Results reflect sale of substantially all of Aerostructure and Industrial Products operations on August 31, 2012

• Sales from continuing operations of $57.7 million, up 4.0% from $55.5 million last year
• Net income from continuing operations of $2.7 million, or $0.09 per diluted share, versus $2.5 million or $0.08 per diluted share last year
• Net income from discontinued operations of $110.0 million
• Cash position of $211.1 million, net of Credit Facility and amounts payable related to the sale transaction
• Special cash distribution of $5.00 per share
• Funded backlog of $378 million
  
  

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.

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.

SOURCE: HEROUX-DEVTEK INC.