Q4 Highlights
- Sales of $166.8 million, up 5.6%
from $157.9 million last year
- Operating loss of $64.4 million
resulting from non-cash impairment charges of $85.8 million
- Adjusted operating income1 of $17.6 million, up from $16.2 million last year
- Adjusted EBITDA1 of 28.6 million, or 17.2% of sales,
up from $25.9 million or 16.4% last
year
- Solid cash flows related to operating activities of
$26.7 million
- Funded backlog of $810 million,
two thirds of which is comprised of defence orders
- All facilities remain open, and Héroux-Devtek has available
liquidity of $193 million
LONGUEUIL, QC, May 21, 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 fourth quarter and fiscal year ended
March 31, 2020. Unless otherwise
indicated, all amounts are in Canadian dollars.
"I am pleased with our strong operational and financial
performance this year and I want to thank our teams around the
world for these great results. Today, our industry is facing a high
degree of uncertainty as to the length and severity of the ongoing
pandemic and its impact on the commercial aerospace industry. Given
these unprecedented circumstances, we took swift action at various
levels to ensure our ability to carry on safely with our production
activities across all Héroux-Devtek sites. We made adjustments to
our capacity to meet the new production rates in the commercial
market and secured enhanced financial flexibility to support our
activities for the long term," said Martin
Brassard, President and CEO of Héroux-Devtek.
"We believe we are in good position to weather the storm and
eventually emerge as a well-positioned organization. First, we can
count on a strong backlog of $810
million, two thirds of which is comprised of orders for the
defence sector. Second, Héroux-Devtek is in a solid financial
position, with $193 million of
available liquidity at yearend and no significant capital
repayments due on our debt until the end of 2024. Last but not
least, we can count on a highly dedicated team of employees in
Canada, Europe and the USA, who have already demonstrated their
impressive resilience under these challenging circumstances,"
concluded Mr. Brassard.
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1
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These are
non-IFRS measures. Please refer to the "Non-IFRS Measures" section
at the end of this press release.
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Three months ended
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Twelve
months ended
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FINANCIAL HIGHLIGHTS
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March 31,
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March 31,
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(in thousands, except
per share data)
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2020
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2019
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2020
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2019
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Sales
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$
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166,800
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$
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157,914
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$
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612,996
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$
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483,877
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Operating income
(loss)
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(64,426)
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15,190
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(30,070)
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37,240
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Adjusted operating
income1
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17,577
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16,208
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52,548
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41,563
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Adjusted
EBITDA1
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28,609
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25,657
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96,191
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74,213
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Net income
(loss)
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(72,113)
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11,958
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(50,658)
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26,194
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Adjusted net
income1
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13,695
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12,794
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35,666
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30,352
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Cash flows related to
operating activities
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26,710
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37,181
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52,573
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69,969
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Free cash
flow1
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16,731
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32,545
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30,330
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58,642
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in dollars per
share
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(Loss) Earnings per
share
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$
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(1.98)
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$
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0.34
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$
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(1.38)
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$
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0.73
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Adjusted
EPS1
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0.38
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0.36
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1.00
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0.84
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March
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March 31,
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As
at
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31,
2020
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2019
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Funded
backlog2
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$
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810,000
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$
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624,000
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1
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This is a non-IFRS
measure. Please refer to the "Non-IFRS Measures" section at the end
of this press release.
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2
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Represents firm
orders.
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FOURTH QUARTER RESULTS
Consolidated sales grew 5.6% to $166.8
million, up from $157.9
million last year, including a 0.4% organic growth and a
contribution of $8.1 million by the
Corporation's recent acquisitions. Commercial sales decreased 7.8%
from $78.0 million to $72.0 million, while defence sales were up 18.7%,
from $79.9 million to $94.8 million. The net impact of foreign exchange
fluctuations was negligible for the quarter ended March
31, 2020.
The decrease in gross profit from 18.8% to 17.9% for the quarter
compared to the same period last fiscal year was mainly driven by
inefficiencies and delayed deliveries brought on by the impact of
COVID-19.
We recorded an operating loss of $64.4
million, mainly due to a $79.7
million non-cash goodwill impairment charge accounted for in
the fourth quarter resulting from the significant reduction in
expected demand for commercial aerospace products caused by the
ongoing COVID-19 pandemic. Excluding non-recurring items, operating
income would have been $17.6 million,
representing 10.5% percent of sales, an increase of 0.2% when
compared to the fourth quarter of Fiscal 2019.
Adjusted EBITDA, which excludes non-recurring items, stood at
$28.6 million, or 17.2% of sales,
compared with $25.9 million, or 16.4%
of sales, a year ago.
