EX-99.3 4 ex-99d3.htm EX-99.3 maxr_Ex99_3

Exhibit 99.3

 

MAXAR TECHNOLOGIES LTD.

Unaudited Condensed Consolidated Statements of Earnings

(In millions of United States dollars, except per share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended

 

Six months ended

 

 

 

 

June 30, 

 

June 30, 

 

    

Note

    

2018

    

2017

    

2018

    

2017

Revenues

 

 8

 

$

578.9

 

$

375.2

 

$

1,136.6

 

$

748.7

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Direct costs, selling, general and administration

 

 9

 

 

407.2

 

 

308.7

 

 

777.5

 

 

619.2

Depreciation and amortization

 

 

 

 

115.1

 

 

19.3

 

 

227.5

 

 

38.3

Foreign exchange loss (gain)

 

 

 

 

3.1

 

 

(9.5)

 

 

2.0

 

 

(9.7)

Share-based compensation expense

 

10

 

 

10.6

 

 

2.0

 

 

9.3

 

 

6.8

Other expense

 

11

 

 

22.0

 

 

17.1

 

 

29.3

 

 

35.8

Earnings before interest and income taxes

 

 

 

 

20.9

 

 

37.6

 

 

91.0

 

 

58.3

Finance expense, net

 

 

 

 

48.7

 

 

10.8

 

 

94.2

 

 

21.4

(Loss) earnings before income taxes

 

 

 

 

(27.8)

 

 

26.8

 

 

(3.2)

 

 

36.9

Income tax (recovery) expense

 

 

 

 

(6.4)

 

 

7.5

 

 

(13.0)

 

 

13.3

Equity in earnings from joint ventures, net of tax

 

 

 

 

(2.8)

 

 

 —

 

 

(2.6)

 

 

 —

Net (loss) earnings

 

 

 

$

(18.6)

 

$

19.3

 

$

12.4

 

$

23.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) earnings per common share:

 

  

 

 

  

 

 

  

 

 

  

 

 

  

Basic

 

12

 

$

(0.33)

 

$

0.53

 

$

0.22

 

$

0.65

Diluted

 

12

 

$

(0.33)

 

$

0.52

 

$

0.22

 

$

0.64

 

See accompanying notes to the Unaudited Condensed Consolidated Interim Financial Statements.

1

 

 

MAXAR TECHNOLOGIES LTD.

Unaudited Condensed Consolidated Statements of Comprehensive Income

(In millions of United States dollars)  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended

 

Six months ended

 

 

June 30, 

 

June 30, 

 

    

2018

    

2017

    

2018

    

2017

Net (loss) earnings

 

$

(18.6)

 

$

19.3

 

$

12.4

 

$

23.6

Other comprehensive (loss) income:

 

 

  

 

 

  

 

 

  

 

 

  

Items that may be subsequently reclassified to earnings:

 

 

  

 

 

  

 

 

  

 

 

  

Foreign currency translation adjustment

 

 

9.5

 

 

0.9

 

 

12.2

 

 

0.7

Net (loss) gain on hedge of net investment in foreign operations (net of income tax expense of nil for each of the three and six months ended June 30, 2018 and 2017, respectively)

 

 

(4.9)

 

 

 —

 

 

(12.3)

 

 

1.3

Effective portion of changes in fair value of derivatives designated as cash flow hedges (net of income tax recovery of $0.2 million and income tax expense of $0.3 million for the three months ended June 30, 2018 and 2017, respectively; and net of income tax recovery of $1.0 and income tax expense of $0.4 million for the six months ended June 30, 2018 and 2017, respectively)

 

 

3.0

 

 

(0.9)

 

 

0.7

 

 

(2.8)

Net change in fair value of derivatives designated as cash flow hedges transferred to earnings (net of income tax recovery of $0.1 million and $1.2 million for the three months ended June 30, 2018 and 2017, respectively; and net of income tax recovery of $0.2 and $1.2 million for the six months ended June 30, 2018 and 2017, respectively)

 

 

(0.3)

 

 

(5.5)

 

 

(0.6)

 

 

(5.7)

Net change in fair value of available-for-sale financial assets (net of income tax expense of nil for each of the three and six months ended June 30, 2018 and 2017, respectively.

 

 

 —

 

 

 —

 

 

 —

 

 

0.1

Other comprehensive income (loss), net of income taxes

 

 

7.3

 

 

(5.5)

 

 

 —

 

 

(6.4)

Comprehensive (loss) income

 

$

(11.3)

 

$

13.8

 

$

12.4

 

$

17.2

 

See accompanying notes to the Unaudited Condensed Consolidated Interim Financial Statements.

2

 

 

MAXAR TECHNOLOGIES LTD.

Unaudited Condensed Consolidated Balance Sheets

(In millions of United States dollars)  

 

 

 

 

 

 

 

 

 

 

    

 

    

June 30, 

    

December 31, 

 

 

Note

 

2018

 

2017

Assets

 

  

 

  

 

 

  

 

Current assets:

 

  

 

 

  

 

 

  

Cash and cash equivalents

 

  

 

$

13.3

 

$

19.1

Trade and other receivables, net

 

  

 

 

328.8

 

 

348.2

Financial assets, other

 

  

 

 

16.9

 

 

16.3

Contract assets

 

  

 

 

197.4

 

 

128.3

Inventories

 

  

 

 

95.3

 

 

96.5

Non-financial assets

 

  

 

 

98.4

 

 

125.2

Current tax assets

 

  

 

 

95.3

 

 

71.7

Total current assets

 

  

 

 

845.4

 

 

805.3

Non-current assets:

 

  

 

 

  

 

 

  

Orbital receivables

 

  

 

 

430.9

 

 

424.2

Financial assets, other

 

  

 

 

82.9

 

 

95.2

Non-financial assets

 

  

 

 

54.8

 

 

41.6

Deferred tax assets

 

  

 

 

147.2

 

 

108.3

Property, plant and equipment

 

  

 

 

1,060.5

 

 

1,054.9

Intangible assets

 

  

 

 

1,673.4

 

 

1,753.4

Goodwill

 

  

 

 

2,368.8

 

 

2,374.4

Total non-current assets

 

  

 

 

5,818.5

 

 

5,852.0

Total assets

 

  

 

$

6,663.9

 

$

6,657.3

Liabilities and Shareholders’ Equity

 

  

 

 

  

 

 

  

Current liabilities:

 

  

 

 

  

 

 

  

Trade and other payables

 

  

 

$

236.6

 

$

236.9

Current tax liabilities

 

  

 

 

29.4

 

 

49.2

Financial liabilities, other

 

  

 

 

11.6

 

 

18.9

Provisions and other non-financial liabilities

 

  

 

 

19.8

 

 

11.3

Employee benefits

 

  

 

 

102.8

 

 

123.9

Contract liabilities

 

  

 

 

390.9

 

 

465.5

Securitization liability

 

  

 

 

15.4

 

 

15.5

Current portion of long-term debt

 

 6

 

 

18.1

 

 

18.1

Total current liabilities

 

 

 

 

824.6

 

 

939.3

Non-current liabilities:

 

  

 

 

  

 

 

  

Financial liabilities, other

 

  

 

 

14.5

 

 

13.8

Provisions

 

  

 

 

49.0

 

 

159.3

Employee benefits

 

  

 

 

212.7

 

 

217.6

Non-financial liabilities

 

  

 

 

41.8

 

 

42.1

Contract liabilities

 

 

 

 

93.3

 

 

134.3

Deferred tax liabilities

 

  

 

 

142.9

 

 

103.6

Securitization liability

 

  

 

 

84.9

 

 

90.8

Long-term debt

 

 6

 

 

3,076.4

 

 

2,942.9

Total non-current liabilities

 

 

 

 

3,715.5

 

 

3,704.4

Total liabilities

 

  

 

 

4,540.1

 

 

4,643.7

Shareholders’ equity:

 

  

 

 

  

 

 

  

Share capital (no par value, unlimited common shares authorized; 58.6 million and 56.2 million common shares issued and outstanding, respectively)

 

 

 

 

1,670.1

 

 

1,550.3

Contributed surplus

 

  

 

 

60.7

 

 

50.6

Retained earnings

 

  

 

 

242.1

 

 

261.8

Accumulated other comprehensive income

 

  

 

 

150.9

 

 

150.9

Total shareholders' equity

 

  

 

 

2,123.8

 

 

2,013.6

Total liabilities and shareholders' equity

 

  

 

$

6,663.9

 

$

6,657.3

 

See accompanying notes to the Unaudited Condensed Consolidated Interim Financial Statements.

