Avcorp announces 2009 First Quarter Results



    VANCOUVER, May 15 /CNW/ - Avcorp (AVP on the Toronto Stock Exchange)
today announced its financial results for the quarter ended March 31, 2009.
    During the quarter ended March 31, 2009, the Company recorded a loss from
operations of $1,989,000 on $22,087,000 revenue, as compared to $183,000
earnings from operations on $31,151,000 revenue for the same quarter of the
preceding year; and a net loss for the current quarter of $3,172,000 as
compared to a net loss of $423,000 for the quarter ended March 31, 2008.
    First quarter 2009 continued softening of customers' order book has
caused the Company to review operations and further reduce union and non-union
employees. This has necessitated a $325,000 charge against income for the
quarter ended March 31, 2009. Current quarter income was also adversely
affected by foreign exchange losses amounting to $1,044,000 and unrealized
derivative losses totaling $654,000.
    Gross profit (revenue less cost of sales) for the quarter ended March 31,
2009 was 14.2% of revenue as compared to 12.1% of revenue for the quarter
ended March 31, 2008.
    Continued strong operational performance improvements in assembly and
fabrication lines and proportionately reduced labour costs have in-part
mitigated the adverse effect on the Company's cost structure resulting from
the substantial decrease in revenues.
    Cash flows from operating activities during the current quarter consumed
$681,000 of cash, as compared to providing $1,529,000 of cash during the
quarter ended March 31, 2008. The Company has a working capital deficit of
$5,745,000 as at March 31, 2009 (December 31, 2008: $2,065,000 deficit)
primarily as a result of classifying the $4,122,000 convertible debenture held
by Export Development Canada as current portion of long-term debt, and an
accumulated deficit of $59,571,000 at March 31, 2009 (December 31, 2008:
$56,213,000).
    The Company has not paid $186,000 of Preferred Share dividends which were
payable as at March 31, 2009.
    Subsequent to the end of the quarter, the Landlord for one of the
Company's operations issued to the Company a demand for $208,000 rent and
related expenses which are in arrears. The Company is currently negotiating
the payment of arrears and future rent with the Landlord.
    As at March 31, 2009, the Company was not in compliance with its
financial covenants associated with its operating line of credit provided by a
Canadian chartered bank. The Company has not obtained a waiver from the debt
holder for this non-compliance and for anticipated future breaches. Also, as
at March 31, 2009, the Company was not in compliance with its financial
covenants associated with the convertible debenture held by Export Development
Canada. The Company has not obtained a waiver from the debenture holder for
these non-compliances and for anticipated future breaches. On March 13, 2009,
Export Development Canada served notice to the Company requiring that if the
non-compliances are not rectified within 60 days of the notice date, all
balances shall become payable on demand. The Company is currently negotiating
the terms of repayment with Export Development Canada.
    The Company's current and forecasted financing requirements for 2009 and
2010 exceed cash from operations and its current availability of the operating
line of credit. Accordingly, the Company is in the process of obtaining
additional debt financing or equity, renegotiating debt repayments, reducing
operating expenses and managing customer payments to existing terms in order
to provide liquidity in excess of forecasted requirements.
    A number of financing activities are being pursued as of the date of this
report. It is important to note that the success of these activities cannot be
assured.

    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, 520 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"                          "signed"
    MARK VAN ROOIJ                    PAUL KALIL
    CHIEF EXECUTIVE OFFICER           PRESIDENT
    

    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 Balance Sheets
    as at March 31, 2009 and December 31, 2008 (unaudited, in thousands of
    Canadian dollars)
    -------------------------------------------------------------------------

