MDA Reports Second Quarter 2003 Results

Results From Operations

Second quarter 2003 revenues increased to $147.4 million. This compares to revenues of $139.2 million for the second quarter of 2002. Information Products revenues increased 28% to $81.1 million, compared with the second quarter a year ago. Information Systems contributed revenues of $66.3 million for the quarter compared to $75.9 million for the second quarter last year. The decline in RADARSAT-2 program revenues accounted for the decrease in Systems revenues. New space programs are now expected to start in the fourth quarter. In addition, overall company revenues were impacted by the continued strengthening of the Canadian dollar.

During the first six months of the year, the Company witnessed a significant strengthening in the Canadian dollar. It is important to note that while cash flows are hedged, the exchange rates that are used for preparation of Canadian dollar financial statements have reduced the results from our foreign operations. From an accounting perspective, a strengthening in the Canadian dollar decreases the value of our foreign operations' financial results, when consolidating the revenues and operating results from these self-sustaining operations.

Net earnings for the quarter increased 17% to $10.7 million ($0.28 per common share diluted), compared to net earnings for the 2002 second quarter of $9.2 million ($0.24 per common share diluted).

For the six months ended June 30, 2003, revenues increased 12% to $300.4 million. Information Systems contributed $146.4 million of these revenues compared to $152.9 million for the six months ended June 30, 2002. Information Products revenues increased 34% to $154.0 million, compared to $115.2 million for the six months ended June 30, 2002.

Net earnings increased 23% to $21.1 million for the six months ended June 30, 2003 ($0.55 per common share diluted). Net earnings for the six months ended June 30, 2002, were $17.2 million ($0.45 per common share diluted).

Earnings before income taxes, amortization of capital and intangible assets, and interest expense ("EBITDA") increased to $24.5 million for the quarter, from $22.3 million for the 2002 quarter. EBITDA as a percentage of revenues increased from 16.0% for the three months ended June 30, 2002 to 16.6% of revenues for the three months ended June 30, 2003. For the six months ended June 30, 2003, EBITDA increased to $48.3 million, from $42.1 million for the prior period. EBITDA as a percentage of revenues increased from 15.7% for the six months ended June 30, 2002 to 16.1% of revenues for the six months ended June 30, 2003.

The Company continues to maintain a very healthy backlog, ending the quarter with $761 million, 90% of which relates to Information Systems.

Cash Flow Activities

As at June 30, 2003, total assets employed were $506 million.

Net cash flows from operations after tax and changes in working capital were $22.3 million for the six months ended June 30, 2003 compared to $13.8 million for the first six months of 2002. In 2003, $5.9 million was invested in start-up activities, and $8.3 million was invested in capital assets and acquisition of a land information database required by our U.S. operations. After investing $22.7 million in new businesses, long-term debt at June 30, 2003 amounted to $116 million, and unused bank facilities amount to $138 million.

Liquidity ratios continue to be significantly better than that required by the Company's banks. MDA's total net debt to EBITDA ratio was 0.9:1, compared to a ceiling of 3.5:1. Further, our EBITDA to interest ratio was 13.5:1, compared to a covenant of 3.5:1.

Operational Highlights

MDA provides essential information from anywhere in the world for decision making in the workplace, through two principal groups - Information Systems, and Information Products.

The Information Systems Group provides mission critical information systems that help organizations achieve their prime operational objectives. During the second quarter of 2003, MDA achieved several milestones:

In the Robotics area, two key objectives have been to transition MDA's manned space robots to long- term operational contracts, and to develop unmanned robotic markets.

On the first objective, the Canadian Space Agency awarded MDA a 4-year contract worth $109 million to provide ongoing engineering services for the Canadian-made Mobile Servicing System (MSS) on the International Space Station. This transitioned the Mobile Base System and Canadarm2 to long-term operational phase on the Space Station.

On the second objective, an American defense contractor awarded MDA a contract to work on a military demonstrator satellite project. This win, combined with the Orbital Express win in 2002, is a key milestone in the Company's strategic plan to expand from manned space markets into the unmanned, military market. The first phase of this commercial contract is worth $2 million.

