Héroux-Devtek Reports Second Quarter Fiscal 2021 Financial Results

Q2 Financial Highlights

• Sales of$137.1 million, compared to$145.5 millionlast year
• Defence sector sales increased by 11.6%, now representing 66% of consolidated sales
• Operating income of$7.1 million, compared to$10.5 millionlast year
• Adjusted EBITDA1of$21.2 million, or 15.5% of sales, compared to$21.5 million, or 14.8% last year
• Cash flows related to operating activities increased to$15.4 million, compared to$12.5 millionlast year

Q2 Operational Highlights

• Delivery of the first main landing gears to Boeing for the F/A-18 Super Hornet aircraft
• Ramp-up of deliveries for new defence programs, including Boeing F-18, MQ-25 and SAAB Gripen E
• In October, announcement by CESA of contract with Boeing for the manufacture of actuation components

LONGUEUIL, QC,Nov. 13, 2020/CNW Telbec/ – Héroux-Devtek Inc. (TSX: HRX) (“Héroux-Devtek” or the “Corporation”), a leading international manufacturer of aerospace products and the world’s third-largest landing gear manufacturer, today reported its financial results for the second quarter endedSeptember 30, 2020. Unless otherwise indicated, all amounts are in Canadian dollars.”The strategy we adopted immediately at the onset of the pandemic to align our cost structure to new civil production rates while continuing to seize business development opportunities across both our sectors is yielding the targeted results, and I would like to thank our employees for all of their efforts under these challenging circumstances. I am also encouraged by the manufacturing agreement between CESA and Boeing announced in October, which is indicative of the cross-selling potential of our activities,” saidMartin Brassard, President and CEO of Héroux-Devtek.”I am pleased of the profitability and cash flow levels generated this quarter, which are a demonstration of our team’s disciplined approach to managing costs and maintaining a healthy balance sheet. Today, Héroux-Devtek derives two thirds of its revenues from the defence market, in which we enjoy a diversified profile – catering to every major aircraft category. We will continue to rigourously apply the same strategies moving forward in order to ensure robust performance until the civil market strengthens.” added Mr. Brassard.

