Avcorp announces 2015 Third Quarter Financial Results

VANCOUVER, Nov. 13, 2015 /CNW/ - Avcorp Industries Inc. (TSX: AVP) (the "Company", "Avcorp" or the "Avcorp Group") today announced its third quarter financial results for the quarter ended September 30, 2015.

During the quarter ended September 30, 2015 Avcorp Group revenues totaled $21,610,000 as compared to $14,675,000 revenue for the same quarter in the previous year; a significant 47% quarterly revenue increase for 2015 as compared to 2014.  Both commercial and defence programs, for all customers, have experienced increased demand during the current quarter.  Furthermore, new program introductions have added to current year revenues as the Group ramps up to full rates of production. Year-to-date 2015 revenues amount to $57,640,000 as compared to $53,360,000 for the same nine month period in 2014, an 8% increase.

Comtek Advanced Structures Ltd. ("Comtek" a wholly owned subsidiary of Avcorp Industries Inc.) increased production of composite floor panels for delivery to Bombardier Aerospace's ("Bombardier") regional and business jets floors product line, along with strong sales into the composite floor panel aftermarket, have driven composite floor panel revenue during the current quarter to exceed Q3 2014 revenue by 99% for this market segment; new program revenues contributed $736,000 to this growth.  In total, Comtek's third quarter revenues have increased by 55% over the same quarter in 2014.

Increased revenues during the current quarter relative to the same quarter in 2014, augmented by production efficiencies, have improved current quarter production margins by $2,758,000 over Q3 2014.

Significant factors underlying the current quarter loss include: $1,782,000 (year-to-date $2,273,000) for expenditures in support of current merger and acquisition initiatives; as well, there remain within operations significant levels of unutilized plant capacity. The Company has expensed $1,184,000 of overhead costs during the current quarter (September 30, 2014: $1,300,000) in respect of unutilized plant capacity.  New program revenue growth, which continued in the current quarter, will be the largest contributing factor to reducing the Company's cost structure and contributing towards offsetting idle capacity costs. 

During the quarter ended September 30, 2015, the Avcorp Group recorded a net loss of $2,053,000 as compared to a net loss of $2,229,000 for the quarter ended September 30, 2014. 

Cash flows from operating activities during the quarter ended September 30, 2015 utilized $3,439,000 of cash as compared to utilizing $1,047,000 of cash during the quarter ended September 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, as well as a growth in accounts receivable attributable to increased revenues.  As at September 30, 2015, the Company had $976,000 cash on hand (December 31, 2014: $3,159,000) and utilized $5,465,000 of its operating line of credit (December 31, 2014: $Nil).  The Company has a working capital surplus of $2,981,000 as at September 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 September 30, 2015 is $71,622,000 (December 31, 2014: $65,673,000).

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 Q4 2015.

About Avcorp

The Avcorp Group 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 385 skilled employees and 340,000 square feet of facilities at our Avcorp location in Delta BC which is dedicated to light weight metal manufacturing and assembly and at our Comtek location in Burlington ON which is dedicated to composites manufacturing and repair, the Avcorp Group 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 Industries Inc. 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)








September 30, 2015

December 31, 2014

ASSETS



Current assets



Cash

$  976

$  3,159

Accounts receivable

11,240

5,642

Inventories

14,022

13,738

Prepayments and other assets

1,002

1,290


27,240

23,829

Non-current assets



Prepaid rent

146

146

Development costs

3,582

3,303

Property, plant and equipment

8,174

8,204

Total assets

39,142

35,482




LIABILITIES AND EQUITY



Current liabilities



Bank indebtedness

5,465

-

Accounts payable and accrued liabilities

9,840

8,549

Current portion of long-term debt

4,799

293

Deferred program revenues

4,155

7,782


24,259

16,624

Non-current liabilities



Deferred gain

133

168

Lease inducement

296

370

Long-term debt

1,634

943


26,322

18,105

Equity



Capital stock

79,921

79,921

Contributed surplus

4,521

3,129

Deficit

(71,622)

(65,673)


12,820

17,377

Total liabilities and equity

39,142

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

Nine months ended

FOR THE PERIOD ENDED SEPTEMBER 30

2015

2014

2015

2014

 

