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Results reflect sale of substantially all of Aerostructure and Industrial Products operations on August 31, 2012
LONGUEUIL, QC, Nov. 9, 2012 /CNW Telbec/ - Héroux-Devtek Inc. (TSX: HRX), ("Héroux-Devtek" or the "Corporation"), a leading Canadian manufacturer of aerospace products, today reported its results for the second quarter of fiscal 2013 ended September 30, 2012. Unless otherwise indicated, all amounts are in Canadian dollars.
These results reflect the sale of substantially all of the Corporation's Aerostructure and Industrial Products operations (the "sale transaction") on August 31, 2012 to Precision Castparts Corp. (NYSE: PCP) for proceeds of $232.0 million, net of related taxes and expenses. Assets sold by Héroux-Devtek included the Aerostructure manufacturing sites in Dorval (Quebec), Querétaro (Mexico) and Arlington (Texas), as well as the Cincinnati (Ohio) Industrial Products manufacturing sites. Héroux-Devtek retained all of its Landing Gear product line and the Magtron operations. As a result of the sale transaction, the Corporation recorded a gain on the disposal of discontinued operations of $107.1 million, net of related taxes, in the quarter ended September 30, 2012.
"The second quarter of fiscal 2013 was transformational for Héroux-Devtek. We made the strategic decision to focus on our core landing gear market, in which we are the third largest player in the world and where we have successfully established our reputation as an integrated supplier of high-quality, value-added products and services. Our landing gear operations had a solid quarter driven by the strength of the commercial aerospace market, mainly the large commercial aircraft and business jet segments, in which we increasingly benefit from greater production on leading programs," said Gilles Labbé, President and CEO of Héroux-Devtek.
FINANCIAL HIGHLIGHTS | Quarters ended September 30, | Six months ended September 30, | ||||
(in thousands of dollars, except per share data) | 2012 | 2011 | 2012 | 2011 | ||
Sales from continuing operations | 57,684 | 55,464 | 121,464 | 116,756 | ||
EBITDA from continuing operations | 6,972 | 7,300 | 15,225 | 15,796 | ||
Operating income from continuing operations | 3,868 | 3,919 | 8,881 | 9,000 | ||
Net income from continuing operations | 2,724 | 2,481 | 5,749 | 5,768 | ||
Per share - diluted ($) | 0.09 | 0.08 | 0.19 | 0.19 | ||
Net income from discontinued operations | 110,000 | 2,331 | 113,258 | 4,841 | ||
Net income | 112,724 | 4,812 | 119,007 | 10,609 | ||
Per share - diluted ($) | 3.64 | 0.16 | 3.86 | 0.35 | ||
Weighted-average shares outstanding (diluted, in '000s) | 30,985 | 30,714 | 30,824 | 30,664 |
SECOND QUARTER RESULTS
Consolidated sales from continuing operations for the second quarter
were $57.7 million, up 4.0% from $55.5 million for the same period last
year. Sales to the commercial aerospace market rose 15.5% to $24.9
million driven by higher production rates for certain large commercial
aircraft and business jet programs, as well as increased aftermarket
sales for the Learjet 45 business jet and CL-415 amphibious aircraft
programs. Sales to the military aerospace market decreased 3.3% to
$32.8 million essentially due to lower electronic enclosure and cabinet
sales at Magtron.
Fluctuations in the value of the Canadian dollar versus the US currency decreased second quarter sales by $0.3 million, or 0.5%, compared with last year, and reduced gross profit by $0.3 million, or 0.4% 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.
Earnings before interest, taxes, depreciation and amortization ("EBITDA") from continuing operations were $7.0 million, or 12.1% of sales, compared with $7.3 million, or 13.2% of sales, last year. This variation mainly reflects certain non-recurring costs associated with the development of a new landing gear system program and lower production at Magtron that resulted in the under-absorption of manufacturing overhead costs. Operating income from continuing operations stood at $3.9 million, or 6.7% of sales, versus $3.9 million, or 7.1% of sales, last year.
Net income from continuing operations amounted to $2.7 million, or $0.09 per diluted share, up 9.8% from $2.5 million, or $0.08 per diluted share, a year ago. Income from discontinued operations of $110.0 million reflects the aforementioned net gain and net income from the businesses sold up to the completion of the sale transaction. As a result, net income stood at $112.7 million, or $3.64 per diluted share.
SOLID BALANCE SHEET
Reflecting proceeds from the sale transaction, Héroux-Devtek had cash
and cash equivalents of $291.2 million, as at September 30, 2012. The
Corporation used a portion of proceeds to repay certain debt totaling
$54.0 million. As a result, total debt was $60.5 million as at
September 30, 2012, including $21.6 million drawn against the Credit
Facility. Considering the Credit Facility used, as well as income tax
and expenses payable in regards to the sale transaction,
Héroux-Devtek's net cash position stood at $211.1 million as at
September 30, 2012.