Results per share decreased from earnings of $0.34 last year to a loss of $1.98, mainly due to the non-cash impairment
charges of $85.8 million recorded in
Q4. Adjusted EPS grew 5.6% in the fourth quarter, from $0.36 last year to $0.38.
YEAR-END RESULTS
Consolidated sales grew 26.7% to $613.0
million, up from $483.9
million for the corresponding period last year. Commercial
sales grew 20.1% in Fiscal 2020, from $236.3
million to $283.7 million,
while defence sales were up 33.0% in Fiscal 2020, from $247.6 million to $329.3
million, driven mainly by acquisitions and a 12.2% organic
growth.
Gross profit as a percentage of sales decreased from 17.2% to
16.8% over the twelve-month period due to inefficiencies and
delayed deliveries resulting from COVID-19, as well as by higher
manufacturing costs at our Longueuil facility in the first six months of
the year. The net impact of foreign exchange fluctuations was
negligible for the twelve-month period ended March 31, 2020.
In Fiscal 2020, the Company recorded an operating loss of
$30.1 million, due to a $79.7 million non-cash goodwill impairment charge
recorded in Q4 as a result of the significant reduction in expected
demand for commercial aerospace products driven by the ongoing
COVID-19 pandemic. Excluding non-recurring items, the operating
income as a percentage of sales remained stable at 8.6% compared to
the prior year.
Adjusted EBITDA, which excludes non-recurring items, stood at
$96.2 million, or 15.7% of sales,
compared with $74.2 million, or 15.3%
of sales last year.
In Fiscal 2020, results per share decreased from earnings of
$0.73 last year to a loss of
$1.38 due to the same factors as for
the operating income, while adjusted EPS grew to $1.00, up 19.0% from the $0.84 recorded last year.
GUIDANCE UPDATE
On April 7, 2020, management
announced its decision to withdraw Fiscal 2022 sales guidance given
the uncertainty related to the duration and extent of the impact of
the ongoing COVID-19 pandemic on the aerospace industry and on the
Corporation's activities.
Due to the unprecedented uncertainty brought by the pandemic,
management is not providing any financial guidance for Fiscal
2021.
FINANCIAL POSITION
Cash flows related to operating activities reached $26.7 million in the fourth quarter, down from
$36.9 million last year. For the
twelve-month period, cash flows related to operating activities
amounted to $52.6 million, down from
$70.0 million for the prior year.
Both decreases result from investments in inventory related to
organic growth in defence programs, as well as from the impact of
foreign exchange fluctuations.
As at March 31, 2020, net debt
stood at $246.9 million, up from
$243.0 million as at April 1, 20191. The increase in
long-term debt during the twelve-month period is mainly related to
the Alta acquisition partially offset by the fiscal year's cash
flow generation.
In April 2020, subsequently to the
end of the fourth quarter, the Corporation drew $60 million on its credit facilities, comprised
of $45 million on the Revolving
Facility and $15 million on the Term
Loan Facility. These drawings were made as a precaution for
potential liquidity requirements related to the
COVID-19 pandemic.
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1
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Pro forma net debt as
at April 1, 2019 reflects the impact of the adoption of IFRS 16 –
Leases. See the Corporation's financial statements for further
details.
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SUBSEQUENT EVENTS
Subsequent to the end of the fourth quarter, on May 5, 2020, the Corporation announced a
restructuring initiative leading to a 10% reduction in its
workforce, or approximately 225 employees, and resulted in the
closure of the business unit formerly known as Alta Precision.
These initiatives, which will be completed over the remainder of
the fiscal year, will result in a non-recurring charge totalling up
to $12.0 million before taxes
accounted for in Fiscal 2021.
CONFERENCE CALL
Héroux-Devtek Inc. will hold a conference call to discuss these
results on Thursday, May 21, 2020 at
8:30 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/events or at
https://bit.ly/HRXQ4F2020. An accompanying presentation is also
available on Héroux-Devtek's website at
https://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 2155803 on your phone. This recording will be available
from Thursday, May 21, 2020 as of
11:30 AM Eastern Time until 11:59 PM Eastern
Time on Thursday, May 28, 2020.
FORWARD-LOOKING STATEMENTS
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 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 the Impact of COVID-19
section under Overview and the Risk Management
section under Additional Information, as well as the
Guidance section in the Corporation's MD&A for the
fourth quarter ended March 31, 2020
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.
NON-IFRS MEASURES
Earnings before interest, taxes, depreciation and amortization
("EBITDA"), 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-DEVTEK
Héroux-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
of Canada, including about 53% in
the United States. The
Corporation's head office is located in Longueuil, Québec with facilities in
Canada, the United States, the United Kingdom and Spain.
SOURCE Héroux-Devtek Inc.