Avcorp Announces 2015 Third Quarter Financial Results

  • By Avcorp Industries
  • 13 Nov, 2015
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 USbased 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.
By Avcorp Industries 14 Nov, 2016
November 14, 2016
VANCOUVER: Avcorp Industries Inc. (TSX: AVP) (the “Company”, “Avcorp” or the “Avcorp Group”) today announced its financial results for the three and nine month periods ended September 30, 2016. All amounts are in Canadian currency unless otherwise stated. 
By Avcorp Industries 10 Nov, 2016
November 10, 2016
VANCOUVER: Avcorp Industries Inc. (TSX: AVP) (the “Company”, “Avcorp” or the “Avcorp Group”) is pleased to announce that it has been awarded a long-term production contract with the Aerospace Company of Fuji Heavy Industries Ltd. (“FHI”), a tier-one supplier to major original equipment manufacturers (“OEM”) of commercial and defence aircraft around the world.

Avcorp will produce complex composite structural components for FHI that will be assembled for the Boeing 787 center wing box. Avcorp, which will produce the components from its Composite Fabrication facility located in Gardena, California, expects that production volumes will grow by as much as 50% over historical supply rates.

“The contract award with FHI is significant on a number of levels,” said Mr. Peter George, CEO of Avcorp Industries. “First, it transitions our role with FHI from being a supplier with short-term purchase orders to one with a long-term contract for complex composite components for the Boeing 787 platform. Second, it extends our reach within the Boeing supply chain by complementing our longstanding relationship with the OEM. Both developments are due to our growing reputation as a quality supplier and to the recent investments we have made towards developing expertise in the manufacture of complex composite materials.”

As a result of the contract award, Avcorp’s order backlog is currently estimated at $901 million. The new total reflects the cumulative net effect of recent production deliveries as well as the addition of production contract with FHI.
By Avcorp Industries 07 Nov, 2016
November 7, 2016
VANCOUVER: Avcorp Industries Inc. (TSX: AVP) (the “Company”, “Avcorp” or the “Avcorp Group”) has announced that it has issued 60 day WARN notifications on October 24, 2016, as part of a restructuring initiative at its Gardena California facility that will result in a workforce reduction of 75 permanent employees by December 31, 2016. This reduction is in addition to exiting 180 temporary workers during the last 90 days, which were added this year to support customers’ requirements arising from legacy product issues.

The restructuring will result in significant annual cost savings for the Company, net of anticipated severance costs of approximately $260,000.

“The team in Gardena has done a great job of meeting our customers’ needs under challenging conditions,” said Mr. Peter George, CEO of the Avcorp Group. “Our customers and our people understand the issues we face, and we are continuing to identify and act on opportunities in a focused and measured way. While these decisions were not taken lightly, they are intended to protect our people and capabilities, stabilize our processes and optimize our work flows so that we deliver world-class performance to our customers.”
By Avcorp Industries 28 Sep, 2016
September 28, 2016
VANCOUVER: Avcorp Industries Inc. (TSX: AVP) (the “Company”, “Avcorp” or the “Avcorp Group”) announced today that it has closed a $5 Million USD unsecured loan facility. The loan facility bears interest at a rate of 8% per annum and matures on April 7, 2017. In connection with the loan facility, the lender was issued share purchase warrants totalling 30,714,118 warrants to purchase common shares exercisable at a price of $0.07 per common share for a period of 24 months from issuance. The lender is a non-arm’s length party to the Corporation. The proceeds of the loan will be for working capital at the Corporation’s Delta, B.C. and Gardena, California facilities. 
By Avcorp Industries 15 Aug, 2016
September 22, 2016
VANCOUVER: Avcorp Industries Inc. (TSX: AVP) (the “Company”, “Avcorp” or the “Avcorp Group”) today announced that it has been awarded multiple production contracts from Boeing.

These production contracts consist of complex metal bond and multi-material structural assemblies that complement Avcorp’s capability as a strategic integrated supplier within the aerospace industry. The new contracts include:

  • Production of Spoilers for the Boeing 737 MAX program. This will be one of the most significant contracts in Avcorp’s order backlog. The addition of the Spoiler production will result in considerable increases to Avcorp’s existing plant and equipment utilization for the coming years. The 737 MAX is Boeing’s new, more fuel-efficient single-aisle airplane, with first delivery anticipated next year. 
  • Production of Metal Bond Panels for the Boeing 777X. This award is the first contract for Avcorp with Boeing’s new 777X program. The 777X will be the world’s largest and most fuelefficient twin-engine commercial airplane, with first delivery anticipated in 2020. 
  • Production and supply of Doors for the Boeing Next-Generation 737 and 737 MAX. This contract creates beneficial production synergies that complement Avcorp’s current 737 Wheel Well Fairing high-rate production program, having daily just-in-time deliveries to 737 assembly lines. 
  • Avcorp previously announced a contract to produce Tanker Fairings for the KC-46 Program; the Boeing Tanker built on a 767 platform. This assembly leverages Avcorp’s integration capabilities utilizing composite and metallic materials. 
Avcorp’s order backlog is currently estimated at $579 million, in consideration of attaining full award values, after reduction for sales made during the first two months of the current quarter. “These latest awards expand Avcorp’s manufacturing relationship with Boeing with a timeline that goes well into the future,” said Peter George, Avcorp Industries Inc. CEO. “We are very proud to support Boeing on new programs such as the 737 MAX and 777X, and look forward to continued growth providing better solutions to all our customers.”