MDA continued to make progress in the U.S. systems market, as NASA exercised a one-year, $4 million option with our U.S. based information systems group to provide NASA Centers across the country with engineering services. In addition, NASA awarded the Company a strategic $380,000 contract related to the MDA-built robot on the International Space Station.

In the Earth Observation area, MDA continued its pursuit of commercial missions, with a bid to supply core information systems to the Landsat Data Continuity Mission in the United States, (which will follow Landsat-7), and with continued support to RapidEye in finalizing their financing package.

In the government sector of the Earth Observation market, one strategic push is for further expansion into environmental missions. Here, MDA won key studies for Space Agencies in North America and Europe. These study contracts include SPECTRA, EarthCare, and the Global Environment and Security program for the European Space Agency, as well as the HYDROS mission involving NASA and the Canadian Space Agency.

In the Defence area, the Information Systems group completed a successful acceptance test for an enhancement to the Naval Combat Operations Trainer, and was awarded a further $650,000 contract to upgrade it for the Iroquois class destroyer.

The Information Products Group aims to provide everything there is to know about a parcel of land. During the second quarter of 2003, the MDA Geographic Information Products Group continued to make good progress in advancing its products into a number of markets.

In defense and enforcement markets, where customers limit disclosures:

• MDA received a multi-year, $4.5 million order to provide information products. RADARSAT-1's ability to detect small objects during cloudy weather and even in complete darkness makes these products possible.
• MDA received a $1.3 million order to do land-use mapping and monitoring. This same customer relied on MDA Information Systems to build their ground station last year.
• And MDA was awarded $6.4 million in land information orders from Defense Intelligence customers.

MDA took a significant step in the market for monitoring agricultural production and growth, with an order for $3.5 million to provide digital land information products that will help the U.S. Department of Agriculture monitor crop growth.

Finally in the local government market, MDA secured approximately $2 million worth of orders from Provincial, State, and Municipal authorities in Canada and the United States. These land information products will be used to provide infrastructure improvements, soil management, erosion control, growth planning, and to help prepare effective responses to environmental emergencies.

In the Legal and Asset Information area, transactions at BC OnLine continued to be strong.

DataQuick's automated valuation model (AVM) business - where it provides a high confidence estimate of property value over the Internet - continued to experience growth.

DataQuick also signed a multi-tier contract with Banton Technologies of Alabama this quarter to sell their products. Banton is a collateral assessment firm.

LandMDA transaction volumes for Florida continued at the same level. In California, new customers continue to sign to test the product, including a major customer who is expected to ramp up later this summer.

In England and Wales, NLIS Hub transactions are over 5,500 per week, compared to 4,300 at last report. With regard to the Differential Pricing Program, 146 Local Authorities have now agreed to participate in the program, up from 137 when the company last reported.

The number of Local Authorities electronically connected continues to increase, and now account for 59% of all NLIS searches. At this point, 212 Local Authorities are able to handle search requests electronically. That's up from 184 at last report.

At MDA's NLIS Channel, TransAction Online continued to grow, and expanded the services it offers to include a specialized Environment report for commercial conveyancers.

At Millar & Bryce in Scotland, results were as expected, and integration has gone well. The company finished testing a new search product in Edinburgh and Glasgow called PECs. These "Property Enquiry Certificates" incorporate information from Local Authorities into existing databases at Millar & Bryce. The company has now expanded its PECs offerings to 21 Local Authorities across Scotland, covering 75% of the population. Product uptake has been on plan.

After researching geographic expansion possibilities over the past 2 years, MDA selected Germany. Given the significant differences from other markets the Company operates in, MDA decided to begin in partnership with a local company, on-geo GmbH.

On-geo has a vision and approach compatible to MDA's. They're presently securing access rights to some essential information necessary to complete real estate transactions in Germany. MDA has an option to acquire 50% of the company until mid-2004.

Related Websites:
www.mdacorporation.com