Avcorp announces 2012 Third Quarter Results

VANCOUVER, Nov. 13, 2012 /CNW/ - Avcorp Industries Inc. (TSX: AVP) (the "Company" or "Avcorp") today announced its financial results for the quarter ended September 30, 2012.

During the quarter ended September 30, 2012, the Company recorded a loss from operations of $1,446,000 on $19,324,000 revenue, as compared to a $186,000 operating loss on $20,383,000 revenue for the same quarter in the preceding year; and a net loss for the current quarter of $2,729,000 as compared to a net loss of $150,000 for the quarter ended September 30, 2011.

Current quarter revenues have decreased from the same quarter in the preceding year primarily as a result of the wind-down of Cessna Aircraft Company (Cessna) programs. During the third quarter 2012, the Company renewed its long-term agreement with the Boeing Commercial Airplane Group (Boeing CA) which is forecasted to provide in excess of $83 million revenue over the next five years. Start-up and commencement of production deliveries for BAE Systems (Operations) Limited (BAE) F35 program has also contributed to an overall $110 million increase in order backlog during the current quarter.

Earnings before interest, taxes, depreciation and amortization (EBITDA) was negative $1,205,000 for the quarter ended September 30, 2012 compared to a positive EBITDA of $1,455,000 for the quarter ended September 30, 2011.  The decline in EBITDA was primarily as a result of reduced revenues and costs associated with customer contract terminations. During the quarter-ended September 30, 2012, the Company incurred $825,000 (September 30, 2011: $136,000) in costs associated with customer contract terminations.

On September 27, 2012, the Company secured a three year $12,000,000 operating line of credit.  Concurrently, the Company repaid its $6,000,000 term loan.  Also during the quarter the Company increased its share capital by $2,798,000.

Cash flows from operating activities during the quarter ended September 30, 2012 provided $350,000 of cash as compared to utilizing $766,000 of cash during the quarter ended September 30, 2011.  The Company has a working capital surplus of $10,130,000 as at September 30, 2012 which has decreased from the December 31, 2011 $14,663,000 surplus, as a result of utilizing cash on hand to repay long-term debt.  The Company's accumulated deficit as at September 30, 2012 was $78,581,000 (December 31, 2011: $76,016,000).

About Avcorp

Avcorp designs and builds major airframe structures for some of the world's leading aircraft companies, including BAE Systems, Boeing, and Bombardier. With more than 50 years of experience, over 400 skilled employees and 354,000 square feet of facilities in Delta BC and Burlington ON, 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. Our Burlington location also offers composite repairs for commercial aircraft. 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, prepared in accordance with IFRS, expressed in thousands of Canadian dollars)

	September 30, 2012	December 31, 2011
ASSETS
Current assets
Cash	$   1,403	$   3,778
Accounts receivable	8,312	12,160
Inventories	18,739	19,418
Prepayments and other assets	994	1,396
	29,448	36,752
Non-current assets
Prepaid rent	146	146
Development costs	4,736	5,540
Property, plant and equipment	10,737	12,523
Total assets	45,067	54,961
LIABILITIES AND EQUITY
Current liabilities
Accounts payable and accrued liabilities	8,391	10,694
Current portion of long-term debt	470	1,505
Preferred shares	10,457	9,890
	19,318	22,089
Non-current liabilities
Deferred gain	275	311
Lease inducement	592	666
Deferred program revenues	19,054	18,671
Long-term debt	4,409	12,027
Warranty provisions	85	85
	43,733	53,849
Equity
Capital stock	76,217	73,251
Equity component of convertible loan	206	453
Contributed surplus	3,492	3,424
Deficit	(78,581)	(76,016)
	1,334	1,112
Total liabilities and equity	45,067	54,961

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(unaudited, prepared in accordance with IFRS, expressed in thousands of Canadian dollars, except number of shares and per share amounts)

