U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 6-K

REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16 UNDER THE SECURITIES EXCHANGE ACT OF 1934

~~UNDER THE~~For ~~SECURITIES~~the ~~EXCHANGE~~month ~~ACT~~of ~~OF 1934~~September 2003

For the month of June 2003

NORTHSTAR AEROSPACE (CANADA) INC.

105 Bedford Road Toronto, Ontario Canada M5R 2K4

Toronto, Ontario

Canada M5R 2K4

(Address of registrant’s principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F ý Form 40-F o

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes o No ý

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): .

Rule 12g3-2(b): .

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

		NORTHSTAR AEROSPACE (CANADA) INC.		~~NORTHSTAR AEROSPACE (CANADA) INC.~~
		(Registrant)		~~(Registrant)~~
Date:	August 22, 2003			By:	/s/ Randal L. Levine
Date: November 13, 2003		By:	Randal L. Levine
		Name:	Randal L. Levine	~~Name:~~	~~Randal L. Levine~~
		Title:	Vice-President and Chief Financial Officer	~~Title:~~	~~Vice-President and Chief Financial Officer~~

NORTHSTAR AEROSPACE REPORTS THIRD QUARTER FINANCIAL RESULTS

REPORT TO SHAREHOLDERS – THIRD QUARTER FINANCIAL RESULTS

TORONTO, November 11, 2003 - Northstar Aerospace today reported earnings from continuing operations for the third quarter ending September 30, 2003 of $0.4 million or $0.01 per share compared to $4.6 million or $0.16 per share in the prior year period. Changes in foreign exchange rates continue to have a significant negative impact on revenues and earnings. Net earnings for the quarter, after discontinued operations were $0.4 million or $0.01 per share compared to $4.1 million or $0.14 per share in the prior year. For the nine months of 2003 earnings from continuing operations were $4.4 million or $0.15 per share compared to $9.8 million or $0.34 per share in the prior year. Net earnings, including discontinued operations were a loss of $5.1 million or $0.18 per share in the nine months of 2003 compared to a profit of $8.6 million or $0.30 per share in the prior year.

Revenue from continuing operations totaled $41.2 million in the third quarter compared to $43.3 million in the previous year, representing a decrease of 4.9%. Military revenues in the quarter were lower as a result of lower volumes on a key program to the Canadian operations. For the nine months of 2003 revenues were $130.2 million, a 2% decrease from 2002.

Earnings before interest and taxes (“EBIT”) margin for continuing operations were 7.2% for the third quarter compared to 19.9% in the prior year. The higher Canadian/US exchange rate reduced EBIT by approximately $1.9 million in the third quarter as compared to the prior year. EBIT margins for the nine months of 2003 were 10.5% compared to 15.3% in the prior year. . The decrease EBIT in the quarter and the nine months is attributable primarily to the impact of foreign exchange, lower commercial aerospace activity, lower activity on a key military program in Canada, severance costs in the second quarter and a legal settlement in the third quarter. A more detailed discussion of the third quarter and first nine months of 2003 is contained in the Management Discussion and Analysis including comments on the comparability of results between the current and prior year.

Commenting on these results, President and Chief Executive Officer, Mark Emery stated:

“The third quarter of 2003 was difficult. The reduced commercial aerospace activities and negative impact of an improved Canadian dollar have had a significant impact on our results for the first nine months of 2003. We are adjusting to the new reality and have taken steps to reduce costs and increase profitability but this will take some time before the impacts are seen. Our commercial aerospace manufacturing activities continue to be negatively impacted by the downturn in their markets. We do not expect to realize improvements in our commercial aerospace activities in the short term. Also, reduced volumes on a key military program due to reduced customer demand, have impacted our Canadian facilities.

We anticipate the balance of 2003 to show continued weakness in results.

We are focusing increased efforts on cash flow improvements and are expecting to show positive results in this area by year-end.

At September 30, 2003 the released backlog was $166 million, compared to $238 million at December 31, 2002. Recently received orders have not been fully incorporated into the September 2003 backlog as they have not yet been released.”

Forward Looking Statements

This report includes “forward-looking statements” that are subject to risk and uncertainty. All statements other than statements of historical facts included in this report, including, without limitation, those regarding the Company’s financial position, business strategy, projected costs and plans, projected revenues, objectives of management for future operations, and certain other items discussed above may be or include forward-looking statements. There is uncertainty over the impact of the September 11, 2001 terrorist attacks and the declining North American economy on the Company’s revenues and earnings for 2002 and beyond. There is also uncertainty as a result of the extend and duration of a downturn in the commercial aerospace market, the impact of lower world wide commercial passenger air travel, air freight traffic and the impact of the level of future U.S. military expenditures. Forward-looking information contained herein is based upon a number of assumptions regarding the Canadian, U.S. and global economic environment and local and foreign government policies and actions. Actual future results of the Company may differ materially depending on a variety of factors, including production rates, timing of product deliveries, Canadian, U.S. and foreign government activities, volatility of the market for the Company’s products and services, worldwide political stability, factors that result in significant and prolonged disruption to commercial air travel worldwide, worldwide political stability, domestic and international economic conditions, and other political and economic risks and uncertainties. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, there can be no assurance that such expectations will prove to have been correct. Important factors that could cause actual results to differ materially from the Company’s expectations (“Cautionary Statements’), are included in the Company’s Annual Report for the Year Ended December 31, 2002 - Management’s Discussion and Analysis - Risks and Uncertainties, and in Form 20F under the heading of Risks and Uncertainties. All information contained in this report and subsequent written and oral forward-looking statements attributable to the Company or persons acting on behalf of the Company are expressly qualified in their entirety by the Cautionary Statements.

Non-GAAP Measure

The Company defines EBITDA as earnings from operations before interest, income taxes, depreciation, amortization and write-off of deferred development costs.

The Company has included information concerning EBITDA because it believes certain investors use this measure as a means of measuring continuing financial performance. EBITDA is not a measure of financial performance under Canadian or American generally accepted accounting principles (“GAAP”). As well, this measure has no standardized meaning prescribed under GAAP and may not be comparable to similarly titled measures used by other companies. This measure should not be construed as an alternative to cash flow from operations or earnings from operations as determined in accordance with GAAP as measures of liquidity or earnings.

Donald K. Jackson
Chairman

Attachments:	Consolidated Balance Sheet
	Consolidated Statement of Shareholders’ Equity
	Consolidated Statement of Operations
	Consolidated Statement of Cash Flows
	Notes to Consolidated Financial Statements
	Management Discussion and Analysis

~~NORTHSTAR~~Consolidated ~~AEROSPACE~~Balance ~~REPORTS STRONG MILITARY REVENUES~~Sheets

~~REPORT~~As TOat ~~SHAREHOLDERS — SECOND QUARTER FINANCIAL RESULTS~~September 30

TORONTO, August 18, 2003 - Northstar Aerospace today reported earnings from continuing operations for the second quarter ending June 30, 2003 of $1.3 million or $0.04 per share compared to $3.1 million or $0.11 per share (in ~~the prior~~thousands ~~year period. Net earnings for the quarter, after discontinued operations were $1.3 million or $0.04 per share compared to $3.7 million or $0.13 per share in the prior year. For the first half~~ of ~~2003~~Canadian earnings from continuing operations were $4.0 million or $0.14 per share compared to $5.2 million or $0.18 per share in the prior year. Net earnings, including discontinued operations was a loss of $5.5 million or $0.19 per share in the first half of 2003 compared to a profit of $4.5 million or $0.16 per share in the prior year.dollars)

Revenue from continuing operations totaled $41.9 million in the second quarter compared to $45.9 million in the prior year, representing a decrease of 8.8%. For the first half of 2003 revenues were $89.1 million, less than a 1% decrease from 2002.UNAUDITED

Earnings before interest and taxes (“EBIT”) margin for continuing operations was 10% for the second quarter compared to 14.2% in the prior year. The higher Canadian/US exchange rate reduced EBIT by approximately $1.2 million ($0.04 per share) in the second quarter. EBIT margins for the first half of 2003 were 12% compared to 12.3% in the prior year after adjusting for comparability between periods. The decrease in the quarter and the first six months is primarily attributable to the impact of foreign exchange.

	September 30 2003		December 31 2002
ASSETS

Current

Cash	$	—	$	2,450
Accounts receivable	31,440		21,864
Inventories	75,491		86,844
Other current assets	2,946		2,525
Discontinued operations	—		27,201
Total current assets	109,877		140,884

Property, plant and equipment	53,016		58,490
Goodwill, net	5,767		6,692
Other long-term assets (note 2b)	10,275		16,025

Total assets	$	178,935	$	222,091

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current
Bank indebtedness	$	10,779	$	—
Accounts payable and accrued liabilities	21,653		29,959
Current portion of long-term debt	634		722
Discontinued operations	—		25,730
Total current liabilities	33,066		56,411

Long-term debt	85,939		100,243
Other long-term liabilities (note 2c)	13,619		22,719

Total liabilities	132,624		179,373

Shareholders’ equity	46,311		42,718

Total liabilities and shareholders’ equity	$	178,935	$	222,091

ATo ~~more~~be ~~detailed~~read ~~discussion of the second quarter and first half of 2003 is contained~~ in ~~the~~conjunction ~~Management~~with ~~Discussion and~~notes ~~Analysis including comments on the comparability of results between the current and prior year. This is attached~~ to ~~the Interim~~interim ~~Consolidated~~consolidated ~~Financial~~financial ~~Statement for the three and six months ended June 30, 2003~~statements.

