Avcorp Announces 2017 Second Quarter Financial Results
VANCOUVER, Aug. 14, 2017 /CNW/ - Avcorp Industries Inc. (TSX: AVP) (the "Company", "Avcorp" or the "Avcorp Group") today announced its financial results for the quarter ended June 30, 2017. All amounts are in Canadian currency unless otherwise stated.
2017 Highlights
- On April 4, 2017, the Company collected the final amount of consideration receivable from SGL Carbon SE ("SGL") for the acquisition of the US-based composite Aerostructures division of Hitco, a subsidiary of Frankfurt-listed SGL ("Hitco"), amounting to USD$9.2 million.
- On May 26, 2017, the Company signed a loan agreement to replace the current agreement with a Canadian Chartered Bank, supported by a major customer, to access a USD$58 million operating line of credit.
- Effective July 6, 2017 the Company and Panta Canada B.V. ("Panta") amended a term loan held by Panta to provide for an extended maturity date. Panta is Avcorp's majority shareholder owning approximately 65.5% of the issued and outstanding common shares on June 30, 2017. Panta is wholly owned by Panta Holdings B.V. Both companies are incorporated in The Netherlands and Mr. Jaap Rosen Jacobson, a director of the Company, is the sole shareholder of Panta Holdings B.V.
- On July 31, 2017 the Company repaid a principal amount of USD$2,500,000 plus interest accrued in the amount of USD$285,000 of the Panta term loan.
- On August 3, 2017 Panta exercised 12,105,327 warrants expiring August 17, 2017 at $0.07 whose aggregate price of $847,000 was deemed to be made by way of set-off against the Panta loan obligation
- New program start-up revenues contributed $1,367,000 in 2017 in commencement of the $523 million increase in order backlog which occurred in 2016 for new and legacy aircraft programs.
- Leveraging of support personnel skills and capacity has allowed for a reduction in certain roles within the operating sites.
- A consolidation of purchasing volumes has afforded the ability to garner price decreases within the Company's supply chain.
- 2017 operating line re-financing has provided for in excess of $12 million Q2 2017 supply chain payments; allowing for a return to on-time deliveries of products and services from suppliers.
- Supply chain continuity provides the Company with the opportunity to accelerate its operational turn around in Gardena and capture increased revenue availability for the second half of 2017.
Review of 2017 Second Quarter Financial Results
For the quarter ending June 30, 2017, the Avcorp Group recorded losses from operations totaling $11,170,000 from $36,686,000 revenue, which include costs incurred on start-up of new programs, as compared to $6,010,000 operating losses from $50,234,000 revenue for the same quarter in the previous year.
During the quarter ended June 30, 2017, cash flows from operating activities, excluding the impact of changes in non-cash working capital, utilized $12,085,000 of cash as compared with utilization of $13,293,000 of cash during the quarter ended June 30, 2016 (utilization for six months ended June 30, 2017: $21,788,000; utilization for six months ended June 30, 2016: $26,075,000). Cash flows from operating activities were most significantly impacted as a result of operating losses incurred from the integration and production costs expended for the acquired Hitco operations; losses arising from unfavourable customer contracts assumed; operational, administrative, and legal expenditures incurred at Avcorp's Gardena facility; as well as new program introduction and start-up costs at the Delta facility.
As at June 30, 2017, the Company had $3,350,000 cash on hand (December 31, 2016: $3,960,000) and had utilized $27,776,000 of its operating line of credit (December 31, 2016: $17,111,000). Based on net collateral provided to its bank, Avcorp Group is able to draw up to an additional $46,204,000 on its operating line of credit as at June 30, 2017 (December 31, 2016: $4,901,000). The Company has a working capital deficit of $27,265,000 as at June 30, 2017 which has increased from the December 31, 2016 $5,439,000 deficit. Working capital surplus/deficit is defined as the difference between current assets and current liabilities. However, the Company's accounts receivable and inventories net of accounts payable, amount to $41,531,000 as at June 30, 2017 (December 31, 2016: $38,399,000). The Company's accumulated deficit as at June 30, 2017 is $114,297,000 (December 31, 2016: $93,791,000).
