Avcorp Industries Inc.: Second Quarter Fiscal 2000 Results.

Business Editors

VANCOUVER, BRITISH COLUMBIA--(BUSINESS WIRE)--May 19, 2000

Avcorp Industries Inc. (TSE:AVP.) reported a $79,000 second quarter loss ($0.01 per share) compared to a loss of $9,610,000 ($0.72 per share) in the same period last year and a loss of $99,000 in the previous quarter. Revenues increased 11% to $22,994,000 compared to $20,702,000 last year. Earnings before interest, taxes and amortization (EBITDA) improved to $1,711,000 from a loss of $8,300,000 last year. Excluding the write-down of non-recurring inventory on the CRJ700 and environmental remediation costs included in last year's loss, the EBITDA improved by $1,461,000.

The quarter benefited from one-time recoveries on both Boeing and Bombardier programs, which represented about 9% of the quarter's sales and improved the gross margins in the quarter.

The Company continues to see soft sales to Boeing with an unfavourable mix as they reduce their levels of inventory and rates of production. Stronger revenues from Bombardier on the regional jet programs partially offset these declines, especially on the 70-seat regional jet program, which is a new aircraft that went into commercial production this year. The Company's sales backlog is approximately $236 million at March 31, 2000.

The Company ended the quarter with a bank line of $7,706,000 compared to $9,168,000 at the end of the 1999 fiscal year. The improvement was primarily due to securing a $4,000,000 financing from the Province of British Columbia in the 1st quarter less investments made in working capital. The Company's current ratio at quarter end is at 2.13.

Interest and amortization increased to $1,749,000 in the quarter compared to $1,272,000 last year and reflects the higher levels of investment made in the Company over the last two years. In our 1999 annual report, the Company set strategic, operational and fiscal 2000 goals as follows:

* Maintain delivery schedule and quality with our customers;

* Return the Company to profitability;

* Increase cash flow from operations by $3 million;

* Increase earnings before interest and amortization, and excluding the 1999 loss on the sale of the CRJ700 intellectual property, by $4 million; and,

* Obtain new contracts totaling in excess of $25 million.

Delivery schedule and quality commitments continue to be met and management is confident that the new contract goal will be exceeded. Although the continuing Boeing volume and unfavourable sales mix make meeting the financial goals for the second half a challenge, management continues to work on new initiatives to enable these goals to be achieved.

Results for the three and six months ended March 31 are as follows:

                           AVCORP INDUSTRIES INC.
                           STATEMENT OF EARNINGS
                          (in thousands of dollars)

                                Three Months Ended   Six Months Ended
                                   March 31             March 31
                               2000        1999      2000       1999

Sales                        $ 22,994   $ 20,702 $  40,282 $  39,418
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Cost of sales and expenses
  Cost of sales                19,253     18,242    33,070    33,840
  Write down of non-recurring
     Inventory on the CRJ-700
     Program                      -        8,000       -       8,000
  Administrative and general
     Expenses                   2,030      2,760     3,976     5,048
  Amortization                    835        722     1,645     1,302
  Interest                        914        550     1,688       947
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Total cost of sales and
  Expenses                     23,032     30,274    40,379    49,137
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Loss before income taxes          (38)    (9,572)      (97)   (9,144)
Income taxes                       41         38        81        75
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Net loss                   ($      79) ($  9,610)($    178) ($ 9,794)
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Net loss per common share   ($   0.01) ($   0.72)($   0.01) ($  0.73)
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Avcorp Industries Inc. is a Canadian aerospace industry manufacturer. The Company is a single-source supplier for design, machining, fabrication and assembly of metal, composite and plastic components for global aerospace markets and comprises of two divisions: Aerostructures Division in British Columbia and the Integrated Products Division in Quebec.