~~Commenting on these results, President and Chief Executive Officer, Mark Emery stated:~~3

~~“The second~~Consolidated ~~quarter~~Statements of ~~2003 was challenging.~~ ~~The~~Shareholders’ reduced commercial aerospace activities and negative impact of an improved Canadian dollar have had a significant impact on our results for the second quarter and first half of 2003. If the Canadian dollar had remained at the levels it was in 2002, we would have reported similar profits to the prior year. We are adjusting to the new reality and have taken steps to reduce costs and increase profitability but this will take some time before the impacts are seen. Our commercial aerospace manufacturing activities continue to be negatively impacted by the downturn in their markets. We do not expect to realize improvements in our commercial aerospace activities in the short term.Equity

~~We anticipate~~For ~~the~~three ~~balance of 2003 to show lower results as compared to the first half of the year due to changes in product mix, reduced customer demand in commercial aerospace, pricing changes~~ and ~~the~~nine ~~ongoing~~months ~~effects~~ended ~~of changes in foreign exchange rates. Military related activities are anticipated to contribute over 65% of our 2003 revenues.~~September 30

3(in thousands of Canadian dollars)

~~We are focusing increased efforts on cash flow improvements and anticipate positive results in this area by year-end.~~UNAUDITED

At June 30, 2003 the released backlog was $179 million, compared to $238 million at December 31, 2002.

	Three Months Ended September 30						Nine Months Ended September 30
	2003			2002			2003			2002
Deficit – beginning of period as previously reported	$	(102,332	)	$	(92,911	)	$	(96,819	)	$	(95,066	)

Change in accounting policy	—			—			—			(2,357		)

Deficit – beginning of period as restated	(102,332		)	(92,911		)	(96,819		)	(97,423		)

Net income (loss) for the period	374			4,105			(5,139		)	8,617

Deficit – end of period	(101,958		)	(88,806		)	(101,958		)	(88,806		)

Capital stock	152,851			152,642			152,851			152,642

Currency Translation Adjustment –
Continuing operations	(4,582		)	(3,581		)	(4,582		)	(3,581		)
Discontinued Operations (note 3)	—			(9,467		)	—			(9,467		)

TOTAL SHAREHOLDERS’ EQUITY	$	46,311		$	50,788		$	46,311		$	50,788

~~Northstar is~~To ~~well~~be ~~positioned~~read toin ~~balance~~conjunction ~~both~~with ~~military~~notes ~~and~~to ~~commercial~~interim ~~applications for~~consolidated ~~superior~~financial ~~longer-term performance under a variety of economic conditions~~statements.”

~~Forward Looking Statements~~4

~~This~~Consolidated report includes “forward-looking statements” that are subject to risk and uncertainty. All statements other than statements of historical facts included in this report, including, without limitation, those regarding the Company’s financial position, business strategy, projected costs and plans, projected revenues, objectives of management for future operations, and certain other items discussed above may be or include forward-looking statements. There is uncertainty over the impact of the September 11, 2001 terrorist attacks and the declining North American economy on the Company’s revenues and earnings for 2002 and beyond. There is also uncertainty as a result of the extend and duration of a downturn in the commercial aerospace market, the impact of lower world wide commercial passenger air travel, air freight traffic and the impact of the level of future U.S. military expenditures. Forward-looking information contained herein is based upon a number of assumptions regarding the Canadian, U.S. and global economic environment and local and foreign government policies and actions. Actual future results of the Company may differ materially depending on a variety of factors, including production rates, timing of product deliveries, Canadian, U.S. and foreign government activities, volatility of the market for the Company’s products and services, worldwide political stability, factors that result in significant and prolonged disruption to commercial air travel worldwide, worldwide political stability, domestic and international economic conditions, and other political and economic risks and uncertainties. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, there can be no assurance that such expectations will prove to have been correct. Important factors that could cause actual results to differ materially from the Company’s expectations (“Cautionary Statements~~’),~~ ~~are included in the Company’s Annual Report for the Year Ended December 31, 2001 - Management’s Discussion and Analysis - Risks and Uncertainties, and in Form 20F under the heading~~ of ~~Risks and Uncertainties. All information~~Operations

~~contained~~For inthree ~~this report~~ and ~~subsequent~~nine ~~written~~months ~~and~~ended ~~oral forward-looking statements attributable to the Company or persons acting on behalf of the Company are expressly qualified in their entirety by the Cautionary Statements.~~September 30

~~Non-GAAP~~(in thousands ~~Measure~~of Canadian dollars except per share amounts)

~~The Company defines EBITDA as earnings from operations before interest, income taxes, depreciation, amortization and write off of deferred development costs.~~UNAUDITED

	Three months ended September 30					Nine Months ended September 30
	2003		2002			2003			2002

REVENUES	$	41,189	$	43,307		$	130,243		$	132,710

COST OF SALES AND EXPENSES
Cost of Sales	30,974		27,928			93,940			92,573
Selling, general and administration	5,216		4,672			16,498			13,784
Depreciation and amortization	2,029		2,081			6,113			6,019
Interest, net	2,348		2,626			7,242			7,752

Income from continuing operations before income taxes	622		6,000			6,450			12,582
Income taxes	248		1,386			2,065			2,812
Income from continuing operations	374		4,614			4,385			9,770
Discontinued operations (note 3)	—		(509		)	(9,524		)	(1,153		)

Net Income (loss) for the period	$	374	$	4,105		$	(5,139	)	$	8,617

Income (loss) per common share

Basic
Continuing operations	$	0.01	$	0.16		$	0.15		$	0.34
Discontinued operations	0.00		(0.02		)	(0.33		)	(0.04		)
Net income (loss) per common share - basic	$	0.01	$	0.14		$	(0.18	)	$	0.30

Diluted
Continuing operations	$	0.01	$	0.16		$	0.15		$	0.33
Discontinued operations	0.00		(0.02		)	(0.32		)	(0.04		)
Net income (loss) per common share - diluted	$	0.01	$	0.14		$	(0.17	)	$	0.29

Weighted average number of shares
Basic	28,878,573		28,836,847			28,895,176			28,839,136
Diluted	29,768,682		29,220,460			29,785,285			29,222,749

~~Donald~~To K.be ~~Jackson~~read in conjunction with notes to interim consolidated financial statements.

~~Chairman~~5

~~Attachments:~~ Consolidated ~~Balance~~Statements ~~Sheet Consolidated Statement~~ of ~~Shareholders’ Equity Consolidated Statement of Operations Consolidated Statement of~~ Cash Flows ~~Notes to Consolidated Financial Statements Management Discussion and Analysis~~

4For the three and nine months ended September 30

~~Consolidated Balance~~(in ~~Sheets~~thousands of Canadian dollars)

~~As at June 30~~UNAUDITED

(in thousands of Canadian dollars)

	Three Months Ended September 30						Nine Months Ended September 30
	2003			2002			2003			2002
CASH PROVIDED BY (USED FOR):
OPERATING ACTIVITIES
Income from continuing operations	$	374		$	4,614		$	4,385		$	9,770
Items not affecting cash:
Depreciation and amortization	2,029			2,081			6,113			6,019
Post retirement benefits	291			—			711			377
Foreign exchange (gains)/losses	—			(79		)	50			(21		)
Future income taxes	177			1,291			1,654			2,591
	2,871			7,907			12,913			18,736
Net change in non-cash working capital balances related to continuing operations (note 2a)	(3,227		)	(12,311		)	(16,359		)	(15,710		)
	(356		)	(4,404		)	(3,446		)	3,026

Discontinued operations	—			1,051			—			1,520
Cash provided by (used for) operating activities	(356		)	(3,353		)	(3,446		)	4,546

INVESTING ACTIVITIES
Capital expenditures	(1,899		)	(3,252		)	(5,708		)	(5,914		)
Decrease (increase) in long-term assets	(209		)	(18		)	(2,973		)	(96		)
Discontinued operations	—			(256		)	(300		)	(402		)
Cash used for investing activities	(2,108		)	(3,526		)	(8,981		)	(6,412		)

FINANCING ACTIVITIES
Common shares issued	60			—			209			17
Long-term debt (repayments) increase	8			(224		)	(514		)	(1,095		)
Increase (decrease) in bank indebtedness	2,333			8,850			10,670			6,011
Increase (decrease) in other long term liabilities	63			(952		)	(388		)	(1,949		)
Discontinued operations	—			(795		)	—			(1,118		)
Cash provided by financing activities	2,464			6,879			9,977			1,866

Change in cash during the period	—			—			(2,450		)	—
Cash at beginning of period	—			—			2,450			—
Cash at end of period	$	—		$	—		$	—		$	—

~~UNAUDITED~~See also notes to consolidated financial statements

	June 30 2003		December 31 2002
ASSETS
Current
Cash	$	—	$	2,450
Accounts receivable	20,015		21,864
Inventories	86,098		86,844
Other current assets	2,624		2,525
Discontinued operations	—		27,201
Total current assets	108,737		140,884
Property, plant and equipment	53,087		58,490
Goodwill, net	5,770		6,692
Other long-term assets (note 2b)	10,427		16,025
Total assets	$	178,021	$	222,091
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current
Bank indebtedness	$	9,303	$	—
Accounts payable and accrued liabilities	22,999		29,959
Current portion of long-term debt	634		722
Discontinued operations	—		25,730
Total current liabilities	32,936		56,411
Long-term debt	85,886		100,243
Other long-term liabilities (note 2c)	13,293		22,719
Total liabilities	132,115		179,373
Shareholders’ equity	45,906		42,718
Total liabilities and shareholders’ equity	$	178,021	$	222,091

~~To be read in conjunction with notes~~ Notes to ~~interim~~Consolidated ~~consolidated~~Interim ~~financial statements.~~Financial Statements

~~2003 Northstar~~For ~~Aerospace~~the Q2Quarter ~~Report~~ended ~~to Shareholders~~September 30

5(in thousands of Canadian dollars)

~~Consolidated Statements of Shareholders’ Equity~~UNAUDITED

~~For~~1. SIGNIFICANT ~~three~~ACCOUNTING ~~and six months ended June 30~~POLICIES

~~(in thousands of~~Accounting ~~Canadian dollars)~~standards

~~UNAUDITED~~The unaudited interim consolidated financial statements have been prepared by the Company in accordance with Canadian generally accepted accounting principles (“GAAP”) on a basis consistent with those in the 2002 audited consolidated financial statements. These unaudited consolidated financial statements do not contain all the disclosures required by generally accepted accounting principles for annual financial statements and should be read in conjunction with the audited consolidated financial statements and notes included in the Company’s 2002 annual report.

