- Sales and profitability stable compared with last year
- Solid cash flow related to operating activities and free cash flow1
- Increased sales guidance to mid-single digit growth reflecting the closing of the Beaver acquisition
- Selected by The Boeing Company to manufacture main landing gear and side braces for the F/A-18E/F Super Hornet and EA-18G Growler aircraft
- Awarded a five-year contract by Lockheed Martin Aeronautics Company to manufacture landing gear for the C-130J Hercules aircraft
LONGUEUIL, Québec, Aug. 10, 2018 (GLOBE NEWSWIRE) -- Héroux-Devtek Inc. (TSX:HRX), ("Héroux-Devtek" or the "Corporation"), a leading international manufacturer of aerospace products, today reported its results for the first quarter of fiscal 2019 ended June 30, 2018. Unless otherwise indicated, all amounts are in Canadian dollars.
"First quarter results, including sales and profitability, were stable versus last year, in line with Management's expectations. Sales in the commercial aerospace market increased, driven by Boeing 777 and 777X deliveries, while sales in the defence aerospace market decreased, mainly as a result of the ramp-down of the United States Air Force ("USAF") contract, which will partially be offset by the new AAR contract starting to gradually ramp-up in the second quarter. We continued to generate strong free cash flow which allowed us to improve an already healthy financial position, with cash and cash equivalents of $99.0 million and a resulting net debt of $33.4 million, said Gilles Labbé, President and CEO of Héroux-Devtek.
"In the past few months, we continued to build a sustainable future. We completed the acquisition of Beaver and signed a number of new contracts with AAR Corporation, The Boeing Company and Lockheed Martin. These accomplishments are a testament to our leadership position in the landing gear market. In particular, the contract for the F/A-18E/F Super Hornet and EA-18G Growler attests to our growing relationship with Boeing and represents a significant win for our defence activities. As for our sales guidance, with the Beaver acquisition, we now expect mid-single digit sales growth for the year when compared to the previous year. Finally, with the CESA acquisition expected to close in the coming weeks, we are well positioned for our next expansion phase," concluded Gilles Labbé.
|FINANCIAL HIGHLIGHTS||Quarters ended June 30,|
|(in thousands of dollars, except per share data)||2018||2017|
|Adjusted operating income1||5,217||5,408|
|Per share – diluted ($)||0.10||0.11|
|Adjusted net income1||3,786||4,027|
|Per share ($)||0.10||0.11|
|1 This is a non-IFRS measure. Please refer to the "Non-IFRS Measures" section at the end of this press release.|
FIRST QUARTER RESULTS
Consolidated sales reached $85.8 million, compared with $86.9 million in the first quarter of fiscal 2018. This slight decrease reflects lower sales to the defence aerospace market and a net negative impact of $2.5 million due to year-over-year fluctuations in the value of the Canadian currency versus foreign currencies, partially offset by higher sales to the commercial aerospace market, as detailed below.
Commercial sales increased 5.6% to $45.8 million, versus $43.3 million last year. The increase is mainly attributable to higher large commercial programs sales, mainly related to increased Boeing 777 and 777X deliveries. It is also due to higher business jet sales, primarily related to higher deliveries for the Embraer 450/500 program. These positive factors were partly offset by lower engineering activities.
Defence sales declined 8.1% from $43.5 million to $40.0 million. This variation is essentially due to the ramp-down of repair and overhaul ("R&O") activities for the USAF and lower manufacturing requirements for certain civil customers. However, the new AAR Corporation contract will begin to mitigate a portion of this loss starting in the second quarter. These negative factors were partly offset by higher spare requirements for the U.S. Government.
Gross profit was $13.1 million, or 15.2% of sales, versus $12.9 million, or 14.9% of sales, last year. The increase mainly reflects higher absorption of costs related to the Boeing 777 program and improved production efficiencies. These factors were partly offset by unfavourable exchange rate fluctuations representing 0.3% of sales.
Operating income stood at $4.9 million, or 5.7% of sales, compared to $5.4 million, or 6.2% of sales last year. Adjusted operating income was $5.2 million, as compared to $5.4 million last year. This quarter's adjusted operating income excluded $0.4 million of acquisition-related costs. Consequently, adjusted EBITDA, which excludes non-recurring items, was $12.2 million, or 14.3% of sales, compared with $11.9 million, or 13.7% of sales, a year ago.
Net income reached $3.6 million, or $0.10 per diluted share, in the first quarter of fiscal 2019, versus $4.0 million, or $0.11 per diluted share, last year. Excluding non-recurring items net of taxes, adjusted net income reached $3.8 million, or $0.10 per share, versus $4.0 million, or $0.11 per share last year.