                                                      March 31,  December 31,
                                                          2009          2008
                                                   --------------------------
    Assets
    Current assets
    Accounts receivable                            $     8,898   $    12,609
    Inventories                                         22,035        19,206
    Prepayments                                          1,380         1,761
    Other assets                                            85           746
                                                   --------------------------
                                                        32,398        34,322
    Development costs                                    4,465         3,299
    Property, plant and equipment                       18,642        19,431
    Warranty claim receivable                            1,784         1,784
    Intangible assets                                    2,070         2,154
                                                   --------------------------
                                                        59,359        60,990
                                                   --------------------------
                                                   --------------------------
    Liabilities
    Current liabilities
    Bank indebtedness                                   15,159        14,273
    Demand loan                                            400             -
    Accounts payable and accrued liabilities            16,342        15,841
    Current portion of long-term debt                    6,242         6,273
                                                   --------------------------
                                                        38,143        36,387
    Deferred gain                                          441           453
    Lease inducement                                       937           962
    Deferred tooling revenues                            1,210         1,173
    Long-term debt                                       2,843         2,872
    Warranty provision                                   1,632         1,632
    Future income tax liability                          1,186         1,186
                                                   --------------------------
                                                        46,392        44,665
                                                   --------------------------
    Shareholders' Equity
    Capital stock                                       62,269        62,269
    Preferred shares                                     7,622         7,622
    Contributed surplus                                  2,647         2,647
    Deficit                                            (59,571)      (56,213)
                                                   --------------------------
                                                        12,967        16,325
                                                   --------------------------
                                                        59,359        60,990
                                                   --------------------------
                                                   --------------------------



    Consolidated Statements of Operations and Comprehensive Loss
    For the quarter ended March 31, 2009 and 2008
    (unaudited, in thousands of Canadian dollars, except number of shares and
    per share amounts)
    -------------------------------------------------------------------------

    For the quarter ended March 31                        2009          2008
                                                   --------------------------

    Revenues                                       $    22,087   $    31,151
                                                   --------------------------

    Cost of sales and expenses
    Cost of sales                                       18,947        27,389
    Administrative and general expenses                  3,019         2,956
    Amortization and depreciation                        1,066         1,087
    Foreign exchange (gain) loss                         1,044          (464)
                                                   --------------------------

                                                        24,076        30,968
                                                   --------------------------
                                                   --------------------------
    Income (Loss) from operations                       (1,989)          183

    Interest expense and financing charges                (529)         (589)
    Unrealized derivative loss                            (654)          (17)
                                                   --------------------------
                                                   --------------------------

    Loss and comprehensive loss for the period          (3,172)         (423)
                                                   --------------------------
                                                   --------------------------

    Basic and diluted loss per common share              (0.10)        (0.01)
                                                   --------------------------
                                                   --------------------------

    Basic and diluted weighted average number of
     shares outstanding (000's)                         32,315        31,808
                                                   --------------------------
                                                   --------------------------


    Consolidated Statements of Deficit
    For the quarter ended March 31, 2009 and 2008 (unaudited, in thousands of
    Canadian dollars)
    -------------------------------------------------------------------------

    For the quarter ended March 31                        2009          2008
                                                   --------------------------

    Deficit - Beginning of period                  $   (56,213)  $   (53,204)

    Loss for the period                                 (3,172)         (423)

    Preferred share dividends                             (186)         (189)
                                                   --------------------------

    Deficit - End of period                            (59,571)      (53,816)
                                                   --------------------------
                                                   --------------------------



    Consolidated Statements of Cash Flows
    For the quarter ended March 31, 2009 and 2008 (unaudited, in thousands
    of Canadian dollars)
    -------------------------------------------------------------------------

    For the quarter ended March 31                        2009          2008
                                                   --------------------------

    Cash flows from operating activities
    Loss for the period                            $    (3,172)  $      (423)
    Items not affecting cash                             2,491         1,952
                                                   --------------------------
                                                          (681)        1,529
    Change in non-cash items related to operating
     activities                                          1,447          (576)
                                                   --------------------------
                                                           766           953
                                                   --------------------------

    Cash flows from investing activities
    Purchase of property, plant and equipment             (193)         (933)
    Payments relating to development costs and tooling  (1,193)         (550)
                                                   --------------------------
                                                        (1,386)       (1,483)
    Cash flows from financing activities
    Net proceeds from bank indebtedness                    886           625
    Proceeds from long-term debt                             -           131
    Proceeds from sale of tooling                          149           372
    Repayment of long-term debt                           (415)         (630)
    Issue of common shares                                   -           221
    Preferred share dividends                                -          (189)
                                                   --------------------------
                                                           620           530
                                                   --------------------------


    Net change in cash and cash equivalents                  -             -

    Cash and cash equivalents - Beginning of period          -             -
                                                   --------------------------

    Cash and cash equivalents - End of period                -             -
                                                   --------------------------
                                                   --------------------------

    Interest paid                                          440           379
                                                   --------------------------
                                                   --------------------------
    





For further information:

For further information: Sandi DiPrimo, Investor Relations Contact,
(604) 587-4938


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