	Three Months Ended June 30						Six Months Ended June 30
	2003			2002			2003			2002
Deficit – beginning of period as previously reported	$	(103,625	)	$	(96,638	)	$	(96,819	)	$	(95,066	)
Change in accounting policy	—			—			—			(2,357		)
Deficit – beginning of period as restated	(103,625		)	(92,638		)	(96,819		)	(97,423		)
Net income (loss) for the period	1,293			3,727			(5,513		)	4,512
Deficit – end of period	(102,332		)	(92,911		)	(102,332		)	(92,911		)
Capital stock	152,791			152,642			152,791			152,642
Currency Translation Adjustment – Continuing operations	(4,553		)	(3,581		)	(4,553		)	(3,581		)
Discontinued Operations (note 3)	—			(9,326		)	—			(9,326		)
TOTAL SHAREHOLDERS’ EQUITY	$	45,906		$	46,824		$	45,906		$	46,824

2. SUPPLEMENTARY INFORMATION

Toa) Details of bechanges ~~read~~ in ~~conjunction~~non-cash ~~with~~working ~~notes~~capital toitems ~~interim~~related ~~consolidated~~to ~~financial~~continuing operations ~~statements.~~as follows:

	Three Months Ended September 30						Nine Months Ended September 30
	2003			2002			2003			2002

Cash provided by (used for):
Accounts receivable	$	(12,967	)	$	(11,520	)	$	(12,970	)	$	(3,021	)
Inventories	11,240			(1,519		)	2,535			(11,996		)
Other current assets	(309		)	(602		)	(698		)	(205		)
Accounts payable and accrued liabilities	(1,191		)	1,330			(5,226		)	(488		)
Cash used, net	$	(3,227	)	$	(12,311	)	$	(16,359	)	$	(15,710	)

~~Consolidated~~The ~~Statements~~majority of ~~Operations~~the company’s non-cash working capital items are denominated in US dollars. The amounts above include the US dollar changes in those assets and liabilities for the period, translated to Canadian dollars at the average rate for the period. The resultant changes measured in Canadian dollars, will not equal the changes between the corresponding balance sheet amounts, in which US dollar balances are translated at period end rates.

~~For three and six months ended June 30~~7

~~(in~~b) Other long-term ~~thousands~~assets ofcomprise ~~Canadian~~the ~~dollars except per share amounts)~~following:

UNAUDITED

	September 30 2003		December 31 2002

Debt issue costs net of amortization of $4,308 (2002-$3,800)	$	1,280	$	1,548
Future income tax asset	2,430		4,084
Investment in Vector Aerospace Corporation (quoted market value $7,464 (2002 - $2,246))	4,672		2,019
Other	1,893		1,837
Discontinued operations	—		6,537
Total other long-term assets	$	10,275	$	16,025

	Three months ended June 30				Six Months ended June 30
	2003		2002		2003			2002
REVENUES	$	41,896	$	45,948	$	89,054		$	89,403
COST OF SALES AND EXPENSES
Cost of Sales	29,447		32,394		62,966			64,645
Selling, general and administration	6,225		4,995		11,282			9,112
Depreciation and amortization	2,031		2,012		4,084			3,938
Interest, net	2,115		2,322		4,894			5,126
Income from continuing operations before income taxes	$	2,078	$	4,225	$	5,828		$	6,582
Income taxes	785		1,161		1,817			1,426
Income from continuing operations	$	1,293	$	3,064	$	4,011		$	5,156
Discontinued operations (note 3)	—		663		(9,524		)	(644		)
Net Income for the period	$	1,293	$	3,727	$	(5,513	)	$	4,512
Income (loss) per common share
Basic
Continuing operations	0.04		0.11		0.14			0.18
Discontinued operations	0.00		0.02		(0.33		)	(0.02		)
Net income per common share - basic	0.04		0.13		(0.19		)	0.16
Diluted
Continuing operations	0.04		0.10		0.13			0.17
Discontinued operations	0.00		0.02		(0.32		)	(0.02		)
Net income per common share - diluted	0.04		0.12		(0.18		)	0.15
Weighted average number of shares
Basic	28,872,167		28,847,318		28,863,921			28,835,658
Diluted	29,794,099		29,735,925		29,785,853			29,724,265

c) Other long-term liabilities comprise:

To be read in conjunction with notes to interim consolidated financial statements.

	September 30 2003		December 31 2002

Pensions and post retirement benefits	$	11,129	$	11,105
Environmental remediation – long-term portion	2,280		3,045
Other	210		261
Discontinued operations	—		8,308
Total other long-term liabilities	$	13,619	$	22,719

7d) Earnings per share

~~Consolidated~~Diluted ~~Statements~~earnings per share reflect the dilutive effect of ~~Cash~~the ~~Flows~~exercise of options where the grant price was below the average market price for the period ended September 30. The dilutive effect of options for the nine months of 2003 was 890,109 shares and for the nine months of 2002 was 383,613 shares.

~~For six and three months ended~~3. DISCONTINUED ~~June 30~~OPERATIONS

~~(in~~On ~~thousands~~March 31, 2003, the Company completed a significant capital restructuring of ~~Canadian~~the ~~dollars)~~pump companies with its joint venture partner. Under the agreement, the Company’s common shares in the pump companies were exchanged for non-participating preferred shares, which the pump companies must purchase on March 31, 2008 for $18 million.

~~UNAUDITED~~At December 31, 2002 the Company made a provision to reduce the carrying value of the pump investments to nil given the significant uncertainty about the future of the pump companies.

	Three Months Ended June 30						Six Months Ended June 30
	2003			2002			2003			2002
CASH PROVIDED BY (USED FOR):
OPERATING ACTIVITIES
Income from continuing operations	$	1,293		$	3,064		$	4,011		$	5,156
Items not affecting cash:
Depreciation and amortization	2,031			2,012			4,084			3,938
Post retirement benefits	356			275			420			377
Foreign exchange (gains)/losses	9			(6		)	50			58
Future income taxes	684			1,084			1,477			1,300
	4,373			6,429			10,042			10,829
Net change in non-cash working capital balances related to continuing operations (note 2a)	(4,043		)	(1,963		)	(13,132		)	(3,399		)
	$	330		$	4,466		$	(3,090	)	$	7,430
Discontinued operations	—			746			—			469
Cash provided by (used for) operating activities	$	330		$	5,212		$	(3,090	)	$	7,899
INVESTING ACTIVITIES
Capital expenditures	(1,677		)	(2,002		)	(3,809		)	(2,662		)
Decrease (increase) in long-term assets	(309		)	70			(2,764		)	(78		)
Discontinued operations	—			(285		)	(300		)	(146		)
Cash used for investing activities	$	(1,986	)	$	(2,217	)	$	(6,873	)	$	(2,886	)
FINANCING ACTIVITIES
Common shares issued	132			17			149			17
Long-term debt repayments	(403		)	(701		)	(522		)	(871		)
Increase (decrease) in bank indebtedness	2,360			(1,143		)	8,337			(2,839		)
Increase (decrease) in other long term liabilities	(433		)	(707		)	(451		)	(997		)
Discontinued operations	—			(461		)	—			(323		)
Cash provided by (used for) financing activities	$	1,656		$	(2,995	)	$	7,513		$	(5,013	)
Change in cash during the period	—			—			(2,450		)	—
Cash at beginning of period	—			—			2,450			—
Cash at end of period	$	—		$	—		$	—		$	—

~~See~~As ~~also~~a ~~notes~~result toof ~~consolidated~~the completion of the capital restructuring, the Company wrote off in the quarter ended March 31, 2003, ~~financial~~the ~~statements~~currency translation adjustment included in shareholders’ equity related to discontinued operations.

84. SEGMENTED INFORMATION

~~Notes~~The tocontinuing ~~Consolidated~~operations of the Company solely relate ~~Interim~~to ~~Financial~~the ~~Statements~~aerospace industry and are organized and managed as business segments outlined below:

~~For~~Defense – ~~the~~The ~~Quarter~~main products for military markets include helicopter gears and transmissions, helicopter rotor heads, accessory gearboxes for engines used in ~~ended~~military ~~June~~aircraft, 30and maintenance, repair and overhaul (“MRO”) services for certain helicopter transmissions.

(Commercial – The main products include components for accessory gearboxes and auxiliary power units for engines used in ~~thousands~~fixed ofwing ~~Canadian~~aircraft, machining and fabrication services, and MRO services for helicopter engines, and gyroscope inertial ~~dollars)~~navigation systems.

~~UNAUDITED~~Sector income statement:

1. SIGNIFICANT ACCOUNTING POLICIES

		Three Months Ended September 30				Nine Months Ended September 30
		2003		2002		2003		2002

Revenue	Defense	$	29,065	$	27,216	$	89,047	$	82,450
	Commercial	12,124		16,091		41,196		50,260
		41,189		43,307		130,243		132,710

Cost of Sales	Defense	21,027		17,339		60,141		54,901
	Commercial	9,947		10,589		33,799		37,672
		30,974		27,928		93,940		92,573

Selling, general and administration		5,216		4,672		16,498		13,784
Depreciation and amortization		2,029		2,081		6,113		6,019
Interest, net		2,348		2,626		7,242		7,752

Income from continuing operations before income taxes		$	622	$	6,000	$	6,450	$	12,582

~~Accounting standards~~9

The ~~unaudited~~same ~~interim consolidated financial statements have been~~fixed ~~prepared~~assets byof the Company inare ~~accordance~~used ~~with~~for ~~Canadian~~both ~~generally~~the ~~accepted accounting~~Commercial ~~principles~~and ~~(“GAAP”)~~Defense ~~on a basis consistent with those in the 2002~~aerospace ~~audited~~manufacturing ~~consolidated financial statements~~segments. Accordingly, ~~These unaudited consolidated financial statements do not contain all~~ the ~~disclosures~~ ~~required~~identifiable byassets, ~~generally~~capital ~~accepted accounting principles for annual financial statements~~ and ~~should~~goodwill beexpenditures ~~read~~cannot ~~in conjunction with the audited consolidated~~be ~~financial~~specifically ~~statements~~allocated ~~and~~to ~~notes~~these ~~included in the Company’s 2002 annual report~~segments.

