November 13, 2015
VANCOUVER: Avcorp Industries Inc. (TSX: AVP) (the “Company”, “Avcorp” or the “Avcorp Group”) today
announced its third quarter financial results for the quarter ended September 30, 2015.
During the quarter ended September 30, 2015 Avcorp Group revenues totaled $21,610,000 as compared
to $14,675,000 revenue for the same quarter in the previous year; a significant 47% quarterly revenue
increase for 2015 as compared to 2014. Both commercial and defence programs, for all customers, have
experienced increased demand during the current quarter. Furthermore, new program introductions
have added to current year revenues as the Group ramps up to full rates of production. Year-to-date
2015 revenues amount to $57,640,000 as compared to $53,360,000 for the same nine month period in
2014, an 8% increase.
Comtek Advanced Structures Ltd. (“Comtek” a wholly owned subsidiary of Avcorp Industries Inc.)
increased production of composite floor panels for delivery to Bombardier Aerospace’s (“Bombardier”)
regional and business jets floors product line, along with strong sales into the composite floor panel
aftermarket, have driven composite floor panel revenue during the current quarter to exceed Q3 2014
revenue by 99% for this market segment; new program revenues contributed $736,000 to this growth. In
total, Comtek’s third quarter revenues have increased by 55% over the same quarter in 2014.
Increased revenues during the current quarter relative to the same quarter in 2014, augmented by
production efficiencies, have improved current quarter production margins by $2,758,000 over Q3 2014.
Significant factors underlying the current quarter loss include: $1,782,000 (year-to-date $2,273,000) for
expenditures in support of current merger and acquisition initiatives; as well, there remain within
operations significant levels of unutilized plant capacity. The Company has expensed $1,184,000 of
overhead costs during the current quarter (September 30, 2014: $1,300,000) in respect of unutilized plant
capacity. New program revenue growth, which continued in the current quarter, will be the largest
contributing factor to reducing the Company’s cost structure and contributing towards offsetting idle
During the quarter ended September 30, 2015, the Avcorp Group recorded a net loss of $2,053,000 as
compared to a net loss of $2,229,000 for the quarter ended September 30, 2014.
Cash flows from operating activities during the quarter ended September 30, 2015 utilized $3,439,000 of
cash as compared to utilizing $1,047,000 of cash during the quarter ended September 30, 2014. The
primary use of cash from operations during the current quarter is due to recognition of revenue related to
current quarter product deliveries for which the cash was received in a previous quarter, as well as a
growth in accounts receivable attributable to increased revenues. As at September 30, 2015, the
Company had $976,000 cash on hand (December 31, 2014: $3,159,000) and utilized $5,465,000 of its
operating line of credit (December 31, 2014: $Nil). The Company has a working capital surplus of
$2,981,000 as at September 30, 2015 which has decreased from the December 31, 2014 $7,205,000
surplus, as a result of cash utilized in operating activities. The Company’s accumulated deficit as at
September 30, 2015 is $71,622,000 (December 31, 2014: $65,673,000).
On July 20, 2015, the Company entered into a definitive agreement (the “Agreement”) to acquire the US-based
composite aerostructures division of Hitco Carbon Composites Inc. (“Hitco”) a subsidiary of
Frankfurt-listed SGL Carbon SE (“SGL”).
The aerostructures division of Hitco is a large carbon composites aerostructures manufacturer which
produces and supplies composite aerostructures assemblies to aerospace markets. Its products comprise
complex mold line structures such as beams, wing skins, tailcones, pressurized bulkheads and control
surfaces. Hitco’s products are sold within the commercial and military aerospace industry.
The acquisition of Hitco’s aerostructures composite division offers a unique opportunity to transform the
Avcorp Group’s existing metal fabrication and integrated assembly business by broadening the product
range and strengthening its composite capabilities. Advanced composite fabrication capabilities, provided
by this acquisition, will enhance Avcorp Group’s ability to participate in large aerospace assembly
programs which combine mixed material components.
Closing is subject to customary conditions, including finalization of other ancillary agreements, third party
and regulatory approvals, and is anticipated to occur in Q4 2015.