2024, the Corporation declared and paid dividends on its common shares on March 29, 2024,
June 28, 2024, September 30, 2024 and December 31, 2024 of $0.025 per share amounting to $5,715.
For the year ended December 31, 2023, the Corporation declared and paid dividends on its common shares on March 31, 2023,
June 30, 2023, September 29, 2023 and December 29, 2023 of $0.025 per share amounting to $5,734.
44
MAGELLAN 2024 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unless otherwise stated, all amounts are in thousands of Canadian dollars)
Subsequent to December 31, 2024, the Corporation declared dividends to holders of its common shares in the amount of
$0.025 per common share payable on March 31, 2025, for shareholders of record at the close of business on March 19, 2025.
Normal Course Issuer Bid
On May 25, 2022, the Corporation announced that the TSX had accepted the Corporation’s notice of intention to make a normal
course issuer bid (the “2022 NCIB”). The 2022 NCIB allowed for the purchase of up to 2,886,455 common shares, over a
twelve-month period commencing May 27, 2022 and ending May 26, 2023. On May 25, 2023, the Corporation’s second NCIB
application was approved (the “2023 NCIB”). The 2023 NCIB allows for the purchase of up to 2,868,106 common shares over
a twelve-month period commencing May 27, 2023 and ending May 26, 2024. On May 24, 2024, the Corporation’s third NCIB
application was approved (the “2024 NCIB”). The 2024 NCIB allows the Corporation to purchase up to 2,857,469 common shares
over a twelve-month period commencing May 28, 2024 and ending May 27, 2025.
During the year ended December 31, 2024, 92,217 shares were purchased for cancellation for $689 at a volume weighted
average price paid of $7.47 per common share. During the year ended December 31, 2023, 214,937 shares were purchased for
cancellation for $1,622 at a volume weighted average price paid of $7.55 per common share.
22. 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, 2024
and December 31, 2023, 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. One third of the
cash payment of the Units awarded 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 Total Shareholder Return performance 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 each performance period. As at December 31, 2024, 69,977 Units were outstanding at an
accrued value of $700 [December 31, 2023 - $630]. The Corporation recorded compensation expense in relation to the
DSU Plan during the year of $187 [2023 - $127].
23. 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.
45
MAGELLAN 2024 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unless otherwise stated, all amounts are in thousands of Canadian dollars)
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:
X
Financial assets
at fair value
through profit
or loss 1
Financial
assets at
amortized
cost 2
Total
financial
assets
Financial
liabilities at
fair value
through
profit of loss
Financial
liabilities at
fair value
through other
comprehensive
income 3
Financial
liabilities at
amortized
cost 4
Total
financial
liabilities
December 31, 2023
8,709
280,416
289,125
–
1,315
250,026
251,341
December 31, 2024
56,437
290,846
347,283
–
2,078
291,488
293,566
1 Includes cash and cash equivalents and restricted cash.
2 Includes trade and other receivables and contract assets.
3 Includes derivative financial instruments.
4 Includes bank indebtedness, accounts payable and accrued liabilities, contract liabilities, long-term debt, lease liabilities, and borrowings
subject to specific conditions.
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, 2024, fluctuations of +/- 1% would, everything else being equal, have an effect on net income for the
year ended December 31, 2024 of approximately +/- $441. 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 $4,503.
46
MAGELLAN 2024 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unless otherwise stated, all amounts are in thousands of Canadian dollars)
Interest rate risk
The Corporation is exposed to interest rate risk in its floating rate bank indebtedness. As at December 31, 2024, $22,720 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, 2024
by approximately +/- $170.
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.
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 income (loss) 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 2024,
the Corporation sold receivables to various financial institutions in the amount of $12,922 [2023–$11,113] for a discount of
$289 [2023–$231] representing an annualized interest rate of 8.5% [2023–8.4%].
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 programs or factoring transactions 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.
