VANCOUVER: Avcorp Industries Inc. (TSX: AVP) (the “Company”, “Avcorp” or the “Avcorp Group”) today announced its financial results for the quarter ended September 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 (converted as approximately CAD$72.4 million as at September 30, 2017). The Company has utilized $51,481,000 of the operating line of credit, with $7,510,000 cash on hand, as at September 30, 2017.
- 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 68.6% of the issued and outstanding common shares on September 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$2.5 million 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.
- On August 25, 2017 Panta exercised 6,052,664 warrants expiring September 9, 2017 at $0.07 whose aggregate price of $424,000 was deemed to be made by way of set-off against the Panta loan obligation.
- On September 8, 2017 Panta exercised 12,105,327 warrants expiring September 23, 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.
- 2017 third quarter operating losses were reduced by $5.4 million relative to the same quarter in 2016; cost reduction initiatives and operational process changes are underway and commencing to have a positive financial impact.
- New program start-up revenues total $2.8 million in 2017 in commencement of 2016 order backlog growth for new and legacy aircraft programs.
- $2.9 million defense aerostructure contract awarded to ASI during the third quarter 2017.
- During the third quarter 2017 customer contract renewals having an estimated $39 million value for commercial aerostructures were secured by ASI.
- Six new customer production programs launched at ASI during 2017.
- Effective July 1, 2017, the Company changed its functional currency from Canadian dollars (“CAD”) to United States (“US”) dollars (“USD”) for Avcorp Industries Inc. and Comtek Advanced Structures Limited resulting in the entire company and all its subsidiaries having a USD functional currency.
Review of 2017 Third Quarter Financial Results
For the quarter ending September 30, 2017, the Avcorp Group recorded losses from operations totalling $6,644,000 from $36,267,000 revenue, which include costs incurred on start-up of new programs, as compared to $12,060,000 operating losses from $47,349,000 revenue for the same quarter in the previous year. During the third quarter 2017 the Company was successful in significantly reducing operating losses by $5,416,000 relative to the third quarter 2016. Turn around activities focused on cost reduction initiatives as well as operational process flow improvements contributing to the financial improvement.
During the quarter ended September 30, 2017, cash flows from operating activities, excluding the impact of changes in non-cash working capital, utilized $8,114,000 of cash as compared with utilization of $16,720,000 of cash during the quarter ended September 30, 2016 (utilization for nine months ended September 30, 2017: $29,902,000; utilization for nine months ended September 30, 2016: $49,069,000). 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 in support of Avcorp’s Gardena facility; as well as new program introduction and start-up costs at the Delta facility.
As at September 30, 2017, the Company had $7,510,000 cash on hand (December 31, 2016: $3,960,000) and had utilized $51,481,000 of its operating line of credit (December 31, 2016: $17,111,000). The Company has a USD$58 million operating line of credit (converted as approximately CAD$72.4 million as at September 30, 2017). The Company has a working capital deficit of $36,331,000 as at September 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 $45,917,000 as at September 30, 2017 (December 31, 2016: $38,399,000). The Company’s accumulated deficit as at September 30, 2017 is $121,683,000 (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 September 30, 2017 can be found at www.avcorp.com or at www.sedar.com.