Avcorp Announces 2002 Third Quarter Results
VANCOUVER, British Columbia--Aug. 20, 2002-- Avcorp Industries Inc. (TSX:AVP) today announced results for the third quarter of fiscal 2002 ended June 30, 2002. The financial statements are presented as continuing and discontinued operations, following the recent sale of the Company's Integrated Products Division (IPD) located in Quebec.Revenue for continuing operations in the quarter was $14.4 million and year-to-date revenue is $45.0 million, decreases of 31% and 23% respectively compared to prior periods. The decrease in revenue is caused by the continued industry downturn and also by the three-week strike at Bombardier during April.
A loss from continuing operations of $309,000 was incurred during the quarter for a year-to-date loss of $982,000, compared to prior period profits of $253,000 and $499,000 respectively. The Company has reduced its operating costs to reflect reduced revenue and continues to undertake operational improvement initiatives. In the quarter, the cost of these initiatives, all of which were expensed, was $568,000 for a year-to-date cost of $1.4 million. The Company has benefitted from these initiatives in 2002 and expects further savings in 2003.
Revenue from discontinued operations in the quarter was $4.4 million and year-to-date revenue is $13.6 million. Losses from discontinued operations during the quarter were $546,000 for a year-to-date loss of $510,000, compared to prior period profits of $328,000 and $1,023,000 respectively.
The Company ended the quarter with a bank line utilization of $1.9 million against an $8.0 million facility, compared to utilization of zero at September 30, 2001. The Company continues to reduce long-term debt, manage working capital, and minimize capital expenditure. The Company also continues to invest in new programs, and at the quarter end the Company had invested $2.5 million in new program development as part of the Cessna program ($0.3 million as at September 30, 2001).
The Company's credit agreement with its bank expires on September 30, 2002, and debt with three other lenders matures in 2003. The Company is in the process of renegotiating debt with its three other major lenders and in establishing replacement debt and credit facilities with a different major bank. The Company expects these activities to be completed before September 30, 2002.
Order backlog at June 30, 2002 was $322 million compared to $340 million at March 31, 2002 and $320 million at September 30, 2001.
John Nicholson, President and CEO, states, "We are continuing to strengthen the Company through investing in new programs and in our operations. We are working towards our target of September 30, 2002 to establish a new credit facility and renegotiate debt that matures in 2003, having made significant progress with recent private placements and long-term debt reduction. Customer satisfaction remains high as we continue to deliver on time, quality products including engineering design work and prototypes for Cessna. Our orders from Bombardier and Cessna are increasing as the regional jet market remains strong and the Cessna Sovereign starts production. We are at the preliminary stages of some exciting new major programs and expect to announce one of these programs before the end of the year."
Avcorp Industries Inc. is a Canadian aerospace industry manufacturer. The company is a single-source supplier for engineering design, manufacture and assembly of subassemblies and complex major structures for aircraft manufacturers.
Certain statements in this press release that are not purely historical constitute forward-looking statements within the meaning of Section 21E of the Securities and Exchange Act of 1934, as amended, including statements regarding the Company's expectations, beliefs, intentions or strategies regarding the future. The information in this press release is based on information available to the Company as of the date hereof and the Company assumes no obligation to update any such forward-looking statements. Forward-looking statements involve a number of risks and uncertainties that could cause actual results to differ materially from those anticipated. Such risks include, among others, general business and economic conditions and competitive actions as well as other risks and uncertainties.
