2022 Second Quarter Highlights
- Second quarter 2022 revenue was
$29,257,000 compared to$24,385,000 in 2021. 2022 revenue increased by$4,872,000 in comparison to 2021, mainly attributed to the continued growth in the F35 program and recovery of Boeing customer revenues in the Delta Facility. - Second quarter 2022 net loss was
$5,569,000 compared to net loss of$1,212,000 in 2021. The net income in 2021 was supported by the government loan forgiven of$2,195,000 andCanada Emergency Wage Subsidies ("CEWS") of$1,548,000 recognized as other income and a modification gain on bank indebtedness of$1,155,000 . - Second quarter 2022 cash outflows from operating activities were
$1,316,000 compared to inflows of$704,000 in 2021. The second quarter of 2021 cash flows from operating activities were supported by the receipt of CEWS of$2,078,000 and the receipt ofCanada Emergency Rent Subsidies ("CERS") of$305,000 . - On
April 1, 2022 , the Company signed a contract withBLR Aerospace to produceKing Air 200 Wingtips and shipped the first delivery onJune 20, 2022 . - On
April 12, 2022 , the Company signed a contract extension to 2027 with Boeing to provide the detail parts, bench top assemblies and metal bonded assemblies for the Boeing 737 and 777 aircrafts. - On
May 4, 2022 , the Company entered into a definitive arrangement agreement (the "Original Agreement") with LatécoèreS.A. ("Latécoère") pursuant to which Latécoère agreed to acquire all of the issued and outstanding common shares of Avcorp (each, an "Avcorp Share") for cash consideration of$0.11 per Avcorp Share, by way of a court-approved plan of arrangement under the Canada Business Corporations Act (the "Arrangement"). Pursuant to the Arrangement, the options (the "Avcorp Options") exercisable to acquire Avcorp Shares outstanding immediately prior to the effective time of the Arrangement will automatically vest and be cancelled in exchange for a cash payment from the Company equal to the amount (if any) by which$0.11 exceeds the exercise price of such Avcorp Option. Together with the repayment or assumption of Avcorp's net debt and other lease liabilities, the Arrangement implies a total transaction value of approximately$139 million for the Company. - On
June 24, 2022 , Latécoère assigned, transferred and conveyed toAlbatross Bidco Inc. , a wholly-owned subsidiary of Latécoère, (the "Purchaser") its rights, title and interest in and to, and all benefits of Latécoère under, the Arrangement Agreement, and delegated to the Purchaser all of its obligations and liabilities under the Original Agreement (the "Assignment and Delegation"). In accordance with the Original Agreement, under the Assignment and Delegation, Latécoère remains jointly and severally liable with the Purchaser under the Original Agreement. On the same date, Avcorp and the Purchaser entered into an amending agreement to the Original Agreement (the Original Agreement as amended, the "Arrangement Agreement") to reflect the Assignment and Delegation. - On
June 30, 2022 , Avcorp held its annual general and special meeting (the "Meeting") of holders of commons shares ("Shareholders") and options ("Optionholders", and together with the Shareholders, the "Securityholders"). At the Meeting, the Securityholders overwhelmingly voted in favour of the special resolution (the "Arrangement Resolution") to approve the Arrangement with the Purchaser
Highlights Subsequent to Quarter-End
- On
July 1, 2022 , the Company received approval for forgiveness on the second wave Small Business Administration Paycheck Protection Program Loan full loan amount of USD$2,000,000 and all related interests. - On
July 5, 2022 , Avcorp obtained a final order of theBritish Columbia Supreme Court approving the Arrangement. - On
July 14, 2022 , the Company accepted an offer for an interest-free repayable financial contribution up to$4,862,000 from theGovernment of Canada under the Aerospace Regional Recovery Initiative administered by thePacific Economic Development ofCanada . Avcorp will receive a reimbursement of costs for projects that adopt digital technologies to create efficiencies and enhance productivity. The financial contribution will be repaid over 60 monthly payments startingMarch 31, 2025 for funding received.
