Provided by Avcorp Industries Inc./CNW
VANCOUVER, March 30, 2020 /CNW/ – 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).