MRO Magazine

Heroux-Devtek Reports Fiscal 2015 Fourth Quarter and Year-End Results

By Marketwire News   

LONGUEUIL, QUEBEC–(Marketwired – May 28, 2015) – Heroux-Devtek Inc. (TSX:HRX), (“Heroux-Devtek” or the “Corporation”), a leading international manufacturer of aerospace products, today reported its results for the fourth quarter and fiscal year ended March 31, 2015. Unless otherwise indicated, all amounts are in Canadian dollars. As mentioned by press release earlier today, the Corporation recorded a non-recurring charge of $11.6 million before taxes, equivalent to $7.9 million or $0.22 per diluted share after taxes, in its fiscal 2015 fourth quarter and fiscal year-end results following the execution of a Memorandum of Settlement with UTC Aerospace Systems.”Heroux-Devtek had a solid year in fiscal 2015 driven by a strong contribution from the UK and Wichita operations for the entire year and higher organic sales to the commercial aerospace market. We also accomplished significant progress on our main growth platforms, including the capital investment plan for the B-777 and B-777X contract, the integration of the UK and Wichita operations, deliveries of initial production shipsets on certain landing gear design programs and the creation of a world-class, dedicated product support team. These platforms are important growth vectors in achieving our longer-term goal of annual sales of approximately $500 million by the end of fiscal 2019, based on existing contracts and assuming no further acquisition,” said Gilles Labbe, President and CEO of Heroux-Devtek. /T/—————————————————————————- Quarters ended Fiscal years endedFINANCIAL HIGHLIGHTS March 31, March 31,(in thousands of dollars, except per share data) 2015 2014 2015 2014—————————————————————————-Sales 106,054 91,212 364,916 272,034Adjusted(1) EBITDA 15,899 13,249 47,781 35,800Adjusted(2) net income 7,456 5,953 19,412 15,258 Per share – diluted ($) 0.21 0.19 0.55 0.48Non-recurring charges(3), net of taxes 9,096 4,723 16,188 6,022Net income (loss) (1,640) 1,230 3,224 9,236 Per share – diluted ($) (0.05) 0.04 0.09 0.29Weighted-average shares outstanding (diluted, in ‘000s) 36,056 31,702 35,016 31,662—————————————————————————-(1) Excluding settlement of a litigation, restructuring charges and acquisition-related costs. (2) Excluding non-recurring charges, net of taxes. (3) Includes impairment of finite-life intangible assets, settlement of a litigation, restructuring charges and acquisition-related costs. /T/FOURTH QUARTER RESULTSConsolidated sales rose 16.3% to $106.1 million, versus $91.2 million in the fourth quarter of fiscal 2014. This increase mainly reflects an additional contribution of $11.4 million from the UK and Wichita operations compared to last year, while year-over-year fluctuations in the value of the Canadian currency versus the U.S. currency increased fourth-quarter sales by $6.4 million. Commercial sales reached $53.1 million, up 39.7% from $38.0 million last year. This increase includes an additional contribution of $5.3 million from the UK and Wichita operations. Excluding the latter, commercial sales rose due to higher production rates for certain large commercial programs, mainly the B-777 aircraft, entry into production of new landing gear system designs for the Embraer Legacy 450/500 and Airbus Helicopter EC-175 programs, as well as a $3.2 million favourable currency effect. Military sales totalled $53.0 million, down slightly by $0.2 million from a year ago, as the additional contribution of $6.1 million from the UK and Wichita operations and a $3.2 million favourable foreign exchange impact were offset by lower spare part requirements, mainly with the U.S. government. Gross profit reached $17.3 million, or 16.3% of sales, compared with $15.4 million, or 16.9% of sales, last year. The increase in dollars reflects the additional contribution from the UK and Wichita operations, while the decrease as a percentage of sales is mainly due to a less favourable aftermarket product mix. Currency variation had a positive effect equivalent to 1.4% of sales on gross profit compared with last year’s fourth quarter. Adjusted EBITDA stood at $15.9 million, or 15.0% of sales, versus $13.2 million, or 14.5% of sales, a year ago. This year’s fourth-quarter adjusted EBITDA excludes a non-recurring charge of $11.6 million for the settlement of a litigation as well as restructuring charges of $1.6 million mainly related to manufacturing capacity optimization and consolidation initiatives announced in January 2014 and the integration of the UK and Wichita operations. Last year’s adjusted EBITDA excluded acquisition-related costs of $3.6 million and restructuring charges of $1.9 million.Adjusted net income, which excludes the after-tax effect of $9.1 million from the aforementioned non-recurring charges, was $7.5 million, or $0.21 per diluted share, in the fourth quarter of fiscal 2015, up from $6.0 million, or $0.19 per diluted share, in the fourth quarter of fiscal 2014, excluding acquisition-related costs and restructuring charges of $4.7 million, net of taxes.FISCAL 2015 RESULTS For the fiscal year ended March 31, 2015, consolidated sales reached $364.9 million, up 34.1% from $272.0 million last year. This variation mainly reflects an additional contribution of $83.5 million from the UK and Wichita operations. Excluding this factor, commercial sales increased by $20.2 million, or 16.6%, mainly resulting from higher sales on certain large commercial aircraft programs and entry into production of the Embraer Legacy 450/500 aircraft, while military sales decreased by $10.9 million, or 7.3%, mainly due to lower spare part requirements from the U.S. government. Foreign exchange fluctuations increased sales by $13.0 million, or 4.8%, when compared to last year. Reflecting the acquisition of the UK and Wichita operations and their more favourable product mix during the year, gross