VANCOUVER, Nov. 14, 2019 /PRNewswire/ - Avcorp Industries
Inc. (TSX: AVP) (the "Company", "Avcorp" or the "Avcorp Group")
today announced its financial results for the quarter ended
September 30, 2019. All amounts are
in Canadian currency unless otherwise stated.
2019 Highlights
Key financial results include:
- Third quarter 2019 revenue was $37,437,000 compared to $44,862,000 in the same quarter in 2018. The
third quarter revenue was lower by $6,091,000, in comparison to the same quarter in
2018; after the benefit of amortization of the unfavourable
contract liability is removed.
- Third quarter 2019 operating loss was higher by $335,000, in comparison to the same quarter in
2018; after the benefit of amortization of unfavourable contracts
liability, onerous contracts provisions, net contract modification
and the net claims impact have been removed. This was mainly due to
the lower deliveries caused by Boeing 737 MAX grounding, labour
disruption and new program start-up costs at the Delta facility offset by the consolidation of
costs and improved operating effectiveness.
- On September 25, 2019 the Company
reached a new labour agreement with the International Association
of Machinists and Aerospace Workers (Lodge 250) (the "Union") at
its Delta, British Columbia
facility. The six year labour agreement was ratified by the Union
and will expire on March 31, 2025
bringing the company long term stability.
- Third quarter 2019 cash flows used in operating activities,
before changes in non-cash working capital, increased by
$276,000, relative to the same
quarter in 2018.
- During the second quarter of 2019, the Company received all
required approvals from Boeing for the 737 MAX spoiler program;
subsequently, on July 5, 2019 the
Company successfully shipped the first shipset. Production ramp up
to support full contractual requirements is underway.
- On January 25, 2019, the Company
entered into a net claim settlement agreement with HITCO Carbon
Composites, Inc., SGL Carbon, LLC, and SGL Carbon SE (the "SGL
parties") and a customer, which provided the Company a settlement
in satisfaction of existing and potential claims, causes of action,
disputes and other business matters related to the acquisition from
the SGL parties. The net claim settlement resulted in a gain of
$19,744,000.
- The Company is in discussions with a Canadian Chartered bank to
extend the existing revolving loan facility which matures on
June 30, 2020.
- In Comtek's continuing effort to reduce airline operator's key
metric of turnaround time for repaired aircraft components, while
still providing premium quality, Comtek has embarked on deploying a
forward base of operations located in the United Kingdom. EASA certification has now
been granted and the team is actively engaged on its' first repair
orders, providing much needed support for the growing Q400 fleet in
Europe.
Review of 2019 Third Quarter Financial Results
For the quarter ended September 30,
2019, the Avcorp Group recorded losses from
operations totaling $5,164,000 from
$37,437,000 revenue, as compared to
$41,782,000 operating income from
$44,862,000 revenue for the previous
years' quarter. It should be noted that 2019 operating loss
benefited by $408,000 income from
amortization of onerous contracts provision (September 30, 2018: $3,330,000 amortization of unfavourable contract
liability and onerous contract liability). The third quarter ended
2018 also benefited from the net contract modification for an
unfavourable contract in the amount of $41,470,000 and a net claim settlement of
$2,219,000. The current operating
loss was higher by $335,000, in
comparison to the same quarter in 2018 after these benefits have
been removed.
During the quarter ended September 30,
2019, cash utilization from operating activities, excluding
the impact of changes in non‑cash working capital, were
$3,766,000 of cash as compared with
utilization of $3,490,000 of cash
during the quarter ended September 30,
2018.
