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Press release from CNW Group

H�roux-Devtek reports fiscal 2010 year-end results

Friday, May 28, 2010

H�roux-Devtek reports fiscal 2010 year-end results07:00 EDT Friday, May 28, 2010 << - Sales for the year of $320.4 million, down slightly from $337.6 million last year - Diluted EPS of $0.52, versus $0.67 last year - Solid balance sheet with $46.6 million in cash and cash equivalents - Funded backlog of $423 million >> LONGUEUIL, QC, May 28 /CNW Telbec/ - H�roux-Devtek Inc. (TSX: HRX), a leading Canadian manufacturer of aerospace and industrial products, today reported its results for the fourth quarter and fiscal year ended March 31, 2010.FISCAL 2010 RESULTSConsolidated sales were $320.4 million, versus $337.6 million in fiscal 2009. This 5.1% decline is mainly attributable to lower Industrial product sales and currency impact. Earnings before interest, taxes, depreciation and amortization (EBITDA) was $48.4 million, or 15.1% of sales, compared with $54.6 million, or 16.2% of sales, last year, as Aerospace sales were basically at the same level as last year but offset by the negative variance coming mainly from the lower Industrial market sales and the negative impact from the fluctuation of the Canadian dollar versus the U.S. currency in fiscal 2010. Operating income stood at $27.2 million, compared with $34.5 million a year ago, for the same reasons just mentioned. The Company reported net income of $16.0 million, or $0.52 per share, fully diluted, compared with net income of $21.4 million, or $0.67 per share, fully diluted, a year ago. Cash flow from operations amounted to $45.9 million this year, down slightly from $48.0 million last year.Fluctuations in the value of the Canadian dollar versus the US currency decreased fiscal 2010 sales by $1.9 million or 0.5%, compared with last year, and had a negative impact of 1.7% this year on gross profit expressed as a percentage of sales which stood at 15.7% this fiscal year. The impact of currency movements on the Company's gross profit is mitigated by the use of forward foreign exchange sales contracts and the natural hedging from the purchase of materials made in US dollars. << ------------------------------------------------------------------------- ------------------------------------------------------------------------- Financial highlights (in thousands of dollars, except per share data) ------------------------------------------------------------------------- Quarters ended Fiscal years ended March 31, March 31, 2010 2009 2010 2009 ------------------------------------------------------------------------- Sales 84,965 92,146 320,354 337,635 Operating income 7,287 10,020 27,177 34,453 Net income 4,405 6,431 16,003 21,363 Per share - basic ($) 0.14 0.20 0.52 0.68 Per share - diluted ($) 0.14 0.20 0.52 0.67 Cash flows from operations 12,250 14,056 45,867 48,042 Weighted-average shares outstanding (basic, in '000s) 30,490 31,391 30,662 31,583 ------------------------------------------------------------------------- >> "Despite a year of lingering recession and challenging market conditions, mainly in the regional and business aircraft markets as well as in the Industrial segment, H�roux-Devtek achieved solid results and maintained a solid balance sheet," said President and CEO Gilles Labb�. "The Company's success in fiscal 2010 resulted from the diversity of our high-quality products and services, cost reduction initiatives, as well as the ability of our dedicated employees to achieve greater productivity. Moreover, we reaffirmed our leading position in our core landing gear and aerostructure markets by winning several multi-year contracts on strategic programs, such as the F-35 Joint Strike Fighter (JSF) and the CH-47 Chinook helicopter."As at March 31, 2010, H�roux-Devtek's balance sheet remained healthy with cash and cash equivalents of $46.6 million and long-term debt, including the current portion, of $81.1 million. As a result, the net debt-to-equity ratio stood at 0.16:1 at the end of the fiscal 2010, compared with 0.25:1 three months earlier and 0.24:1 at the end of the previous fiscal year. The net-debt-to-equity ratio is defined as the total long-term debt, including the current portion, less cash and cash equivalents over shareholders' equity.Since renewing its normal course issuer bid program in November 2009, H�roux-Devtek has repurchased 93,400 common shares at an average cost of $5.14 per share. This program allows the Company to repurchase a maximum of 1.5 million common shares until November 24, 2010.FOURTH QUARTER RESULTSFor the fourth quarter of fiscal 2010, consolidated sales totalled $85.0 million compared with $92.1 million a year earlier. Excluding the currency impact of $9.5 million, fourth quarter sales would have been $2.4 million higher than last year. EBITDA amounted to $12.3 