Avcorp announces 2010 Third Quarter Results

VANCOUVER, Nov. 15 /PRNewswire-FirstCall/ - Avcorp (AVP on the Toronto Stock Exchange) today announced its financial results for the quarter ended September 30, 2010. 

During the quarter ended September 30, 2010, the Company recorded income from operations of $77,000 on $21,808,000 revenue, as compared to a $2,128,000 loss from operations on $14,302,000 revenue for the same quarter of the preceding year; and a net loss for the current quarter of $269,000 as compared to a net loss of $2,585,000 for the quarter ended September 30, 2009. 

The significant revenue growth for the current quarter combined with continued cost control and improved operating efficiencies have caused gross margins to improve by $3,430,000 over the same quarter in 2009.

The Company has realized 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 has experienced in excess of 52% revenue growth during the third quarter of 2010 relative to the same quarter in 2009, as a result of program re-starts and production rate increases.

It should be noted that the current quarter loss includes a $104,000 foreign exchange loss, while income for the quarter ended September 30, 2009 included a $1,384,000 foreign exchange gain which occurred as a result of holding foreign-currency-denominated receivables, payables and debt.

Cash flows from operating activities during the current quarter provided $203,000 of cash, as compared to utilizing $1,375,000 of cash during the quarter ended September 30, 2009.  The Company has a working capital surplus of $2,354,000 as at September 30, 2010 (December 31, 2009: $820,000 surplus) and an accumulated deficit of $70,841,000 at September 30, 2010 (December 31, 2009: $65,379,000).

As at September 30, 2010, the Company was not in compliance with financial covenants associated with its operating lines of credit.  The lender has 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 ended on October 15, 2010.  The Company is currently in the process of renewing the Forbearance Agreement with the bank.

Also, as at September 30, 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, 585 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 September 30, 2010 and December 31, 2009
(unaudited, in thousands of Canadian dollars)

Consolidated Statements of Operations and Comprehensive Loss
For the three and nine months ended September 30, 2010 and 2009
(unaudited, in thousands of Canadian dollars, except number of shares and per share amounts)

Consolidated Statements of Deficit
For the three and nine months ended September 30, 2010 and 2009
(unaudited, in thousands of Canadian dollars)

Consolidated Statements of Cash Flows
For the three and nine months ended September 30, 2010 and 2009
(unaudited, in thousands of Canadian dollars)

SOURCE Avcorp Industries Inc.