As at September 30, 2019, the
Company had $9,668,000 cash on hand
(December 31, 2018: $2,051,000) and had utilized $81,026,000 of its operating line of credit
(December 31, 2018: $85,840,000). The Company has a working capital
deficit of $73,760,000 as at
September 30, 2019 which has
decreased from the December 31, 2018
$71,503,000 deficit. Working capital
surplus/deficit is defined as the difference between current assets
and current liabilities. The Company's accounts receivable,
contract assets, and inventories net of accounts payable, amount to
a $13,417,000 surplus as at
September 30, 2019 (December 31, 2018: $22,000,000 surplus). The Company's accumulated
deficit as at September 30, 2019 is
$131,348,000 (December 31, 2018: $132,878,000).
About Avcorp
The Avcorp Group designs and builds major airframe structures
for some of the world's leading aircraft companies, including BAE
Systems, Boeing, Bombardier, Lockheed Martin and Subaru
Corporation. The Avcorp Group has more than 60 years of experience,
over 700 skilled employees and 636,000 square feet of facilities.
Avcorp Structures & Integration located in Delta British Columbia, Canada is dedicated to
metallic and composite aerostructures assembly and integration;
Avcorp Engineered Composites located in Burlington Ontario, Canada is dedicated to
design and manufacture of composite aerostructures, and Avcorp
Composite Fabrication located in Gardena
California, USA has advanced composite aerostructures
fabrication capabilities for composite aerostructures. The Avcorp
Group offers integrated composite and metallic aircraft structures
to aircraft manufacturers, a distinct advantage in the pursuit of
contracts for new aircraft designs, which require lower-cost,
light‑weight, strong, reliable structures. Comtek Advanced
Structures Ltd., at our Burlington,
Ontario, Canada location also provides aircraft operators
with aircraft structural component repair services for commercial
aircraft.
Avcorp Composite Fabrication Inc. is wholly owned by Avcorp US
Holdings Inc. Both companies are incorporated in the State of Delaware, USA, and are wholly owned
subsidiaries of Avcorp Industries Inc.
Comtek Advanced Structures Ltd., incorporated in the Province of
Ontario, Canada, is a wholly owned
subsidiary of Avcorp Industries Inc.
Avcorp Industries Inc. is a federally incorporated reporting
company in Canada and traded on
the Toronto Stock Exchange (TSX:AVP).
AMANDEEP KALER
CHIEF EXECUTIVE OFFICER
AVCORP GROUP
Contact: Amandeep Kaler, Investor
Relations Contact / 604-582-6677 Ext 2534
Forward-Looking Statements
This release should be read in conjunction with the Company's
unaudited financial statements contained in the Company's Annual
Report and with the quarterly financial statements and accompanying
notes filed with Sedar (www.sedar.com).
Certain statements in this release and other oral and written
statements made by the Company from time to time are
forward-looking statements, including those that discuss
strategies, goals, outlook or other non‑historical matters; or
projected revenues, income, returns or other financial measures.
These forward‑looking statements are subject to risks and
uncertainties that may cause actual results to differ materially
from those contained in the statements, including the
following: (a) changes in worldwide economic and political
conditions that impact interest and foreign exchange rates; (b) the
occurrence of work stoppages and strikes at key facilities of the
Corporation or the Corporation's customers or suppliers; (c)
government funding and program approvals affecting products being
developed or sold under government programs; (d) cost and delivery
performance under various program and development contracts; (e)
the adequacy of cost estimates for various customer care programs
including servicing warranties; (f) the ability to control costs
and successful implementation of various cost reduction programs;
(g) the timing of certifications of new aircraft products; (h) the
occurrence of downturns in customer markets to which the
Corporation products are sold or supplied or where the Corporation
offers financing; (i) changes in aircraft delivery schedules or
cancellation of orders; (j) the Corporation's ability to offset,
through cost reductions, raw material price increases and pricing
pressure brought by original equipment manufacturer customers; (k)
the availability and cost of insurance; (l) the Corporation's
ability to maintain portfolio credit quality; (m) the Corporation's
access to debt financing at competitive rates; (n) uncertainty in
estimating contingent liabilities and establishing reserves
tailored to address such contingencies; and (o) integration of
newly acquired operations and associated expenses may adversely
affect profitability.
