VANCOUVER, Nov. 14, 2018 /CNW/ - Avcorp Industries Inc.
(TSX: AVP) (the "Company", "Corporation", "Avcorp" or the "Avcorp
Group") today announced its financial results for the quarter ended
September 30, 2018. All amounts are
in Canadian currency unless otherwise stated.
2018 Highlights
Key financial results include:
- Third quarter 2018 operating loss was reduced by $4,100,000, in comparison to the same quarter in
2017, primarily as a result of increased revenues, consolidation of
costs and improved operating effectiveness; after the benefit of
amortization to income of unfavourable contracts liability and
onerous contracts provisions, and the income impact of a claim
settlement and termination of contract, have been removed.
- During the third quarter 2018 production of a certain
unfavourable contract was terminated after the customer stopped
issuing purchase orders to the Company and redirected production
requirements to another supplier, giving rise to the full
amortization of the unfavourable contracts liability and related
onerous contract provision into income. This has been recorded in
the Condensed Interim Consolidated Statements of Income and
Comprehensive Income as a Termination of Contract in the amount of
$40,758,000.
- On August 20, 2018, the Company
entered into a settlement agreement with a customer, in the amount
of $2,219,000, which provided the
Company a Net Claim Settlement in satisfaction of existing and
potential claims, causes of action, and disputes between the
Company and its customer.
- On a year-to-date basis, negative 2018 cash flows used in
operating activities were reduced by $15,906,000, over the same period in 2017.
- On March 28, 2018, the Company
signed a loan agreement to expand the current agreement with a
Canadian Chartered Bank, supported by a major and material
customer, to access an additional USD$10
million operating line of credit.
- On August 24, 2018, the Company
signed a non-revolving term loan agreement with Panta in the
principal amount of USD$3,500,000.
Review of 2018 Third Quarter Financial Results
For the quarter ending September 30,
2018, the Avcorp Group recorded income from operations
totaling $41,070,000 from
$44,862,000 revenue, as compared to
$6,644,000 operating losses from
$36,267,000 revenue for the same
quarter in the previous year. It should be noted that third quarter
2018 operating income benefited by $3,330,000 income from amortization of an
unfavourable contract liability and onerous contracts provision
into income (September 30, 2017:
$2,693,000). During the third quarter
2018 production of a certain unfavourable contract was terminated
after the customer stopped issuing purchase orders to the Company
and redirected production requirements to another supplier, giving
rise to the full amortization of the unfavourable contracts
liability and related onerous contract provision into income. This
has been recorded in Condensed Interim Consolidated Statements of
Income and Comprehensive Income as a Termination of Contract in the
amount of $40,758,000. On
August 20, 2018, the Company entered
into a settlement agreement with a customer, in the amount of
$2,219,000, which provided the
Company a net settlement in satisfaction of existing and potential
claims, causes of action, and disputes between the Company and its
customer. Increased sales and continued consolidation of operating
costs have resulted in reduced current quarter operating losses, in
comparison to the same quarter in 2017 after the benefit of
amortization to income of unfavourable contracts liability and
onerous contracts provisions, and the income impact of a claim
settlement and termination of contract, have been removed.
During the quarter ended September 30,
2018, cash flows from operating activities, excluding the
impact of changes in non-cash working capital, utilized
$3,490,000 of cash as compared with
utilization of $8,114,000 of cash
during the quarter ended September 30,
2017; a significant improvement, primarily attributable to a
reduction in operating losses during 2018 in comparison to 2017.
Changes in non-cash working capital during the current quarter
utilized $3,693,000 as compared to
the same quarter previous year during which non-cash working
capital utilized $4,238,000;
primarily as a result of prepayments made by a customer on future
program deliveries.
As at September 30, 2018, the
Company had $2,923,000 cash on hand
(December 31, 2017: $5,212,000) and had utilized $81,454,000 of its operating line of credit
(December 31, 2017: $61,283,000). The Company has a working capital
deficit of $58,480,000 as at
September 30, 2018 which has
decreased from the December 31, 2017
$63,038,000 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 $39,689,000
surplus as at September 30, 2018
(December 31, 2017: $38,464,000 surplus). The Company's accumulated
deficit as at September 30, 2018 is
$125,670,000 (December 31, 2017: $157,185,000).