Revenues

$  21,610

$  14,675

$  57,640

$  53,360

 

Cost of sales

18,451

14,274

51,770

48,898

 

Gross profit

3,159

401

5,870

4,462

Administrative and general expenses

5,068

2,579

11,327

8,220

Office equipment depreciation

121

143

370

432

 

Operating (Loss) Income

(2,030)

(2,321)

(5,827)

(4,190)

 

Finance costs – net

219

16

313

36

Foreign exchange (gain) loss

(194)

(108)

(189)

(173)

(Gain) write-down on sale of equipment

(2)

-

(2)

7

 

(Loss) Income before income tax

(2,053)

(2,229)

(5,949)

(4,060)

 

Income tax expense

-

-

-

-

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

the period

(2,053)

(2,229)

(5,949)

(4,060)

 

(Loss) Earnings per share:





Basic (loss) earnings per common share

(0.01)

(0.01)

(0.02)

(0.01)

Diluted (loss) earnings per common share

(0.01)

(0.01)

(0.02)

(0.01)

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

302,633

283,083

302,633

282,732

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

302,633

283,083

302,633

282,732

 


CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, prepared in accordance with IAS 34, expressed in thousands of Canadian dollars)








Three months ended

Nine months ended

FOR THE PERIOD ENDED SEPTEMBER 30

2015

2014

2015

2014

 

Cash flows from (used in) operating activities





(Loss) Income before income tax

$ (2,053)

$ (2,229)

$ (5,949)

$ (4,060)

   Adjustment for items not affecting cash:






Accrued interest and government royalties

96

15

190

36


Depreciation

395

417

1,177

1,192


Development cost amortization

882

1

930

137


Provision for loss-making contracts

(107)

129

(130)

98


Provision for obsolete inventory

41

(9)

194

40


Stock based compensation

244

1

736

6


Fair value of warrants amortization

123

-

123

-


Other items

(32)

(6)

(94)

(82)


(411)

(1,681)

(2,823)

(2,633)

Changes in non-cash working capital






Accounts receivable

(2,413)

1,150

(3,953)

2,205


Inventories

1,255

(97)

(348)

2,341


Prepayments and other assets

122

137

286

338


Accounts payable and accrued liabilities

(763)

(558)

986

1,574


Deferred program revenues

(1,229)

2

(4,700)

(6,919)

Net cash from (used in) operating activities

(3,439)

(1,047)

(10,552)

(3,094)






Cash flows from (used in) investing activities





Proceeds from sale of equipment

-

21

-

589

Purchase of equipment

(240)

(127)

(1,028)

(917)

Payments relating to development costs and tooling

(114)

(511)

(1,209)

(1,916)

Net cash from (used in) investing activities

(354)

(617)

(2,237)

(2,244)






Cash flows from (used in) financing activities





Increase (decrease) in bank indebtedness

(784)

-

5,465

-

Payment of interest

(57)

(15)

(132)

(36)

Proceeds from current and long term debt

5,090

-

5,843

-

Proceeds from issuance of common shares

-

-

-

142

Redemption of preferred shares and accrued dividends

-

-

-

(36)

Repayment of current and long-term debt

(106)

(67)

(290)

(390)

Net cash from (used in) financing activities

4,143

(82)

10,886

(320)

Net increase (decrease) in cash

350

(1,746)

(1,903)

(5,658)

Net foreign exchange difference

(204)

(101)

(280)

(174)

Cash - Beginning of period

830

3,027

3,159

7,012

Cash - End of period

976

1,180

976

1,180

 

 

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

-

-

(6)

-

(6)

 

Transfer to share capital on exercise of stock options

-

87

(87)

-

-

 

Loss for the period

-

-

-

(4,060)

(4,060)

 

Balance September 30, 2014

283,082,652

77,910

3,500

(61,783)

19,627

 

Balance December 31, 2014

302,633,184

79,921

3,129

(65,673)

17,377

 

Stock-based compensation expense

-

-

736

-

736

 

Fair value of warrants issued

-

-

656

-

656

 

Loss for the period

-

-

-

(5,949)

(5,949)

 

Balance September 30, 2015

302,633,184

79,921

4,521

(71,622)

12,820

 

SOURCE Avcorp Industries Inc.

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

RELATED LINKS
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