May 16, 2016
VANCOUVER: Avcorp Industries Inc. (TSX: AVP) (the “Company”, “Avcorp” or the “Avcorp Group”)
today announced its first quarter financial results for the quarter ended March 31, 2016.
During the quarter ended March 31, 2016 Avcorp Group revenues totaled $35,347,000 as compared to
$15,661,000 revenue for the same quarter in the previous year. The December 18, 2015 acquisition of
the US based composite Aerostructures division of Hitco located in Gardena, CA has added
$18,933,000 to current quarter revenues.
Composite aircraft structure repair revenues out of Comtek, Avcorp’s Burlington, ON facility, continued
with a strong performance, as 2016 revenues increased 94% over revenues in the previous year’s first
quarter. Composite floor panel revenues arising from aftermarket or spare component sales remained
flat in first quarter 2016 relative to first quarter 2015; while composite floor panel revenues derived
from sales to original equipment manufacturers have significantly increased by 107%.
Avcorp’s Delta facility revenues generated by legacy production contracts have decreased by 11%
during the current quarter relative the same quarter in the previous year; primarily as a result of a
scheduled customer decrease in deliveries for one defence program contract.
During the quarter ended March 31, 2016, the Avcorp Group recorded a loss from operations of
$12,399,000 on $35,347,000 revenue, as compared to a $2,672,000 operating loss on $15,661,000
revenue for the same quarter in the previous year.
The start-up, post-acquisition of the new operations in Gardena faced several unanticipated challenges
during the first quarter 2016. As a result of legacy quality issues raised by customers, a number of
items were identified that required corrective action. These items accounted for substantial
expenditures beyond normal production costs. The implementation of the necessary corrective actions
limited production output during the current quarter and was the major contributor to lower than
forecasted sales. The majority of the corrective actions will be implemented in the second quarter of
2016 thereby allowing the Gardena operations to achieve fully contracted output levels. Avcorp’s key
commercial customers have worked collaboratively with Avcorp to mitigate production schedules and
support the earliest resolution of the outstanding process and product issues.
The Gardena facility defence programs have not experienced the extraordinary unanticipated issues
relative to process quality and operational disruptions as the commercial programs have. The planned
improvement plans for the defence programs, including the F-35 program for Lockheed Martin, are
performing as forecasted.
As at March 31, 2016, the Company had $10,493,000 cash on hand and had not utilized its operating
line of credit. The Company has a working capital surplus of $47,036,000 as at March 31, 2016.