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL
POSITION
(unaudited, expressed in thousands of Canadian
dollars)
|
September 30,
2019
|
December 31,
2018
|
ASSETS
|
|
|
Current
assets
|
|
|
Cash
|
$9,668
|
$2,051
|
Accounts
receivable
|
19,881
|
23,442
|
Contract
assets
|
24,143
|
24,762
|
Inventories
|
12,360
|
15,601
|
Prepayments and other
assets
|
4,668
|
6,076
|
|
70,720
|
71,932
|
Non-current
assets
|
|
|
Prepaid rent and
security
|
-
|
146
|
Development
costs
|
13,580
|
11,755
|
Property, plant and
equipment
|
45,561
|
28,416
|
Intangibles
|
5,866
|
3,137
|
Investment in
AVS-SYS
|
662
|
682
|
|
|
|
Total
assets
|
136,389
|
116,068
|
|
|
|
LIABILITIES AND
EQUITY
|
|
|
Current
liabilities
|
|
|
Bank
indebtedness
|
81,026
|
85,840
|
Accounts payable and
accrued liabilities
|
42,967
|
41,805
|
Guarantee
Fee
|
4,676
|
-
|
Current portion of
term debt
|
7,948
|
5,510
|
Customer
advance
|
6,148
|
6,334
|
Contract
liability
|
1,304
|
2,137
|
Onerous contract
provision
|
411
|
1,809
|
|
144,480
|
143,435
|
Non-current
liabilities
|
|
|
Guarantee
fee
|
-
|
2,994
|
Term debt
|
22,018
|
2,800
|
Contract
liability
|
3,403
|
2,862
|
Onerous contract
provision
|
-
|
121
|
|
|
|
|
169,901
|
152,212
|
(Deficiency)
Equity
|
|
|
Capital
stock
|
86,219
|
86,219
|
Contributed
surplus
|
5,428
|
5,370
|
Accumulated other
comprehensive income
|
6,189
|
5,145
|
Accumulated
deficit
|
(131,348)
|
(132,878)
|
|
|
|
|
(33,512)
|
(36,144)
|
|
|
|
Total liabilities
and deficiency
|
136,389
|
116,068
|
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF
(LOSS) INCOME AND COMPREHENSIVE (LOSS) INCOME
(unaudited,
expressed in thousands of Canadian dollars, except number of shares
and per share amounts)
FOR THE PERIOD
ENDED SEPTEMBER 30
|
Three months
ended
|
Nine months
ended
|
|
2019
|
2018
|
2019
|
2018
|
Revenues
|
$37,437
|
$44,862
|
$126,461
|
$131,430
|
|
|
|
|
|
Cost of
sales
|
36,843
|
39,361
|
120,728
|
119,514
|
|
|
|
|
|
Gross
profit
|
594
|
5,501
|
5,733
|
11,916
|
|
|
|
|
|
Administrative and
general expenses
|
5,568
|
7,259
|
16,119
|
17,705
|
Office equipment
depreciation
|
190
|
149
|
579
|
438
|
Net contract
modification
|
-
|
(41,470)
|
-
|
(41,470)
|
Net claims
settlement
|
-
|
(2,219)
|
(17,955)
|
(2,219)
|
|
|
|
|
|
Operating (loss)
income
|
(5,164)
|
41,782
|
6,990
|
37,462
|
|
|
|
|
|
Finance costs –
net
|
2,140
|
1,585
|
5,937
|
3,968
|
Foreign exchange loss
(gain)
|
171
|
(37)
|
(588)
|
(178)
|
Net loss on sale of
equipment
|
36
|
-
|
111
|
-
|
|
|
|
|
|
(Loss) income
before income tax
|
(7,511)
|
40,234
|
1,530
|
33,672
|
|
|
|
|
|
Income tax
expense
|
-
|
-
|
-
|
-
|
|
|
|
|
|
(Loss) income for
