Sales for the year increased 9.7% to $337.6 million
May 29, 2009 – Héroux-Devtek Inc. a leading Canadian manufacturer of aerospace and industrial products has reported its results for the fourth quarter and fiscal year ended March 31, 2009.
May 29, 2009 By Administrator
Héroux-Devtek Inc. a leading Canadian manufacturer of aerospace and industrial products has reported its results for the fourth quarter and fiscal year ended March 31, 2009. The Company concluded fiscal 2009 with record sales and net income, as well as a solid balance sheet.
FISCAL 2009 RESULTS
Sales for fiscal 2009 amounted to $337.6 million, an increase of 9.7% over sales of $307.9 million in fiscal 2008. Operating income increased 24.1% over last year to reach $34.5 million, or 10.2% of sales, compared with $27.8 million, or 9.0% of sales, last year. Net income in fiscal 2009 totalled $21.4 million, or $0.67 per share, fully diluted, up from $19.0 million, or $0.59 per share, fully diluted, in fiscal 2008. When excluding a $2.4 million income tax benefits due to the utilization of tax losses carried forward and a $0.9 million favourable impact coming from the forgiveness of a loan, net income would have increased from $15.7 million to $21.4 million or 36.3%. Cash flows from operations amounted to $48.0 million, up 26.9% from $37.8 million a year earlier.
Fluctuations in the value of the Canadian dollar versus the US currency increased fiscal 2009 sales by $6.9 million, or 2.2%, compared with last year. In spite of this favourable variance, currency fluctuations had a 0.3% negative impact on gross profit, compared with last year and expressed as a percentage of sales, considering the Company's hedging policy. The impact of currency movements 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 U.S. dollars.
As at March 31, 2009, Héroux-Devtek's balance sheet remained healthy with cash and cash equivalents of $39.8 million and long-term debt, including the current portion, of $87.3 million. As a result, the net debt-to-equity ratio stood at 0.24:1 at the end of fiscal 2009, compared with 0.29:1 one year 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.
"Fiscal 2009 was a very successful year for Héroux-Devtek, as all divisions further improved their market position in spite of rapidly deteriorating business conditions in certain segments," said Héroux-Devtek President and CEO, Gilles Labbé. "The Landing Gear Division won two large-scale design and development mandates as well as important aftermarket contracts, the Aerostructure Division further strengthened its relationship with key customers through the attribution of additional orders on strategic programs, and the Gas Turbine Components Division significantly improved its profitability. We concluded the year in a strong financial position and with a solid backlog, well diversified among customers and market segments."
FOURTH QUARTER RESULTS
For the fourth quarter ended March 31, 2009, sales grew 10.9% to $92.1 million, versus $83.1 million last year. Operating income was essentially stable at $10.0 million or 10.9% of sales, compared with $9.6 million or 11.6% of sales a year earlier. Last year's fourth quarter operating income included the forgiveness of a $1.3 million non-interest bearing loan accounted for as a reduction of cost of sales, which increased the operating margin by 1.5%. Net income amounted to $6.4 million, or $0.20 per share fully diluted, in the fourth quarter of 2009, versus $6.5 million or $0.20 per share, fully diluted, a year ago. Net income for the fourth quarter of fiscal 2008 benefitted from $0.8 million, or $0.03 per share, fully diluted, in tax loss utilization, while the net impact of writing off the non-interest bearing loan also increased diluted earnings per share by $0.03. Cash flows from operations were $14.1 million, an increase of 17.5% over $12.0 million a year ago.
On April 28, 2009, Lockheed Martin Aeronautics Company awarded the Aerostructure Division a multi-year contract to manufacture complex structural components and assemblies for the outer wing, inner wing, and forward fuselage for all three F-35 Lightning II (JSF) aircraft variants in support of Low Rate Initial Production (LRIP) lots 3 through 7 over the next five years. Based on best estimated quantity production rates, the value of the contract is estimated to be in excess of Cdn$50 million and is in addition to a Cdn$135 million, multi-year contract awarded in 2007 for forged aluminum bulkheads and other complex components.
