Avcorp announces 2015 Second Quarter Financial Results

VANCOUVER, Aug. 13, 2015 /PRNewswire/ - 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 GEORGECHIEF 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.

SOURCE Avcorp Industries Inc.