Chronicle Journal: Finance

Avcorp announces 2015 First Quarter Financial Results and Merger and Acquisitions Update

VANCOUVER, May 15, 2015 /PRNewswire/ - Avcorp Industries Inc. (TSX: AVP) (the "Company" or "Avcorp") today announced its financial results for the quarter ended March 31, 2015.

Revenue for the quarter ended March 31, 2015 was $15,661,000 as compared to $17,551,000 for the quarter ended March 31, 2014. Revenues have decreased during the current quarter relative to the same quarter in the previous year as the timing of customer demand for certain business jet aircraft structures, and one defence program structure, manufactured by the Company which have shifted to later quarters in 2015, in part offset by strong current year aircraft component repairs revenue.  The Company's production has met and continues to exceed customer quality and delivery requirements.

Comtek Advanced Structures Ltd. ("Comtek") has commenced the production introduction process of composite floor panels in supply to Bombardier Aerospace's Global 5000/6000 and Global 7000/8000 programs. Full rate production for these programs will further establish the wholly owned subsidiary as a leading manufacturer of composite floor panels.  Comtek has also developed long term relationships with aircraft operators ensuring that its growth in composite aircraft structure repair revenues provides a strong operating cash flow from this market segment.

The Company continues to actively pursue production contracts on aerospace programs throughout North America, Asia, and Europe both in the commercial and defence aerospace sectors.  The Company is expending significant resources with a focused business development strategy to grow revenues via a targeted customer approach, and where beneficial, aligned with the Government of Canada Defence Procurement Strategy leveraging Industrial and Technological Benefits ("ITBs").

During the quarter ended March 31, 2015, the Company recorded a loss from operations of $2,672,000 on $15,661,000 revenue, as compared to a $1,397,000 operating loss on $17,551,000 revenue for the same quarter in the previous year; and a net loss for the current quarter of $2,761,000 as compared to net loss of $1,242,000 for the quarter ended March 31, 2014.

In addition to $1,292,000 expensed for unutilized plant capacity, the current quarter loss includes $224,000 in provisions for slow-moving inventory and loss making contracts, as well as $222,000 in non-cash employee incentive costs.  The 2015 loss also included a $66,000 foreign exchange loss which resulted from holding foreign currency denominated cash, accounts receivable and accounts payable.

Cash flows from operating activities during the quarter ended March 31, 2015 utilized $1,947,000 of cash as compared to utilizing $835,000 of cash during the quarter ended March 31, 2014.  The primary use of cash from operations during the current quarter is due to operating losses reflecting temporary reduced customer demand.  As at March 31, 2015, the Company had $881,000 cash on hand (December 31, 2014: $3,159,000) and utilized $3,118,000 of its operating line of credit (December 31, 2014: $Nil).  The Company has a working capital surplus of $4,200,000 as at March 31, 2015 which has decreased from the December 31, 2014 $7,205,000 surplus, as a result of cash utilized in operating activities.  The Company's accumulated deficit as at March 31, 2015 is $68,434,000 (December 31, 2014: $65,673,000).

Further to the news release of May 7, 2015, The Company is pleased to announce that it has entered into a Letter of Intent effective May 12, 2015 ("LOI") for the acquisition of certain assets and undertaking of a manufacturer of parts for major aerospace industry customers. Material terms contemplate the consideration for the assets and undertaking remain subject to negotiation and adjustment in relation to assumed contracts and certain performance criteria being achieved.   A definitive agreement and closing of any acquisitions remains subject to material conditions including, inter alia, satisfactory due diligence and certain customer, supplier, and other third party consents and approvals. As a result of the material conditions outstanding, there can be no assurance that the proposed transaction will complete or that a definitive agreement will be entered into. Based on the foregoing, the Company will not be identifying the proposed target until such time as a definitive agreement has been reached and all conditions have been satisfied. 

About Avcorp

Avcorp designs and builds major airframe structures for some of the world's leading aircraft companies, including BAE Systems, Boeing and Bombardier.  With more than 50 years of experience, over 380 skilled employees and 340,000 square feet of facilities in Delta BC and Burlington ON, Avcorp 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.  Our Burlington location also offers composite repairs for commercial aircraft.  Avcorp is a Canadian public company traded on the Toronto Stock Exchange (TSX:AVP).

(signed)

PETER GEORGE
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) the extent to which the Company is able to achieve savings from its restructuring plans; (b) uncertainty in estimating the amount and timing of restructuring charges and related costs; (c) changes in worldwide economic and political conditions that impact interest and foreign exchange rates; (d) the occurrence of work stoppages and strikes at key facilities of the Company or the Company's customers or suppliers; (e) government funding and program approvals affecting products being developed or sold under government programs; (f) cost and delivery performance under various program and development contracts; (g) the adequacy of cost estimates for various customer care programs including servicing warranties; (h) the ability to control costs and successful implementation of various cost reduction programs; (i) the timing of certifications of new aircraft products; (j) the occurrence of further downturns in customer markets to which the Company products are sold or supplied or where the Company offers financing; (k) changes in aircraft delivery schedules or cancellation of orders; (l) the Company's ability to offset, through cost reductions, raw material price increases and pricing pressure brought by original equipment manufacturer customers; (m) the availability and cost of insurance; (n) the Company's ability to maintain portfolio credit quality; (o) the Company's access to debt financing at competitive rates; and (p) uncertainty in estimating contingent liabilities and establishing reserves tailored to address such contingencies.