As at June 30, 2018, Héroux-Devtek's funded (firm orders) backlog stood at $454 million, compared to $466 million three months earlier. The backlog does not include recently announced contracts.
SOLID CASH FLOWS AND HEALTHY FINANCIAL POSITION
Cash flows related to operating activities amounted to $8.5 million in the first quarter of fiscal 2019, versus $2.6 million last year. This variation reflects a more favourable variation in non-cash working capital items. Free cash flow in the first quarter of fiscal 2019 was $6.4 million, up significantly from $0.5 million last year. Given this free cash flow generation, Héroux-Devtek's already healthy financial position improved further as at June 30, 2018, with cash and cash equivalents of $99.0 million, while total long-term debt was $132.4 million, including the current portion, but excluding net deferred financing costs. Long-term debt includes $55.3 million drawn against the Corporation's authorized credit facility of $200 million. As a result, the net debt position was $33.4 million at the end of the first quarter, down from $38.8 million as at March 31, 2018. The net debt to adjusted EBITDA ratio stood at 0.6x versus 0.7x three months earlier.
- On May 16, 2018, Héroux-Devtek announced the signing of a contract with AAR to perform the remanufacturing of landing gear assemblies of the KC-135 aircraft, the manufacturing of spare parts for the C-130 and KC-135 aircraft and the manufacturing of other landing gear components, all in support of a contract AAR was awarded from the USAF. The contract's total value could exceed $65 million over the 4-year term.
- On July 2, 2018, Héroux-Devtek completed the acquisition of all the shares of Beaver Aerospace & Defense Inc. and its wholly-owned subsidiary PowerTHRU Inc.
- On July 17, 2018, Héroux-Devtek announced that it had been selected by The Boeing Company to manufacture main landing gear and side braces for the F/A Super Hornet and EA-18G Growler. First deliveries are expected in the third quarter of calendar 2020. The contract also includes potential spare parts and aftermarket services.
- On July 18, 2018, the Corporation announced that it had been awarded a five-year contract by Lockheed Martin Aeronautics Company to manufacture landing gear for the C130-J Hercules aircraft. The contract renewal covers the manufacture and assembly of landing gear and provision of spare parts beginning in January 2020.
Management is updating its sales guidance for fiscal 2019 reflecting the Beaver acquisition. Management now expects sales growth in the mid-single digits versus fiscal 2018, up from stable sales in the previous guidance. Capital expenditures remain unchanged at $15 million.
Please see "Forward-Looking Statements" below and the Guidance section in the Corporation's MD&A for the quarter ended June 30, 2018, for further details regarding the material assumptions underlying the foregoing guidance.
Héroux-Devtek Inc. will hold a conference call to discuss these results on Friday, August 10, 2018 at 11:30 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 Héroux-Devtek's website, www.herouxdevtek.com/investor-relations/events or http://www.gowebcasting.com/9346.
An accompanying presentation will also be available on Héroux-Devtek's website, www.herouxdevtek.com/investor-relations/events.
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 3274689 on your phone. This recording will be available on Friday, August 10, 2018 as of 2:30 PM Eastern Time until 11:59 PM Eastern Time on Friday, August 17, 2018.
Héroux-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 90% of the Corporation's sales are outside Canada, including about 65% in the United States. The Corporation's head office is located in Longueuil, Québec 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; Livonia, Michigan, and Runcorn, Nottingham and Bolton, United Kingdom.
Except for historical information provided herein, this press release contains information and statements of a forward-looking nature concerning the future performance of the Corporation. Forward looking statements are based on assumptions 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. Please see the Guidance section in the Corporation's MD&A for the fiscal year ended March 31, 2018, for further details regarding the material assumptions underlying the forecasts and guidance. Such forecasts and guidance are provided for the purpose of assisting the reader in understanding the Corporation's financial performance and prospects and to present management's assessment of future plans and operations, and the reader is cautioned that such statements may not be appropriate for other purposes.
Earnings before interest, taxes, depreciation and amortization ("EBITDA"), adjusted EBITDA, adjusted operating income, adjusted net income, adjusted earnings per share and free cash flow 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. Refer to Non-IFRS financial measures under Operating Results in the Corporation's MD&A for definitions of these measures and reconciliations to the most comparable IFRS measures.
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.
|President and Chief Executive Officer|
|Tel.: (450) 679-3330|
|Stéphane Arsenault||Pierre Boucher|
|Chief Financial Officer||Tel.: (514) 731-0000|
|Tel.: (450) 679-3330|
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