PR Newswire | May 12, 2021 09:02PM EDT

05/12 20:01 CDT

Avcorp announces 2021 First Quarter Financial Results VANCOUVER, BC, May 12, 2021

VANCOUVER, BC, May 12, 2021 /PRNewswire/ - Avcorp Industries Inc. (TSX: AVP) (the "Company", "Avcorp" or the "Avcorp Group") today announced its financial results for the quarter ended March 31, 2021. All amounts are in Canadian currency unless otherwise stated.

2021 First Quarter Highlights

* First quarter 2021 revenue was $23,933,000 compared to $40,205,000 in 2020. 2021 revenue decreased by $16,272,000, in comparison to 2020. Revenue was affected by lower customer requirements due to the Coronavirus ("COVID-19"). * First quarter 2021 net income was $17,390,000 compared to net loss of $10,414,000 in 2020. The net income in the first quarter of 2021 was supported by the accommodation agreement. * On March 12, 2021, the Company entered into a multiparty amended and restated Accommodation Agreement with a customer and Panta Canada B.V. * Panta Canada B.V. has agreed to provide a USD $10,000,000 non-revolving standby loan facility and a USD $3,000,000 equipment loan for an aggregate availability of USD $13,000,000. * The elimination of an unamortized cash advance, mutual release and forgiveness of certain historic and future guarantee fees payable to the customer, and a legal claim. The customer advance of $5,800,000 (USD $4,643,000), guarantee fee of $8,595,000 (USD $6,880,000), and a legal claim provision of $6,996,000 (USD $5,600,000) were released and included in the first quarter 2021 Net income.

* First quarter 2021 cash flows from operating activities were $1,603,000 compared to an outflow of $5,338,000 in 2020. The first quarter of 2021 cash flows from operating activities were supported by the receipt of Canada Emergency Wage Subsidies of $3,127,000. * On February 25, 2021, the Company amended the Avcorp Composite Fabrication Inc.'s Gardena facility lease agreement effective January 1, 2021 to vacate certain buildings, reduce shared operating expenses, and set new lease terms. * On March 15, 2021, the Company received a $2,532,000 (USD $2,000,000) second wave Small Business Administration Paycheck Protection Program Loan. The Company has recognized an estimated forgiveness of $1,224,000 (USD $967,000) in the current quarter as the company has satisfied the requirements of loan forgiveness.

Highlights Subsequent to Quarter-End

* The Company received Canada Emergency Wage Subsidies of $733,000 and Canada Emergency Rent Subsidies of $277,000 in April 2021.

Review of 2021 First Quarter Results

For the quarter ended March 31, 2021, the Avcorp Group recorded an operating income of $18,274,000 from $23,933,000 of revenue, as compared to an operating loss of $4,700,000 from $40,205,000 of revenue from the same quarter in the previous year. The first quarter of 2021 operating income increased in comparison to 2020 by $22,974,000 mainly attributable to the Accommodation Agreement settlement of $21,391,000 and the recognition of $3,231,000 government grants as other income in the current quarter, partially offset by a stock-based compensation expense of $1,376,000 on the 17,350,000 incentive stock options granted on March 19, 2021.

During the quarter ended March 31, 2021, cash flows from operating activities generated $1,603,000 as compared to utilization of $5,338,000 in 2020. The increase was attributed to the receipt of the Canada Emergency Wage Subsidies of $3,127,000 in the current quarter and the timing difference on accounts receivables collection. The increase was partially offset by the increase in inventory in the current quarter.

As at March 31, 2021, the Company had $8,305,000 cash on hand (December 31, 2020: $7,044,000) and had utilized $74,906,000 of its operating line of credit (December 31, 2020: $76,439,000). The balance of the net loss and related adjustments on modification of bank indebtedness as a result of executing an amending agreement in 2019 was $135,000 as at March 31, 2021 (December 31, 2020$269,000). The Company has a working capital deficit of $56,569,000 as at March 31, 2021, compared with $77,780,000 deficit as at December 31, 2020. Working capital surplus/deficit is defined as the difference between current assets and current liabilities. The Company's accounts receivable, government grant receivable, contract assets, and inventories net of accounts payable amount to a $39,157,000 surplus as at March 31, 2021 (December 31, 2020: $33,174,000 surplus). The Company's accumulated deficit as at March 31, 2021 is $131,529,000 (December 31, 2020: $148,919,000).

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 65 years of experience, over 500 skilled employees and 560,000 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 KALERCHIEF EXECUTIVE OFFICERAVCORP GROUP

Forward-Looking Statements

This release should be read in conjunction with the Company's audited 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.