SIX MONTHS RESULTS
For the first six months of fiscal 2013, consolidated sales from
continuing operations amounted to $121.5 million, up 4.0% from $116.8
million a year earlier. Currency variations had no significant impact
on sales in the first six months of fiscal 2013. EBITDA from continuing operations totalled $15.2 million, or 12.5% of
sales, versus $15.8 million, or 13.5% of sales, a year earlier, due to
a $0.8 million increase in stock-based compensation expenses in the
first six months of fiscal 2013. Operating income from continuing
operations stood at $8.9 million, or 7.3% of sales, compared with $9.0
million, or 7.7% of sales, last year. Net income from continuing operations totalled $5.7 million, or $0.19 per diluted
share, versus $5.8 million, or $0.19 per diluted share, in the prior
year. Reflecting the net gain and net income from discontinued
operations, net income for the first half of fiscal 2013 stood at
$119.0 million, or $3.86 per diluted share.
SPECIAL CASH DISTRIBUTION OF $5.00 PER SHARE
On November 8, 2012, the Board of Directors of Héroux-Devtek approved a
special cash distribution to shareholders of $5.00 per common share, or
$160.0 million based on up to 32 million common shares, to be paid on
December 19, 2012 to shareholders of record on November 20, 2012.
Subject to shareholders' approval, the distribution would consist of a
partial reduction and repayment of the Corporation's issued capital of
$2.70 per share ($86.4 million), and of a dividend of $2.30 per share
($73.6 million). If the capital reduction is not approved by the
shareholders, the special distribution will consist of a special
dividend of $5.00 per share.
The Board determined that the special distribution represents an appropriate use of Héroux-Devtek's financial resources following the completion of the sale transaction, as it provides shareholders with an adequate return on their investment, while allowing the Corporation to maintain a solid financial position. The Board decided to retain financial resources to ensure adequate funding of expected capital and other investments and potential opportunities for future growth, including strategic acquisitions. On a pro forma basis, Héroux-Devtek would have cash and cash equivalents of $131.2 million, after giving consideration to the special distribution, and a net cash position of $51.1 million. The Board will periodically review Héroux-Devtek's cash position and capital requirements and evaluate available alternatives to enhance shareholder value.
A Special Meeting of Shareholders will be held on December 18, 2012 to approve the proposed capital reduction and repayment. Full details of the special distribution and proposed capital reduction and repayment, including a summary description of the principal Canadian federal income tax considerations applicable to shareholders in connection with the special distribution, will be included in the management proxy circular that will be mailed to shareholders on or about November 26, 2012.
OUTLOOK
Conditions remain favourable in the commercial aerospace market. Large
commercial aircraft manufacturers are proceeding with production rate
increases on certain leading programs and are forecasting higher
deliveries for calendar 2012. New orders remain solid and backlogs
represent approximately seven years of production at current rates. The
business jet market continues to see positive signs and shipments
should increase in calendar 2012, followed by sustained growth in
subsequent years driven by a better economy and the introduction of
several new aircraft, including three models for which Héroux-Devtek is
currently developing the landing gear. The military aerospace market
remains uncertain, as governments address their deficits, but the
Corporation's diversified military portfolio, balanced between new
component manufacturing and aftermarket products and services, should
lessen its exposure to defense budget cutbacks.
As at September 30, 2012, Héroux-Devtek's funded (firm orders) backlog stood at $378 million, versus $385 million three months earlier, and remains well diversified.
"Looking ahead, Héroux-Devtek will focus on leveraging its strengths and know-how in the landing gear industry. In so doing, we will further enhance our status as a world-class organization in our major markets. The Corporation's balance sheet will remain healthy after the special distribution, enabling us to consider other strategic acquisitions and investments that would enhance our product portfolio and provide new technology. For the current fiscal year ending March 31, 2013, we continue to anticipate an internal sales growth from continuing operations of approximately 5%, assuming the Canadian dollar remains at parity versus the U.S. currency," concluded Mr. Labbé.
CONFERENCE CALL
Héroux-Devtek Inc. will hold a conference call to discuss these results
on Friday, November 9, 2012 at 10:00 AM Eastern Time. Interested parties can join the call by dialling (514) 807-9895
(Montreal or overseas) or 1-888-231-8191 (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 1-855-859-2056 and entering the passcode 36922346# on your phone. This tape recording will be available on Friday, November 9, 2012 as of 12:00 PM Eastern Time until 11:59 PM Eastern Time on Friday, November 16, 2012.
PROFILE
Héroux-Devtek Inc. (TSX: HRX) is a Canadian company specializing in the
design, development, manufacture and repair and overhaul of landing
gear systems and components for the Aerospace market. The Corporation
is the third largest landing gear company is the world, 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. 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, Laval and St-Hubert); Kitchener and Toronto, Ontario;
as well as Springfield and Cleveland, Ohio.
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") is a financial measure not prescribed by International
Financial Reporting Standards ("IFRS") and is not likely to be
comparable to similar measures presented by other issuers. Management
considers this 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. |
SOURCE: HEROUX-DEVTEK INC.
From:
Héroux-Devtek Inc.
Gilles Labbé
President and Chief Executive Officer
Tel.: (450) 679-3330
Contact:
Héroux-Devtek Inc.
Réal Bélanger
Executive Vice-President and Chief Financial Officer
Tel.: (450) 679-3330
MaisonBrison
Martin Goulet, CFA
Tel.: (514) 731-0000