Avcorp announces 2009 Third Quarter Results

VANCOUVER, Nov. 16 /PRNewswire-FirstCall/ - Avcorp (AVP on the Toronto Stock
Exchange) today announced its financial results for the quarter ended
September 30, 2009.
During the quarter ended September 30, 2009, the Company recorded a loss from
operations of $2,128,000 on $14,302,000 revenue, as compared to $1,004,000
earnings from operations on $30,894,000 revenue for the same quarter of the
preceding year; and a net loss for the current quarter of $2,585,000 as
compared to a net loss of $220,000 for the quarter ended September 30, 2008.
It should be noted that the current quarter loss includes a $1,384,000 foreign
exchange gain (September 30, 2008: $26,000) which occurred as a result of
holding foreign-currency-denominated receivables, payables and debt. On a
year-to-date basis, the Company has recorded a $5,692,000 net loss on
$52,561,000 revenue as compared to a $279,000 net loss on $94,434,000 revenue
for the same period in 2008.
Cash flows from operating activities during the current quarter utilized
$3,157,000 of cash, as compared to providing $2,847,000 of cash during the
quarter ended September 30, 2008. During the first three quarters of 2009 and
2008, the Company's generated cash flows from operating activities in the
amounts of $237,000 and $6,762,000 respectively. The Company has a working
capital deficit of $4,922,000 as at September 30, 2009 (December 31, 2008:
$2,065,000 deficit) primarily as a result of classifying the $4,265,000
convertible debenture held by Export Development Canada as current portion of
long-term debt, and an accumulated deficit of $62,471,000 at September 30,
2009 (December 31, 2008: $56,213,000).
Significantly reduced customer demand, relative to the same quarter in the
preceding year, has resulted in idle plant capacity. The Company has expensed
$1,760,000 of overhead costs during the current quarter (year-to-date
September 30, 2009: $3,218,000) which under prior periods' production levels
would have been inventoried.
The Company incurred legal, consulting and professional investment service
fees in the course of negotiating, analyzing and documenting its financial
restructuring. These are one-time costs for which fees amounting to $371,000
were expensed during the third quarter 2009 (year-to-date September 30, 2009:
$731,000).
As at September 30, 2009, the Company was not in compliance with its financial
covenants associated with its operating line of credit. In addition, the
Company is forecasting that it will be in default of one or more of its
financial covenants in the next 12 months. The lender has agreed to forebear
from demanding payment of the indebtedness and from taking steps to enforce
the security subject to the Company complying with terms and conditions of a
Forbearance Agreement.
Also, as at September 30, 2009, the Company was not in compliance with its
financial covenants associated with the convertible debenture held by Export
Development Canada. The Company has not obtained a waiver from the debenture
holder for these non-compliances and for anticipated future breaches. In the
absence of obtaining a waiver of such breaches, the lender is entitled to
demand immediate payment. The Company is currently in discussion regarding the
terms of repayment with Export Development Canada.
On October 7, 2009, the Company completed a rights offering within which
129,259,718 common shares were issued at $0.06 per share providing gross
proceeds of $7,756,000. The Company received aggregate net proceeds of
$4,386,000 after set off against certain shareholder loan obligations. The
Company's total issued and outstanding common shares after this issuance are
177,732,112.

About Avcorp

Avcorp designs and builds major airframe structures for some of the world's
leading aircraft companies, including Boeing, Bombardier, and Cessna. With
more than 50 years of experience, 483 skilled employees and 354,000 square
feet of facilities, 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. Avcorp is a Canadian public company traded on the
Toronto Stock Exchange (TSX:AVP).

MARK VAN ROOIJ PAUL KALIL
CHIEF EXECUTIVE OFFICER PRESIDENT

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.

Consolidated Balance Sheets
as at September 30, 2009 and December 31, 2008 (unaudited, in thousands
of Canadian dollars)
-------------------------------------------------------------------------

September 30 December 31
2009 2008
----------------------------
Assets
Current assets
Accounts receivable $ 6,856 $ 12,609
Inventories 16,965 19,206
Prepayments 1,337 1,761
Other assets 27 746
----------------------------
25,185 34,322
Development costs 4,048 3,299
Property, plant and equipment 18,762 19,431
Warranty claim receivable 1,494 1,784
Intangible assets 1,902 2,154
----------------------------
51,391 60,990
----------------------------
----------------------------
Liabilities
Current liabilities
Bank indebtedness 9,636 14,273
Bridge loan 4,052 -
Accounts payable and accrued liabilities 10,259 15,841
Current portion of long-term debt 6,160 6,273
----------------------------
30,107 36,387
Deferred gain 417 453
Lease inducement 888 962
Deferred tooling revenues 2,749 1,173
Long-term debt 2,034 2,872
Warranty provision 1,521 1,632
Future income tax liability 1,186 1,186
----------------------------
38,902 44,665
----------------------------
Shareholders' Equity
Capital stock 64,691 62,269
Preferred shares 7,622 7,622
Contributed surplus 2,647 2,647
Deficit (62,471) (56,213)
----------------------------
12,489 16,325
----------------------------
51,391 60,990
----------------------------
----------------------------