the period
|
(7,511)
|
40,234
|
1,530
|
33,672
|
|
|
|
|
|
Other comprehensive
(loss) income
|
(349)
|
1,130
|
1,046
|
(3,024)
|
Net (loss) income
and total comprehensive (loss) income
for the
period
|
(7,860)
|
41,364
|
2,576
|
30,648
|
|
|
|
|
|
(Loss) income
per share:
|
|
|
|
|
Basic (loss) income
per common share
|
(0.02)
|
0.12
|
0.00
|
0.10
|
Diluted (loss) income
per common share
|
(0.02)
|
0.12
|
0.00
|
0.10
|
|
|
|
|
|
Basic weighted
average number of shares outstanding (000's)
|
368,118
|
339,408
|
368,118
|
338,080
|
|
|
|
|
|
Diluted weighted
average number of shares outstanding (000's)
|
368,118
|
339,408
|
369,308
|
338,080
|
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH
FLOWS
(unaudited, expressed in thousands of Canadian
dollars)
|
Three months
ended
|
Nine months
ended
|
FOR THE PERIOD
ENDED SEPTEMBER 30
|
2019
|
2018
|
2019
|
2018
|
|
|
|
|
|
Cash flows from
(used in) operating activities
|
|
|
|
|
Net (loss) income for
the period
|
$(7,511)
|
$40,234
|
$1,530
|
$33,672
|
Adjustment for items
not affecting cash:
|
|
|
|
|
Interest
expense
|
2,137
|
1,583
|
5,928
|
3,961
|
Depreciation
|
1,891
|
1,171
|
5,716
|
3,357
|
Development cost
amortization
|
279
|
332
|
1,183
|
1,881
|
Intangible assets
amortization
|
295
|
341
|
890
|
1,008
|
Non-cash financing
cost accretion
|
|
3
|
2
|
9
|
7
|
Provision for
unfavourable contracts
|
-
|
(1,334)
|
-
|
(6,195)
|
Provision for onerous
contracts
|
(408)
|
(1,996)
|
(1,510)
|
(5,376)
|
Provision for doubtful
accounts
|
-
|
-
|
(555)
|
-
|
Provision for obsolete
inventory
|
(535)
|
343
|
(1,508)
|
1,505
|
Stock based
compensation
|
17
|
29
|
58
|
580
|
Net contract
modification
|
-
|
(41,470)
|
-
|
(41,470)
|
Net claim
settlement
|
8
|
(2,219)
|
(1,512)
|
(2,219)
|
Loss on disposal of
equipment
|
36
|
-
|
111
|
-
|
Unrealized foreign
exchange
|
22
|
(481)
|
(730)
|
223
|
Other items
|
-
|
(25)
|
-
|
(91)
|
Cash flows (used in)
from operating activities before changes in non-
cash working
capital
|
(3,766)
|
(3,490)
|
9,610
|
(9,157)
|
Changes in non-cash
working capital
|
|
|
|
|
Accounts
receivable
|
9,577
|
775
|
8,247
|
6,079
|
Contract
assets
|
(2,242)
|
990
|
440
|
(2,447)
|
Inventories
|
21
|
2,071
|
4,498
|
162
|
Prepayments and other
assets
|
359
|
(1,464)
|
2,203
|
(2,033)
|
Accounts payable and
accrued liabilities
|
1,908
|
2,001
|
(1,889)
|
5,175
|
Customer advance
payable
|
257
|
(502)
|
-
|
(2,660)
|
Contract
liability
|
87
|
(7,564)
|
(4,391)
|
(1,965)
|
|
|
|
|
|
Net cash from
(used in) operating activities
|
6,201
|
(7,183)
|
18,718
|
(19,004)
|
|
|
|
|
|
Cash flows (used
in) investing activities
|
|
|
|
|