~~2. SUPPLEMENTARY~~Geographic ~~INFORMATION~~Information

a) Details of changes in non-cash working capital items related to continuing operations as follows:

Three Months Ended
September 30

Canada

United States

Total

2003

2002

2003

2002

2003

2002

Revenue

17,202

19,646

23,987

23,661

41,189

43,307

	Three Months Ended June 30						Six Months Ended June 30
	Nine Months Ended September 30
	2003			2002			2003			2002
	Canada						United States						Total
Cash provided by (used for):
	2003			2002			2003			2002			2003		2002
Accounts receivable	$	2,472		$	1,968		$	(3	)	$	8,499
Revenue	$	54,568		$	62,462		$	75,675		$	70,248		$	130,243	$	132,710
Inventories	(268		)	(5,739		)	(8,705		)	(10,477		)
Other current assets	(468		)	127			(389		)	397
Accounts payable and accrued liabilities	(5,779		)	1,681			(4,035		)	(1,818		)
Cash used, net	$	(4,043	)	$	(1,963	)	$	(13,132	)	$	(3,399	)

~~The~~Revenues ~~majority of the company’s non-cash working capital items~~ are ~~denominated~~attributed into ~~US dollars. The~~geographic ~~amounts~~location ~~above include the~~based USon ~~dollar changes in those assets and liabilities for~~ the ~~period,~~location ~~translated~~of ~~to Canadian dollars at~~ the ~~average~~business ~~rate~~unit ~~for~~reporting the ~~period~~revenue. ~~The~~Domestic ~~resultant~~sales ~~changes~~to ~~measured~~foreign incustomers ~~Canadian~~totaled approximately ~~dollars~~$17,107 ~~will~~(2002 ~~not~~- ~~equal the~~$19,303) ~~changes~~in ~~between~~ the ~~corresponding~~third ~~balance~~quarter ~~sheet~~and ~~amounts~~$54,279 in(2002 ~~which US dollar~~– ~~balances~~$60,350) ~~are~~in ~~translated~~the atnine ~~period~~months ~~end~~of ~~rates~~2003.

	Canada				United States				Total
	Sept 30 2003		Dec 31 2002		Sept 30 2003		Dec 31 2002		Sept 30 2003		Dec 31 2002

Property, plant and equipment and goodwill	$	20,998	$	19,958	$	37,785	$	45,224	$	58,783	$	65,182

~~b) Other long term assets comprise the following:~~10

	June 302003		December 31 2002
Debt issue costs net of amortization of $4,139 (2002-$3,800)	$	1,209	$	1,548
Future income tax asset	2,607		4,084
Investment in Vector Aerospace Corporation (quoted market value $7,041 (2002 - $2,246))	4,672		2,019
Other	1,939		1,837
Discontinued operations	—		6,537
Total other long-term assets	$	10,427	$	16,025

INTENTIONALLY BLANK

~~c) Other long-term liabilities comprise:~~11

	June 30 2003		December 31 2002
Pensions and post retirement benefits	$	10,875	$	11,105
Environmental remediation – long-term portion	2,203		3,045
Other	215		261
Discontinued operations	—		8,308
Total other long-term liabilities	$	13,293	$	22,719

MANAGEMENT DISCUSSION & ANALYSIS

~~d) Earnings~~For ~~per~~the ~~share~~three and nine months ended September 30, 2003

~~Diluted~~The ~~earnings~~following ~~per~~discussion ~~share~~and ~~reflect~~analysis ~~the~~by ~~dilutive~~management ~~effect~~ of the ~~exercise~~ offinancial ~~options~~position ~~where~~and ~~the~~results ~~grant~~of ~~price~~operations ~~was~~of ~~below~~ the ~~average~~Company ~~market~~is ~~price~~qualified ~~for~~by ~~the~~and ~~period~~should ~~ended~~be ~~June~~read ~~30. The~~in ~~dilutive effect~~conjunction ofwith ~~options for~~ the ~~six~~Interim ~~months~~Consolidated ofFinancial Statements ~~2003~~and ~~was~~Notes ~~921,932~~thereto ~~shares and~~ for the ~~six months~~three ofand ~~2002~~nine ~~was~~months ~~888~~ended September 30,~~607~~ ~~shares~~2003.

~~3. DISCONTINUED~~RESULTS OF OPERATIONS

OnRevenues ~~March~~in ~~31, 2003,~~ the ~~Company~~third ~~completed~~quarter ~~a significant~~were ~~capital~~$2.1 ~~restructuring~~million of(4.9%) below the ~~pump~~prior ~~companies~~year ~~with~~comparative ~~its~~as ~~joint~~a ~~venture partner. Under~~result ~~the~~of ~~agreement,~~changes ~~the Company’s common shares~~ in ~~the~~foreign ~~pump~~exchange rates. Excluding ~~companies~~foreign ~~were exchanged non-participating~~exchange ~~preferred shares~~impacts, ~~which~~revenue for the ~~pump~~third ~~companies~~quarter ~~must~~would ~~purchase~~have onbeen ~~March~~$1 ~~31,~~million ~~2008~~higher ~~for~~than ~~$18,000~~the previous year.

AtFor ~~December~~the 31nine months ended September 30, ~~2002~~2003, revenues decreased by $2.5 million from the ~~Company~~prior ~~made~~year as a ~~provision~~result toof ~~reduce~~foreign ~~the~~exchange ~~carrying~~impacts. Using ~~value~~the ofsame exchange rate as for the ~~pump~~comparable ~~investments~~period toin ~~nil~~2002, ~~given~~revenues for the ~~significant~~first ~~uncertainty~~nine months of ~~about~~2003 ~~the~~would ~~future~~have ofbeen approximately $5 million higher than the ~~pump~~previous ~~companies~~year.

AsFor athe ~~result~~third ofquarter and the ~~completion~~nine months of 2003, commercial aerospace revenues have declined from the ~~capital~~prior ~~restructuring,~~year due to the ~~Company~~impact of foreign ~~wrote~~exchange ~~off~~and decreased activity in ~~the~~repair ~~quarter~~and ~~ended~~overhaul ~~March~~and ~~31,~~machining ~~2003,~~and ~~the~~fabrication services. These ~~currency~~areas ~~translation~~are anticipated ~~adjustment~~to ~~included~~remain inat ~~shareholders’~~depressed ~~equity~~levels ~~related~~throughout tothe ~~discontinued~~balance ~~operations~~of 2003.

10Compared to the prior year, military related activity for the quarter and the nine months ended September 30, 2003 has increased. Increased work related to the Apache build contract accounts for this improvement. A stronger Canadian dollar compared to the previous year has negatively impacted revenues in 2003 and is expected to continue to have negative effects on revenues and margins.

~~Notes~~Gross margins, excluding depreciation, for the third quarter were 24.8%, compared to ~~Consolidated~~35.5% for the third quarter of 2003. Gross margins related to military activities for the quarter decreased 8.6% year-over-year as a result of product mix. The reduction in activity related to the ~~Interim~~Lynx ~~Financial~~contract ~~Statements~~due to reduced customer requirements has negatively impacted margins and overhead absorption at Northstar’s Canadian facilities. Also, the Apache build contract comprised a higher portion of total military margins in 2003 as compared to 2002 due to higher activity levels. Margins on this contract are below the average military margins due to pricing pressures and learning curve impacts. Commercial margins for the quarter decreased 16.2% compared to the prior year primarily as a result of lower activity levels in machining and fabrication services, the impact of a higher Canadian dollar and pricing reductions.

For ~~three~~the ~~and~~nine ~~six~~ months ended ~~June~~September 30, 2003 gross margins, excluding depreciation were 27.9% compared to 30.2% in the prior year. Both military and commercial margins decreased as a result of the factors noted above. Using the same Canadian/US exchange rate as the

~~(in thousands of Canadian dollars)~~12

~~UNAUDITED~~prior year, gross margins for the nine months of 2003 would have increased by approximately $5 million compared to the reported results.

~~4. SEGMENTED~~For the last quarter of 2003 military and commercial gross margins are expected to be marginally lower than the third quarter as a result of changes ~~INFORMATION~~to product mix, pricing, lower customer demand and exchange rates.

~~The~~Selling, ~~continuing~~general ~~operations~~and administration (“SG&A”) expenses totaled $5.2 million (12.7% of sales) for the ~~Company~~third ~~solely~~quarter ~~relates~~compared to $4.7 million in the prior year comparative. The increase is ~~aerospace~~largely ~~industry~~a ~~and~~result ~~are~~of ~~organized~~costs ~~and~~related ~~managed~~to asa ~~business~~legal ~~segments~~settlement ~~outlined~~of approximately $0.6 million recorded in the third quarter of 2003. ~~below:~~For the nine months ended September 30, 2003, SG&A expenses were $16.5 million (12.7% of sales) representing an increase of $2.7 million over the prior year. The increase primarily relates to a one-time insurance recovery of $0.7 million in 2002, severance costs of $1 million incurred in the second quarter of 2003 and legal settlements of $0.6 million in the third quarter of 2003.

~~Defense~~Depreciation –and ~~The~~amortization ~~main~~in ~~products~~the ~~for~~third ~~military~~quarter ~~markets~~was ~~include~~$2.0 ~~helicopter~~million, ~~gears~~similar ~~and~~to ~~transmissions,~~the ~~helicopter~~third ~~rotor~~quarter ~~heads,~~of ~~accessory~~2002. For ~~gearboxes for~~the ~~engines~~nine ~~used~~months inended ~~military aircraft~~September 30, 2003 depreciation and ~~maintenance,~~amortization ~~repair~~was ~~and~~$6.1 ~~overhaul (“MRO”)~~million ~~services~~compared ~~for~~to ~~certain~~$6.0 ~~helicopter~~million ~~transmissions~~in 2002.

