Avcorp announces 2011 Second Quarter Results

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Aug 10, 2011, 01:33 ET

VANCOUVER, Aug. 10, 2011 /PRNewswire/ - Avcorp (AVP on the Toronto Stock Exchange) today announced its financial results for the quarter ended June 30, 2011.

During the quarter ended June 30, 2011, the Company recorded a loss from operations of $752,000 on $20,492,000 revenue, as compared to a $2,191,000 loss from operations on $18,710,000 revenue for the same quarter preceding year; and a net loss for the current quarter of $1,148,000 as compared to a net loss of $2,213,000 for the quarter ended June 30, 2010.

The Company has realized revenue growth during the second quarter 2011 relative to the same quarter in 2010 for most major structures deliveries; while customer demand for non-original equipment manufacturers' products and services has increased slightly.

Earnings before interest, taxes, depreciation and amortization (EBITDA) were positive $258,000 for the current quarter compared to a negative EBITDA of $957,000 for the quarter ended June 30, 2010.

Cash flows from operating activities during the current quarter utilized $785,000 of cash resulting from working capital growth in support of increased revenues, as well as operating losses; as compared to providing $1,189,000 of cash during the quarter ended June 30, 2010. The Company has a working capital surplus of $10,897,000 as at June 30, 2011 (December 31, 2010: $1,493,000 surplus) and an accumulated deficit of $76,156,000 at June 30, 2011 (December 31, 2010: $73,564,000).

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, over 500 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
PRESIDENT and 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 STATEMENT OF FINANCIAL POSITION
(unaudited, expressed in thousands of Canadian dollars)

	June 30, 2011	December 31, 2010

ASSETS
Current assets
Accounts receivable	$ 13,586	$ 8,869
Inventories	17,218	14,886
Prepayments	1,404	1,922
Other assets	27	28
	32,235	25,705
Non-current assets
Development costs	5,853	5,181
Property, plant and equipment	13,434	14,794
Total assets	51,522	45,680

LIABILITIES AND EQUITY
Current liabilities
Bank indebtedness	8,697	8,158
Accounts payable and accrued liabilities	10,650	10,634
Current portion of long-term debt	1,991	5,420
	21,338	24,212
Non-current liabilities
Deferred gain	334	358
Lease inducement	715	764
Deferred tooling revenues	14,835	6,804
Long-term debt	6,516	3,275
Warranty provisions	186	167
	43,924	35,580
Equity
Attributable to shareholders of the Company:
Capital stock	72,927	72,927
Equity component of convertible loan	453	453
Preferred shares	7,622	7,622
Contributed surplus	2,752	2,662
Deficit	(76,156)	(73,564)
	7,598	10,100
Total liabilities and equity	51,522	45,680

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		Six months ended
FOR THE PERIOD ENDED JUNE 30	2011	2010	2011	2010

Revenues	$ 20,492	$ 18,710	$ 41,408	$ 36,086
Cost of sales	18,208	17,654	36,840	34,057
Gross profit	2,284	1,056	4,568	2,029
Administrative and general expenses	2,873	2,985	5,508	5,717
Office equipment depreciation	166	263	335	535
Other (gains) and losses - net	(3)	(1)	(6)	(1)
Operating Loss	(752)	(2,191)	(1,269)	(4,222)
Foreign exchange (gain) loss	(69)	(285)	135	(327)
Finance costs	465	307	813	564
Loss before income tax	(1,148)	(2,213)	(2,217)	(4,459)
Income taxes recovery (expense)	-	-	-	-
Future income tax recovery (expense)	-	-	-	-
Loss and comprehensive loss for the period	(1,148)	(2,213)	(2,217)	(4,459)
Earnings (loss) per share:
Basic and diluted loss per common share	(0.01)	(0.01)	(0.01)	(0.02)
Basic weighted average number of shares outstanding (000's)	195,505	195,505	195,505	189,712
Diluted weighted average number of shares outstanding (000's)	199,490	195,505	201,115	190,404

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

	Three months ended		Six months ended
FOR THE PERIOD ENDED JUNE 30	2011	2010	2011	2010

Cash flows from operating activities
Profit (loss) before tax	$ (1,148)	$ (2,213)	$ (2,217)	$ (4,459)
Adjustment for items not affecting cash:
Accretion on convertible loan	21	-	42	-
Accrued interest and government royalties	137	157	283	266
Amortization and depreciation	840	887	1,686	1,754
Deferred tooling revenue amortization	(204)	(201)	(426)	(399)
Development cost amortization	102	62	190	100
Provision for loss-making contracts	(200)	174	(291)	279
Provision for obsolete inventory	(3)	(412)	(50)	(427)
Stock based compensation	45	-	90	-
Warranty provisions	(2)	458	(12)	875
Other items	(35)	46	(96)	(47)
	(447)	(1,042)	(801)	(2,058)
Changes in non-cash working capital
Accounts receivable	1,281	871	(1,740)	(35)
Inventories	(987)	1,266	(1,991)	2,367
Prepayments	251	(426)	518	(460)
Accounts payable and accrued liabilities	(913)	690	(367)	1,992
Other items	30	(170)	30	(170)
Net cash from operating activities	(785)	1,189	(4,351)	1,636

Cash flows from investing activities
Purchase of equipment	(133)	(329)	(327)	(518)
Payments relating to development costs and tooling	(529)	(288)	(862)	(526)
Net cash from investing activities	(662)	(617)	(1,189)	(1,044)

Cash flows from financing activities
(Decrease) increase in bank indebtedness	571	(2,810)	539	(3,804)
Proceeds from customer funding of program non-recurring expenditures	1,109	712	5,480	1,081
Proceeds from current and long-term debt	-	1,771	-	1,771
Repayment of current and long-term debt	(233)	(245)	(479)	(613)
Issue of common shares	-	-	-	977
Share issue expense	-	-	-	(4)
Net cash from financing activities	1,447	(572)	5,540	(592)
Net increase (decrease) in cash and cash equivalents	-	-	-	-
Cash and cash equivalents - Beginning of period	-	-	-	-
Cash and cash equivalents - End of period	-	-	-	-

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(unaudited, expressed in thousands of Canadian dollars, except number of shares)

	Share capital		Equity component convertible loan	Preferred shares	Contributed surplus	Deficit	Total equity
	Shares	Amount
Balance January 1, 2010	177,732,112	$71,954	$ -	$7,622	$2,647	$(66,162)	$16,061
Issue of common shares	17,773,211	973	-	-	-	-	973
Loss for the period	-	-	-	-	-	(4,459)	(4,459)
Dividends on preferred shares	-	-	-	-	-	(375)	(375)
Balance June 30, 2010	195,505,323	72,927	-	7,622	2,647	(70,996)	12,200
Balance December 31, 2010	195,505,323	72,927	453	7,622	2,662	(73,564)	10,100
Stock based compensation expense	-	-	-	-	90	-	90
Loss for the period	-	-	-	-	-	(2,217)	(2,217)
Dividends on preferred shares	-	-	-	-	-	(375)	(375)
Balance June 30, 2011	195,505,323	72,927	453	7,622	2,752	(76,156)	7,598