 

 

3

 

 

 

 

MAXAR TECHNOLOGIES LTD.

Unaudited Condensed Consolidated Statements of Change in Shareholders’ Equity

(In millions of United States dollars)

Six months ended June 30, 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated other comprehensive income

 

 

 

 

    

 

    

 

    

 

    

 

    

 

    

 

    

Actuarial

    

 

    

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

gains

 

 

 

 

 

 

 

 

 

 

 

 

Net

 

 

 

Fair

 

on defined

 

 

 

 

 

 

 

 

 

 

 

 

loss on

 

 

 

value

 

benefit

 

Total

 

 

 

 

 

 

 

 

 

 

hedge

 

Foreign

 

gains

 

pension plans

 

accumulated

 

 

 

 

 

 

 

 

 

 

of net investment

 

currency

 

(losses) on

 

and other

 

other

 

Total

 

 

Share

 

Contributed

 

Retained

 

in foreign

 

translation

 

cash flow

 

post-retirement

 

comprehensive

 

shareholders’

 

 

capital

 

surplus

 

earnings

 

operations

 

adjustment

 

hedges

 

benefit plans

 

income (loss)

 

equity

Balance as at January 1, 2018

 

$

1,550.3

 

$

50.6

 

$

261.8

 

$

(28.6)

 

$

157.9

 

$

3.3

 

$

18.3

 

$

150.9

 

$

2,013.6

Common shares issued as part of dissenting shareholder settlement

 

 

110.5

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

110.5

Common shares issued under employee share purchase plan

 

 

2.2

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

2.2

Common shares issued upon vesting or exercise of share-based compensation awards

 

 

7.1

 

 

(7.1)

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

Reclassification of cash-settled share-based compensation awards to equity-settled

 

 

 —

 

 

0.6

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

0.6

Equity-settled share-based compensation expense

 

 

 —

 

 

16.6

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

16.6

Dividends (C$0.74 per common share)

 

 

 —

 

 

 —

 

 

(32.1)

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(32.1)

Comprehensive income (loss)

 

 

 —

 

 

 —

 

 

12.4

 

 

(12.3)

 

 

12.2

 

 

0.1

 

 

 —

 

 

 —

 

 

12.4

Balance as at June 30, 2018

 

$

1,670.1

 

$

60.7

 

$

242.1

 

$

(40.9)

 

$

170.1

 

$

3.4

 

$

18.3

 

$

150.9

 

$

2,123.8

 

Six months ended June 30, 2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated other comprehensive income

 

 

 

 

    

 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

Actuarial

 

    

 

 

    

 

 

 

 

 

 

 

 

 

 

 

 

Net

 

 

 

 

 

 

 

Fair

 

gains

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

gain

 

 

 

 

Fair

 

value

 

on defined

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(loss) on

 

 

 

 

value

 

gains on

 

benefit

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

hedge

 

Foreign

 

gains

 

available-

 

pension plans

 

accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

of net investment

 

currency

 

(losses) on

 

for-sale 

 

and other

 

other

 

Total

 

 

Share

 

Contributed

 

Retained

 

in foreign

 

translation

 

cash flow

 

financial

 

post-retirement

 

comprehensive

 

shareholders’

 

    

capital

    

surplus

    

earnings

    

operations

    

adjustment

    

hedges

    

assets

    

benefit plans

    

income (loss)

    

equity

Balance as at January 1, 2017

 

$

466.9

 

$

31.0

 

$

208.8

 

$

(28.4)

 

$

152.3

 

$

10.2

 

$

0.7

 

$

21.5

 

$

156.3

 

$

863.0

Common shares issued under employee share purchase plan

 

 

2.5

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

2.5

Common shares issued upon exercise of share-based compensation awards

 

 

1.1

 

 

(1.1)

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

Equity-settled share-based compensation expense

 

 

 —

 

 

4.4

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

4.4

Dividends (C$0.74 per common share)

 

 

 —

 

 

 —

 

 

(20.2)

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(20.2)

Comprehensive income (loss)

 

 

 —

 

 

 —

 

 

23.6

 

 

1.3

 

 

0.7

 

 

(8.5)

 

 

0.1

 

 

 —

 

 

(6.4)

 

 

17.2

Balance as at June 30, 2017

 

$

470.5

 

$

34.3

 

$

212.2

 

$

(27.1)

 

$

153.0

 

$

1.7

 

$

0.8

 

$

21.5

 

$

149.9

 

$

866.9

 

See accompanying notes to the Unaudited Condensed Consolidated Interim Financial Statements.

 

4

 

 

MAXAR TECHNOLOGIES LTD.

Unaudited Condensed Consolidated Statement of Cash Flows

(In millions of United States dollars)

 

 

 

 

 

 

 

 

 

 

 

 

 

Six months ended

 

 

 

 

June 30, 

 

    

Note

    

2018

    

2017

Cash flows provided by (used in):

 

 

 

 

 

 

 

 

Operating activities:

 

  

 

 

  

 

 

  

Net earnings

 

  

 

$

12.4

 

$

23.6

Adjustments to reconcile to net cash from operating activities:

 

  

 

 

  

 

 

  

Depreciation of property, plant and equipment

 

  

 

 

78.0

 

 

16.4

Amortization of intangible assets

 

  

 

 

149.5

 

 

21.9

Share-based compensation expense

 

10

 

 

9.3

 

 

6.8

Finance income

 

  

 

 

(0.3)

 

 

(0.1)

Finance expense

 

  

 

 

90.0

 

 

16.8

Foreign exchange loss (gain)

 

  

 

 

8.2

 

 

(9.9)

Income tax (recovery) expense

 

  

 

 

(13.0)

 

 

13.3

Income taxes paid, net

 

  

 

 

(1.6)

 

 

(0.7)

Settlement with preferred stockholders

 

 

 

 

3.2

 

 

 —

Loss on sale of subsidiary

 

 

 

 

2.8

 

 

 —

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Trade and other receivables

 

 

 

 

14.2

 

 

37.1

Contract assets

 

 

 

 

(72.2)

 

 

1.0

Financial assets, other

 

 

 

 

(32.6)

 

 

(25.0)

Trade and other payables

 

 

 

 

19.8

 

 

23.0

Employee benefits liability

 

 

 

 

(15.6)

 

 

(8.0)

Contract liabilities

 

 

 

 

(113.9)

 

 

(114.8)

Financial liabilities, other

 

 

 

 

3.1

 

 

5.4

Cash provided by operating activities

 

  

 

 

141.3

 

 

6.8

 

 

 

 

 

 

 

 

 

Investing activities:

 

  

 

 

  

 

 

  

Purchase of property, plant and equipment

 

  

 

 

(85.4)

 

 

(20.4)

Purchase/development of intangible assets

 

  

 

 

(74.8)

 

 

(28.9)

Decrease in restricted cash

 

  

 

 

13.9

 

 

6.3

Cash collected on note receivable

 

 

 

 

5.0

 

 

 —

Disposal of subsidiary and short-term investments

 

  

 

 

4.7

 

 

0.1

Cash used in investing activities

 

