VANCOUVER, May 15, 2020 /PRNewswire/ - Avcorp
Industries Inc. (TSX: AVP) (the "Company", "Avcorp" or the "Avcorp
Group") today announced its financial results for the quarter ended
March 31, 2020. All amounts are in
Canadian currency unless otherwise stated.
2020 Highlights
Key financial results include:
- First quarter 2020 revenue was $40,205,000 compared to $42,225,000 in 2019. 2020 revenue decreased by
$2,020,000 as a result of lower
deliveries caused by lower customer requirements, the novel
Coronavirus ("COVID-19"), and 737 MAX grounding.
- First quarter 2020 operating loss was $4,700,000 compared to operating income of
$15,057,000 in 2019. Operating loss
improved by $380,000 in comparison to
2019, after the benefit of the amortization of onerous contract
provisions and a net claim settlement have been removed. This was
mainly due to improvement in operational performance and
consolidation of costs.
- First quarter 2020 foreign exchange loss was $2,858,000 (March 31,
2019: $430,000 gain). The
Canadian dollar significantly weakened against the US dollar
resulting in a loss predominately from the translation of the
Company's US dollar denominated Bank indebtedness and Term
debt.
- 2020 cash flows used in operating activities before changes in
non-cash working capital was $2,540,000 (March 31,
2019: cash inflow of $12,998,000). 2020 cash flows used in operating
activities worsened by $1,107,000
relative to 2019, after the positive net cash settlement in 2019 of
$14,431,000 (USD$10,810,000).
- On March 2, 2020, the Company
entered into an amendment to the standby credit facility ("2019
Panta Loan") with Panta Canada B.V. ("Panta") securing and drawing
an additional $2,686,000 (USD$2,000,000).
Highlights Subsequent to Quarter-End
- On April 27, 2020, the Company
entered into an amendment to its existing operating credit facility
with a Canadian Chartered Bank whereby the maximum availability
under the Loan agreement cannot exceed USD $68,000,000 less USD $1,000,000 until June 30,
2020 and thereafter less USD $2,300,000 providing additional liquidity.
- The Company has taken actions to manage short term liquidity,
on April 28, 2020, the Company
received a loan in the amount of USD $4,123,100 to support Avcorp Composite
Fabrication Inc ("ACF") through the Paycheck Protection Program
from the U.S. Small Business Administration. The loan has a term of
2 years. The loan bears interest at a fixed rate of 1% per annum
with the first six months of interest deferred and will be forgiven
if at least 75% of the loan proceeds are used by ACF to cover
payroll costs including benefits. ACF expects to meet the
requirements of loan forgiveness.
Review of 2020 First Quarter
Results
For the quarter ended March 31,
2020, the Avcorp Group recorded losses from operations
totaling $4,700,000 from $40,205,000 revenue, as compared to income from
operations totaling $15,057,000 from
$42,225,000 revenue from the same
quarter in the previous year. It should be noted that 2020
operating loss benefited by $124,000
income from amortization of onerous contracts provision
(March 31, 2019: $517,000 amortization of onerous contract
liability). In addition, 2019 benefitted from a net settlement gain
of $19,744,000. Continued
consolidation of operating costs have resulted in reduced current
year operating losses of $380,000 in
comparison to the first quarter of 2019 after these benefits have
been removed.
During the quarter ended March 31,
2020, cash flows from operating activities, excluding the
impact of changes in non-cash working capital, utilized
$2,540,000 of cash as compared with
$12,998,000 of cash provided during
the quarter ended March 31, 2019. The
company received a 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 in the first quarter of 2019. Cash
flows from operating activities excluding the impact of changes in
non-cash working capital and the net claim settlement decreased by
$1,107,000 in 2020 compared to
2019.
