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Avcorp announces 2019 Annual Financial Results
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PR Newswire
VANCOUVER, March 30, 2020
VANCOUVER, March 30, 2020 /PRNewswire/ - Avcorp Industries Inc. (TSX: AVP) (the "Company", "Avcorp" or the "Avcorp Group") today announced its financial results for the year ended December 31, 2019. All amounts are in Canadian currency unless otherwise stated.
2019 Highlights
Key financial results include:
- 2019 revenue was $164,770,000 compared to $170,710,000 in 2018. 2019 revenue decreased by $1,323,000, in comparison to 2018, after the benefit of amortization of the unfavourable contract liability is removed.
- 2019 operating loss was $1,124,000 compared to operating income of $26,917,000 in 2018. Operating loss improved by $2,101,000 in comparison to 2018, after the benefit of amortization of unfavourable contracts liability and onerous contracts provisions, net contract modification, and the net claims impact have been removed. This was mainly due to improvement in operational performance and consolidation of costs. 2019 operating results were negatively impacted by the lower deliveries caused by 737 MAX grounding and labour disruptions at the Delta facility.
- 2019 cash flows from operating activities was $10,911,000 compared to utilization of $16,029,000 in 2018. 2019 cash flows from operating activities improved by $12,508,000, relative to 2018, after the net cash settlement of $14,431,000 (USD$10,810,000) from the agreement with Hitco Carbon Composites Inc., SGL Carbon, SGL, and SGL Carbon SE (the "SGL Parties") and a customer has been removed.
- On January 25, 2019, the Company entered into a net claim settlement agreement with HITCO Carbon Composites, Inc., SGL Carbon, LLC, and SGL Carbon SE (the "SGL parties") and a customer, which provided the Company a settlement in satisfaction of existing and potential claims, causes of action, disputes and other business matters related to the acquisition from the SGL parties. The net claim settlement resulted in a gain of $19,759,000.
- During the second quarter of 2019, the Company received all required customer approvals for the 737 MAX spoiler program; subsequently, on July 5, 2019 the Company successfully shipped the first shipset.
- On September 25, 2019 the Company reached a new labour agreement with the International Association of Machinists and Aerospace Workers (Lodge 250) (the "Union") at its Delta, British Columbia facility. The six-year labour agreement was ratified by the Union and will expire on March 31, 2025 bringing the company long term stability.
- On November 15, 2019 the Company amended its loan agreement with a Canadian Chartered Bank to extend the maturity date of the existing operating credit facility to June 30, 2021, which is supported by a major and material customer of the Company by way of a guarantee.
- On November 15, 2019 the Company entered into an amendment and restatement of the existing non-revolving term loan agreement with Panta Canada B.V. ("Panta"), as well as securing an additional USD$3,500,000 revolving loan facility from Panta.
Highlights Subsequent to Year-End
- On March 2, 2020 the Company entered into an amendment and restatement of the existing non-revolving term loan agreement with Panta Canada B.V. ("Panta"), as well as securing an additional USD$2,000,000 revolving loan facility from Panta.
Review of 2019 Financial Results
For the year ended December 31, 2019, the Avcorp Group recorded losses from operations totaling $1,124,000 from $164,770,000 revenue, as compared to $26,917,000 operating income from $170,710,000 revenue for the previous year. It should be noted that 2019 operating loss benefited by $1,665,000 income from amortization of onerous contracts provision (December 31, 2018: $13,732,000 amortization of unfavourable contract liability and onerous contract liability). In addition, 2019 benefitted from the net settlement gain of $17,974,000 in comparison to 2018 which benefitted from the net contract modification for an unfavourable contract in the amount of $41,470,000 and a net claim settlement loss of $5,421,000. Continued consolidation of operating costs have resulted in reduced current year operating losses of $2,101,000 in comparison to 2018 after these benefits have been removed.
During the year ended December 31, 2019, cash flows from operating activities, excluding the impact of changes in non‑cash working capital, were $2,631,000 of cash as compared with utilization of $11,632,000 of cash during the year ended December 31, 2018. The company received a net cash settlement of USD$10,810,000 from the agreement with Hitco Carbon Composites Inc., SGL Carbon, SGL, and SGL Carbon SE (the "SGL Parties") and a customer.
As at December 31, 2019, the Company had $4,316,000 cash on hand (December 31, 2018: $2,051,000) and had utilized $84,661,000 of its operating line of credit (December 31, 2018: $85,840,000). The Company has a working capital deficit of $71,561,000 as at December 31, 2019 which has increased slightly from the December 31, 2018 $71,503,000 deficit. Working capital surplus/deficit is defined as the difference between current assets and current liabilities. However, the Company's accounts receivable, contract assets, and inventories net of accounts payable, amount to a $18,541,000 surplus as at December 31, 2019 (December 31, 2018: $22,000,000 surplus). The Company's accumulated deficit as at December 31, 2019 is $142,194,000 (December 31, 2018: $132,878,000).
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).
AMANDEEP KALE
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
(unaudited, expressed in thousands of Canadian dollars)
| AS AT DECEMBER 31 | 2019 | 2018 |
| ASSETS | | |
| Current assets | | |
| Cash | $4,316 | $2,051 |
| Accounts receivable | 17,625 | 23,442 |
| Contract assets | 26,162 | 24,762 |
| Inventories | 12,933 | 15,601 |
| Prepayments and other assets | 2,136 | 3,205 |
| | 63,172 | 69,061 |
| Non-current assets | | |
| Prepayments and other assets | 2,738 | 3,017 |
| Development costs | 14,075 | 11,755 |
| Property, plant and equipment | 46,328 | 28,416 |
| Intangibles | 1,827 | 3,137 |
| Investment in AVS-SYS | - | 682 |
| Total assets | 128,140 | 116,068 |
| | | |
| LIABILITIES AND EQUITY | | |
| Current liabilities | | |
| Bank indebtedness | 85,470 | 85,840 |
| Accounts payable and accrued liabilities | 38,178 | 41,805 |
| Current portion of term debt | 2,768 | 5,510 |
| Customer advance | 6,030 | 6,334 |
| Contract liability | 2,036 | 2,137 |
| Onerous contract provision | 251 | 1,809 |
| | 134,733 | 143,435 |
| Non-current liabilities | | |
| Guarantee fee | 5,277 | 2,994 |
| Term debt | 26,848 | 2,800 |
| Contract liability | 4,757 | 2,862 |
| Onerous contract provision | - | 121 |
| | 171,615 | 152,212 |
| (Deficiency) Equity | | |
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