2016-04-12_annual report

Avcorp announces 2015 Annual Financial Results

2015 Annual Report
April 12, 2016

VANCOUVER: Avcorp Industries Inc. (TSX: AVP) (the “Company”, “Avcorp” or the “Avcorp Group”) today announced its annual financial results for the year ended December 31, 2015.

During the year ended December 31, 2015 Avcorp Group revenues totaled $79,925,000 as compared to $67,104,000 revenue for the previous year; a strong 19% annual revenue increase for 2015 as compared to 2014. Both commercial and defence programs, for all customers, have experienced increased demand during the current year. Furthermore, new program introductions and acquisition based revenues have added to current year revenues as the Group ramps up to full rates of production on existing programs in all facilities. 

Effective December 18, 2015, Avcorp completed the acquisition of the US-based composite Aerostructures division of Hitco, a subsidiary of Frankfurt-listed SGL. The Acquisition was completed pursuant to the terms of an asset purchase agreement that was entered into on July 20, 2015, and subsequent amendments to December 18, 2015. Pursuant to the Agreement Avcorp’s subsidiary, Avcorp Composite Fabrication Inc., purchased the assets of the division of Hitco which produces composite structural parts for commercial and military aerostructures. 

The Acquisition, which was first announced in July 2015, will approximately double Avcorp’s revenue while strengthening its balance sheet and adding approximately $274 million to the Company’s order backlog. Avcorp’s business acquisition contributed $1,856,000 to the 2015 revenues arising during the period post the December 18, 2015 acquisition date.

The Delta facility revenues have increased by 17% during the current year relative the previous year: primarily as a result of the successful start-up of a rotary wing aircraft defence program whose full rate production occurred during the second half of 2015. Current year commercial jet and business jet aircraft structure and retro-fit program deliveries increased as well in 2015 over 2014, reflecting increased customer production rate demand and spare components sales.

The Burlington facility commenced production of composite floor panels in supply to Bombardier Aerospace’s Global 5000/6000 and Global 7000/8000 programs during the current year, with increased rates of production expected for 2016. Full rate production for these programs will further establish the wholly owned subsidiary as a leading manufacturer of composite floor panels. Composite floor panel revenues arising from aftermarket or spare component sales have risen by 91% in 2015 over 2014; while composite floor panel revenues derived from sales to original equipment manufacturers (“OEM”) have increased by 20%. Comtek has also developed long term relationships with aircraft operators ensuring that its growth in composite and metal aircraft structure repair revenues will continue to provide a strong operating cash flow from this market segment. In summary, Avcorp’s Burlington operations increased revenue in 2015 relative to 2014 by $3,685,000 (28%).

During the year ended December 31, 2015, the Avcorp Group recorded a loss from operations of $12,114,000 on $79,925,000 revenue, as compared to an $8,038,000 operating loss on $67,104,000 revenue for the previous year. During the current year Avcorp incurred expenses totaling $5,865,000 in support of its current merger and acquisition initiatives. Although recent customer contract awards will commence to increase facility utilization, there remain within operations significant levels of unutilized plant capacity within the Company’s Delta, British Columbia facility. The Company has expensed $4,906,000 of overhead costs during the current year (December 31, 2014: $5,047,000) in respect of unutilized plant capacity.

Net income for the current year amounted to $3,208,000 as compared to a net loss of $7,950,000 for the year ended December 31, 2014. A $15,973,000 gain was recorded in 2015, arising from the December 18, 2015 acquisition of the composite Aerostructures division of Hitco.

Cash flows from operating activities during the year ended December 31, 2015 utilized $20,004,000 of cash as compared to utilizing $3,139,000 of cash during the year ended December 31, 2014. Cash flows from operating activities were most significantly impacted as a result of the December 18, 2015 acquisition of Hitco’s Aerostructures division, as well as working capital growth in support of increased production and revenues.

Total current assets less total current liabilities were in a surplus position of $55,045,000 at December 31, 2015 and $7,205,000 at December 31, 2014.

On December 31, 2015, the ratio of the Company's current assets to current liabilities was 2.02:1 (December 31, 2014: 1.43:1), with the debt to equity ratio at 0.09:1 (December 31, 2014: 0.07:1).

About Avcorp
The Avcorp Group designs and builds major airframe structures for some of the world’s leading aircraft companies, including BAE Systems, Boeing, Bombardier, Fuji Heavy Industries and Lockheed Martin. The Avcorp Group has more than 50 years of experience, over 776 skilled employees and 636,000 square feet of facilities. Avcorp Structures & Integration located in Delta BC is dedicated to metallic and composite aerostructures assembly and integration; Avcorp Engineered Composites located in Burlington ON is dedicated to design and manufacture of small-sized composite aerostructures, and Avcorp Composite Fabrication located in Gardena CA has advanced composite aerostructures fabrication capabilities for medium and large composite aerostructures. 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. Comtek Advanced Structures Ltd., at our Burlington location also offers aircraft structural component repair services for commercial aircraft.

Avcorp Composite Fabrication Inc. is wholly owned by Avcorp US Holdings Inc. Both companies are incorporated in The State of Delaware and are wholly owned subsidiaries of Avcorp Industries Inc.

Comtek Advanced Structures Ltd., incorporated in the Province of Ontario is a wholly owned subsidiary of Avcorp Industries Inc.

Avcorp Industries Inc. is a federally incorporated reporting company traded on the Toronto Stock Exchange (TSX:AVP).
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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