Avcorp announces 2015 Second Quarter Financial Results

VANCOUVER, Aug. 13, 2015 /CNW/ - 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, 2015.

During the quarter ended June 30, 2015 Avcorp Group revenues totaled $20,369,000 as compared to $21,134,000 revenue for the same quarter in the previous year.  2015 year-to date revenues for the Avcorp Group have increased for production and deliveries of commercial aerospace products, while government budgetary curtailed defense spending has caused deliveries of defense aerospace products to be lesser in 2015 than for the same two quarter period in 2014.  Year-to-date 2015 revenues amount to $36,030,000 as compared to $38,685,000 for the same period in 2014.

Increased production by Comtek of composite floor panels for delivery to Bombardier Aerospace's regional and business jets floors product lines, strong sales into the composite floor panel aftermarket, as well as continued higher than historical composite and metal aircraft structure repairs on a "loyalty" program with key accounts, has significantly contributed to increasing Comtek's second quarter revenues by 13% over the same quarter in 2014.

On July 20, 2015, the Company entered into a definitive agreement (the "Agreement") to acquire the US-based 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 Q3 2015.

During the quarter ended June 30, 2015, the Avcorp Group recorded a loss from operations of $1,125,000 on $20,369,000 revenue, as compared to a $472,000 operating loss on $21,134,000 revenue for the same quarter in the previous year; and a net loss for the current quarter of $1,135,000 as compared to net loss of $589,000 for the quarter ended June 30, 2014. 

During the current quarter Avcorp incurred expenses totaling $491,000 in support of its current merger and acquisition initiatives.  Specifically, the Company incurred costs in execution of the due diligence process related to constructing the legal framework, examining operations and conducting financial, as well as valuation assessments.  Although one time in nature, these costs are expected to continue through to close of the acquisition transaction.

There remain within operations significant levels of unutilized plant capacity within the Company's British Columbia facility.  The Company has expensed $1,204,000 of overhead costs during the current quarter (June 30, 2014: $1,268,000) in respect of unutilized plant capacity.  The amount of overhead costs expensed, as a result of unutilized capacity, will fluctuate from quarter to quarter as production in support of deliveries varies. 

Cash flows from operating activities during the quarter ended June 30, 2015 utilized $2,580,000 of cash as compared to generating $103,000 of cash during the quarter ended June 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.  The Company has a working capital surplus of $3,189,000 as at June 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 June 30, 2015 is $69,569,000 (December 31, 2014: $65,673,000).

About Avcorp

Avcorp designs and builds major airframe structures for some of the world's leading aircraft companies, including BAE Systems, Boeing and Bombardier.  With more than 50 years of experience, over 388 skilled employees and 340,000 square feet of facilities in Delta BC and Burlington ON, Avcorp offers integrated composite and metallic aircraft structures to aircraft manufacturers, a distinct advantage in the pursuit of contracts for new aircraft designs, which require lower-cost, light weight, strong, reliable structures.  Our Burlington location also offers composite repairs for commercial aircraft.  Avcorp is a Canadian public company traded on the Toronto Stock Exchange (TSX:AVP).

(signed)

PETER GEORGE
CHIEF EXECUTIVE OFFICER, AVCORP GROUP

Forward-Looking Statements

This release should be read in conjunction with the Company's unaudited financial statements contained in the Company's Annual Report and with the quarterly financial statements and accompanying notes filed with Sedar (www.sedar.com).

Certain statements in this release and other oral and written statements made by the Company from time to time are forward-looking statements, including those that discuss strategies, goals, outlook or other non-historical matters; or projected revenues, income, returns or other financial measures.  These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those contained in the statements, including the following:  (a) the extent to which the Company is able to achieve savings from its restructuring plans; (b) uncertainty in estimating the amount and timing of restructuring charges and related costs; (c) changes in worldwide economic and political conditions that impact interest and foreign exchange rates; (d) the occurrence of work stoppages and strikes at key facilities of the Company or the Company's customers or suppliers; (e) government funding and program approvals affecting products being developed or sold under government programs; (f) cost and delivery performance under various program and development contracts; (g) the adequacy of cost estimates for various customer care programs including servicing warranties; (h) the ability to control costs and successful implementation of various cost reduction programs; (i) the timing of certifications of new aircraft products; (j) the occurrence of further downturns in customer markets to which the Company products are sold or supplied or where the Company offers financing; (k) changes in aircraft delivery schedules or cancellation of orders; (l) the Company's ability to offset, through cost reductions, raw material price increases and pricing pressure brought by original equipment manufacturer customers; (m) the availability and cost of insurance; (n) the Company's ability to maintain portfolio credit quality; (o) the Company's access to debt financing at competitive rates; and (p) uncertainty in estimating contingent liabilities and establishing reserves tailored to address such contingencies.