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(unaudited, prepared in accordance with IFRS, expressed in thousands of Canadian dollars)


March 31, 2015

December 31, 2014

ASSETS



Current assets



Cash

$

881

$

3,159

Accounts receivable

7,901

5,642

Inventories

15,059

13,738

Prepayments and other assets

946

1,290


24,787

23,829

Non-current assets



Prepaid rent

146

146

Development costs

3,993

3,303

Property, plant and equipment

8,458

8,204

Total assets

37,384

35,482




LIABILITIES AND EQUITY



Current liabilities



Bank indebtedness

3,118

-

Accounts payable and accrued liabilities

10,080

8,549

Current portion of long-term debt

398

293

Deferred program revenues

6,991

7,782


20,587

16,624

Non-current liabilities



Deferred gain

156

168

Lease inducement

345

370

Long-term debt

1,434

943


22,522

18,105

Equity



Capital stock

79,921

79,921

Contributed surplus

3,375

3,129

Deficit

(68,434)

(65,673)


14,862

17,377

Total liabilities and equity

37,384

35,482

 

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF (LOSS) INCOME AND COMPREHENSIVE (LOSS) INCOME
(unaudited, prepared in accordance with IFRS, expressed in thousands of Canadian dollars, except number of shares and per share amounts)





FOR THE QUARTER ENDED MARCH 31

2015

2014






Revenues

$

15,661

$

17,551




Cost of sales

15,128

15,924




Gross profit

533

1,627




Administrative and general expenses

3,077

2,879

Office equipment depreciation

128

145




Operating (Loss) Income

(2,672)

(1,397)




Finance (income) costs – net

23

(2)

Foreign exchange (gain) loss

66

(157)

Write-down of equipment

-

4




(Loss) Income before income tax

(2,761)

(1,242)




Income tax expense

-

-




(Loss) Income and total comprehensive (loss) income for the period

(2,761)

(1,242)

(Loss) Earnings per share:



Basic (loss) earnings per common share

(0.01)

(0.00)

Diluted (loss) earnings per common share

(0.01)

(0.00)




Basic weighted average number of shares outstanding (000's)

302,633

282,091




Diluted weighted average number of shares outstanding (000's)

302,633

282,091

 

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, prepared in accordance with IFRS, expressed in thousands of Canadian dollars)





FOR THE QUARTER ENDED MARCH 31

2015

2014




Cash flows from (used in) operating activities



(Loss) Income before income tax

$

(2,761)

$

(1,242)


Adjustment for items not affecting cash:





Accrued interest and government royalties

18

3



Depreciation

387

364



Development cost amortization

2

135



Provision for loss-making contracts

95

(31)



Provision for obsolete inventory

98

(41)



Stock based compensation

246

5



Write-down of equipment

-

4



Other items

(32)

(32)


(1,947)

(835)

Changes in non-cash working capital




Accounts receivable

(1,438)

1,372


Inventories

(1,514)

(148)


Prepayments and other assets

343

44


Accounts payable and accrued liabilities

1,317

631


Deferred program revenues

(1,352)

(3,219)

Net cash from (used in) operating activities

(4,591)

(2,155)




Cash flows from (used in) investing activities



Proceeds from sale of equipment

-

9

Purchase of equipment

(641)

(390)

Payments relating to development costs and tooling

(692)

(312)

Net cash from (used in) investing activities

(1,333)

(693)




Cash flows from (used in) financing activities



Increase (decrease) in bank indebtedness

3,118

-

Payment of interest

(9)

(3)

Proceeds from current and long term debt

662

-

Proceeds from issuance of common shares

-

98

Redemption of preferred shares and accrued dividends

-

(36)

Repayment of current and long-term debt

(75)

(16)

Net cash from (used in) financing activities

3,696

43

Net increase (decrease) in cash

(2,228)

(2,805)

Net foreign exchange difference

(50)

(149)

Cash - Beginning of period

3,159

7,012

Cash - End of period

881

4,058

 

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(unaudited, prepared in accordance with IFRS, expressed in thousands of Canadian dollars, except number of shares)


Share capital











Shares

Amount

Contributed
surplus

Deficit

Total
equity







Balance December 31, 2013

280,391,152

$ 77,681

$ 3,593

$ (57,723)

$ 23,551







Issue of common shares

1,961,000

98

-

-

98







Stock based compensation expense

-

-

5

-

5







Transfer to share capital on exercise of stock options

-

61

(61)

-

-







Loss for the quarter

-

-

-

(1,242)

(1,242)







Balance March 31, 2014

282,352,152

77,840

3,537

(58,965)

22,412







Balance December 31, 2014

302,633,184

79,921

3,129

(65,673)

17,377







Stock-based compensation expense

-

-

246

-

246







Loss for the quarter

-

-

-

(2,761)

(2,761)







Balance March 31, 2015

302,633,184

79,921

3,375

(68,434)

14,862

 

SOURCE Avcorp Industries Inc.

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