John H. Nicholson, President and Chief Executive Officer
expressed in thousands of Canadian dollars except per share amounts
----------------------------------------------------------------------
Balance Sheets unaudited
----------------------------------------------------------------------
Jun 30 Sept 30
2002 2001
-------------------
ASSETS
Current Assets
Bank - 595
Accounts receivable (note 1) 10,870 10,916
Inventories 20.955 19,700
Prepayments and other assets 659 805
-------------------
32,484 32,016
Property, plant and equipment 31,640 35,715
Note receivable (note 1) 1,674 -
Investment (note 2) 1,527 -
Other assets 100 150
-------------------
67,425 67,881
-------------------
-------------------
LIABILITIES
Current liabilities
Bank indebtedness 1,906 -
Accounts payable and accrued liabilities 9,837 11,801
Deferred revenue 3,587 3,737
Current portion of long-term debt (note 3) 6,210 3,611
--------------------
21,540 19,149
Long-term debt (note 3) 24,609 30,824
--------------------
46,149 49,973
--------------------
Shareholders' Equity
Capital stock (note 4) 35,080 30,219
Deficit (13,804) (12,311)
--------------------
21,276 17,908
--------------------
67,425 67,881
--------------------
--------------------
expressed in thousands of Canadian dollars except per share amounts
----------------------------------------------------------------------
Statements of Operations unaudited
----------------------------------------------------------------------
For the three For the nine
months ended months ended
Jun 30 Jun 30 Jun 30 Jun 30
2002 2001 2002 2001
------------------------------
Revenues 14,393 20,770 45,003 58,795
------------------------------
Cost of sales and expenses
Cost of sales 12,535 17,558 38,683 49,584
Administrative and general expenses 877 1,271 3,138 3,793
Depreciation and amortization 512 704 1,603 1,894
Interest 748 961 2,471 2,921
------------------------------
14,672 20,494 45,895 58,192
------------------------------
Earnings (loss) from continuing
operations before income taxes (279) 276 (892) 603
Income taxes (30) (23) (90) (104)
------------------------------
Net earnings (loss) from continuing
operations (309) 253 (982) 499
Net earnings (loss) from discontinued
operations (note 1) (546) 328 (510) 1,023
------------------------------
Earnings (loss) (855) 581 (1,492) 1,522
Earnings (loss) per share
Basic
Continuing operations (0.02) 0.02 (0.07) 0.04
Discontinued operations (0.03) 0.02 (0.03) 0.07
------------------------------
(0.05) 0.04 (0.10) 0.11
Weighted average number outstanding
(000's) 16,431 13,301 15,246 13,301
Diluted
Continuing operations (0.02) 0.02 (0.07) 0.04
Discontinued operations (0.03) 0.02 (0.03) 0.07
------------------------------
(0.05) 0.04 (0.10) 0.11
Weighted average number outstanding
(000's) 16,449 13,342 15,263 13,320
----------------------------------------------------------------------
expressed in thousands of Canadian dollars except per share amounts
----------------------------------------------------------------------
Statements of Cashflows unaudited
----------------------------------------------------------------------
For the three For the nine
months ended months ended
Jun 30 Jun 30 Jun 30 Jun 30
2002 2001 2002 2001
------------------------------
Cashflows from operating activities
Earnings (loss) from operations (855) 581 (1,492) 1,522
Items not affecting cash
Continuing operations 1,471 752 1,704 1,813
Discontinued operations (190) 76 182 327
Change in non-cash items related to
operating activities
Continuing operations (3,917)(1,447) (4,328) 1,458
Discontinued operations 961 (272) 1,169 (1,731)
------------------------------
(2,530) (310) (2,765) 3,389
------------------------------
Cashflows from Investing activities
Sale of capital assets
Continuing operations - - 1,094 -
Purchase of capital assets
Continuing operations (40) (346) (270) (522)
Discontinued operations (194) (76) (301) (134)
------------------------------
(234) (422) 523 (656)
------------------------------
Cashflows from financing activities
Net change in bank indebtedness 1,521 46 1,906 (1,677)
Proceeds of settlement with equipment
manufacturer - 1,486 - 1,486
Issue of common shares (net of
issue costs) 4,737 - 4,861 -
Other assets - - 50 -
Investment (1,527) - (1,527) -
Repayment of long-term debt
Continuing operations (1,967) (746) (3,587)(2,431)
Discontinued operations - (54) (56) (111)
------------------------------
2,764 732 1,647 (2,733)
------------------------------
Net change in cash and cash equivalents - - (595) -
Cash and cash equivalents
Beginning of period - - 595 -
------------------------------
End of period - - - -
----------------------------------------------------------------------
Notes to Financial Statements for the period ending June 30, 2002
1. Discontinued Operations
Effective June 30, 2002, the Company sold its Integrated Products Division located in Quebec for net book value (excluding cash) of approximately $6.7 million. Proceeds of $5,000,000 cash were received on July 31, 2002 and the balance of $1,674,000 is payable by September 30, 2004. The outstanding amount bears interest at the Royal Bank of Canada's prime plus 2% with the interest payable monthly.
