Avcorp announces 2016 Second Quarter Financial Results

VANCOUVER, Aug. 15, 2016 /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, 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 second quarter.

About Avcorp

The Avcorp Group designs and builds major airframe structures for some of the world's leading aircraft companies, including BAE Systems, Boeing, Bombardier, Fuji Heavy Industries and Lockheed Martin.  The Avcorp Group has more than 50 years of experience, over 750 skilled employees and 636,000 square feet of facilities. Avcorp Structures & Integration located in Delta British Columbia, Canada is dedicated to metallic and composite aerostructures assembly and integration; Avcorp Engineered Composites located in Burlington Ontario, Canada is dedicated to design and manufacture of composite aerostructures, and Avcorp Composite Fabrication located in Gardena California, USA has advanced composite aerostructures fabrication capabilities for composite aerostructures. 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.  Comtek Advanced Structures Ltd., at our Burlington Ontario, Canada location also provides operators and MRO's aircraft structural component repair services for commercial aircraft. 

Avcorp Composite Fabrication Inc. is wholly owned by Avcorp US Holdings Inc.  Both companies are incorporated in The State of Delaware, USA, and are wholly owned subsidiaries of Avcorp Industries Inc.

Comtek Advanced Structures Ltd., incorporated in the Province of Ontario, Canada, is a wholly owned subsidiary of Avcorp Industries Inc.

Avcorp Industries Inc. is a federally incorporated reporting company in Canada and 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) changes in worldwide economic and political conditions that impact interest and foreign exchange rates; (b) the occurrence of work stoppages and strikes at key facilities of the Corporation or the Corporation's customers or suppliers; (c) government funding and program approvals affecting products being developed or sold under government programs; (d) cost and delivery performance under various program and development contracts; (e) the adequacy of cost estimates for various customer care programs including servicing warranties; (f) the ability to control costs and successful implementation of various cost reduction programs; (g) the timing of certifications of new aircraft products; (h) the occurrence of downturns in customer markets to which the Corporation products are sold or supplied or where the Corporation offers financing; (i) changes in aircraft delivery schedules or cancellation of orders; (j) the Corporation's ability to offset, through cost reductions, raw material price increases and pricing pressure brought by original equipment manufacturer customers; (k) the availability and cost of insurance; (l) the Corporation's ability to maintain portfolio credit quality; (m) the Corporation's access to debt financing at competitive rates; (n) uncertainty in estimating contingent liabilities and establishing reserves tailored to address such contingencies; and (o) integration of newly acquired operations and associated expenses may adversely affect profitability.

CONDENSED INTERM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(unaudited, prepared in accordance with IAS 34, expressed in thousands of Canadian dollars)


June 30, 2016

December 31, 2015

ASSETS



Current assets



Cash

$5,052

$14,484

Accounts receivable

28,386

30,124

Consideration receivable

17,747

26,624

Inventories

35,442

36,383

Prepayments and other assets

1,432

1,424


88,059

109,039

Non-current assets



Prepaid rent and security

428

449

Consideration receivable

-

12,096

Development costs

4,615

3,187

Property, plant and equipment

29,291

29,880

Intangibles

12,987

16,095

Total assets

135,380

170,746




LIABILITIES AND EQUITY



Current liabilities



Bank indebtedness

1,511

-

Accounts payable and accrued liabilities

33,242

27,087

Current portion of long-term debt

156

240

Customer advance

9,791

10,408

Deferred program revenues

3,709

4,924

Unfavourable contracts liability

9,299

11,335


57,708

53,994

Non-current liabilities



Deferred gain

97

121

Lease inducement

222

271

Long-term debt

1,650

1,646

Customer advance

6,948

12,697

Unfavourable contracts liability

69,315

78,636

Deferred program revenues

177

-

Deferred income taxes payable

1,152

1,235


137,269

148,600

Equity



Capital stock

80,302

80,158

Contributed surplus

4,887

4,453

Accumulated other comprehensive income

429

-

Deficit

(87,507)

(62,465)


(1,889)

22,146

Total liabilities and equity

135,380

170,746

 

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 June 30

Six months ended June 30


2016

2015

2016

2015






Revenues

$44,246

$20,369

$79,593

$36,030






Cost of sales

50,379

18,191

92,291

33,319






Gross profit

(6,133)

2,178

(12,698)

2,711


6,566

3,182

12,175

6,259

Administrative and general expenses

Office equipment depreciation

82

121

307

249


(12,781)

(1,125)

(25,180)

(3,797)

