Héroux-Devtek reports second quarter results


    
    - Sales of $76.6 million compared to $77.3 million last year
    - EBITDA of $11.7 million compared to $11.6 million last year
    - Operating income of $6.4 million, versus $6.8 million last year
    - Funded backlog of $434 million
    
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<p>KITCHENER, ON, <chron>Oct. 30</chron> /CNW Telbec/ - Héroux-Devtek Inc. (TSX: HRX), a leading Canadian manufacturer of aerospace and industrial products, today reported results for the second quarter of fiscal 2010 ended <chron>September 30, 2009</chron>. Unless otherwise indicated, all amounts are in Canadian dollars.</p>
<p>Consolidated sales for the second quarter were <money>$76.6 million</money>, versus <money>$77.3 million</money> for the same period last year. Operating income stood at <money>$6.4 million</money>, or 8.3% of sales, compared with <money>$6.8 million</money>, or 8.8% of sales, a year ago. Earnings before interest, taxes, depreciation and amortization (EBITDA) for the second quarter was <money>$11.7 million</money> compared to <money>$11.6 million</money> last year. The Company reported net income of <money>$3.5 million</money>, or <money>$0.11</money> per share, fully diluted, compared with net income of <money>$4.1 million</money>, or <money>$0.13</money> per share, fully diluted, a year ago. Cash flow from operations amounted to <money>$11.7 million</money> this year, up 10.4% from <money>$10.6 million</money> last year.</p>
<p>For the first six months of the current fiscal year, consolidated sales totalled <money>$158.7 million</money> compared with <money>$159.9 million</money> a year earlier. Operating income was <money>$13.8 million</money>, or 8.7% of sales, versus <money>$16.6 million</money>, or 10.4% of sales, last year. Year-to-date, EBITDA stood at <money>$24.5 million</money> compared to <money>$26.1 million</money> last year. Net income reached <money>$8.1 million</money>, or <money>$0.26</money> per share, fully diluted, compared with <money>$9.8 million</money>, or <money>$0.31</money> per share, fully diluted, in the prior year. Cash flow from operations amounted to <money>$23.5 million</money> this year, up 5.4% from <money>$22.3 million</money> last year.</p>
<p>Fluctuations in the value of the Canadian dollar versus the US currency increased second quarter sales by <money>$3.0 million</money> or 3.9%, compared with last year, and had a negative impact of 0.1% on gross profit expressed as a percentage of sales. These fluctuations increased sales for the first six months of fiscal 2010 by <money>$9.9 million</money>, but reduced gross profit as a percentage of sales by 0.8%. The impact of currency movements on the Company's gross profit is mitigated by the use of forward foreign exchange sales contracts and the natural hedging from the purchase of materials made in US dollars.</p>
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    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Financial highlights
    (in thousands of dollars, except per share data)
    -------------------------------------------------------------------------
                                     Quarters ended         Six months ended
                                      September 30,           September 30,
                                    2009        2008        2009        2008
    -------------------------------------------------------------------------
    Sales                         76,570      77,340     158,730     159,911
    Operating income               6,358       6,796      13,829      16,599
    Net income                     3,518       4,056       8,060       9,754
      Per share - basic and
       diluted ($)                  0.11        0.13        0.26        0.31
    Cash flows from
     operations                   11,657      10,558      23,487      22,277
    Weighted-average shares
     outstanding (basic)      30,644,832  31,657,841  30,795,183  31,651,611
    -------------------------------------------------------------------------
    
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<p/>
<p>"Héroux-Devtek continues to deliver solid results in spite of unfavourable conditions in the commercial aerospace and industrial markets," said President and CEO Gilles Labbé. "Our diversified business mix provides the Company with a solid cash flow generation that further solidifies our balance sheet. This financial soundness, combined with the quality of our products and customer service, and our proven track record for on-time delivery, position us as a leader in our markets. As customers are increasingly looking to reduce their supplier base, we believe we will benefit from this trend and gain further market share."</p>
<p>As at <chron>September 30, 2009</chron>, Héroux-Devtek's balance sheet remained healthy with cash and cash equivalents of <money>$27.2 million</money> and long-term debt, including the current portion, of <money>$88.5 million</money>. As a result, the net debt-to-equity ratio stood at 0.29:1 at the end of the second quarter, compared with 0.35:1 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.</p>
<p>During the second quarter, the Company repurchased 239,400 common shares at an average cost of <money>$4.35</money> per share under its normal course issuer bid program. This program allows Héroux-Devtek to repurchase a maximum of 1.5 million shares until <chron>November 23, 2009</chron>. As at <chron>September 30, 2009</chron>, the Company had repurchased a total of 1,180,400 shares.</p>
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    SECOND QUARTER HIGHLIGHTS

    - The Aerospace segment entered into a Memorandum of Understanding (MOU)
      with The Boeing Company to manufacture the landing gear for the H-47F
      Chinook heavy-lift helicopter, including the CH-147 as it is known for
      the Canadian Forces. Under the MOU, the Aerospace segment is set to
      benefit from opportunities to fabricate, assemble, test and deliver the
      landing gear for H-47F aircraft scheduled to be delivered to customers
      outside the United States over a four-year period, expected to begin
      early in the Company's fiscal year 2012. Héroux-Devtek may also be
      considered for an intellectual property license to service variants in
      the worldwide fleet of Chinook aircraft, currently estimated at over
      1,000 aircraft.

    - The Aerospace segment has been 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, B-52, E-3
      and P-3 aircraft. Production will be spread out over the next four
      years, with deliveries starting in fiscal year 2010. The combined value
      of the contracts is approximately Cdn$11.3 million.
    
