Avcorp announces 2009 Second Quarter Results



    VANCOUVER, Aug. 13 /CNW/ - Avcorp (AVP on the Toronto Stock Exchange)
today announced its financial results for the quarter ended June 30, 2009.
    During the quarter ended June 30, 2009, the Company recorded income from
operations of $552,000 on $16,172,000 of revenue, as compared to $859,000
earnings from operations on $32,389,000 of revenue for the same quarter of the
preceding year; and net income for the current quarter of $65,000 as compared
to net income of $364,000 for the quarter ended June 30, 2008. Earnings
include a $3,962,000 foreign exchange gain (June 30, 2008: $116,000) which
occurred as a result of holding foreign-currency-denominated receivables,
payables and debt. On a year-to-date basis, the Company has recorded a
$3,107,000 net loss on $38,259,000 of revenue as compared to a $59,000 net
loss on $63,540,000 of revenue for the same period in 2008.
    Continued softening of customer order books in the second quarter of 2009
has caused the Company to review operations and terminate more employees. This
has necessitated a $196,000 charge against income for the quarter ended June
30, 2009. In addition, significantly reduced customer demand, relative to the
same quarter in the preceding year, has resulted in idle plant capacity. The
Company has expensed $1,500,000 of overhead costs during the current quarter
which under prior periods' production levels would have been inventoried.
    Cash flows from operating activities during the current quarter provided
$2,272,000 of cash, as compared to providing $1,023,000 of cash during the
quarter ended June 30, 2008. During the first two quarters of 2009 and 2008,
the Company's generated cash flows from operating activities in the amounts of
$1,591,000 and $2,552,000 respectively. The Company had a working capital
deficit of $5,633,000 as at June 30, 2009 (December 31, 2008: $2,065,000
deficit) primarily as a result of classifying the $4,193,000 convertible
debenture held by Export Development Canada as current portion of long-term
debt, and an accumulated deficit of $59,695,000 at June 30, 2009 (December 31,
2008: $56,213,000).
    As at June 30, 2009, the Company was not in compliance with its financial
covenants associated with its operating line of credit provide by a Canadian
Chartered Bank and convertible debenture held by Export Development Canada. In
addition, the Company is forecasting that it will be in default of one or more
of its financial covenants in 2009. The Company has not obtained a waiver from
the debt holders for these non-compliances and for anticipated future
breaches. In the absence of obtaining waivers of such breaches, the lenders
are entitled to demand immediate payment.
    Subsequent to the end of the second quarter 2009, the Company's Bank
changed the terms of its agreement with the Company. On August 12, 2009, the
Company entered into a Forbearance Agreement with the Bank providing its
operating lines of credit. The Forbearance Agreement establishes terms and
conditions under which the Bank will continue to provide these facilities.

    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, 410 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 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 Balance Sheets
    as at June 30, 2009 and December 31, 2008 (unaudited, in thousands of
    Canadian dollars)
    -------------------------------------------------------------------------
                                                       June 30,  December 31,
                                                          2009          2008
                                                    -------------------------
    Assets
    Current assets
    Accounts receivable                              $   7,355     $  12,609
    Inventories                                         18,240        19,206
    Prepayments                                          1,292         1,761
    Other assets                                            29           746
                                                    -------------------------
                                                        26,916        34,322
    Development costs                                    5,864         3,299
    Property, plant and equipment                       17,795        19,431
    Warranty claim receivable                            1,569         1,784
    Intangible assets                                    1,986         2,154
                                                    -------------------------
                                                        54,130        60,990
                                                    -------------------------
                                                    -------------------------
    Liabilities
    Current liabilities
    Bank indebtedness                                   12,239        14,273
    Demand loan                                            412             -
    Bridge loan                                          1,558             -
    Accounts payable and accrued liabilities            12,095        15,841
    Current portion of long-term debt                    6,245         6,273
                                                    -------------------------
                                                        32,549        36,387
    Deferred gain                                          429           453
    Lease inducement                                       912           962
    Deferred tooling revenues                            2,303         1,173
    Long-term debt                                       2,387         2,872
    Warranty provision                                   1,521         1,632
    Future income tax liability                          1,186         1,186
                                                    -------------------------
                                                        41,287        44,665
                                                    -------------------------
    Shareholders' Equity
    Capital stock                                       62,269        62,269
    Preferred shares                                     7,622         7,622
    Contributed surplus                                  2,647         2,647
    Deficit                                            (59,695)      (56,213)
                                                    -------------------------
                                                        12,843        16,325
                                                    -------------------------
                                                        54,130        60,990
                                                    -------------------------
                                                    -------------------------



