CONSOLIDATED FINANCIAL STATEMENTS / MANAGEMENT'S DISCUSSION ANDANALYSIS
FOURTHQUARTER ENDED MARCH 31,2024
CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal years ended March 31, 2024 and 2023
TABLE OF CONTENTS | ||
Management's report | ||
Independent Auditor's report | ||
Consolidated financial statements | ||
Notes to the consolidated financial statements | 13 | |
Note 1 | Nature of activities and corporate information | 13 |
Note 2 | Basis of preparation | 13 |
Note 3 | Material accounting policies | 14 |
Note 4 | Significant accounting estimates and assumptions | 21 |
Note 5 | Sales | 22 |
Note 6 | Government assistance | 23 |
Note 7 | Cost of sales, selling and administrative expenses | 23 |
Note 8 | Gains on extinguishment of a liability and business divestiture | 23 |
Note 9 | Net financial expenses | 24 |
Note 10 | Earnings per share | 24 |
Note 11 | Inventories | 24 |
Note 12 | Derivative financial instruments | 25 |
Note 13 | Other assets | 25 |
Note 14 | Property, plant and equipment | 26 |
Note 15 | Finite-lifeintangible assets | 28 |
Note 16 | Goodwill | 29 |
Note 17 | Accounts payable and accrued liabilities | 29 |
Note 18 | Provisions | 30 |
Note 19 | Long-termdebt | 30 |
Note 20 | Other liabilities | 31 |
Note 21 | Issued capital | 31 |
Note 22 | Accumulated other comprehensive income | 33 |
Note 23 | Income taxes | 34 |
Note 24 | Pension and other retirement benefit plans | 35 |
Note 25 | Commitments and contingencies | 38 |
Note 26 | Net change in non-cashitems | 38 |
Note 27 | Geographic information | 39 |
Note 28 | Executive compensation | 39 |
Note 29 | Financial instruments | 39 |
Note 30 | Financial risk management | 40 |
Note 31 | Capital risk management | 42 |
HÉROUX-DEVTEKINC. - Fiscal 2024 Consolidated Financial Statements - 3
MANAGEMENT'S REPORT
The accompanying consolidated financial statements and Management's Discussion and Analysis ("MD&A") of Héroux-Devtek Inc. (the "Corporation") are the responsibility of management and have been reviewed and approved by its Board of Directors. The accompanying consolidated financial statements have been prepared by management in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB"). The MD&A has been prepared in accordance with the requirements of Canadian securities regulators. The consolidated financial statements and MD&A include items that are based on best estimates and judgments of the expected effects of current events and transactions. Management has determined such items on a reasonable basis in order to ensure that the consolidated financial statements and MD&A are presented fairly in all material respects. All figures presented in these consolidated financial statements are expressed in thousands of Canadian dollars unless otherwise indicated.
Héroux-Devtek Inc.'s Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO") have designed disclosure controls and procedures ("DC&P"), or have caused them to be designed under their supervision, to provide reasonable assurance that material information related to the Corporation has been made known to them and has been properly disclosed or submitted by it under applicable securities legislation has been recorded, processed, summarized and reported within the time periods specified in securities legislation. The Corporation's CEO and CFO have also designed internal controls over financial reporting ("ICFR"), or caused them to be designed under their supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes, in accordance with IFRS.
Héroux-Devtek Inc.'s CEO and CFO have also evaluated the effectiveness of such ICFR and DC&P as at the end of fiscal year 2024, or caused them to be evaluated under their supervision. As at March 31, 2024, management has concluded that the ICFR and DC&P were effective based on this evaluation, and had no material weaknesses. However, due to their inherent limitation, certain misstatements may not be prevented or detected by ICFR.
Héroux-Devtek Inc.'s CEO and CFO have provided a certification related to Héroux-Devtek Inc.'s annual disclosure documents to the Canadian Securities Administrators in accordance with Regulation 52-109, including the consolidated financial statements and MD&A.
The Board of Directors is responsible for ensuring that management fulfills its responsibilities for financial reporting and is ultimately responsible for reviewing and approving the consolidated financial statements and MD&A. The Board of Directors carries out this responsibility principally through its Audit Committee. The Audit Committee is appointed by the Board of Directors and consists entirely of independent and financially literate directors.
