Avcorp announces 2022 First Quarter Financial Results

VANCOUVER, BC, May 12, 2022 /CNW/ - Avcorp Industries Inc. (TSX: AVP) (the "Company", "Avcorp" or the "Avcorp Group") today announced its financial results for the quarter ended March 31, 2022. All amounts are in Canadian currency unless otherwise stated.

2022 First Quarter Highlights

• First quarter 2022 revenue was $27,858,000 compared to $23,933,000 in 2021. 2022 revenue increased by $3,925,000 in comparison to 2021, mainly contributed by the continued growth in the F35 program in the Delta Facility.
• First quarter 2022 net loss was $1,198,000 compared to net income of $17,390,000 in 2021. The net income in 2021 was supported by the accommodation agreement settlement of $21,391,000.
• First quarter 2022 cash inflows from operating activities were $3,172,000 compared to inflows of $1,603,000 in 2021. The first quarter of 2021 cash flows from operating activities were supported by the receipt of Canada Emergency Wage Subsidies of $3,127,000.

Highlights Subsequent to Quarter-End

• On April 1, 2022, the Company signed a contract with BLR Aerospace to produce King Air 200 Wingtips with estimated first delivery by the second quarter of 2022.
• On April 12, 2022, the Company signed a contract extension to 2027 with Boeing to provide the detail parts, bench top assemblies  and metal bonded assemblies for the Boeing 737 and 777 aircrafts.
• On May 4, 2022, the Company entered into a definitive arrangement agreement with Latécoère S.A. (the "Purchaser") to purchase all the issued and outstanding common shares of Avcorp for cash consideration of $0.11 per share and repay or assume Avcorp's net debt and other lease liabilities. The Arrangement implies a total transaction value of approximately $139 million for the Company.

Review of 2022 First Quarter Financial Results

For the quarter ended March 31, 2022, the Avcorp Group recorded an operating loss of $276,000 from $27,858,000 of revenue, as compared to an operating income of $18,274,000 from $23,933,000 of revenue from the same quarter in previous year. The first quarter of 2022 operating income decreased in comparison to 2021 by $18,550,000 mainly due to the inclusion of the Accommodation Agreement settlement of $21,391,000 recognized in the first quarter of 2021, partially offset by the decrease in administrative and general expenses due to the recognition of stock-based compensation expense of $1,376,000 on the 17,350,000 incentive stock options granted in the first quarter of 2021.

During the quarter ended March 31, 2022, cash inflows from operating activities were $3,172,000 compared to an inflow of $1,603,000 in 2021. The increase was attributable to the stronger operational performance in the current quarter.

As at March 31, 2022, the Company had $4,946,000 cash on hand (December 31, 2021: $4,060,000) and had utilized $74,253,000 of its operating line of credit (December 31, 2021: $75,335,000). The bank indebtedness balance of the modification gain and related adjustments as a result of the execution of an amending agreement in 2021 was $768,000 as at March 31, 2022, (December 31, 2021 gain of $923,000). The Company has a working capital surplus of $6,748,000 as at March 31, 2022, compared with $7,613,000 surplus as at December 31, 2021. Working capital is defined as the difference between current assets and current liabilities. On March 31, 2022, the ratio of the Company's current assets to current liabilities was 1.17:1 (December 31, 2021: 1.18:1).

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.  The Avcorp Group has more than 65 years of experience, over 490 skilled employees and 560,000 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).

AMANDEEP KALER
CHIEF EXECUTIVE OFFICER
AVCORP GROUP

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(unaudited, expressed in thousands of Canadian dollars)

	March 31, 2022	December 31, 2021
ASSETS
Current assets
Cash	$4,946	$4,060
Accounts receivable	16,933	18,116
Contract assets	9,932	13,319
Inventories	13,085	12,809
Prepayments and other assets	1,703	2,091
	46,599	50,395
Non-current assets
Prepayments and other assets	2,828	2,868
Development costs	10,531	10,597
Contract assets	18,079	18,079
Property, plant, and equipment	20,039	20,698
Total assets	98,076	102,637
LIABILITIES AND DEFICIENCY
Current liabilities
Accounts payable and accrued liabilities	19,270	19,792
Term debt	2,705	3,041
Contract liability	16,834	18,625
Onerous contract provision	1,042	1,324
	39,851	42,782
Non-current liabilities
Bank indebtedness	73,485	74,412
Term debt	25,551	26,156
Contract liability	5,329	4,843
Accounts payable and accrued liabilities	2,011	2,011
Onerous contract provision	336	540
	146,563	150,744
(Deficiency) Equity
Capital stock	86,456	86,456
Contributed surplus	6,742	6,742
Accumulated other comprehensive income	8,963	8,145
Accumulated deficit	(150,648)	(149,450)
	(48,487)	(48,107)
Total liabilities and deficiency	98,076	102,637

