Avcorp announces 2009 Third Quarter Results

VANCOUVER, Nov. 16 /CNW/ - Avcorp (AVP on the Toronto Stock Exchange) today announced its financial results for the quarter ended September 30, 2009.

During the quarter ended September 30, 2009, the Company recorded a loss from operations of $2,128,000 on $14,302,000 revenue, as compared to $1,004,000 earnings from operations on $30,894,000 revenue for the same quarter of the preceding year; and a net loss for the current quarter of $2,585,000 as compared to a net loss of $220,000 for the quarter ended September 30, 2008. It should be noted that the current quarter loss includes a $1,384,000 foreign exchange gain (September 30, 2008: $26,000) 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 $5,692,000 net loss on $52,561,000 revenue as compared to a $279,000 net loss on $94,434,000 revenue for the same period in 2008.

Cash flows from operating activities during the current quarter utilized $3,157,000 of cash, as compared to providing $2,847,000 of cash during the quarter ended September 30, 2008. During the first three quarters of 2009 and 2008, the Company's generated cash flows from operating activities in the amounts of $237,000 and $6,762,000 respectively. The Company has a working capital deficit of $4,922,000 as at September 30, 2009 (December 31, 2008: $2,065,000 deficit) primarily as a result of classifying the $4,265,000 convertible debenture held by Export Development Canada as current portion of long-term debt, and an accumulated deficit of $62,471,000 at September 30, 2009 (December 31, 2008: $56,213,000).

Significantly reduced customer demand, relative to the same quarter in the preceding year, has resulted in idle plant capacity. The Company has expensed $1,760,000 of overhead costs during the current quarter (year-to-date September 30, 2009: $3,218,000) which under prior periods' production levels would have been inventoried.

The Company incurred legal, consulting and professional investment service fees in the course of negotiating, analyzing and documenting its financial restructuring. These are one-time costs for which fees amounting to $371,000 were expensed during the third quarter 2009 (year-to-date September 30, 2009: $731,000).

As at September 30, 2009, the Company was not in compliance with its financial covenants associated with its operating line of credit. In addition, the Company is forecasting that it will be in default of one or more of its financial covenants in the next 12 months. The lender has agreed to forebear from demanding payment of the indebtedness and from taking steps to enforce the security subject to the Company complying with terms and conditions of a Forbearance Agreement.

Also, as at September 30, 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. In the absence of obtaining a waiver of such breaches, the lender is entitled to demand immediate payment. The Company is currently in discussion regarding the terms of repayment with Export Development Canada.

On October 7, 2009, the Company completed a rights offering within which 129,259,718 common shares were issued at $0.06 per share providing gross proceeds of $7,756,000. The Company received aggregate net proceeds of $4,386,000 after set off against certain shareholder loan obligations. The Company's total issued and outstanding common shares after this issuance are 177,732,112.

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, 483 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).

    
    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 September 30, 2009 and December 31, 2008 (unaudited, in thousands
    of Canadian dollars)
    -------------------------------------------------------------------------

                                                  September 30   December 31
                                                          2009          2008
                                                 ----------------------------
    Assets
    Current assets
    Accounts receivable                              $   6,856     $  12,609
    Inventories                                         16,965        19,206
    Prepayments                                          1,337         1,761
    Other assets                                            27           746
                                                 ----------------------------
                                                        25,185        34,322
    Development costs                                    4,048         3,299
    Property, plant and equipment                       18,762        19,431
    Warranty claim receivable                            1,494         1,784
    Intangible assets                                    1,902         2,154
                                                 ----------------------------
                                                        51,391        60,990
                                                 ----------------------------
                                                 ----------------------------
    Liabilities
    Current liabilities
    Bank indebtedness                                    9,636        14,273
    Bridge loan                                          4,052             -
    Accounts payable and accrued liabilities            10,259        15,841
    Current portion of long-term debt                    6,160         6,273
                                                 ----------------------------
                                                        30,107        36,387
    Deferred gain                                          417           453
    Lease inducement                                       888           962
    Deferred tooling revenues                            2,749         1,173
    Long-term debt                                       2,034         2,872
    Warranty provision                                   1,521         1,632
    Future income tax liability                          1,186         1,186
                                                 ----------------------------
                                                        38,902        44,665
                                                 ----------------------------
    Shareholders' Equity
    Capital stock                                       64,691        62,269
    Preferred shares                                     7,622         7,622
    Contributed surplus                                  2,647         2,647
    Deficit                                            (62,471)      (56,213)
                                                 ----------------------------
                                                        12,489        16,325
                                                 ----------------------------
                                                        51,391        60,990
                                                 ----------------------------
                                                 ----------------------------



