VANCOUVER, July 11, 2018 /CNW/ - Avcorp Industries Inc. (TSX: AVP) (the "Company", "Avcorp" or the "Avcorp Group") today announced its financial results for the year ended December 31, 2017. All amounts are in Canadian currency unless otherwise stated.
2017 Highlights
Key fiscal year 2017 financial results include:
- On April 3, 2017, the Company collected the final amount of consideration receivable from SGL Carbon SE ("SGL") for the acquisition of the US-based composite Aerostructures division of Hitco, a subsidiary of Frankfurt-listed SGL ("Hitco"), amounting to USD$9.2 million.
- On May 26, 2017, the Company signed a loan agreement to replace the current agreement with a Canadian Chartered Bank, supported by a major customer, to access a USD$58 million operating line of credit (converted as approximately CAD$72.8 million as at December 31, 2017). The Company has utilized $61,283,000 of the operating line of credit, with $5,212,000 cash on hand, as at December 31, 2017.
- Effective July 6, 2017 the Company and Panta Canada B.V. ("Panta") amended a term loan held by Panta to provide for an extended maturity date. Panta is Avcorp's majority shareholder owning approximately 68.6% of the issued and outstanding common shares on December 31, 2017. Panta is wholly owned by Panta Holdings B.V. Both companies are incorporated in The Netherlands and Mr. Jaap Rosen Jacobson, a director of the Company, is the sole shareholder of Panta Holdings B.V.
- On July 31, 2017 the Company repaid a principal amount of USD$2.5 million plus interest accrued in the amount of USD$285,000 of the Panta term loan.
- On August 3, 2017 Panta exercised 12,105,327 warrants expiring August 17, 2017 at $0.07 whose aggregate price of $847,000 was deemed to be made by way of set-off against the Panta loan obligation.
- On August 25, 2017 Panta exercised 6,052,664 warrants expiring September 9, 2017 at $0.07 whose aggregate price of $424,000 was deemed to be made by way of set-off against the Panta loan obligation.
- On September 8, 2017 Panta exercised 12,105,327 warrants expiring September 23, 2017 at $0.07 whose aggregate price of $847,000 was deemed to be made by way of set-off against the Panta loan obligation.
- Customer order backlog increased by $249 million during 2017 due to increases in production rates, contract renewals for various existing programs, and contract awards.
- New program start-up revenues total $5.4 million in 2017 in commencement of 2016 order backlog growth for new and legacy aircraft programs.
- Six new customer production programs launched at Avcorp's Delta facility during 2017.
Highlights Subsequent to Year-End
Since December 31, 2017 key developments include:
- Avcorp is a member of Canada's Digital Technology Supercluster ("CDTS") which was awarded funding under the Federal Government's Innovation Supercluster Initiative ("ISI").
- On March 28, 2018, signed a loan agreement to expand the current agreement with a Canadian Chartered Bank, supported by a major and material customer, to access an additional USD$10 million operating line of credit.
- In Comtek's continuing effort to reduce the operator's key metric of turnaround time for repaired components, while still providing premium quality, Comtek has embarked on deploying a forward base of operations located in the United Kingdom. Doors open in the third quarter and will initially provide much needed support for the growing Q400 fleet in Europe.
- On April 19, 2018 Avcorp's Board appointed Amandeep Kaler, formerly the General Manager of Avcorp's Delta operations, as the new CEO of Avcorp Group.
Review of 2017 Financial Results
For the year ending December 31, 2017, the Avcorp Group recorded losses from operations totaling $53,773,000 from $149,444,000 revenue, which include costs incurred on start-up of new programs, as compared to $16,405,000 operating losses from $183,707,000 revenue for the previous year. It should be noted that 2016 operating losses benefited by $38,937,000 income from amortization of an unfavourable contract liability into income (2017: $9,058,000).