Aerospace sales for fiscal 2009 amounted to $299.4 million, an increase of 7.3% over sales of $278.9 million in fiscal 2008. Sales of the Landing Gear Division grew 4.9% to $190.7 million resulting from greater volume in the business jet and helicopter markets, as well as improved throughput on repair and overhaul work, partially offset by the labour strike at Boeing, the unfavourable exchange rates considering the Company's hedging position and the completion of a major large commercial retrofit program late in fiscal 2008. Aerostructure sales grew 13.2% to $107.6 million driven by schedule catch-up on military sales, the ramp up of the JSF program and favourable currency movements during the year, somewhat offset by lower sales to the large commercial aerospace market. Fourth quarter sales for the Aerospace segment increased 8.8% to $82.3 million.
The Aerospace segment operating income for fiscal 2009 was $29.3 million, up from $27.4 million a year earlier. As a percentage of sales, it reached 9.8% in fiscal 2009 and 2008. Despite higher sales, the currency translation loss on net monetary items mainly at the Landing Gear Division more than offset this favourable variance. In the fourth quarter, operating income amounted to $9.0 million compared with $9.3 million last year, reflecting the favourable effect, in fiscal 2008, of the aforementioned loan forgiveness. Industrial sales totalled $38.2 million in fiscal 2009, up 32.0% from $29.0 million last year. All major market segments, namely gas turbines, wind energy and heavy industry markets, experienced double-digit revenue growth. Industrial sales for the fourth quarter of fiscal 2009 increased 36.5% in comparison with a year ago, to $9.9 million.
Operating income for the Industrial segment amounted to $5.2 million, or 13.5% of sales in fiscal 2009, versus $0.4 million or 1.4% of sales, last year. This improvement mirrors the increase in value-added sales to the industrial gas turbine and wind energy markets as well as better overall production efficiency and sales mix. In the fourth quarter of fiscal 2009, operating income reached $0.7 million compared with $0.3 million last year.
In the face of mounting economic uncertainty, the volume of order intake for commercial aircraft manufacturers has been reduced in recent months. While backlogs remain sound, existing orders can be deferred or cancelled which could lead to further reductions in production schedules. The military aerospace market remains solid with major programs progressing as expected, particularly the JSF program, for which the U.S. Department of Defense recently recommended increasing the number of aircraft to be purchased throughout the U.S. government's 2010 fiscal year. Still, the new U.S. administration may reduce funding of future military budgets. In the power generation industry, the industrial gas turbine and wind energy markets will be impacted over the short-term by the financial crisis given the significant capital requirements of these projects and the infrastructure issues associated with the distribution of power from these new energy sources.
"The current economic environment will unquestionably slow the activity of some business segments. However, our achievements of the past year and the measures we are taking to continue to reduce costs and improve operating efficiency have positioned us strongly for the coming years. Although Héroux-Devtek can count on strong customer relationships and a solid backlog, we are not anticipating any significant sales growth for fiscal 2010 considering the prevailing economic uncertainty," concluded Mr. Labbé.
Héroux-Devtek Inc. will hold a conference call to discuss these results on Friday, May 29, 2009 at 10 AM (ET). Interested parties can join the call by dialling 416-644-3417 (Toronto or overseas) or 1-800-731-6941 (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 21306169# on your phone. This tape recording will be available on Friday, May 29, 2009, as of 12:00 PM until 11:59 PM on Friday, June 5, 2009.
Héroux-Devtek, 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 65% 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.
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 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: Héroux-Devtek Inc., Gilles Labbé, President and Chief Executive Officer, (450) 679-3330; Héroux-Devtek Inc., Réal Bélanger, Executive Vice-President and Chief Financial Officer, (450) 679-3330; MaisonBrison, Martin Goulet, CFA, (514) 731-0000