  

 

 

(136.6)

 

 

(42.9)

 

 

 

 

 

 

 

 

 

Financing activities:

 

  

 

 

  

 

 

  

Net proceeds from the Syndicated Credit Facility and other long-term debt

 

  

 

 

128.3

 

 

190.5

Repayment of 2017 Term Notes

 

 

 

 

 —

 

 

(100.0)

Repayment of 2024 Term Notes

 

 

 

 

 —

 

 

(10.2)

Interest paid on long-term debt

 

 

 

 

(98.4)

 

 

(16.0)

Payment of dividends and other

 

 

 

 

(32.5)

 

 

(18.6)

Settlement of securitization liability, including interest

 

  

 

 

(9.1)

 

 

(10.9)

Cash (used in) provided by financing activities

 

 

 

 

(11.7)

 

 

34.8

Decrease in cash and cash equivalents

 

 

 

 

(7.0)

 

 

(1.3)

Effect of foreign exchange on cash and cash equivalents

 

 

 

 

(0.1)

 

 

(0.7)

Cash and cash equivalents, beginning of period (a)

 

 

 

 

19.1

 

 

(3.8)

Cash and cash equivalents, end of period (a)

 

 

 

$

12.0

 

$

(5.8)

 

(a)

Cash and cash equivalents are net of bank overdrafts of $1.3 million and $11.8 million as at June 30, 2018 and 2017, respectively. There were no bank overdrafts as at December 31, 2017.

 

See accompanying notes to the Unaudited Condensed Consolidated Interim Financial Statements.

 

 

MAXAR TECHNOLOGIES LTD.

Notes to the Unaudited Condensed Consolidated Interim Financial Statements

(Tabular amounts in millions of United States dollars, except per share amounts)

Three and six months ended June 30, 2018 and 2017

1.General business description:

Maxar Technologies Ltd. (the “Company” or “Maxar”), is a corporation continued under the laws of the province of British Columbia, Canada with common shares listed on the Toronto Stock Exchange and the New York Stock Exchange, each under the symbol: MAXR. On October 5, 2017, the Company’s name was changed from MacDonald, Dettwiler and Associates Ltd. to Maxar Technologies Ltd. The Company’s registered office is located at Suite 1700, 666 Burrard Street, Vancouver, British Columbia, Canada.

Maxar is an industry leading vertically-integrated space and geospatial intelligence company with a full range of space technology solutions for commercial and government customers including satellite building and operations, ground infrastructure, space robotics, earth imagery, geospatial data and analytics.

2.Basis of preparation:

These unaudited condensed consolidated interim financial statements were prepared using the same accounting policies and methods as those used in the Company’s consolidated financial statements for the year ended December 31, 2017, with the exception of new accounting policies that were adopted on January 1, 2018 as described in note 3.  In addition, the Company reclassified $27.4 million related to its equity method investment in a joint venture from non-current non-financial assets to non-current financial assets, other. Certain other prior period amounts have been reclassified to conform to the current period presentation. These condensed consolidated interim financial statements have been prepared in compliance with IAS 34 - Interim Financial Reporting. Accordingly, certain disclosures normally included in annual financial statements prepared in accordance with International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board (the “IASB”), have been omitted or condensed. These condensed consolidated interim financial statements should be read in conjunction with the Company’s consolidated financial statements for the year ended December 31, 2017, which are included in the Company’s 2017 Annual Report.

6

 

 

MAXAR TECHNOLOGIES LTD.

Notes to the Unaudited Condensed Consolidated Interim Financial Statements

(Tabular amounts in millions of United States dollars, except per share amounts)

Three and six months ended June 30, 2018 and 2017

3.Change in accounting policy:

IFRS 15 - Revenue from Contracts with Customers

In May 2014, the IASB issued IFRS 15 - Revenue from Contracts with Customers, which supersedes IAS 18 - Revenue, IAS 11 - Construction Contracts and other interpretive guidance associated with revenue recognition. IFRS 15 provides a single, principles-based five-step model to be applied to all contracts with customers to determine how and when an entity should recognize revenue. The standard also provides guidance on whether revenue should be recognized at a point in time or over time as well as requirements for more informative, relevant disclosures.

The Company adopted IFRS 15 on January 1, 2018 and its adoption did not have a material impact on the Company’s condensed consolidated interim financial statements and related disclosures, except for the classification of certain liabilities as described below. The Company has applied IFRS 15 in accordance with the full retrospective transitional approach, and used the practical expedients for completed contracts in IFRS 15.C5(a) and (b), and for modified contracts in accordance with IFRS 15.C5(c).

IFRS 15 did not have a significant impact on the Company’s accounting policies. Approximately half of the Company’s revenue related to construction contracts which will continue to be recognized over time under the cost-to-cost method under the new standard. The Company identified that certain of its construction contracts had two performance obligations under IFRS 15 versus one component under IAS 11 and IAS 18. However, this change did not materially impact revenue recognition for the periods presented and is not expected to materially impact the amount or timing of revenue recognized in the future. The remainder of the Company’s revenue is related to services contracts in its Imagery and Services segments. Revenue in the Imagery segment is recognized based on satellite capacity made available to the customer in a particular period, when imagery is delivered to the customer, or ratably over the subscription period. Under IAS 18, the Company was accounting for certain of its performance obligations on a straight-line basis. However, under IFRS 15, the Company will recognize revenue for these performance obligations as imagery is delivered. This change has not and is not expected to materially impact the amount or timing of revenues. The Services segment primarily enters into contracts that compensate the Company at a firm fixed price or on a time and materials basis. Revenue is typically recognized for these contracts over time based on the stage of services completed to date as a percentage of total services to be performed, or on the basis of time plus reimbursable costs incurred during the period. The Company did not identify any changes to its accounting policies for contracts in its Services segment as a result of applying IFRS 15.

 

IFRS 15 uses the term ‘contract asset’ and ‘contract liability’ to describe what the Company previously referred to as ‘construction contract assets’, ‘construction contract liabilities’ and ‘deferred revenue’. While the standard does not prohibit an entity from using alternative descriptions in the statement of financial position, the Company has adopted the terminology used in IFRS 15 to describe such balances. As at December 31, 2017, deferred revenue of $206.6 million and $134.3 million was previously classified in ‘current non-financial liabilities’ and ‘non-current non-financial liabilities’, respectively. Those amounts have been reclassified to current and non-current contract liabilities, respectively.

IFRS 9 - Financial Instruments

In July 2014, the IASB issued IFRS 9 - Financial Instruments, which replaces the earlier versions of IFRS 9 (2009, 2010, and 2013) and completes the IASB’s project to replace IAS 39 - Financial Instruments: Recognition and Measurement. IFRS 9 includes a logical model for classification and measurement of financial assets; a single, forward-looking ‘expected credit loss’ impairment model and a substantially reformed approach to hedge accounting to better link the economics of risk management with its accounting treatment.

7

 

 

MAXAR TECHNOLOGIES LTD.

Notes to the Unaudited Condensed Consolidated Interim Financial Statements

(Tabular amounts in millions of United States dollars, except per share amounts)

Three and six months ended June 30, 2018 and 2017

The Company adopted IFRS 9 on January 1, 2018. The adoption of IFRS 9 did not have a material impact on the Company’s condensed consolidated interim financial statements and related disclosures. With respect to classification and measurement, the Company has applied the exemption not to restate comparative information for prior periods. The determination of the business model within which a financial asset is held has been made on the basis of facts and circumstances that existed at the date of initial application. The following table and the accompanying notes below explain the original measurement categories under IAS 39 and the new measurement categories under IFRS 9 for each class of financial assets as at January 1, 2018. The new carrying amounts under IFRS 9 are the same as the original carrying amounts under IAS 39.

