Avcorp Announces 2015 Third Quarter Financial Results

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.