AVP Avcorp Industries Inc

VANCOUVER, May 14, 2019 /CNW/ - Avcorp Industries Inc. (TSX: AVP) (the "Company", "Avcorp" or the "Avcorp Group") today announced its financial results for the quarter ended March 31, 2019. All amounts are in Canadian currency unless otherwise stated.

2019 Highlights

Key fiscal year 2019 financial results include:

• First quarter 2019 operating loss was reduced by $2,983,000, in comparison to the same quarter in 2018, primarily as a result of consolidation of costs and improved operating effectiveness; after the benefit of amortization to income of unfavourable contracts liability, onerous contracts provisions, and the income impact of the net claim settlement have been removed.
  
  
• On January 25, 2019, the Company entered into a net claim settlement agreement with HITCO Carbon Composites, Inc., SGL Carbon, LLC, and SGL Carbon SE (the "SGL parties") and a customer, which provided the Company a settlement in satisfaction of existing and potential claims, causes of action, disputes and other business matters related to the acquisition from the SGL parties. The net claim settlement resulted in a gain of $19,744,000.
  
  
• First quarter 2019 cash flows from operating activities were increased by $27,497,000, relative to the same quarter in 2018.
  
  
• In Comtek's continuing effort to reduce airline operator's key metric of turnaround time for repaired aircraft components, while still providing premium quality, Comtek has embarked on deploying a forward base of operations located in the United Kingdom. EASA certification has now been granted and the team is actively engaged on its' first repair orders, providing much needed support for the growing Q400 fleet in Europe.

Review of 2019 First Quarter Financial Results

For the quarter ended March 31, 2019, the Avcorp Group recorded income from operations totaling $15,057,000 from $42,225,000 revenue, as compared to $4,606,000 operating losses from $43,276,000 revenue for the previous quarter. It should be noted that 2019 operating income benefited by $517,000 income from amortization of onerous contracts provision into income (March 31, 2018: $3,581,000 amortization of unfavourable contract liability and onerous contract liability). On January 25, 2019, the Company and its subsidiary Avcorp Composite Fabrication Inc. (the "Avcorp Parties") entered into an agreement with HITCO Carbon Composites, Inc., SGL Carbon, LLC, and SGL Carbon SE (the "SGL parties") and a customer to settle all claims related to alleged deficiencies in HITCO's non-destructive inspection processes and other business matters including a lease renewal and collection of previously provisioned accounts receivable in exchange for gross consideration of USD$12,000,000 from the SGL parties to Avcorp and mutual releases among the Avcorp Parties, SGL Parties and a customer related to the acquisition. The net claim settlement resulted in a gain of $19,744,000. Continued consolidation of operating costs have resulted in reduced current quarter operating losses, in comparison to the same quarter in 2018 after the benefit of amortization to income of unfavourable contracts liability and onerous contracts provisions, and the income impact of the net claim settlement have been removed.

During the quarter ended March 31, 2019, cash flows from operating activities, excluding the impact of changes in non-cash working capital, provided $12,998,000 of cash as compared with utilization of $4,572,000 of cash during the quarter ended March 31, 2018; a significant improvement, primarily attributable to a reduction in operating losses during 2019 in comparison to 2018 and net claim settlement collected of USD$10,810,000.

As at March 31, 2019, the Company had $2,405,000 cash on hand (December 31, 2018: $2,051,000) and had utilized $72,005,000 of its operating line of credit (December 31, 2018: $85,840,000). The Company has a working capital deficit of $61,345,000 as at March 31, 2019 which has decreased from the December 31, 2018 $71,503,000 deficit. Working capital surplus/deficit is defined as the difference between current assets and current liabilities. However, the Company's accounts receivable, contract assets, and inventories net of accounts payable, amount to a $19,148,000 surplus as at March 31, 2019 (December 31, 2018: $22,000,000 surplus). The Company's accumulated deficit as at March 31, 2019 is $119,269,000 (December 31, 2018: $132,878,000).

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, Lockheed Martin and Subaru Corporation. The Avcorp Group has more than 60 years of experience, over 700 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 aircraft operators with 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).

AMANDEEP KALER
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 INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(unaudited, expressed in thousands of Canadian dollars)

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS)
(unaudited, expressed in thousands of Canadian dollars, except number of shares and per share amounts)

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, expressed in thousands of Canadian dollars)

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(unaudited, expressed in thousands of Canadian dollars, except number of shares)

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SOURCE Avcorp Industries Inc.