VANCOUVER, March 30, 2020 /PRNewswire/ - Avcorp Industries
Inc. (TSX: AVP) (the "Company", "Avcorp" or the "Avcorp Group")
today announced its financial results for the year ended
December 31, 2019. All amounts are in
Canadian currency unless otherwise stated.
2019 Highlights
Key financial results include:
- 2019 revenue was $164,770,000
compared to $170,710,000 in 2018.
2019 revenue decreased by $1,323,000,
in comparison to 2018, after the benefit of amortization of the
unfavourable contract liability is removed.
- 2019 operating loss was $1,124,000 compared to operating income of
$26,917,000 in 2018. Operating loss
improved by $2,101,000 in comparison
to 2018, after the benefit of amortization of unfavourable
contracts liability and onerous contracts provisions, net contract
modification, and the net claims impact have been removed. This was
mainly due to improvement in operational performance and
consolidation of costs. 2019 operating results were negatively
impacted by the lower deliveries caused by 737 MAX grounding and
labour disruptions at the Delta
facility.
- 2019 cash flows from operating activities was $10,911,000 compared to utilization of
$16,029,000 in 2018. 2019 cash flows
from operating activities improved by $12,508,000, relative to 2018, after the net cash
settlement of $14,431,000
(USD$10,810,000) from the agreement
with Hitco Carbon Composites Inc., SGL Carbon, SGL, and SGL Carbon
SE (the "SGL Parties") and a customer has been removed.
- 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
$19,759,000.
- During the second quarter of 2019, the Company received all
required customer approvals for the 737 MAX spoiler program;
subsequently, on July 5, 2019 the
Company successfully shipped the first shipset.
- 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.
- On November 15, 2019 the Company
amended its loan agreement with a Canadian Chartered Bank to extend
the maturity date of the existing operating credit facility to
June 30, 2021, which is supported by
a major and material customer of the Company by way of a
guarantee.
- On November 15, 2019 the Company
entered into an amendment and restatement of the existing
non-revolving term loan agreement with Panta Canada B.V. ("Panta"), as well as securing
an additional USD$3,500,000 revolving
loan facility from Panta.
Highlights Subsequent to Year-End
- On March 2, 2020 the Company
entered into an amendment and restatement of the existing
non-revolving term loan agreement with Panta Canada B.V. ("Panta"), as well as securing
an additional USD$2,000,000 revolving
loan facility from Panta.
Review of 2019 Financial Results
For the year ended December 31,
2019, the Avcorp Group recorded losses from operations
totaling $1,124,000 from $164,770,000 revenue, as compared to $26,917,000 operating income from $170,710,000 revenue for the previous year. It
should be noted that 2019 operating loss benefited by $1,665,000 income from amortization of onerous
contracts provision (December 31,
2018: $13,732,000 amortization
of unfavourable contract liability and onerous contract liability).
In addition, 2019 benefitted from the net settlement gain of
$17,974,000 in comparison to 2018
which benefitted from the net contract modification for an
unfavourable contract in the amount of $41,470,000 and a net claim settlement loss of
$5,421,000. Continued consolidation
of operating costs have resulted in reduced current year operating
losses of $2,101,000 in comparison to
2018 after these benefits have been removed.
During the year ended December 31,
2019, cash flows from operating activities, excluding the
impact of changes in non‑cash working capital, were $2,631,000 of cash as compared with
utilization of $11,632,000 of cash
during the year ended December 31,
2018. The company received a net cash settlement of
USD$10,810,000 from the agreement
with Hitco Carbon Composites Inc., SGL Carbon, SGL, and SGL Carbon
SE (the "SGL Parties") and a customer.
As at December 31, 2019, the
Company had $4,316,000 cash on hand
(December 31, 2018: $2,051,000) and had utilized $84,661,000 of its operating line of credit
(December 31, 2018: $85,840,000). The Company has a working capital
deficit of $71,561,000 as at
December 31, 2019 which has increased
slightly from the December 31, 2018
$71,503,000 deficit. Working capital
surplus/deficit is defined as the difference between current assets
and current liabilities. However, the Company's accounts
receivable, contract assets, and inventories net of accounts
payable, amount to a $18,541,000
surplus as at December 31, 2019
(December 31, 2018: $22,000,000 surplus). The Company's accumulated
deficit as at December 31, 2019 is
$142,194,000 (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 KALE
CHIEF EXECUTIVE OFFICER
AVCORP GROUP
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.