~~Commercial~~Net –interest ~~The~~expense ~~main~~in ~~products~~the ~~include~~third ~~components~~quarter ~~for~~was $2.3 million, $0.3 ~~accessory~~million ~~gearboxes~~lower ~~and~~than ~~auxiliary~~the ~~power~~prior ~~units~~year ~~for~~as ~~engines~~a ~~used~~result inof ~~fixed~~exchange ~~wing~~impacts. Net interest expense for the nine months of ~~aircraft,~~2003 ~~machining~~was ~~and~~$7.2 ~~fabrication~~million ~~services,~~compared ~~and~~to ~~MRO~~$7.8 ~~services~~million ~~for~~in ~~helicopter~~the prior year. The decrease in interest expense results ~~engines,~~from foreign exchange effects and ~~gyroscope~~lower ~~inertial~~interest ~~navigation~~rates ~~systems~~on bank overdraft borrowings as compared to 2002.

~~Sector~~Income ~~income~~from continuing operations, before taxes, for the third quarter and nine months of 2003 was respectively $5.4 million and $6.1 million below ~~statement:~~the prior year comparatives. These decreases are primarily a result of the impact of the higher Canadian dollar on gross margins. In addition, one-time severance expenses in the second quarter and legal settlements in the third quarter negatively impacted EBIT. Year-over-year the strengthening Canadian dollar negatively impacted earnings before interest and taxes (“EBIT”) by approximately 6¢ per share.

		Three Months EndedJune 30				Six Months EndedJune 30
		2003		2002		2003		2002
Revenue	Defense	$	27,665	$	27,707	$	59,982	$	55,234
	Commercial	14,231		18,241		29,072		34,169
		$	41,896	$	45,948	$	89,054	$	89,403
Cost of Sales	Defense	16,747		18,335		39,114		37,562
	Commercial	12,700		14,059		23,852		27,083
		$	29,447	$	32,394	$	62,966	$	64,645
Selling, general and administration		6,225		4,995		11,282		9,112
Depreciation and amortization		2,031		2,012		4,084		3,938
Interest, net		2,115		2,322		4,894		5,126
Income from continuing operations before income taxes		$	2,078	$	4,225	$	5,828	$	6,582

Income tax expense for continuing operations for the third quarter was $0.2 million compared to $1.4 million in the prior year. Income taxes for the nine months of 2003 of $2.1 million decreased $0.7 million from the prior year comparative. The difference in effective tax rates between 2003 and 2002 relates to the lower profitability and the utilization of tax loss carry forwards.

11Income from continuing operations after tax for the third quarter decreased $4.2 million year-over-year from $0.16 per share to $0.01 per share. For the nine months of 2003 the year-over-year decrease was $5.4 million from $0.34 per share to $0.15 per share.

The same fixed assets of the Company are used for both the Commercial and Defense aerospace manufacturing segments. Accordingly, the identifiable assets, capital and goodwill expenditures cannot be specifically allocated to these segments.13

~~Geographic~~Net ~~Information~~income for the three months ended September 30, 2003 was $0.01 per share compared to $0.14 per share for the prior year. The net loss for the nine months of 2003 was of $0.18 per share compared to income of $0.30 per share for the prior year. The decrease is primarily

	Three Months Ended June 30
	Canada				United States				Total
	2003		2002		2003		2002		2003		2002
Revenue	$	18,878	$	21,777	$	23,018	$	24,171	$	41,896	$	45,948
Property, plant and equipment and goodwill	$	20,712	$	19,958	$	38,146	$	45,224	$	58,857	$	65,182
	Six Months Ended June 30
	Canada				United States				Total
	2003		2002		2003		2002		2003		2002
Revenue	$	37,366	$	42,816	$	51,688	$	46,587	$	89,054	$	89,403
Property, plant and equipment and goodwill	$	20,712	$	19,958	$	38,146	$	5,224	$	58,857	$	65,182

a result of the write-off of the currency translation adjustment related to the discontinued operations in the first quarter of 2003 and lower earnings from continuing operations.

~~Sales~~Sector ~~are~~Revenue attributed to geographic location based on the location of the business unit reporting the revenue. Domestic sales to foreign customers totaled approximately $18,507 (2002 - $21,045) in the second quarter and ~~$36,472~~Gross ~~(2002 – $41,047) in the six months~~Margin ~~of 2003.~~Analysis

	Quarter ended September 30						Nine months ended September 30
	(in millions)						(in millions)
	2003			2002			2003			2002
Revenues
Defense	$	29.1		$	27.2		$	89.0		$	82.4
Commercial	12.1			16.1			41.2			50.3
Total revenues	$	41.2		$	43.3		$	130.2		$	132.7

Gross margin (% of revenue)
Defense	27.7		%	36.3		%	32.5		%	33.4		%
Commercial	18.0		%	34.2		%	18.0		%	25.0		%
Total gross margin%	24.8		%	35.5		%	27.9		%	30.2		%

~~MANAGEMENT DISCUSSION~~Comparability &Summary ~~ANALYSIS~~Table

For the three and six months ended June 30, 2003

	Quarter ended September 30						Nine months ended September 30
	(in millions)						(in millions)
	2003			2002			2003			2002

Income from continuing operations – before interest and taxes, as reported	$	3.0		$	8.6		$	13.7		$	20.3
Adjustments:
Legal settlement	0.6			—			0.6			—
Benefits insurance recovery	—			—			—			(0.7		)
Income from continuing operations, before interest and taxes – comparable basis	$	3.6		$	8.6		$	14.3		$	19.6
% of Revenue	*8.7*		%	19.9		%	*11.0*		%	14.8		%
Add:
Depreciation and amortization	2.0			2.1			6.1			6.0

EBITDA, continuing operations – comparable basis	$	5.6		$	10.7		$	20.4		$	25.6
% of Revenue	*13.6*		%	24.7		%	*15.7*		%	19.3		%

The following discussion and analysis by management of the financial position and results of operations of the Company is qualified by and should be read in conjunction with the Interim Consolidated Financial Statements and Notes thereto for the quarter and six months ended June 30, 2003.14

~~RESULTS OF OPERATIONS~~BALANCE SHEET

~~Revenues~~Total inassets ~~the~~related ~~second~~to ~~quarter~~continuing ~~were~~operations, increased by $40.1 9 million ~~(8.8%)~~in ~~below~~ the ~~prior~~quarter ~~year~~and ~~comparative~~decreased as$9.4 amillion year-to-date ~~result~~to of$179 ~~lower~~million ~~levels~~as ~~of activity~~at inSeptember 30, ~~commercial aerospace~~2003. The higher Canadian dollar reduced ~~revenues~~total assets by approximately $319 million in the ~~quarter. Excluding~~ ~~foreign~~nine ~~exchange impacts,~~months ~~revenue~~of ~~for the second quarter would have been similar to the same period in the prior year~~2003.

~~For~~Working ~~the~~capital ~~six~~related ~~months~~to ~~ended~~continuing ~~June~~operations ~~30, 2003,~~of ~~revenues~~$76.8 ~~decreased~~million increased by $01.30 million ~~from~~in the ~~prior~~third ~~year~~quarter asand adecreased ~~result of reduced~~$6.2 ~~commercial~~million ~~aerospace activity largely offset by increased military aerospace revenues~~year-to-date. ~~Using~~Excluding the ~~same exchange rate~~impact asof ~~for~~changes ~~the~~in ~~comparable~~foreign ~~period~~exchange ~~in 2002~~rates, ~~revenues~~working ~~would~~capital ~~have~~increased ~~been approximately~~ $6 1.0 million ~~higher~~ in the ~~first~~quarter ~~half~~and of$3.6 ~~2003~~million year-to-date.

~~For~~Fixed ~~the~~assets ~~second~~declined ~~quarter~~$0.1 ~~and~~million in the ~~first~~quarter ~~six~~due ~~months~~to ofthe ~~2003,~~impact ~~commercial~~of ~~aerospace~~foreign ~~revenues~~exchange ~~have declined as a result of~~rates. ~~decreased~~The ~~activity~~decrease in ~~machining~~goodwill ~~and~~is ~~fabrication~~solely ~~services. These~~related ~~areas are anticipated~~ to ~~remain at depressed levels throughout~~ the ~~balance~~impact of ~~2003~~foreign exchange.

~~Compared~~LIQUIDITY toAND ~~the~~CAPITAL prior year, military related activity for the quarter and the six months ended June 30, 2003 has increased. Increased work related to the Apache build contract accounts for this improvement. For the last half of 2003 military revenues are anticipated to be lower than they were in 2002, primarily due to the effects of changes in foreign exchange rates.RESOURCES

~~Gross~~A ~~margins,~~significant ~~excluding~~portion ~~depreciation,~~of ~~for~~ the ~~second~~Company’s ~~quarter~~assets ~~were~~and ~~29.7%,~~liabilities ~~compared~~are denominated toin ~~29.5%~~US ~~for the second quarter of 2002~~dollars. ~~Gross~~The ~~margins related to military~~amounts ~~activities~~included ~~for~~in the ~~quarter~~Consolidated ~~increased~~Statement ~~5.6%~~of ~~year-over-year~~Cash asFlows afor ~~result~~changes ofin these US ~~increased~~dollar ~~activity~~assets and ~~product~~liabilities ~~mix. Commercial~~are ~~margins~~calculated ~~for~~in ~~the~~US ~~quarter~~currency ~~decreased~~and ~~12.1%~~then ~~compared~~ translated to ~~the~~Canadian ~~prior year~~dollars, ~~primarily~~at asthe aaverage ~~result~~exchange ofrate ~~lower~~for ~~activity~~the ~~levels~~period. For inthis ~~machining and fabrication services~~reason, the ~~impact~~resultant ofchanges measured ain ~~higher~~ Canadian ~~dollar~~dollars ~~and~~will ~~pricing reductions. Using~~not equal the ~~same~~difference ~~Canadian/US~~between balance ~~exchange~~sheet ~~rate~~amounts. In as the ~~prior~~balance ~~year~~sheet, ~~gross~~US dollar ~~margins~~balances ~~for~~are ~~the~~translated ~~second~~to ~~quarter~~Canadian ofdollars ~~2003 would~~at ~~have~~period ~~increased~~end ~~by approximately $2 million~~exchange rates.

