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.

Sandi DiPrimo, Investor Relations Contact 604-587-4938 or email [email protected]