As at March 31, 2020, the Company
had $3,199,000 cash on hand
(December 31, 2019: $4,316,000) and had utilized $93,186,000 of its operating line of credit
(December 31, 2019: $84,661,000). During the first quarter of 2020,
there was a significant weakening of the Canadian dollar against
the US dollar resulting in the Company's US dollar denominated
operating line of credit to increase; the Company had drawn an
additional $653,000 in 2020. The
Company has a working capital deficit of $77,983,000 as at March
31, 2020 which was higher than the $71,561,000 deficit as at December 31, 2019. 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 $21,989,000
surplus as at March 31, 2020
(December 31, 2019: $18,542,000 surplus). The Company's accumulated
deficit as at March 31, 2020 is
$152,608,000 (December 31, 2019: $142,194,000).
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
Forward-Looking Statements
This release should be read in conjunction with the Company's
audited 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)
|
|
|
March 31,
2020
|
December 31,
2019
|
ASSETS
|
|
|
Current
assets
|
|
|
Cash
|
$3,199
|
$4,316
|
Accounts
receivable
|
24,382
|
17,625
|
Contract
assets
|
25,263
|
26,162
|
Inventories
|
13,117
|
12,933
|
Prepayments and other
assets
|
2,234
|
2,136
|
|
68,195
|
63,172
|
Non-current
assets
|
|
|
Prepayments and other
assets
|
2,981
|
2,738
|
Development
costs
|
15,217
|
14,075
|
Property, plant and
equipment
|
47,265
|
46,328
|
Intangibles
|
1,679
|
1,827
|
Total
assets
|
135,337
|
128,140
|
|
|
|
LIABILITIES AND
EQUITY
|
|
|
Current
liabilities
|
|
|
Bank
indebtedness
|
93,860
|
85,470
|
Accounts payable and
accrued liabilities
|
40,773
|
38,178
|
Current portion of
term debt
|
2,878
|
2,768
|
Customer
advance
|
6,587
|
6,030
|
Contract
liability
|
1,938
|
2,036
|
Onerous contract
provision
|
142
|
251
|
|
146,178
|
134,733
|
Non-current
liabilities
|
|
|
Guarantee
fee
|
6,602
|
5,277
|
Term debt
|
35,358
|
26,848
|
Contract
liability
|
5,063
|
4,757
|
|
193,201
|
171,615
|
(Deficiency)
Equity
|
|
|
Capital
stock
|
86,219
|
86,219
|
Contributed
surplus
|
5,455
|
5,446
|
Accumulated other
comprehensive income
|
3,070
|
7,054
|
Accumulated
deficit
|
(152,608)
|
(142,194)
|
|
(57,864)
|
(43,475)
|
Total liabilities
and deficiency
|
135,337
|
128,140
|
CONDENSED INTERIM
CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND
COMPREHENSIVE INCOME (LOSS)
(unaudited,
expressed in thousands of Canadian dollars, except number of shares
and per share amounts)
|
|
|
|
FOR THE QUARTER
ENDED MARCH 31
|
2020
|
2019
|
Revenues
|
$40,205
|
$42,225
|
Cost of
sales
|
40,303
|
41,572
|
Gross
profit
|
(98)
|
653
|
Administrative and
general expenses
|
4,407
|
5,151
|
Office equipment
depreciation
|
195
|
189
|
Net gain on
claims
|
-
|
(19,744)
|
Operating (loss)
income
|
(4,700)
|
15,057
|
Finance costs –
net
|
2,769
|
1,878
|
Foreign exchange loss
(gain)
|
2,858
|
(430)
|
Net loss on sale of
equipment
|
87
|
-
|
(Loss) income
before income tax
|
(10,414)
|
13,609
|
Income tax
expense
|
-
|
-
|
(Loss) income for
the period
|
(10,414)
|
13,609
|
Other comprehensive
(loss) gain
|
(3,984)
|
755
|
Total
comprehensive (loss) income for the period
|
(14,398)
|
14,364
|
(Loss) income
per share:
|
|
|
Basic (loss) income
per common share
|
(0.03)
|
0.04
|
Diluted (loss) income
