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Avcorp announces 2012 Third Quarter Results

VANCOUVER, Nov. 13, 2012 /PRNewswire/ - Avcorp Industries Inc. (TSX: AVP) (the "Company" or "Avcorp") today announced its financial results for the quarter ended September 30, 2012.

During the quarter ended September 30, 2012, the Company recorded a loss from operations of $1,446,000 on $19,324,000 revenue, as compared to a $186,000 operating loss on $20,383,000 revenue for the same quarter in the preceding year; and a net loss for the current quarter of $2,729,000 as compared to a net loss of $150,000 for the quarter ended September 30, 2011.

Current quarter revenues have decreased from the same quarter in the preceding year primarily as a result of the wind-down of Cessna Aircraft Company (Cessna) programs. During the third quarter 2012, the Company renewed its long-term agreement with the Boeing Commercial Airplane Group (Boeing CA) which is forecasted to provide in excess of $83 million revenue over the next five years. Start-up and commencement of production deliveries for BAE Systems (Operations) Limited (BAE) F35 program has also contributed to an overall $110 million increase in order backlog during the current quarter.

Earnings before interest, taxes, depreciation and amortization (EBITDA) was negative $1,205,000 for the quarter ended September 30, 2012 compared to a positive EBITDA of $1,455,000 for the quarter ended September 30, 2011.  The decline in EBITDA was primarily as a result of reduced revenues and costs associated with customer contract terminations. During the quarter-ended September 30, 2012, the Company incurred $825,000 (September 30, 2011: $136,000) in costs associated with customer contract terminations.

On September 27, 2012, the Company secured a three year $12,000,000 operating line of credit.  Concurrently, the Company repaid its $6,000,000 term loan.  Also during the quarter the Company increased its share capital by $2,798,000.

Cash flows from operating activities during the quarter ended September 30, 2012 provided $350,000 of cash as compared to utilizing $766,000 of cash during the quarter ended September 30, 2011.  The Company has a working capital surplus of $10,130,000 as at September 30, 2012 which has decreased from the December 31, 2011 $14,663,000 surplus, as a result of utilizing cash on hand to repay long-term debt.  The Company's accumulated deficit as at September 30, 2012 was $78,581,000 (December 31, 2011: $76,016,000).

About Avcorp

Avcorp designs and builds major airframe structures for some of the world's leading aircraft companies, including BAE Systems, Boeing, and Bombardier. With more than 50 years of experience, over 400 skilled employees and 354,000 square feet of facilities in Delta BC and Burlington ON, Avcorp 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. Our Burlington location also offers composite repairs for commercial aircraft. Avcorp is a Canadian public company traded on the Toronto Stock Exchange (TSX: AVP).



Forward-Looking Statements

This management discussion and analysis should be read in conjunction with the Company's audited financial statements.  Certain statements in this report and other oral and written statements made by the Company from time to time are forward-looking statements, including those that discuss strategies, goals, outlook or other non-historical matters; or projected revenues, income, returns or other financial measures.  These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those contained in the statements, including the following:  (a) the ability of the Company to renegotiate its debt agreements under which it is in default; (b) the extent to which the Company is able to achieve savings from its restructuring plans; (c) uncertainty in estimating the amount and timing of restructuring charges and related costs; (d) changes in worldwide economic and political conditions that impact interest and foreign exchange rates; (e) the occurrence of work stoppages and strikes at key facilities of the Company or the Company's customers or suppliers; (f) government funding and program approvals affecting products being developed or sold under government programs; (g) cost and delivery performance under various program and development contracts; (h) the adequacy of cost estimates for various customer care programs including servicing warranties; (i) the ability to control costs and successful implementation of various cost reduction programs; (j) the timing of certifications of new aircraft products; (k) the occurrence of further downturns in customer markets to which the Company products are sold or supplied or where the Company offers financing; (l) changes in aircraft delivery schedules or cancellation of orders; (m) the Company's ability to offset, through cost reductions, raw material price increases and pricing pressure brought by original equipment manufacturer customers; (n) the availability and cost of insurance; (o) the Company's ability to maintain portfolio credit quality; (p) the Company's access to debt financing at competitive rates; and (q) uncertainty in estimating contingent liabilities and establishing reserves tailored to address such contingencies.

(unaudited, prepared in accordance with IFRS, expressed in thousands of Canadian dollars)

  September 30, 2012 December 31, 2011
Current assets    
Cash $   1,403 $   3,778
Accounts receivable 8,312 12,160
Inventories 18,739 19,418
Prepayments and other assets 994 1,396
  29,448 36,752
Non-current assets    
Prepaid rent 146 146
Development costs 4,736 5,540
Property, plant and equipment 10,737 12,523
Total assets 45,067 54,961
Current liabilities    
Accounts payable and accrued liabilities 8,391 10,694
Current portion of long-term debt 470 1,505
Preferred shares 10,457 9,890
  19,318 22,089
Non-current liabilities    
Deferred gain 275 311
Lease inducement 592 666
Deferred program revenues 19,054 18,671
Long-term debt 4,409 12,027
Warranty provisions 85 85
  43,733 53,849
Capital stock 76,217 73,251
Equity component of convertible loan 206 453
Contributed surplus 3,492 3,424
Deficit (78,581) (76,016)
  1,334 1,112
Total liabilities and equity 45,067 54,961