 

 

 

 

 

 

 

IAS 39

 

IFRS 9

Financial assets:

 

 

 

 

Current:

 

 

 

 

Cash and cash equivalents

 

Loans & receivables

 

Amortized cost

Trade and other receivables

 

Loans & receivables

 

Amortized cost

 

 

 

 

 

Financial assets, other:

 

 

 

 

Short-term investments1

 

Available for sale

 

Fair value through earnings

Notes receivable

 

Loans & receivables

 

Amortized cost

Derivative financial instruments

 

Fair value through earnings

 

Fair value through earnings

Restricted cash

 

Loans & receivables

 

Amortized cost

 

 

 

 

 

Non-current:

 

 

 

 

Financial assets, other:

 

 

 

 

Notes receivable

 

Loans & receivables

 

Amortized cost

Derivative financial instruments

 

Fair value through earnings

 

Fair value through earnings

Long-term investments2

 

Available for sale

 

Fair value through earnings

Restricted cash

 

Loans & receivables

 

Amortized cost

 

1

The balance included in other comprehensive income related to these assets was zero at December 31, 2017. Therefore, no adjustment was required to retained earnings as at January 1, 2018.

2

IFRS 9 requires all investments in equity instruments to be measured at fair value. However, in limited instances, cost may be an appropriate estimate of fair value. The Company determined that cost was an appropriate estimate of fair value as at January 1, 2018 and June 30, 2018.

Refer to note 7 for the carrying amounts and fair values of financial assets and financial liabilities.

The Company has elected to defer application of the new general hedging model under IFRS 9 on all of its hedges and continue to apply the hedge accounting requirements of IAS 39 in their entirety until the standard resulting from the IASB's project on macro hedge accounting is effective.

 

8

 

 

MAXAR TECHNOLOGIES LTD.

Notes to the Unaudited Condensed Consolidated Interim Financial Statements

(Tabular amounts in millions of United States dollars, except per share amounts)

Three and six months ended June 30, 2018 and 2017

4.New standards and interpretations not yet adopted:

IFRS 16 - Leases 

In January 2017, the IASB issued IFRS 16 - Leases, which supersedes IAS 17 - Leases. IFRS 16 establishes principles for the recognition, measurement, presentation and disclosure of leases. The standard establishes a single model for lessees to bring leases on-balance sheet while lessor accounting remains largely unchanged and retains the finance and operating lease distinctions. IFRS 16 is effective for annual periods beginning on or after January 1, 2019. The Company is currently evaluating the impact of IFRS 16 on its financial statements.

5.Business combination: 

On October 5, 2017, the Company completed the acquisition of DigitalGlobe, Inc. (“DigitalGlobe”) for a combination of equity and cash consideration totaling $2,328.2 million (the “DigitalGlobe Transaction”). Headquartered in Westminster, Colorado, DigitalGlobe is a global leading provider of high-resolution Earth imagery, data and analysis.

The merger consideration paid out on the closing of the transaction excluded amounts due to dissenting shareholders owning 80,000 shares of DigitalGlobe Series A Convertible Preferred Stock (the “Preferred Stockholders”) and 352,225 common shares of DigitalGlobe. In the fourth quarter of 2017, shareholders owning 90,000 DigitalGlobe common shares withdrew their dissent and were paid the original merger consideration in the second quarter of 2018.  On June 15, 2018, the Company entered into an agreement to settle all pending litigation with the Preferred Stockholders (the “Settlement Agreement”). Under the Settlement Agreement, the Preferred Stockholders received (i) 2,206,464 common shares of Maxar and (ii) a payment in cash for the interest that has accrued on the merger consideration from the closing of the DigitalGlobe Transaction. Refer to note 11 for the settlement with Preferred Stockholders included within the statement of earnings.

In note 9 of the Company’s consolidated financial statements for the year ended December 31, 2017, the Company disclosed the fair value of the consideration transferred and the preliminary estimated fair values of the major classes of assets acquired and liabilities assumed at the acquisition date. No significant adjustments have been made for the six months ended June 30, 2018. The Company may adjust the preliminary purchase price allocation, as necessary, up to one year after the acquisition closing date as new information is obtained about facts and circumstances that existed as of the closing date. Changes in estimates and assumptions used could have a material impact on the amount of goodwill recorded and the amount of depreciation and amortization expense recognized in earnings for depreciable assets in future periods.

6.Debt:

 

 

 

 

 

 

 

 

 

June 30, 

 

December 31, 

 

    

2018

    

2017

Syndicated Credit Facility:

 

 

  

 

 

  

Revolving loan payable

 

$

572.0

 

$

454.0

Operating loan payable in Canadian dollars (June 30, 2018 - C$81.0 million; December 31, 2017 - C$51.0 million)

 

 

61.7

 

 

40.6

Term Loan A

 

 

500.0

 

 

500.0

Term Loan B

 

 

1,990.0

 

 

2,000.0

Financing fees

 

 

(45.9)

 

 

(52.4)

Obligations under finance leases

 

 

16.7

 

 

18.8

Total long-term debt

 

 

3,094.5

 

 

2,961.0

Current portion

 

 

(18.1)

 

 

(18.1)

Non-current portion

 

$

3,076.4

 

$

2,942.9

 

9

 

 

MAXAR TECHNOLOGIES LTD.

Notes to the Unaudited Condensed Consolidated Interim Financial Statements

(Tabular amounts in millions of United States dollars, except per share amounts)

Three and six months ended June 30, 2018 and 2017

On October 5, 2017, in connection with the DigitalGlobe Transaction, the Company entered into a $3.75 billion senior secured syndicated credit facility (the “Syndicated Credit Facility”), which is comprised of the four-year senior secured first lien revolving credit facility and four-year senior secured first lien operating facility (collectively, the “Revolving Credit Facility”), the senior secured first lien term A facility (“Term Loan A”), and the seven-year senior secured first lien term B facility (“Term Loan B”). The net proceeds of the Syndicated Credit Facility were used, along with cash on hand, to consummate the DigitalGlobe Transaction, to refinance all amounts outstanding under the Company’s existing syndicated credit facility and senior term loans, to repay DigitalGlobe’s outstanding indebtedness, to pay transaction fees and expenses, to fund working capital and for general corporate purposes.

Term Loan B amortizes in equal quarterly installments in aggregate annual amounts equal to 1% of the original principal amount of the loan. On June 29, 2018, the Company repaid the quarterly $5.0 million installment of Term Loan B, for total repayments of $10.0 million during the six months ended June 30, 2018.

The Revolving Credit Facility includes an aggregate $200.0 million sub limit under which letters of credit can be issued. As of June 30, 2018 and December 31, 2017, the Company had $18.5 million and $25.8 million, respectively, of issued and undrawn letters of credit outstanding under the Revolving Credit Facility.

 

7.Financial instruments and fair value disclosures:

(a) Financial instruments by category:

The classification of financial assets and liabilities and their carrying amounts are as follows:

As at June 30, 2018:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

    

Derivative

    

 

    

 

 

    

 

 

 

Financial

 

instruments

 

 

 

 

 

 

 

 

 

assets at

 

in a

 

 

 

 

 

 

 

 

 

fair value

 

qualifying 

 

 

 

Other

 

Total

 

 

through

 

hedging

 

Amortized

 

financial

 

carrying

 

 

earnings

 

relationship

 

cost

 

assets

 

amount

Financial assets:

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

Current:

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

Cash and cash equivalents

 

$

 -

 

$

 -

 

$

13.3

 

$

 -

 

$

13.3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trade accounts receivable1

 

$

 -

 

$

 -

 

$

299.0

 

$

 -

 

$

299.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial assets, other:

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

Short-term investments

 

$

5.7

 

$

 -

 

$

 -

 

$

 -

 

$

5.7

Notes receivable

 

 

 -

 

 

 -

 

 

0.1

 

 

 -

 

 

0.1

Derivative financial instruments

 

 

3.2

 

 

1.3

 

 

 -

 

 

 -

 

 

4.5

Restricted cash

 

 

 -

 

 

 -

 

 

6.6

 

 

 -

 

 

6.6

 

 

$

8.9

 

$

1.3

 

$

6.7

 

$

 -

 

$

16.9

Non-current:

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

Financial assets, other:

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

Notes receivable

 

$

 -

 

$

 -

 

$

21.2

 

$

 -

 

$

21.2

Derivative financial instruments

 

 

1.6

 

 

6.0

 

 

 -

 

 

 -

 

 

7.6

Long-term investments2

 

 

25.1

 

 

 -

 

 

1.2

 

 

 -

 

 

26.3

Restricted cash

 

 

 -

 

 

 -

 

 

2.4

 

 

 -

 

 

2.4

 

 

$

26.7

 

$

6.0

 

$

24.8

 

$

 -

 

$

57.5

 

1

Other receivables of $29.8 million are not considered to be financial assets under IFRS 9.