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

                                  Three months ended       Nine months ended
                                        September 30            September 30
    For the quarter          ------------------------------------------------
     ended September 30             2009        2008        2009        2008
                             ------------------------------------------------
    Revenues                   $  14,302   $  30,894   $  52,561   $  94,434
                             ------------------------------------------------

    Cost of sales and
     expenses
    Cost of sales                 14,155      25,443      48,700      79,798
    Administrative and
     general expenses              2,656       3,291       8,643       9,791
    Amortization and
     depreciation                  1,003       1,182       3,085       3,405
    Foreign exchange (gain)       (1,384)        (26)     (4,302)       (606)
                             ------------------------------------------------

                                  16,430      29,890      56,126      92,388
                             ------------------------------------------------
                             ------------------------------------------------

    Loss from operations          (2,128)      1,004      (3,565)      2,046
    Interest expense and
     financing charges              (458)       (465)     (1,423)     (1,564)
    Unrealized derivative
     gain (loss)                       1           -        (704)         (2)
    Write-down of investment           -        (759)          -        (759)
                             ------------------------------------------------
                             ------------------------------------------------

    Loss and comprehensive
     loss for the period          (2,585)       (220)     (5,692)       (279)
                             ------------------------------------------------
                             ------------------------------------------------

    Basic and diluted loss per
     common share                  (0.06)      (0.01)      (0.16)      (0.01)
                             ------------------------------------------------
                             ------------------------------------------------

    Basic and diluted weighted
     average number of shares
     outstanding (000's)          44,784      32,312      36,517      32,248
                             ------------------------------------------------
                             ------------------------------------------------



    Consolidated Statements of Deficit
    For the three and nine months ended September 30, 2009 and 2008
    (unaudited, in thousands of Canadian dollars)
    -------------------------------------------------------------------------

                                  Three months ended       Nine months ended
                                        September 30            September 30
    For the quarter          ------------------------------------------------
     ended September 30             2009        2008        2009        2008
                             ------------------------------------------------
    Deficit - Beginning of
     period                    $ (59,695)  $ (53,641)  $ (56,213)  $ (53,204)

    Loss for the period           (2,585)       (220)     (5,692)       (279)

    Preferred share dividends       (191)       (190)       (566)       (568)

                             ------------------------------------------------

    Deficit - End of period      (62,471)    (54,051)    (62,471)    (54,051)
                             ------------------------------------------------
                             ------------------------------------------------



    Consolidated Statements of Cash Flows
    For the three and nine months ended September 30, 2009 and 2008
    (unaudited, in thousands of Canadian dollars)
    -------------------------------------------------------------------------

                                  Three months ended       Nine months ended
                                        September 30            September 30
                             ------------------------------------------------
                                    2009        2008        2009        2008
                             ------------------------------------------------

    Cash flows from operating
     activities
    Loss for the period        $  (2,585)  $    (220)  $  (5,692)  $    (279)
    Items not affecting cash       1,210       2,726       4,483       5,104
                             ------------------------------------------------
                                  (1,375)      2,506      (1,209)      4,825
    Change in non-cash items
     related to operating
     activities                   (1,782)        341       1,446       1,937
                             ------------------------------------------------
                                  (3,157)      2,847         237       6,762
                             ------------------------------------------------

    Cash flows from investing
     activities
    Purchase of property, plant
     and equipment                   (12)       (443)       (290)     (2,769)
    Payments relating to
     development costs and
     tooling                         (79)       (855)     (2,684)     (2,061)
                             ------------------------------------------------
                                     (91)     (1,298)     (2,974)     (4,830)
                             ------------------------------------------------

    Cash flows from financing
     activities
    Net repayment of bank
     indebtedness                 (2,603)       (735)     (4,637)       (900)
    Proceeds from current and
     long-term debt                4,000           -       5,952         131
    Proceeds from sale and
     leaseback of property,
     plant and equipment               -           -           -       1,215
    Proceeds from sale of
     tooling                       1,809           -       2,214         372
    Repayment of current and
     long-term debt                 (815)       (624)     (1,649)     (2,553)
    Issue of common shares net
     of debt repayment set-off       857           -         857         371
    Preferred share dividends          -        (190)          -        (568)
                             ------------------------------------------------
                                   3,248      (1,549)      2,737      (1,932)
                             ------------------------------------------------

    Net change in cash and
     cash equivalents                  -           -           -           -

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

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

    Interest paid                    348         388         992       1,114
                             ------------------------------------------------
                             ------------------------------------------------
    

SOURCE Avcorp Industries Inc.

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


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