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS)
(unaudited, expressed in thousands of Canadian dollars, except number of shares and per share amounts)

FOR THE QUARTER ENDED MARCH 31	2022	2021
Revenues	$27,858	$23,933
Cost of sales	24,121	24,334
Gross profit (loss)	3,737	(401)
Administrative and general expenses	3,900	5,434
Office equipment depreciation	113	187
Accommodation agreement settlement	-	(21,391)
Other income	-	(2,905)
Operating (loss) income	(276)	18,274
Finance costs – net	1,064	1,256
Foreign exchange gain	(142)	(431)
Net loss on sale of equipment	-	59
(Loss) income before income tax	(1,198)	17,390
Income tax expense	-	-
(Loss) income for the period	(1,198)	17,390
Other comprehensive income	818	557
Total comprehensive (loss) income for the period	(380)	17,947
(Loss) income per share:
Basic (loss) income per common share	(0.00)	0.05
Diluted (loss) income per common share	(0.00)	0.05
Basic weighted average number of shares outstanding (000's)	370,931	368,118
Diluted weighted average number of shares outstanding (000's)	370,931	370,337

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

FOR THE QUARTER ENDED MARCH 31		2022	2021
Cash flows from operating activities
Net (loss) income for the period		$(1,198)	$17,390
Adjustment for items not affecting cash:
Net interest expense		1,064	1,256
Depreciation		1,021	1,838
Development cost amortization		332	165
Intangible assets amortization		-	23
Loss on disposal of equipment		-	59
Provision for onerous contracts		(486)	(165)
Stock based compensation		-	1,379
Provision for obsolete inventory		299	(90)
Provision for doubtful accounts		1	-
Unrealized foreign exchange		(288)	(388)
Government grant income		-	(2,135)
Accommodation agreement settlement		-	(21,391)
Loss on lease modification		-	350
Cash flows from (used in) operating activities before changes in non-cash working capital		745	(1,709)
Changes in non-cash working capital
Accounts receivable		6,755	4,290
Contract assets		3,377	875
Inventories		(678)	(2,561)
Prepayments and other assets		480	1,624
Accounts payable and accrued liabilities		(480)	1,003
Contract liability		(7,027)	(1,919)
Net cash from operating activities		3,172	1,603
Cash flows used in investing activities
Proceeds from sale of equipment		-	654
Purchase of equipment		(398)	(228)
Payments relating to development costs and tooling		(266)	(1,329)
Net cash used in investing activities		(664)	(903)
Cash flows (used in) from financing activities
Repayment of bank indebtedness		-	(591)
Payment of interest		(580)	(628)
Proceeds from term debt		-	2,532
Repayment of term debt		(1,042)	(739)
Net cash (used in) from financing activities		(1,622)	574
Net increase in cash		886	1,274
Net foreign exchange difference		-	(13)
Cash - Beginning of the period		4,060	7,044
Cash - End of the period		4,946	8,305

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' DEFICIENCY
(unaudited, expressed in thousands of Canadian dollars, except number of shares)

	Capital Stock
	Number of Shares	Amount	Contributed Surplus	Accumulated Deficit	Accumulated Other Comprehensive Income	Total Deficiency
Balance at December 31, 2020	368,118,620	86,219	5,478	(148,919)	8,082	(49,140)
Stock-based compensation expense	-	-	1,379	-	-	1,379
Unrealized currency gain on translation for the period	-	-	-	-	557	557
Net income for the period	-	-	-	17,390	-	17,390
Balance at March 31, 2021	368,118,620	86,219	6,857	(131,529)	8,639	(29,814)
Balance at December 31, 2021	370,931,120	86,456	6,742	(149,450)	8,145	(48,107)
Unrealized currency gain on translation for the period	-	-	-	-	818	818
Net loss for the period	-	-	-	(1,198)	-	(1,198)
Balance at March 31, 2022	370,931,120	86,456	6,742	(150,648)	8,963	(48,487)

Forward-Looking Statements Disclaimer

This release should be read in conjunction with the Company's management discussion and analysis ("MD&A") and audited financial statements contained in the Company's Annual Report and accompanying notes filed with Sedar (www.sedar.com).