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(unaudited, expressed in thousands of Canadian dollars)

March 31, 2021 December 31, 2020

ASSETS

Current assets

Cash $8,305 $7,044

Accounts receivable 14,120 14,436

Government grant receivable 1,253 2,688

Contract assets 33,398 34,325

Inventories 12,259 9,657

Prepayments and other assets 2,090 2,108

71,425 70,258

Non-current assets

Prepayments and other assets 2,843 2,877

Development costs 10,209 9,045

Property, plant, and equipment 31,745 38,703

Intangibles 624 655

Total assets 116,846 121,538

LIABILITIES AND DEFICIENCY

Current liabilities

Bank indebtedness 75,041 76,708

Accounts payable and accrued liabilities 21,873 27,932

Current portion of term debt 17,263 16,868

Contract liability 13,076 11,502

Onerous contract provision 400 282

Deferred government grant 341 657

Customer advance - 5,911

Guarantee fee - 8,178

127,994 148,038

Non-current liabilities

Term debt 15,364 19,168

Contract liability 3,302 3,189

Onerous contract provision - 283

146,660 170,678

(Deficiency) Equity

Capital stock 86,219 86,219

Contributed surplus 6,857 5,478

Accumulated other comprehensive income 8,639 8,082

Accumulated deficit (131,529) (148,919)

(29,814) (49,140)

Total liabilities and deficiency 116,846 121,538

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVEINCOME (LOSS)

(unaudited, expressed in thousands of Canadian dollars, except number of sharesand per share amounts)

FOR THE QUARTER ENDED MARCH 31 2021 2020

Revenues $23,933 $40,205

Cost of sales 24,334 40,303

Gross loss (401) (98)

Administrative and general expenses 5,434 4,407

Office equipment depreciation 187 195

Accommodation agreement settlement (21,391) -

Other income (2,905) -

Operating income (loss) 18,274 (4,700)

Finance costs - net 1,256 2,769

Foreign exchange (gain) loss (431) 2,858

Net loss on sale of equipment 59 87

Income (loss) before income tax 17,390 (10,414)

Income tax expense - -

Income (loss) for the period 17,390 (10,414)

Other comprehensive gain (loss) 557 (3,984)

Total comprehensive income (loss) for the period 17,947 (14,398)

Income (loss) per share:

Basic income (loss) per common share 0.05 (0.03)

Diluted income (loss) per common share (0.03) 0.05

Basic weighted average number of shares outstanding (000's) 368,118 368,118

Diluted weighted average number of shares outstanding (000's) 370,337 368,118

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, expressed in thousands of Canadian dollars)

FOR THE QUARTER ENDED MARCH 31 2021 2020

Cash flows from (used in) operating activities

Net income (loss) for the year $17,390 $(10,414)

Adjustment for items not affecting cash:

Net interest expense 1,256 2,634

Depreciation 1,838 2,068

Development cost amortization 165 311

Intangible assets amortization 23 300

Provision for onerous contracts (165) (124)

Provision for doubtful accounts - (127)

Provision for obsolete inventory (90) (252)

Accommodation agreement settlement (21,391) -

Stock based compensation 1,379 9

Lease modification loss 350 -

Loss on disposal of equipment 59 87

Government grant income (2,135) -

Unrealized foreign exchange (388) 2,968

Cash flows used in operating activities before (1,709) (2,540)changes in non-cash working capital

Changes in non-cash working capital

Accounts receivable 4,290 (6,512)

Contract assets 875 1,376

Inventories (2,561) 541

Prepayments and other assets 1,624 117

Accounts payable and accrued liabilities 1,003 1,524

Contract liability (1,919) 156

Net cash from (used in) operating activities 1,603 (5,338)

Cash flows (used in) from investing activities

654 -Proceeds from sale of equipment

Purchase of equipment (228) (221)

Payments relating to development costs and tooling (1,329) (1,450)

Net cash used in investing activities (903) (1,671)

Cash flows from (used in) financing activities

Proceeds from bank indebtedness - 653

Repayment of bank indebtedness (591) -

Payment of interest (628) (1,147)

Proceeds from term debt 2,532 6,924

Repayment of term debt (739) (612)

Net cash from financing activities 574 5,818

Net increase (decrease) in cash 1,274 (1,191)

Net foreign exchange difference (13) 74

Cash - Beginning of the period 7,044 4,316

Cash - End of the period 8,305 3,199

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS'DEFICIENCY

(unaudited, expressed in thousands of Canadian dollars, except number ofshares)

Capital Stock

Accumulated Number of Amount Contributed Accumulated Other Total Shares Surplus Deficit Comprehensive Deficiency Income

Balance atDecember 31, 368,118,620 86,219 5,446 (142,194) 7,054 (43,475)2019

Stock-basedcompensation - - 9 - - 9expense

Unrealizedcurrencyloss on - - - - (3,984) (3,984)translationfor theperiod

Net loss for - - - (10,414) - (10,414)the period

Balance atMarch 31, 368,118,620 86,219 5,455 (152,608) 3,070 (57,864)2020

Balance atDecember 31, 368,118,620 86,219 5,478 (148,919) 8,082 (49,140)2020

Stock-basedcompensation - - 1,379 - - 1,379expense

Unrealizedcurrencygain on - - - - 557 557translationfor theperiod

Net incomefor the - - - 17,390 - 17,390period

Balance atMarch 31, 368,118,620 86,219 6,857 (131,529) 8,639 (29,814)2021

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SOURCE Avcorp Industries Inc.