(unaudited, prepared in accordance with IFRS, expressed in thousands of Canadian dollars, except number of shares and per share amounts)

  Three months ended Nine months ended
FOR THE PERIOD ENDED SEPTEMBER 30 2012 2011 2012 2011
Revenues $  19,324 $  20,383 $  69,522 $ 61,791
Cost of sales 16,936 17,686 58,151 54,526
Gross profit 2,388 2,697 11,371 7,265
Administrative and general expenses 3,715 2,729 11,190 8,237
Office equipment depreciation 119 160 360 495
Other (gains) and losses - net - (6) (4) (12)
Operating Income (loss) (1,446) (186) (175) (1,455)
Foreign exchange (gain) loss 300 (706) 221 (571)
Finance costs 586 670 1,772 1,861
Loss on repayment of debt 397 - 397 -
Income (loss) before income tax (2,729) (150) (2,565) (2,745)
Income tax expense - - - -
Income (loss) and total comprehensive income (loss) for the period (2,729) (150) (2,565) (2,745)
Earnings (loss) per share:        
Basic earnings (loss) per common share (0.01) 0.00 (0.01) (0.01)
Diluted earnings (loss) per common share (0.01) 0.00 (0.01) (0.01)
Basic weighted average number of shares outstanding (000's) 205,851 198,750 204,134 196,599
Diluted weighted average number of shares outstanding (000's) 205,851 199,930 204,321 202,684

(unaudited, prepared in accordance with IFRS, expressed in thousands of Canadian dollars)

  Three months ended Nine months ended
FOR THE PERIOD ENDED SEPTEMBER 30 2012 2011 2012 2011
Cash flows from operating activities        
Profit (loss) before tax $   (2,729) $ (150) $   (2,565) $ (2,745)
   Adjustment for items not affecting cash:        
     Accretion on convertible loan 23 21 67 63
     Accrued interest and government royalties 330 466 1,007 1,232
     Amortization and depreciation 724 844 2,280 2,530
     Deferred tooling revenue amortization and reclassification to revenue (2,292) (214) (8,710) (640)
     Development cost amortization and reclassification to cost of sales 662 91 1,698 281
     Fair value of warrants amortization 44 44 132 44
     Loss on repayment of debt 397 - 397 -
     Preferred share dividends accrued 189 189 567 567
     Provision for loss-making contracts (108) (300) (189) (591)
     Provision for obsolete inventory (84) (123) (67) (173)
     Stock based compensation 25 25 69 115
     Other items (47) 61 (105) (47)
  (2,866) 954 (5,419) 636
Changes in non-cash working capital        
    Accounts receivable 2,869 (1,396) 5,173 (3,136)
    Inventories (272) (1,065) 935 (3,056)
    Prepayments and other assets 471 - 396 518
    Accounts payable and accrued liabilities 148 818 (2,316) 451
    Other Items - (77) - (47)
Net cash from operating activities 350 (766) (1,231) (4,634)
Cash flows from investing activities        
Purchase of equipment (53) (364) (354) (691)
Payments relating to development costs and tooling (280) (99) (894) (961)
Net cash from investing activities (333) (463) (1,248) (1,652)
Cash flows from financing activities        
(Decrease) increase in bank indebtedness - (8,054) - (7,515)
Payment of interest (552) (342) (1,048) (881)
Proceeds from issuance of common shares 973 - 973 -
Proceeds from customer funding of program introduction 1,680 3,837 7,769 9,317
Proceeds from current and long-term debt - 6,000 - 6,000
Repayment of current and long-term debt (7,097) (212) (7,590) (635)
Net cash from financing activities (4,996) 1,229 104 6,286
Net increase (decrease) in cash (4,979) - (2,375) -
Cash - Beginning of period 6,382 - 3,778 -
Cash - End of period 1,403 - 1,403 -

(unaudited, prepared in accordance with IFRS, expressed in thousands of Canadian dollars, except number of shares)

  Share capital Equity
Deficit Total
  Shares Amount
Balance December 31, 2010 195,505,323 $ 72,927 $   453 $  2,662 $ (73,561) $  2,481
Issue of common shares 6,488,790 324 - - - 324
Stock based compensation expense - - - 115 - 115
Fair value warrants - - - 42 - 42
Loss for the period - - - - (2,745) (2,745)
Balance September 30, 2011 201,994,113 73,251 453 2,819 (76,306) 217
Balance December 31, 2011 201,994,113 73,251 453 3,424 (76,016) 1,112
Issue of common shares 52,903,959 2,966 - - - 2,966
Loan conversion - - (247) - - (247)
Stock-based compensation expense - - - 68 - 68
Loss for the period - - - - (2,565) (2,565)
Balance September 30, 2012 254,898,072 76,217 206 3,492 (78,581) 1,334



SOURCE Avcorp Industries Inc.

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