The Company's complete financial statements and management's discussion and analysis for the year ended December 31, 2016 and quarter ended June 30, 2017 can be found at www.avcorp.com or at www.sedar.com.
About Avcorp
The Avcorp Group designs and builds major airframe structures for some of the world's leading aircraft companies, including BAE Systems, Boeing, Bombardier, Lockheed Martin and Subaru Corporation (formerly Fuji Heavy Industries Inc.). The Avcorp Group has more than 50 years of experience, over 710 skilled employees and 636,000 square feet of facilities. Avcorp Structures & Integration located in Delta British Columbia, Canada is dedicated to metallic and composite aerostructures assembly and integration; Avcorp Engineered Composites located in Burlington Ontario, Canada is dedicated to design and manufacture of composite aerostructures, and Avcorp Composite Fabrication located in Gardena California, USA has advanced composite aerostructures fabrication capabilities for composite aerostructures. The Avcorp Group 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. Comtek Advanced Structures Ltd., at our Burlington, Ontario, Canada location also provides aircraft operators with aircraft structural component repair services for commercial aircraft.
Avcorp Composite Fabrication Inc. is wholly owned by Avcorp US Holdings Inc. Both companies are incorporated in The State of Delaware, USA, and are wholly owned subsidiaries of Avcorp Industries Inc.
Comtek Advanced Structures Ltd., incorporated in the Province of Ontario, Canada, is a wholly owned subsidiary of Avcorp Industries Inc.
Avcorp Industries Inc. is a federally incorporated reporting company in Canada and 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) changes in worldwide economic and political conditions that impact interest and foreign exchange rates; (b) the occurrence of work stoppages and strikes at key facilities of the Corporation or the Corporation's customers or suppliers; (c) government funding and program approvals affecting products being developed or sold under government programs; (d) cost and delivery performance under various program and development contracts; (e) the adequacy of cost estimates for various customer care programs including servicing warranties; (f) the ability to control costs and successful implementation of various cost reduction programs; (g) the timing of certifications of new aircraft products; (h) the occurrence of downturns in customer markets to which the Corporation products are sold or supplied or where the Corporation offers financing; (i) changes in aircraft delivery schedules or cancellation of orders; (j) the Corporation's ability to offset, through cost reductions, raw material price increases and pricing pressure brought by original equipment manufacturer customers; (k) the availability and cost of insurance; (l) the Corporation's ability to maintain portfolio credit quality; (m) the Corporation's access to debt financing at competitive rates; (n) uncertainty in estimating contingent liabilities and establishing reserves tailored to address such contingencies; and (o) integration of newly acquired operations and associated expenses may adversely affect profitability.
| CONDENSED INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION |
||
| (unaudited, expressed in thousands of Canadian dollars) |
||
| June 30, 2017 |
December 31, 2016 |
|
| ASSETS |
||
| Current assets |
||
| Cash |
$3,350 |
$3,960 |
| Accounts receivable |
22,494 |
26,262 |
| Consideration receivable |
- |
12,251 |
| Inventories |
44,577 |
44,259 |
