VANCOUVER, BC, Aug. 13, 2020 /CNW/ – Avcorp Industries Inc. (TSX: AVP) (the “Company”, “Avcorp” or the “Avcorp Group”) today announced its financial results for the quarter ended June 30, 2020. All amounts are in Canadian currency unless otherwise stated.
2020 Highlights
Key financial results include:
- Second quarter 2020 revenue was $32,246,000 compared to $46,799,000 in 2019. 2020 revenue decreased by $14,553,000 as a result of lower deliveries caused by lower customer requirements due to the novel Coronavirus (“COVID-19”) and 737 MAX grounding.
- Second quarter 2020 net loss was $1,594,000 compared to net loss of $4,568,000 in 2019. Net loss improved in comparison to 2019 after receiving the Canada Emergency Wage Subsidies of $2,404,000.
- Second quarter 2020 foreign exchange gain was $1,414,000 (June 30, 2019: $329,000 gain). The Canadian dollar strengthened against the US dollar resulting in a gain predominately from the translation of the Company’s US dollar denominated Bank indebtedness and Term debt.
- Second quarter 2020 cash flows from operating activities before changes in non-cash working capital was $1,694,000 (June 30, 2019: cash inflow of $121,000). Second quarter 2020 cash flows used in operating activities worsened by $831,000 relative to 2019, after the cash receipts from Canada Emergency Wage Subsidies of $2,404,000 has been removed.
- On April 28, 2020, the Company received a loan in the amount of USD $4,123,000 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 and bears interest at a fixed rate of 1% per annum with the first six months of interest deferred. The loan is forgivable if certain requirements are met.
- On June 30, 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 July 31, 2020 and thereafter less USD $2,300,000 providing additional liquidity.
Highlights Subsequent to Quarter-End
- BAE Systems awarded the Company a contract for the assembly of the F-35 Carrier Variant Outboard Wing. The total awards are approximately $87 million extending Avcorp’s current long-term contract with BAE systems into 2022.
- In July 2020, the Company received an additional Canada Emergency Wage Subsidy of $1,231,000.
- On July 31, 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 August 31, 2020 and thereafter less USD $2,300,000 providing additional liquidity.
Review of 2020 Second Quarter Results
For the quarter ended June 30, 2020, the Avcorp Group recorded losses from operations totaling $1,080,000 from $32,246,000 revenue, as compared to losses from operations totaling $2,903,000 from $46,799,000 revenue from the same quarter in the previous year. The second quarter 2020 operating loss increased in comparison to 2019 by $1,608,000 after the removal of the onerous contracts provision of $244,000 (June 30, 2019: $585,000 income), a net loss on settlement of $1,789,000 in 2019 and government grants of $2,471,000 in 2020. The increase in operating loss is contributed to customer delivery scheduling changes due to COVID-19 decreasing revenue in the current quarter.
During the quarter ended June 30, 2020, cash flows from operating activities, excluding the impact of changes in non–cash working capital, provided $1,694,000 of cash as compared to $121,000 during the quarter ended June 30, 2019. The Company received $2,404,000 of Canada Emergency Wage Subsidies contributing to the positive operating cash flows in the current quarter.
As at June 30, 2020, the Company had $8,814,000 cash on hand (December 31, 2019: $4,316,000) and had utilized $89,514,000 of its operating line of credit (December 31, 2019: $84,661,000). The Company has a working capital deficit of $84,103,000 as at June 30, 2020, compared with $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 $22,302,000 surplus as at June 30, 2020 (December 31, 2019: $18,542,000 surplus). The Company’s accumulated deficit as at June 30, 2020 is $154,202,000 (December 31, 2019: $142,194,000).