The Company has entered into a supply agreement with Avior Integrated Products Inc. (Avior), the company formed by the sale of the division. Under this supply agreement, the Company expects to purchase $4 million worth of goods per year from Avior. In the event that the Company purchases less than $2.5 million in either of the next two 12-month periods, the outstanding balance will then be reduced by 20% of the shortfall.
The results from discontinued operations are summarized as follows:
expressed in thousands of Canadian dollars except per share amounts
----------------------------------------------------------------------
Statements of Operations of Discontinued Operations unaudited
----------------------------------------------------------------------
For the three For the nine
months ended months ended
Jun 30 Jun 30 Jun 30 Jun 30
2002 2001 2002 2001
--------------------------------
Revenues 4,431 5,990 13,622 15,996
--------------------------------
Earnings (loss) from discontinued
operations before taxes (170) 328 (134) 1,023
Income Taxes - - - -
--------------------------------
Earnings (loss) from discontinued
operations (170) 328 (134) 1,023
--------------------------------
Profit (loss) on disposition
of net assets - - - -
Expenses incurred on disposition 376 - 376 -
--------------------------------
Net earnings (loss) from discontinued
operations 546 328 510 1,023
----------------------------------------------------------------------
expressed in thousands of Canadian dollars except per share amounts
----------------------------------------------------------------------
Statements of Net Assets of Discontinued Operations unaudited
----------------------------------------------------------------------
Jun 30 Sept 30
2002 2001
------------------------------
Accounts receivable - 3,157
Inventories - 4,454
Prepaid expenses - 291
Capital assets - 2,049
Accounts payable and accrued liabilities - (1,640)
Deferred revenue - (371)
------------------------------
- 7,940
----------------------------------------------------------------------
expressed in thousands of Canadian dollars except per share amounts
----------------------------------------------------------------------
Statements of Cashflows of Discontinued Operations unaudited
----------------------------------------------------------------------
For the three For the nine
months ended months ended
Jun 30 Jun 30 Jun 30 Jun 30
2002 2001 2002 2001
--------------------------------
Cashflows from operating activities 771 (196) 1,351 (1,404)
Cashflows from investing activities (194) (76) (301) (134)
Cashflows from financing activities - (54) (56) (111)
--------------------------------
577 (326) 994 (1,649)
----------------------------------------------------------------------
2. Investment
On June 17, 2002, the Company acquired 5,264 Series D Preferred Stock of Eclipse Aviation Corporation (Eclipse) for $1,527,000.
3. Long-Term Debt
Cash received on July 31, 2002 from the sale of the Integrated Products Division was used to prepay a mortgage with the bank maturing in September 2003, and equipment leases with the bank maturing in January 2003 and May 2004. The Company is re-negotiating its $2,500,000 convertible debenture with the holder to extend the maturity date past March 2003. As at June 30, 2002, the debenture is disclosed within current portion of long-term debt.
4. Capital Stock
a) On April 25, 2002, Working Opportunity Fund (EVCC) Ltd. (WOF) acquired 590,560 common shares of the Company at a price of $1.40 per common share for total consideration of $826,784. The proceeds, after costs of $13,157, were used for general working capital and to reduce bank operating line utilization.
b) During the quarter ended June 30, 2002, the Company issued 3,400,000 units in a private placement. Each unit was issued at $1.20 and consisted of one common share and 0.5 non-transferrable share purchase warrants. Each warrant entitles the holder to purchase one additional common share at a price of $1.30 for a 12-month period expiring July 2003. The costs of the private placement amounting to $157,588 were deducted from the proceeds in recording $3,922,412 as capital stock. The proceeds of the financing will be used for general working capital and for investment purposes.