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 |
Deficit |
Accumulated |
Total |
|
| 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.
Sandi DiPrimo, Investor Relations Contact | 604-587-4938
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