Avcorp announces 2019 First Quarter Financial Results

Provided by Avcorp Industries Inc/CNW

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).