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