Avcorp announces 2014 Annual Financial Results

VANCOUVER, March 31, 2015 /CNW/ - Avcorp Industries Inc. (TSX: AVP) (the "Company" or "Avcorp") today announced its financial results for the year ended December 31, 2014.

Avcorp's recurring contracted revenue base remains strong as customers continue to place orders within existing long-term supply agreements.  Deliveries of commercial jet assembly structures rose in 2014 over 2013, while production by Avcorp in supply of defense assembly structures were maintained in 2014 at 2013 levels although certain significant program deliveries were deferred by the customer at year end into the first quarter 2015.  Overall revenues decreased in 2014 relative to 2013 as deliveries of business jet assembly structures were reduced in the last quarter of 2013 and continued at a lower production rate through 2014.  Customer orders for business jet assembly structures have been received for 2015 which indicate an increase over 2014.  Composite structures repairs and composite floor panel production and deliveries out of Avcorp's Burlington Ontario subsidiary Comtek Advanced Structures Ltd., continued its significant growth posting a 25% revenue increase in 2014 over 2013.

Revenue for the year ended December 31, 2014 was $67,104,000 as compared to $77,364,000 for the year ended December 31, 2013.

During the year ended December 31, 2014, the Company recorded a net loss for the current year of $7,950,000 on $67,104,000 revenue, as compared to net loss of $1,802,000 for the year ended December 31, 2013 on $77,364,000 revenue. A slowdown in production for certain business jet assembly structures, as well as near-term process improvement initiatives, has caused production costs for certain aircraft structures assemblies to exceed plan by $1,371,000. Losses incurred in 2014  included $5,047,000 expensed for unutilized plant capacity; also the current year loss includes  $1,076,000 in severance and retiring allowance costs as well as $503,000 in recruitment and related compensation benefits incurred to realign the Avcorp organization and reduce overhead costs.  Expected cost reductions resulting from restructuring initiatives commenced in the fourth quarter of 2014 are targeted to reduce operational expense, administrative and general expenses, as well as supply chain costs. The implementation of these improvement initiatives will be completed during the first half of 2015.

The Company continues to actively pursue production contracts on aerospace programs throughout North America, Asia, and Europe both in the commercial and defence aerospace sectors.  The Company is expending significant resources with a focused business development strategy to grow revenues via a targeted customer approach, and where beneficial, aligned with the Government of Canada Defence Procurement Strategy leveraging Industrial and Technological Benefits ("ITBs").

Cash flows from operating activities during the year ended December 31, 2014 utilized $2,795,000 of cash as compared to providing $24,028,000 of cash during the year ended December 31, 2013.  The primary use of cash from operations during the current year is due to operating losses reflecting temporary reduced customer demand. In contrast, collection of an Other Receivable during the third quarter 2013 provided cash during 2013.  As at December 31, 2014, the Company had $3,159,000 cash on hand (December 31, 2013: $7,012,000). 

The Company has a working capital surplus of $7,205,000 as at December 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 December 31, 2014 is $65,673,000 (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 360 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
(prepared in accordance with IFRS, expressed in thousands of Canadian dollars)


AS AT DECEMBER 31

2014

2013

ASSETS



Current assets



Cash

$

3,159

$

7,012

Accounts receivable

5,642

8,845

Inventories

13,738

14,940

Prepayments and other assets

1,290

1,306


23,829

32,103

Non-current assets



Prepaid rent

146

146

Development costs

3,303

1,240

Property, plant and equipment

8,204

8,704

Total assets

35,482

42,193




LIABILITIES AND EQUITY



Current liabilities



Accounts payable and accrued liabilities

8,549

7,645

Current portion of long-term debt

293

199

Preferred shares

-

36

Deferred program revenues

7,782

10,010


16,624

17,890

Non-current liabilities



Deferred gain

168

216

Lease inducement

370

469

Long-term debt

943

67


18,105

18,642

Equity



Capital stock

79,921

77,681

Contributed surplus

3,129

3,593

Deficit

(65,673)

