Avcorp announces 2011 First Quarter Results

VANCOUVER, June 14, 2011 /CNW/ - Avcorp (TSX: AVP) today announced its financial results for the quarter ended March 31, 2011.

During the quarter ended March 31, 2011, the Company recorded a loss from operations of $517,000 on $20,916,000 revenue, as compared to a $2,031,000 loss from operations on $17,376,000 revenue for the same quarter preceding year; and a net loss for the current quarter of $1,069,000 as compared to a net loss of $2,246,000 for the quarter ended March 31, 2010.

The Company has realized revenue growth during the first quarter 2011 relative to the same quarter in 2010, from the restart in deliveries as well as increase in deliveries of several programs; while customer demand for non-original equipment manufacturer's products and services has increased slightly.

Cash flows from operating activities during the current quarter utilized $3,566,000 of cash primarily resulting from working capital growth in support of increased revenues, as compared to providing $447,000 of cash during the quarter ended March 31, 2010. The Company has a working capital surplus of $5,096,000 as at March 31, 2011 (December 31, 2010: $1,493,000 surplus).

Subsequent to the end of the current quarter the Company and its bank entered into an agreement amending its existing banking arrangement as announced in our press release of May 26, 2011.

In conjunction with the banking requirements, the Company completed a secured subordinated convertible loan from Panta with a principal amount of $6,000,000 which will be used to pay down its operating line of credit, and is convertible into 85,714,286 common shares as announced in our press release of May 26, 2011.

The Company is currently not in compliance with the covenants of its EDC debenture and is working on the refinancing of the Export Development Canada convertible debenture which matured on March 31, 2011. At the same time the Company is working to refinance its preferred shares which are redeemable on July 1, 2011. The Company expects to complete these refinancings during the second quarter 2011 although no assurance for a successful completion can be given.

About Avcorp

Avcorp designs and builds major airframe structures for some of the world's leading aircraft companies, including Boeing, Bombardier, and Cessna. With more than 50 years of experience, 565 skilled employees and 354,000 square feet of facilities, 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. 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, expressed in thousands of Canadian dollars)

        March 31, 2011       December 31, 2010       January 1, 2010
ASSETS                        
Current assets                        
Accounts receivable       $   12,349       $   8,869       $   6,689
Inventories       16,028       14,886       15,497
Prepayments       1,655       1,922       1,092
Other assets       27       28       24
        30,059       25,705       23,302
Non-current assets                        
Development costs       5,426       5,181       3,923
Property, plant and equipment       14,142       14,794       17,346
Warranty claim receivable       -       -       1,637
                         
Total assets       49,627       45,680       46,208
                         
LIABILITIES AND EQUITY                        
Current liabilities                        
Bank indebtedness       8,126       8,158       8,422
Accounts payable and accrued liabilities       11,380       10,634       7,752
Current portion of long-term debt       5,457       5,420       6,131
        24,963       24,212       22,305
Non-current liabilities                        
Deferred gain       346       358       405
Lease inducement       740       764       863
Deferred tooling revenues       11,412       6,804       3,116
Long-term debt       3,129       3,275       1,811
Warranty provisions       147       167       1,647
                         
        40,737       35,580       30,147
Equity                        
Attributable to shareholders of the Company:                        
Capital stock       72,927       72,927       71,954
Equity component of convertible loan       453       453       -
Preferred shares       7,622       7,622       7,622
Contributed surplus       2,707       2,662       2,647
Deficit       (74,819)       (73,564)       (66,162)
                         
        8,890       10,100       16,061
Total liabilities and equity       49,627       45,680       46,208



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

FOR THE QUARTER ENDED MARCH 31                   2011       2010
                             
Revenues                   $   20,916       $   17,376
                             
Cost of sales                   18,632       16,403
                             
Gross profit                   2,284       973
Administrative and general expenses                   2,635       2,732
Office equipment depreciation                   169       272
Other (gains) and losses - net                   (3)       -
                             
Loss profit                   (517)       (2,031)
                             
Foreign exchange (gain) loss                   204       (42)
Finance costs                   348       257
                             
Loss before income tax                   (1,069)       (2,246)
                             
Income taxes recovery (expense)                   -       -
Future income tax recovery (expense)                   -       -
                             
Loss and comprehensive loss for the quarter                   (1,069)       (2,246)
                             
Earnings (loss) per share:                            
Basic and diluted loss per common share                   (0.01)       (0.01)
                             
Basic weighted average number of shares outstanding (000's)                   195,505       183,854
                             
Diluted weighted average number of shares outstanding (000's)                   202,568       183,854



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

FOR THE QUARTER ENDED MARCH 31       2011       2010
Cash flows from operating activities                
Profit (loss) before tax       $   (1,069)       $   (2,246)
  Adjustment for items not affecting cash:                
    Accretion on convertible loan       21       -
    Accrued interest and government royalties       146       109
    Amortization and depreciation       846       867
    Deferred tooling revenue amortization       (222)       (198)
    Development cost amortization       88       38
    Provision for loss-making contracts       (91)       105
    Provision for obsolete inventory       (47)       (15)
    Stock based compensation       45       -
    Warranty provisions       (10)       417
    Other items       (61)       (93)
        (354)       (1,016)
Changes in non-cash working capital                
  Accounts receivable       (3,021)       (906)
  Inventories       (1,004)       1,101
  Prepayments       267       (34)
  Accounts payable and accrued liabilities       546       1,302
                 
Net cash from operating activities       (3,566)       447
                 
Cash flows from investing activities                
Purchase of equipment       (194)       (189)
Payments relating to development costs and tooling       (333)       (238)
                 
Net cash from investing activities       (527)       (427)
                 
Cash flows from financing activities                
(Decrease) increase in bank indebtedness       (32)       (994)
Proceeds from customer funding of program non-recurring expenditures       4,371       369
Repayment of current and long-term debt       (246)       (368)
Issue of common shares       -       977
Share issue expense       -       (4)
                 
Net cash from financing activities       4,093       (20)
                 
Net increase (decrease) in cash and cash equivalents       -       -
Cash and cash equivalents - Beginning of period       -       -
Cash and cash equivalents - End of period       -       -



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

      Share capital                    
      Shares   Amount   Equity
component
convertible
loan
  Preferred
shares
  Contributed
surplus
  Deficit   Total
equity
Balance January 1, 2010     177,732,112   $71,954   $    -   $7,622   $2,647   $(66,162)   $16,061
Issue of shares     17,773,211   973   -   -   -   -   973
Loss for the quarter     -   -   -   -   -   (2,246)   (2,246)
Dividends on preferred shares     -   -   -   -   -   (186)   (186)
Balance March 31, 2010     195,505,323   72,927   -   7,622   2,647   (68,594)   14,602
Balance December 31, 2010     195,505,323   72,927   453   7,622   2,662   (73,564)   10,100
Stock based compensation expense     -   -   -   -   45   -   45
Loss for the quarter     -   -   -   -   -   (1,069)   (1,069)
Dividends on preferred shares     -   -   -   -   -   (186)   (186)
Balance March 31, 2011     195,505,323   72,927   453   7,622   2,707   (74,819)   8,890

 

SOURCE Avcorp Industries Inc.

For further information:

Sandi DiPrimo, Investor Relations Contact 604-587-4938


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