2014

Avcorp announces 2013 Annual Financial Results

VANCOUVER, March 31, 2014 /PRNewswire/ - Avcorp Industries Inc. (TSX: AVP) (the "Company" or "Avcorp") today announced its financial results for the year ended December 31, 2013.

Revenue for the year ended December 31, 2013 was $77,364,000 as compared to $89,337,000 for the year ended December 31, 2012. Current year revenues have decreased relative to the previous year primarily as a result of the wind-down of Cessna programs, offset by increased deliveries for the F-35 CV-OBW program.

During the year ended December 31, 2013, the Company recorded a loss from operations of $2,015,000 on $77,364,000 revenue, as compared to $24,002,000 operating income on $89,337,000 revenue for the preceding year; and a net loss for the current year of $1,802,000 as compared to net income of $20,641,000 for the year ended December 31, 2012.   

On November 16, 2012, the Company received the determination of an appointed arbitration panel constituted to adjudicate outstanding issues relating to cost reimbursements and compensation payable to the Company in connection with the transition of Cessna Aircraft Company ("Cessna") production work back to Cessna and other suppliers.  The quantum of damages was assessed by the arbitration panel in 2012 at US$27,391,000. 

On September 5, 2013 the Company entered into a settlement agreement, from a court directed mediation with Cessna, which settled all outstanding litigation between the Company and Cessna. The settlement required payment by Cessna of US$27,964,000 ($29,380,000) in satisfaction of the judgement entered against Cessna from the arbitration award made on November 16, 2012, resulting in US$573,000 ($604,000) recorded as additional award settlement for 2013. The settlement funds were received in full by the Company on September 6, 2013.   This settlement satisfies the judgement and has resulted in the dismissal of the outstanding appeal.

Cash flows from operating activities during the year ended December 31, 2013 provided $23,849,000 of cash as compared to providing $6,109,000 of cash during the year ended December 31, 2012.  The primary source of cash from operations during the current year is from the Cessna award settlement.  The Company utilized the funds received from the Cessna award settlement to repay $6,660,000 of bank indebtedness, a $4,045,000 convertible debenture, and $11,803,000 preferred shares and accrued dividends leaving $6,872,000 of cash from the Cessna award settlement for funding operations.  As at December 31, 2013 the Company had $7,012,000 cash on hand. 

During fiscal 2013 and 2012 the Company has repaid in excess of $26 million of debt and has cash reserves on hand as at December 31, 2013 amounting to $7,012,000 (December 31, 2012: $2,597,000). 

The Company has a working capital surplus of $14,213,000 as at December 31, 2013 which has decreased from the December 31, 2012 $16,759,000 surplus, as a result of repaying bank indebtedness from Cessna award settlement proceeds.  The Company's accumulated deficit as at December 31, 2013 is $57,723,000 (December 31, 2012: $55,921,000).

During 2013 the Company added $53 million to its order backlog due to increases in the production rates and contract renewals for various existing programs, as well as recently awarded statements of work.

The Company has amended its accounting with respect to the classification of deferred program revenues in its 2013 financial statements.  Previously, all of the Company's deferred program revenues were classified as non-current.  Deferred program revenues will now be classified as current or non-current based on the estimated timing of when the related revenue will be recognized.  As a result, deferred program revenues as at December 31, 2012 in the amount of $17,514,000 has been reclassified from non-current to current.  The impact as of January 1, 2012 has not been estimated as it is impracticable to determine what management would have estimated as of January 1, 2012 without undue application of hindsight. 

As a result of the reclassification of deferred program revenues, 2012 cash inflows of $9,712,000 have been reclassified from financing activities to operating activities, to reflect the nature of the deferred revenue balance which has generated the cash flows.

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 400 skilled employees and 354,000 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 Comtek subsidiary also offers composite repairs for commercial aircraft out of their Burlington location. Avcorp is a Canadian public company traded on the Toronto Stock Exchange (TSX:AVP).