Purchase of
equipment
|
(406)
|
(632)
|
(893)
|
(1,463)
|
Proceeds from sale of
equipment
|
66
|
-
|
66
|
-
|
Addition of developed
software
|
-
|
-
|
-
|
(371)
|
Payments relating to
development costs and tooling
|
(1,181)
|
(1,692)
|
(3,007)
|
(3,892)
|
|
|
|
|
|
Net cash from
(used in) investing activities
|
(1,521)
|
(2,324)
|
(3,834)
|
(5,726)
|
|
|
|
|
|
Cash flows from
(used in) financing activities
|
|
|
|
|
Increase (decrease)
in bank indebtedness
|
5,539
|
-
|
(2,357)
|
17,961
|
Payment of
interest
|
(1,252)
|
(847)
|
(3,739)
|
(2,010)
|
Proceeds from term
debt
|
352
|
5,466
|
868
|
5,664
|
Exercise of
warrants
|
-
|
938
|
-
|
938
|
Repayment of term
debt
|
(567)
|
(58)
|
(2,023)
|
(211)
|
|
|
|
|
|
Net cash from
(used in) financing activities
|
4,072
|
5,499
|
(7,251)
|
22,342
|
Net increase
(decrease) in cash
|
8,752
|
(4,008)
|
7,633
|
(2,388)
|
Net foreign
exchange difference
|
-
|
62
|
(16)
|
99
|
Cash - Beginning
of the period
|
916
|
6,869
|
2,051
|
5,212
|
Cash - End of the
period
|
9,668
|
2,923
|
9,668
|
2,923
|
|
|
|
|
|
|
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN
EQUITY
(unaudited, expressed in thousands of Canadian
dollars, except number of shares)
|
Capital
Stock
|
|
|
|
|
|
Number of
Shares
|
Amount
|
Contributed
Surplus
|
Accumulated
Deficit
|
Accumulated
Other
Comprehensive
Income
|
Total
Deficiency
|
|
|
|
|
|
|
|
Balance at January 1,
2018
|
337,404,502
|
82,905
|
6,979
|
(153,251)
|
9,896
|
(53,471)
|
|
|
|
|
|
|
|
Issue of common
shares
|
30,714,118
|
2,152
|
-
|
-
|
-
|
2,152
|
|
|
|
|
|
|
|
Stock-based
compensation expense
|
-
|
-
|
140
|
-
|
-
|
140
|
|
|
|
|
|
|
|
Cancellation of
issued stock options
|
-
|
-
|
440
|
-
|
-
|
440
|
|
|
|
|
|
|
|
Transfer to share
capital on
exercise of stock options
|
-
|
1,162
|
(1,162)
|
-
|
-
|
-
|
|
|
|
|
|
|
|
Unrealized currency
gain on
translation for the period
|
-
|
-
|
-
|
-
|
(3,024)
|
(3,024)
|
|
|
|
|
|
|
|
Net income for the
period
|
-
|
-
|
-
|
33,672
|
-
|
33,672
|
|
|
|
|
|
|
|
Balance at
September 30, 2018
|
368,118,620
|
86,219
|
6,397
|
(119,579)
|
6,872
|
(20,091)
|
|
|
|
|
|
|
|
Balance at December
31, 2018
|
368,118,620
|
86,219
|
5,370
|
(132,878)
|
5,145
|
(36,144)
|
|
|
|
|
|
|
|
Stock-based
compensation expense
|
-
|
-
|
58
|
-
|
-
|
58
|
|
|
|
|
|
|
|
Unrealized currency
loss on
translation for the period
|
-
|
-
|
-
|
-
|
1,044
|
1,044
|
|
|
|
|
|
|
|
Net income for the
period
|
-
|
-
|
-
|
1,530
|
-
|
1,530
|
|
|
|
|
|
|
|
Balance at
September 30, 2019
|
368,118,620
|
86,219
|
5,428
|
(131,348)
|
6,189
|
(33,512)
|
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SOURCE Avcorp Industries Inc.