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Press release from CNW Group

Héroux-Devtek reports solid first quarter results

Thursday, August 04, 2011

Héroux-Devtek reports solid first quarter results07:00 EDT Thursday, August 04, 2011ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS LATER THIS MORNING Sales of $91.9 million, up 11.3% from $82.5 million last year24.9% increase in EBITDA to $14.9 million, compared with $12.0 million a year agoNet income of $5.8 million, or $0.19 per diluted share, versus $0.11 per diluted share last year Funded backlog of $509 millionLONGUEUIL, QC, Aug. 4, 2011 /CNW Telbec/ - Héroux-Devtek Inc. (TSX: HRX), a leading Canadian manufacturer of aerospace and industrial products, today reported its results for the first quarter of fiscal 2012 ended June 30, 2011. These results are the first presented by the Corporation following its adoption for reporting purposes, on April 1, 2011, of International Financial Reporting Standards ("IFRS"). Results for the prior year have been restated. Results include the contribution of Eagle Tool & Machine Co. and of its subsidiary All Tools Inc. ("Landing Gear USA") for the entire period, versus only two months in the prior year. Unless otherwise indicated, all amounts are in Canadian dollars.Consolidated sales were $91.9 million, up 11.3% from $82.5 million for the same period last year. This increase reflects higher sales for the Aerostructure and Industrial product lines as well as an additional sales contribution of $5.3 million from Landing Gear USA.Earnings before interest, taxes, depreciation and amortization ("EBITDA")were $14.9 million, or 16.3% of sales, compared with $12.0 million, or 14.5% of sales. This improvement mainly results from a better absorption of manufacturing overhead costs due to higher Aerostructure and Industrial volumes. Operating income stood at $9.1 million, or 9.9% of sales, up from $5.9 million, or 7.1% of sales last year. Net income amounted to $5.8 million, or $0.19 per share, fully diluted, compared with $3.3 million, or $0.11 per share, fully diluted, a year ago. Results for the first quarter of 2012 include expenses of $180,000 net of income tax, or $0.01 per share, related to the start-up of the new facility in Mexico, while the first quarter of fiscal 2011 contained restructuring charges of $258,000 net of income tax, or $0.01 per share, related to the closure of the Rivière-des-Prairies facility. Finally, cash flow from operations reached $12.8 million this year, up from $10.6 million last year.Fluctuations in the value of the Canadian dollar versus the US currency decreased first quarter sales by $3.4 million, or 4.2%, compared with last year, and reduced gross profit by $0.7 million, or 0.2% of sales. The impact of currency movements on the Corporation's gross profit is mitigated by the use of forward foreign exchange sales contracts and the natural hedging from the purchase of materials made in U.S. dollars.    FINANCIAL HIGHLIGHTSQuarters ended June 30,(in thousands of dollars, except per share data)2011 2010Sales91,873 82,541EBITDA 14,948 11,966Operating income9,083 5,872Net income5,797 3,318 Per share - basic and diluted ($)0.19 0.11Cash flows from operations12,811 10,592Weighted-average shares outstanding (basic, in '000s)30,215 30,237"Héroux-Devtek's first quarter results clearly highlight the positive momentum that is driving most of its strategic markets," said President and CEO Gilles Labbé. "The Landing Gear product line is increasingly benefitting from higher production rates for certain major large commercial aircraft programs, the ramp-up of several strategic programs is contributing to the growth of our Aerostructure product line, while demand for our main Industrial products remains solid. More importantly, this greater volume and further efficiency gains have resulted in a significant increase in profitability and cash flow."As at June 30, 2011, Héroux-Devtek's balance sheet remained healthy with cash and cash equivalents of $40.1 million and long-term debt, including the current portion, of $105.3 million. As a result, the net debt-to-equity ratio stood at 0.28:1 at the end of the first quarter, compared with 0.32:1 three months earlier. 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.SEGMENT RESULTSAerospace sales were $84.6 million in the first quarter of fiscal 2012 compared with $76.0 million last year. Landing Gear product sales increased 9.5% to $59.4 million reflecting the additional one-month contribution from Landing Gear USA. Excluding this factor, sales were essentially stable as increased activity for certain large commercial aircraft, mainly the B-777, and business jet programs were offset by currency fluctuations and reduced customer requirements for certain helicopter and regional jet programs. Aerostructure product sales grew 15.0% to $24.9 million due to higher sales for business jet programs, the ramp-up of the Bell 429 helicopter program and increased JSF sales, which more than offset currency fluctuations.Industrial sales totalled $7.2 million in the first three months of fiscal 2012, up from $6.5 million a year earlier. This increase reflects higher demand for heavy equipment in the mining industry and, to a lesser extent, higher sales to the power generation