VANCOUVER, BC, Nov. 13, 2020 /PRNewswire/ – Avcorp Industries Inc. (TSX: AVP) (the “Company”, “Avcorp” or the “Avcorp Group”) today announced its financial results for the quarter ended September 30, 2020. All amounts are in Canadian currency unless otherwise stated.
2020 Third Quarter Highlights
Key financial results include:
- Third quarter 2020 revenue was $33,769,000 compared to $37,437,000 in 2019. 2020 revenue decreased by $3,668,000 because of lower deliveries caused by lower customer requirements due to the novel Coronavirus (“COVID-19”) and 737 MAX grounding.
- Third quarter 2020 defense program related revenue was $20,848,000 compared to $13,737,000 in 2019, a strong growth of $7,111,000.
- Third quarter 2020 net loss was $1,263,000 compared to net loss of $7,511,000 in 2019. Net loss improved in comparison to 2019 due to higher gross profit, savings in administrative and general expenses and the receipts of government support.
- Third quarter 2020 foreign exchange gain was $712,000 (September 30, 2019: $171,000 loss). The Canadian dollar strengthened against the US dollar resulting in a gain predominately from the translation of the Company’s US dollar denominated Bank indebtedness and Term debt.
- Third quarter 2020 cash flows from operating activities before changes in non-cash working capital was $2,021,000 (September 30, 2019: cash outflow of $3,509,000). Third quarter 2020 cash flows from operating activities increased by $4,104,000 relative to 2019, after the cash receipts from Canada Emergency Wage Subsidies and other government grants of $1,426,000 have been removed.
- Third quarter 2020, the Company repaid $4,744,000 of bank indebtedness (September 30, 2019: Nil) and paid trade payables down to $11,829,000 (December 31, 2019: $23,201,000).
- BAE Systems awarded the Company a contract for the assembly of the F-35 Carrier Variant Outboard Wing. The total awards are approximately $87 million extending Avcorp’s current long-term contract with BAE systems into 2022.
- In July 2020, the Company received an additional Canada Emergency Wage Subsidy of $1,231,000.
Highlights Subsequent to Quarter-End
- On October 30, 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 December 31, 2020 and thereafter less USD $2,300,000 providing additional liquidity.
- In October and November 2020, the Company received an additional Canada Emergency Wage Subsidy of $1,077,000.
Review of 2020 Third Quarter Results
For the quarter ended September 30, 2020, the Avcorp Group recorded losses from operations totaling $326,000 from $33,769,000 revenue, as compared to losses from operations totaling $5,164,000 from $37,437,000 revenue from the same quarter in the previous year. The third quarter 2020 operating loss decreased in comparison to 2019 by $3,721,000 after the removal of the onerous contracts provision of $Nil (September 30, 2019: $408,000 income), and government grants of $1,525,000 in 2020. The decrease in operating loss is due to continued operational improvement, cost reduction initiatives and the change in program revenue mix.
During the quarter ended September 30, 2020, cash flows from operating activities, excluding the impact of changes in non–cash working capital and $1,426,000 of Canada Emergency Wage and other government subsidies, provided $595,000 of cash as compared to utilization of $3,509,000 during the quarter ended September 30, 2019.
