Avcorp announces 2010 Third Quarter Results

VANCOUVER, Nov. 15 /CNW/ - 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)

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	September 30, 2010	December 31, 2009
Assets
Current assets
Accounts receivable	$  10,126	$   6,689
Inventories	13,158	15,497
Prepayments	2,429	1,092
Other assets	26	24
	25,739	23,302
Development costs	5,158	3,923
Property, plant and equipment	15,507	17,346
Warranty claim receivable	1,637	1,637
Intangible assets	1,566	1,818
	49,607	48,026
Liabilities
Current liabilities
Bank indebtedness	6,721	8,422
Accounts payable and accrued liabilities	11,290	7,929
Current portion of long-term debt	5,374	6,131
	23,385	22,482
Deferred gain	370	405
Lease inducement	789	863
Deferred tooling revenues	5,672	3,116
Long-term debt	3,866	1,811
Warranty provision	2,312	1,647
Future income tax liability	858	858
	37,252	31,182
Shareholders' Equity
Capital stock	72,927	71,954
Preferred shares	7,622	7,622
Contributed surplus	2,647	2,647
Deficit	(70,841)	(65,379)
	12,355	16,844
	49,607	48,026

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)

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	Three months ended September 30		Nine months ended September 30
For the quarter ended September 30	2010	2009	2010	2009
Revenues	$  21,808	$   14,302	$  57,894	$   52,561
Cost of sales and expenses
Cost of sales	18,231	14,155	51,069	48,700
Administrative and general expenses	2,413	2,656	8,130	8,643
Amortization and depreciation	983	1,003	2,905	3,085
Foreign exchange loss (gain)	104	(1,384)	(223)	(4,302)
	21,731	16,430	61,881	56,126
Income (Loss) from operations	77	(2,128)	(3,987)	(3,565)
Interest expense and financing charges	(348)	(458)	(912)	(1,423)
Unrealized derivative gain (loss)	2	1	3	(704)
Income (Loss) and comprehensive income (loss) for the period	(269)	(2,585)	(4,896)	(5,692)
Basic and diluted income (loss) per common share	(0.00)	(0.06)	(0.03)	(0.16)
Basic weighted average number of shares outstanding (000's)	195,505	44,784	191,664	36,517
Diluted weighted average number of shares outstanding (000's)	195,505	44,784	192,379	36,517

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

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	Three months ended September 30		Nine months ended September 30
For the quarter ended September 30	2010	2009	2010	2009
Deficit - Beginning of period	$  (70,381)	$   (59,695)	$  (65,379)	$   (56,213)
Income (Loss) for the period	(269)	(2,585)	(4,896)	(5,692)
Preferred share dividends	(191)	(191)	(566)	(566)
Deficit - End of period	(70,841)	(62,471)	(70,841)	(62,471)

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

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	Three months ended September 30		Nine months ended September 30
	2010	2009	2010	2009
Cash flows from operating activities
Income (loss) for the period	$  (269)	$   (2,585)	$  (4,896)	$   (5,692)
Items not affecting cash	472	1,210	3,041	4,483
	203	(1,375)	(1,855)	(1,209)
Change in non-cash items related to operating activities	(2,536)	(1,782)	1,158	1,446
	(2,333)	(3,157)	(697)	237
Cash flows from investing activities
Purchase of property, plant and equipment	(290)	(12)	(808)	(290)
Payments relating to development costs and tooling	(876)	(79)	(1,402)	(2,684)
	(1,166)	(91)	(2,210)	(2,974)
Cash flows from financing activities
Net increase or (repayment) of bank indebtedness	2,103	(2,603)	(1,701)	(4,637)
Proceeds from customer funding of program development	1,658	1,809	2,739	2,214
Proceeds from current and long-term debt	-	4,000	1,771	5,952
Repayment of current and long-term debt	(262)	(815)	(875)	(1,649)
Issue of common shares net of debt repayment set-off	-	857	977	857
Share issue expense	-	-	(4)	-
	3,499	3,248	2,907	2,737
Net change in cash and cash equivalents	-	-	-	-
Cash and cash equivalents - Beginning of period	-	-	-	-
Cash and cash equivalents - End of period	-	-	-	-
Interest paid	216	348	596	992

For further information:

Sandi DiPrimo, Investor Relations Contact 604-587-4938