VANCOUVER, BC, Aug. 11, 2022 /CNW/ – Avcorp Industries Inc. (TSX: AVP) (the “Company”, “Avcorp” or the “Avcorp Group”) today announced its financial results for the quarter ended June 30, 2022. All amounts are in Canadian currency unless otherwise stated.
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 and Canada 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 of Canada Emergency Rent Subsidies (“CERS”) of $305,000.
- On April 1, 2022, the Company signed a contract with BLR Aerospace to produce King Air 200 Wingtips and shipped the first delivery on June 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 Latécoère S.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 to Albatross 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 the British 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 the Government of Canada under the Aerospace Regional Recovery Initiative administered by the Pacific Economic Development of Canada. 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 starting March 31, 2025 for funding received.
Review of 2022 Second Quarter Financial Results
For the quarter ended June 30, 2022, the Avcorp Group recorded loss from operations of $3,786,000 (June 30, 2021: $1,978,000). Operating loss in the second quarter of 2022 increased in comparison to 2021 by $1,808,000 mainly due to higher administrative and general expenses as a result of transaction related costs and an impairment of assets write-off of $583,000 incurred during the current quarter. The lower loss in 2021 was also supported by the government loan forgiven of $2,195,000 and CEWS of $1,548,000 recognized as other income in the second quarter of 2021. The higher loss in current quarter was partially offset by the higher gross profit of $2,843,000 compared to a gross loss of $706,000 in 2021.
Cash flows from operating activities, before consideration of changes in non-cash working capital, utilized $2,072,000 during the quarter ended June 30, 2022 as compared to utilizing $780,000 cash during the quarter ended June 30, 2021.
The Company ended the quarter with bank operating line utilization of $77,537,000 (USD $60,171,000) offset by $2,013,000 cash compared to utilization of $75,335,000 (USD $59,421,000) with $4,060,000 cash on hand as of December 31, 2021. The bank indebtedness balance of the modification gain and related adjustments as a result of executing the amending agreement in 2021 was $615,000 as at June 30, 2022 (December 31, 2021, gain of $923,000).
The Avcorp Group designs and builds major airframe structures for some of the world’s leading aircraft companies, including BAE Systems, Boeing, Bombardier, Lockheed Martin, and Subaru Corporation. The Avcorp Group has more than 65 years of experience, over 500 skilled employees and 560,000 square feet of facilities. Avcorp Structures & Integration located in Delta British Columbia, Canada is dedicated to metallic and composite aerostructures assembly and integration; Avcorp Engineered Composites located in Burlington Ontario, Canada is dedicated to design and manufacture of composite aerostructures, and Avcorp Composite Fabrication located in Gardena California, USA has advanced composite aerostructures fabrication capabilities for composite aerostructures. The Avcorp Group offers integrated composite and metallic aircraft structures to aircraft manufacturers, a distinct advantage in the pursuit of contracts for new aircraft designs, which require lower-cost, light‑weight, strong, reliable structures. Comtek Advanced Structures Ltd., at our Burlington, Ontario, Canada location also provides aircraft operators with aircraft structural component repair services for commercial aircraft.
Avcorp Composite Fabrication Inc. is wholly owned by Avcorp US Holdings Inc. Both companies are incorporated in the State of Delaware, USA, and are wholly owned subsidiaries of Avcorp Industries Inc.
Comtek Advanced Structures Ltd., incorporated in the Province of Ontario, Canada, is a wholly owned subsidiary of Avcorp Industries Inc.
Avcorp Industries Inc. is a federally incorporated reporting company in Canada and traded on the Toronto Stock Exchange (TSX:AVP).