~~For~~At ~~the six months ended June~~ September 30, 2003 ~~gross margins~~, ~~excluding~~the ~~depreciation~~Company ~~were~~had ~~29.3%~~total ~~compared~~net todebt ~~27.7%~~of ~~in the prior~~$97.4 ~~year~~million. ~~Increased~~Bank ~~military~~indebtedness ~~related~~increased by ~~margins~~$1.5 ~~partially~~million ~~offset~~during bythe ~~reduced~~third ~~commercial~~quarter ~~margins~~of ~~accounted~~2003. At ~~for~~September 30, 2003 the ~~net increase. Using~~Company ~~the~~had ~~same~~bank ~~Canadian/US~~indebtedness of $10.8 ~~exchange~~million ~~rate~~compared asto ~~the~~cash ~~prior~~of ~~year,~~$2.5 ~~gross~~million ~~margins~~at ~~for~~December 31, 2002. During the ~~first~~three ~~half~~and ofnine ~~2003~~months ~~would~~ended ~~have~~September 30, ~~increased~~2003, bycash ~~approximately~~flows $3were ~~million~~negatively impacted by working capital changes.

~~For~~Cash used for operating activities related to continuing operations in the ~~last~~third ~~half~~quarter was $0.4 million. This represents a decrease of ~~2003~~$4.0 ~~military~~million ~~and~~compared to the third quarter of 2002. The year-over-year change for ~~commercial~~the ~~gross~~third ~~margins~~quarter ~~are~~is ~~expected~~largely due to beworking capital changes and lower ~~than~~net income. The ~~the~~Company ~~first~~continues ~~half~~to asfund a ~~result~~significant portion of ~~changes~~the work-in-progress related to ~~product~~the ~~mix,~~Apache ~~exchange~~build contract ~~rates,~~from ~~pricing~~cash ~~and~~generated ~~lower~~from ~~customer~~operations. This situation has improved after quarter-end as a result of collection ~~demand~~of progress billings on this job.

13For the nine months ended September 30, 2003 cash used in operating activities related to continuing operations increased $6.5 million over the prior comparative, primarily as a result of lower net income. The Company is focusing significant attention on the reduction of inventories through the implementation of lean manufacturing techniques, which is anticipated to improve future cash flows.

Selling, general and administration (“SG&A”) expenses totaled $6.2 million (14.8% of sales) for the second quarter compared to $5.0 million in the prior year comparative. The increase is largely a result of severance costs of $1 million incurred in the second quarter of 2003. Due to lower activity levels related to commercial aerospace and efforts to reduce administrative costs, layoffs and staff position reductions occurred in the second quarter. For the six months ended June 30, 2003, SG&A expenses were $11.3 million (12.7% of sales) representing an increase of $2.2 million over the prior year. The increase primarily relates to a one-time insurance recovery of $0.7 million in 2002 and severance costs incurred in the second quarter of 2003.15

~~Depreciation~~Cash ~~and~~used ~~amortization~~ in ~~the~~investing ~~second~~activities related to continuing operations for the third quarter of 2003 was $2.01 million, ~~similar~~and to$8.7 million for the ~~second~~first nine months, which included capital expenditures of $1.9 million for the third quarter and $5.7 million for the nine months of ~~2002~~2003. ~~For~~Cash invested to increase the ~~six~~investment ~~months~~in ~~ended~~Vector ~~June~~Aerospace amounted ~~30,~~to $2.6 million in the nine months of 2003. Cash used in investing activities related to continuing ~~depreciation~~operations ~~and~~for ~~amortization~~the third quarter of 2002 was $43.13 million ~~compared~~and to $36.90 million in the nine months of 2002. The 2002 amounts included capital expenditures of $3.3 million for the quarter and $5.9 million for the nine months ended September 30, 2002.

~~Net~~Cash ~~interest~~provided ~~expense~~by infinancing activities related to continuing operations for the ~~second~~third quarter was $2.15 million, and $010.20 million ~~lower~~for ~~than~~ the ~~prior~~nine ~~year~~months of 2003. ~~Net~~This ~~interest~~included ~~expense~~an ~~for~~increase of bank indebtedness of $2.3 million in the ~~first~~third ~~half~~quarter ofand $10.7 million for the nine months of 2003. In the third quarter of 2002, cash used in financing activities from continuing operations was $47.9 7 million ~~compared~~and to $53.10 million infor the ~~prior~~nine ~~year~~months of 2002. The ~~decrease~~year-over-year inchange ~~interest~~is ~~expense~~primarily ~~results from~~related ~~lower~~to ~~interest~~increases ~~rates~~in bank indebtedness and ~~foreign~~debt ~~exchange effects~~repayments.

~~Earnings~~At ~~for continuing operations~~September 30, ~~before taxes~~2003, ~~for~~ the ~~second~~Company ~~quarter~~had ~~and~~approximately ~~first half of 2003 were respectively~~ $~~2.1 million~~5 ~~and $0.8~~ million ~~below the prior year comparatives. These decreases are primarily a result~~ of ~~the~~borrowing ~~impact~~capacity ofavailable ~~the~~under ~~higher~~its ~~Canadian~~existing ~~dollar~~credit ~~and one time severance expenses in the second quarter~~facilities. ~~During~~The ~~the~~Company ~~quarter~~believes ~~the impact~~it ofhas ~~the~~adequate ~~strengthening Canadian dollar was approximately $0.04 per share~~credit ~~reduction~~facilities into ~~earnings~~meet ~~before~~its ~~interest~~cash ~~and~~requirements ~~taxes~~for ~~(“EBIT”). Using~~ the ~~same~~remainder ~~exchange rate as the second quarter~~ of ~~2002, EBIT from continuing operations would have increased by approximately $2 million. Using the same exchange rate as the first six months of 2002, EBIT for~~ 2003 ~~would have increased by approximately $2 million~~.

~~Income tax expense for continuing operations~~INVESTMENT ~~for~~IN ~~the~~VECTOR second quarter was $0.8 million compared to $1.2 million in the prior year. Income taxes for the first half of 2003 of $1.8 million increased $0.4 million from the prior year comparative. The difference in effective tax rates between 2003 and 2002 relates to the utilization of tax loss carry forwards.AEROSPACE

~~Income~~During ~~from~~the ~~continuing~~past ~~operations~~twelve ~~after~~months, ~~tax for~~ the ~~second~~Company ~~quarter~~has ~~decreased~~acquired ~~$1.8~~shares ~~million~~in Vector ~~year-over-year~~Aerospace ~~from~~Corporation ~~$0.11~~(“Vector”) ~~per share~~and totoday $0owns approximately 9.049% ~~per~~of Vector’s ~~share~~common stock. ~~For~~Vector’s business is in the ~~first six~~Maintenance ~~months~~Repair ofand ~~2003~~Overhaul (MRO) sector while Northstar’s primary business is the ~~year-over-year~~manufacture ~~decrease~~of ~~was~~precision ~~$1.1~~gears, ~~million~~transmissions ~~from~~and auxiliary $0gear boxes.18 Less ~~per~~than 5% of ~~share~~Northstar’s existing revenues relate to $0activities that currently compete with Vector.14 Northstar ~~per~~does ~~share~~not consider the companies to be competitors.

~~Net~~Northstar, ~~income~~together ~~for~~with ~~the~~a ~~three~~limited ~~months~~number ~~ended~~of ~~June 30,~~other ~~2003~~Vector ~~was~~shareholders proposed ~~$0.04~~an ~~per~~alternate ~~share~~slate ~~compared~~of todirectors ~~$0.13~~for ~~per~~Vector ~~share~~at ~~for~~ the ~~prior~~Vector Annual ~~year~~Meeting held on May 23, 2003. ~~Net~~At that ~~income~~meeting, ~~for~~ the ~~first~~incumbent ~~half~~management slate of ~~2003~~ directors was aelected ~~loss~~by ofa $0very narrow margin.19 Subsequent ~~per~~to ~~share~~the ~~compared~~Vector Annual toMeeting, ~~income~~additional ofshareholders ~~$0.16~~indicated ~~per~~a ~~share~~willingness ~~for~~to support an ~~the~~alternate ~~prior~~slate ~~year. The~~of ~~decrease~~directors ~~is primarily~~and Northstar requisitioned a ~~result~~shareholders meeting of ~~the~~Vector ~~write-off~~to ofelect ~~the~~a ~~currency~~new ~~translation~~Vector ~~adjustment~~board. ~~related~~The toVector ~~the~~Shareholders’ ~~discontinued~~Meeting ~~operations~~is inscheduled ~~the~~for ~~first~~November 28, 2003. An ~~quarter~~Information ofCircular ~~2003~~relating to meeting will be issued.

1416

~~Sector Revenue and Gross Margin Analysis~~DISCONTINUED OPERATIONS

	Quarter ended June 30 (in millions)						Six months ended June 30 (in millions)
	2003			2002			2003			2002
Revenues
Defense	$	27.7		$	27.7		$	60.0		$	55.2
Commercial	14.2			18.2			29.1			34.2
Total revenues	$	41.9		$	45.9		$	89.1		$	89.4
Gross margin (% of revenue)
Defense	39.5		%	33.8		%	35.6		%	32.0		%
Commercial	10.8		%	22.9		%	18.0		%	20.7		%
Total gross margin %	29.7		%	29.5		%	29.3		%	27.7		%
Comparability Summary Table
	Quarter ended June 30 (in millions)						Six months ended June 30 (in millions)
	2003			2002			2003			2002
Income from continuing operations – before interest and taxes, as reported	$	4.2		$	6.0		$	10.7		$	11.7
Adjustments:
Benefits insurance recovery	—			—			—			(0.7		)
Income from continuing operations, before interest and taxes – comparable basis	$	4.2		$	6.0		$	10.7		$	11.0
% of Revenue	10.0		%	14.0		%	12.0		%	12.3		%
Add:
Depreciation and amortization	2.0			2.0			4.1			4.0
EBITDA, continuing operations – comparable basis	$	6.2		$	8.0		$	14.8		$	15.0
% of Revenue	14.8		%	18.0		%	16.6		%	16.8		%

On March 31, 2003 the Company concluded an agreement with its joint venture partner resulting in Northstar’s common shares of the pump companies being exchanged for non-participating preferred shares. The pump companies must purchase the preferred shares on March 31, 2008 for $18 million.

