MRO Magazine

Heroux-Devtek Reports Solid Fiscal 2016 First Quarter Results

By Marketwire News   

LONGUEUIL, QUEBEC–(Marketwired – Aug. 7, 2015) – Heroux-Devtek Inc. (TSX:HRX), (“Heroux-Devtek” or the “Corporation”), a leading international manufacturer of aerospace products, today reported its results for the first quarter of fiscal 2016 ended June 30, 2015. Unless otherwise indicated, all amounts are in Canadian dollars. “Heroux-Devtek’s main growth platforms contributed soundly to its fiscal 2016 first quarter results. We realized higher sales from the production ramp-up of the business jet programs for which we designed the landing gear, while we further increased our aftermarket reach in support of existing aircraft equipped with our systems and components. Meanwhile, we continued to methodically execute our capital investment plan for the B-777 and B-777X contract and we remain on schedule with respect to our main initiatives,” said Gilles Labbe, President and CEO of Heroux-Devtek. /T/—————————————————————————-FINANCIAL HIGHLIGHTS Quarters ended June 30,(in thousands of dollars, except per share data) 2015 2014—————————————————————————-Sales 98,237 86,408Adjusted(1) EBITDA 13,084 10,360Adjusted(2) net income 5,519 3,756 Per share – diluted ($) 0.15 0.12Net income 4,510 3,500 Per share – diluted ($) 0.13 0.11Weighted-average shares outstanding (diluted, in ‘000s) 36,069 31,947—————————————————————————-(1) Excluding non-recurring charges. (2) Excluding non-recurring charges, net of taxes. /T/FIRST QUARTER RESULTS Consolidated sales reached $98.2 million, compared with $86.4 million in the first quarter of fiscal 2015. This 13.7% increase reflects the strength of the commercial aerospace market, while year-over-year fluctuations in the value of the Canadian currency versus the U.S. currency increased first-quarter sales by $7.9 million. Commercial sales reached $51.5 million, up 18.8% from $43.3 million last year. This increase was driven by higher sales of landing gear systems designed by Heroux-Devtek for business jets due to production ramp-up of the Embraer Legacy 450/500 program and delivery of first production units for the Dassault Falcon 5X program, higher aftermarket sales related to a new strategic alliance to provide support for the Saab 340 program and higher production rates for certain large commercial programs, mainly the B-787 aircraft. Year-over-year currency fluctuations had a $4.1 million favourable effect on commercial sales. Defence sales increased 8.6% to $46.8 million, as higher sales to Boeing on the CH-47 helicopter program, greater repair and overhaul (R&O) sales to the U.S. Air Force and a $3.8 million favourable foreign exchange impact were partially offset by lower spare part requirements, mainly with the U.S. government. Gross profit reached $16.6 million, or 16.9% of sales, compared with $14.2 million, or 16.4% of sales, last year. The increase reflects favourable year-over-year currency fluctuations equivalent to 1.5% of sales and a better product mix driven by higher commercial aftermarket sales. These factors were partially offset by higher non-quality costs and the ramp-up of business jet design programs, which is currently dilutive as the initial units of a product’s life cycle incur higher costs than those of a mature program. Adjusted EBITDA stood at $13.1 million, or 13.3% of sales, versus $10.4 million, or 12.0% of sales, a year ago. This year’s first-quarter adjusted EBITDA excludes non-recurring charges of $1.5 million related to legal fees as part of the settlement of a litigation as already disclosed. Last year’s adjusted EBITDA excluded restructuring charges of $0.4 million.Adjusted net income, which excludes the after-tax effect of $1.0 million from the aforementioned non-recurring charges, was $5.5 million, or $0.15 per diluted share, in the first quarter of fiscal 2016, up from $3.8 million, or $0.12 per diluted share, in the first quarter of fiscal 2015, excluding restructuring charges of $0.3 million, net of taxes.FINANCIAL POSITION As at June 30, 2015, Heroux-Devtek’s balance sheet remained healthy with cash and cash equivalents of $14.8 million, while total long-term debt was $131.7 million, including the current portion, but excluding net deferred financing costs. Long-term debt includes $68.7 million drawn against the Corporation’s authorized Credit Facility of $200.0 million. As a result, the Corporation’s net debt position stood at $116.9 million as at June 30, 2015, while the net-debt-to equity ratio was 0.38:1, up from 0.27:1 as at the beginning of the year. This increase mainly reflects the Corporation’s capital investments, essentially those related to the B-777 and B-777X contract, as well as a payment for the settlement of a litigation.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. In the business jet market, the production ramp-up of business jet models for which Heroux-Devtek has designed the landing gear should provide sustained growth for the Corporation for several years. The defence 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. defence market, as a more geographically diversified portfolio, mainly composed of leading programs, and also balanced between new component manufacturing and aftermarket products and services, should lessen this impact.As at June 30, 2015, Heroux-Devtek’s funded (firm orders) backlog stood at $444 million, versus $459 million at the beginning of the fiscal year. “Fiscal 2016 is off to a solid start for Heroux-Devtek. Given forces driving our main markets, we expect an organic sales growth of approximately 10% for the entire fiscal year, with commercial sales growing in excess of 10% and defence sales experiencing a slight increase. In regards to the second quarter, it is important to remember that it has traditionally been a relatively slower period due to seasonal factors, such as plant shutdowns and summer vacations. Over the long-term, Heroux-Devtek remains focused on the disciplined execution of its business strategy on all its growth platforms in order to further expand its reach in the global landing gear market. These platforms will provide a solid foundation to capture profitable business opportunities and create sustainable value for our shareholders,” concluded Mr. Labbe.CONFERENCE CALL Heroux-Devtek Inc. will hold a conference call to discuss these results on Friday, August 7, 2015 at 11:00 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 72811181 on your phone. This tape recording will be available on Friday, August 7, 2015 as of 2:00 PM Eastern Time until 11:59 PM Eastern Time on Friday, August 14, 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 defence 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 and electronic enclosures. 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 Strongsville, Ohio; Wichita, Kansas; Everett, Washington; 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 unaudited interim condensed 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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