47
MAGELLAN 2024 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unless otherwise stated, all amounts are in thousands of Canadian dollars)
Contractual maturity analysis
Contractual maturity of the Corporation’s financial liabilities (including both interest and principal cash flows):
Year 1
Years 2
and 3
Years 4
and 5
Thereafter
Total
Bank indebtedness
19,857
–
–
–
19,857
Long-term debt
2,863
–
–
–
2,863
Lease liabilities
6,488
13,518
12,244
13,248
45,498
Borrowings subject to specific conditions
1,391
3,022
3,598
25,660
33,671
Other long-term liabilities
22
7,528
176
3,423
11,149
Total
30,621
24,068
16,018
42,331
113,038
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, contract assets and liabilities, 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
Certain of the Corporation’s future cash flows are incurred in US dollars and British pounds. Decreases in the value of
the Canadian dollar relative to the US dollar and British pound could have an adverse effect on the Corporation’s cash
flows. To mitigate some of the uncertainty in respect these cash flows, the Corporation may enter into foreign currency
forward and collar contracts in respect of US dollars and British pounds. With respect to 2024, the Corporation entered into
forward foreign exchange contracts to purchase US dollars of $4,000 and British pounds of £23,540 over a period of one
month commencing December of 2024 at exchange rates of $1.4360 and $1.7972 Canadian dollars, respectively. 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, and British pounds. The Corporation
conversely entered into foreign currency collar contracts as follows:
Maturity
Notional
amount
Floor
Ceiling
Carrying
value
Line item in the statement of financial position
June 2025
US$10,800
1.2500
1.3245
$1,154
Accounts payable, accrued liabilities and provisions
June 2025
US$10,800
1.2500
1.3300
$1,095
Accounts payable, accrued liabilities and provisions
The fair value of foreign currency contracts is determined using an estimated credit-adjusted mark-to-market valuation
using observable forward exchange rates at the end of the reporting periods and currency contract forward rates.
For the twelve months ended December 31, 2024, a loss of $579 (pre-tax loss of $763) [2023—gain of $2,251 (pre-tax gain
of $3,033)] was recorded in other comprehensive income (loss) for the effective portion of cash flow hedges. In accordance
with the fair value hierarchy of financial instruments, the derivatives are considered Level 2. As at December 31, 2024, the
Corporation recorded $2,078 of derivative liabilities [2023–$1,315], included in accounts payable, accrued liabilities and
provisions on the consolidated statement of financial position.
Long-term debt
As at December 31, 2024, the carrying amount of the Corporation’s long-term debt of $2,863 [2023–$3,348] 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.
48
MAGELLAN 2024 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unless otherwise stated, all amounts are in thousands of Canadian dollars)
Borrowings subject to specific conditions
As at December 31, 2024, the Corporation has recognized $25,604 [2023–$25,442] 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, 2024, the carrying amount of all of the financial assets that the Corporation has pledged as collateral
for its long-term debt facilities and bank indebtedness was $22,720 [2023–$26,097].
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.
24. 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 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, 2021, December 31, 2022, December 31, 2023 and November 30, 2024.
In April 2023, the Corporation purchased annuity contracts for a portion of the Corporation’s defined benefit pension plans
using plan assets and settled approximately $19,624 of benefit plan obligations resulting in the recognition of a settlement loss
of $644 in the consolidated statements of income (loss). The adjustment period for this transaction expired in the first quarter
of 2024 and the Corporation has recognized a partly offsetting settlement gain of $203 associated with the refund of various
premiums associated with this transaction in the consolidated statements of income (loss) in 2024.
49
MAGELLAN 2024 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unless otherwise stated, all amounts are in thousands of Canadian dollars)
Also in April 2023, the Corporation purchased $27,350 of buy-in annuities for one of its defined benefit pension plans. As
the buy-in annuity does not represent a transaction that eliminates all further legal or constructive obligations for the benefits
under the plan, these obligations currently remain on the balance sheet with the fair value of the buy-in assets equalling
the obligation amount. When the Corporation receives regulatory approval to wind-up the plan, the buy-in annuities will be
converted to buy-out annuities and a settlement gain (loss) will be recognized. The wind-up is expected to occur in 2025.
In October 2022, the Corporation purchased annuity contracts for a portion of the Corporation’s defined benefit pension plans
using plan assets and settled approximately $17,183 of benefit plan obligations resulting in the recognition of a settlement loss
of $631 in the consolidated statements of income (loss) in 2022. In November 2023, after the expiration of the adjustment
period for this transaction, various adjustments resulted in a partly offsetting settlement gain of $211 in the consolidated
statements of income (loss) in 2023.
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.
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, 30% in fixed income instruments and
65% in equity for the Canadian defined benefit plans. 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.
50
MAGELLAN 2024 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unless otherwise stated, all amounts are in thousands of Canadian dollars)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unless otherwise stated, all amounts are in thousands of Canadian dollars)
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.
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 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 $7,243 for the year ended December 31, 2024
[2023–$6,698].
