Héroux-Devtek Reports Solid Third Quarter Results



    ARLINGTON, TX, Feb. 6 /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 2008 ended December 31,
2007. Sales for the period reached $76.3 million, an increase of 6.6% over
sales of $71.5 million in the same quarter a year ago. Operating income for
the third quarter stood at $6.6 million, compared with $3.8 million last year,
resulting from greater business activity and improved productivity. As a
result, and reflecting the utilization of certain tax losses carried forward
for which no income tax benefits had previously been recognized, third quarter
net income was $5.3 million, or $0.17 per share, fully diluted, compared with
$2.2 million, or $0.07 per share, fully diluted, for the same quarter last
year. Cash flows from operations amounted to $8.7 million, up 31.7% from
$6.6 million a year earlier.
    For the first nine months of the current fiscal year, sales increased by
12.1% to reach $224.8 million, versus $200.5 million last year. Operating
income of $18.1 million compares favourably with $7.6 million a year earlier.
Net income amounted to $12.5 million, or $0.39 per share, fully diluted,
versus $4.4 million, or $0.14 per share, fully diluted, a year ago. Finally,
cash flows from operations were $25.9 million, an increase of 46.7% over
$17.6 million a year ago.
    The stronger Canadian dollar reduced third-quarter sales by $7.8 million,
or 10.9%, compared with last year and lowered the gross profit margin by 1.6%.
Year-to-date, the stronger Canadian dollar reduced sales by $12.5 million, or
6.2%, in comparison with last year and reduced the gross profit margin by
0.8%. The impact of the stronger Canadian dollar against the US currency on
the Company's gross profit margin, expressed as a percentage of sales, is
mitigated by the use of forward foreign exchange sales contracts and the
natural hedging from the purchase of materials made in US dollars.

    
    -------------------------------------------------------------------------
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    Financial highlights
    (in thousands of dollars, except per share data)
    -------------------------------------------------------------------------
                                      Quarters ended       Nine months ended
                                         December 31,            December 31,
                                    2007        2006        2007        2006
    -------------------------------------------------------------------------
    Sales                         76,260      71,519     224,794     200,505
    Operating income               6,561       3,807      18,141       7,645
    Net income                     5,287       2,198      12,545       4,382
      Per share - basic ($)         0.17        0.07        0.40        0.14
      Per share - diluted ($)       0.17        0.07        0.39        0.14
    Cash flow from operations      8,664       6,579      25,882      17,639
    Weighted-average shares
     outstanding (basic)      31,629,197  31,518,561  31,601,154  31,507,054
    -------------------------------------------------------------------------

    "We are pleased with our third quarter results, which represent our ninth
consecutive profitable quarter," said Héroux-Devtek President and CEO, Gilles
Labbé. "Business activity was solid in all our markets. We continued to
realize profitability improvements in spite of a strong Canadian dollar, which
clearly validates our strategic decision to invest in state-of-the-art
equipment, adequate training for our dedicated employees and lean
manufacturing initiatives at all levels of the organization, along with a
better alignment, over the years, of our manufacturing operations and sales
geographically."
    During the quarter, Héroux-Devtek's Landing Gear Division signed a
preferred supplier agreement with Messier-Dowty accompanied by orders to
manufacture major landing gear components currently estimated in stated
Canadian currency at more than $115 million over the next 10 years. The
agreement calls for Héroux-Devtek to manufacture these components for three
large commercial aircraft programs. Production of these complex components
will require an investment of $16 million over the next two years in
ultra-modern and highly-automated equipment. Deliveries will begin in the
current calendar year and a full production ramp-up is anticipated over an
18-month period.

    SECTOR RESULTS

    Aerospace sales for the third quarter amounted to $69.1 million,
representing an increase of 6.7% over sales of $64.8 million for the same
quarter last year. Sales of the Landing Gear division grew by 16.1% from the
same quarter a year ago to $45.7 million, mainly reflecting continued growth
in component sales for military aircraft programs as well as increased
business jet sales. Engineering work on the Sikorsky CH-53K program also began
during the quarter. Aerostructure sales declined by 7.8% to $23.0 million, as
lower sales for regional jet programs and the strength of the Canadian dollar
offset greater sales for the F-16 program as well as further schedule recovery
of orders for commercial aircraft programs. Aircraft engine component sales of
$0.4 million represent residual business following the decision to exit this
market based on a mutual agreement with the customer.
    The Aerospace segment operating income for the third quarter reached
$6.3 million, or 9.1% of sales, compared with $4.3 million, or 6.6% of sales,
in the same period last year. The improvement stems from higher overall sales,
improved performance at the Landing Gear division as well as further
productivity improvements stemming from lean manufacturing initiatives
previously implemented.
    Year-to-date sales for the Aerospace segment increased 12.1% to
$203.3 million with double-digit growth for both the Landing Gear and
Aerostructure divisions. Operating income amounted to $18.1 million or 8.9% of
sales, significantly higher than the $9.5 million or 5.2% of sales reported
for the first nine months of last year.
    Industrial sales for the third quarter totalled $7.2 million, up 6.2% from
$6.7 million last year. The recovery in Industrial Gas Turbine sales continues
to gain momentum with year-over-year sales growth of 12.4% in the third
quarter to $3.8 million. The Industrial segment recorded, for the first time
in many years, an operating profit of $0.3 million, compared with an operating
loss of $0.4 million in the third quarter of last year, owing to further
operational improvements, better margins and greater business activity.
    Industrial sales for the first nine months of this fiscal year increased
12.2% to $21.5 million when compared with the first nine months a year
earlier. Operating income reached $0.1 million compared with a loss of
$1.8 million for the first nine months of last year.

    CHANGES IN ACCOUNTING POLICIES

    The implementation of the new accounting standards, at April 1, 2007,
relating to the new financial instruments rules reduced the Company's net
income by $41,000 in the third quarter and $129,000 for the first nine months
this year, but it had no impact on cash flows from operations.

    OUTLOOK

    The order books of large commercial aircraft manufacturers continue to be
strong, a situation conducive to yield business opportunities for suppliers
such as Héroux-Devtek. The military aerospace market also remains solid.
Meanwhile, the power generation industry's sustained recovery should further
improve operating profitability in the Industrial segment.
    "In light of current economic risks and the continued strength of the
Canadian dollar against the US currency, we must continue to make productivity
gains to maintain our competitiveness. Our significant capital expenditure
investment plan and employee training programs, along with continuous lean
manufacturing initiatives, should contribute to improving our productivity.
Given our solid backlog, we continue to expect achieving approximately 10%
internal sales growth in fiscal 2008," concluded Mr. Labbé.

    CONFERENCE CALL

    Héroux-Devtek Inc. will hold a conference call to discuss these results
tomorrow, February 7, at 10 AM (ET). Interested parties can join the call by
dialling 416-644-3421 (Toronto or overseas) or 1-800-731-5319 (elsewhere in
North America). The conference call can also be accessed via live webcast at
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 21260377#
on your phone. This tape recording will be available on Thursday, February 7,
2008, as of 12:00 PM until 11:59 PM on Thursday, February 14, 2008.

    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 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 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 and
Cincinnati, Ohio.

    Forward-looking statement

    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.

    Note to readers:  Complete unaudited interim consolidated financial
                      statements and Management's Discussion & Analysis of
                      Financial Position and Operating Results 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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