2

Long-term investments excludes an investment of $25.4 million in a joint venture not subject to the scope of IFRS 9.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

    

Derivative

    

 

    

 

 

 

Financial

 

instruments

 

 

 

 

 

 

liabilities at

 

in a

 

 

 

 

 

 

fair value

 

qualifying 

 

 

 

Total

 

 

through

 

hedging

 

Amortized

 

carrying

 

 

earnings

 

relationship

 

cost

 

amount

Financial liabilities:

 

 

  

 

 

  

 

 

  

 

 

  

Current:

 

 

  

 

 

  

 

 

  

 

 

  

Trade and other payables

 

$

 -

 

$

 -

 

$

236.6

 

$

236.6

Financial liabilities, other:

 

 

  

 

 

  

 

 

  

 

 

  

Non-trade payables

 

$

 -

 

$

 -

 

$

4.5

 

$

4.5

Derivative financial instruments

 

 

2.4

 

 

4.7

 

 

 -

 

 

7.1

 

 

$

2.4

 

$

4.7

 

$

4.5

 

$

11.6

 

 

 

 

 

 

 

 

 

 

 

 

 

Securitization liability

 

$

 -

 

$

 -

 

$

15.4

 

$

15.4

Long-term debt:

 

 

  

 

 

  

 

 

  

 

 

  

Long-term debt

 

$

 -

 

$

 -

 

$

11.8

 

$

11.8

Obligations under finance leases

 

 

 -

 

 

 -

 

 

6.3

 

 

6.3

 

 

$

 -

 

$

 -

 

$

18.1

 

$

18.1

Non-current:

 

 

  

 

 

  

 

 

  

 

 

  

Financial liabilities, other:

 

 

  

 

 

  

 

 

  

 

 

  

Non-trade payables

 

$

 -

 

$

 -

 

$

13.6

 

$

13.6

Derivative financial instruments

 

 

0.2

 

 

0.7

 

 

 -

 

 

0.9

 

 

$

0.2

 

$

0.7

 

$

13.6

 

$

14.5

 

 

 

 

 

 

 

 

 

 

 

 

 

Securitization liability

 

$

 -

 

$

 -

 

$

84.9

 

$

84.9

Long-term debt:

 

 

  

 

 

  

 

 

  

 

 

  

Long-term debt

 

$

 -

 

$

 -

 

$

3,066.0

 

$

3,066.0

Obligations under finance leases

 

 

 -

 

 

 -

 

 

10.4

 

 

10.4

 

 

$

 -

 

$

 -

 

$

3,076.4

 

$

3,076.4

 

 

(b) Fair value of financial instruments:

 

The table below provides information about fair value of financial assets and liabilities carried at fair value as at June 30, 2018, except for the Company’s long-term investments. The different levels have been defined as follows:

Level 1:   Quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2:   Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

Level 3:   Inputs for the assets  or liabilities that are not based on observable market data (unobservable inputs).

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30, 2018

    

Level 1

    

Level 2

    

Level 3

    

Total

Assets

 

 

  

 

 

  

 

 

  

 

 

  

Short-term investments

 

$

5.7

 

$

 -

 

$

 -

 

$

5.7

Derivative financial instruments

 

$

 -

 

$

12.1

 

$

 -

 

$

12.1

Liabilities

 

 

  

 

 

  

 

 

  

 

 

  

Derivative financial instruments

 

$

 -

 

$

8.0

 

$

 -

 

$

8.0

 

For the three and six months ended June 30, 2018, no transfers occurred between Level 1 and Level 2 financial instruments.

The fair values of the short-term investments are based on their quoted prices. The Company determines fair value of its derivative financial instruments based on internal valuation models, such as discounted cash flow analysis, using management estimates and observable market-based inputs, as applicable. Management estimates include assumptions concerning the amount and timing of estimated future cash flows and application of appropriate discount rates. Observable market-based inputs are sourced from third parties and include interest rates and yield curves, currency spot and forward rates, and credit spreads, as applicable.

Long-term investments includes an investment of $24.9 million (C$32.7 million) (December 31, 2017 - $26.1 million (C$32.7 million)) in unquoted equity securities in which the Company does not have significant influence. The Company determined that as at June 30, 2018, cost is a reasonable approximation of fair value.

The table below provides information about the fair value of financial assets and liabilities carried at amortized cost as at June 30, 2018 and December 31, 2017. It does not include fair value information for financial assets and liabilities if the carrying amount is a reasonable approximation of fair value. Except for long-term debt and the Company’s securitization liability, the fair values of all financial instruments carried at amortized cost approximated their carrying values as at June 30, 2018 and December 31, 2017.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Carrying

 

 

Fair Value

 

 

 

Value

 

 

Level 1

 

 

Level 2

 

 

Level 3

Long-term debt at June 30, 2018

 

$

3,077.8

 

$

 -

 

$

3,256.1

 

$

 -

Long-term debt at December 31, 2017

 

$

2,942.2

 

$

 -

 

$

3,176.3

 

$

 -

Securitization liability at June 30, 2018

 

$

100.3

 

$

 -

 

$

108.0

 

$

 -

Securitization liability at December 31, 2017

 

$

106.3

 

$

 -

 

$

118.1

 

$

 -

 

As at June 30, 2018 and December 31, 2017, substantially all of the Company’s assets were pledged as collateral.

10

 

 

MAXAR TECHNOLOGIES LTD.

Notes to the Unaudited Condensed Consolidated Interim Financial Statements

(Tabular amounts in millions of United States dollars, except per share amounts)

Three and six months ended June 30, 2018 and 2017

(c) Credit risk:

The Company has provided financial guarantee contracts to export credit agencies in the form of indemnities or letters of credit in partial support of selected satellite financings provided by the export credit agencies. If the financial guarantee contracts were called upon, the maximum value of the financial guarantee contracts as at June 30, 2018 would amount to $54.0 million (December 31, 2017 - $59.7 million).

8.Revenue and segmented information:

The Company’s business is organized into market sectors based on its products and services and has three reportable segments: (i)  Space Systems;  (ii)  Imagery; and (iii) Services.

Segmented information is prepared using the accounting policies described in note 3 of the Company’s consolidated financial statements for the year ended December 31, 2017, except for the application of hedge accounting, and as adjusted to reflect accounting policies adopted as of January 1, 2018 (refer to note 3). For segment reporting, hedge accounting is applied to all such hedging relationships even when not qualifying for hedge accounting under IFRS.

