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Northstar Aerospace posts second quarter results

As discussed in the Notes to Company's Consolidated Interim Financial Statements, the Company implemented International Financial Reporting Standards as of January 1, 2011.  The 2010 amounts in this release and the financial statements have been restated to comply with those standards.

Defense revenue was $33.7 million for the three months ended June 30, 2011, a $1.0 million decrease compared to the same period of 2010. The decrease was primarily the result of lower volumes on the F-22 program as the final production shipments were made in February 2011.  Commercial revenue in the three months ended June 30, 2011 was $12.6 million compared to $12.9 million in the same period of 2010.  The year-over-year decrease was primarily due to timing of revenue between the first and second quarters.

Gross margin decreased to 19.0% in the three months ended June 30, 2011 from 21.1% in the same period in 2010.  Defense margin (excluding depreciation) was 17.1% in the three months ended June 30, 2011 compared to 20.2% in the same period of 2010. The decrease was due to losses incurred completing the Apache Block II Program; Anderson, Indiana plant shutdown costs; disruption in the Chicagoplant due to the absorption of work from the Anderson plant; and start up costs and inefficiencies related to initial Apache Block III production.  Commercial margin (excluding depreciation) increased to 24.1% in the three months ended June 30, 2011 compared to 23.7% in 2010, primarily due to increased sales of higher margin spares as compared to 2010.

Selling, general and administrative ("SG&A") expenses were $4.5 million (9.7% of revenue) for the three months ended June 30, 2011.  For the same period in 2010, SG&A expenses were $4.9 million (10.3% of revenue).  The year-over-year decrease in total SG&A expense was primarily the result of reductions in salary and benefit expense in 2011.

For the three months ended June 30, 2010, the Company revised its estimate of future cash outlays related to its environmental remediation provision.  As such, the discount on the provision was increased$0.4 million which was recorded as an unusual item in the consolidated interim statement of operations.  There were no unusual items incurred during the three-month period ended June 30, 2011.

Net income for the three months ended June 30, 2011 was $0.8 million or $0.02 per share compared to $1.5 million ($0.05 per share) in the three months ended June 30, 2010.  The per share decrease was due to the aforementioned losses on the Apache programs, and plant shutdown and disruption costs associated with the closure of the Anderson, Indiana facility.

The Company's backlog was $377.8 million at June 30, 2011 compared to $414.7 million at June 30, 2010.  The decrease is due to increased CH-47 program shipments, completion of F-22 production deliveries, and the winding down of the Apache Block II program.

Glenn Hess, President and Chief Executive Officer, stated:

"During the quarter we achieved two strategic initiatives: delivered the first full Apache Block III transmission ship set; and rationalized capacity by shutting down our Anderson, Indiana facility.  While these accomplishments impacted defense margins and will challenge management for the remainder of the year, they were necessary to align capacity with forecasted demand and to initiate a program with the potential to provide revenue and earnings for years to come."