| Prepayments and other assets |
3,480 |
4,144 |
| 73,901 |
90,876 |
|
| Non-current assets |
||
| Prepaid rent and security |
146 |
146 |
| Development costs |
6,280 |
5,200 |
| Property, plant and equipment |
29,740 |
31,930 |
| Intangibles |
4,611 |
4,887 |
| Total assets |
114,678 |
133,039 |
| LIABILITIES AND EQUITY |
||
| Current liabilities |
||
| Bank indebtedness |
27,776 |
17,111 |
| Accounts payable and accrued liabilities |
25,540 |
32,122 |
| Current portion of term debt |
7,014 |
6,283 |
| Customer advance |
7,765 |
8,034 |
| Deferred program revenues |
15,664 |
13,861 |
| Unfavourable contracts liability |
17,407 |
18,904 |
| 101,166 |
96,315 |
|
| Non-current liabilities |
||
| Deferred gain and lease inducement |
173 |
246 |
| Term debt |
1,588 |
1,646 |
| Customer advance |
1,600 |
3,539 |
| Unfavourable contracts liability |
33,053 |
38,065 |
| Deferred program revenues |
3,579 |
111 |
| 141,159 |
139,922 |
|
| (Deficiency) Equity |
||
| Capital stock |
80,302 |
80,302 |
| Contributed surplus |
7,141 |
6,744 |
| Accumulated other comprehensive loss |
373 |
(138) |
| Accumulated deficit |
(114,297) |
(93,791) |
| (26,481) |
(6,883) |
|
| Total liabilities and (deficiency) equity |
114,678 |
133,039 |
| CONDENSED INTERIM CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS |
||||
| (unaudited, expressed in thousands of Canadian dollars, except number of shares and per share amounts) |
||||
| Three months ended June 30 |
Six months ended June 30 |
|||
| 2017 |
2016 |
2017 |
2016 |
|
| Revenues |
$36,686 |
$50,234 |
$75,254 |
$90,175 |
| Cost of sales |
42,471 |
50,384 |
83,931 |
93,244 |
| Gross (loss) profit |
(5,785) |
(150) |
(8,677) |
(3,069) |
| Administrative and general expenses |
5,317 |
5,778 |
10,972 |
10,202 |
| Office equipment depreciation |
68 |
82 |
138 |
307 |
| Operating Loss |
(11,170) |
(6,010) |
(19,787) |
(13,578) |
| Finance costs – net |
654 |
20 |
1,430 |
32 |
| Foreign exchange (gain) loss |
(765) |
150 |
(726) |
(120) |
| Net loss (gain) on sale of equipment |
- |
- |
15 |
(50) |
| Loss before income tax |
(11,059) |
(6,180) |
(20,506) |
(13,440) |
| Income tax expense |
- |
- |
- |
- |
| Net loss for the period |
(11,059) |
(6,180) |
(20,506) |
(13,440) |
| Other comprehensive income (loss) |
509 |
(58) |
511 |
429 |
| Net loss and total comprehensive loss for the period |
(10,550) |
(6,238) |
(19,995) |
(13,011) |
| Loss per share: |
||||
| Basic and diluted loss per common share |
(0.04) |
(0.02) |
(0.07) |
(0.04) |
| Basic and diluted weighted average number of shares outstanding (000's) |
307,141 |
306,065 |
307,141 |
306,065 |
| CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS |
|||||||
| (unaudited, expressed in thousands of Canadian dollars) |
|||||||
| Three months ended June 30 |
Six months ended June 30 |
||||||
| 2017 |
2016 |
2017 |
2016 |
||||
| Cash flows from (used in) operating activities |
|||||||
| Net loss for the period |
$(11,059) |
$(6,180) |
$(20,506) |
$(13,440) |
|||
| Adjustment for items not affecting cash: |
|||||||
| Interest expense |
593 |
18 |
838 |
38 |
|||
| Depreciation |
1,015 |
868 |
2,029 |
1,728 |
|||
| Development cost amortization |
495 |
134 |
892 |
287 |
|||
| Intangible assets amortization |
343 |
302 |
674 |
671 |
|||
| Non-cash financing cost accretion |
52 |
- |
588 |
- |
|||
| (Gain) loss on disposal of equipment |
- |
- |
15 |
(50) |
|||
| Provision for unfavourable contracts |
(1,799) |
(6,519) |
(4,434) |
(12,588) |
|||
| Provision for doubtful accounts |
- |
(204) |
- |
- |
|||
| Provision for obsolete inventory |
- |
965 |
85 |
996 |