million, or 14.4% of sales, compared with $15.4 million, or 16.7% of sales, last year. The negative variance mainly reflects the currency impact related to the rapid depreciation of the Canadian dollar when compared to the U.S. dollar in the fourth quarter of last fiscal year. Operating income was $7.3 million, versus $10.0 million last year. Net income reached $4.4 million, or $0.14 per share, fully diluted, compared with $6.4 million, or $0.20 per share, fully diluted, in the prior year. Cash flow from operations amounted to $12.3 million this year, versus $14.1 million last year.SEGMENT RESULTSAerospace sales declined marginally to $297.9 million in fiscal 2010 compared with $299.4 million last year. Excluding the currency impact, as explained above, sales for this segment were essentially stable in comparison with last year. Landing gear product sales increased by 2.2% to $194.9 million reflecting new business in the large commercial aircraft segment and new repair and overhaul work on military programs, partially offset by the deceleration of production schedules for regional and business jet as well as commercial helicopter programs. Aerostructure product sales decreased 5.4% to $101.7 million, as the ramp-up of the JSF and the Bell 429 helicopter programs sales were more than offset by lower military aftermarket sales and business jet activity as well as by unfavourable currency fluctuations. Fourth-quarter Aerospace sales declined 3.8% to $79.1 million.Fiscal 2010 operating income was $24.7 million, or 8.3% of sales, compared with $29.3 million, or 9.8% of sales, in fiscal 2009. Lower sales resulting from the deceleration of production schedules and order push-outs in the commercial aerospace market was partly offset by a better throughput for landing gear products and cost reduction measures.Industrial sales totalled $22.5 million in fiscal 2010, down from $38.2 million in fiscal 2009. This decline reflects soft conditions in the power generation industry, including wind energy, and in the heavy equipment industry as a result of a weak economy. Fourth-quarter Industrial sales were $5.8 million compared with $9.9 million a year ago.Operating income was $2.4 million, or 10.8% of sales, in fiscal 2010, down from $5.2 million, or 13.5% of sales last year. The decrease reflects lower sales partly offset by successful cost reduction measures.RECENT EVENTSOn April 28, 2010, H�roux-Devtek completed the acquisition of substantially all the net assets of Eagle Tool & Machine Co. ("Eagle Tool") and of its subsidiary E-2 Precision Products ("E-2"), two privately-owned manufacturers of precision machined components for the aerospace industry located in Ohio. For the year ended December 31, 2009, Eagle Tool generated sales of approximately US$38 million. Eagle Tool principally manufactures Original Equipment Manufacturer (OEM) and aftermarket complex landing gear components mainly for the military aerospace industry and also for certain commercial aerospace programs. It is mainly involved in the production of components for the C-5, C-17, C-130, F-15, F-18 and T-38 programs, while also participating in the JSF program. The transaction is expected to be accretive to earnings per share by up to 10% in the first year following the acquisition.On May 10, 2010, H�roux-Devtek announced an important investment program of $26.5 million over five years at its Kitchener, Ontario landing gear facility to support its world class international customers. This wide-ranging investment program includes the purchase of state-of-the-art, highly automated equipment and the modernization of existing equipment. Such initiatives will also allow the Company to provide more value-added to its customers by fabricating increasingly large and complex landing gear components.On May 18, 2010, the Company announced that its landing gear product operations were awarded additional orders for the manufacturing of landing gear components. These orders, essentially from the US Air Force and US Navy, are mainly for the B-1B, C-130, C-5, KC-135R and P-3 aircraft. Production will be spread out over the next four years, with deliveries starting in fiscal year 2011. The combined value of the contracts is approximately Cdn$16 million.OUTLOOKConditions have improved in the commercial aerospace market, but the recovery remains fragile and existing orders can be deferred or cancelled. In the large commercial aircraft segment, Boeing and Airbus have confirmed that calendar 2010 deliveries would be near 2009 levels. More importantly, both have recently announced production rate increase for calendar 2011 on platforms such as the B-777, B-747, and A-320, while initial deliveries of the B-787 are scheduled for late calendar 2010. Finally, backlogs remain strong with more than six years of production at current rates. The business jet market appears to have