The Company's complete financial statements and management's
discussion and analysis for the year ended December 31, 2017 and quarter ended September 30, 2018 can be found at www.avcorp.com
or at www.sedar.com.
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
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.
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL
POSITION
(unaudited, expressed in thousands of Canadian
dollars)
|
September 30,
2018
|
December 31,
2017
|
ASSETS
|
|
|
Current
assets
|
|
|
Cash
|
$2,923
|
$5,212
|
Accounts
receivable
|
26,821
|
18,942
|
Claim settlement
receivable
|
2,396
|
-
|
Contract
assets
|
16,601
|
-
|
Inventories
|
25,112
|
42,781
|
Prepayments and other
assets
|
5,487
|
4,390
|
|
79,340
|
71,325
|
Non-current
assets
|
|
|
Prepaid rent and
security
|
146
|
146
|
Development
costs
|
10,634
|
8,623
|
Property, plant and
equipment
|
28,329
|
29,318
|
Intangibles
|
3,342
|
3,864
|
Total
assets
|
121,791
|
113,276
|
|
|
|
LIABILITIES AND
EQUITY
|
|
|
Current
liabilities
|
|
|
Bank
indebtedness
|
81,454
|
61,283
|
Accounts payable and
accrued liabilities
|
28,845
|
23,259
|
Current portion of
term debt
|
164
|
1,285
|
Customer
advance
|
6,061
|
7,227
|
Deferred program
revenues
|
15,972
|
17,131
|
Unfavourable
contracts liability
|
-
|
16,881
|
Onerous contract
provision
|
5,324
|
7,297
|
|
137,820
|
134,363
|
Non-current
liabilities
|
|
|
Guarantee
fee
|
2,217
|
575
|
Deferred gain and
lease inducement
|
-
|
100
|
Term debt
|
7,651
|
1,885
|
Deferred program
revenues
|
-
|
110
|
Unfavourable
contracts liability
|
-
|
27,579
|
Onerous contract
provision
|
285
|
6,069
|
|
147,973
|
170,681
|
(Deficiency)
Equity
|
|
|
Capital
stock
|
86,219
|
82,905
|
Contributed
surplus
|
6,397
|
6,979
|
Accumulated other
comprehensive income
|
6,872
|
9,896
|
Accumulated
deficit
|
(125,670)
|
(157,185)
|
|
(26,182)
|
(57,405)
|
Total liabilities
and (deficiency) equity
|
121,791
|
113,276
|
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF
INCOME AND COMPREHENSIVE INCOME
(unaudited, expressed in
thousands of Canadian dollars, except number of shares and per
share amounts)
|
Three months
ended
September 30
|
Nine months ended
September 30
|
|
2018
|
2017
|
2018
|
2017
|
Revenues
|
$44,862
|
$36,267
|
$131,430
|
$111,521
|
|
|
|
|
|
Cost of
sales
|
39,361
|
38,244
|
119,514
|
122,175
|
|
|
|
|
|
Gross profit
(loss)
|
5,501
|
(1,977)
|
11,916
|
(10,654)
|
|
|
|
|
|
Administrative and
general expenses
|
7,259
|
4,589
|
17,705
|
15,561
|
Office equipment
depreciation
|
149
|
78
|
438
|
216
|
Net termination of
contract
|
(40,758)
|
-
|
(40,758)
|
-
|
Net claim
settlement
|
(2,219)
|
-
|
(2,219)
|
-
|
|
|
|
|
|
Operating income
(loss)
|
41,070
|
(6,644)
|
36,750
|
(26,431)
|
|
|
|
|
|
Finance costs –
net
|
1,585
|
664
|
3,968