		Three months ended			Nine months ended
FOR THE PERIOD ENDED SEPTEMBER 30		2012	2011		2012	2011
Revenues		$  19,324	$  20,383		$  69,522	$ 61,791
Cost of sales		16,936	17,686		58,151	54,526
Gross profit		2,388	2,697		11,371	7,265
Administrative and general expenses		3,715	2,729		11,190	8,237
Office equipment depreciation		119	160		360	495
Other (gains) and losses - net		-	(6)		(4)	(12)
Operating Income (loss)		(1,446)	(186)		(175)	(1,455)
Foreign exchange (gain) loss		300	(706)		221	(571)
Finance costs		586	670		1,772	1,861
Loss on repayment of debt		397	-		397	-
Income (loss) before income tax		(2,729)	(150)		(2,565)	(2,745)
Income tax expense		-	-		-	-
Income (loss) and total comprehensive income (loss) for the period		(2,729)	(150)		(2,565)	(2,745)
Earnings (loss) per share:
Basic earnings (loss) per common share		(0.01)	0.00		(0.01)	(0.01)
Diluted earnings (loss) per common share		(0.01)	0.00		(0.01)	(0.01)
Basic weighted average number of shares outstanding (000's)		205,851	198,750		204,134	196,599
Diluted weighted average number of shares outstanding (000's)		205,851	199,930		204,321	202,684

CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, prepared in accordance with IFRS, expressed in thousands of Canadian dollars)

	Three months ended		Nine months ended
FOR THE PERIOD ENDED SEPTEMBER 30	2012	2011	2012	2011
Cash flows from operating activities
Profit (loss) before tax	$   (2,729)	$ (150)	$   (2,565)	$ (2,745)
Adjustment for items not affecting cash:
Accretion on convertible loan	23	21	67	63
Accrued interest and government royalties	330	466	1,007	1,232
Amortization and depreciation	724	844	2,280	2,530
Deferred tooling revenue amortization and reclassification to revenue	(2,292)	(214)	(8,710)	(640)
Development cost amortization and reclassification to cost of sales	662	91	1,698	281
Fair value of warrants amortization	44	44	132	44
Loss on repayment of debt	397	-	397	-
Preferred share dividends accrued	189	189	567	567
Provision for loss-making contracts	(108)	(300)	(189)	(591)
Provision for obsolete inventory	(84)	(123)	(67)	(173)
Stock based compensation	25	25	69	115
Other items	(47)	61	(105)	(47)
	(2,866)	954	(5,419)	636
Changes in non-cash working capital
Accounts receivable	2,869	(1,396)	5,173	(3,136)
Inventories	(272)	(1,065)	935	(3,056)
Prepayments and other assets	471	-	396	518
Accounts payable and accrued liabilities	148	818	(2,316)	451
Other Items	-	(77)	-	(47)
Net cash from operating activities	350	(766)	(1,231)	(4,634)
Cash flows from investing activities
Purchase of equipment	(53)	(364)	(354)	(691)
Payments relating to development costs and tooling	(280)	(99)	(894)	(961)
Net cash from investing activities	(333)	(463)	(1,248)	(1,652)
Cash flows from financing activities
(Decrease) increase in bank indebtedness	-	(8,054)	-	(7,515)
Payment of interest	(552)	(342)	(1,048)	(881)
Proceeds from issuance of common shares	973	-	973	-
Proceeds from customer funding of program introduction	1,680	3,837	7,769	9,317
Proceeds from current and long-term debt	-	6,000	-	6,000
Repayment of current and long-term debt	(7,097)	(212)	(7,590)	(635)
Net cash from financing activities	(4,996)	1,229	104	6,286
Net increase (decrease) in cash	(4,979)	-	(2,375)	-
Cash - Beginning of period	6,382	-	3,778	-
Cash - End of period	1,403	-	1,403	-

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

		Share capital				Equity component convertible loan		Contributed surplus		Deficit		Total equity
		Shares		Amount
Balance December 31, 2010		195,505,323		$ 72,927		$   453		$  2,662		$ (73,561)		$  2,481
Issue of common shares		6,488,790		324		-		-		-		324
Stock based compensation expense		-		-		-		115		-		115
Fair value warrants		-		-		-		42		-		42
Loss for the period		-		-		-		-		(2,745)		(2,745)
Balance September 30, 2011		201,994,113		73,251		453		2,819		(76,306)		217
Balance December 31, 2011		201,994,113		73,251		453		3,424		(76,016)		1,112
Issue of common shares		52,903,959		2,966		-		-		-		2,966
Loan conversion		-		-		(247)		-		-		(247)
Stock-based compensation expense		-		-		-		68		-		68
Loss for the period		-		-		-		-		(2,565)		(2,565)
Balance September 30, 2012		254,898,072		76,217		206		3,492		(78,581)		1,334

 

 

SOURCE: Avcorp Industries Inc.

Contact: Sandi DiPrimo, Investor Relations Contact 604-587-4938