Chronicle Journal: Finance

Avcorp announces 2020 Annual Financial Results

VANCOUVER, BC, March 22, 2021 /PRNewswire/ - Avcorp Industries Inc. (TSX: AVP) (the "Company", "Avcorp" or the "Avcorp Group") today announced its financial results for the year ended December 31, 2020. All amounts are in Canadian currency unless otherwise stated.

2020 Highlights

Key financial results include:

  • 2020 revenue was $150,962,000 compared to $164,770,000 in 2019. 2020 revenue decreased by $13,808,000, in comparison to 2019. The decrease in revenue in 2020 was due to lower customer requirements because of the impact of the Coronavirus ("COVID-19") on the commercial aerospace sector and 737 MAX grounding.

  • 2020 net loss was $6,725,000 compared to net loss of $9,316,000 in 2019. The net loss improved by $2,591,000 in comparison to 2019 mainly due to higher gross profit and savings in administrative and general expenses. In addition, the 2020 net loss was supported by $11,397,000 in government grants while 2019 was supported by a net claim settlement of $17,974,000.

  • 2020 cash flows from operating activities was $9,125,000 compared to $10,911,000 in 2019. 2020 cash flows from operating activities was supported by the Canada Emergency Wage Subsidies of $4,765,000 and 2019 was supported by 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.

  • In 2020, the Company repaid $7,368,000 of bank indebtedness (December 31, 2019: $18,010,000) and paid trade payables down to $10,980,000 (December 31, 2019: $23,201,000).

  • 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).

  • On April 28, 2020, the Company received a loan in the amount of USD $4,123,000 to support Avcorp Composite Fabrication Inc ("ACF") from a U.S. Chartered Bank through the U.S. Small Business Administration Paycheck Protection Program. The Company has recognized a forgiveness of USD $3,430,000 in 2020 as the company has satisfied the requirements of loan forgiveness.

  • 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.

Highlights Subsequent to Year-End 

  • The Company received Canada Emergency Wage Subsidies of $712,000 in February and March 2021 and applied for an additional $2,415,000.

  • On February 25, 2021, the Company amended the Avcorp Composite Fabrication Inc.'s Gardena facility lease agreement effective January 1, 2021 to vacate certain buildings and negotiated new lease terms.

  • On March 12, 2021, the Company entered into a multiparty amended and restated Accommodation Agreement with each of a customer, and Panta Canada B.V. whereby, inter alia;
    • Panta Canada B.V. has agreed to provide a USD $10,000,000 non-revolving standby loan facility and a USD $3,000,000 equipment loan for an aggregate availability of USD $13,000,000; and

    • The elimination of unamortized cash advance, mutual release and forgiveness of certain historic and future guarantee fees payable to the customer. As at December 31, 2020, the guarantee fee is $8,178,000 (USD $6,423,000), the customer advance is $5,911,000 (USD $4,643,000) and the legal claim is $7,130,000 (USD $5,600,000).

  • On March 15, 2021, the Company received a USD $2,000,000 second wave Small Business Administration Paycheck Protection Program Loan.

  • On March 19, 2021, the Company approved the grant of an aggregate of 17,350,000 incentive stock options under the Company's 2007 Stock Option Plan to Directors, Officers and Employees. The options will have a five year term and will have an exercise price determined by the market price effective the close of markets March 22,2021.

Review of 2020 Financial Results

For the year ended December 31, 2020, the Avcorp Group recorded income from operations totaling $2,371,000 from $150,962,000 revenue, as compared to $1,124,000 operating loss from $164,770,000 revenue for the previous year. The 2019 operating loss contains $1,665,000 amortization of onerous contract and $17,325,000 net claim settlement gain and other loss. The 2020 operating income contains $308,000 provision of onerous contracts, $11,642,000 government grant and other income, and the estimate of variable consideration on the contract termination of convenience. The operating loss improvement was also due to continued operational improvement and cost reduction initiatives, growth in revenue related to defence programs, and offset by a decrease in revenue related to commercial programs as a result of COVID-19.

During the year ended December 31, 2020, cash flows from operating activities was $9,125,000 compared with $10,911,000 in 2019. 2020 cash flows from operating activities was supported by the Canada Emergency Wage Subsidies of $4,765,000 and 2019 was supported by 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.

As at December 31, 2020, the Company had $7,044,000 cash on hand (December 31, 2019: $4,316,000) and had utilized $76,439,000 of its operating line of credit (December 31, 2019: $84,661,000). The balance of the net loss and related adjustments on modification of bank indebtedness as a result of executing an amending agreement in 2019 was $269,000 as at December 31, 2020 (December 31, 2019 $809,000). The Company has a working capital deficit of $77,780,000 as at December 31, 2020 which has increased from the December 31, 2019 $71,561,000 deficit. Working capital is defined as the difference between current assets and current liabilities. However, the Company's accounts and other receivables, contract assets, and inventories net of accounts payable, amount to a $33,174,000 surplus as at December 31, 2020 (December 31, 2019: $18,542,000 surplus). The Company's accumulated deficit as at December 31, 2020 is $148,919,000 (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 500 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.

