HÉROUX-DEVTEK REPORTS THIRD QUARTER RESULTS

  • Sales of $85.8 million, compared with $76.7 million last year
  • EBITDA of $14.2 million, versus $11.7 million a year ago
  • Earnings per share of $0.17, up from $0.12 last year
  • Funded backlog of $586 million, up from $574 million three months ago

LONGUEUIL, QC, Feb. 4 /CNW Telbec/ - Héroux-Devtek Inc. (TSX: HRX), a leading Canadian manufacturer of aerospace and industrial products, today reported its results for the third quarter of fiscal 2011 ended December 31, 2010. Results include the contribution of Eagle Tool & Machine Co. ("Eagle") and of its subsidiary All Tools, Inc. ("E2"), acquired on April 28, 2010. Unless otherwise indicated, all amounts are in Canadian dollars.

Consolidated sales for the third quarter were $85.8 million, an increase of 12.0% over sales of $76.7 million for the same period last year. Excluding an $11.7 million sales contribution from Eagle and E2, sales declined slightly mainly due to longer-than-anticipated product introduction for certain landing gear military manufacturing contracts and unfavourable currency impact, partially offset by higher Industrial sales. Earnings before interest, taxes, depreciation and amortization ("EBITDA") grew 21.5% to $14.2 million, or 16.5% of sales, compared with $11.7 million, or 15.2% of sales, last year. This improvement essentially reflects higher repair and overhaul throughput, greater profitability for the Industrial segment due to a higher absorption of manufacturing overhead costs and further efficiency gains. Operating income stood at $8.5 million, or 9.9% of sales, compared with $6.1 million, or 7.9% of sales, last year. Net income reached $5.1 million, or $0.17 per share, fully diluted, compared with net income of $3.5 million, or $0.12 per share, fully diluted, a year ago. Cash flow from operations amounted to $12.8 million this year, up from $10.1 million last year.

Fluctuations in the value of the Canadian dollar versus the US currency decreased third quarter sales by $1.4 million compared with last year, but had a minimal impact on gross profit given the Company's hedging policy. 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
Quarters ended December 31, Nine months ended December 31,
(in thousands of dollars, except per share data)                 2010                 2009                 2010                 2009
Sales 85,843 76,659 251,578 235,389
EBITDA  14,204 11,686 36,465 36,169
Operating income 8,459 6,061 18,976 19,890
Net income 5,064 3,538 10,803 11,598
  Per share - basic ($) 0.17 0.12 0.36 0.38
  Per share - diluted ($) 0.17 0.12 0.36 0.38
Cash flows from operations 12,773 10,129 32,018 33,617
Weighted-average shares outstanding (basic, in '000s) 30,071 30,552 30,105 30,714

"Improved conditions in the commercial aerospace and industrial markets had a favourable impact on Héroux-Devtek's third-quarter results, which more than offset lower military sales, excluding our recent acquisition, mainly in the Landing Gear product line," said President and CEO Gilles Labbé. "The resurgence in commercial aerospace is broad based, as we recorded higher sales in the business jet and commercial helicopter markets. More importantly, this greater business activity and further efficiency gains yielded better profit margins. Our newly-acquired U.S. Landing Gear products operations also performed well and remain on track to achieve the financial objectives we had set out."

As at December 31, 2010, Héroux-Devtek's balance sheet remained healthy with cash and cash equivalents of $40.3 million and long-term debt, including the current portion, of $102.1 million. As a result, the net debt-to-equity ratio stood at 0.28:1 at the end of the third quarter, compared with 0.33:1 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. 

During the third quarter, Héroux-Devtek completed its normal course issuer bid program. Under this program, a total of 711,100 common shares were repurchased at an average net price of $5.68 per share between November 25, 2009 and November 24, 2010. As of this date, the Company has not implemented a new program.

THIRD-QUARTER HIGHLIGHT
On November 26, 2010, French aircraft manufacturer Dassault Aviation awarded the Landing Gear product line operations a contract to provide the landing gear for a new business jet program. Under the terms of the long-term agreement, Héroux-Devtek will design, develop, fabricate, assemble, qualify and participate in the certification of the landing gear and actuation system for the new aircraft. This life-cycle mandate also includes the provision of spare parts.

INCREASED CREDIT FACILITIES
Subsequent to the end of the third quarter, an agreement in principle was reached with a syndicate of banks to renew and increase the Company's Credit Facilities from $125 million to $150 million, on a secured basis, for a period of 5 years. Management anticipates closing this transaction successfully before the end of the current fiscal year as at March 31, 2011. Existing Credit Facilities mature on October 4, 2011.

