May 16, 2016
VANCOUVER: Avcorp Industries Inc. (TSX: AVP) (the “Company”, “Avcorp” or the “Avcorp Group”) today announced its first quarter financial results for the quarter ended March 31, 2016.
During the quarter ended March 31, 2016 Avcorp Group revenues totaled $35,347,000 as compared to $15,661,000 revenue for the same quarter in the previous year. The December 18, 2015 acquisition of the US based composite Aerostructures division of Hitco located in Gardena, CA has added $18,933,000 to current quarter revenues.
Composite aircraft structure repair revenues out of Comtek, Avcorp’s Burlington, ON facility, continued with a strong performance, as 2016 revenues increased 94% over revenues in the previous year’s first quarter. Composite floor panel revenues arising from aftermarket or spare component sales remained flat in first quarter 2016 relative to first quarter 2015; while composite floor panel revenues derived from sales to original equipment manufacturers have significantly increased by 107%.
Avcorp’s Delta facility revenues generated by legacy production contracts have decreased by 11% during the current quarter relative the same quarter in the previous year; primarily as a result of a scheduled customer decrease in deliveries for one defence program contract.
During the quarter ended March 31, 2016, the Avcorp Group recorded a loss from operations of $12,399,000 on $35,347,000 revenue, as compared to a $2,672,000 operating loss on $15,661,000 revenue for the same quarter in the previous year.
The start-up, post-acquisition of the new operations in Gardena faced several unanticipated challenges during the first quarter 2016. As a result of legacy quality issues raised by customers, a number of items were identified that required corrective action. These items accounted for substantial expenditures beyond normal production costs. The implementation of the necessary corrective actions limited production output during the current quarter and was the major contributor to lower than forecasted sales. The majority of the corrective actions will be implemented in the second quarter of 2016 thereby allowing the Gardena operations to achieve fully contracted output levels. Avcorp’s key commercial customers have worked collaboratively with Avcorp to mitigate production schedules and support the earliest resolution of the outstanding process and product issues.
The Gardena facility defence programs have not experienced the extraordinary unanticipated issues relative to process quality and operational disruptions as the commercial programs have. The planned improvement plans for the defence programs, including the F-35 program for Lockheed Martin, are performing as forecasted.
As at March 31, 2016, the Company had $10,493,000 cash on hand and had not utilized its operating line of credit. The Company has a working capital surplus of $47,036,000 as at March 31, 2016.
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 800 skilled employees and 636,000 square feet of facilities. Avcorp Structures & Integration located in Delta British Columbia, Canada is dedicated to metallic and composite aerostructures assembly and integration; Avcorp Engineered Composites located in Burlington Ontario, Canada is dedicated to design and manufacture of composite aerostructures, and Avcorp Composite Fabrication located in Gardena California, USA has advanced composite aerostructures fabrication capabilities for 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, Ontario, Canada location also provides aircraft operators with 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, USA, and are wholly owned subsidiaries of Avcorp Industries Inc.
Comtek Advanced Structures Ltd., incorporated in the Province of Ontario, Canada, is a wholly owned subsidiary of Avcorp Industries Inc.
Avcorp Industries Inc. is a federally incorporated reporting company in Canada and traded on the Toronto Stock Exchange (TSX:AVP).
Sandi DiPrimo, Investor Relations Contact | 604-587-4938