The Company’s Chief Operating Decision Maker (“CODM”) measures the performance of each segment based on revenue, adjusted EBITDA and segment Adjusted EBIT. Adjusted EBITDA is a non-IFRS measure and is defined as earnings before interest, taxes, depreciation and amortization, adjusted for items that management does not consider when evaluating segment performance including foreign exchange gains and losses, adjustments relating to hedge accounting as described above, share-based compensation expense or recovery, and other income or expense. Segment Adjusted EBIT is a non-IFRS measure and is defined as adjusted EBITDA less depreciation and amortization expense, excluding amortization of acquisition related intangible assets. The following table summarizes the operating performance of the reporting segments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended

 

Six months ended

 

 

June 30, 

 

June 30, 

 

    

2018

    

2017

    

2018

    

2017

Revenues:

 

 

  

 

 

  

 

 

  

 

 

  

Space Systems

 

$

329.9

 

$

338.2

 

$

623.3

 

$

679.7

Imagery

 

 

212.0

 

 

10.9

 

 

423.4

 

 

18.6

Services

 

 

66.3

 

 

27.2

 

 

136.3

 

 

52.6

Intersegment eliminations

 

 

(29.3)

 

 

(1.1)

 

 

(46.4)

 

 

(2.2)

Total Revenue

 

$

578.9

 

$

375.2

 

$

1,136.6

 

$

748.7

 

 

 

 

 

 

 

 

 

 

 

 

 

Intersegment revenue eliminations:

 

 

  

 

 

  

 

 

  

 

 

  

Space Systems

 

$

26.0

 

$

0.6

 

$

39.6

 

$

1.4

Imagery

 

 

1.2

 

 

0.5

 

 

2.5

 

 

0.7

Services

 

 

2.1

 

 

 —

 

 

4.3

 

 

0.1

 

 

$

29.3

 

$

1.1

 

$

46.4

 

$

2.2

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA:

 

 

 

 

 

 

 

 

 

 

 

 

Space Systems

 

$

42.2

 

$

61.4

 

$

96.8

 

$

123.6

Imagery

 

 

136.2

 

 

6.5

 

 

274.3

 

 

9.5

Services

 

 

6.9

 

 

4.7

 

 

14.0

 

 

8.7

Intersegment eliminations

 

 

(5.4)

 

 

 —

 

 

(7.4)

 

 

 —

Total Segment Adjusted EBITDA

 

$

179.9

 

$

72.6

 

$

377.7

 

$

141.8

Space Systems depreciation and amortization

 

 

12.2

 

 

10.3

 

 

21.5

 

 

20.3

Imagery depreciation and amortization

 

 

34.2

 

 

 —

 

 

67.9

 

 

0.1

Services depreciation and amortization

 

 

(2.5)

 

 

1.0

 

 

1.7

 

 

1.9

Segment Adjusted EBIT

 

$

136.0

 

$

61.3

 

$

286.6

 

$

119.5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended

 

Six months ended

 

 

June 30, 

 

June 30, 

 

    

2018

    

2017

    

2018

    

2017

Segment Adjusted EBIT

 

$

136.0

 

$

61.3

 

$

286.6

 

$

119.5

Unallocated corporate expenses

 

 

(8.7)

 

 

(6.6)

 

 

(19.1)

 

 

(12.7)

Amortization of acquisition related intangible assets

 

 

(71.2)

 

 

(8.0)

 

 

(136.4)

 

 

(16.0)

Foreign exchange differences

 

 

(2.6)

 

 

10.0

 

 

(1.5)

 

 

10.1

Share-based compensation expense (note 10)

 

 

(10.6)

 

 

(2.0)

 

 

(9.3)

 

 

(6.8)

Other expense (note 11)

 

 

(22.0)

 

 

(17.1)

 

 

(29.3)

 

 

(35.8)

Earnings before interest and income taxes

 

 

20.9

 

 

37.6

 

 

91.0

 

 

58.3

Finance expense, net

 

 

(48.7)

 

 

(10.8)

 

 

(94.2)

 

 

(21.4)

(Loss) earnings before income taxes

 

$

(27.8)

 

$

26.8

 

$

(3.2)

 

$

36.9

 

 

 

 

 

 

 

 

 

 

 

 

 

The Company’s capital expenditures are as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Space

 

 

 

 

 

 

 

Corporate and

 

 

 

Three months ended June 30, 2018

 

 

Systems

    

 

Imagery

    

 

Services

    

eliminations

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital expenditures:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property, plant and equipment

 

$

5.2

 

$

41.4

 

$

0.8

 

$

(5.6)

 

$

41.8

Intangible assets

 

 

25.6

 

 

15.0

 

 

1.0

 

 

(0.7)

 

 

40.9

 

 

$

30.8

 

$

56.4

 

$

1.8

 

$

(6.3)

 

$

82.7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Space

 

 

 

 

 

 

 

Corporate and

 

 

 

Three months ended June 30, 2017

 

 

Systems

    

 

Imagery

    

 

Services

    

eliminations

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital expenditures:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property, plant and equipment

 

$

12.2

 

$

 —

 

$

0.2

 

$

 —

 

$

12.4

Intangible assets

 

 

11.1

 

 

 —

 

 

0.1

 

 

 —

 

 

11.2

 

 

$

23.3

 

$

 —

 

$

0.3

 

$

 —

 

$

23.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Space

 

 

 

 

 

 

 

Corporate and

 

 

 

Six months ended June 30, 2018

 

 

Systems

    

 

Imagery

    

 

Services

    

eliminations

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital expenditures:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property, plant and equipment

 

$

11.2

 

$

78.9

 

$

0.8

 

$

(5.5)

 

$

85.4

Intangible assets

 

 

42.0

 

 

31.9

 

 

1.6

 

 

(0.7)

 

 

74.8

 

 

$

53.2

 

$

110.8

 

$

2.4

 

$

(6.2)

 

$

160.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Space

 

 

 

 

 

 

 

Corporate and

 

 

 

Six months ended June 30, 2017

 

 

Systems

    

 

Imagery

    

 

Services

    

eliminations

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital expenditures:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property, plant and equipment

 

$

19.7

 

$

 —

 

$

0.7

 

$

 —

 

$

20.4

Intangible assets

 

 

28.5

 

 

 —

 

 

0.2

 

 

0.2

 

 

28.9

 

 

$

48.2

 

$

 —

 

$

0.9

 

$

0.2

 

$

49.3

 

11

 

 

MAXAR TECHNOLOGIES LTD.

Notes to the Unaudited Condensed Consolidated Interim Financial Statements

(Tabular amounts in millions of United States dollars, except per share amounts)

Three and six months ended June 30, 2018 and 2017

The Company’s primary sources of revenue are as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Space

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended June 30, 2018

    

Systems

    

Imagery

    

Services

    

Eliminations

    

Total

Construction contracts

 

$

307.0

 

$

 —

 

$

0.8

 

$

(26.5)

 

$

281.3

Service contracts

 

 

22.9

 

 

212.0

 

 

65.5

 

 

(2.8)

 

 

297.6

 

 

$

329.9

 

$

212.0

 

$

66.3

 

$

(29.3)

 

$

578.9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Space

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended June 30, 2017

    

Systems

    

Imagery

    

Services

    

Eliminations

    

Total

Construction contracts

 

$

318.4

 

$

 —

 

$

1.7

 

$

(0.5)

 

$

319.6

Service contracts

 

 

19.8

 

 

10.9

 

 

25.5

 

 

(0.6)

 

 

55.6

 

 

$

338.2

 

$

10.9

 

$

27.2

 

$

(1.1)

 

$

375.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Space

 

 

 

 

 

 

 

 

 

 

 

 

Six months ended June 30, 2018

    

Systems

    

Imagery

    

Services

    

Eliminations

    

Total

Construction contracts

 

$

596.3

 

$

 —

 

$

1.5

 

$

(39.6)

 

$

558.2

Service contracts

 

 

27.0

 

 

423.4

 

 

134.8

 

 

(6.8)

 

 

578.4

 

 

$

623.3

 

$

423.4

 

$

136.3

 

$

(46.4)

 

$

1,136.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Space

 

 

 

 

 

 

 

 

 

 

 

 

Six months ended June 30, 2017

    

Systems

    

Imagery

    

Services

    

Eliminations

    

Total

Construction contracts

 

$

636.7

 

$

 —

 

$

3.3

 

$

(0.7)

 

$

639.3

Service contracts

 

 

43.0

 

 

18.6

 

 

49.3

 

 

(1.5)

 

 

109.4

 

 

$

679.7

 

$

18.6

 

$

52.6

 

$

(2.2)

 

$

748.7

 

Certain of the Company’s contracts with customers in the Space Systems segment include a significant financing component since payments are received from the customer more than one year after delivery of the promised goods or services. The Company recognized orbital interest revenue of $8.6 million and $16.4 million for the three and six months ended June 30, 2018, respectively (three and six months ended June 30, 2017 - $9.1 million and $17.6 million, respectively) related to these contracts, which is included in revenue from construction contracts.