(Signed)
MARK VAN ROOIJ
PRESIDENT and CHIEF EXECUTIVE OFFICER

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

2013

2012

ASSETS



Current assets



Cash

$    7,012

$    2,597

Accounts receivable

8,845

7,944

Inventories

14,940

16,572

Prepayments and other assets

1,306

1,634

Other receivable

-

27,391


32,103

56,138

Non-current assets



Prepaid rent

146

146

Development costs

1,240

2,718

Property, plant and equipment

8,704

9,633

Total assets

42,193

68,635




LIABILITIES AND EQUITY



Current liabilities



Bank indebtedness

-

2,122

Accounts payable and accrued liabilities

7,645

7,859

Current portion of long-term debt

199

692

Preferred shares

36

11,192

Deferred program revenues

10,010

17,514


17,890

39,379

Non-current liabilities



Deferred gain

216

263

Lease inducement

469

567

Long-term debt

67

4,300

Warranty provisions

-

85


18,642

44,594

Equity



Capital stock

77,681

76,423

Contributed surplus

3,593

3,539

Deficit

(57,723)

(55,921)


23,551

24,041

Total liabilities and equity

42,193

68,635

 

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

2013

2012




Revenues

$  77,364

$  89,337

Cost of sales

67,710

77,722

Gross profit

9,654

11,615

Administrative and general expenses

11,682

14,517

Office equipment depreciation

591

487

Other operating (income)

(604)

(27,391)

Operating (Loss) Income

(2,015)

24,002

Finance costs

927

2,116

Foreign exchange (gain) loss

(1,085)

193

Loss on repayment of debt

-

397

Gain on disposal of equipment

(108)

-

Write-down of equipment

53

655

(Loss) Income before income tax

(1,802)

20,641

Income tax expense

-

-

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

(1,802)

20,641

(Loss) Earnings per share:



Basic (loss) earnings per common share

(0.01)

0.09

Diluted (loss) earnings per common share

(0.01)

0.09

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

271,380

217,775

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

271,380

218,084

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

(prepared in accordance with IFRS, expressed in thousands of Canadian dollars)

 


FOR THE YEAR ENDED DECEMBER 31

2013

2012

Cash flows from (used in) operating activities



(Loss) Income before tax

$  (1,802)

$  20,641

   Adjustment for items not affecting cash:



  Accretion on convertible loan

-

67

  Accrued interest and government royalties

270

1,161

  Depreciation

2,082

3,012

  Development cost amortization

2,034

3,893

  Fair value of warrants amortization

-

132

  Loss on repayment of debt

-

397

  Preferred share dividends accrued

657

756

  Provision for loss-making contracts

51

(189)

  Provision for obsolete inventory

335

(67)

  Stock based compensation

54

115

  Warranty provision

(85)

-

  Write-down of equipment

53

655

  Other items

(127)

(122)


3,522

30,451

Changes in non-cash working capital



  Accounts receivable

1,858

4,908

  Inventories

1,246

3,102

  Prepayments and other assets

326

(244)

  Other receivable

27,391

(27,391)

  Accounts payable and accrued liabilities

(232)

(2,853)

  Deferred program revenues

(10,262)

(1,864)

Net cash from (used in) operating activities

23,849

6,109




Cash flows from (used in) investing activities



Purchase of equipment

(1,206)

(557)

Payments relating to development costs and tooling

(556)

(1,071)

Net cash from (used in) investing activities

(1,762)

(1,628)




Cash flows from (used in) financing activities



(Decrease) in bank indebtedness

(2,122)

2,122

Payment of interest

(323)

(1,144)

Proceeds from issuance of common shares

1,249

973

Redemption of preferred shares and accrued dividends

(11,803)

-

Repayment of current and long-term debt

(4,415)

(6,882)

Repayment of government royalties

(258)

(731)

Net cash from financing activities

(17,672)

(5,662)

Net increase (decrease) in cash

4,415

(1,181)

Cash - Beginning of year

2,597

3,778

Cash - End of year

7,012

2,597

 

 

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(prepared in accordance with IFRS, expressed in thousands of Canadian dollars, except number of shares)

 


Share capital

Equity

component 

convertible

 loan

 

Contributed

 surplus

Deficit

Total

equity


Shares

Amount

Balance December 31, 2011

201,994,113

$ 73,251

$   453

$  3,424

$ (76,562)

$  566

Issue of common shares

52,903,959

2,966

-

-

-

2,966

Loan conversion

-

206

(453)

-

-

(247)

Stock based compensation expense

-

-

-

115

-

115

Income for the period

-

-

-

-

20,641

20,641

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

 

SOURCE Avcorp Industries Inc.



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