Consolidated Statements of Operations and Comprehensive Loss
For the three and nine months ended September 30, 2009 and 2008
(unaudited, in thousands of Canadian dollars, except number of shares and
per share amounts)
-------------------------------------------------------------------------

Three months ended Nine months ended
September 30 September 30
For the quarter ------------------------------------------------
ended September 30 2009 2008 2009 2008
------------------------------------------------
Revenues $ 14,302 $ 30,894 $ 52,561 $ 94,434
------------------------------------------------

Cost of sales and
expenses
Cost of sales 14,155 25,443 48,700 79,798
Administrative and
general expenses 2,656 3,291 8,643 9,791
Amortization and
depreciation 1,003 1,182 3,085 3,405
Foreign exchange (gain) (1,384) (26) (4,302) (606)
------------------------------------------------

16,430 29,890 56,126 92,388
------------------------------------------------
------------------------------------------------

Loss from operations (2,128) 1,004 (3,565) 2,046
Interest expense and
financing charges (458) (465) (1,423) (1,564)
Unrealized derivative
gain (loss) 1 - (704) (2)
Write-down of investment - (759) - (759)
------------------------------------------------
------------------------------------------------

Loss and comprehensive
loss for the period (2,585) (220) (5,692) (279)
------------------------------------------------
------------------------------------------------

Basic and diluted loss per
common share (0.06) (0.01) (0.16) (0.01)
------------------------------------------------
------------------------------------------------

Basic and diluted weighted
average number of shares
outstanding (000's) 44,784 32,312 36,517 32,248
------------------------------------------------
------------------------------------------------

Consolidated Statements of Deficit
For the three and nine months ended September 30, 2009 and 2008
(unaudited, in thousands of Canadian dollars)
-------------------------------------------------------------------------

Three months ended Nine months ended
September 30 September 30
For the quarter ------------------------------------------------
ended September 30 2009 2008 2009 2008
------------------------------------------------
Deficit - Beginning of
period $ (59,695) $ (53,641) $ (56,213) $ (53,204)

Loss for the period (2,585) (220) (5,692) (279)

Preferred share dividends (191) (190) (566) (568)

------------------------------------------------

Deficit - End of period (62,471) (54,051) (62,471) (54,051)
------------------------------------------------
------------------------------------------------

Consolidated Statements of Cash Flows
For the three and nine months ended September 30, 2009 and 2008
(unaudited, in thousands of Canadian dollars)
-------------------------------------------------------------------------

Three months ended Nine months ended
September 30 September 30
------------------------------------------------
2009 2008 2009 2008
------------------------------------------------

Cash flows from operating
activities
Loss for the period $ (2,585) $ (220) $ (5,692) $ (279)
Items not affecting cash 1,210 2,726 4,483 5,104
------------------------------------------------
(1,375) 2,506 (1,209) 4,825
Change in non-cash items
related to operating
activities (1,782) 341 1,446 1,937
------------------------------------------------
(3,157) 2,847 237 6,762
------------------------------------------------

Cash flows from investing
activities
Purchase of property, plant
and equipment (12) (443) (290) (2,769)
Payments relating to
development costs and
tooling (79) (855) (2,684) (2,061)
------------------------------------------------
(91) (1,298) (2,974) (4,830)
------------------------------------------------

Cash flows from financing
activities
Net repayment of bank
indebtedness (2,603) (735) (4,637) (900)
Proceeds from current and
long-term debt 4,000 - 5,952 131
Proceeds from sale and
leaseback of property,
plant and equipment - - - 1,215
Proceeds from sale of
tooling 1,809 - 2,214 372
Repayment of current and
long-term debt (815) (624) (1,649) (2,553)
Issue of common shares net
of debt repayment set-off 857 - 857 371
Preferred share dividends - (190) - (568)
------------------------------------------------
3,248 (1,549) 2,737 (1,932)
------------------------------------------------

Net change in cash and
cash equivalents - - - -

Cash and cash equivalents
- Beginning of period - - - -
------------------------------------------------

Cash and cash equivalents
- End of period - - - -
------------------------------------------------
------------------------------------------------

Interest paid 348 388 992 1,114
------------------------------------------------
------------------------------------------------

SOURCE Avcorp Industries Inc.

Contact: Sandi DiPrimo, Investor Relations Contact, (604) 587-4938