Avcorp announces 2014 Third Quarter Financial Results

VANCOUVER, Nov. 13, 2014 /CNW/ - Avcorp Industries Inc. (TSX: AVP) (the "Company" or "Avcorp") today announced its financial results for the quarter ended September 30, 2014.

Revenue for the quarter ended September 30, 2014 was $14,675,000 as compared to $19,767,000 for the quarter ended September 30, 2013. Current quarter revenues have decreased relative to same quarter in the previous year primarily as a result of a decrease in quantities delivered for two defence programs and one commercial business jet program, in part offset by strong current quarter aircraft component repairs revenue.

During the quarter ended September 30, 2014, the Company recorded a loss from operations of $2,321,000 on $14,675,000 revenue, as compared to $211,000 operating loss on $19,767,000 revenue for the same quarter in the preceding year; and a net loss for the current quarter of $2,229,000 as compared to net loss of $1,139,000 for the quarter ended September 30, 2013. 

Cash flows from operating activities during the quarter ended September 30, 2014 utilized $1,152,000 of cash as compared to providing $25,595,000 of cash during the quarter ended September 30, 2013.  The primary use of cash from operations during the current quarter is due to operating losses reflecting temporary reduced customer demand. During the nine months ended September 30, 2014 the Company utilized $3,276,000 cash from operating activities as compared to providing $21,403,000 cash for the same period in 2013.  The primary causes of operating cash movement during the nine month period ended September 30, 2014 and 2013 were the same circumstances as existed during the three month periods noted above, however, collection of an Other Receivable during the third quarter 2013 provided cash during 2013.  As at September 30, 2014 the Company had $1,180,000 cash on hand (December 31, 2013: $7,012,000). 

The Company has a working capital surplus of $8,797,000 as at September 30, 2014 as compared to a $14,213,000 surplus on December 31, 2013.  The Company's accumulated deficit as at September 30, 2014 is $61,783,000 (December 31, 2013: $57,723,000).

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 380 skilled employees and 340,000 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)

PETER GEORGE
CHIEF EXECUTIVE OFFICER, AVCORP GROUP

Forward-Looking Statements

This release should be read in conjunction with the Company's unaudited financial statements contained in the Company's Annual Report and with the quarterly financial statements and accompanying notes filed with Sedar (www.sedar.com).

Certain statements in this release 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 extent to which the Company is able to achieve savings from its restructuring plans; (b) uncertainty in estimating the amount and timing of restructuring charges and related costs; (c) changes in worldwide economic and political conditions that impact interest and foreign exchange rates; (d) the occurrence of work stoppages and strikes at key facilities of the Company or the Company's customers or suppliers; (e) government funding and program approvals affecting products being developed or sold under government programs; (f) cost and delivery performance under various program and development contracts; (g) the adequacy of cost estimates for various customer care programs including servicing warranties; (h) the ability to control costs and successful implementation of various cost reduction programs; (i) the timing of certifications of new aircraft products; (j) the occurrence of further downturns in customer markets to which the Company products are sold or supplied or where the Company offers financing; (k) changes in aircraft delivery schedules or cancellation of orders; (l) the Company's ability to offset, through cost reductions, raw material price increases and pricing pressure brought by original equipment manufacturer customers; (m) the availability and cost of insurance; (n) the Company's ability to maintain portfolio credit quality; (o) the Company's access to debt financing at competitive rates; and (p) uncertainty in estimating contingent liabilities and establishing reserves tailored to address such contingencies.

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

	September 30, 2014	December 31, 2013
ASSETS
Current assets
Cash	$  1,180	$   7,012
Accounts receivable	8,879	8,845
Inventories	12,461	14,940
Prepayments and other assets	945	1,306
	23,465	32,103
Non-current assets
Prepaid rent	146	146
Development costs	3,019	1,240
Property, plant and equipment	8,392	8,704
Total assets	35,022	42,193
LIABILITIES AND EQUITY
Current liabilities
Accounts payable and accrued liabilities	9,303	7,645
Current portion of long-term debt	281	199
Preferred shares	-	36
Deferred program revenues	5,084	10,010
	14,668	17,890
Non-current liabilities
Deferred gain	180	216
Lease inducement	395	469
Long-term debt	152	67
	15,395	18,642
Equity
Capital stock	77,910	77,681
Contributed surplus	3,500	3,593
Deficit	(61,783)	(57,723)
	19,627	23,551
Total liabilities and equity	35,022	42,193