SEGMENT RESULTS
Aerospace sales reached $79.5 million in the third quarter of fiscal 2011, up 9.4% from $72.6 million a year earlier. Sales of the Landing Gear product line increased 14.8% to $55.4 million, reflecting the contribution of Eagle and E2. Excluding the acquisition, sales decreased 9.4% due to longer-than-anticipated product introduction for certain military aerospace contracts and unfavourable currency impact that more than offset new business on the A-320, B-787 and Fokker programs. Aerostructure product sales remained essentially stable at $23.9 million, as reduced JSF sales, resulting from a different sales mix, and unfavourable currency fluctuations were offset by the ramp-up of the Bell 429 commercial helicopter program and increased business jet sales. 

Industrial sales rose to $6.4 million in the third quarter of fiscal 2011, up significantly from $4.1 million a year earlier. This increase reflects solid demand for heavy equipment from the mining industry and, to a lesser extent, a modest recovery in demand for industrial gas turbine components. 

NINE MONTHS RESULTS
For the first nine months of fiscal 2011, consolidated sales reached $251.6 million, including a $32.3 million contribution from Eagle and E2, up from $235.4 million in fiscal 2010. Aerospace sales rose 6.3% to $232.5 million, while Industrial sales grew 14.5% to $19.1 million. EBITDA was $36.5 million, or 14.5% of sales, excluding restructuring charges of $637,000 due to the closure of the Rivière-des-Prairies facility during the second quarter, versus $36.2 million, or 15.4% of sales, a year earlier. Operating income stood at $19.0 million, or 7.5% of sales, compared with $19.9 million, or 8.4% of sales, last year. Net income totalled $10.8 million, or $0.36 per share, fully diluted, versus $11.6 million, or $0.38 per share, fully diluted, in the prior year. Restructuring charges, net of income taxes, reduced net income by $0.02 per share in the first nine months of fiscal 2011. Finally, cash flow from operations amounted to $32.0 million, compared with $33.6 million in the corresponding period a year ago, mainly due to the variation of future income taxes.

OUTLOOK
Conditions are further improving in the commercial aerospace market. In the large commercial aircraft segment, production rate increases on leading programs are scheduled for calendars 2011, 2012 and 2013, new orders increased significantly in calendar 2010 and both Boeing and Airbus are forecasting higher deliveries for calendar 2011. The business jet market is seeing positive signs, such as greater aircraft utilization and fewer used aircraft for sale, but a significant recovery in build rates is not expected until calendar 2012. The military aerospace market is stabilizing as governments address their deficits. As to the JSF program, the U.S. government has put the short take-off and vertical landing (STOVL) variant on a two-year probation period, but the ramp-up of other variants continues, albeit at a slightly more moderate pace over the near term. In Canada, the Government's decision to purchase 65 JSF aircraft should also benefit the Canadian aerospace industry. Finally, the North American power generation industry appears to have bottomed out, as leading equipment manufacturers continue to report rising new orders.

As at December 31, 2010, Héroux-Devtek's funded (firm orders) backlog was $586 million, up from $574 million three months ago and $423 million at the beginning of the fiscal year, excluding the backlog of Eagle and E2 at the time. The backlog also remains well diversified.

"Over the next quarters, Héroux-Devtek is poised to benefit from scheduled production rate increases on key large commercial aircraft programs. The ramp-up of other strategic commercial aerospace programs in which we are actively involved should also strongly contribute to our results going forward. However, the two-year probation on the STOVL variant of the JSF should result in the production of a slightly lower number of shipsets for Héroux-Devtek in fiscal 2012, compared to fiscal 2011. Nonetheless, as the fourth quarter has historically been a strong period, we continue to anticipate our fiscal 2011 second-half sales to be approximately 15% higher than in the first half, given the acquisition and assuming no major change in the average exchange rate," concluded Mr. Labbé.

CONFERENCE CALL
Héroux-Devtek Inc. will hold a conference call to discuss these results on Friday, February 4, 2011 at 10:00 A.M. Eastern Time. Interested parties can join the call by dialling (514) 807-8791 (Montreal 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 4401243# on your phone. This tape recording will be available on Friday, February 4, 2011 as of 1:00 PM Eastern Time until 11:59 PM Eastern Time on Friday, February 11, 2011.

PROFILE
Héroux-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. Héroux-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, 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 STATEMENTS
Except 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 MEASURES
Earnings 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 Héroux-Devtek's website at www.herouxdevtek.com.


SOURCE HEROUX-DEVTEK INC.

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

Profil de l'entreprise

HEROUX-DEVTEK INC.

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