15The preferred shares are classified as a long-term asset on the balance sheet and are carried at a nil value.

~~BALANCE~~On ~~SHEET~~March 31, 2003 the Company recorded as a charge to discontinued operations in the Income Statement the currency translation adjustment (“CTA”) related to discontinued operations, which was previously included as a separate component of Shareholders’ Equity. The CTA write off for discontinued operations amounted to $9.5 million. Shareholders’ equity was not affected by this charge.

Total assets related to continuing operations, decreased by $11.9 million in the quarter and $10.3 million year-to-date to $178 million as at June 30, 2003. The higher Canadian dollar reduced total assets by approximately $10 million in the quarter and $19 million in the first half of 2003.OUTLOOK

~~Working~~The ~~capital related~~Company toexpects ~~continuing~~the ~~operations~~last quarter of ~~$75.8~~2003 ~~million~~to ~~decreased~~show bycontinued $3weak results.6 Continued ~~million~~strength in the Canadian ~~second~~dollar ~~quarter~~has ~~and~~adversely ~~$7.2~~affected ~~million~~results ~~year-to-date. Excluding~~for the ~~impact~~first ofnine ~~changes~~months ~~in foreign exchange rates,~~of ~~working~~2003 ~~capital~~and ~~increased~~is ~~$1.6~~expected ~~million~~to incontinue ~~the~~to ~~quarter~~do ~~and $2~~so.~~7 million year-to-date.~~

~~Fixed~~During ~~assets~~the third quarter of 2003 more than 70% of the Company’s ~~declined~~revenues $3were derived from defense customers.1 This ~~million~~has inincreased ~~the~~by ~~quarter~~approximately ~~due~~8% tofrom the ~~impact~~prior year comparative primarily as a result of ~~foreign~~the ~~exchange rates~~decline in commercial aerospace activity. The ~~decrease~~trend towards increased defense revenues in ~~goodwill~~proportion to total revenues is expected to continue and results from ongoing weakness in commercial revenues. ~~solely~~The ~~related~~increase in defense activity also relates to the ~~impact~~higher activity in the Apache build contract, which began in the second half of ~~foreign~~2002. This ~~exchange~~contract is expected to continue to generate revenues until the end of 2004. Although the Company has performed work on the Apache transmission components before, this is the first contract to deliver complete assembled new transmissions. As with most new work, there is a learning curve; the Apache build contract is no exception.

~~LIQUIDITY~~There continues to be uncertainty regarding the duration and extent of the continued softening in the commercial aviation market. A number of the Company’s commercial aerospace ~~AND~~customers ~~CAPITAL~~have ~~RESOURCES~~indicated that their requirements will likely be lower in the latter half of 2003. The Company anticipates lower commercial revenues and margins in the remainder of 2003.

AThe ~~significant~~Canadian ~~portion~~dollar ofhas ~~the~~appreciated ~~Company’s~~against ~~assets and~~its ~~liabilities are denominated in~~ US ~~dollars. The~~counterpart ~~amounts included~~ in the first ~~Consolidated~~nine ~~Statement~~months of ~~Cash~~2003 ~~Flows~~from ~~for changes~~a ~~in these~~ Canadian/US ~~dollar~~exchange ~~assets~~rate ~~and~~of ~~liabilities~~$1.57 (December 31, ~~are~~2002) ~~calculated~~to in$1.35 US(September 30, ~~currency and~~2003). Subsequent ~~then translated~~ to ~~Canadian dollars~~quarter-end, at the ~~average~~dollar ~~exchange~~has strengthened ~~rate~~further ~~for~~to ~~the period~~$1.30. ~~For~~The ~~this~~vast majority ~~reason,~~of the ~~resultant changes~~Company’s ~~measured~~revenues inare US dollar based. The stronger Canadian ~~dollars~~currency will ~~not~~continue to ~~equal~~negatively ~~the~~impact ~~difference~~revenues, ~~between balance~~margins ~~sheet~~and ~~amounts~~cash flows. InManagement ~~the~~is ~~balance sheet,~~assessing USvarious ~~dollar~~options ~~balances~~to improve ~~are~~profitability ~~translated~~in tothe ~~Canadian~~face ~~dollars~~of ata ~~period~~strengthening ~~end exchange~~Canadian ~~rates~~dollar.

At June 30, 2003, the Company had total net debt of $95.8 million. Bank indebtedness increased by $3.0 million during the second quarter of 2003. At June 30, 2003 the Company had bank indebtedness of $9.3 million compared to cash of $2.5 million at December 31, 2002. During the three and six months ended June 30, 2003, cash flows were negatively impacted by working capital changes.17

~~Cash~~The ~~provided~~Company byanticipates ~~operating~~lower ~~activities~~revenues ~~related~~and margins in 2004 as compared to ~~continuing~~2003, ~~operations~~primarily inas ~~the~~a ~~second~~result ~~quarter~~of ~~was~~foreign $0exchange rates and military product mix.3 The ~~million,~~average ~~representing~~US/Canadian aexchange ~~decrease~~rate offor 2003 is anticipated to be approximately $4.1.40 ~~million~~ compared to the ~~second~~current rate ~~quarter~~ of $1.30 and an average rate in 2002 of $1.58. The ~~year-over-year~~changes ~~change~~in ~~for~~exchange ~~the~~rates ~~second quarter~~are isanticipated ~~largely~~to ~~due~~have toa significant ~~working~~negative ~~capital~~impact ~~changes~~on revenues and ~~lower~~earnings ~~net~~in ~~income. The~~2004 ~~Company~~as ~~continues~~compared to prior ~~fund~~years. In addition, a significant ~~portion~~military ofcontract, ~~the~~which ~~work-in-progress~~had ~~related~~reported tostrong ~~the~~gross ~~Apache~~margins ~~build~~is ~~contract~~anticipated ~~from cash~~to ~~generated~~have ~~from~~much ~~operations. This situation~~lower isvolumes ~~anticipated~~in to2004 ~~improve~~as ~~once~~compared to the ~~Company~~last ~~receives~~two ~~full~~years. These ~~progress billings~~reductions onare ~~this~~due ~~job,~~to ~~which~~lower iscustomer demands ~~expected~~and tocustomer ~~begin~~inventory ~~in Q4~~adjustments.

~~For~~These ~~the~~impacts ~~six~~together ~~months~~are ~~ended~~expected ~~June~~to ~~30,~~result ~~2003~~in ~~cash used~~a decrease in ~~operating~~revenue and ~~activities~~earnings ~~increased~~for ~~$11~~2004.0 These ~~million over the prior~~impacts ~~comparative,~~are ~~primarily~~not asexpected ato ~~result~~be oflong-term ~~working~~in ~~capital changes~~nature. The Company is ~~focusing~~taking ~~significant attention~~steps ~~towards~~necessary ~~the~~to ~~reduction~~reduce ofthe ~~inventories~~impacts ~~through~~to the extent ~~implementation~~possible. The oflong-term ~~lean~~viability ~~manufacturing~~and ~~techniques,~~prospects ~~which~~of isthe ~~anticipated~~Company toremain ~~improve future cash flows~~strong.

16Northstar’s aerospace operations are well positioned for long-term growth. The Company believes that its mix of commercial and defense work will continue to enhance its future success.

~~Cash~~Backlog ~~used~~for ~~in investing activities related to~~ continuing operations, ~~for the second quarter of~~at September 30, 2003 was approximately $~~1.9~~166 million ~~and~~compared to $~~6.6~~238 million at ~~for the first six months~~December 31, ~~which~~2002. Of ~~included capital~~the ~~expenditures of~~ $~~1.7~~ 72 million ~~for~~decrease, ~~the second quarter and~~ $~~3.8 million~~20 ~~for~~million ~~the~~is ~~first~~a ~~six~~result ~~months~~ of ~~2003. During~~ the ~~quarter,~~higher ~~cash~~Canadian/US ~~invested~~exchange torate. The ~~increase~~balance of the ~~investment~~reduction ~~in Vector~~primarily ~~Aerospace~~relates ~~amounted~~ to ~~$0.2~~work ~~million~~completed ~~and~~on ~~$2.6~~programs ~~million~~ in the ~~first~~nine ~~six~~ months of 2003. ~~Cash~~Further ~~used~~purchase inorders ~~investing~~are ~~activities related to~~anticipated ~~continuing~~later ~~operations~~in ~~for the second quarter of 2002 was $2~~2003.2 Backlog ~~million~~only ~~and $2.9~~includes ~~million in~~ the ~~first~~value ~~half~~ of ~~2002. The 2002~~purchase ~~amounts~~orders ~~included~~in ~~capital~~hand ~~expenditures~~with ofrespect ~~$2.0~~to ~~million~~long-term ~~for~~customer ~~the quarter and~~supply $2agreements.~~7 million for the six months ended June 30, 2002.~~

Cash provided by financing activities related to continuing operations for the second quarter was $1.7 million and $7.5 million for the first six months of 2003. This included an increase of bank indebtedness of $2.4 million in the second quarter and $8.3 million for the first half of 2003. In the second quarter of 2002, cash used in financing activities from continuing operations was $2.5 million and $4.7 million for the first six months of 2002. The yearForward-~~over-year~~Looking ~~change is primarily related to increases in bank indebtedness and debt repayments.~~statements