During the year ended December 31, 2017, cash flows from operating activities, excluding the impact of changes in non‑cash working capital, utilized $42,257,000 of cash as compared with utilization of $59,091,000 of cash during the year ended December 31, 2016. Cash flows from operating activities were most significantly impacted as a result of operating losses incurred from the integration and production costs expended for the acquired Hitco operations; losses arising from unfavourable customer contracts assumed; operational, administrative, and legal expenditures incurred in support of Avcorp's Gardena facility; as well as new program introduction and start-up costs at the Delta facility.
As at December 31, 2017, the Company had $5,212,000 cash on hand (December 31, 2016: $3,960,000) and had utilized $61,283,000 of its operating line of credit (December 31, 2016: $17,111,000). The Company has a working capital deficit of $63,613,000 as at December 31, 2017 which has increased from the December 31, 2016 $5,439,000 deficit. Working capital surplus/deficit is defined as the difference between current assets and current liabilities. The increase in bank utilization during 2017 has increased the working capital deficit in 2017 over 2016. However, the Company's accounts receivable and inventories net of accounts payable, amount to a $37,889,000 surplus as at December 31, 2017 (December 31, 2016: $38,436,000 surplus). The Company's accumulated deficit as at December 31, 2017 is $157,185,000 (December 31, 2016: $98,647,000).
About Avcorp
The Avcorp Group designs and builds major airframe structures for some of the world's leading aircraft companies, including BAE Systems, Boeing, Bombardier, Lockheed Martin and Subaru Corporation. The Avcorp Group has more than 60 years of experience, over 700 skilled employees and 636,000 square feet of facilities. Avcorp Structures & Integration located in Delta British Columbia, Canada is dedicated to metallic and composite aerostructures assembly and integration; Avcorp Engineered Composites located in Burlington Ontario, Canada is dedicated to design and manufacture of composite aerostructures, and Avcorp Composite Fabrication located in Gardena California, USA has advanced composite aerostructures fabrication capabilities for composite aerostructures. The Avcorp Group 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. Comtek Advanced Structures Ltd., at our Burlington, Ontario, Canada location also provides aircraft operators with aircraft structural component repair services for commercial aircraft.
Avcorp Composite Fabrication Inc. is wholly owned by Avcorp US Holdings Inc. Both companies are incorporated in the State of Delaware, USA, and are wholly owned subsidiaries of Avcorp Industries Inc.
Comtek Advanced Structures Ltd., incorporated in the Province of Ontario, Canada, is a wholly owned subsidiary of Avcorp Industries Inc.
Avcorp Industries Inc. is a federally incorporated reporting company in Canada and traded on the Toronto Stock Exchange (TSX:AVP).
(Signed)
AMANDEEP KALER
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) changes in worldwide economic and political conditions that impact interest and foreign exchange rates; (b) the occurrence of work stoppages and strikes at key facilities of the Corporation or the Corporation's customers or suppliers; (c) government funding and program approvals affecting products being developed or sold under government programs; (d) cost and delivery performance under various program and development contracts; (e) the adequacy of cost estimates for various customer care programs including servicing warranties; (f) the ability to control costs and successful implementation of various cost reduction