profit reached $59.2 million, or 16.2% of sales, compared with $42.4 million, or 15.6% of sales, last year. Adjusted EBITDA totalled $47.8 million, or 13.1% of sales, up from $35.8 million, or 13.2% of sales, in the prior year. Finally, adjusted net income, which excludes the after-tax effect of $16.2 million from the non-recurring charges, was $19.4 million, or $0.55 per diluted share, versus $15.3 million, or $0.48 per diluted share, a year ago. In addition to the litigation settlement charge, this year’s adjusted net income excludes a $5.8 million impairment charge related to Bombardier’s decision to pause the Learjet 85 program and restructuring charges of $2.5 million. Last year, the Corporation recorded a favourable adjustment of deferred income tax liabilities amounting to $1.1 million, or $0.04 per diluted share.FINANCIAL POSITION As at March 31, 2015, Heroux-Devtek’s balance sheet remained healthy with cash and cash equivalents of $35.1 million, while total long-term debt was $114.2 million, including the current portion, but excluding net deferred financing costs. Long-term debt includes $56.7 million drawn against the Corporation’s authorized Credit Facility of $200.0 million. As a result, the Corporation’s net debt position stood at $79.1 million as at March 31, 2015, while the net-debt-to equity ratio was 0.27:1.OUTLOOK Conditions remain favourable in the commercial aerospace market. Production rate increases for certain leading large commercial aircraft programs are scheduled through calendar 2018 and manufacturers’ order backlogs represent more than eight years of production at current rates. The business jet market continues to improve with growing aircraft shipments and momentum should be sustained over several years driven by a better economy and new aircraft introduction, including certain models for which Heroux-Devtek developed the landing gear. The military aerospace market remains uncertain and although sequestration cuts were eliminated through the U.S. government’s 2015 fiscal year, current funding requests beyond that horizon exceed planned budget limits, which could affect the Corporation over its ensuing fiscal years. However, UK operations reduce Heroux-Devtek’s relative exposure to the U.S. military market, as a more geographically diversified military portfolio, mainly composed of leading programs, and also balanced between new component manufacturing and aftermarket products and services, should lessen this impact.As at March 31, 2015, Heroux-Devtek’s funded (firm orders) backlog stood at $459 million, versus $456 million at the beginning of the fiscal year. “Heroux-Devtek’s strategic platforms offer tremendous growth potential. For this reason, we believe we are entering the most exciting phase of our history. On the one hand, we are well positioned to further expand our reach in the global landing gear market; on the other, we have an organization that is both disciplined and committed. Thus our focus is totally on execution to achieve the success the Corporation deserves. In the short-term, we anticipate organic sales growth of approximately 10% in fiscal 2016, assuming stable currencies. Commercial sales should grow in excess of 10%, while military sales should experience a single-digit increase. Over the longer term, our platforms will provide a solid foundation for further profitable business opportunities. The result should be sustainable value creation for our shareholders,” concluded Mr. Labbe.CONFERENCE CALL Heroux-Devtek Inc. will hold a conference call to discuss these results on Thursday, May 28, 2015 at 10:00 AM Eastern Time. Interested parties can join the call by dialling 1-877-223-4471 (North America) or 1-647-788-4922 (overseas). The conference call can also be accessed via live webcast at Heroux-Devtek’s website, or If you are unable to call in at this time, you may access a tape recording of the meeting by calling 1-800-585-8367 and entering the passcode 21953602 on your phone. This tape recording will be available on Thursday, May 28, 2015 as of 1:00 PM Eastern Time until 11:59 PM Eastern Time on Thursday, June 4, 2015. PROFILE Heroux-Devtek Inc. (TSX:HRX) is an international company specializing in the design, development, manufacture and repair and overhaul of landing gear and actuation systems and components for the Aerospace market. The Corporation is the third largest landing gear company worldwide, supplying both the commercial and military sectors of the Aerospace market with new landing gear systems and components, as well as aftermarket products and services. The Corporation also manufactures hydraulic systems, fluid filtration systems, electronic enclosures, heat exchangers and cabinets for suppliers of airborne radar, electro-optic systems and aircraft controls. Approximately 75% of the Corporation’s sales are outside Canada, including about 50% in the United States. The Corporation’s head office is located in Longueuil, Quebec with facilities in the Greater Montreal area (Longueuil, Laval and St-Hubert); Kitchener, Cambridge and Toronto, Ontario; Springfield and Cleveland, Ohio; Wichita, Kansas; and Runcorn, Nottingham and Bolton, United Kingdom.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 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.NON-IFRS MEASURES Earnings before interest, taxes, depreciation and amortization (“EBITDA”), adjusted EBITDA, adjusted net income and adjusted earnings per share 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 audited consolidated financial statements and Management’s Discussion & Analysis are available on Heroux-Devtek’s website at Information: From:Heroux-Devtek Inc.Gilles LabbePresident and Chief Executive Officer(450) 679-3330Contact:Heroux-Devtek Inc.Stephane ArsenaultChief Financial Officer(450) 679-3330MaisonBrisonMartin Goulet, CFA(514) 731-0000


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