Operating (Loss)


20

71

32

94

Finance costs – net

Foreign exchange (gain) loss

150

(61)

(120)

5

Gain on sale of equipment

-

-

(50)

-


(12,951)

(1,135)

(25,042)

(3,896)

(Loss) Income before income tax


-

-

-

-

Income tax expense


(12.951)

(1,135)

(25,042)

(3,896)

Net (loss) income for the period


58

-

(429)

-

Other comprehensive income


(13,009)

(1,135)

(24,613)

(3,896)

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






(Loss) Earnings per share:

Basic (loss) earnings per common share

(0.04)

(0.00)

(0.08)

(0.01)

Diluted (loss) earnings per common share

(0.04)

(0.00)

(0.08)

(0.01)


306,570

302,633

306,065

302,633

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


306,570

302,633

306,065

302,633

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

 

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



Three months ended June 30

Six months ended June 30


2016

2015

2016

2015

Cash flows from (used in) operating activities





Net (loss) income for the period

$(12,951)

$(1,135)

$(25,042)

$(3,896)


Adjustment for items not affecting cash:







Accrued interest and government royalties

18

18

38

36



Depreciation

868

395

1,728

782



Development cost amortization

134

46

287

48



Intangible assets amortization

1,014

-

2,095

-



Loss (gain) on disposal of equipment

-

-

(50)

-



Provision for onerous contracts

(3,224)

-

(5,498)

-



Provision for loss-making contracts and obsolete inventory

963

(63)

996

130



Provision for doubtful accounts

(204)

-

-

-



Stock based compensation

652

246

465

492



Other items

(32)

(30)

(64)

(62)


(12,762)

(523)

(25,045)

(2,470)

Changes in non-cash working capital







Accounts receivable

1,447

(102)

(356)

(1,540)



Consideration receivable

(612)

-

18,939

-



Inventories

2,509

(89)

(445)

(1,603)



Prepayments and other assets

33

(179)

(20)

164



Accounts payable and accrued liabilities

8,762

432

7,644

1,749



Customer advance

(2,358)

-

(4,969)

-



Deferred program revenues

(2,117)

(2,119)

(1,575)

(3,471)






Net cash from (used in) operating activities

(5,098)

(2,580)

(5,827)

(7,171)






Cash flows from (used in) investing activities





Proceeds from sale of equipment

-

-

50

-

Purchase of equipment

(1,146)

(147)

(2,628)

(788)

Payments relating to development costs and tooling

(671)

(403)

(1,715)

(1,095)






Net cash from (used in) investing activities

(1,817)

(550)

(4,293)

(1,883)






Cash flows from (used in) financing activities





Increase (decrease) in bank indebtedness

1,511

3,131

1,511

6,249

Payment of interest

(6)

(8)

(14)

(17)

Proceeds from current and long term debt

28

91

59

753

Proceeds from issuance of common shares

113

-

113

-

Repayment of current and long-term debt

(58)

(109)

(163)

(184)






Net cash from (used in) financing activities

1,588

3,105

1,506

6,801






Net increase (decrease) in cash

(5,327)

(25)

(8,614)

(2,253)






Net foreign exchange difference

(114)

(26)

(818)

(76)






Cash - Beginning of period

10,493

881

14,484

3,159






Cash - End of period

5,052

830

5,052

830

 

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

Accumulated
Other
Comprehensive
Income

Total
equity


302,633,184

$79,921

$3,129

$(65,673)

$ -

$17,377

Balance December 31, 2014


-

-

492

-

-

492

Stock based compensation expense


-

-

-

(3,896)

-

(3,896)

Loss for the period


302,633,184

79,921

3,621

(69,569)

-

13,973

Balance June 30, 2015


305,555,184

80,158

4,453

(62,465)

-

22,146

Balance December 31, 2015


1,586,000

113

-

-

-

113

Issue of Common Shares


-

-

885

-

-

885

Stock-based compensation expense


-

-

(420)

-

-

(420)

Cancellation of issued stock options


-

31

(31)

-

-

-

Transfer to share capital on exercise of stock options


-

-

-

-

429

429

Unrealized currency gain on translation for the period


-

-

-

(25,042)

-

(25,042)

Loss for the quarter


307,141,184

80,302

4,887

(87,507)

429

(1,889)

Balance June 30, 2016

 

SOURCE Avcorp Industries Inc.

For further information: Sandi DiPrimo, Investor Relations Contact | 604-587-4938

RELATED LINKS
http://www.avcorp.com

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