programs; (g) the timing of certifications of new aircraft products; (h) the occurrence of downturns in customer markets to which the Corporation products are sold or supplied or where the Corporation offers financing; (i) changes in aircraft delivery schedules or cancellation of orders; (j) the Corporation's ability to offset, through cost reductions, raw material price increases and pricing pressure brought by original equipment manufacturer customers; (k) the availability and cost of insurance; (l) the Corporation's ability to maintain portfolio credit quality; (m) the Corporation's access to debt financing at competitive rates; (n) uncertainty in estimating contingent liabilities and establishing reserves tailored to address such contingencies; and (o) integration of newly acquired operations and associated expenses may adversely affect profitability.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(expressed in thousands of Canadian dollars)
| AS AT DECEMBER 31 |
2017 |
2016 |
| ASSETS |
||
| Current assets |
||
| Cash |
$5,212 |
$3,960 |
| Accounts receivable |
18,942 |
26,262 |
| Consideration receivable |
- |
12,251 |
| Inventories |
42,781 |
44,296 |
| Prepayments and other assets |
4,390 |
4,144 |
| 71,325 |
90,913 |
|
| Non-current assets |
||
| Prepaid rent |
146 |
146 |
| Development costs |
8,623 |
5,200 |
| Property, plant and equipment |
29,318 |
31,930 |
| Intangibles |
3,864 |
4,887 |
| Total assets |
113,276 |
133,076 |
| LIABILITIES AND EQUITY |
||
| Current liabilities |
||
| Bank indebtedness |
61,283 |
17,111 |
| Accounts payable and accrued liabilities |
23,834 |
32,122 |
| Current portion of term debt |
1,285 |
6,283 |
| Customer advance |
7,227 |
8,034 |
| Deferred program revenues |
17,131 |
13,861 |
| Unfavourable contracts liability |
16,881 |
18,904 |
| Onerous contract provision |
7,297 |
37 |
| 134,938 |
96,352 |
|
| Non-current liabilities |
||
| Deferred gain and lease inducement |
100 |
246 |
| Term debt |
1,885 |
1,646 |
| Customer advance |
- |
3,539 |
| Deferred program revenues |
110 |
111 |
| Unfavourable contracts liability |
27,579 |
38,065 |
| Onerous contract provision |
6,069 |
- |
| 170,681 |
139,959 |
|
| (Deficiency) Equity |
||
| Capital stock |
82,905 |
80,302 |
| Contributed surplus |
6,979 |
6,744 |
| Accumulated other comprehensive income |
9,896 |
4,718 |
| Accumulated deficit |
(157,185) |
(98,647) |
| (57,405) |
(6,883) |
|
| Total liabilities and (deficiency) equity |
113,276 |
133,076 |
CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS
(expressed in thousands of Canadian dollars, except number of shares and per share amounts)
| AS AT DECEMBER 31 |
2017 |
2016 |
| Revenues |
$149,444 |
$183,707 |
| Cost of sales |
181,296 |
175,333 |
| Gross (loss) profit |
(31,852) |
8,374 |
| Administrative and general expenses |
21,580 |
24,429 |
| Office equipment depreciation |
341 |
350 |
| Operating Loss |
(53,773) |
(16,405) |
| Finance costs – net |
2,806 |
339 |
| Foreign exchange loss |
1,944 |
3,278 |
| Net loss (gain) on sale of equipment |
15 |
(63) |
| Loss before income tax |
(58,538) |
(19,959) |
| Income tax expense |
- |
- |
| Net loss for the period |
(58,538) |
(19,959) |
| Other comprehensive income |
5,178 |
3,857 |
| Comprehensive loss for the period |
(53,360) |
(16,102) |
| Loss per share: |
||
| Basic and diluted loss per common share |
(0.18) |
(0.07) |
| Basic and diluted weighted average number of shares outstanding (000's) |
318,019 |
306,611 |
CONSOLIDATED STATEMENTS OF CASH FLOWS
(expressed in thousands of Canadian dollars)
| AS AT DECEMBER 31 |
2017 |
2016 |
||
| Cash flows (used in) from operating activities |
||||
| Net loss for the year |
$(58,538) |
$(19,959) |
||
| Adjustment for items not affecting cash: |
||||
