Avcorp announces 2014 First Quarter Financial Results

VANCOUVER, May 15, 2014 /CNW/ - Avcorp Industries Inc. (TSX: AVP) (the "Company" or "Avcorp") today announced its financial results for the quarter ended March 31, 2014.

Revenue for the quarter ended March 31, 2014 was $17,551,000 as compared to $19,946,000 for the quarter ended March 31, 2013. Current quarter revenues have decreased relative to same quarter in the previous year primarily as a result of reductions in customer demand due to concerted efforts in inventory reduction and a slowdown in production rates.

Comtek Advanced Structures Ltd. ("Comtek"), a wholly owned subsidiary of Avcorp, generated an 89% increase in the delivered quantity of aircraft composite floor boards to original equipment manufacturers ("OEM").  Additionally, Comtek's repositioning and introduction of new products has produced a 41% increase in composite floor board sales to airlines.

Aircraft component repairs serviced by Comtek have increased revenues by 9%, as customer loyalty programs commence having a positive impact on sales.

During the quarter ended March 31, 2014, the Company recorded a loss from operations of $1,397,000 on $17,551,000 revenue, as compared to $440,000 operating income on $19,946,000 revenue for the same quarter in the preceding year; and a net loss for the current quarter of $1,242,000 as compared to net income of $108,000 for the quarter ended March 31, 2013.  A $376,000 restructuring provision, as well as $1,191,000 expensed as unutilized plant capacity have significantly impacted income for the current quarter.

Cash flows from operating activities during the quarter ended March 31, 2014 utilized $2,304,000 of cash as compared to utilizing $1,416,000 of cash during the quarter ended March 31, 2013.  The primary source of cash from operations during the current quarter is from accounts receivable while the utilization of cash from operating activities is primarily attributable to recognition of revenues which were funded in previous quarters.  As at March 31, 2014 the Company had $4,058,000 cash on hand (December 31, 2013: $7,012,000).

The Company has a working capital surplus of $12,828,000 as at March 31, 2014 which has decreased from the December 31, 2013 $14,213,000 surplus, as a result of cash utilized in operating activities.  The Company's accumulated deficit as at March 31, 2014 is $58,965,000 (December 31, 2013: $57,723,000).

On April 23, 2014, the Company announced that it has received a Strategic Aerospace and Defence Initiative ("SADI") Contribution Agreement from the Government of Canada for up to $4.4 million to support development of advanced metal bond manufacturing processes and capabilities.  In particular, this SADI supported project will assist Avcorp to undertake specific capability development for large, complex metal bonded structural components, for our customers, including The Boeing Company and Cascade Aerospace.  This project will also support implementation of Lean Manufacturing process improvements and advancements along our Metal Bond Technology Roadmap.  This funding support from the Government of Canada will be instrumental in enabling Avcorp to achieve these capability and competitiveness enhancements in a timeframe that meets both the Company's customers' requirements and the demands of the market.

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 Comtek subsidiary also offers composite repairs for commercial aircraft out of their Burlington location. 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 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)

                  March 31, 2014     December 31, 2013
ASSETS                        
Current assets                        
Cash                 $ 4,058     $ 7,012
Accounts receivable                 8,624     8,845
Inventories                 15,160     14,940
Prepayments and other assets                 1,263     1,306
                  29,105     32,103
Non-current assets                        
Prepaid rent                 146     146
Development costs                 1,417     1,240
Property, plant and equipment                 8,717     8,704
Total assets                 39,385     42,193
                         
LIABILITIES AND EQUITY                        
Current liabilities                        
Accounts payable and accrued liabilities                 8,328     7,645
Current portion of long-term debt                 203     199
Preferred shares                 -     36
Deferred program revenues                 7,746     10,010
                  16,277     17,890
Non-current liabilities                        
Deferred gain                 204     216
Lease inducement                 444     469
Long-term debt                 48     67
                  16,973     18,642
Equity                        
Capital stock                 77,840     77,681
Contributed surplus                 3,537     3,593
Deficit                 (58,965)     (57,723)
                  22,412     23,551
Total liabilities and equity                 39,385     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)

FOR THE QUARTER ENDED MARCH 31           2014         2013
Revenues           $ 17,551       $ 19,946
Cost of sales             15,924         16,869
Gross profit             1,627         3,077
Administrative and general expenses             2,879         2,501
Office equipment depreciation             145         136
Operating (Loss) Income             (1,397)         440
Finance (income) costs - net             (2)         265
Foreign exchange (gain) loss             (157)         67
Write-down of equipment             4         -
(Loss) Income before income tax             (1,242)         108
Income tax expense             -         -
(Loss) Income and total comprehensive (loss) income for the period             (1,242)         108
(Loss) Earnings per share:                        
Basic (loss) earnings per common share             (0.00)         0.00
Diluted (loss) earnings per common share             (0.00)         0.00
Basic weighted average number of shares outstanding (000's)             282,091         254,898
Diluted weighted average number of shares outstanding (000's)             282,091         255,898



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

FOR THE QUARTER ENDED MARCH 31 2014           2013
Cash flows from (used in) operating activities              
(Loss) Income before income tax $  (1,242)           $  108
  Adjustment for items not affecting cash:              
    Accrued interest and government royalties 3           79
    Depreciation 364           532
    Development cost amortization 135           336
    Preferred share dividends accrued -           189
    Provision for loss-making contracts (31)           -
    Provision for obsolete inventory (41)           (103)
    Write-down of equipment 4           -
    Other items (27)           (7)
  (835)           1,134
Changes in non-cash working capital              
    Accounts receivable 1,175           515
    Inventories (148)           34
    Prepayments and other assets 44           350
    Accounts payable and accrued liabilities 679           1,014
    Deferred program revenues (3,219)           (4,463)
Net cash from (used in) operating activities (2,304)           (1,416)
               
Cash flows from (used in) investing activities              
Proceeds from sale of equipment 9           -
Purchase of equipment (390)           (237)
Payments relating to development costs and tooling (312)           (114)
Net cash from (used in) investing activities (693)           (351)
               
Cash flows from (used in) financing activities              
Increase (Decrease) in bank indebtedness -           2,167
Payment of interest (3)           (80)
Proceeds from issuance of common shares 98           -
Redemption of preferred shares and accrued dividends (36)           -
Repayment of current and long-term debt (16)           (17)
Net cash from (used in) financing activities 43           2,070
Net increase (decrease) in cash (2,954)           303
Cash - Beginning of period 7,012           2,597
Cash - End of period 4,058           2,900



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   $   (55,921)   $   24,041
Stock based compensation expense - - 22 - 22
Income for the quarter - - - 108 108
Balance March 31, 2013 254,898,072 76,423 3,561 (55,813) 24,171
Balance December 31, 2013 280,391,152 77,681 3,593 (57,723) 23,551
Issue of common shares 1,961,000 98 - - 98
Stock-based compensation expense - - 5 - 5
Transfer to share capital on exercise of stock options - 61 (61) - -
Loss for the quarter - - - (1,242) (1,242)
Balance March 31, 2014 282,352,152 77,840 3,537 (58,965) 22,412

 


SOURCE Avcorp Industries Inc.

For further information:

Contact: Sandi DiPrimo, Investor Relations Contact 604-587-4938 or email info@avcorp.com