Review of 2022 Second Quarter Financial Results
For the quarter ended
Cash flows from operating activities, before consideration of changes in non-cash working capital, utilized
The Company ended the quarter with bank operating line utilization of
About Avcorp
CHIEF EXECUTIVE OFFICER
AVCORP GROUP
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(unaudited, expressed in thousands of Canadian dollars)
ASSETS | |||
Current assets | |||
Cash | |||
Accounts receivable | 16,455 | 18,116 | |
Contract assets | 11,091 | 13,319 | |
Inventories | 13,355 | 12,809 | |
Prepayments and other assets | 1,248 | 2,091 | |
44,612 | 50,395 | ||
Non-current assets | |||
Prepayments and other assets | 2,914 | 2,868 | |
Development costs | 10,921 | 10,597 | |
Contract assets | 18,079 | 18,079 | |
Property, plant, and equipment | 19,472 | 20,698 | |
Total assets | 95,548 | 102,637 | |
LIABILITIES AND DEFICIENCY | |||
Current liabilities | |||
Bank indebtedness | 76,922 | - | |
Accounts payable and accrued liabilities | 22,854 | 19,792 | |
Term debt | 17,782 | 3,041 | |
Contract liability | 14,702 | 18,625 | |
Onerous contract provision | 565 | 1,324 | |
132,825 | 42,782 | ||
Non-current liabilities | |||
Bank indebtedness | - | 74,412 | |
Term debt | 11,120 | 26,156 | |
Contract liability | 5,091 | 4,843 | |
Accounts payable and accrued liabilities | 2,011 | 2,011 | |
Onerous contract provision | 316 | 540 | |
151,363 | 150,744 | ||
(Deficiency) Equity | |||
Capital stock | 86,456 | 86,456 | |
Contributed surplus | 6,742 | 6,742 | |
Accumulated other comprehensive income | 7,204 | 8,145 | |
Accumulated deficit | (156,217) | (149,450) | |
(55,815) | (48,107) | ||
Total liabilities and deficiency | 95,548 | 102,637 |
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF (LOSS) INCOME AND COMPREHENSIVE (LOSS) INCOME
(unaudited, expressed in thousands of Canadian dollars, except number of shares and per share amounts)
FOR THE PERIOD ENDED | Three months ended | Six months ended | |||
2022 | 2021 | 2022 | 2021 | ||
Revenues | |||||
Cost of sales | 26,414 | 25,091 | 50,535 | 49,425 | |
Gross profit (loss) | 2,843 | (706) | 6,580 | (1,107) | |
Administrative and general expenses | 5,925 | 4,957 | 9,825 | 10,392 | |
Office equipment depreciation | 121 | 182 | 234 | 369 | |
Accommodation agreement settlement | - | - | - | (21,391) | |
Impairment loss | 583 | - | 583 | - | |
Other income | - | (3,867) | - | (6,772) | |
Operating (loss) income | (3,786) | (1,978) | (4,062) | 16,295 | |
Finance costs – net | 1,222 | (420) | 2,286 | 836 | |
Foreign exchange loss (gain) | 561 | (346) | 419 | (777) | |
Net loss on sale of equipment | - | - | - | 58 | |
(Loss) income before income tax | (5,569) | (1,212) | (6,767) | 16,178 | |
Income tax expense | - | - | - | - | |
(Loss) income for the period | (5,569) | (1,212) | (6,767) | 16,178 | |
Other comprehensive (loss) gain | (1,759) | 643 | (941) | 1,200 | |
Total comprehensive (loss) income for the period | (7,328) | (569) | (7,708) | 17,378 | |
(Loss) income per share: | |||||
Basic (loss) income per common share | (0.02) | (0.00) | (0.02) | 0.04 | |
Diluted (loss) income per common share | (0.02) | (0.00) | (0.02) | 0.04 | |
Basic weighted average number of shares outstanding | 370,931 | 368,118 | 370,931 | 368,118 | |
Diluted weighted average number of shares | 370,931 | 368,118 | 370,931 | 370,499 |
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, expressed in thousands of Canadian dollars)
Three months ended | Six months ended | ||||
FOR THE PERIOD ENDED | 2022 | 2021 | 2022 | 2021 | |
Cash flows (used in) from operating activities | |||||
Net (loss) income for the period | |||||
Adjustment for items not affecting cash: | |||||
Interest expense | 1,222 | (420) | 2,286 | 836 | |
Depreciation | 1,057 | 1,749 | 2,078 | 3,587 | |
Development cost amortization | 381 | 398 | 713 | 563 | |
Intangible assets amortization | - | 22 | - | 45 | |
Provision for onerous contracts | (497) | 187 | (983) | 22 | |
