March 31, 2014
VANCOUVER: Avcorp Industries Inc. (TSX: AVP) (the “Company” or “Avcorp”) today announced its
financial results for the year ended December 31, 2013.
Revenue for the year ended December 31, 2013 was $77,364,000 as compared to $89,337,000 for the
year ended December 31, 2012. Current year revenues have decreased relative to the previous year
primarily as a result of the wind‐down of Cessna programs, offset by increased deliveries for the F‐35 CV-OBW
During the year ended December 31, 2013, the Company recorded a loss from operations of $2,015,000
on $77,364,000 revenue, as compared to $24,002,000 operating income on $89,337,000 revenue for the
preceding year; and a net loss for the current year of $1,802,000 as compared to net income of
$20,641,000 for the year ended December 31, 2012.
On November 16, 2012, the Company received the determination of an appointed arbitration panel
constituted to adjudicate outstanding issues relating to cost reimbursements and compensation payable
to the Company in connection with the transition of Cessna Aircraft Company (“Cessna”) production work
back to Cessna and other suppliers. The quantum of damages was assessed by the arbitration panel in
2012 at US$27,391,000.
On September 5, 2013 the Company entered into a settlement agreement, from a court directed
mediation with Cessna, which settled all outstanding litigation between the Company and Cessna. The
settlement required payment by Cessna of US$27,964,000 ($29,380,000) in satisfaction of the judgement
entered against Cessna from the arbitration award made on November 16, 2012, resulting in US$573,000
($604,000) recorded as additional award settlement for 2013. The settlement funds were received in full
by the Company on September 6, 2013. This settlement satisfies the judgement and has resulted in the
dismissal of the outstanding appeal.
Cash flows from operating activities during the year ended December 31, 2013 provided $23,849,000 of
cash as compared to providing $6,109,000 of cash during the year ended December 31, 2012. The
primary source of cash from operations during the current year is from the Cessna award settlement. The
Company utilized the funds received from the Cessna award settlement to repay $6,660,000 of bank
indebtedness, a $4,045,000 convertible debenture, and $11,803,000 preferred shares and accrued
dividends leaving $6,872,000 of cash from the Cessna award settlement for funding operations. As at
December 31, 2013 the Company had $7,012,000 cash on hand.
During fiscal 2013 and 2012 the Company has repaid in excess of $26 million of debt and has cash
reserves on hand as at December 31, 2013 amounting to $7,012,000 (December 31, 2012: $2,597,000).
The Company has a working capital surplus of $14,213,000 as at December 31, 2013 which has decreased
from the December 31, 2012 $16,759,000 surplus, as a result of repaying bank indebtedness from Cessna
award settlement proceeds. The Company’s accumulated deficit as at December 31, 2013 is $57,723,000
(December 31, 2012: $55,921,000).
During 2013 the Company added $53 million to its order backlog due to increases in the production rates
and contract renewals for various existing programs, as well as recently awarded statements of work.
The Company has amended its accounting with respect to the classification of deferred program revenues
in its 2013 financial statements. Previously, all of the Company’s deferred program revenues were
classified as non‐current. Deferred program revenues will now be classified as current or non‐current
based on the estimated timing of when the related revenue will be recognized. As a result, deferred
program revenues as at December 31, 2012 in the amount of $17,514,000 has been reclassified from non-current
to current. The impact as of January 1, 2012 has not been estimated as it is impracticable to
determine what management would have estimated as of January 1, 2012 without undue application of
As a result of the reclassification of deferred program revenues, 2012 cash inflows of $9,712,000 have
been reclassified from financing activities to operating activities, to reflect the nature of the deferred
revenue balance which has generated the cash flows.