2015-11-13_Q3

Avcorp announces 2015 Third Quarter Financial Results

Q3 2015 Report
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 capacity costs.

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.

About Avcorp
The Avcorp Group 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 385 skilled employees and 340,000 square feet of facilities at our Avcorp location in Delta BC which is dedicated to light weight metal manufacturing and assembly and at our Comtek location in Burlington ON which is dedicated to composites manufacturing and repair, 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. Our Burlington location also offers composite repairs for commercial aircraft. Avcorp Industries Inc. is a Canadian public company traded on the Toronto Stock Exchange (TSX:AVP).

Contact:
Sandi DiPrimo, Investor Relations Contact | 604-587-4938
Forward-Looking Statements
This release should be read in conjunction with the Company’s unaudited financial statements contained in the Company’s Annual Report and with the quarterly financial statements and accompanying notes filed with Sedar (www.sedar.com). Certain statements in this release 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) changes in worldwide economic and political conditions that impact interest and foreign exchange rates; (b) the occurrence of work stoppages and strikes at key facilities of the Corporation or the Corporation’s customers or suppliers; (c) government funding and program approvals affecting products being developed or sold under government programs; (d) cost and delivery performance under various program and development contracts; (e) the adequacy of cost estimates for various customer care programs including servicing warranties; (f) the ability to control costs and successful implementation of various cost reduction programs; (g) the timing of certifications of new aircraft products; (h) the occurrence of downturns in customer markets to which the Corporation products are sold or supplied or where the Corporation offers financing; (i) changes in aircraft delivery schedules or cancellation of orders; (j) the Corporation’s ability to offset, through cost reductions, raw material price increases and pricing pressure brought by original equipment manufacturer customers; (k) the availability and cost of insurance; (l) the Corporation’s ability to maintain portfolio credit quality; (m) the Corporation’s access to debt financing at competitive rates; (n) uncertainty in estimating contingent liabilities and establishing reserves tailored to address such contingencies; and (o) integration of newly acquired operations and associated expenses may adversely affect profitability.


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