ANNUAL MEETING OF SHAREHOLDERS LATER THIS MORNING
- Sales of $82.5 million, compared with $82.2 million last year
- EBITDA of $11.4 million, versus $12.8 million a year ago
- Net income of $3.2 million, or $0.10 per diluted share, compared to
$0.15, mainly resulting from lower Aerostructure production volume
- Funded backlog of $545 million, including backlog of recent acquisition
LONGUEUIL, QC, Aug. 5 /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 2011 ended June 30, 2010. Results include the contribution of Eagle Tool & Machine Co. ("Eagle") and of its subsidiary All Tools, Inc. ("E2"), acquired on April 28, 2010. It also includes restructuring charges of $368,000 before taxes, equivalent to $0.01 per share net of taxes, in connection with the previously announced closure of the Rivière-des-Prairies plant. Unless otherwise indicated, all amounts are in Canadian dollars.
Consolidated sales for the first quarter were $82.5 million, an increase of 0.5% over sales of $82.2 million for the same period last year. Excluding a $7.1 million sales contribution from Eagle and E2, sales declined mainly due to lower volumes for the Aerostructure product line and unfavourable currency impact. Earnings before interest, taxes, depreciation and amortization ("EBITDA") were $11.4 million, or 13.9% of sales, compared with $12.8 million, or 15.5% of sales, last year essentially reflecting lower Aerostructure volumes and its related unfavourable impact on the manufacturing overhead cost absorption. Operating income stood at $5.6 million or 6.8% of consolidated sales compared to $7.5 million or 9.1% of sales last year. The Company reported net income of $3.2 million, or $0.10 per share, fully diluted, compared with net income of $4.5 million, or $0.15 per share, fully diluted, a year ago, mainly resulting from the manufacturing overhead cost absorption impact explained above. It also reflects the unfavourable currency impact which was offset by the favourable income tax adjustment during the quarter. Cash flow from operations amounted to $10.3 million this year, down from $11.8 million last year.
Fluctuations in the value of the Canadian dollar versus the US currency decreased first quarter sales by $5.0 million or 6.0%, compared with last year, but had a negligible impact on the Company's gross profit. The impact of currency movements on the Company's gross profit is mitigated by the use of forward foreign exchange sales contracts and the natural hedging from the purchase of materials made in US dollars. However, the underabsorption of manufacturing overhead costs already mentioned above explains most of the negative gross profit margin variance when compared with last year.
(in thousands of dollars, except per share data)
Quarters ended June 30,
Sales 82,541 82,160
EBITDA 11,448 12,761
Operating income 5,583 7,471
Net income 3,183 4,542
Per share - basic ($) 0.11 0.15
Per share - diluted ($) 0.10 0.15
Cash flows from operations 10,267 11,830
Weighted-average shares outstanding (basic, in '000s) 30,237 30,946
"Although somewhat more favourable, general economic conditions still had a negative impact on sales volume in the first quarter. The timing of certain deliveries on the JSF program also slightly affected results, but we have since made necessary adjustments to comply with the altered scheduling," said President and CEO Gilles Labbé. "Eagle and E2 had a favourable impact on operating profitability in the first two months following their acquisition. The integration of these two operations is a main priority in fiscal 2011 and we look forward to achieving all synergies from this strategic transaction."
As at June 30, 2010, Héroux-Devtek's balance sheet remained healthy with cash and cash equivalents of $28.7 million and long-term debt, including the current portion, of $103.7 million. As a result, the net debt-to-equity ratio stood at 0.35:1 at the end of the first quarter, compared with 0.16:1 three months earlier, a variation that reflects the financing of the Eagle and E2 acquisition. 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 first quarter, Héroux-Devtek repurchased 546,000 common shares under its normal course issuer bid program, bringing the total shares repurchased under the program to 639,400. This program allows the Company to repurchase a maximum of 1.5 million common shares until November 24, 2010.