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
2024
X
2023
X
Defined benefitx
plansx
Other benefiti
plani
Defined benefiti
plans i
Other benefit
plan
Current service cost
1,027
–
1,044
–
Net interest on net defined benefit liability
(87)
38
(134)
37
Other
1,125
–
1,130
–
Settlement (gain) loss
(203)
–
433
–
Total defined benefit cost recognized in net income
1,862
38
2,473
37
51
MAGELLAN 2024 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unless otherwise stated, all amounts are in thousands of Canadian dollars)
The re-measurement components recognized in the statement of other comprehensive income for the Corporation’s benefit
plans comprise the following:
X
X
2024
X
2023
Actuarial (gains) losses
Defined benefit i
plans i
Other benefit i
plan i
Defined benefiti
plansi
Other benefit
plan
Return on pension assets (excluding amounts in
xxnet interest on defined benefit schemes)
(9,259)
–
(8,825)
–
Based on adjustment of liability assumptions
550
–
2,929
–
Due to liability experience adjustment
1,002
38
(316)
142
Other
47
–
29
–
Change in effect of asset ceiling
1,920
–
4,476
–
Total defined benefit (gains) loss recognized in the
xxstatement of other comprehensive income
(5,740)
38
(1,707)
142
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
X 2024
X
2023
X
Defined benefiti
plansi
Other benefiti
plani
Defined benefiti
plansi
Other benefit i
plan i
Fair value, beginning of year
80,466
–
93,523
–
Interest income on plan assets
3,630
–
4,022
–
Actual return on assets (excluding interest income
xxon plan assets)
9,259
–
8,825
–
Employer contributions
(394)
193
345
136
Employee contributions
130
82
132
86
Benefit payments
(10,677)
(275)
(3,672)
(222)
Plan settlement
829
–
(21,550)
–
Administration costs
(1,172)
–
(1,159)
–
End of year
82,071
–
80,466
–
Changes in effect of asset ceiling
X
X
2024
X
2023
X
Defined benefiti
plansi
Other benefiti
plani
Defined benefiti
plansi
Other benefit i
plan i
Effect of asset ceiling, beginning of year
17,561
–
12,416
–
Interest on effect of asset ceiling
816
–
669
–
Change in effect of asset ceiling during the period
1,920
–
4,476
–
End of year
20,297
–
17,561
–
52
MAGELLAN 2024 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unless otherwise stated, all amounts are in thousands of Canadian dollars)
Changes in the benefit plan obligations of the Corporation’s benefit plans
X
X
2024
X
2023
X
Defined benefiti
plansi
Other benefiti
plani
Defined benefiti
plansi
Other benefit i
plan ii
Beginning of year
60,584
773
78,365
750
Current service cost
1,027
–
1,044
–
Interest cost
2,727
38
3,219
37
Employee contributions
130
82
132
86
Actuarial (gains) losses in other comprehensive
income from:
xxChanges in demographic assumptions
17
–
(56)
–
xxChanges in financial assumptions
533
–
2,985
–
xxExperience adjustments
1,002
38
(316)
142
Benefit payments
(10,677)
(275)
(3,672)
(222)
Plan settlement
626
–
(21,117)
–
Exchange difference
–
62
–
(20)
End of year
55,969
718
60,584
773
Reconciliation of funded status of benefit plans to amounts recorded in the consolidated financial statements
X
X
2024
X
2023
X
Defined benefiti
plansi
Other benefiti
plani
Defined benefiti
plansi
Other benefit i
plan ii
Fair value of plan assets
82,071
–
80,466
–
Accrued benefit obligation
(55,969)
(718)
(60,584)
(773)
Irrecoverable surplus (effect of asset ceiling)
(20,297)
–
(17,561)
–
Net defined benefit asset (liability)
5,805
(718)
2,321
(773)
—Included in other long-term liabilities
and provisions
–
(718)
–
(773)
—Included in other assets
5,805
–
2,321
–
The Corporation expects to contribute approximately $Nil in 2025 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.
53
MAGELLAN 2024 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unless otherwise stated, all amounts are in thousands of Canadian dollars)
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
X
2024 X
2023
X
Defined benefiti
plansi
Other benefiti
plani
Defined benefiti
plansi
Other benefit i
plan ii
Discount rate
4.55–4.70%
5.30%
4.65%
4.70%
Rate of compensation increase
2.0% / 3.0%
–
2.0% / 3.0%
–
Mortality Table
xxCanadian defined benefit plans
Club Vita Canada’s 2022, 2021 and
2020 VitaCurves projected with CPM-B
improvement scales.
