PR Newswire | Nov 10, 2021 09:35PM EST

11/10 20:34 CST

Avcorp announces 2021 Third Quarter Financial Results VANCOUVER, BC, Nov. 10, 2021

VANCOUVER, BC, Nov. 10, 2021 /PRNewswire/ - Avcorp Industries Inc. (TSX: AVP) (the "Company", "Avcorp" or the "Avcorp Group") today announced its financial results for the quarter ended September 30, 2021. All amounts are in Canadian currency unless otherwise stated.

2021 Third Quarter Highlights

* Third quarter 2021 revenue was $25,905,000 compared to $33,769,000 in 2020. 2021 revenue decreased by $7,864,000, in comparison to 2020. Revenue was affected by lower customer requirements due to the COVID-19 virus and fulfilling the remaining customer requirements of a contract at the Gardena facility, offset by the continued growth in the F35 Program in the Delta facility. * Third quarter 2021 net loss was $3,172,000 compared to net loss of $1,263,000 in 2020. Loss increased in comparison to 2020 mainly due to lower gross profit, and a foreign exchange loss of $385,000 in current quarter compared to a gain of $712,000 in 2020, partially offset by lower administrative and general expenses. The US dollar strengthened against the Canadian dollar resulting in a loss predominately from the translation of the Company's US dollar denominated Bank indebtedness and Term debt. * Third quarter 2021 cash flows from operating activities before changes in non-cash working capital were $695,000 compared to an inflow of $2,021,000 in 2020. 2020 cashflow was partially supported by the Canada Emergency Wage Subsidies of $1,232,000. * In August 2021, the Company signed a contract extension with Boeing to provide the Wheel Well Fairing assemblies for the Boeing 737 MAX. * The Company has improved the shareholders' deficiency to $34,810,000 as at September 30, 2021 (December 31, 2020: deficiency of $49,140,000). This was the result of the Company entering into a multiparty amended and restated Accommodation Agreement with a customer and Panta Canada B.V on March 12, 2021. This eliminated the unamortized cash advance, provided a mutual release and forgiveness of certain historic and future guarantee fees payable to the customer, and a legal claim.

Review of 2021 Third Quarter Results

For the quarter ended September 30, 2021, the Avcorp Group recorded an operating loss of $1,590,000 from $25,905,000 of revenue, as compared to an operating loss of $326,000 from $33,769,000 of revenue from the same quarter in the previous year. The third quarter of 2021 operating loss increased in comparison to 2020 by $1,264,000 mainly due to lower revenue, lower gross profit of $1,053,000 and lower other income of $479,000, partially offset by lower administrative and general expenses of $249,000.

During the quarter ended September 30, 2021, cash flows from operating activities before changes in non-cash working capital were $695,000 compared to an inflow of $2,021,000 in 2020. 2020 cashflow was partially supported by the Canada Emergency Wage Subsidies of $1,232,000.

As at September 30, 2021, the Company had $6,442,000 cash on hand (December 31, 2020: $7,044,000) and had utilized $74,435,000 of its operating line of credit (December 31, 2020: $76,439,000). The bank indebtedness balance of the modification gain and related adjustments as a result of the execution of an amending agreement in 2021 was $1,076,000 as at September 30, 2021, (December 31, 2020 loss of $269,000 from the 2019 amendment). The Company has a working capital surplus of $26,327,000 as at September 30, 2021, compared with $77,780,000 deficit as at December 31, 2020. Working capital is defined as the difference between current assets and current liabilities. The increase compared to 2020 was mainly due to the bank indebtedness re-classified as non-current upon extension of maturity to June 30, 2023 with a loan amendment entered into in June 2021. On September 30, 2021, the ratio of the Company's current assets to current liabilities was 1.64:1 (December 31, 2020: 0.47:1).

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 450 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)

September 30, 2021 December 31, 2020

ASSETS

Current assets

Cash $6,442 $7,044

Accounts receivable 11,721 14,436

Government grant receivable 1,102 2,688

Contract assets 33,110 34,325

Inventories 12,846 9,657

Prepayments and other assets 2,364 2,108

67,585 70,258

Non-current assets

Prepayments and other assets 2,881 2,877

Development costs 10,598 9,045

Property, plant, and equipment 29,928 38,703

Intangibles 586 655

Total assets 111,578 121,538

LIABILITIES AND DEFICIENCY

Current liabilities

Bank indebtedness - 76,708

Accounts payable and accrued liabilities 20,284 27,932

Term debt 2,976 16,868

Contract liability 16,999 11,502

Onerous contract provision 800 282

Deferred government grant 199 657

Customer advance - 5,911

Guarantee fee - 8,178

41,258 148,038

Non-current liabilities

Bank indebtedness 73,359 -

Term debt 26,853 19,168

Contract liability 4,918 3,189

Onerous contract provision - 283

146,388 170,678

(Deficiency) Equity

Capital stock 86,219 86,219

Contributed surplus 6,863 5,478

Accumulated other comprehensive income 8,021 8,082

Accumulated deficit (135,913) (148,919)

(34,810) (49,140)