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<p/>
<p>SECTOR RESULTS</p>
<p/>
<p>Aerospace sales for the second quarter rose 4.1% to <money>$70.9 million</money> compared with <money>$68.1 million</money> last year. Sales of landing gear products increased by 5.7% to <money>$47.4 million</money> reflecting higher military aftermarket sales, new business in the large commercial aircraft segment and favourable currency fluctuations, partially offset by the deceleration of production schedules for business jet and commercial helicopter programs. Aerostructure sales grew 1.7% to <money>$23.3 million</money> driven by the ramp-up of the JSF program which more than offset lower aftermarket sales and business jet activity. Operating income was <money>$5.6 million</money>, or 7.9% of sales, compared with <money>$5.3 million</money>, or 7.8% of sales, in the second quarter of last year, essentially reflecting improved throughput for landing gear products.</p>
<p>For the first six months of the current fiscal year, Aerospace sales amounted to <money>$146.1 million</money>, up 2.8% over sales of <money>$142.1 million</money> a year earlier. Operating income was <money>$12.3 million</money>, or 8.4% of sales, compared with <money>$13.7 million</money>, or $9.6% of sales, last year.</p>
<p>Industrial sales totalled <money>$5.7 million</money> for the second quarter of fiscal 2010, representing a decrease of 38.6% over sales of <money>$9.2 million</money> in the second quarter of fiscal 2009. This decline reflects soft conditions in the power generation industry, including wind energy, and in the heavy equipment industry resulting from a weak economy. Due to lower sales, operating income stood at <money>$0.7 million</money> or 13.1% of sales, versus <money>$1.5 million</money>, or 16.3% of sales, last year.</p>
<p>After the first six months of fiscal 2010, Industrial sales reached <money>$12.6 million</money>, down 29.0% from <money>$17.8 million</money> a year ago, while operating income amounted to <money>$1.5 million</money>, or 12.2% of sales, versus <money>$2.9 million</money>, or 16.3% of sales, a year ago.</p>
<p/>
<p>OUTLOOK</p>
<p/>
<p>Although the economy is showing signs of recovery, the commercial aerospace market remains weak, as it typically lags the economy. Given fewer new orders, as well as cancellations or deferrals, production schedules have been reduced in the business jet, commercial helicopter and large commercial aircraft segments. The military aerospace market remains solid with major programs progressing as expected, particularly the JSF program. While proposed funding for the US Department of Defense 2010 fiscal year budget is up 4%, subsequent budget funding may be reduced. The power generation industry is impacted over the short-term by the economic situation and tight lending conditions given significant capital requirements for these projects, but the wind energy market still holds considerable potential over the mid-term. Funded backlog was <money>$434 million</money> as at <chron>September 30, 2009</chron>, down from <money>$468 million</money> three months earlier.</p>
<p>"Our cost reduction plan implemented earlier this year and ongoing measures to improve productivity are aimed at ensuring Héroux-Devtek remains globally competitive in spite of the Canadian dollar's increased volatility of recent weeks. As economic uncertainty prevails and visibility remains limited, we are still not anticipating any significant sales growth for fiscal 2010. Still, we are confident that our solid customer relationships, sound diversification and healthy balance sheet will enable Héroux-Devtek to emerge from this uncertain economic situation in a stronger position," concluded Mr. Labbé.</p>
<p/>
<p>CONFERENCE CALL</p>
<p/>
<p>Héroux-Devtek Inc. will hold a conference call to discuss these results on <chron>Friday, October 30</chron> at <chron>10:00 A.M. Eastern Time</chron>. Interested parties can join the call by dialling (416) 644-3425 (<location>Toronto</location> or overseas) or 1-800-732-1073 (elsewhere in <location>North America</location>). The conference call can also be accessed via live webcast at Héroux-Devtek's website, <a href="http://www.herouxdevtek.com">www.herouxdevtek.com</a>, <a href="http://www.newswire.ca">www.newswire.ca</a> or <a href="http://www.q1234.com">www.q1234.com</a>.</p>
<p>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 4170524# on your phone. This tape recording will be available on <chron>Friday, October 30, 2009</chron> as of <chron>12:00 PM Eastern Time</chron> until <chron>11:59 PM Eastern Time</chron> on <chron>Friday, November 6, 2009</chron>.</p>
<p/>
<p>PROFILE</p>
<p/>
<p>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 (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 65% of the Company's sales are outside <location>Canada</location>, mainly in the <location>United States</location>. The Company's head office is located in Longueuil, Québec with facilities in the Greater <location>Montreal</location> area (Longueuil, Dorval, Laval and Rivière-des-Prairies); Kitchener and <location>Toronto</location>, Ontario; Arlington, Texas and <location>Cincinnati</location>, Ohio.</p>
<p>Héroux-Devtek was recognized, in the July/August edition of The Globe & Mail's Report on Business magazine, as the fourth fastest growing company in <location>Canada</location> measured in terms of net earnings growth between 2003 and 2008.</p>
<p/>
<p>Forward-looking statements</p>
<p/>
<p>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.</p>
<p/>
<p>Non-GAAP Measures</p>
<p/>
<p>EBITDA, which is earnings before interest, taxes, depreciation and amortization, is a non-GAAP measure that is used by management and financial analysts.</p>
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<pre>
    
    Note to readers: Complete unaudited interim consolidated financial
                     statements and Management's Discussion & Analysis are
                     available on Héroux-Devtek's website at
                     www.herouxdevtek.com.
    

For further information: For further information: Héroux-Devtek Inc.: Gilles Labbé, President and Chief Executive Officer, (450) 679-3330; Réal Bélanger, Executive Vice-President and Chief Financial Officer, (450) 679-3330; MaisonBrison: Martin Goulet, CFA, (514) 731-0000

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