Avcorp announces 2010 First Quarter Results
VANCOUVER, May 17 /PRNewswire-FirstCall/ - Avcorp (AVP on the Toronto Stock Exchange) today announced its financial results for the quarter ended March 31, 2010.
During the quarter ended March 31, 2010, the Company recorded a loss from operations of $2,073,000 on $17,376,000 revenue, as compared to a $1,989,000 loss from operations on $22,087,000 revenue for the same quarter of the preceding year; and a net loss for the current quarter of $2,330,000 as compared to a net loss of $3,172,000 for the quarter ended March 31, 2009.
Continued reduced customer demand has resulted in idle plant capacity. The Company has expensed $1,333,000 of overhead costs during the current quarter (March 31, 2009: $Nil) which under normal production levels would have been inventoried, then expensed at a later time when the product is sold.
The Company expects revenue growth in 2010 from full rate production of the Boeing Defense Space & Security CH47 helicopter and the Cessna Citation CJ4 business jet; both programs were in start-up phase for the Company in 2009. Additionally, the Company will experience moderate growth during the second half of 2010 as a result of program re-starts and production rate increases.
The Company has increased its provision for loss making contracts by $105,000 during the current quarter, primarily as a result of the adverse impact the strengthening of the Canadian dollar relative to the US dollar has had on US dollar denominated sales.
During the current quarter the Company provisioned for $417,000 of expected warranty expenditures relating to a manufacturing deficiency arising within its supply chain.
It should be noted that the current quarter loss includes a $42,000 foreign exchange gain (March 31, 2009: $1,044,000 foreign exchange loss) which occurred as a result of holding foreign-currency-denominated receivables, payables and debt.
Cash flows from operating activities during the current quarter utilized $1,016,000 of cash, as compared to utilizing $681,000 of cash during the quarter ended March 31, 2009. The Company has a working capital surplus of $1,761,000 as at March 31, 2010 (December 31, 2009: $820,000 surplus) and an accumulated deficit of $67,895,000 at March 31, 2010 (December 31, 2009: $65,379,000).
As at March 31, 2010, the Company was not in compliance with a financial covenant associated with its operating lines of credit. The lender had agreed to forbear from demanding payment of the indebtedness and from taking steps to enforce the security, subject to the Company complying with terms and conditions of a Forbearance Agreement which ends on June 9, 2010. Also, as at March 31, 2010, the Company was not in compliance with a financial covenant associated with the convertible debenture held by Export Development Canada. The Company has obtained a waiver from the debenture holder for this non-compliance.
About Avcorp
Avcorp designs and builds major airframe structures for some of the world's leading aircraft companies, including Boeing, Bombardier, and Cessna. With more than 50 years of experience, 507 skilled employees and 354,000 square feet of facilities, 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. Avcorp is a Canadian public company traded on the Toronto Stock Exchange (TSX:AVP).
(signed)
MARK VAN ROOIJ
CHIEF EXECUTIVE OFFICER
Forward-Looking Statements
This management discussion and analysis should be read in conjunction with the Company's audited financial statements. Certain statements in this report 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 ability of the Company to renegotiate its debt agreements under which it is in default; (b) the extent to which the Company is able to achieve savings from its restructuring plans; (c) uncertainty in estimating the amount and timing of restructuring charges and related costs; (d) changes in worldwide economic and political conditions that impact interest and foreign exchange rates; (e) the occurrence of work stoppages and strikes at key facilities of the Company or the Company's customers or suppliers; (f) government funding and program approvals affecting products being developed or sold under government programs; (g) cost and delivery performance under various program and development contracts; (h) the adequacy of cost estimates for various customer care programs including servicing warranties; (i) the ability to control costs and successful implementation of various cost reduction programs; (j) the timing of certifications of new aircraft products; (k) the occurrence of further downturns in customer markets to which the Company products are sold or supplied or where the Company offers financing; (l) changes in aircraft delivery schedules or cancellation of orders; (m) the Company's ability to offset, through cost reductions, raw material price increases and pricing pressure brought by original equipment manufacturer customers; (n) the availability and cost of insurance; (o) the Company's ability to maintain portfolio credit quality; (p) the Company's access to debt financing at competitive rates; and (q) uncertainty in estimating contingent liabilities and establishing reserves tailored to address such contingencies.