|||
| Stock based compensation |
181 |
652 |
397 |
465 |
|||
| Unrealized foreign exchange |
(1,860) |
(3,298) |
(2,302) |
(4,118) |
|||
| Other items |
(46) |
(31) |
(64) |
(64) |
|||
| Cash flows (used in) operating activities before changes in non-cash working capital |
(12,085) |
(13,293) |
(21,788) |
(26,075) |
|||
| Changes in non-cash working capital |
|||||||
| Accounts receivable |
(1,331) |
1,447 |
2,583 |
(1,332) |
|||
| Inventories |
(3,770) |
2,509 |
(1,144) |
(445) |
|||
| Prepayments and other assets |
1,467 |
33 |
1,113 |
(20) |
|||
| Accounts payable and accrued liabilities |
(12,487) |
8,762 |
(6,384) |
7,644 |
|||
| Customer advance payable |
(1,003) |
(1,827) |
(2,208) |
(2,963) |
|||
| Deferred program revenues |
7,027 |
(2,117) |
5,270 |
(1,575) |
|||
| Net cash (used in) operating activities |
(22,182) |
(4,486) |
(22,558) |
(24,766) |
|||
| Cash flows (used in) from investing activities |
|||||||
| Proceeds from consideration receivable |
12,378 |
(612) |
12,378 |
18,939 |
|||
| Proceeds from sale of equipment |
- |
- |
20 |
50 |
|||
| Purchase of equipment |
(246) |
(1,146) |
(681) |
(2,628) |
|||
| Addition of developed software |
(147) |
- |
(537) |
- |
|||
| Payments relating to development costs and tooling |
(1,309) |
(671) |
(1,972) |
(1,715) |
|||
| Net cash (used in) from investing activities |
10,676 |
(2,429) |
9,208 |
14,646 |
|||
| Cash flows from (used in) financing activities |
|||||||
| Increase in bank indebtedness |
10,145 |
1,511 |
10,665 |
1,511 |
|||
| Payment of interest |
(448) |
(6) |
(573) |
(14) |
|||
| Proceeds from term debt |
- |
28 |
1,213 |
59 |
|||
| Proceeds from issuance of common shares |
- |
113 |
- |
113 |
|||
| Repayment of term debt |
(1,254) |
(58) |
(1,293) |
(163) |
|||
| Net cash from (used in) financing activities |
8,443 |
1,588 |
10,012 |
1,506 |
|||
| Net (decrease) in cash |
(3,063) |
(5,327) |
(3,338) |
(8,614) |
|||
| Net foreign exchange difference |
2,193 |
(114) |
2,728 |
(818) |
|||
| Cash - Beginning of the period |
4,220 |
10,493 |
3,960 |
14,484 |
|||
| Cash - End of the period |
3,350 |
5,052 |
3,350 |
5,052 |
|||
| CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY |
||||||
| (unaudited, expressed in thousands of Canadian dollars, except number of shares) |
||||||
| Capital Stock |
||||||
| Number of |
Amount |
Contributed |
Deficit |
Accumulated |
Total |
|
| Balance December 31, 2015 |
305,555,184 |
80,158 |
4,453 |
(77,827) |
- |
6,784 |
| Issue of Common Shares |
1,586,000 |
113 |
- |
- |
- |
113 |
| Stock-based compensation expense |
- |
- |
885 |
- |
- |
885 |
| Forfeiture of issued stock options |
- |
- |
(420) |
- |
- |
(420) |
| Transfer to share capital on exercise of stock options |
- |
31 |
(31) |
- |
- |
- |
| Unrealized currency gain on translation for the period |
- |
- |
- |
- |
429 |
429 |
| Net loss for the period |
- |
- |
- |
(13,440) |
- |
(13,440) |
| Balance June 30, 2016 – restated |
307,141,184 |
80,302 |
4,887 |
(91,267) |
429 |
(5,649) |
| Balance December 31, 2016 |
307,141,184 |
80,302 |
6,744 |
(93,791) |
(138) |
(6,883) |
| Stock-based compensation expense |
- |
- |
395 |
- |
- |
395 |
| Cancellation of issued stock options |
- |
- |
2 |
- |
- |
2 |
| Unrealized currency gain on translation for the period |
- |
- |
- |
- |
511 |
511 |
| Net loss for the period |
- |
- |
- |
(20,506) |
- |
(20,506) |
| Balance June 30, 2017 |
307,141,184 |
80,302 |
7,141 |
(114,297) |
373 |
(26,481) |
SOURCE Avcorp Industries Inc.
Sandi DiPrimo, Investor Relations Contact, 604-587-4938
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