CONDENSED INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(unaudited, prepared in accordance with IAS 34, expressed in thousands of Canadian dollars)








June 30, 2015

December 31, 2014

ASSETS



Current assets



Cash

$  830

$  3,159




Accounts receivable

11,032

5,642




Inventories

15,210

13,738




Prepayments and other assets

1,124

1,290





28,196

23,829

Non-current assets



Prepaid rent

146

146




Development costs

4,350

3,303




Property, plant and equipment

8,294

8,204




Total assets

40,986

35,482




LIABILITIES AND EQUITY



Current liabilities



Bank indebtedness

6,249

-




Accounts payable and accrued liabilities

10,468

8,549




Current portion of long-term debt

366

293




Deferred program revenues

7,924

7,782





25,007

16,624

Non-current liabilities






Deferred gain

144

168




Lease inducement

320

370




Long-term debt

1,542

943





27,013

18,105

Equity






Capital stock

79,921

79,921




Contributed surplus

3,621

3,129




Deficit

(69,569)

(65,673)





13,973

17,377




Total liabilities and equity

40,986

35,482

 

 


CONDENSED INTERIM CONSOLIDATED STATEMENTS OF (LOSS) INCOME AND COMPREHENSIVE (LOSS) INCOME

(unaudited, prepared in accordance with IAS 34, expressed in thousands of Canadian dollars, except number of shares and per share amounts)








Three months ended

Six months ended






FOR THE PERIOD ENDED JUNE 30

2015

2014

2015

2014






Revenues

$  20,369

$  21,134

$  36,030

$  38,685






Cost of sales

18,191

18,700

33,319

34,624






Gross profit

2,178

2,434

2,711

4,061






Administrative and general expenses

3,182

2,762

6,259

5,641






Office equipment depreciation

121

144

249

289






Operating (Loss) Income

(1,125)

(472)

(3,797)

(1,869)






Finance (income) costs – net

71

22

94

20






Foreign exchange (gain) loss

(61)

92

5

(65)











Write-down of equipment

-

3

-

7






(Loss) Income before income tax

(1,135)

(589)

(3,896)

(1,831)






Income tax expense

-

-

-

-






(Loss) Income and total comprehensive (loss) income for the period

(1,135)

(589)

(3,896)

(1,831)






(Loss) Earnings per share:










Basic (loss) earnings per common share

(0.00)

(0.00)

(0.01)

(0.01)






Diluted (loss) earnings per common share

(0.00)

(0.00)

(0.01)

(0.01)






Basic weighted average number of shares outstanding (000's)

302,633

283,010

302,633

282,553






Diluted weighted average number of shares outstanding (000's)

302,633

283,010

302,633

282,553

 

 


CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, prepared in accordance with IAS 34, expressed in thousands of Canadian dollars)








Three months ended

Six months ended






FOR THE PERIOD ENDED JUNE 30

2015

2014

2015

2014






Cash flows from (used in) operating activities










(Loss) Income before income tax

$  (1,135)

$  (589)

$  (3,896)

$  (1,831)






   Adjustment for items not affecting cash:










Accrued interest and government royalties

18

13

36

16






Depreciation

395

411

782

775






Development cost amortization

46

1

48

136






Provision for loss-making contracts

(118)

-

(23)

(31)






Provision for obsolete inventory

55

90

153

49






Stock based compensation

246

12

492

7






Write-down of equipment

-

3

-

7






Other items

(30)

(62)

(62)

(84)


(523)

(121)

(2,470)

(956)

Changes in non-cash working capital










Accounts receivable

(102)

(317)

(1,540)

1,055






Inventories

(89)

2,586

(1,603)

2,438






Prepayments and other assets

(179)

157

164

201






Accounts payable and accrued liabilities

432

1,500

1,749

2,132






Deferred program revenues

(2,119)

(3,702)

(3,471)

(6,921)






Net cash from (used in) operating activities

(2,580)

103

(7,171)

(2,051)











Cash flows from (used in) investing activities










Proceeds from sale of equipment

-

559

-

568






Purchase of equipment

(147)

(400)

(788)

(790)






Payments relating to development costs and tooling

(403)

(1,093)

(1,095)

(1,405)






Net cash from (used in) investing activities

(550)

(934)

(1,883)

(1,627)






Cash flows from (used in) financing activities










Increase (decrease) in bank indebtedness

3,131

-

6,249

-






Payment of interest

(8)

(14)

(17)

(17)






Proceeds from current and long term debt

91

-

753

-






Proceeds from issuance of common shares

-

44

-

142






Redemption of preferred shares and accrued dividends

-

-

-

(36)






Repayment of current and long-term debt

(109)

(307)

(184)

(323)






Net cash from (used in) financing activities

3,105

(277)

6,801

(234)






Net increase (decrease) in cash

(25)

(1,108)

(2,253)

(3,912)






Net foreign exchange difference

(26)

77

(76)

(73)






Cash - Beginning of period

881

4,058

3,159

7,012






Cash - End of period

830

3,027

830

3,027

 

 

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(unaudited, prepared in accordance with IAS 34, expressed in thousands of Canadian dollars, except number of shares)












Share capital











Shares

Amount

Contributed
surplus

Deficit

Total
equity







Balance December 31, 2013

280,391,152

77,681

3,593

(57,723)

23,551







Issue of common shares

2,691,500

142

-

-

142







Stock based compensation expense

-

-

(7)

-

(7)







Transfer to share capital on exercise of stock options

-

87

(87)

-

-







Loss for the period

-

-

-

(1,831)

(1,831)







Balance June 30, 2014

283,082,652

77,910

3,499

(59,554)

21,855







Balance December 31, 2014

302,633,184

79,921

3,129

(65,673)

17,377







Stock-based compensation expense

-

-

492

-

492







Loss for the period

-

-

-

(3,896)

(3,896)







Balance June 30, 2015

302,633,184

79,921

3,621

(69,569)

13,973

SOURCE Avcorp Industries Inc.

For further information: Sandi DiPrimo, Investor Relations Contact 604-587-4938 or email info@avcorp.com

RELATED LINKS
http://www.avcorp.com

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