From Avcorp Industries Inc
VANCOUVER, May 15, 2020 /CNW/ – Avcorp Industries Inc. (TSX: AVP) (the “Company”, “Avcorp” or the “Avcorp Group”) today announced its financial results for the quarter ended March 31, 2020. All amounts are in Canadian currency unless otherwise stated.
2020 Highlights
Key financial results include:
- First quarter 2020 revenue was $40,205,000 compared to $42,225,000 in 2019. 2020 revenue decreased by $2,020,000 as a result of lower deliveries caused by lower customer requirements, the novel Coronavirus (“COVID-19”), and 737 MAX grounding.
- First quarter 2020 operating loss was $4,700,000 compared to operating income of $15,057,000 in 2019. Operating loss improved by $380,000 in comparison to 2019, after the benefit of the amortization of onerous contract provisions and a net claim settlement have been removed. This was mainly due to improvement in operational performance and consolidation of costs.
- First quarter 2020 foreign exchange loss was $2,858,000 (March 31, 2019: $430,000 gain). The Canadian dollar significantly weakened against the US dollar resulting in a loss predominately from the translation of the Company’s US dollar denominated Bank indebtedness and Term debt.
- 2020 cash flows used in operating activities before changes in non-cash working capital was $2,540,000 (March 31, 2019: cash inflow of $12,998,000). 2020 cash flows used in operating activities worsened by $1,107,000 relative to 2019, after the positive net cash settlement in 2019 of $14,431,000 (USD$10,810,000).
- On March 2, 2020, the Company entered into an amendment to the standby credit facility (“2019 Panta Loan”) with Panta Canada B.V. (“Panta”) securing and drawing an additional $2,686,000 (USD$2,000,000).
Highlights Subsequent to Quarter-End
- On April 27, 2020, the Company entered into an amendment to its existing operating credit facility with a Canadian Chartered Bank whereby the maximum availability under the Loan agreement cannot exceed USD $68,000,000 less USD $1,000,000 until June 30, 2020 and thereafter less USD $2,300,000 providing additional liquidity.
- The Company has taken actions to manage short term liquidity, on April 28, 2020, the Company received a loan in the amount of USD $4,123,100 to support Avcorp Composite Fabrication Inc (“ACF”) through the Paycheck Protection Program from the U.S. Small Business Administration. The loan has a term of 2 years. The loan bears interest at a fixed rate of 1% per annum with the first six months of interest deferred and will be forgiven if at least 75% of the loan proceeds are used by ACF to cover payroll costs including benefits. ACF expects to meet the requirements of loan forgiveness.
Review of 2020 First Quarter Results
For the quarter ended March 31, 2020, the Avcorp Group recorded losses from operations totaling $4,700,000 from $40,205,000 revenue, as compared to income from operations totaling $15,057,000 from $42,225,000 revenue from the same quarter in the previous year. It should be noted that 2020 operating loss benefited by $124,000 income from amortization of onerous contracts provision (March 31, 2019: $517,000 amortization of onerous contract liability). In addition, 2019 benefitted from a net settlement gain of $19,744,000. Continued consolidation of operating costs have resulted in reduced current year operating losses of $380,000 in comparison to the first quarter of 2019 after these benefits have been removed.
During the quarter ended March 31, 2020, cash flows from operating activities, excluding the impact of changes in non-cash working capital, utilized $2,540,000 of cash as compared with $12,998,000 of cash provided during the quarter ended March 31, 2019. The company received a 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 in the first quarter of 2019. Cash flows from operating activities excluding the impact of changes in non-cash working capital and the net claim settlement decreased by $1,107,000 in 2020 compared to 2019.
As at March 31, 2020, the Company had $3,199,000 cash on hand (December 31, 2019: $4,316,000) and had utilized $93,186,000 of its operating line of credit (December 31, 2019: $84,661,000). During the first quarter of 2020, there was a significant weakening of the Canadian dollar against the US dollar resulting in the Company’s US dollar denominated operating line of credit to increase; the Company had drawn an additional $653,000 in 2020. The Company has a working capital deficit of $77,983,000 as at March 31, 2020 which was higher than the $71,561,000 deficit as at December 31, 2019. 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 $21,989,000 surplus as at March 31, 2020 (December 31, 2019: $18,542,000 surplus). The Company’s accumulated deficit as at March 31, 2020 is $152,608,000 (December 31, 2019: $142,194,000).