Provision for doubtful accounts | (1) | 2 | - | 2 | |
Provision for obsolete inventory | 108 | 220 | 407 | 130 | |
Accommodation agreement settlement | - | - | - | (21,391) | |
Stock based compensation | - | 3 | - | 1,382 | |
Loss on disposal of equipment | - | - | - | 58 | |
Impairment loss | 583 | - | 583 | - | |
Lease modification loss | - | - | - | 345 | |
Unrealized foreign exchange | 644 | (352) | 356 | (687) | |
Government grant income | - | (1,377) | - | (3,512) | |
Cash flows used in operating activities before | (2,072) | (780) | (1,327) | (2,442) | |
Changes in non-cash working capital | |||||
Accounts receivable | 226 | (577) | 6,981 | 3,713 | |
Contract assets | (1,134) | 2,597 | 2,243 | 3,472 | |
Inventories | (151) | (116) | (829) | (2,677) | |
Prepayments and other assets | 476 | 1,048 | 956 | 2,672 | |
Accounts payable and accrued liabilities | 3,479 | (2,006) | 2,999 | (1,003) | |
Contract liability | (2,140) | 538 | (9,167) | (1,381) | |
Net cash (used in) from operating activities | (1,316) | 704 | 1,856 | 2,354 | |
Cash flows (used in) from investing activities | |||||
Proceeds from sale of equipment | - | - | - | 645 | |
Purchase of equipment | (329) | (478) | (727) | (706) | |
Payments relating to development costs and tooling | (772) | (752) | (1,038) | (2,081) | |
Net cash used in investing activities | (1,101) | (1,230) | (1,765) | (2,142) | |
Cash flows (used in) from financing activities | |||||
Proceeds from bank indebtedness | 949 | - | 949 | - | |
Repayment of bank indebtedness | - | (1,515) | - | (2,106) | |
Payment of interest | (713) | (598) | (1,293) | (1,226) | |
Proceeds from term debt | - | - | - | 2,494 | |
Repayment of term debt | (752) | (1,203) | (1,794) | (1,942) | |
Net cash used in financing activities | (516) | (3,316) | (2,138) | (2,780) | |
Net decrease in cash | (2,933) | (3,842) | (2,047) | (2,568) | |
Net foreign exchange difference | - | 7 | - | (6) | |
Cash - Beginning of the period | 4,946 | 8,305 | 4,060 | 7,044 | |
Cash - End of the period | 2,013 | 4,470 | 2,013 | 4,470 |
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' DEFICIENCY
(unaudited, expressed in thousands of Canadian dollars, except number of shares)
Capital Stock | ||||||
Number of | Amount | Contributed | Accumulated | Accumulated | Total | |
Balance at | 368,118,620 | 86,219 | 5,478 | (148,919) | 8,082 | (49,140) |
Stock-based compensation expense | - | - | 1,382 | - | - | 1,382 |
Unrealized currency gain on | - | - | - | - | 1,200 | 1,200 |
Net income for the period | - | - | - | 16,178 | - | 16,178 |
Balance at | 368,118,620 | 86,219 | 6,860 | (132,741) | 9,282 | (30,380) |
Balance at | 370,931,120 | 86,456 | 6,742 | (149,450) | 8,145 | (48,107) |
Unrealized currency loss on | - | - | - | - | (941) | (941) |
Net loss for the period | - | - | - | (6,767) | - | (6,767) |
Balance at | 370,931,120 | 86,456 | 6,742 | (156,217) | 7,204 | (55,815) |
Forward-Looking Statements Disclaimer
This press release includes forward-looking statements, which may involve, but are not limited to: statements with respect to our business objectives, prospects, and guidance in respect of various financial and industry metrics, including, goals, strategies, capabilities, market position, competitive strengths, prospects, plans, expectations, anticipations, estimates and intentions; business and economic, industry trends; customer demand for products; order backlog mix; the regulatory environment and legal proceedings; strength of our balance sheet, creditworthiness, capital resources, anticipated financial requirements, productivity enhancements, operational efficiencies, cost reduction and the intended benefits and timing thereof; availability of government assistance programs, compliance with debt covenants; and the impact of the COVID-19 pandemic on the foregoing; expectations regarding gradual market and economic recovery in the aftermath of the COVID-19 pandemic.