(57,723)


17,377

23,551

Total liabilities and equity

35,482

42,193

 

CONSOLIDATED STATEMENTS OF (LOSS) INCOME AND COMPREHENSIVE (LOSS) INCOME
(prepared in accordance with IFRS, expressed in thousands of Canadian dollars, except number of shares and per share amounts)


FOR THE YEAR ENDED DECEMBER 31

2014

2013






Revenues

$

67,104

$

77,364




Cost of sales

62,199

67,710




Gross profit

4,905

9,654




Administrative and general expenses

12,373

11,682

Office equipment depreciation

570

591

Other operating (income)

-

(604)




Operating (Loss)

(8,038)

(2,015)




Finance costs – net

64

927

Foreign exchange (gain)

(159)

(1,085)

Loss (gain) on disposal of equipment

3

(108)

Write-down of equipment

4

53




(Loss) Income before income tax

(7,950)

(1,802)




Income tax expense

-

-




(Loss) Income and total comprehensive (loss) income for the period

(7,950)

(1,802)




(Loss) Earnings per share:



Basic (loss) earnings per common share

(0.03)

(0.01)

Diluted (loss) earnings per common share

(0.03)

(0.01)




Basic weighted average number of shares outstanding (000's)

284,052

271,380




Diluted weighted average number of shares outstanding (000's)

284,052

271,380

 

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


FOR THE YEAR ENDED DECEMBER 31

2014

2013

Cash flows from (used in) operating activities



(Loss) Income before income tax

$

(7,950)

$

(1,802)


Adjustment for items not affecting cash:





Accrued interest and government royalties

38

270



Depreciation

1,601

2,082



Development cost amortization

148

2,034



Loss (gain) on disposal of equipment

3

(108)



Preferred share dividends accrued

-

657



Provision for loss-making contracts

139

51



Provision for obsolete inventory

60

335



Stock based compensation

240

54



Warranty provision

-

(85)



Write-down of equipment

4

53



Other items

(112)

(19)


(5,829)

3,522

Changes in non-cash working capital




Accounts receivable

4,466

2,121



Inventories

1,003

1,246



Prepayments and other assets

(7)

326



Other receivable

-

27,391



Accounts payable and accrued liabilities

740

(316)


Deferred program revenues

(3,168)

(10,262)

Net cash from (used in) operating activities

(2,795)

24,028




Cash flows from (used in) investing activities



Proceeds from sale of equipment

589

-

Purchase of equipment

(1,001)

(1,206)

Payments relating to development costs and tooling

(2,211)

(556)

Net cash from (used in) investing activities

(2,623)

(1,762)




Cash flows from (used in) financing activities



Decrease in bank indebtedness

-

(2,122)

Payment of interest

(36)

(323)

Proceeds from long term debt

760

-

Proceeds from issuance of common shares

1,536

1,249

Redemption of preferred shares and accrued dividends

(36)

(11,803)

Repayment of current and long-term debt

(355)

(4,415)

Repayment of government royalties

(132)

(258)

Net cash from (used in) financing activities

1,737

(17,672)

Net increase (decrease) in cash

(3,681)

4,594

Net foreign exchange difference

(172)

(179)

Cash - Beginning of period

7,012

2,597

Cash - End of period

3,159

7,012

 

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(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







Issue of common shares

25,493,080

1,258

-

-

1,258







Stock based compensation expense

-

-

54

-

54







Loss for the period

-

-

-

(1,802)

(1,802)







Balance December 31, 2013

280,391,152

77,681

3,593

(57,723)

23,551







Issue of common shares

22,242,032

1,536

-

-

1,536







Stock-based compensation expense

-

-

240

-

240







Transfer to share capital on exercise of
stock options and warrants

-

704

(704)

-

-







Loss for the period

-

-

-

(7,950)

(7,950)







Balance December 31, 2014

302,633,184

79,921

3,129

(65,673)

17,377

 

 

SOURCE Avcorp Industries Inc.

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

RELATED LINKS
http://www.avcorp.com

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