    Consolidated Statements of Operations and Comprehensive Loss
    For the three and six months ended June 30, 2009 and 2008
    (unaudited, in thousands of Canadian dollars, except number of shares
     and per share amounts)
    -------------------------------------------------------------------------
                                  Three months ended        Six months ended
                                             June 30                 June 30
    For the quarter          ------------------------------------------------
     ended June 30                  2009        2008        2009        2008
                             ------------------------------------------------

    Revenues                   $  16,172   $  32,389   $  38,259   $  63,540
                             ------------------------------------------------

    Cost of sales and
     expenses
    Cost of sales                 15,598      26,966      34,545      54,355
    Administrative and
     general expenses              2,968       3,544       5,987       6,500
    Amortization and
     depreciation                  1,016       1,136       2,082       2,223
    Foreign exchange (gain)       (3,962)       (116)     (2,918)       (580)
                             ------------------------------------------------

                                  15,620      31,530      39,696      62,498
                             ------------------------------------------------
                             ------------------------------------------------
    Income (Loss) from
     operations                      552         859      (1,437)      1,042
    Interest expense and
     financing charges              (436)       (510)       (965)     (1,099)
    Unrealized derivative
     gain (loss)                     (51)         15        (705)         (2)
                             ------------------------------------------------
                             ------------------------------------------------


    Income (Loss) and
     comprehensive income
     (loss) for the period            65         364      (3,107)        (59)
                             ------------------------------------------------
                             ------------------------------------------------

    Basic and diluted income
     (loss) per common share        0.00        0.01       (0.10)       0.00
                             ------------------------------------------------
                             ------------------------------------------------

    Basic and diluted
     weighted average
     number of shares
     outstanding (000's)          32,315      32,132      32,315      31,970
                             ------------------------------------------------
                             ------------------------------------------------



    Consolidated Statements of Deficit
    For the three and six months ended June 30, 2009 and 2008
    (unaudited, in thousands of Canadian dollars)
    -------------------------------------------------------------------------
                                  Three months ended        Six months ended
                                             June 30                 June 30
    For the quarter          ------------------------------------------------
     ended June 30                  2009        2008        2009        2008
                             ------------------------------------------------

    Deficit - Beginning
     of period                 $ (59,571)  $ (53,816)  $ (56,213)  $ (53,204)

    Income (Loss) for
     the period                       65         364      (3,107)        (59)

    Preferred share
     dividends                      (189)       (189)       (375)       (378)
                             ------------------------------------------------

    Deficit - End of period      (59,695)    (53,641)    (59,695)    (53,641)
                             ------------------------------------------------
                             ------------------------------------------------



    Consolidated Statements of Cash Flows
    For the three and six months ended June 30, 2009 and 2008
    (unaudited, in thousands of Canadian dollars)
    -------------------------------------------------------------------------
                                  Three months ended        Six months ended
                                             June 30                 June 30
    For the quarter          ------------------------------------------------
     ended June 30                  2009        2008        2009        2008
                             ------------------------------------------------
    Cash flows from
     operating activities
    Income (loss) for the
     period                    $      65   $     364   $  (3,107)  $     (59)
    Items not affecting
     cash                          2,207         542       4,698       2,377
                             ------------------------------------------------
                                   2,272         906       1,591       2,318
    Change in non-cash items
     related to operating
     activities                      911       2,172       1,958       1,596
                             ------------------------------------------------
                                   3,183       3,078       3,549       3,914
                             ------------------------------------------------

    Cash flows from
     investing activities
    Purchase of property,
     plant and equipment             (85)     (1,510)       (278)     (2,326)
                             ------------------------------------------------
    Payments relating to
     development costs and
     tooling                      (1,412)       (654)     (2,605)     (1,204)
                             ------------------------------------------------
                                  (1,497)     (2,164)     (2,883)     (3,530)
                             ------------------------------------------------

    Cash flows from
     financing activities
    Net repayment of bank
     indebtedness                 (2,920)       (790)     (2,034)       (165)
    Proceeds from current
     and long-term debt            1,552           -       1,952         131
    Proceeds from sale and
     leaseback of property,
     plant and equipment               -       1,215           -       1,215
    Proceeds from sale of
     tooling                         100           -         249         372
    Repayment of long-term debt     (418)     (1,300)       (833)     (1,930)
    Issue of common shares             -         150           -         371
    Preferred share dividends          -        (189)          -        (378)
                             ------------------------------------------------
                                  (1,686)       (914)       (666)       (384)
                             ------------------------------------------------

    Net change in cash and
     cash equivalents                  -           -           -           -

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

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

    Interest paid                    204         303         644         726
                             ------------------------------------------------
                             ------------------------------------------------
    





For further information:

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


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