Avcorp announces 2016 First Quarter Financial Results

VANCOUVER, May 16, 2016 /PRNewswire/ - Avcorp Industries Inc. (TSX: AVP) (the "Company", "Avcorp" or the "Avcorp Group") today announced its first quarter financial results for the quarter ended March 31, 2016.

During the quarter ended March 31, 2016 Avcorp Group revenues totaled $35,347,000 as compared to $15,661,000 revenue for the same quarter in the previous year.  The December 18, 2015 acquisition of the US based composite Aerostructures division of Hitco located in Gardena, CA has added $18,933,000 to current quarter revenues.

Composite aircraft structure repair revenues out of Comtek, Avcorp's Burlington, ON facility, continued with a strong performance, as 2016 revenues increased 94% over revenues in the previous year's first quarter.  Composite floor panel revenues arising from aftermarket or spare component sales remained flat in first quarter 2016 relative to first quarter 2015; while composite floor panel revenues derived from sales to original equipment manufacturers have significantly increased by 107%. 

Avcorp's Delta facility revenues generated by legacy production contracts have decreased by 11% during the current quarter relative the same quarter in the previous year; primarily as a result of a scheduled customer decrease in deliveries for one defence program contract. 

During the quarter ended March 31, 2016, the Avcorp Group recorded a loss from operations of $12,399,000 on $35,347,000 revenue, as compared to a $2,672,000 operating loss on $15,661,000 revenue for the same quarter in the previous year. 

The start-up, post-acquisition of the new operations in Gardena faced several unanticipated challenges during the first quarter 2016. As a result of legacy quality issues raised by customers, a number of items were identified that required corrective action. These items accounted for substantial expenditures beyond normal production costs. The implementation of the necessary corrective actions limited production output during the current quarter and was the major contributor to lower than forecasted sales.  The majority of the corrective actions will be implemented in the second quarter of 2016 thereby allowing the Gardena operations to achieve fully contracted output levels. Avcorp's key commercial customers have worked collaboratively with Avcorp to mitigate production schedules and support the earliest resolution of the outstanding process and product issues.

The Gardena facility defence programs have not experienced the extraordinary unanticipated issues relative to process quality and operational disruptions as the commercial programs have. The planned improvement plans for the defence programs, including the F-35 program for Lockheed Martin, are performing as forecasted.

As at March 31, 2016, the Company had $10,493,000 cash on hand and had not utilized its operating line of credit. The Company has a working capital surplus of $47,036,000 as at March 31, 2016.

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 BC is dedicated to metallic and composite aerostructures assembly and integration; Avcorp Engineered Composites located in Burlington ON is dedicated to design and manufacture of small-sized composite aerostructures, and Avcorp Composite Fabrication located in Gardena CA has advanced composite aerostructures fabrication capabilities for medium and large 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 location also offers 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 and are wholly owned subsidiaries of Avcorp Industries Inc.

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

Avcorp Industries Inc. is a federally incorporated reporting 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) 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)

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)

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

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)

SOURCE Avcorp Industries Inc.