SECOND QUARTER RESULTSConsolidated sales decreased 5.8% to$137.1 million, from$145.5 millionlast year. Defence sales were up 11.6%, from$80.6 millionlast year to$90.0 millionin the second quarter, while civil sales decreased 27.5%, from$64.9 millionto$47.1 million. This decrease was mainly related to lower OEM demand in the large commercial sector, where twin-aisle deliveries decreased 44% due to the ongoing pandemic.Gross profit as a percentage of sales increased from 15.3% last year to 15.4%, as a better sales mix offset the impact of lower volume without a corresponding decrease in fixed costs such as depreciation, which represented a negative year-over-year impact of 0.5% of sales.Operating income decreased to$7.1 million, or 5.2% of sales, from$10.5 million, or 7.2% of sales last year, reflecting restructuring charges totaling$2.7 millionthis quarter, with none during the same period last year. Adjusted EBITDA, which excludes non-recurring items, stood at$21.2 million, or 15.5% of sales, compared with$21.5 million, or 14.8% of sales, a year ago.Earnings per share decreased from$0.18last year to$0.11this year due to the factors stated above. Adjusted EPS remained relatively stable at$0.17compared to$0.18last year.The Corporation’s funded backlog was relatively stable at$764 millionas atSeptember 30, 2020, compared to$772 millionas atJune 30, 2020, as an increase in defence orders offset lower demand for large commercial programs.SIX-MONTH RESULTSConsolidated sales decreased 8.1% to$265.4 million, from$288.9 millionfor the corresponding period last year. Defence sales were up 7.5%, from$156.6 millionlast year to$168.4 millionin the first six months of the year, while civil sales decreased 26.7%, from$132.4 millionto$97.0 million.Gross profit as a percentage of sales decreased to 15.7% from 16.1% last year, mainly as a result of lower volume without a corresponding decrease in fixed costs such as depreciation, which represented a year-over-year impact of 0.7% of sales. This factor was partly offset by a better sales mix.Operating income decreased to$8.5 million, or 3.2% of sales, from$20.9 million, or 7.2% of sales last year, reflecting restructuring charges totaling$8.7 million, compared to$0.6 millionlast year. Adjusted EBITDA, which excludes non-recurring items, stood at$39.6 million, or 14.9% of sales, compared with$43.0 million, or 14.9% of sales last year.EPS decreased from$0.36last year to$0.07, reflecting the factors described above, while adjusted EPS decreased to$0.26from the$0.37recorded in the same period last year.FINANCIAL POSITIONAs atSeptember 30, 2020, net debt stood at$218.8 million, down from$246.9 millionas atMarch 31, 2020. In the second quarter, net debt decreased$13.7 million, and decreased by$28.1 millionover the six-month period – mainly as a result of cash flow generation over the three- and six-month periods. The net debt to adjusted EBITDA ratio stood at 2.4x versus 2.6x six months earlier.As at September 30, 2020, the Corporation had a strong financial position with $228.7 million of available liquidity, an increase of$35.9 millioncompared to March 31, 2020.RESTRUCTURING UPDATEThe restructuring initiatives announced inMay 2020are progressing as planned, with approximately 70% of expected workforce reductions completed to date. Related restructuring charges of$8.7 millionhave been incurred to date this fiscal year. In October, management made the decision to also close Héroux-Devtek’s Wichita facility as a result of decreasing business volume. The business unit’s repair and overhaul activities will be consolidated in other Héroux-Devtek facilities, while manufacturing activities will be terminated. This decision will affect 37 additional employees, and the net cost of the closure will fit within the initially estimated$12.0 millionof restructuring charges.CONFERENCE CALLHéroux-Devtek Inc. will hold a conference call to discuss these results onFriday, November 13, 2020at8:30 AM Eastern Time. Interested parties can join the call by dialing 1-888-231-8191 (North America) or 1-647-427-7450 (overseas). The conference call can also be accessed via live webcast on Héroux-Devtek’s website,www.herouxdevtek.com/en/news-events/eventsor athttp://bit.ly/HRX_Q2-2021.An accompanying presentation is also available on Héroux-Devtek’s website athttps://www.herouxdevtek.com/en/investors/financial-documents.If you are unable to call in at this time, you may access a recording of the meeting by calling 1-855-859-2056 and entering the passcode 6556316 on your phone. This recording will be available fromFriday, November 13, 2020as of11:30 AM Eastern Time until 11:59 PM Eastern Time on Friday, November 20, 2020.FORWARD-LOOKING STATEMENTSExcept 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 include, but are not limited to: the effect of the ongoing COVID-19 pandemic on Héroux-Devtek’s operations, customers, supply chain, the aerospace industry and the economy in general; the impact of other worldwide general economic conditions; industry conditions including changes in laws and regulations; increased competition; the lack of availability of qualified personnel or management; availability of commodities and fluctuations in commodity prices; financial and operational performance of suppliers and customers; foreign exchange or interest rate fluctuations; and the impact of accounting policies issued by international standard setters. Readers are cautioned that the foregoing list of factors that may affect future growth, results and performance is not exhaustive and undue reliance should not be placed on forward-looking statements.As a result, readers are advised that actual results may differ from expected results. Please see theImpact of COVID-19section underOverviewand theRisk Managementsection underAdditional Information, as well as theGuidancesection in the Corporation’s MD&A for the second quarter endedSeptember 30, 2020for 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.NON-IFRS MEASURESAdjusted operating income, adjusted EBITDA, 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.ABOUT HÉROUX-DEVTEKHéroux-Devtek Inc. (TSX: HRX) is an international company specializing in the design, development, manufacture, repair and overhaul of aircraft landing gear, hydraulic and electromechanical actuators, custom ball screws and fracture-critical components for the Aerospace market. The Corporation is the third-largest landing gear company worldwide, supplying both the defence and commercial sectors. Approximately 90% of the Corporation’s sales are outside ofCanada, including about 53% inthe United States. The Corporation’s head office is located inLongueuil, Québec with facilities inCanada,the United States, theUnited KingdomandSpain.SOURCE Héroux-Devtek Inc.View original content:http://www.newswire.ca/en/releases/archive/November2020/13/c1446.html