per common share
|
(0.03)
|
0.04
|
Basic weighted
average number of shares outstanding (000's)
|
368,118
|
368,118
|
Diluted weighted
average number of shares outstanding (000's)
|
368,118
|
369,001
|
CONDENSED INTERIM
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, expressed in thousands of Canadian
dollars)
|
|
|
|
FOR THE QUARTER
ENDED MARCH 31
|
2020
|
2019
|
Cash flows from
(used in) operating activities
|
|
|
Net (loss) income for
the year
|
$(10,414)
|
$13,609
|
Adjustment for items
not affecting cash:
|
|
|
Interest
expense
|
2,766
|
1,875
|
Depreciation
|
2,068
|
1,904
|
Development cost
amortization
|
311
|
305
|
Intangible assets
amortization
|
300
|
297
|
Non-cash financing
cost accretion
|
|
3
|
3
|
Provision for onerous
contracts
|
(124)
|
(517)
|
Provision for doubtful
accounts
|
(127)
|
(536)
|
Provision for obsolete
inventory
|
(252)
|
(240)
|
Stock based
compensation
|
9
|
21
|
Net claim
settlement
|
-
|
(3,309)
|
Loss on disposal of
equipment
|
87
|
-
|
Unrealized foreign
exchange
|
2,968
|
(414)
|
Loss on loan
modification amortization
|
(135)
|
-
|
Cash flows (used in)
from operating activities before changes in non-cash
working capital
|
(2,540)
|
12,998
|
Changes in non-cash
working capital
|
|
|
Accounts
receivable
|
(6,512)
|
3,269
|
Contract
assets
|
1,376
|
491
|
Inventories
|
541
|
1,481
|
Prepayments and other
assets
|
117
|
(190)
|
Accounts payable and
accrued liabilities
|
1,524
|
(895)
|
Contract
liability
|
156
|
(1,882)
|
Net cash (used in)
from operating activities
|
(5,338)
|
15,272
|
|
|
|
Cash flows used in
investing activities
|
|
|
Purchase of
equipment
|
(221)
|
(182)
|
Payments relating to
development costs and tooling
|
(1,450)
|
(707)
|
Net cash used in
investing activities
|
(1,671)
|
(889)
|
|
|
|
Cash flows from
(used in) financing activities
|
|
|
Proceeds from bank
indebtedness
|
653
|
5,864
|
Repayment of bank
indebtedness
|
-
|
(17,912)
|
Payment of
interest
|
(1,147)
|
(1,248)
|
Proceeds from term
debt
|
6,924
|
-
|
Repayment of term
debt
|
(612)
|
(603)
|
Net cash from
(used in) financing activities
|
5,818
|
(13,899)
|
Net (decrease)
increase in cash
|
(1,191)
|
484
|
Net foreign
exchange difference
|
74
|
(130)
|
Cash - Beginning
of the period
|
4,316
|
2,051
|
Cash - End of the
period
|
3,199
|
2,405
|
|
|
|
|
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 December
31, 2018
|
368,118,620
|
86,219
|
5,370
|
(132,878)
|
5,145
|
(36,144)
|
Stock-based
compensation
expense
|
-
|
-
|
21
|
-
|
-
|
21
|
Unrealized currency
loss on
translation for the period
|
-
|
-
|
-
|
-
|
755
|
755
|
Net income for the
period
|
-
|
-
|
-
|
13,609
|
-
|
13,609
|
Balance at March
31, 2019
|
368,118,620
|
86,219
|
5,391
|
(119,269)
|
5,900
|
(21,759)
|
Balance at December
31, 2019
|
368,118,620
|
86,219
|
5,446
|
(142,194)
|
7,054
|
(43,475)
|
Stock-based
compensation
expense
|
-
|
-
|
9
|
-
|
-
|
9
|
Unrealized currency
gain on
translation for the period
|
-
|
-
|
-
|
-
|
(3,984)
|
(3,984)
|
Net loss for the
period
|
-
|
-
|
-
|
(10,414)
|
-
|
(10,414)
|
Balance at March
31, 2020
|
368,118,620
|
86,219
|
5,455
|
(152,608)
|
3,070
|
(57,864)
|
|
The accompanying
notes are an integral part of these condensed interim financial
statements.
|
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SOURCE Avcorp Industries Inc.