As at September 30, 2020, the Company had $6,606,000 cash on hand (December 31, 2019: $4,316,000) and had utilized $82,808,000 of its operating line of credit (December 31, 2019: $84,661,000). The Company has a working capital deficit of $92,484,000 as at September 30, 2020, compared with $71,561,000 deficit as at December 31, 2019. 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 $20,546,000 surplus as at September 30, 2020 (December 31, 2019: $18,542,000 surplus). The Company’s accumulated deficit as at September 30, 2020 is $155,465,000 (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 550 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)
|
|
September 30, 2020
|
December 31, 2019
|
|
ASSETS
|
|
|
|
Current assets
|
|
|
|
Cash
|
$6,606
|
$4,316
|
|
Accounts receivable
|
17,032
|
17,625
|
|
Contract assets
|
19,714
|
26,162
|
|
Inventories
|
11,569
|
12,933
|
|
Prepayments and other assets
|
2,992
|
2,136
|
|
|
57,913
|
63,172
|
|
Non-current assets
|
|
|
|
Prepayments and other assets
|
3,012
|
2,738
|
|
Development costs
|
16,074
|
14,075
|
|
Property, plant and equipment
|
42,718
|
46,328
|
|
Intangibles
|
984
|
1,827
|
|
Total assets
|
120,701
|
128,140
|
|
|
|
|
|
LIABILITIES AND EQUITY
|
|
|
|
Current liabilities
|
|
|
|
Bank indebtedness
|
83,213
|
85,470
|
|
Accounts payable and accrued liabilities
|
27,769
|
38,178
|
|
Current portion of term debt
|
16,515
|
2,768
|
|
Contract liability
|
8,246
|
2,036
|
|
Guarantee fee
|
7,778
|
–
|
|
Customer advance
|
6,193
|
6,030
|
|
Deferred government grant
|
392
|
–
|
|
Onerous contract provision
|
291
|
251
|
|
|
150,397
|
134,733
|
|
Non-current liabilities
|
|
|
|
Term debt
|
24,801
|
26,848
|
|
Contract liability
|
3,020
|
4,757
|
|
Deferred government grant
|
229
|
–
|
|
Onerous contract provision
|
91
|
–
|
|
Guarantee fee
|
–
|
5,277
|
|
|
178,538
|
171,615
|
|
(Deficiency) Equity
|
|
|
|
Capital stock
|
86,219
|
86,219
|
|
Contributed surplus
|
5,470
|
5,446
|
|
Accumulated other comprehensive income
|
5,939
|
7,054
|
|
Accumulated deficit
|
(155,465)
|
(142,194)
|
|
|
(57,837)
|
(43,475)
|
|
Total liabilities and deficiency
|
120,701
|
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 PERIOD ENDED SEPTEMBER 30
|
Three months ended
|
Nine months ended
|
|
|
2020
|
2019
|
2020
|
2019
|
|
Revenues
|
$33,769
|
$37,437
|
$106,220
|
$126,461
|
|
|
|
|
|
|
|
Cost of sales
|
31,209
|
36,843
|
103,144
|
120,728
|
|
|
|
|
|
|
|
Gross profit
|
2,560
|
594
|
3,076
|
5,733
|
|
|
|
|
|
|
|
Administrative and general expenses
|
4,218
|
5,568
|
12,590
|
16,119
|
|
Office equipment depreciation
|
193
|
190
|
588
|
579
|
|
Net gain on claims
|
–
|
–
|
–
|
(17,955)
|
|
Government grants
|
(1,525)
|
–
|
(3,996)
|
–
|
|
|
|
|
|
|
|
Operating (loss) income
|
(326)
|
(5,164)
|
(6,106)
|
6,990
|
|
|
|
|
|
|
|
Finance costs – net
|
1,649
|
2,140
|
6,346
|
5,937
|
|
Foreign exchange (gain) loss
|
(712)
|
171
|
732
|
(588)
|
|
Net loss on sale of equipment
|
–
|
36
|
87
|
111
|
|
|
|
|
|
|
|
(Loss) income before income tax
|
(1,263)
|
(7,511)
|
(13,271)
|
1,530
|
|
|
|
|
|
|
|
Income tax expense
|
–
|
–
|
–
|
–
|
|
|
|
|
|
|
|
(Loss) income for the period
|
(1,263)
|
(7,511)
|
(13,271)
|
1,530
|
|
|
|
|
|
|
|
Other comprehensive gain (loss)
|
977
|
(349)
|
(1,115)
|
1,046
|
|
|
|
|
|
|
|
Total comprehensive (loss) income for the period
|
(286)
|
(7,860)
|
(14,386)
|
2,576
|
|
|
|
|
|
|
|
(Loss) income
per share:
|
|
|
|
|
|
Basic (loss) income per common share
|
(0.00)
|
(0.02)
|
(0.04)
|
0.00
|
|
Diluted (loss) income per common share
|
(0.00)
|
(0.02)
|
(0.04)
|
0.00
|
|
Basic weighted average number of shares outstanding (000’s)
|
368,118
|
368,118
|
368,118
|
368,118
|
|