CONSOLIDATED STATEMENTS OF FINANCIAL
POSITION
(unaudited, expressed in thousands of Canadian
dollars)
AS AT DECEMBER
31
|
2019
|
2018
|
ASSETS
|
|
|
Current
assets
|
|
|
Cash
|
$4,316
|
$2,051
|
Accounts
receivable
|
17,625
|
23,442
|
Contract
assets
|
26,162
|
24,762
|
Inventories
|
12,933
|
15,601
|
Prepayments and other
assets
|
2,136
|
3,205
|
|
63,172
|
69,061
|
Non-current
assets
|
|
|
Prepayments and other
assets
|
2,738
|
3,017
|
Development
costs
|
14,075
|
11,755
|
Property, plant and
equipment
|
46,328
|
28,416
|
Intangibles
|
1,827
|
3,137
|
Investment in
AVS-SYS
|
-
|
682
|
Total
assets
|
128,140
|
116,068
|
|
|
|
LIABILITIES AND
EQUITY
|
|
|
Current
liabilities
|
|
|
Bank
indebtedness
|
85,470
|
85,840
|
Accounts payable and
accrued liabilities
|
38,178
|
41,805
|
Current portion of
term debt
|
2,768
|
5,510
|
Customer
advance
|
6,030
|
6,334
|
Contract
liability
|
2,036
|
2,137
|
Onerous contract
provision
|
251
|
1,809
|
|
134,733
|
143,435
|
Non-current
liabilities
|
|
|
Guarantee
fee
|
5,277
|
2,994
|
Term debt
|
26,848
|
2,800
|
Contract
liability
|
4,757
|
2,862
|
Onerous contract
provision
|
-
|
121
|
|
171,615
|
152,212
|
(Deficiency)
Equity
|
|
|
Capital
stock
|
86,219
|
86,219
|
Contributed
surplus
|
5,446
|
5,370
|
Accumulated other
comprehensive income
|
7,054
|
5,145
|
Accumulated
deficit
|
(142,194)
|
(132,878)
|
|
(43,475)
|
(36,144)
|
Total liabilities
and deficiency
|
128,140
|
116,068
|
CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND
COMPREHENSIVE INCOME (LOSS)
(expressed in thousands of
Canadian dollars, except number of shares and per share
amounts)
AS AT DECEMBER
31
|
|
|
|
2019
|
2018
|
Revenues
|
$164,770
|
$170,710
|
|
|
|
Cost of
sales
|
160,982
|
155,753
|
|
|
|
Gross
profit
|
3,788
|
14,957
|
|
|
|
Administrative and
general expenses
|
21,467
|
23,446
|
Office equipment
depreciation
|
770
|
623
|
Net contract
modification
|
-
|
(41,470)
|
Net (gain) loss on
claims
|
(17,974)
|
5,421
|
Other
losses
|
649
|
-
|
|
|
|
Operating (loss)
income
|
(1,124)
|
26,917
|
|
|
|
Finance costs –
net
|
8,924
|
5,774
|
Foreign exchange
(gain) loss
|
(843)
|
770
|
Net loss on sale of
equipment
|
111
|
-
|
|
|
|
(Loss) income
before income tax
|
(9,316)
|
20,373
|
|
|
|
Income tax
expense
|
-
|
-
|
|
|
|
(Loss) income for
the year
|
(9,316)
|
20,373
|
|
|
|
Other comprehensive
income gain (loss)
|
1,909
|
(4,751)
|
|
|
|
Net (loss) income
and total comprehensive (loss) income for the period
|
(7,407)
|
15,622
|
|
|
|
(Loss) income
per share:
|
|
|
Basic (loss) income
per common share
|
(0.03)
|
0.06
|
Diluted (loss) income
per common share
|
(0.03)
|
0.06
|
|
|
|
Basic weighted
average number of shares outstanding (000's)
|
368,118
|
345,651
|
|
|
|
Diluted weighted
average number of shares outstanding (000's)
|
368,118
|
345,993
|
CONSOLIDATED STATEMENTS OF CASH FLOWS
(expressed in
thousands of Canadian dollars)
|
|
|
AS AT DECEMBER
31
|
2019
|
2018
|
Cash flows from
(used in) operating activities
|
|
|
Net (loss) income for
the year
|
$(9,316)
|
$20,373
|
Adjustment for items
not affecting cash:
|
|
|
Interest
expense
|
8,008
|
5,765
|
Depreciation
|
8,218
|
4,482
|
Development cost
amortization
|
1,786
|
3,291
|
Intangible assets
amortization
|
1,184
|
1,379
|
Non-cash financing