CONSOLIDATED STATEMENTS OF (LOSS) INCOME AND COMPREHENSIVE (LOSS) 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	2014	2013	2014	2013
Revenues	$  14,675	$  19,767	$  53,360	$  60,205
Cost of sales	14,274	16,493	48,898	51,463
Gross profit	401	3,274	4,462	8,742
Administrative and general expenses	2,579	2,816	8,220	8,292
Office equipment depreciation	143	144	432	432
Other operating (income) loss	-	525	-	(604)
Operating (Loss) Income	(2,321)	(211)	(4,190)	622
Finance costs – net	16	284	36	840
Foreign exchange (gain) loss	(108)	644	(173)	(783)
Write-down and loss on disposal of equipment	-	-	7	-
(Loss) Income before income tax	(2,229)	(1,139)	(4,060)	565
Income tax expense	-	-	-	-
(Loss) Income and total comprehensive (loss) income for the period	(2,229)	(1,139)	(4,060)	565
(Loss) Earnings per share:
Basic (loss) earnings per common share	(0.01)	(0.00)	(0.01)	0.00
Diluted (loss) earnings per common share	(0.01)	(0.00)	(0.01)	0.00
Basic weighted average number of shares outstanding (000's)	283,083	280,390	282,732	268,344
Diluted weighted average number of shares outstanding (000's)	283,083	280,390	282,732	269,877

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			2014	2013	2014	2013
Cash flows from (used in) operating activities
(Loss) Income before income tax			$  (2,229)	$  (1,139)	$  (4,060)	$   565
	Adjustment for items not affecting cash:
		Accrued interest and government royalties	10	94	26	275
		Depreciation	417	494	1,192	1,561
		Development cost amortization	1	875	137	1,855
		Loss on settlement	-	525	-	525
		Preferred share dividends accrued	-	186	-	563
		Provision for loss-making contracts	129	-	98	-
		Provision for obsolete inventory	(9)	(156)	40	(259)
		Write-down and loss on disposal of equipment	-	-	7	-
		Other items	(4)	7	(81)	(15)
			(1,685)	886	(2,641)	5,070
	Changes in non-cash working capital
		Accounts receivable	954	(251)	1,960	597
		Inventories	(97)	(197)	2,341	(86)
		Prepayments and other assets	137	180	338	675
		Other receivables	-	29,380	-	26,832
		Accounts payable and accrued liabilities	(463)	(1,003)	1,645	(313)
		Deferred program revenues	2	(3,400)	(6,919)	(11,372)
Net cash from (used in) operating activities			(1,152)	25,595	(3,276)	21,403
Cash flows from (used in) investing activities
Proceeds from sale of equipment			21	-	589	-
Purchase of equipment			(127)	(218)	(917)	(646)
Payments relating to development costs and tooling			(511)	(25)	(1,916)	(335)
Net cash from (used in) investing activities			(617)	(243)	(2,244)	(981)
Cash flows from (used in) financing activities
Increase (Decrease) in bank indebtedness			-	(6,496)	-	(2,122)
Payment of interest			(11)	(95)	(28)	(277)
Proceeds from issuance of common shares			-	-	142	1,249
Redemption of preferred shares and accrued dividends			-	-	(36)	-
Repayment of current and long-term debt			(67)	(170)	(390)	(466)
Net cash from (used in) financing activities			(78)	(6,761)	(312)	(1,616)
Net increase (decrease) in cash			(1,847)	18,591	(5,832)	18,806
Cash - Beginning of period			3,027	2,812	7,012	2,597
Cash - End of period			1,180	21,403	1,180	21,403

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

	Share capital
	Shares	Amount	Contributed surplus	Deficit	Total equity
Balance December 31, 2012	254,898,072	$ 76,423	$  3,539	$ (55,375)	$  24,587
Issue of common shares	25,493,080	1,258	-	-	1,258
Stock based compensation expense	-	-	45	-	45
Income for the period	-	-	-	565	565
Balance September 30, 2013	280,391,152	77,681	3,584	(54,810)	26,455
Balance December 31, 2013	280,391,152	77,681	3,593	(57,723)	23,551
Issue of common shares	2,691,500	142	-	-	142
Stock-based compensation expense	-	-	(6)	-	(6)
Transfer to share capital on exercise of stock options	-	87	(87)	-	-
Loss for the period	-	-	-	(4,060)	(4,060)
Balance September 30, 2014	283,082,652	77,910	3,500	(61,783)	19,627

SOURCE: Avcorp Industries Inc.

Sandi DiPrimo, Investor Relations Contact 604-587-4938 or email [email protected].