|
2,094
|
Foreign exchange
(gain) loss
|
(749)
|
1,136
|
(890)
|
2,529
|
Net loss on sale of
equipment
|
-
|
-
|
-
|
15
|
|
|
|
|
|
Income (loss)
before income tax
|
40,234
|
(8,444)
|
33,672
|
(31,069)
|
|
|
|
|
|
Income tax
expense
|
-
|
-
|
-
|
-
|
|
|
|
|
|
Income (loss) for
the period
|
40,234
|
(8,444)
|
33,672
|
(31,069)
|
|
|
|
|
|
Other comprehensive
income (loss)
|
1,130
|
2,088
|
(3,024)
|
4,718
|
|
|
|
|
|
Net income (loss)
and total comprehensive income (loss) for
the period
|
41,364
|
(6,356)
|
30,648
|
(26,351)
|
|
|
|
|
|
Income (loss) per
share:
|
|
|
|
|
|
|
|
|
|
Basic and diluted
income (loss) per common share
|
0.12
|
(0.03)
|
0.10
|
(0.10)
|
|
|
|
|
|
Basic and diluted
weighted average number of shares outstanding (000's)
|
339,408
|
320,036
|
338,080
|
311,487
|
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH
FLOWS
(unaudited, expressed in thousands of Canadian
dollars)
|
Three months
ended
September 30
|
Nine months ended
September 30
|
|
2018
|
2017
|
2018
|
2017
|
Cash flows (used
in) operating activities
|
|
|
|
|
Net loss for the
period
|
$40,234
|
$(8,444)
|
$33,672
|
$(31,069)
|
Adjustment for items
not affecting cash:
|
|
|
|
|
Interest
expense
|
1,583
|
664
|
3,961
|
1,506
|
Depreciation
|
1,171
|
980
|
3,357
|
3,009
|
Development cost
amortization
|
332
|
235
|
1,881
|
1,127
|
Intangible assets
amortization
|
341
|
306
|
1,008
|
980
|
Non-cash financing
cost accretion
|
2
|
-
|
7
|
588
|
Loss on disposal of
equipment
|
-
|
-
|
-
|
15
|
Provision for
unfavourable contracts
|
(1,334)
|
(2,693)
|
(6,195)
|
(7,127)
|
Provision for onerous
contracts
|
(1,996)
|
-
|
(5,376)
|
-
|
Provision for obsolete
inventory
|
343
|
(366)
|
1,505
|
(281)
|
Stock based
compensation
|
29
|
178
|
580
|
575
|
Net termination of
contract
|
(40,758)
|
-
|
(40,758)
|
-
|
Net claim
settlement
|
(2,219)
|
-
|
(2,219)
|
-
|
Unrealized foreign
exchange
|
(1,193)
|
1,058
|
(489)
|
875
|
Other items
|
(25)
|
(32)
|
(91)
|
(100)
|
Cash flows (used in)
operating activities before changes in non-cash working
capital
|
(3,490)
|
(8,114)
|
(9,157)
|
(29,902)
|
Changes in non-cash
working capital
|
|
|
|
|
Accounts
receivable
|
775
|
1,021
|
(6,079)
|
3,604
|
Contract
assets
|
990
|
-
|
(2,446)
|
-
|
Inventories
|
2,071
|
(3,808)
|
162
|
(4,952)
|
Prepayments and other
assets
|
(1,464)
|
(1,783)
|
(2,034)
|
(670)
|
Accounts payable and
accrued liabilities
|
2,001
|
418
|
5,175
|
(5,966)
|
Customer advance
payable
|
(502)
|
(961)
|
(2,660)
|
(3,169)
|
Deferred program
revenues
|
(7,564)
|
875
|
(1,965)
|
6,145
|
|
|
|
|
|
Net cash (used in)
operating activities
|
(7,183)
|
(12,352)
|
(19,004)
|
(34,910)
|
|
|
|
|
|
Cash flows (used
in) from investing activities
|
|
|
|
|
Proceeds from
consideration receivable
|
-
|
-
|
-
|
12,378
|
Proceeds from sale of
