Avcorp announces 2010 Annual Financial Results

Mar 31, 2011, 22:59 ET from Avcorp Industries Inc.

VANCOUVER, March 31 /PRNewswire-FirstCall/ - Avcorp (AVP on the Toronto Stock Exchange) today announced its financial results for the year ended December 31, 2010.

During the year ended December 31, 2010, the Company recorded a net loss of $7,606,000 on $77,258,000 revenue, as compared to a $8,410,000 net loss on $69,202,000 revenue for the preceding year.

The Company has realized revenue growth in 2010 from full rate production of certain programs which were in start-up phase for the Company in 2009.  Additionally, the Company has experienced an increase in revenue during 2010 relative to 2009 arising from rate increases on mature programs, while customer demand for non-original equipment manufacturer's products and services has fallen.

Gross profit (revenue less cost of sales) for the year ended December 31, 2010 was 12.1% of revenue as compared to 6.7% of revenue for the year ended December 31, 2009.  During 2010 gross margin has improved by $4,722,000 over 2009. Gross profit has increased significantly during 2010 relative to the preceding year as a result of increased revenues and improved operating efficiencies.

Although customer demand for the Company's products has increased from the previous year, there remains within its operations significant levels of unutilized plant capacity.  The Company has expensed $4,125,000 of overhead costs during the current year (December 31, 2009: $4,667,000) in respect of unutilized plant capacity.  As at December 31, 2010, the Company recorded a one-time non-cash charge against income in the amount of $1,482,000 for the full write-down of the carrying amount of intangible assets which arose on the 2007 acquisition of its subsidiary Comtek Advanced Structures Ltd.  Concurrently, the associated future income tax liability amounting to $858,000 has been recovered in its entirety.

It should be noted that the current year loss includes a $43,000 foreign exchange loss, while the loss for the year ended December 31, 2009 was mitigated by a $4,412,000 foreign exchange gain which occurred as a result of holding foreign-currency-denominated receivables, payables and debt.

Cash flows from operating activities during the current year utilized $2,694,000 of cash, as compared to utilizing $1,493,000 of cash during the year ended December 31, 2009.  The Company has a working capital surplus of $1,316,000 as at December 31, 2010 (December 31, 2009: $820,000 surplus) and an accumulated deficit of $73,741,000 at December 31, 2010 (December 31, 2009: $65,379,000).

There were 195,505,323 common shares issued as at December 31, 2011.  The book value of common shares issued and outstanding as at December 31, 2010 was $76,042,000 (December 31, 2009: $74,601,000).

The Company is currently engaged with several of its financial stakeholders in the re-financing of certain financial arrangements.

As at December 31, 2010, the Company was not in compliance with financial covenants associated with its operating lines of credit.  In the absence of obtaining a waiver of such breach, the lender is entitled to demand immediate payment.

Also, as at December 31, 2010, the Company was not in compliance with a financial covenant associated with the convertible debenture held by Export Development Canada.  The Company has obtained a waiver from the debenture holder for this non-compliance.  Principal and interest on this loan are due March 31, 2011.

On July 1, 2011, the Company's preferred shares and all accrued and unpaid dividends will be redeemable at the option of the holder.

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, 473 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).


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 December 31, 2010 and December 31, 2009
(in thousands of Canadian dollars)

  December 31, 2010 December 31, 2009
Current assets    
Accounts receivable $   8,869 $   6,689
Inventories 14,886 15,497
Prepayments 1,922 1,092
Other assets 28 24
  25,705 23,302
Development costs 5,181 3,923
Property, plant and equipment 14,794 17,346
Warranty claim receivable - 1,637
Intangible assets - 1,818
  45,680 48,026
Current liabilities    
Bank indebtedness 8,158 8,422
Accounts payable and accrued liabilities 10,811 7,929
Current portion of long-term debt 5,420 6,131
  24,389 22,482
Deferred gain 358 405
Lease inducement 764 863
Deferred tooling revenues 6,804 3,116
Long-term debt 3,275 1,811
Warranty provision 167 1,647
Future income tax liability 0 858
  35,757 31,182
Shareholders' Equity    
Capital stock 72,927 71,954
Equity component of convertible loan 453 -
Preferred shares 7,622 7,622
Contributed surplus 2,662 2,647
Deficit  (73,741) (65,379)
  9,923 16,844
  45,680 48,026

Consolidated Statements of Operations and Comprehensive Loss
For the years ended December 31, 2010 and 2009
(in thousands of Canadian dollars, except number of shares and per share amounts)

  December 31, 2010 December 31, 2009
Revenues $   77,258 $   69,202
Cost of sales and expenses    
Cost of sales 67,889 64,555
Administrative and general expenses 10,842 10,477
Amortization and depreciation 3,761 4,083
Foreign exchange loss (gain) 43 (4,412)
  82,535 74,703
Income (Loss) from operations (5,277) (5,501)
Interest expense and financing charges (1,361) (1,739)
Unrealized derivative gain (loss) 5 (705)
Write-down of equipment (349) (793)
Write-down of intangible assets (1,482) -
Loss before income taxes (8,464) (8,738)
Future Income Tax Recovery 858 328
Loss and comprehensive loss for the period (7,606) (8,410)
Basic and diluted loss per common share (0.04) (0.12)
Basic weighted average number of shares outstanding (000's) 192,632 69,632
Diluted weighted average number of shares outstanding (000's) 193,507 69,632

Consolidated Statements of Deficit
For the years ended December 31, 2010 and 2009
(in thousands of Canadian dollars)

  December 31, 2010 December 31, 2009
Deficit - Beginning of period $   (65,379) $  (56,213)
Income (Loss) for the period (7,606) (8,410)
Preferred share dividends (756) (756)
Deficit - End of period (73,741) (65,379)

Consolidated Statements of Cash Flows
For the years ended December 31, 2010 and 2009
(in thousands of Canadian dollars)

  December 31, 2010 December 31, 2009
Cash flows from operating activities    
Income (Loss) for the period $   (7,606) $  (8,410)
Items not affecting cash 4,255 6,408
  (3,351) (2,002)
Change in non-cash items related to operating activities 657 509
  (2,694) (1,493)
Cash flows from investing activities    
Purchase of property, plant and equipment (1,228) (402)
Proceeds from disposal of property, plant and equipment 11 58
Payments relating to development costs and tooling (1,501) (2,586)
  (2,718) (2,930)
Cash flows from financing activities    
Net increase or (repayment) of bank indebtedness (264) (5,851)
Proceeds from customer funding of program development and tooling 4,057 2,309
Proceeds from current and long-term debt 1,771 5,952
Repayment of current and  long-term debt (1,125) (2,738)
Issue of common shares 977 5,244
Share issue expense (4) (493)
  5,412 4,423
Net change in cash and cash equivalents - -
Cash and cash equivalents - Beginning of period - -
Cash and cash equivalents - End of period - -
Interest paid 801 1,300



SOURCE Avcorp Industries Inc.