VANCOUVER: Avcorp Industries Inc. (TSX: AVP) (the “Company”, “Avcorp” or the “Avcorp Group”) today announced its financial results for the quarter ended June 30, 2017. All amounts are in Canadian currency unless otherwise stated.
- On April 4, 2017, the Company collected the final amount of consideration receivable from SGL Carbon SE (“SGL”) for the acquisition of the US-based composite Aerostructures division of Hitco, a subsidiary of Frankfurt-listed SGL (“Hitco”), amounting to USD$9.2 million.
- On May 26, 2017, the Company signed a loan agreement to replace the current agreement with a Canadian Chartered Bank, supported by a major customer, to access a USD$58 million operating line of credit.
- Effective July 6, 2017 the Company and Panta Canada B.V. (“Panta”) amended a term loan held by Panta to provide for an extended maturity date. Panta is Avcorp’s majority shareholder owning approximately 65.5% of the issued and outstanding common shares on June 30, 2017. Panta is wholly owned by Panta Holdings B.V. Both companies are incorporated in The Netherlands and Mr. Jaap Rosen Jacobson, a director of the Company, is the sole shareholder of Panta Holdings B.V.
- On July 31, 2017 the Company repaid a principal amount of USD$2,500,000 plus interest accrued in the amount of USD$285, 000 of the Panta term loan.
- On August 3, 2017 Panta exercised 12,105,327 warrants expiring August 17, 2017 at $0.07 whose aggregate price of $847,000 was deemed to be made by way of set-off against the Panta loan obligation
- New program start-up revenues contributed $1,367,000 in 2017 in commencement of the $523 million increase in order backlog which occurred in 2016 for new and legacy aircraft programs.
- Leveraging of support personnel skills and capacity has allowed for a reduction in certain roles within the operating sites.
- A consolidation of purchasing volumes has afforded the ability to garner price decreases within the Company’s supply chain.
- 2017 operating line re-financing has provided for in excess of $12 million Q2 2017 supply chain payments; allowing for a return to on-time deliveries of products and services from suppliers.
- Supply chain continuity provides the Company with the opportunity to accelerate its operational turn around in Gardena and capture increased revenue availability for the second half of 2017.
Review of 2017 Second Quarter Financial Results
For the quarter ending June 30, 2017, the Avcorp Group recorded losses from operations totaling $11,170,000 from $36,686,000 revenue, which include costs incurred on start-up of new programs, as compared to $6,010,000 operating losses from $50,234,000 revenue for the same quarter in the previous year.
During the quarter ended June 30, 2017, cash flows from operating activities, excluding the impact of changes in non-cash working capital, utilized $12,085,000 of cash as compared with utilization of $13,293,000 of cash during the quarter ended June 30, 2016 (utilization for six months ended June 30, 2017: $21,788,000; utilization for six months ended June 30, 2016: $26,075,000). Cash flows from operating activities were most significantly impacted as a result of operating losses incurred from the integration and production costs expended for the acquired Hitco operations; losses arising from unfavourable customer contracts assumed; operational, administrative, and legal expenditures incurred at Avcorp’s Gardena facility; as well as new program introduction and start-up costs at the Delta facility.
As at June 30, 2017, the Company had $3,350,000 cash on hand (December 31, 2016: $3,960,000) and had utilized $27,776,000 of its operating line of credit (December 31, 2016: $17,111,000). Based on net collateral provided to its bank, Avcorp Group is able to draw up to an additional $46,204,000 on its operating line of credit as at June 30, 2017 (December 31, 2016: $4,901,000). The Company has a working capital deficit of $27,265,000 as at June 30, 2017 which has increased from the December 31, 2016 $5,439,000 deficit. Working capital surplus/deficit is defined as the difference between current assets and current liabilities. However, the Company’s accounts receivable and inventories net of accounts payable, amount to $41,531,000 as at June 30, 2017 (December 31, 2016: $38,399,000). The Company’s accumulated deficit as at June 30, 2017 is $114,297,000 (December 31, 2016: $93,791,000).
The Company’s complete financial statements and management’s discussion and analysis for the year ended December 31, 2016 and quarter ended June 30, 2017 can be found at www.avcorp.com or at www.sedar.com.