Club Vita Canada’s 2021 and 2020
VitaCurves projected with CPM-B
improvement scales.
xxOther benefit plan
SOA Pri-2012 Blue Collar Mortality
Table with projection Scale MP-2021
SOA Pri-2012 Blue Collar Mortality
Table with projection Scale MP-2021
x
x
x
The discount rate assumptions 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, 2024, a 1.0% decrease in the discount rate
used (all other assumptions remaining unchanged) could result in a $5,551 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
2024. 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, 2024 was nominal.
Assets
The weighted average asset allocations of the defined benefit plans at the measurement date, by asset category:
X
2024
2023
Equity investments
59%
54%
Fixed income investments
12%
12%
Buy-in annuity
28%
33%
Other investments
1%
1%
X
100%
100%
Defined benefit pension liability term
X
2024
2023
Defined benefits schedule for disbursement within 12 months
4,603
3,883
Defined benefits schedule for disbursement within 2-5 years
13,445
15,818
Defined benefits schedule for disbursement after 5 years or more
15,514
18,910
33,562
38,611
54
MAGELLAN 2024 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unless otherwise stated, all amounts are in thousands of Canadian dollars)
25. SEGMENTED INFORMATION
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 includes 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
2024
2023
Sale of goods
765,993
712,198
Services
176,375
167,419
X
942,368
879,617
Timing of revenue recognition based on transfer of control:
X
2024
2023
At a point of time
575,264
523,289
Over time
367,104
356,328
X
942,368
879,617
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, 2024 and 2023 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
2024
2023
Less than 24 months
943,934
846,926
Thereafter
133,298
161,358
Revenues from the Corporation’s two largest customers accounted for 36.2% of total sales for the year ended December 31, 2024
consisting of 25.5% and 10.7%, respectively. For the year ended December 31, 2023, the two largest customers accounted for
36.5% of total sales consisting of 25.0% and 11.5%, respectively.
Revenues information by geographic segments:
X
2024
2023
Revenues
Canada
357,769
364,275
United States
262,645
234,234
Europe
321,954
281,108
942,368
879,617
Export revenues1
Canada
237,224
243,823
United States
60,180
43,245
Europe
86,904
84,403
384,308
371,471
1 Export revenue is attributed to countries based on the location of the customers.
55
MAGELLAN 2024 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unless otherwise stated, all amounts are in thousands of Canadian dollars)
Corporation’s long-lived assets by geographic segment:
X
2024
2023
Property, plant and equipment, right-of-use assets, intangible
assets and goodwill
Canada
157,582
156,623
United States
158,200
144,232
Europe
157,794
145,285
473,576
446,140
26. COST OF REVENUES
X
2024
2023
Operating expenses
792,619
744,349
Depreciation and amortization
41,145
43,332
Investment tax credits
(1,150)
(1,939)
Impairment of inventories
1,865
3,729
Impairment of long-lived assets
–
1,155
X
834,479
790,626
27. ADMINISTRATIVE AND GENERAL EXPENSES
X
2024
2023
Salaries, wages and benefits
31,434
31,640
Administration and office expenses
19,348
19,809
Professional services
2,581
2,557
Depreciation and amortization
3,572
3,290
X
56,935
57,296
28. RESTRUCTURING
In 2020, the Corporation 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. The plan included downsizing the
employee base, moving various manufacturing capabilities to other sites and engaging in other actions designed to reduce
the cost structure and improve productivity.
The Corporation has recognized restructuring charges of $Nil [2023–$1,167] associated with this plan. Restructuring
charges include various costs associated with the workforce restructuring and closure costs required to restructure the
operations and relocate the assets involved.
The Corporation has incurred additional workforce reduction and other costs of $Nil [2023–$571] associated with downsizing
its employee base.