bottomed out and the industry is beginning to see positive signs. The military aerospace market remains solid and the ramp-up of the JSF program is progressing, although it has been announced that this ramp-up will occur at a slightly more moderate pace over the near term. While funding was increased for the US Department of Defense 2010 fiscal year budget and a further increase is being proposed for fiscal 2011, subsequent budget funding may be reduced as the US administration must address its overall deficit. The power generation industry appears to have bottomed out, but is not expected to experience any significant recovery before calendar 2011. In the wind energy market, low power demand and price have slowed down the rate of new installations since the beginning of calendar 2010, but the market still holds considerable potential over the mid-term."The integration of Eagle Tool and E-2 will be a main priority in fiscal 2011. Excluding additional contribution of these companies, we are anticipating sales to remain relatively stable in comparison with the previous year, assuming no major changes in exchange rate. As at March 31, 2010, H�roux-Devtek's funded (firm orders) backlog stood at $423 million and remains well diversified. The acquisition of Eagle and E-2 will add approximately $125 million to our funded backlog. Despite this solid backlog and strong customer relationships, we must continue to seek further productivity gains and streamline our cost base to remain globally competitive in light of the volatility of the Canadian dollar," concluded Mr. Labb�.CONFERENCE CALLH�roux-Devtek Inc. will hold a conference call to discuss these results on Friday, May 28, 2010 at 10:00 A.M. Eastern Time. Interested parties can join the call by dialling (514) 807-9895 (Montreal or overseas) or 1-866-865-3087 (elsewhere in North America). The conference call can also be accessed via live webcast at H�roux-Devtek's website, www.herouxdevtek.com, www.newswire.ca or www.q1234.com.If you are unable to call in at this time, you may access a tape recording of the meeting by calling 1-800-642-1687 and entering the passcode 75556115 on your phone. This tape recording will be available on Friday, May 28, 2010 as of 1:00 PM Eastern Time until 11:59 PM Eastern Time on Friday, June 4, 2010.PROFILEH�roux-Devtek (TSX: HRX), a Canadian company, serves two main market segments: Aerospace and Industrial Products, specializing in the design, development, manufacture and repair and overhaul of related systems and components. H�roux-Devtek supplies both the commercial and military sectors of the Aerospace segment with landing gear systems (including spare parts, repair and overhaul services) and airframe structural components. The Company also supplies the industrial segment with large components for power generation equipment and precision components for other industrial applications. Approximately 70% of the Company's sales are outside Canada, mainly in the United States. The Company's head office is located in Longueuil, Qu�bec with facilities in the Greater Montreal area (Longueuil, Dorval, Laval and Rivi�re-des-Prairies); Kitchener and Toronto, Ontario; Arlington, Texas; as well as Springfield, Cleveland and Cincinnati, Ohio.FORWARD-LOOKING STATEMENTSExcept for historical information provided herein, this press release may contain information and statements of a forward-looking nature concerning the future performance of the Company. These statements are based on suppositions and uncertainties as well as on management's best possible evaluation of future events. Such factors may include, without excluding other considerations, fluctuations in quarterly results, evolution in customer demand for the Company's products and services, the impact of price pressures exerted by competitors, and general market trends or economic changes. As a result, readers are advised that actual results may differ from expected results.NON-GAAP MEASURESEarnings before interest, taxes, depreciation and amortization ("EBITDA") and cash flows from operations are financial measures not prescribed by Canadian generally accepted accounting principles ("GAAP") and are not likely to be comparable to similar measures presented by other issuers. Management, as well as investors, considers these to be useful information to assist them in evaluating the company's profitability, liquidity and ability to generate funds to finance its operations. << Note to readers: Complete unaudited consolidated financial statements and Management's Discussion & Analysis are available on H�roux-Devtek's website at www.herouxdevtek.com. >> For further information: H�roux-Devtek Inc.: Gilles Labb�, President and Chief Executive Officer, (450) 679-3330; R�al B�langer, Executive Vice-President and Chief Financial Officer, (450) 679-3330; MaisonBrison: Martin Goulet, CFA, (514) 731-0000