Avcorp Doubles Revenue and Strengthens Balance Sheet through the Completion of the Acquisition of Hitco Carbon Composites Aerostructures Division

  • Transaction expands Avcorp's ability to manufacture composite airframe structures

DELTA, BC, Dec. 21, 2015 /CNW/ - Avcorp Industries Inc. (the "Company" or "Avcorp") (AVP:TSX) announced today that it has completed its acquisition of the assets and certain liabilities of the composite Aerostructures division of SGL Carbon SE's ("SGL's") subsidiary, Hitco Carbon Composites Inc. ("Hitco").  The acquisition, which was first announced in July 2015, will approximately double Avcorp's revenue while strengthening its balance sheet. This acquisition will also significantly expand Avcorp's carbon composite manufacturing capabilities and result in the Company receiving cash, payment commitments and supplies valued at approximately $65 million. All amounts are in Canadian currency.

"The acquisition of the assets and certain liabilities of Hitco's Aerostructures division represents one of our most significant milestones to date and is strategic on a number of levels," said Pete George, Avcorp Group's CEO.  "Without incurring any debt or diluting shareholders through the issuance of new shares, we have significantly strengthened our ability to address the growing market for composite airframe structures in the aviation sector.  More importantly, we have strengthened our position within the supply chains of our most important customers. We have witnessed first-hand how the aerospace industry leaders are taking advantage of the benefits that carbon composites provide, including reducing aviation fuel costs, reducing the number of component parts and increasing design flexibility."

Mr. George also said, "Adding Hitco's Aerostructures division's manufacturing facilities to our operations will be immediately accretive to our financial performance, essentially almost doubling our revenue to a range of approximately $165 million to $175 million on a pro forma annualized basis.  With expected operational efficiencies and improved utilization of our existing facilities in Delta and Burlington, the transaction will accelerate our expected return to profitability." 

Transaction Highlights

  • Avcorp will receive approximately $58 million in cash and payment commitments from SGL, the parent company of Hitco;
  • Avcorp will also receive in kind supplies and/or payments totaling up to $7 million through December 31, 2016;
  • Supplementing the cash and in kind payments received, Avcorp will assume approximately $41 million of working capital, adding to the positive liquidity of the transaction;
  • Equipment received as a component of the acquisition transaction has an estimated fair market value of $54 million;
  • Hitco's production is expected to contribute $93 million in new revenue for Avcorp on an annual basis, while the Hitco Aerostructures division has been operating at a loss;
  • Avcorp will continue to operate Hitco's Aerostructures division facilities from its current location in Gardena, California, transitioning to the new name of Avcorp Composite Fabrication (ACF);
  • Avcorp will strengthen its leadership talent through the addition of key members of management and will retain the majority of Hitco's Aerostructures Division existing employees;
  • Hitco's Aerostructures division,, which is an AS 9001C certified manufacturer, includes Lockheed Martin, Fuji Heavy Industries, Northrop Grumman, Alenia Aeronautica, Spirit AeroSystems, Pratt & Whitney Canada and The Boeing Company among its largest customers; and
  • The transaction has received all relevant regulatory and third-party approvals.

Mr. George added, "Our experience in successfully integrating our Comtek facilities in Burlington following its acquisition will serve as a model with the Avcorp Composite Fabrication facilities. The transition of Comtek to successful consecutive years of profitable growth is our expectation for Avcorp Composite Fabrication in Gardena. We look forward to introducing ACF's capabilities to existing Avcorp customers and also providing the quality and performance levels that Hitco Aerostructures Division's existing customers expect."

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).



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.

SOURCE Avcorp Industries Inc.

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


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