Forward-looking statements can generally be identified by the use of forward-looking terminology such as "may", "will", "shall", "can", "expect", "estimate", "intend", "anticipate", "plan", "forecast", "foresee", "believe", "continue", "maintain" or "align", the negative of these terms, variations of them or similar terminology.
Forward-looking statements are presented for the purpose of assisting investors and others in understanding certain key elements of our current objectives, strategic priorities, expectations, outlook, and plans, and to obtain an understanding of our business and anticipated operating environment. Readers are cautioned that such information may not be appropriate for other purposes.
Forward-looking statements require management and the Board to make assumptions and are subject to and unknown risks and uncertainties, which may cause our actual results in future periods to differ materially from forecast results set forth in forward-looking statements and in this press release. While management and the Board consider these assumptions to be reasonable and appropriate based on information currently available, there is risk that they may not be accurate. The assumptions underlying the forward-looking statements made in this press release in relation to the five-year forecast include the following material assumptions: the award and fulfilment of customer contracts that the Company does not currently have in its backlog, the continuation of existing customer programs and anticipated labour costs associated with our operations for the periods covered in the forecast. Additional information, including with respect to other assumptions and risk factors underlying the forward-looking statements made in this press release, refer to the risk factors in both our MD&A, Annual Report and our Annual Information Form for the fiscal year ended
Certain factors that could cause actual results to differ materially from those anticipated in the forward-looking statements include, but are not limited to, risks associated with overall global and domestic economic conditions, risks associated with our business environment (such as risks associated with the financial condition of our customers; increased competition from international and domestic suppliers; force majeure events), operational risks such as the award of new business; order backlog; the execution of customer orders; cash flows and capital expenditures based on cyclicality; productivity enhancements, operational efficiencies, cost reduction initiatives; product warranty; regulatory and legal proceedings; environmental, health and safety risks; dependence on certain customers, contracts and suppliers; supply chain risks; human resources; reliance on information systems; reliance on and protection of intellectual property rights; adequacy of insurance coverage), financing risks (such as risks related to liquidity and access to capital markets; substantial debt and interest payment requirements; debt covenants), market risks (such as foreign currency fluctuations; changing interest rates; increases in commodity prices; and inflation rate fluctuations). For more details, see the Risks outlined in our MD&A. The foregoing factors may be exacerbated by the ongoing COVID-19 outbreak and may have a significantly more severe impact on the Corporation's business, results of operations and financial condition than in the absence of such outbreak. As a result of the current COVID-19 pandemic, additional factors that could cause actual results to differ materially from those anticipated in the forward-looking statements include, but are not limited to: risks related to the impact and effects of the COVID-19 pandemic on economic conditions and financial markets and the resulting impact on our business, operations, capital resources, liquidity, financial condition, margins, prospects and results; uncertainty regarding the magnitude and length of economic disruption as a result of the COVID-19 outbreak and the resulting effects on the demand for our products and services; emergency measures and restrictions imposed by public health authorities or governments, fiscal and monetary policy responses by governments and financial institutions; disruptions to global supply chain, customers, workforce, counterparties and third-party service providers; further disruptions to operations, orders and deliveries; technology, privacy, cyber security and reputational risks; and other unforeseen adverse events.
The forward-looking statements present certain non-IFRS financial measures to assist readers in understanding the Company's forecasted performance. Non-IFRS financial measures are measures that either exclude or include amounts that are not excluded or included in the most directly comparable measures calculated and presented in accordance with Generally Accepted Accounting Principles ("GAAP").
The foregoing list of factors that may affect future results and performance is not exhaustive and undue reliance should not be placed on forward-looking statements. The forward-looking statements set forth herein reflect management's expectations as at the date of this press release and are subject to change after such date. Unless otherwise required by applicable securities laws, we expressly disclaim any intention, and assume no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. The forward-looking statements contained in this press release are expressly qualified by this cautionary statement.
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