“We appreciate Avcorp’s continued focus on quality, reliability and affordability to support our position in a competitive marketplace,” said John Byrne, Vice President, Boeing Commercial Airplanes Supplier Management for Aircraft Materials & Structures. “Avcorp is a positive example of the strong ties between Canada’s aviation industry and Boeing.”

Avcorp has been manufacturing and supplying Boeing with various aircraft components supporting the 737, 757, 767, 777, 787, CH-47 programs for more than 20 years.
By Avcorp Industries 14 Aug, 2016
August 14, 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.
By Avcorp Industries 12 Jul, 2016
July 12, 2016
Avcorp Industries and the University of British Columbia have agreed to explore the establishment of a Learning Factory for Advanced Composites at UBC’s Okanagan campus.

The two parties, represented by Avcorp CEO Peter George and UBC Deputy Vice-Chancellor and Principal Deborah Buszard, signed an MOU today at the Farnborough International Airshow.

“Avcorp Industries is committed to exploring the establishment of an aerospace industryfirst Learning Factory in a way which will push the boundaries of advanced composite manufacturing as well as provide a platform for a new level of research and training in British Columbia,” says Peter George, CEO of the Avcorp Industries Group. “We are looking forward to working with the UBC-based Composites Research Network in an initial focus on aerospace applications of composite materials and optimized manufacturing processes.”

Avcorp Industries is a leading supplier of integrated composite and metallic aerostructures and is based in Delta, BC.

“BC’s economic success is due in part to our diversified economy — and this MOU will lead to the exploration of innovative opportunities for Kelowna and area,” says Norm Letnick, MLA for Kelowna-Lake Country. “Congratulations to Avcorp Industries and UBC on this important partnership, which will provide great training opportunities for students as well.”

“Composite manufacturing is a growth industry,” says Stephen Fuhr, MP for Kelowna-Lake Country. “This learning factory concept provides a solid opportunity for employment, education and innovation. It would also further solidify Kelowna-Lake Country as one of Canada’s premier aerospace clusters.”

The Learning Factory will integrate industrial production with learning and research and provide UBC students and faculty with new opportunities for research, knowledge translation, and hands-on experiential learning. The Learning Factory will also provide technical and skills training opportunities for students from partner institutions, such as Okanagan College.

Through the development of a composites research and production facility at the UBC Okanagan Innovation Precinct, as well as an integrated digital simulation facility at UBC’s Vancouver campus, the Learning Factory will provide Avcorp Industries enhanced ability to evaluate and improve manufacturing efficiency.

“UBC is committed to bold new types of partnerships that create unique research, learning, and job creation opportunities,” says Dr. Deborah Buszard, UBC Deputy Vice-Chancellor and Principal. “We are excited to take our discussions with Avcorp to the next level. We see this project as key to our ambition to help transform and diversify the regional resource economy to one driven by innovation.”
By Avcorp Industries 30 Jun, 2016
June 30, 2016
VANCOUVER: Avcorp Composite Fabrication Inc. (ACF), located in Gardena, California (Avcorp Industries Inc. most recent acquisition) is pleased to announce that it has reached a Collective Bargaining Agreement with the Glass Molders and Plastics Union (GMP) Local 19 for a six (6) year labor contract.

The new agreement calls for wage increases of 1%, 2.25%, 2.25% and 2.75% in the first four years of the contract. Wage adjustments in year five and six will be reviewed by the Company and the Union at a future date. Through the course of collective bargaining, the Company and Union have agreed to mutually explore and ultimately implement High Performance Work Teams in selected areas of the operation. In addition, in order to accomplish best in class levels of performance, the agreement includes incentive compensation that arises from meeting Team performance targets.

Peter George, CEO of the Avcorp Group, commented, “This agreement is evidence of how committed ACF and the GMP Local 19 are to both our customers and our own success. We look forward to working together in our long standing positive relationship to achieve our performance targets, and to meet the expectations of all of the company’s stakeholders.”
By Avcorp Industries 31 May, 2016
May 31, 2016
VANCOUVER: Avcorp Industries Inc. (TSX: AVP) (the “Company”, “Avcorp” or the “Avcorp Group”) is pleased to announce it has been awarded a contract extension with Lockheed Martin. The agreement extends into 2020 the current composite fabrication work scope, at Avcorp’s Gardena California facility, for F-35 wing skin panels, nacelle panels and body access panels.

This follow-on contract complements Avcorp’s assembly of the F-35 Carrier Variant (“CV”) Outboard Wing (“OBW”) structure which has been under a long-term contract with BAE Systems since 2011 in the Delta, British Columbia plant; as well as the recently awarded Lockheed Martin contract for the integration of paint preparation and complex installation of control surfaces and systems such as outboard leading edge flaps, ailerons, fairings and sub-systems for the CV OBW.

“We are very pleased with the schedule and quality improvement progress being made by the Gardena team and we believe this contract extension by Lockheed Martin reflects their confidence in Avcorp. We hope that in demonstrating our full capabilities with the combined resources of our plant sites that we will create additional collaboration opportunities with Lockheed Martin and help progress their Affordability Initiative for the F-35 program.” states Peter George, CEO of the Avcorp Group.
By Avcorp Industries 27 May, 2016
May 27, 2016
VANCOUVER: Avcorp Industries Inc. (TSX: AVP) (the “Company”, “Avcorp” or the “Avcorp Group”) today announced that at its annual meeting of shareholders held on May 19, 2016 (the “Meeting”), all directors nominated as listed in the management proxy circular dated April 21, 2016 were elected. The details are as follows:
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