cost accretion
|
|
11
|
9
|
Provision for
unfavourable contracts
|
-
|
(4,617)
|
Provision for onerous
contracts
|
(1,665)
|
(9,115)
|
Provision for doubtful
accounts
|
(1,425)
|
543
|
Provision for obsolete
inventory
|
(1,177)
|
(928)
|
Stock based
compensation
|
76
|
(445)
|
Net termination of
Contract
|
-
|
(41,470)
|
Net claim
settlement
|
(3,539)
|
7,640
|
Loss on disposal of
equipment
|
111
|
-
|
Unrealized foreign
exchange
|
(1,196)
|
1,558
|
Loss on Investment in
AVS-SYS
|
649
|
-
|
Loss on loan
modification
|
906
|
-
|
Other items
|
-
|
(97)
|
Cash flows from (used
in) operating activities before
changes in non-cash working capital
|
2,631
|
(11,632)
|
Changes in non-cash
working capital
|
|
|
Accounts
receivable
|
6,747
|
(2,922)
|
Contract
assets
|
(1,673)
|
(6,108)
|
Inventories
|
3,502
|
2,509
|
Prepayments and other
assets
|
1,846
|
(805)
|
Accounts payable and
accrued liabilities
|
(3,324)
|
9,820
|
Customer advance
payable
|
-
|
(2,660)
|
Contract
liability
|
1,182
|
(4,231)
|
Net cash from
(used in) operating activities
|
10,911
|
(16,029)
|
|
|
|
Cash flows used in
investing activities
|
|
|
Proceeds from sale of
equipment
|
99
|
-
|
Purchase of
equipment
|
(904)
|
(1,429)
|
Addition of developed
software
|
-
|
(371)
|
Payments relating to
development costs and tooling
|
(4,116)
|
(6,410)
|
Investment in AVS -
SYS
|
-
|
(551)
|
Initial lease
payments and other direct costs incurred
|
(102)
|
|
Net cash used in
investing activities
|
(5,023)
|
(8,761)
|
|
|
|
Cash flows (used
in) from financing activities
|
|
|
Proceeds from bank
indebtedness
|
20,844
|
17,961
|
Repayment of bank
indebtedness
|
(18,010)
|
-
|
Payment of
interest
|
(5,049)
|
(2,862)
|
Proceeds from term
debt
|
1,196
|
6,601
|
Repayment of term
debt
|
(2,591)
|
(294)
|
Net cash (used in)
from financing activities
|
(3,610)
|
21,406
|
Net increase
(decrease) in cash
|
2,278
|
(3,384)
|
Net foreign
exchange difference
|
(13)
|
223
|
Cash - Beginning
of the year
|
2,051
|
5,212
|
Cash - End of the
year
|
4,316
|
2,051
|
|
|
|
|
CONSOLIDATED STATEMENTS OF CHANGES IN
EQUITY
(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
|
2,150
|
-
|
-
|
-
|
2,150
|
|
|
|
|
|
|
|
Transfer to share
capital on exercise of stock options
|
-
|
1,164
|
(1,164)
|
-
|
-
|
-
|
|
|
|
|
|
|
|
Stock-based
compensation expense
|
-
|
-
|
195
|
-
|
-
|
195
|
|
|
|
|
|
|
|
Cancellation of
issued stock options
|
-
|
-
|
(640)
|
-
|
-
|
(640)
|
|
|
|
|
|
|
|
Unrealized currency
loss on translation for the year
|
-
|
-
|
-
|
-
|
(4,751)
|
(4,751)
|
|
|
|
|
|
|
|
Net income for the
year
|
-
|
-
|
-
|
20,373
|
-
|
20,373
|
|
|
|
|
|
|
|
Balance at
December 31, 2018
|
368,118,620
|
86,219
|
5,370
|
(132,878)
|
5,145
|
(36,144)
|
|
|
|
|
|
|
|
Balance at December
31, 2018
|
368,118,620
|
86,219
|
5,370
|
(132,878)
|
5,145
|
(36,144)
|
|
|
|
|
|
|
|
Stock-based
compensation expense
|
-
|
-
|
76
|
-
|
-
|
76
|
|
|
|
|
|
|
|
Unrealized currency
gain on translation for the year
|
-
|
-
|
-
|
-
|
1,909
|
1,909
|
|
|
|
|
|
|
|
Net loss for the
year
|
-
|
-
|
-
|
(9,316)
|
-
|
(9,316)
|
|
|
|
|
|
|
|
Balance at
December 31, 2019
|
368,118,620
|
86,219
|
5,446
|
(142,194)
|
7,054
|
(43,475)
|
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SOURCE Avcorp Industries Inc.