Consolidated Balance Sheets
as at March 31, 2010 and December 31, 2009
(unaudited, in thousands of Canadian dollars)
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March 31, December 31,
2010 2009
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Assets
Current assets
Accounts receivable $ 8,396 $ 6,689
Inventories 14,306 15,497
Prepayments 1,126 1,092
Other assets 23 24
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23,851 23,302
Development costs 4,123 3,923
Property, plant and equipment 16,668 17,346
Warranty claim receivable 1,637 1,637
Intangible assets 1,734 1,818
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48,013 48,026
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Liabilities
Current liabilities
Bank indebtedness 7,428 8,422
Accounts payable and accrued liabilities 9,421 7,929
Current portion of long-term debt 5,241 6,131
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22,090 22,482
Deferred gain 394 405
Lease inducement 838 863
Deferred tooling revenues 4,088 3,116
Long-term debt 2,380 1,811
Warranty provision 2,064 1,647
Future income tax liability 858 858
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32,712 31,182
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Shareholders' Equity
Capital stock 72,927 71,954
Preferred shares 7,622 7,622
Contributed surplus 2,647 2,647
Deficit (67,895) (65,379)
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15,301 16,844
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48,013 48,026
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Consolidated Statements of Operations and Comprehensive Loss
For the quarter ended March 31, 2010 and 2009
(unaudited, in thousands of Canadian dollars,
except number of shares and per share amounts)
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For the quarter ended March 31 2010 2009
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Revenues $ 17,376 $ 22,087
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Cost of sales and expenses
Cost of sales 15,808 18,947
Administrative and general expenses 2,732 3,019
Amortization and depreciation 951 1,066
Foreign exchange (gain) loss (42) 1,044
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19,449 24,076
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Loss from operations (2,073) (1,989)
Interest expense and financing charges (257) (529)
Unrealized derivative loss - (654)
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Loss and comprehensive loss for the period (2,330) (3,172)
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---------------------------
Basic and diluted loss per common share (0.01) (0.10)
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---------------------------
Basic and diluted weighted average number
of shares outstanding (000's) 183,854 32,315
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Consolidated Statements of Deficit
For the quarter ended March 31, 2010 and 2009
(unaudited, in thousands of Canadian dollars)
-------------------------------------------------------------------------
For the quarter ended March 31 2010 2009
---------------------------
Deficit - Beginning of period $ (65,379) $ (56,213)
Loss for the period (2,330) (3,172)
Preferred share dividends (186) (186)
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Deficit - End of period (67,895) (59,571)
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Consolidated Statements of Cash Flows
For the quarter ended March 31, 2010 and 2009
(unaudited, in thousands of Canadian dollars)
-------------------------------------------------------------------------
For the quarter ended March 31 2010 2009
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Cash flows from operating activities
Loss for the period $ (2,330) $ (3,172)
Items not affecting cash 1,314 2,491
---------------------------
(1,016) (681)
Change in non-cash items related to
operating activities 1,463 1,447
---------------------------
447 766
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Cash flows from investing activities
Purchase of property, plant and equipment (189) (193)
Payments relating to development costs
and tooling (238) (1,193)
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(427) (1,386)
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Cash flows from financing activities
(Decrease) increase in bank indebtedness (994) 886
Proceeds from customer funding of program
non-recurring expenditures 369 149
Repayment of current and long-term debt (368) (415)
Issue of common shares 977 -
Share issue expense (4) -
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(20) 620
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Net change in cash and cash equivalents - -
Cash and cash equivalents - Beginning
of period - -
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Cash and cash equivalents - End of period - -
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Interest paid 193 440
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SOURCE Avcorp Industries Inc.
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