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(expressed in thousands of Canadian dollars)

AS AT DECEMBER 31

2020

2019

ASSETS



Current assets



Cash

$7,044

$4,316

Accounts receivable

14,436

17,625

Government grant receivable

2,688

-

Contract assets

34,325

26,162

Inventories

9,657

12,933

Prepayments and other assets

2,108

2,136


70,258

63,172

Non-current assets



Prepayments and other assets

2,877

2,738

Development costs

9,045

14,075

Property, plant, and equipment

38,703

46,328

Intangibles

655

1,827

Total assets

121,538

128,140




LIABILITIES AND DEFICIENCY



Current liabilities



Bank indebtedness

76,708

85,470

Accounts payable and accrued liabilities

27,932

38,178

Current portion of term debt

16,868

2,768

Customer advance

5,911

6,030

Guarantee fee

8,178

-

Deferred government grant

657

-

Contract liability

11,502

2,036

Onerous contract provision

282

251


148,038

134,733

Non-current liabilities



Guarantee fee

-

5,277

Term debt

19,168

26,848

Contract liability

3,189

4,757

Onerous contract provision

283

-


170,678

171,615

(Deficiency) Equity



Capital stock

86,219

86,219

Contributed surplus

5,478

5,446

Accumulated other comprehensive income

8,082

7,054

Accumulated deficit

(148,919)

(142,194)


(49,140)

(43,475)

Total liabilities and deficiency

121,538

128,140

 

CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS
(expressed in thousands of Canadian dollars, except number of shares and per share amounts)




FOR THE YEAR ENDED DECEMBER 31

2020

2019

Revenues

$150,962

$164,770

Cost of sales 

142,729

160,982

Gross profit

8,233

3,788

Administrative and general expenses

16,717

21,467

Office equipment depreciation

787

770

Net gain on claims

-

(17,974)

Other (income) losses

(11,642)

649

Operating income (loss)

2,371

(1,124)

Finance costs – net 

7,605

8,924

Foreign exchange loss (gain)

364

(843)

Net loss on sale and write-off of equipment

1,127

111

Loss before income tax

(6,725)

(9,316)

Income tax expense

-

-

Loss for the year

(6,725)

(9,316)

Other comprehensive income 

1,028

1,909

Total comprehensive loss for the year

(5,697)

(7,407)

Loss per share:



Basic loss per common share 

(0.02)

(0.03)

Diluted loss per common share

(0.02)

(0.03)

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

368,118

368,118

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

368,118

368,118

 

CONSOLIDATED STATEMENTS OF CASH FLOWS
(expressed in thousands of Canadian dollars)




FOR THE YEAR ENDED DECEMBER 31

2020

2019

Cash flows from operating activities



Net loss for the year

$(6,725)

$(9,316)

Adjustment for items not affecting cash:



Net interest expense

7,605

8,924

Depreciation

8,338

8,218

Development cost amortization

8,955

1,786

Intangible assets amortization

1,197

1,184

Loss on disposal and write-off of equipment


1,127

111

Provision for onerous contracts

308

(1,665)

Stock based compensation

32

76

Loss on Investment in AVS-SYS

-

649

Provision for obsolete inventory

(163)

(1,177)

Provision for doubtful accounts

(326)

(1,425)

Unrealized foreign exchange

(694)

(1,195)

Government grant income

(6,632)

-

Net claim settlement

-

(3,539)

Cash flows from operating activities before
changes in non-cash working capital

13,022

2,631

Changes in non-cash working capital



Accounts receivable

9,195

6,747

Contract assets

(8,270)

(1,673)

Inventories

3,397

3,502

Prepayments and other assets

13

1,846

Accounts payable and accrued liabilities

(10,265)

(3,324)

Contract liability

2,033

1,182

Net cash from operating activities

9,125

10,911




Cash flows used in investing activities



Proceeds from sale of equipment

61

99

Purchase of equipment

(1,769)

(904)

Payments relating to development costs and tooling

(3,929)

(4,116)

Initial lease payments and other direct costs incurred

(31)

(102)

Net cash used in investing activities

(5,668)

(5,023)




Cash flows used in financing activities



Proceeds from bank indebtedness

653

20,844

Repayment of bank indebtedness

(7,368)

(18,010)

Payment of interest

(3,954)

(5,049)

Proceeds from term debt

12,453

1,196

Repayment of term debt

(2,524)

(2,591)

Net cash used in financing activities

(740)

(3,610)

Net increase in cash

2,717

2,278

Net foreign exchange difference

11

(13)

Cash - Beginning of the year

4,316

2,051

Cash - End of the year

7,044

4,316





 

CONSOLIDATED STATEMENTS OF CHANGES IN DEFICIENCY
(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

-

-

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)

Balance at December 31, 2019

368,118,620

86,219

5,446

(142,194)

7,054

(43,475)

Stock-based compensation expense

-

-

32

-

-

32

Unrealized currency gain on translation for the year

-

-

-

-

1,028

1,028

Net loss for the year

-

-

-

(6,725)

-

(6,725)

Balance at December 31, 2020

368,118,620

86,219

5,478

(148,919)

8,082

(49,140)

 

Cision View original content:http://www.prnewswire.com/news-releases/avcorp-announces-2020-annual-financial-results-301252792.html

SOURCE Avcorp Industries Inc.

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