AtThis report ~~June~~includes 30“forward-looking statements” that are subject to risks and uncertainties. All statements, ~~2003~~other than statements of historical facts included in this report, including, without limitation, those regarding the Company’s ~~had~~financial position, business strategy, projected costs and plans, objectives of management for future ~~approximately~~operations, ~~$10~~and ~~million~~certain items discussed in “Risks and Uncertainties” below may be or include forward-looking statements. There is uncertainty over the impact of ~~borrowing~~potential ~~capacity~~terrorist ~~available~~attacks, ~~under~~the war ~~its~~in ~~existing~~Iraq and the uncertain North American economy on the Company’s revenues and earnings in 2003 and beyond. As a ~~credit~~result ~~facilities~~of these factors and others, the extent and duration of the soft commercial aerospace market and the impact of lower world wide commercial passenger air travel cannot be accurately estimated. ~~The~~Also, the impact of the level of future U.S. military expenditures and its impact on the Company’s ~~believes~~revenues cannot be estimated with a high degree of accuracy. itForward-looking ~~has~~information ~~adequate~~contained ~~credit~~herein ~~facilities~~is tobased ~~meet~~upon ~~its~~a ~~cash~~number ~~requirements~~of assumptions ~~for~~regarding the U.S. and global economic environment and local and foreign government policies and actions. ~~remainder~~Actual future results of ~~2003~~the Company may differ materially depending on a variety of factors, including production rates, timing of product deliveries, U.S. and foreign government activities, volatility of the market for the Company’s products and services, worldwide political stability, factors that result in significant and prolonged disruption to commercial air travel worldwide, worldwide political stability, U.S. military activity, domestic and international economic conditions, and other political and economic risks and uncertainties. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, there can be no assurance that such expectations will prove to have been correct. Important factors that could cause actual results to differ materially from the Company’s expectations (“Cautionary Statements”),

~~INVESTMENT IN VECTOR AEROSPACE~~18

~~During~~including those ~~the~~set ~~past~~forth ~~nine~~under ~~months,~~ the ~~Company~~caption ~~has acquired shares in Vector Aerospace Corporation (~~“~~Vector”)~~Risks and ~~today~~Uncertainties” ~~owns~~below, are ~~approximately~~disclosed 9herein.9% All ~~of Vector’s common stock.~~ subsequent ~~Vector’s~~written ~~business is in the Maintenance Repair~~ and ~~Overhaul~~oral ~~(MRO)~~forward-looking ~~sector while~~statements ~~Northstar’s~~attributable ~~primary~~to ~~business is~~ the ~~manufacture~~Company ~~of precision gears,~~or ~~transmissions~~persons ~~and~~acting ~~auxiliary~~on ~~gear~~behalf ~~boxes. Less than 5%~~ of ~~Northstar’s~~the ~~existing~~Company ~~revenues~~are ~~relate~~expressly toqualified ~~activities~~in ~~that~~their ~~currently~~entirety ~~compete~~by ~~with Vector. Northstar does not consider~~ the ~~companies~~Cautionary ~~to be competitors~~Statements.

~~Northstar, together with a limited number of~~The ~~other~~Company ~~Vector~~disclaims ~~shareholders~~any ~~proposed~~intentions anor ~~alternate~~obligation ~~slate of directors for Vector at the Vector Annual Meeting held on May 23, 2003. At that meeting, the incumbent management slate of directors was elected by a very narrow margin. Subsequent~~ to ~~the~~update ~~Vector~~or ~~Annual~~revise ~~Meeting,~~any ~~additional shareholders~~forward ~~indicated~~looking astatements ~~willingness~~or tocomments ~~support~~as ~~an alternate slate of directors and Northstar requisitioned~~ a ~~shareholders~~result ~~meeting~~ of ~~Vector~~any ~~to elect a~~ new ~~Vector board. A majority of the directors proposed for election are not related to Northstar. The Vector Shareholders’ Meeting is scheduled for November 7~~information, ~~2003. Northstar~~ ~~expects~~future ~~to issue an~~event ~~Information~~or ~~Circular relating to such Vector Shareholders’ Meeting~~otherwise.

~~DISCONTINUED~~Non-GAAP ~~OPERATIONS~~Measures

~~On March 31, 2003 the~~ The Company ~~concluded~~defines ~~an agreement~~EBITDA ~~with~~as ~~its~~earnings ~~joint~~from ~~venture~~operations ~~partner~~before ~~resulting~~interest, ~~in Northstar’s common shares~~income ~~being~~taxes, ~~exchanged~~depreciation ~~for~~and ~~non-participating~~amortization ~~preferred~~including ~~shares. The pump companies must purchase~~ the ~~preferred~~ ~~shares on March 31, 2008 for $18 million. The preferred shares are classified as a long~~write-~~term~~off ~~asset~~of ~~on the balance sheet and are carried at a nil~~deferred ~~value~~development costs.

17The Company has included information concerning EBITDA because it believes this measure is used by certain investors as a measure of continuing financial performance. EBITDA is not a measure of financial performance under Canadian or United States generally accepted accounting principles (“GAAP”). As well, this measure has no standardized meaning prescribed under GAAP and is unlikely to be comparable to similarly titled measures used by other companies. This measure should not be construed as an alternative to cash flow from operations or earnings from operations as determined in accordance with GAAP as measures of liquidity or earnings.

On March 31, 2003 the Company wrote off as a charge to discontinued operations in the Income Statement the currency translation adjustment (“CTA”) related to discontinued operations, which was previously included as a separate component of Shareholders’ Equity. The CTA write off for discontinued operations amounted to $9.5 million. Shareholders’ equity was not affected by this write-off.19

OUTLOOK

The Company expects the balance of 2003 to be challenging. Continued weakness in the US dollar coupled with the ongoing reduction in commercial aerospace markets has adversely affected results for the first half of 2003 and is expected to do so in the last half of the year.

During the second quarter of 2003 more than 66% of the Company’s revenues were derived from defense customers. This has increased by approximately 6% from the prior year comparative primarily as a result of the decline in commercial aerospace activity. The trend towards increased defense revenues in proportion to total revenues as compared to 2002 is expected to continue and results from ongoing weakness in commercial revenues. The increase in defense activity also relates to the higher activity in the Apache build contract, which began in the second half of 2002. This contract is expected to continue to generate revenues until the end of 2004. Although the Company has performed work on the Apache transmission components before, this is the first contract to deliver complete assembled new transmissions. As with most new work, there is a learning curve; the Apache build contract is no exception. As further experience is gained and costs decrease, the Company anticipates margins will improve on this contract. We expect defense margins to be negatively impacted in the last half of 2003 as a result of changes in volume, exchange rates and product mix.

There continues to be uncertainty regarding the duration and extent of the continued softening in the commercial aviation market. A number of the Company’s commercial aerospace customers have indicated that their requirements will likely be lower in the latter half of 2003. The Company anticipates lower commercial revenues and margins in the last half 2003 as compared to the first half.

The Canadian dollar has appreciated against its US counterpart in the first six months of 2003 from a Canadian/US exchange rate of $1.57 (December 31, 2002) to $1.35 (June 30, 2003). The vast majority of the Company’s revenues are US dollar based. The stronger Canadian currency will continue to negatively impact revenues, margins and cash flows in 2003 as compared to 2002.

Northstar’s aerospace operations are well positioned for long-term growth. The Company believes that its mix of commercial and defense work will continue to enhance its future success.

Backlog for continuing operations, at June 30, 2003 was approximately $179 million compared to $238 million at December 31, 2002. Of the $59 million decrease, $31 million is a result of the higher Canadian/US exchange rate. The balance of the reduction primarily relates to work completed on programs in the first half of 2003. Further purchase orders are anticipated later in 2003. Backlog only includes the value of purchase orders in hand with respect to long-term customer supply agreements.

FORWARD-LOOKING STATEMENTS

This report includes “forward-looking statements” that are subject to risks and uncertainties. All statements, other than statements of historical facts included in this report, including, without limitation, those regarding the Company’s financial position, business strategy, projected costs and plans, objectives of management for future operations, and certain items discussed in “Risks and Uncertainties” below may be or include forward-looking statements. There is uncertainty over the impact of potential terrorist attacks, the war in Iraq and the uncertain North American economy on the Company’s revenues and earnings in 2003 and beyond. As a result of these factors and others, the extent and duration of the soft commercial aerospace market and the impact of lower world wide commercial passenger air travel cannot be accurately estimated. Also, the impact of the level of future U.S. military expenditures and its impact on the Company’s revenues cannot be estimated with a high degree of accuracy. Forward-looking information contained herein is based upon a number of assumptions regarding the U.S. and global economic environment and local and foreign government policies and actions. Actual future results of the Company may differ materially depending on a variety of factors, including production rates, timing of product deliveries, U.S. and foreign government activities, volatility of the market for the Company’s products and services, worldwide political stability, factors that result in significant and prolonged disruption to commercial air travel worldwide, worldwide political stability, U.S. military activity, domestic and international economic conditions, and other political and economic risks and uncertainties. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, there can be no assurance that such expectations will prove to have been correct. Important factors that could cause actual results to differ materially from the Company’s expectations (“Cautionary Statements”), including those set forth under the caption “Risks and Uncertainties” below, are disclosed herein. All subsequent written and oral forward-looking statements attributable to the Company or persons acting on behalf of the Company are expressly qualified in their entirety by the Cautionary Statements.

The Company disclaims any intentions or obligation to update or revise any forward looking statements or comments as a result of any new information, future event or otherwise.

NON-GAAP MEASURES

The Company defines EBITDA as earnings from operations before interest, income taxes, depreciation and amortization including the write-off of deferred development costs.

The Company has included information concerning EBITDA because it believes this measure is used by certain investors as a measure of continuing financial performance. EBITDA is not a measure of financial performance under Canadian or United States generally accepted accounting principles (“GAAP”). As well, this measure has no standardized meaning prescribed under GAAP and is unlikely to be comparable to similarly titled measures used by other companies. This measure should not be construed as an alternative to cash flow from operations or earnings from operations as determined in accordance with GAAP as measures of liquidity or earnings.

Three Months Ended September 30

Nine Months Ended September 30

Three Months Ended
September 30

Nine Months Ended
September 30

Filing Compare · NORTHSTAR AEROSPACE INC