Diluted weighted average number of shares outstanding (000’s)
|
368,118
|
368,118
|
368,118
|
369,308
|
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
|
2020
|
2019
|
2020
|
2019
|
|
Cash flows from operating activities
|
|
|
|
|
|
Net (loss) income for the period
|
$(1,263)
|
$(7,511)
|
$(13,271)
|
$1,530
|
|
Adjustment for items not affecting cash:
|
|
|
|
|
|
Interest expense
|
1,781
|
2,137
|
6,743
|
5,928
|
|
Depreciation
|
2,047
|
1,891
|
6,321
|
5,716
|
|
Development cost amortization
|
771
|
279
|
1,169
|
1,183
|
|
Intangible assets amortization
|
297
|
295
|
906
|
890
|
|
Non-cash financing cost accretion
|
|
3
|
3
|
8
|
9
|
|
Provision for onerous contracts
|
–
|
(408)
|
120
|
(1,510)
|
|
Provision for doubtful accounts
|
(76)
|
–
|
(326)
|
(555)
|
|
Provision for obsolete inventory
|
(380)
|
(535)
|
(434)
|
(1,508)
|
|
Stock based compensation
|
8
|
17
|
24
|
58
|
|
Net claim settlement
|
–
|
8
|
–
|
(1,512)
|
|
Loss on disposal of equipment
|
–
|
36
|
87
|
111
|
|
Unrealized foreign exchange
|
(933)
|
279
|
669
|
(730)
|
|
Fair value difference on below market rate term debt
|
(99)
|
–
|
(166)
|
–
|
|
Loss on loan modification amortization
|
(135)
|
–
|
(405)
|
–
|
|
Cash flows from (used in) operating activities before changes
in non-cash working capital
|
2,021
|
(3,509)
|
1,445
|
9,610
|
|
Changes in non-cash working capital
|
|
|
|
|
|
Accounts receivable
|
324
|
9,577
|
1,808
|
8,247
|
|
Contract assets
|
4,343
|
(2,242)
|
6,565
|
440
|
|
Inventories
|
16
|
21
|
1,918
|
4,498
|
|
Prepayments and other assets
|
(2,291)
|
359
|
(1,593)
|
2,203
|
|
Accounts payable and accrued liabilities
|
(1,543)
|
1,908
|
(10,703)
|
(1,889)
|
|
Contract liability
|
2,856
|
87
|
4,272
|
(4,391)
|
|
Net cash from operating activities
|
5,726
|
6,201
|
3,712
|
18,718
|
|
|
|
|
|
|
|
Cash flows (used in) investing activities
|
|
|
|
|
|
Proceeds from sale of equipment
|
–
|
66
|
34
|
66
|
|
Purchase of equipment
|
(884)
|
(406)
|
(1,579)
|
(893)
|
|
Payments relating to development costs and tooling
|
(780)
|
(1,181)
|
(3,166)
|
(3,007)
|
|
Initial lease payments and other direct costs incurred
|
–
|
–
|
(31)
|
–
|
|
Net cash used in investing activities
|
(1,664)
|
(1,521)
|
(4,742)
|
(3,834)
|
|
|
|
|
|
|
|
Cash flows (used in) from financing activities
|
|
|
|
|
|
Proceeds from bank indebtedness
|
–
|
5,539
|
653
|
15,555
|
|
Repayment of bank indebtedness
|
(4,744)
|
–
|
(4,744)
|
(17,912)
|
|
Payment of interest
|
(876)
|
(1,252)
|
(3,272)
|
(3,739)
|
|
Proceeds from term debt
|
–
|
352
|
12,553
|
868
|
|
Repayment of term debt
|
(628)
|
(567)
|
(1,880)
|
(2,023)
|
|
Net cash (used in) from financing activities
|
(6,248)
|
4,072
|
3,310
|
(7,251)
|
|
Net (decrease) increase in cash
|
(2,186)
|
8,752
|
2,280
|
7,633
|
|
Net foreign exchange difference
|
(22)
|
–
|
10
|
(16)
|
|
Cash – Beginning of the period
|
8,814
|
916
|
4,316
|
2,051
|
|
Cash – End of the period
|
6,606
|
9,668
|
6,606
|
9,668
|
|
|
|
|
|
|
|
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
|
–
|
–
|
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)
|
|
Balance at December 31, 2019
|
368,118,620
|
86,219
|
5,446
|
(142,194)
|
7,054
|
(43,475)
|
|
Stock-based compensation
expense
|
–
|
–
|
24
|
–
|
–
|
24
|
|
Unrealized currency gain on
translation for the period
|
–
|
–
|
–
|
–
|
(1,115)
|
(1,115)
|
|
Net loss for the period
|
–
|
–
|
–
|
(13,271)
|
–
|
(13,271)
|
|
Balance at September 30, 2020
|
368,118,620
|
86,219
|
5,470
|
(155,465)
|
5,939
|
(57,837)
|
View original content:http://www.prnewswire.com/news-releases/avcorp-announces-2020-third-quarter-financial-results-301173078.html
SOURCE Avcorp Industries Inc.
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