56
MAGELLAN 2024 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unless otherwise stated, all amounts are in thousands of Canadian dollars)
Costs associated with the restructuring charges noted above are summarized in the table below:
X
2024
2023
Workforce reduction
–
458
Closure costs
–
1,280
X
–
1,738
29. OTHER EXPENSE (INCOME)
X
2024
2023
Foreign exchange (gain) loss
(2,682)
4,865
Loss on disposal of property, plant and equipment
218
17
Gain on disposal of investment properties
–
(20)
(Gain) loss on pension settlement
(203)
433
Other
1,655
39
(1,012)
5,334
30. INTEREST EXPENSE
X
2024
2023
Interest on bank indebtedness and long-term debt
1,541
1,237
Accretion charge on long-term debt and borrowings
770
843
Accretion on lease liabilities
1,580
1,378
Discount on sale of trade receivables
289
231
4,180
3,689
31. OTHER COMPREHENSIVE INCOME
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 actuarial gains on defined benefit
pension plans, net of tax. The Corporation recorded unrealized currency translation gains for the year ended December
31, 2024 of $32,678 [2023—gains of $420]; unrealized losses on foreign currency contract hedges of $579 [2023—gains
of $2,251] and net actuarial gains on defined benefit plans of $4,219 [2023—gains of $1,125]. These gains and losses are
reflected in the consolidated statements of financial position and had no impact on net income for the year.
32. RELATED PARTY DISCLOSURE
Transactions with related parties
During the year, the Corporation incurred consulting and cost recovery fees of $200 [2023–$200] payable to a corporation
controlled by the Chairman of the Board of Directors of the Corporation.
57
MAGELLAN 2024 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unless otherwise stated, all amounts are in thousands of Canadian dollars)
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
2024
2023
Short-term benefits
3,617
2,940
Post-employments benefits
183
172
Share-based payments
127
129
3,927
3,241
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. Share-based payments include amounts paid to Officers under
the DSU Plan.
33. SUPPLEMENTARY CASH FLOW INFORMATION
X
2024
2023
Net change in non-cash working capital
Trade and other receivables
8,141
(41,962)
Contract assets
(10,204)
(4,120)
Inventories
(12,753)
(32,020)
Prepaid expenses and other
(737)
(382)
Accounts payable, accrued liabilities and provisions
(11,048)
9,502
Contract liabilities
46,097
(8,242)
X
19,496
(77,224)
Interest paid
1,765
1,140
Income taxes paid
13,888
2,419
34. 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, 2024, total managed capital was $822,160 [2023–$760,137], comprised of shareholders’ equity
attributable to equity holders of the Corporation of $799,440 [2023–$734,040] and interest-bearing debt of $22,720
[2023 –$26,097].
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.
58
MAGELLAN 2024 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unless otherwise stated, all amounts are in thousands of Canadian dollars)
The Corporation must adhere to covenants in its operating credit facility. As at December 31, 2024, the Corporation was in
compliance with these covenants.
35. CONTINGENT LIABILITIES AND COMMITMENTS
In the ordinary course of business activities, the Corporation may be involved in litigation and claims, with or without merit,
with customers, suppliers or 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, 2024, capital commitments in respect of purchase of property, plant and equipment totalled $30,879
[2023–$8,400], all of which had been ordered. There were no other material capital commitments at the end of the year.
59
MAGELLAN 2024 ANNUAL REPORT
BOARD OF DIRECTORS AND EXECUTIVE OFFICERS
EXECUTIVE OFFICERS
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
Michael Gribe
Vice President,
Human Resources
Karen Yoshiki-Gravelsins
Vice President,
Corporate Stewardship and
Operational Excellence
Ian Roberts
Vice President,
Information Technology, and
Transformation
BOARD OF DIRECTORS
N. Murray Edwards (4)
Chairman
Magellan Aerospace Corporation
St. Moritz, Switzerland
Phillip C. Underwood
President and Chief Executive Officer
Magellan Aerospace Corporation
Ontario, Canada
Beth M. Budd Bandler (1, 2, 3, 5)
President
Bandler Corporation
Ontario, Canada
Larry G. Moeller (3, 5)
President
Kimball Capital Corporation
Alberta, Canada
Steven Somerville (1, 2, 3, 4)
President
CCM Capital Corporation
Ontario, Canada
James P. Veitch (1, 2, 4, 5)
Director
Partner Two Corp.
Alberta, Canada
COMMITTEES OF THE BOARD
(1) Audit Committee
Chairman:
Steven Somerville
(2) Governance and
Nominating Committee
Chairman:
James P. Veitch
(3) Human Resources and
Compensation Committee
Chairman:
Beth M. Budd Bandler
(4) Pension Committee
Chairman:
Steven Somerville
(5) Environmental and Health &
Safety Committee
Chairman:
Beth M. Budd Bandler
60
MAGELLAN 2024 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
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
BDO Canada 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