Total liabilities and deficiency 111,578 121,538

CONDENSED INTERIM CONSOLIDATED STATEMENTSOF INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS)(unaudited, expressed in thousands of Canadian dollars, except number of shares and per share amounts)

FOR THE PERIOD ENDED SEPTEMBER 30 Three months Nine months ended ended

2021 2020 2021 2020

Revenues $25,905 $33,769 $74,223 $106,220

Cost of sales 24,398 31,209 73,823 103,144

Gross profit 1,507 2,560 400 3,076

Administrative and general expenses 3,969 4,218 14,361 12,590

Office equipment depreciation 174 193 543 588

Accommodation agreement settlement - - (21,391) -

Other income (1,046) (1,525) (7,818) (3,996)

Operating (loss) income (1,590) (326) 14,705 (6,106)

Finance costs - net 1,197 1,649 2,033 6,346

Foreign exchange loss (gain) 385 (712) (392) 732

Net loss on sale of equipment - - 58 87

(Loss) income before income tax (3,172) (1,263) 13,006 (13,271)

Income tax expense - - - -

(Loss) income for the period (3,172) (1,263) 13,006 (13,271)

Other comprehensive (loss) gain (1,261) 977 (61) (1,115)

Total comprehensive (loss) income for the (4,433) (286) 12,945 (14,386)period

(Loss) income per share:

Basic (loss) income per common share (0.01) (0.00) (0.04) 0.04

Diluted (loss) income per common share (0.01) (0.00) (0.04) 0.04

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

Diluted weighted average number of shares 368,118 368,118 371,465 368,118outstanding (000's)

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS(unaudited, expressed in thousands of Canadian dollars)

Three months Nine months ended ended

FOR THE PERIOD ENDED SEPTEMBER 30 2021 2020 2021 2020

Cash flows (used in) from operatingactivities

Net (loss) income for the period $ $ $13,006 $ (3,172) (1,263) (13,271)

Adjustment for items not affecting cash:

Interest expense 1,197 1,649 2,033 6,346

Depreciation 1,769 2,047 5,356 6,321

Development cost amortization 424 771 987 1,169

Intangible assets amortization 23 297 68 906

Provision for onerous contracts 213 - 235 120

Provision for doubtful accounts 13 (76) 15 (326)

Provision for obsolete inventory 500 (380) 630 (434)

Accommodation agreement settlement - - (21,391) -

Stock based compensation 3 8 1,385 24

Loss on disposal of equipment - - 58 87

Lease modification (gain)/loss (2) - 344 -

Unrealized foreign exchange 549 (933) (150) 669

Government grant income (822) (99) (4,334) (166)

Cash flows from (used in) operatingactivities before changes 695 2,021 (1,758) 1,445in non-cash working capital

Changes in non-cash working capital

Accounts receivable 1,590 324 5,303 1,808

Contract assets (2,212) 4,343 1,260 6,565

Inventories (1,079) 16 (3,756) 1,918

Prepayments and other assets (745) (2,291) 1,927 (1,593)

Accounts payable and accrued liabilities 344 (1,543) (659) (10,703)

Contract liability 5,750 2,856 4,369 4,272

Net cash from operating activities 4,343 5,726 6,686 3,712

Cash flows (used in) from investingactivities

Proceeds from sale of equipment - - 647 34

Purchase of equipment (704) (884) (1,410) (1,579)

Receipt of government grants for purchase of 147 - 147 -equipment

Payments relating to development costs and (458) (780) (2,539) (3,166)tooling

Initial lease payments and other direct costs - - - (31)incurred

Net cash used in investing activities (1,015) (1,664) (3,155) (4,742)

Cash flows (used in) from financingactivities

Proceeds from bank indebtedness - - - 653

Repayment of bank indebtedness - (4,744) (2,106) (4,744)

Payment of interest (634) (876) (1,860) (3,272)

Proceeds from term debt - - 2,503 12,553

Repayment of term debt (657) (628) (2,599) (1,880)

Net cash (used in) from financing activities (1,291) (6,248) (4,062) 3,310

Net increase (decrease) in cash 2,037 (2,186) (531) 2,280

Net foreign exchange difference (65) (22) (71) 10

Cash - Beginning of the period 4,470 8,814 7,044 4,316

Cash - End of the period 6,442 6,606 6,442 6,606

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' DEFICIENCY(unaudited, expressed in thousands of Canadian dollars, except number of shares)

Capital Stock

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

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

Stock-based compensation expense - - 24 - - 24

Unrealized currency loss on translation for the period - - - - (1,115) (1,115)

Net loss for the period - - - (13,271) - (13,271)

Balance at September 30, 2020 368,118,620 86,219 5,470 (155,465) 5,939 (57,837)

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

Stock-based compensation expense - - 1,385 - - 1,385

Unrealized currency loss on translation for the period - - - - (61) (61)

Net income for the period - - - 13,006 - 13,006

Balance at September 30, 2021 368,118,620 86,219 6,863 (135,913) 8,021 (34,810)

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SOURCE Avcorp Industries Inc.