HRX Heroux Devtek Inc

Q1 Highlights

• Sales of $128.3 million, compared to $143.4 million last year
• Operating income of $1.4 million, compared to $10.4 million last year
• Adjusted operating income¹ of $7.4 million, compared to $11.0 million last year
• Adjusted EBITDA¹ of 18.4 million, or 14.3% of sales, compared to $21.5 million or 15.0% last year
• Cash flows related to operating activities of $15.5 million, compared to $3.7 million last year
• Funded backlog of $772 million, with two thirds from firm defence orders

LONGUEUIL, QC, Aug. 7, 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 first quarter ended June 30, 2020. Unless otherwise indicated, all amounts are in Canadian dollars.

"Our first quarter results were encouraging given this turbulent environment. We remained profitable and generated free cash flow that are helping us maintain a healthy balance sheet. The restructuring measures we announced in May are also proceeding according to plan," said Martin Brassard, President and CEO of Héroux- Devtek.

"We now turn to the quarters ahead with prudent optimism, as our $772 million backlog, two thirds of which is comprised of defence orders, will allow us to weather the storm. We are also working on new business opportunities in order to secure work for the coming years. I want to thank our teams around the world who remain committed to delivering best-in-class products," added Mr. Brassard.

FIRST QUARTER RESULTS

Consolidated sales decreased 10.5% to $128.3 million, from $143.4 million last year. Civil sales decreased 25.9% from $67.4 million to $49.9 million, while defence sales were up 3.2%, from $76.0 million last year to $78.4 million in the first quarter. The decrease in civil sales is mainly related to lower demand in the large commercial sector, where twin-aisle deliveries decreased 44% due to the ongoing pandemic.

Gross profit for the quarter decreased from $24.2 million to $20.5 million last year, mainly as a result of the reduction in sales caused by COVID-19. The pandemic also caused additional costs and production inefficiencies which were partly offset by government relief measures. As a percentage of sales, gross profit decreased from 16.9% to 16.0% mainly as a result of lower sales volume without a corresponding decrease in fixed costs such as depreciation, which represented a year-over-year impact of 0.8% of sales.

Operating income decreased to $1.4 million or 1.1% of sales, from $10.4 million or 7.2% of sales due mainly to restructuring charges recorded in Q1 and lower sales volume. Foreign exchange also had an unfavourable net impact of $0.7 million or 0.5% of sales.

Adjusted EBITDA, which excludes non-recurring items, stood at $18.4 million, or 14.3% of sales, compared with $21.5 million, or 15.0% of sales, a year ago.

Earnings per share decreased from $0.18 last year to a loss of $0.04 in the first quarter this year, due to the factors presented above. Adjusted EPS reached $0.09 in the first quarter, down from $0.19 last year.

FINANCIAL POSITION

Cash flows related to operating activities reached $15.5 million in the first quarter, up from $3.7 million last year. The increase results from stronger collection of receivables this year versus last, partially offset by lower adjusted EBITDA and cash charges related to restructuring activities.

As at June 30, 2020, net debt stood at $233.2 million, down from $246.9 million as at March 31, 2020. The decrease in net debt during the three-month period is mainly related to cash flow generation in Q1.

Early into the first 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, unused as at June 30, 2020, were made as a precaution for potential liquidity requirements related to the COVID-19 pandemic.

As at June 30, 2020, the Corporation had $204.6 million of available liquidity.

RESTRUCTURING UPDATE

On May 5, 2020, Héroux-Devtek announced restructuring initiatives in light of the ongoing COVID-19 pandemic. These initiatives will affect 10% of the workforce, or approximately 225 employees, and will include the closure of the business unit formerly known as Alta Précision.

To date, $6.0 million of related costs have been recorded as restructuring charges, mainly comprised of employee-related charges and costs to dismantle and relocate machinery. 60% of staff reductions have been completed, with most of the remaining related to Alta Precision. These employees will remain until the closure of the facility near the end of the fiscal year in order to complete an orderly transition of work packages.

CONFERENCE CALL

Héroux-Devtek Inc. will hold a conference call to discuss these results on Friday, August 7, 2020 at 11:30 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/HRX_Q1_2021. 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 6556316 on your phone. This recording will be available from Friday, August 7, 2020 as of 2:30 PM Eastern Time until 11:59 PM Eastern Time on Friday, August 14, 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 first quarter ended June 30, 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

Adjusted 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-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.