12

 

 

MAXAR TECHNOLOGIES LTD.

Notes to the Unaudited Condensed Consolidated Interim Financial Statements

(Tabular amounts in millions of United States dollars, except per share amounts)

Three and six months ended June 30, 2018 and 2017

The approximate revenue based on geographic location of customers is as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Space

 

 

 

 

 

 

 

 

 

 

    

 

Three months ended June 30, 2018

    

 

Systems

    

 

Imagery

    

 

Services

    

 

Eliminations

 

Total

United States

 

$

171.8

 

$

134.3

 

$

61.8

 

$

(28.9)

 

$

339.0

Asia

 

 

34.4

 

 

57.5

 

 

3.6

 

 

 —

 

 

95.5

Canada

 

 

48.8

 

 

3.9

 

 

0.2

 

 

(0.4)

 

 

52.5

Europe

 

 

28.7

 

 

7.7

 

 

0.3

 

 

 —

 

 

36.7

South America

 

 

44.3

 

 

0.9

 

 

0.2

 

 

 —

 

 

45.4

Other

 

 

1.9

 

 

7.7

 

 

0.2

 

 

 —

 

 

9.8

 

 

$

329.9

 

$

212.0

 

$

66.3

 

$

(29.3)

 

$

578.9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Space

 

 

 

 

 

 

 

 

 

 

    

 

Three months ended June 30, 2017

    

 

Systems

    

 

Imagery

    

 

Services

    

 

Eliminations

 

Total

United States

 

$

113.4

 

$

1.3

 

$

25.0

 

$

(1.0)

 

$

138.7

Asia

 

 

66.5

 

 

1.0

 

 

1.5

 

 

 —

 

 

69.0

Canada

 

 

85.2

 

 

4.3

 

 

0.2

 

 

(0.1)

 

 

89.6

Europe

 

 

65.6

 

 

4.1

 

 

0.2

 

 

 —

 

 

69.9

South America

 

 

1.3

 

 

 —

 

 

 —

 

 

 —

 

 

1.3

Other

 

 

6.2

 

 

0.2

 

 

0.3

 

 

 —

 

 

6.7

 

 

$

338.2

 

$

10.9

 

$

27.2

 

$

(1.1)

 

$

375.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Space

 

 

 

 

 

 

 

 

 

 

    

 

Six months ended June 30, 2018

    

 

Systems

    

 

Imagery

    

 

Services

    

 

Eliminations

 

Total

United States

 

$

346.5

 

$

277.0

 

$

130.4

 

$

(45.9)

 

$

708.0

Asia

 

 

61.3

 

 

106.5

 

 

4.0

 

 

 —

 

 

171.8

Canada

 

 

92.9

 

 

7.9

 

 

0.4

 

 

(0.5)

 

 

100.7

Europe

 

 

54.1

 

 

14.9

 

 

0.7

 

 

 —

 

 

69.7

South America

 

 

65.3

 

 

1.7

 

 

0.4

 

 

 —

 

 

67.4

Other

 

 

3.2

 

 

15.4

 

 

0.4

 

 

 —

 

 

19.0

 

 

$

623.3

 

$

423.4

 

$

136.3

 

$

(46.4)

 

$

1,136.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Space

 

 

 

 

 

 

 

 

 

 

    

 

Six months ended June 30, 2017

    

 

Systems

    

 

Imagery

    

 

Services

    

 

Eliminations

 

Total

United States

 

$

218.4

 

$

2.3

 

$

48.5

 

$

(2.0)

 

$

267.2

Asia

 

 

136.6

 

 

1.5

 

 

2.6

 

 

 —

 

 

140.7

Canada

 

 

182.0

 

 

6.7

 

 

0.4

 

 

(0.2)

 

 

188.9

Europe

 

 

114.5

 

 

7.6

 

 

0.4

 

 

 —

 

 

122.5

South America

 

 

7.4

 

 

0.1

 

 

0.1

 

 

 —

 

 

7.6

Other

 

 

20.8

 

 

0.4

 

 

0.6

 

 

 —

 

 

21.8

 

 

$

679.7

 

$

18.6

 

$

52.6

 

$

(2.2)

 

$

748.7

 

13

 

 

MAXAR TECHNOLOGIES LTD.

Notes to the Unaudited Condensed Consolidated Interim Financial Statements

(Tabular amounts in millions of United States dollars, except per share amounts)

Three and six months ended June 30, 2018 and 2017

Contract assets and contract liabilities by segment are as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Space

 

 

 

 

 

 

 

    

 

As at June 30, 2018

    

 

Systems

    

 

Imagery1

    

 

Services

    

Total

Contract Assets

 

$

197.3

 

$

 -

 

$

0.1

 

$

197.4

Contract Liabilities

 

$

193.9

 

$

287.3

 

$

3.0

 

$

484.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Space

 

 

 

 

 

 

 

    

 

As at December 31, 2017

    

 

Systems

    

 

Imagery1

    

 

Services

    

Total

Contract Assets

 

$

127.8

 

$

 -

 

$

0.5

 

$

128.3

Contract Liabilities

 

$

266.3

 

$

329.8

 

$

3.7

 

$

599.8

 

 

 

 

 

 

 

 

 

 

 

 

 

1

The contract liability balance associated with the Company’s EnhancedView contract was $232.0 million and $277.9 million at June 30, 2018 and December 31, 2017, respectively. During the six months ended June 30, 2018, imputed interest on advanced payments increased the contract liability balance by $14.1 million, and $60.0 million in revenue was recognized, decreasing the contract liability balance. The contract liability balance associated with the Company’s EnhancedView contract is expected to be recognized as revenue over the contract term, or through August 31, 2020. There were no deferred contract costs on the balance sheet associated with this contract as of June 30, 2018 or December 31, 2017.

Revenue from significant customers is as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended

 

Six months ended

 

 

June 30, 

 

June 30, 

 

    

2018

    

2017

    

2018

    

2017

Government:

 

 

  

 

 

  

 

 

  

 

 

  

U.S. Federal Government and agencies

 

$

219.3

 

$

40.2

 

$

451.0

 

$

68.1

Canadian Federal Government and agencies

 

$

30.5

 

$

47.3

 

$

58.7

 

$

98.5

 

The Company’s non-current non-financial assets, property, plant and equipment, intangible assets and goodwill are geographically located as follows:

 

 

 

 

 

 

 

 

    

June 30, 

    

December 31, 

 

 

2018

 

2017

United States

 

$

5,034.7

 

$

5,081.4

Canada

 

 

122.6

 

 

142.7

Europe

 

 

0.2

 

 

0.2

 

 

$

5,157.5

 

$

5,224.3

 

 

14

 

 

MAXAR TECHNOLOGIES LTD.