| Interest expense |
2,216 |
322 |
||
| Depreciation |
4,153 |
3,915 |
||
| Development cost amortization |
1,924 |
604 |
||
| Intangible assets amortization |
1,299 |
1,325 |
||
| Non-cash financing cost accretion |
589 |
31 |
||
| Loss (Gain) on disposal of equipment |
15 |
(15) |
||
| Provision for unfavourable contracts |
(9,058) |
(38,937) |
||
| Provision for onerous contracts |
13,603 |
(77) |
||
| Provision for doubtful accounts |
921 |
189 |
||
| Provision for obsolete inventory |
(678) |
(8,653) |
||
| Stock based compensation |
720 |
1,158 |
||
| Unrealized foreign exchange |
712 |
1,135 |
||
| Other items |
(135) |
(129) |
||
| Cash flows (used in) operating activities before changes in non-cash working capital |
(42,257) |
(59,091) |
||
| Changes in non-cash working capital |
||||
| Accounts receivable |
6,546 |
7,129 |
||
| Inventories |
869 |
(614) |
||
| Prepayments and other assets |
(693) |
(3,994) |
||
| Accounts payable and accrued liabilities |
(6,636) |
6,705 |
||
| Customer advance payable |
(3,702) |
(6,955) |
||
| Deferred program revenues |
3,269 |
6,473 |
||
| Net cash (used in) operating activities |
(42,604) |
(50,347) |
||
| Cash flows from (used in) investing activities |
||||
| Proceeds from consideration receivable |
12,378 |
22,429 |
||
| Proceeds from sale of equipment |
20 |
60 |
||
| Purchase of equipment |
(2,744) |
(5,129) |
||
| Addition of developed software |
(571) |
- |
||
| Payments relating to development costs and tooling |
(5,347) |
(2,617) |
||
| Net cash from (used in) investing activities |
3,736 |
14,743 |
||
| Cash flows from (used in) financing activities |
||||
| Increase in bank indebtedness |
46,872 |
17,111 |
||
| Payment of interest |
(1,331) |
(184) |
||
| Proceeds from term debt |
1,473 |
6,727 |
||
| Proceeds from issuance of common shares |
- |
113 |
||
| Repayment of term debt |
(6,275) |
(240) |
||
| Net cash from financing activities |
40,739 |
23,527 |
||
| Net increase (decrease) in cash |
1,871 |
(12,077) |
||
| Net foreign exchange difference |
(619) |
1,553 |
||
| Cash - Beginning of the period |
3,960 |
14,484 |
||
| Cash - End of the period |
5,212 |
3,960 |
||
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(expressed in thousands of Canadian dollars, except number of shares)
| Capital Stock |
||||||
| Number of |
Amount |
Contributed |
Deficit |
Accumulated |
Total |
|
| Balance at January 1, 2016 |
305,555,184 |
80,158 |
4,453 |
(78,688) |
861 |
6,784 |
| Issue of Common Shares |
1,586,000 |
113 |
- |
- |
- |
113 |
| Stock-based compensation expense |
- |
- |
1,578 |
- |
- |
1,578 |
| Forfeiture of issued stock options |
- |
- |
(420) |
- |
- |
(420) |
| Transfer to share capital on exercise of stock options |
- |
31 |
(31) |
- |
- |
- |
| Fair value of warrants issued |
- |
- |
1,164 |
- |
- |
1,164 |
| Unrealized currency gain on translation for the year |
- |
- |
- |
- |
3,857 |
3,857 |
| Net loss for the year |
- |
- |
- |
(19,959) |
- |
(19,959) |
| Balance December 31, 2016 |
307,141,184 |
80,302 |
6,744 |
(98,647) |
4,718 |
(6,883) |
| Issue of common shares |
30,263,318 |
2,118 |
- |
- |
- |
2,118 |
| Transfer to share capital on exercise of warrants |
- |
485 |
(485) |
- |
- |
- |
| Stock-based compensation expense |
- |
- |
718 |
- |
- |
718 |
| Cancellation of issued stock options |
2 |
- |
- |
2 |
||
| Unrealized currency gain on translation for the year |
- |
- |
- |
- |
5,178 |
5,178 |
| Net loss for the year |
- |
- |
- |
(58,538) |
- |
(58,538) |
| Balance December 31, 2017 |
337,404,502 |
82,905 |
6,979 |
(157,185) |
9,896 |
(57,405) |
SOURCE Avcorp Industries Inc.
For further information: Sandi DiPrimo, Investor Relations Contact | 604-587-4938
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