equipment
|
-
|
-
|
-
|
20
|
Purchase of
equipment
|
(632)
|
(463)
|
(1,463)
|
(1,144)
|
Addition of developed
software
|
-
|
(485)
|
(371)
|
(1,022)
|
Payments relating to
development costs and tooling
|
(1,692)
|
(1,053)
|
(3,892)
|
(3,025)
|
|
|
|
|
|
Net cash (used in)
from investing activities
|
(2,324)
|
(2,001)
|
(5,726)
|
7,207
|
|
|
|
|
|
Cash flows from
(used in) financing activities
|
|
|
|
|
Increase in bank
indebtedness
|
-
|
24,485
|
17,961
|
35,150
|
Payment of
interest
|
(847)
|
(60)
|
(2,010)
|
(633)
|
Proceeds from term
debt
|
5,466
|
260
|
5,664
|
1,473
|
Exercise of
warrants
|
938
|
-
|
938
|
-
|
Repayment of term
debt
|
(58)
|
(3,668)
|
(211)
|
(4,961)
|
|
|
|
|
|
Net cash from
financing activities
|
5,499
|
21,017
|
22,342
|
31,029
|
|
|
|
|
|
Net (decrease)
increase in cash
|
(4,008)
|
6,664
|
(2,388)
|
3,326
|
|
|
|
|
|
Net foreign
exchange difference
|
62
|
(2,504)
|
99
|
224
|
|
|
|
|
|
Cash - Beginning
of the period
|
6,869
|
3,350
|
5,212
|
3,960
|
|
|
|
|
|
Cash - End of the
period
|
2,923
|
7,510
|
2,923
|
7,510
|
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, 2016
|
307,141,184
|
80,302
|
6,744
|
(98,647)
|
4,718
|
(6,883)
|
|
|
|
|
|
|
|
Issue of common
shares
|
30,263,318
|
2,118
|
-
|
-
|
-
|
2,118
|
|
|
|
|
|
|
|
Stock-based
compensation expense
|
-
|
-
|
573
|
-
|
-
|
573
|
|
|
|
|
|
|
|
Cancellation of
issued stock options
|
-
|
-
|
2
|
-
|
-
|
2
|
|
|
|
|
|
|
|
Unrealized currency
gain on translation
for the period
|
-
|
-
|
-
|
-
|
4,718
|
4,718
|
|
|
|
|
|
|
|
Net loss for the
period
|
-
|
-
|
-
|
(31,069)
|
-
|
(31,069)
|
|
|
|
|
|
|
|
Balance September
30, 2017
|
337,404,502
|
82,420
|
7,319
|
(129,716)
|
9,436
|
(30,541)
|
|
|
|
|
|
|
|
Restated balance at
December 31,
20171
|
337,404,502
|
82,905
|
6,979
|
(159,342)
|
9,896
|
(59,562)
|
|
|
|
|
|
|
|
Issue of common
shares
|
30,714,118
|
2,152
|
-
|
-
|
-
|
2,152
|
|
|
|
|
|
|
|
Stock-based
compensation expense
|
-
|
-
|
140
|
-
|
-
|
140
|
|
|
|
|
|
|
|
Cancellation of
issued stock options
|
-
|
-
|
440
|
-
|
-
|
440
|
|
|
|
|
|
|
|
Transfer to share
capital on exercise of
stock options
|
-
|
1,162
|
(1,162)
|
-
|
-
|
-
|
|
|
|
|
|
|
|
Unrealized currency
gain on translation
for the period
|
-
|
-
|
-
|
-
|
(3,024)
|
(3,024)
|
|
|
|
|
|
|
|
Net income for the
year
|
-
|
-
|
-
|
33,672
|
-
|
33,672
|
|
|
|
|
|
|
|
Balance September
30, 2018
|
368,118,620
|
86,219
|
6,397
|
(125,670)
|
6,872
|
(26,182)
|
|
|
|
|
|
|
|
1.
|
The Company has
initially applied IFRS 15 using the retrospective with cumulative
effect method. Under this method, the comparative information is
not restated.
|
View original
content:http://www.prnewswire.com/news-releases/avcorp-announces-2018-third-quarter-financial-results-300750830.html
SOURCE Avcorp Industries Inc.