Aerospace sales reached $76.0 million in the first quarter of fiscal 2011 compared with $75.2 million last year. Landing Gear product sales increased 12.8% to $54.3 million reflecting the contribution of Eagle and E2. Excluding the acquisition, sales declined 1.9% as new business on the A-320, B-787 and Fokker programs, as well as higher military repair and overhaul work, were more than offset by currency fluctuations and reduced B-777 and CL-415 sales. Aerostructure product sales decreased 18.9% to $21.7 million due to reduced F-16 and JSF sales, the latter mainly reflecting altered scheduling, and to unfavourable currency fluctuations. These factors were partially offset by increased F-18 sales and greater activity for certain business jet and regional jet/turboprops programs.
Industrial sales totalled $6.5 million in the first three months of fiscal 2011, down from $7.0 million in the corresponding period a year earlier. This decline reflects soft conditions in the power generation industry, which were partially mitigated by stronger demand for heavy equipment sales during the quarter.
On July 19, 2010, Héroux-Devtek was awarded two new multi-year contracts by Triumph Aerostructures - Vought Aircraft Division with a combined value in excess of $35 million. The first contract, to be carried out at the Arlington, Texas and Dorval, Quebec aerostructure facilities, is to manufacture aluminum wing ribs and other machined components for the Gulfstream 550 business jet program. Deliveries are scheduled to begin later in calendar year 2010 and continue through calendar year 2015. The second long-term agreement involves the fabrication and delivery of torque tubes for the Boeing 737 program. Deliveries will begin in calendar year 2010 and will continue through calendar year 2015. Production will be carried out at the Laval landing gear facility.
Conditions have improved in the commercial aerospace market, but the recovery remains fragile and existing orders can still be deferred or cancelled. In the large commercial aircraft segment, Boeing and Airbus have announced production rate increase for calendar 2011 and 2012 on certain programs and new orders have increased since the beginning of calendar 2010. The business jet market appears to have bottomed out and the industry is seeing 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 proposed funding was increased for the US Department of Defense 2011 fiscal year budget, subsequent budget funding may be reduced as the US Administration must address its overall deficit. In Canada, the Government's recent decision to purchase 65 JSF aircraft should benefit the Canadian aerospace industry. 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. As at June 30, 2010, Héroux-Devtek's funded (firm orders) backlog, including the backlog of Eagle and E2, stood at $545 million and remains well diversified.
"Héroux-Devtek is ready for the pending recovery. Its leadership in core landing gear, aerostructure and industrial markets, strong customer relationships, a healthy balance sheet, talented employees and a commitment to constantly improve efficiency and productivity firmly position the Company to benefit from business opportunities that may arise. In the mean time, we continue to anticipate sales to remain relatively stable in comparison with the previous year, excluding the contribution from Eagle and E2 and assuming no major change in the average exchange rate. Finally, it is 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. We therefore anticipate a stronger second half for fiscal 2011 with sales being 15% to 20% higher when compared with the first half of the year, given the acquisition" concluded Mr. Labbé.
Héroux-Devtek Inc. will hold a conference call to discuss these results on Thursday, August 5, 2010 at 3:00 P.M. Eastern Time. Interested parties can join the call by dialling (647) 427-7450 (Toronto or overseas) or 1-866-865-3087 (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 1-800-642-1687 and entering the passcode 87326524 on your phone. This tape recording will be available on Thursday, August 5, 2010 as of 5:00 PM Eastern Time until 11:59 PM Eastern Time on Thursday, August 12, 2010.
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 Rivière-des-Prairies); Kitchener and Toronto, Ontario; Arlington, Texas; as well as Springfield, Cleveland and Cincinnati, Ohio.
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.
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 Héroux-Devtek Inc.
For further information: For further information: Héroux-Devtek Inc.: Gilles Labbé, President and Chief Executive Officer, Tel.: (450) 679-3330; Réal Bélanger, Executive Vice-President and Chief Financial Officer, Tel.: (450) 679-3330; MaisonBrison: Martin Goulet, CFA, Tel.: (514) 731-0000