August 15, 2016
VANCOUVER: Avcorp Industries Inc. (TSX: AVP) (the “Company”, “Avcorp” or the “Avcorp Group”) today announced its second quarter financial results for the quarter ended June 30, 2016.
During the quarter ended June 30, 2016 Avcorp Group revenues totaled $44,246,000 as compared to $20,369,000 revenue for the same quarter in the previous year. The December 18, 2015 acquisition of the US based composite Aerostructures division of Hitco, a subsidiary of Frankfurt-listed SGL has added $22,595,000 to current quarter revenues.
During the quarter ended June 30, 2016, the Avcorp Group recorded a loss from operations of $12,781,000, which includes costs incurred and yet to be recovered under the Hitco acquisition agreement, on $44,246,000 revenue; as compared to a $1,125,000 operating loss on $20,369,000 revenue for the same quarter in the previous year; and net loss for the current quarter of $12,951,000 which include costs incurred yet to be recovered under the Hitco acquisition agreement as compared to net loss of $1,135,000 for the quarter ended June 30, 2015.
Pre-Hitco acquisition operational events although indemnified and on which Avcorp was required to assist, adversely impacted operations and caused excessive personnel costs, administrative and legal expenditures at ACF Avcorp’s Gardena facility. These costs have yet to be recovered are included in all the costs for 2016.
In addition to indemnified losses, a portion of the losses and one-time costs were anticipated. These costs are part of the 2016 business improvement plan for ACF Gardena.
During the quarter ended June 30, 2016, cash flows from operating activities, excluding the impact of changes in non-cash working capital, utilized $12,762,000 of cash as compared to utilizing $523,000 of cash during the quarter ended June 30, 2015. Cash flows from operating activities were most significantly impacted as a result of operating losses incurred from the integration and productionization costs expended for the newly acquired Hitco operations, losses arising from unfavourable customer contracts assumed, and operational, administrative, and legal expenditures, incurred at Avcorp’s Gardena facility as a direct result of pre-Hitco acquisition operational events.
Avcorp’s Burlington operations increased revenue in the second quarter 2016 relative to the second quarter 2015 by $1,521,000 (35.2%).
Avcorp’s Delta location continues to actively pursue production contracts on aerospace programs throughout North America, Asia, and Europe both in the commercial and defence aerospace sectors. These efforts are driving increased value as evidenced by recent contract awards; in addition to 2015 awards for the expanded scope of production on the Lockheed Martin F-35 Carrier Variant Outboard Wing, as well as production and supply of 767-2C Panoramic Camera Fairings, as part of The Boeing Company’s KC-46 Tanker program. Further contract awards are expected.
The Gardena facility defence programs have been successful and are meeting delivery to customers as planned and have not experienced the extraordinary unanticipated issues relative to process performance and operational disruptions of the commercial programs. The planned improvement initiatives for the defence programs, including the F-35 program for Lockheed Martin, continue and are performing as forecasted; this has resulted in an award of a follow-on contract from Lockheed Martin that was previously announced.
The commercial programs at the Gardena facility have achieved significant improvements in customer deliveries and are progressing to customer agreed plans and targeted schedule position, during the second quarter.
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