Notes to the Unaudited Condensed Consolidated Interim Financial Statements

(Tabular amounts in millions of United States dollars, except per share amounts)

Three and six months ended June 30, 2018 and 2017

9.Expenses by nature:

The following table classifies the Company’s operating expenses by nature:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended

 

Six months ended

 

 

June 30, 

 

June 30, 

 

    

2018

    

2017

    

2018

    

2017

Employee salaries and benefits

 

$

177.0

 

$

136.0

 

$

352.1

 

$

285.2

Costs related to defined benefit plans

 

 

1.6

 

 

2.0

 

 

3.2

 

 

4.1

Costs related to defined contribution plans

 

 

3.3

 

 

3.3

 

 

8.6

 

 

7.4

Inventories used

 

 

30.2

 

 

28.3

 

 

49.1

 

 

56.6

Subcontractor costs relating to construction and service contracts

 

 

117.1

 

 

107.0

 

 

215.6

 

 

196.1

Materials, equipment, professional fees, travel and other

 

 

78.0

 

 

32.1

 

 

148.9

 

 

69.8

Direct costs, selling, general and administration

 

 

407.2

 

 

308.7

 

 

777.5

 

 

619.2

Depreciation and amortization

 

 

115.1

 

 

19.3

 

 

227.5

 

 

38.3

Foreign exchange loss (gain)

 

 

3.1

 

 

(9.5)

 

 

2.0

 

 

(9.7)

Share-based compensation expense  (note 10)

 

 

10.6

 

 

2.0

 

 

9.3

 

 

6.8

Other expense (note 11)

 

 

22.0

 

 

17.1

 

 

29.3

 

 

35.8

 

 

$

558.0

 

$

337.6

 

$

1,045.6

 

$

690.4

 

 

10.Share-based payment plans:

The details of share-based compensation expense are as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

Three months ended

    

Six months ended

 

 

June 30, 

 

June 30, 

 

 

2018

 

2017

 

2018

 

2017

Share appreciation rights:

 

 

  

 

 

  

 

 

  

 

 

  

Cash-settled

 

$

1.7

 

$

(0.8)

 

$

(7.6)

 

$

1.9

Equity-settled

 

 

1.5

 

 

2.3

 

 

2.5

 

 

4.0

Restricted share units:

 

 

 

 

 

 

 

 

 

 

 

 

Equity-settled

 

 

6.8

 

 

 —

 

 

13.6

 

 

 —

Deferred share units:

 

 

 

 

 

 

 

 

 

 

 

 

Equity-settled

 

 

0.3

 

 

0.2

 

 

0.5

 

 

0.4

Share matching program

 

 

0.1

 

 

0.1

 

 

 —

 

 

0.1

Employee share purchase plan

 

 

0.2

 

 

0.2

 

 

0.3

 

 

0.4

Share-based compensation expense

 

$

10.6

 

$

2.0

 

$

9.3

 

$

6.8

 

As at June 30, 2018, the intrinsic value for vested cash-settled share-based payment awards, being the positive difference between the market price of the Company’s share and the exercise price of the award, was nil (December 31, 2017 - $2.3 million).

 

 

 

15

 

 

MAXAR TECHNOLOGIES LTD.

Notes to the Unaudited Condensed Consolidated Interim Financial Statements

(Tabular amounts in millions of United States dollars, except per share amounts)

Three and six months ended June 30, 2018 and 2017

11.Other expense:

The components of other expense are as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended

 

Six months ended

 

 

June 30, 

 

June 30, 

 

    

2018

    

2017

    

2018

    

2017

Acquisition and integration related expense

 

$

6.0

 

$

12.3

 

$

10.7

 

$

20.3

Restructuring and enterprise improvement costs

 

 

12.2

 

 

4.8

 

 

12.6

 

 

15.5

Settlement with preferred stockholders

 

 

3.2

 

 

 —

 

 

3.2

 

 

 —

Loss on sale of subsidiary

 

 

0.6

 

 

 —

 

 

2.8

 

 

 —

Other expense

 

$

22.0

 

$

17.1

 

$

29.3

 

$

35.8

 

For the three and six months ended June 30, 2018, the Company incurred costs of $6.0 million and $10.7 million, respectively, for integration related costs in connection with the DigitalGlobe Transaction compared to $12.3 million and $20.3 million of acquisition related costs for the same periods of 2017, respectively. The expenditures in 2018 related to retention, creating cross functional support services, legal fees and other costs. The acquisition related costs in 2017 were for the DigitalGlobe Transaction, and consisted primarily of legal, tax, consulting and other professional fees.

During the three and six months ended June 30, 2018, the Company incurred employee severance and enterprise improvement costs of $12.2 million and $12.6 million, respectively, compared to $4.8 million and $15.5 million for the same periods of 2017. These costs were primarily related to employment termination within our Space Systems segment. These restructuring actions were undertaken in response to fluctuations in the geostationary communication market and to align with our new strategy.

 

As a result of the Settlement Agreement with the Preferred Stockholders in June 2018, the Company recognized $3.2 million in expense to reflect the additional consideration transferred to the Preferred Stockholders.

 

16

 

 

MAXAR TECHNOLOGIES LTD.

Notes to the Unaudited Condensed Consolidated Interim Financial Statements

(Tabular amounts in millions of United States dollars, except per share amounts)

Three and six months ended June 30, 2018 and 2017

12.Earnings per common share:

Basic earnings per common share is computed by dividing net (loss) earnings by the sum of the weighted average number of common shares outstanding during the period plus outstanding deferred share units awards. Diluted earnings per common share is computed by adjusting the basic earnings per common share calculation for the effects of all potentially dilutive share appreciation rights or restricted share units.

The following table sets forth the computations of basic and diluted earnings per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended

 

Six months ended

 

 

June 30, 

 

June 30, 

 

    

2018

    

2017

    

2018

    

2017

Net (loss) earnings - basic

 

$

(18.6)

 

$

19.3

 

$

12.4

 

$

23.6

Effect of potentially dilutive share appreciation rights

 

 

 —

 

 

(0.2)

 

 

 —

 

 

(0.4)

Net (loss) earnings - dilutive

 

$

(18.6)

 

$

19.1

 

$

12.4

 

$

23.2

Weighted average number of common shares outstanding

 

 

57.1

 

 

36.4

 

 

56.7

 

 

36.4

Deferred share units outstanding

 

 

0.1

 

 

0.1

 

 

0.1

 

 

0.1

Weighted average number of common shares outstanding - basic

 

 

57.2

 

 

36.5

 

 

56.8

 

 

36.5

Weighted average common share equivalents from restricted share units

 

 

 —

 

 

 —

 

 

0.2

 

 

 —

Weighted average number of common shares outstanding - diluted

 

 

57.2

 

 

36.5

 

 

57.0

 

 

36.5

(Loss) earnings per common share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.33)

 

$

0.53

 

$

0.22

 

$

0.65

Dilutive

 

$

(0.33)

 

$

0.52

 

$

0.22

 

$

0.64

 

Certain share-based awards were excluded from the diluted weighted average number of ordinary common shares outstanding calculation because their effect would have been anti-dilutive. These awards included 4.0 million share appreciation rights for the each of the three months and six months ended June 30, 2018 (for the three and six months ended June 30, 2017– 4.3 million and 4.5 million, respectively) and 0.2 million and 0.6 million restricted share units for the three and six months ended June 30, 2018, respectively (for each of the three and six months ended June 30, 2017- nil).

The average market value of the Company’s common shares for the purpose of calculating the dilutive effect of share-based compensation awards was based on quoted market prices for the period in which the share-based compensation awards were outstanding.

 

 

13.Subsequent events:

On July 16, 2018, the Company acquired Neptec Design Group Ltd., a leading electro-optical and electro-mechanical systems and high-performance intelligent Light Detection and Ranging company for C$42 million, comprised of approximately C$8 million in cash and the balance in common shares of Maxar.

On July 30, 2018, the Company declared a quarterly dividend of C$0.37 per common share payable on September 28, 2018 to shareholders of record at the close of business on September 14, 2018.

 

 

 

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