Avcorp Reports Second Quarter Loss
VANCOUVER, BRITISH COLUMBIA - May 21, 1999--Avcorp Ind.(ME:AVP.) (TSE:AVP.) Avcorp Industries Inc. (AVP on The Toronto Stock Exchange) reported a 32 percent increase in revenues as compared to the comparable quarter last year.
However, accelerating production rates and investment in employee training to accommodate rapid revenue growth reduced gross margins. In addition, the Company has taken an $8,000,000 write-down on the estimated non-recurring inventory costs incurred on the Bombardier CRJ-700 regional jet program. Additional one time costs also include a $550,000 charge for environmental costs at the old Richmond, BC facility, a $100,000 write-off of an investment in a startup company and a $200,000 receivable write-off to settle an account with a customer. As a result the Company experienced a second quarter loss of $9,610,000 ($0.72 per share) as compared to earnings of $772,000 ($0.06 per share) for the comparable period last year.
For the six months ended March 31, 1999 gross revenues increased 27 percent compared to last year. The net loss was $9,794,000 ($0.73 per share), which includes approximately $9,000,000 of adjustments described above, compared to earnings of $1,401,000 ($0.10 per share) last year.
As reported previously, the Company has incurred non-recurring costs on the design and development of components for the CRJ-700 which were higher than budgeted. As a result, the Company and Bombardier have agreed to an acceleration of a previously agreed transfer of intellectual property for consideration of approximately $15 million, which will be paid over the next 90 days. The Company expects to have a final agreement, subject to meeting certain conditions, in place within 30 days and will remain a supplier to Bombardier on the CRJ-700 program. This restructuring will generate sufficient immediate cashflow to support the continued growth of the Company. The Company has firm purchase orders in place on both the CRJ-200 and CRJ-700 programs through to fiscal 2001.
Peter Jeffrey, President and CEO stated that "we believe that we can now, ultimately, achieve acceptable gross margins on the production of these components. Bombardier continues to have tremendous success with its regional jet program and we expect strong revenue growth and a resumption of earnings growth over the long term from these programs. Our capital can now be deployed toward ramp up and production of these components without having to substantially increase our debt load or dilute our shareholder base."
The Company's sales backlog remains strong at approximately $300 million at March 31, 1999.
The Aerostructures Division is scheduled to implement a new computer system at the end of the current quarter. This new system is year 2000 compliant. Remaining year 2000 testing and supplier confirmations will be substantially completed by the end of July 1999.
Results for the three and six months ended March 31, 1999 are as follows:
Avcorp Industries Inc. is a Canadian aerospace industry manufacturer. The Company is a single-source supplier for design, fabrication and assembly of metal, composite and plastic components and is made up of five divisions: Aerostructures, Composites, Metal Products, Engineering and Proprietary Products.