Héroux-Devtek reports strong second quarter results

  • Sales of $86.0 million, up 3.4% from $83.2 million last year
  • 20.2% increase in EBITDA to $13.6 million, compared with $11.3 million a year ago
  • Net income of $4.8 million, or $0.16 per diluted share, versus $2.7 million or $0.09 per diluted share last year
  • Funded backlog of $526 million

LONGUEUIL, QC, Nov. 4, 2011 /CNW Telbec/ - Héroux-Devtek Inc. (TSX: HRX), a leading Canadian manufacturer of aerospace and industrial products, today reported its results for the second quarter of fiscal 2012 ended September 30, 2011. These results reflect the adoption for reporting purposes, on April 1, 2011, of International Financial Reporting Standards ("IFRS"). Results for the prior year have been restated. Unless otherwise indicated, all amounts are in Canadian dollars.

Consolidated sales for the second quarter were $86.0 million, an increase of 3.4% from $83.2 million for the same period last year. This increase reflects higher sales for the Aerostructure and Industrial product lines. Earnings before interest, taxes, depreciation and amortization ("EBITDA") were $13.6 million, or 15.8% of sales, compared with $11.3 million, or 13.6% of sales. This improvement mainly reflects a better product mix and a better absorption of manufacturing overhead costs resulting from higher sales volume. Manufacturing improvements also had a favourable impact on operating income which rose to $7.6 million, or 8.9% of sales, up from $5.2 million, or 6.2% of sales last year. Net income amounted to $4.8 million, or $0.16 per share, fully diluted, compared with $2.7 million, or $0.09 per share, fully diluted, a year ago. Results for the second quarter of 2012 include expenses of $158,000 net of income tax, or $0.01 per share, related to the start-up of the new facility in Mexico. Finally, cash flow from operations reached $10.6 million this year, up from $9.3 million last year.

Fluctuations in the value of the Canadian dollar versus the US currency decreased second quarter sales by $3.5 million, or 4.2%, compared with last year, and reduced gross profit by $1.2 million, or 0.7% 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 HIGHLIGHTS Quarters ended September 30,   Six months ended September 30,
(in thousands of dollars, except per share data) 2011 2010     2011 2010  
Sales 86,002 83,194     177,875 165,735  
EBITDA  13,578 11,300     28,526 23,266  
Operating income 7,639 5,184     16,722 11,056  
Net income 4,812 2,654     10,609 5,972  
  Per share - basic and diluted ($) 0.16 0.09     0.35 0.20  
Cash flows from operations 10,627 9,306     23,438 19,898  
Weighted-average shares outstanding (basic, in '000s) 30,390 30,007     30,303 30,122  

"Héroux-Devtek recorded strong second quarter and first half financial results, a performance that clearly validates our focus on value-added products and services as well as earlier investments in productivity enhancement initiatives, as we constantly seek greater efficiency in order to offset the high value of the Canadian currency," said President and CEO Gilles Labbé. "Although the global macro-economic environment remains volatile, underlying demand in our core markets is robust with higher production rates for several large commercial aircraft programs, the ramp-up of new aircraft programs on which we are actively involved, and solid order books in our main industrial markets."

As at September 30, 2011, Héroux-Devtek's balance sheet remained healthy with cash and cash equivalents of $45.4 million and long-term debt, including the current portion, of $114.4 million. As a result, the net debt-to-equity ratio stood at 0.30:1 at the end of the second quarter, compared with 0.28:1 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.

Aerospace sales were $77.6 million in the second quarter of fiscal 2012 compared with $77.0 million last year. Landing Gear product sales decreased slightly 2.7% to $52.2 million, as unfavourable currency fluctuations and lower customer requirements for regional jet and commercial helicopter programs were partially offset by increased activity for certain large commercial aircraft, mainly the B-777 and the A-320. Aerostructure product sales grew 8.2% to $25.2 million due to higher sales for business jet programs and the JSF program, which more than offset lower sales to other military programs, including the F-16 and F-22, as well as unfavourable currency fluctuations.

Industrial sales totalled $8.4 million in the second quarter of fiscal 2012, up 34.3% from $6.2 million a year earlier. This increase reflects higher demand for heavy equipment in the mining industry and higher sales to the power generation sector.

For the first six months of fiscal 2012, consolidated sales amounted to $177.9 million, up 7.3% from $165.7 million a year earlier. Excluding the additional contribution of Landing Gear USA in the first quarter and the unfavourable currency impact, year-to-date sales increased 8.8%. Aerospace sales rose 6.1% to $162.3 million, while Industrial sales grew 22.5% to reach $15.6 million. EBITDA totalled $28.5 million, or 16.0% of sales, versus $23.3 million, or 14.0% of sales, a year earlier, while operating income stood at $16.7 million, or 9.4% of sales, compared with $11.1 million, or 6.7% of sales, last year. Net income totalled $10.6 million or $0.35 per share, versus $6.0 million or $0.20 per share, in the prior year. Results for the first six months of fiscal 2012 include start-up costs of $338,000 net of income taxes, or $0.01 per share, related to the new facility in Mexico, while restructuring charges, related to the closure of the Rivière-des-Prairies facility, reduced net income by $0.02 per share, net of income taxes, in the first six months of fiscal 2011. Finally, cash flow from operations was $23.4 million, up from $19.9 million in the corresponding period a year earlier.

Conditions 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 are significantly above those of a year ago and both Boeing and Airbus are forecasting increased 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 shipments are only expected to increase 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, Héroux-Devtek anticipates to produce a higher number of shipsets in fiscal 2012, compared to fiscal 2011 due to the ramp-up of the other two variants and 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 September 30, 2011, Héroux-Devtek's funded (firm orders) backlog stood at $526 million, up from $509 million three months earlier, and remains well diversified.

"As Héroux-Devtek further broadens its product and service offering, it will be in an increasingly favourable position to capture business opportunities in its strategic markets. The pending start-up of our new facility in Mexico will be another significant factor in our value proposition, while our healthy balance sheet enables us to consider other strategic acquisitions that would enhance our product portfolio and our technologies. For the current fiscal year ending March 31, 2012, we continue to anticipate an internal sales growth of approximately 5%, assuming the Canadian dollar remains at parity versus the U.S. currency. More importantly, the projected ramp-up of many important programs could further accelerate our growth beyond this fiscal year," concluded Mr. Labbé.

Héroux-Devtek Inc. will hold a conference call to discuss these results on Friday, November 4, 2011 at 10:00 AM Eastern Time. Interested parties can join the call by dialling (416) 644-3425 (Toronto or overseas) or 1-800-732-1073 (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 4473126# on your phone. This tape recording will be available on Friday, November 4, 2011 as of 1:00 PM Eastern Time until 11:59 PM Eastern Time on Friday, November 11, 2011.

Héroux-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; Springfield, Cleveland and Cincinnati, Ohio, as well as Querétaro, Mexico.

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 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.

Earnings 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:


Héroux-Devtek Inc.
Gilles Labbé
President and Chief Executive Officer
Tel.: (450) 679-3330

Héroux-Devtek Inc.
Réal Bélanger 
Executive Vice-President and Chief Financial Officer 
Tel.: (450) 679-3330 
Martin Goulet, CFA
Tel.: (514) 731-0000

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