sector.RECENT EVENTOn June 21, 2011, Héroux-Devtek announced that it has been awarded a seven-year contract by Lockheed Martin Aeronautics Company to manufacture the landing gear for the C-130J Super Hercules aircraft. Under the terms of the agreement, Héroux-Devtek will manufacture and assemble the landing gear for Lockheed Martin's global production of C-130J aircraft and provide spare parts over a seven-year period beginning in January 2012. Based on current program expectations, the contract has a potential total value of approximately $70 million.OUTLOOKConditions remain favourable in the commercial aerospace market. Large commercial aircraft manufacturers have announced several production rate increases on leading programs up to calendar 2014, new orders have significantly increased in the first half of 2011 and both Boeing and Airbus are forecasting higher deliveries for calendar 2011. The business jet market continues to see positive signs, such as greater aircraft utilization and fewer used aircraft for sale, but a significant recovery in deliveries is only expected in calendar 2012. The military aerospace market has stabilized as governments address their deficits. As to the JSF program, despite the two-year probation on the short take-off and vertical landing (STOVL) variant, the Corporation anticipates to produce a higher number of shipsets in fiscal 2012, compared to fiscal 2011. This results from the ramp-up of the other two variants, combined with a higher share of the total production. Finally, the Corporation's main industrial markets are showing further momentum, as new orders and backlogs for its main customers continue to increase.As at June 30, 2011, Héroux-Devtek's funded (firm orders) backlog stood at $509 million, up from $502 million three months earlier, and remains well diversified."As the economy continues to progress, Héroux-Devtek is well positioned to leverage the strengths of its world-class organization by further broadening its product and service offering. Encouraging advances in our markets support an optimistic outlook despite the strong Canadian dollar. We are also looking forward to the start-up of our facility in Mexico, which should produce its first components early in calendar 2012, while a sound balance sheet enables us to consider other strategic acquisitions that would enhance our product portfolio and our technologies. In the mean time, we continue to anticipate an internal sales growth of approximately 5% for the current fiscal year, assuming the Canadian dollar remains at parity versus the U.S. currency. It is also important to remember that the second quarter has traditionally been a somewhat slower period owing to seasonal factors, such as plant shutdowns and summer vacations. However, as many important programs will ramp-up beyond this fiscal year, we are confident to achieve our long-term goal to grow internally and through strategic alliances at 10% per year, on average," concluded Mr. Labbé.CONFERENCE CALLHéroux-Devtek Inc. will hold a conference call to discuss these results on Thursday, August 4, 2011 at 3:00 P.M. Eastern Time.Interested parties can join the call by dialling (416) 644-3426 (Toronto or overseas) or 1-800-731-5319 (elsewhere in North America). The conference call can also be accessed via live webcast at Héroux-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 1-877-289-8525 and entering the passcode 4455100# on your phone. This tape recording will be available on Thursday, August 4, 2011 as of 6:00 PM Eastern Time until 11:59 PM Eastern Time on Thursday, August 11, 2011.PROFILEHéroux-Devtek Inc. (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. Héroux-Devtek Inc. 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 Corporation also supplies the industrial segment with large components for power generation equipment and precision components for other industrial applications. Approximately 70% of the Corporation's sales are outside Canada, mainly in the United States. The Corporation's head office is located in Longueuil, Québec with facilities in the Greater Montreal area (Longueuil, Dorval, Laval and St-Hubert); 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 Corporation. 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 Corporation'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-IFRS MEASURESEarnings before interest, taxes, depreciation and amortization ("EBITDA") and cash flows from operations are financial measures not prescribed by International Financial Reporting Standards ("IFRS") and are not likely to be comparable to similar measures presented by other issuers. Management considers these to be useful information to assist investors in evaluating the Corporation's profitability, liquidity and ability to generate funds to finance its operations.Note to readers: Complete unaudited interim condensed consolidated financial statements and Management's Discussion & Analysis are available on Héroux-Devtek's website at www.herouxdevtek.com.  For further information: From:Héroux-Devtek Inc. Gilles Labbé President and Chief Executive Officer Tel.: (450) 679-3330 Contact: Héroux-Devtek Inc. Réal Bélanger  Executive Vice-President and Chief Financial Officer  Tel.: (450) 679-3330  MaisonBrison Martin Goulet, CFA Tel.: (514) 731-0000