This press release includes forward-looking statements, which may involve, but are not limited to: statements with respect to our business objectives, prospects, and  guidance in respect of various financial and industry metrics, including, goals, strategies, capabilities, market position,  competitive strengths,  prospects, plans, expectations, anticipations, estimates and intentions; business and economic, industry trends; customer demand for products; order backlog mix; the  regulatory environment and legal proceedings; strength of our balance sheet, creditworthiness, capital resources, anticipated financial requirements, productivity enhancements, operational efficiencies, cost reduction and the intended benefits and timing thereof; availability of government assistance programs, compliance with debt covenants; and the impact of the COVID-19 pandemic on the foregoing; expectations regarding gradual market and economic recovery in the aftermath of the COVID-19 pandemic.

Forward-looking statements can generally be identified by the use of forward-looking terminology such as "may", "will", "shall", "can", "expect", "estimate", "intend", "anticipate", "plan", "forecast", "foresee", "believe", "continue", "maintain" or "align", the negative of these terms, variations of them or similar terminology.

Forward-looking statements are presented for the purpose of assisting investors and others in understanding certain key elements of our current objectives, strategic priorities, expectations, outlook, and plans, and to obtain an understanding of our business and anticipated operating environment. Readers are cautioned that such information may not be appropriate for other purposes.

Forward-looking statements require management and the Board to make assumptions and are subject to and unknown risks and uncertainties, which may cause our actual results in future periods to differ materially from forecast results set forth in forward-looking statements and in this press release. While management and the Board consider these assumptions to be reasonable and appropriate based on information currently available, there is risk that they may not be accurate. The assumptions underlying the forward-looking statements made in this press release in relation to the five-year forecast include the following material assumptions: the award and fulfilment of customer contracts that the Company does not currently have in its backlog, the continuation of existing customer programs and anticipated labour costs associated with our operations for the periods covered in the forecast. Additional information, including with respect to other assumptions and risk factors underlying the forward-looking statements made in this press release, refer to the risk factors in both our MD&A, Annual Report and our Annual Information Form for the fiscal year ended December 31, 2021. Given the impact of the changing circumstances surrounding the COVID-19 pandemic, there is inherently more uncertainty associated with the Corporation's assumptions as compared to prior years.

Certain factors that could cause actual results to differ materially from those anticipated in the forward-looking statements include, but are not limited to, risks associated with overall global and domestic economic conditions, risks associated with our business environment (such as risks associated with the financial condition of our customers; increased competition from international and domestic suppliers; force majeure events), operational risks such as the award of new business; order backlog; the execution of customer orders; cash flows and capital expenditures based on cyclicality;  productivity enhancements, operational efficiencies, cost reduction initiatives; product  warranty; regulatory and legal proceedings; environmental, health and safety risks; dependence on certain customers, contracts and suppliers; supply chain risks; human resources; reliance on information systems; reliance on and protection of intellectual property rights; adequacy of insurance coverage), financing risks (such as risks related to liquidity and access to capital markets; substantial debt and interest payment requirements; debt covenants), market risks (such as foreign currency fluctuations; changing interest rates; increases in commodity prices; and inflation rate fluctuations). For more details, see the Risks outlined in our MD&A. The foregoing factors may be exacerbated by the ongoing COVID-19 outbreak and may have a significantly more severe impact on the Corporation's business, results of operations and financial condition than in the absence of such outbreak. As a result of the current COVID-19 pandemic, additional factors that could cause actual results to differ materially from those anticipated in the forward-looking statements include, but are not limited to: risks related to the impact and effects of the COVID-19 pandemic on economic conditions and financial markets and the resulting impact on our business, operations, capital resources, liquidity, financial condition, margins, prospects and results; uncertainty regarding the magnitude and length of economic disruption as a result of the COVID-19 outbreak and the resulting effects on the demand for our products and services; emergency measures and restrictions imposed by public health authorities or governments, fiscal and monetary policy responses by governments and financial institutions; disruptions to global supply chain, customers, workforce, counterparties and third-party service providers; further disruptions to operations, orders and deliveries; technology, privacy, cyber security and reputational risks; and other unforeseen adverse events.

The forward-looking statements present certain non-IFRS financial measures to assist readers in understanding the Company's forecasted performance. Non-IFRS financial measures are measures that either exclude or include amounts that are not excluded or included in the most directly comparable measures calculated and presented in accordance with Generally Accepted Accounting Principles ("GAAP").

The foregoing list of factors that may affect future results and performance is not exhaustive and undue reliance should not be placed on forward-looking statements. The forward-looking statements set forth herein reflect management's expectations as at the date of this press release and are subject to change after such date. Unless otherwise required by applicable securities laws, we expressly disclaim any intention, and assume no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. The forward-looking statements contained in this press release are expressly qualified by this cautionary statement.

SOURCE Avcorp Industries Inc.

Ruth MacDonald, 604-587-4938