The Audit Committee meets periodically with management, as well as with the external auditors, to review the consolidated financial statements, the external auditors' report, MD&A, auditing matters and financial reporting issues, to discuss ICFR and DC&P, and to satisfy itself that each party is properly discharging its responsibilities. In addition, the Audit Committee has the duty to review the appropriateness of the accounting policies and significant estimates and judgments underlying the consolidated financial statements as presented by management, and to review and make recommendations to the Board of Directors with respect to the fees of the external auditors. The Audit Committee reports its findings to the Board of Directors for its consideration when it approves the consolidated financial statements and MD&A for issuance to Shareholders.
The consolidated financial statements have been audited by Ernst & Young LLP, the external auditors, in accordance with Canadian generally accepted auditing standards on behalf of the Shareholders. The external auditors have full and free access to the Audit Committee to discuss their audit and related matters.
Martin Brassard | Stéphane Arsenault, CPA |
President and Chief Executive Officer | Vice-President and Chief Financial Officer |
May 21, 2024 |
4 - HÉROUX-DEVTEKINC. - Fiscal 2024 Consolidated Financial Statements
INDEPENDENT AUDITOR'S REPORT
TO THE SHAREHOLDERS OF HÉROUX-DEVTEK INC.
Opinion
We have audited the consolidated financial statements of Héroux-Devtek Inc. and its subsidiaries (the Group), which comprise the consolidated balance sheets as at March 31, 2024 and 2023, and the consolidated statements of income, consolidated statements of comprehensive income, consolidated statements of changes in shareholders' equity and consolidated statements of cash flows for the years then ended, and notes to the consolidated financial statements, including material accounting policy information.
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as at March 31, 2024 and 2023, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with International Financial Reporting Standards (IFRS).
Basis for opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the consolidated financial statements section of our report. We are independent of the Group in accordance with the ethical requirements that are relevant to our audit of the consolidated financial statements in Canada, and we have fulfilled our ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. For the matter below, our description of how our audit addresses the matter is provided in that context.
We have fulfilled the responsibilities described in the Auditor's responsibilities for the audit of the consolidated financial statements section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the consolidated financial statements. The results of our audit procedures, including the procedures performed to address the matter below, provide the basis for our audit opinion on the accompanying consolidated financial statements.
Impairment of goodwill and other non-financial assets
As at March 31, 2024, the Group had goodwill amounting to $113.7 million on the consolidated balance sheet. As disclosed in Note 3 - Material Accounting Policies and Note 16 - Goodwill, for each cash generating unit ("CGU"), to which goodwill has been allocated, management assesses at least annually, or at any time if an indicator of impairment exists, whether there has been an impairment loss in the carrying value of the CGU. Management determined the recoverable amount of each CGU under fair value less costs of disposal approach using a market approach, which requires significant estimation on the part of management.
Recoverable amounts are based on management's estimates of key variables including Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA", a non-IFRS measure) forecasts and multiples of recent sector notable transactions. This combined with the significance and sensitivity of other assumptions led us to conclude that the goodwill impairment test for the Group's CGUs is a key audit matter.
How our audit addressed the key audit matter
Our audit procedures included, amongst others, reviewing management's assumptions relating to EBITDA including overall sales projections and sales related to certain significant programs in comparison to publicly available data including analysts' reports covering aerospace and airlines and existing customers' contracts.
With the assistance of our internal valuation specialists, we evaluated the Group's valuation methodology and mathematical accuracy of the calculation. We assessed the reasonableness of the selection and application of the valuation multiples in comparison to externally available information.
We assessed the historical accuracy of management's estimates of EBITDA margin and growth rates by comparing management's past projections to actual and historical performance. We performed sensitivity analyses on the key assumptions such as EBITDA projections, and market multiples to assess their effects on the determination of the recoverable amount.
We also assessed the adequacy of the Group's disclosures included in Note 16 of the accompanying consolidated financial statements in relation to this matter.
HÉROUX-DEVTEKINC. - Fiscal 2024 Consolidated Financial Statements - 5
Other information
Management is responsible for the other information. The other information comprises:
- Management's Discussion and Analysis
- The information, other than the consolidated financial statements and our auditor's report thereon, in the Annual Report
Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other information, and in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.
We obtained Management's Discussion & Analysis prior to the date of this auditor's report. If, based on the work we have performed, we conclude that there is a material misstatement of this other information; we are required to report that fact in this auditor's report. We have nothing to report in this regard.
The Annual Report is expected to be made available to us after the date of the auditor's report. If based on the work we will perform on this other information, we conclude there is a material misstatement of other information, we are required to report that fact to those charged with governance.
Responsibilities of management and those charged with governance for the consolidated financial statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with IFRS, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the Group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Group's financial reporting process.
Auditor's responsibilities for the audit of the consolidated financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.
As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
- Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
- Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group's internal control.
- Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
- Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Group to cease to continue as a going concern.
- Evaluate the overall presentation, structure, and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
- Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.
6 - HÉROUX-DEVTEKINC. - Fiscal 2024 Consolidated Financial Statements
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
The engagement partner on the audit resulting in this independent auditor's report is Yannick Ouimet.
Ernst & Young LLP
Montréal, Québec
May 21, 2024
_____________________________________________
- CPA Auditor, public accountancy permit no. A127424
HÉROUX-DEVTEKINC. - Fiscal 2024 Consolidated Financial Statements - 7
CONSOLIDATED BALANCE SHEETS
(In thousands of Canadian dollars)
As at March 31, | Notes | 2024 | 2023 | ||||
Assets | 19 | ||||||
Current assets | |||||||
Cash | $ | 9,765 | $ | 15,020 | |||
Accounts receivable | 146,787 | 120,409 | |||||
Income tax receivable | 579 | 2,176 | |||||
Inventories | 11 | 323,350 | 262,995 | ||||
Derivative financial instruments | 12 | 2,778 | 386 | ||||
Other current assets | 13 | 24,586 | 22,215 | ||||
507,845 | 423,201 | ||||||
Property, plant and equipment, net | 14 | 200,505 | 205,490 | ||||
Finite-life intangible assets, net | 15 | 60,558 | 53,654 | ||||
Derivative financial instruments | 12 | 1,840 | 468 | ||||
Deferred income tax assets | 23 | 10,337 | 9,308 | ||||
Goodwill | 16 | 113,651 | 112,384 | ||||
Other long-term assets | 13 | 16,687 | 16,832 | ||||
Total assets | $ | 911,423 | $ | 821,337 | |||
Liabilities and shareholders' equity | |||||||
Current liabilities | |||||||
Accounts payable and accrued liabilities | 17 | $ | 142,718 | $ | 131,019 | ||
Provisions | 18 | 12,165 | 16,632 | ||||
Customer advances and progress billings | 64,479 | 58,904 | |||||
Income tax payable | 2,174 | 466 | |||||
Derivative financial instruments | 12 | 3,147 | 5,493 | ||||
Current portion of long-term debt | 19 | 16,263 | 11,425 | ||||
240,946 | 223,939 | ||||||
Long-term debt | 19 | 201,764 | 166,483 | ||||
Provisions | 18 | 14,218 | 15,576 | ||||
Derivative financial instruments | 12 | 2,692 | 4,895 | ||||
Deferred income tax liabilities | 23 | 14,178 | 11,377 | ||||
Other liabilities | 20 | 7,987 | 8,148 | ||||
481,785 | 430,418 | ||||||
Shareholders' equity | |||||||
Issued capital | 21 | 81,363 | 82,459 | ||||
Contributed surplus | 8,185 | 6,739 | |||||
Accumulated other comprehensive income | 22 | 17,044 | 12,072 | ||||
Retained earnings | 323,046 | 289,649 | |||||
429,638 | 390,919 | ||||||
Total liability and shareholders' equity | $ | 911,423 | $ | 821,337 | |||
Commitments and contingencies (note 25) | |||||||
The accompanying notes are an integral part of these consolidated financial statements. | |||||||
On behalf of the Board of Directors | |||||||
Louis Morin | Gilles Labbé | ||||||
Director | Director |
8 - HÉROUX-DEVTEKINC. - Fiscal 2024 Consolidated Financial Statements
CONSOLIDATED STATEMENTS OF INCOME
(In thousands of Canadian dollars, except per share data)
For the fiscal years ended March 31, | Notes | 2024 | 2023 | ||||
Sales | 5 | $ | 629,767 | $ | 543,622 | ||
Cost of sales | 6, 7, 11 | 518,695 | 470,087 | ||||
Gross profit | 111,072 | 73,535 | |||||
Selling and administrative expenses | 6, 7 | 55,270 | 48,556 | ||||
Gains on extinguishment of a liability and business divestiture | 8 | (3,961) | (1,219) | ||||
Operating income | 59,763 | 26,198 | |||||
Net financial expenses | 9 | 14,275 | 7,575 | ||||
Income before income tax expense | 45,488 | 18,623 | |||||
Income tax expense | 23 | 7,217 | 4,798 | ||||
Net income | $ | 38,271 | $ | 13,825 | |||
Earnings per share - basic and diluted | 10 | 1.13 | 0.40 | ||||
The accompanying notes are an integral part of these consolidated financial statements. |
HÉROUX-DEVTEKINC. - Fiscal 2024 Consolidated Financial Statements - 9
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands of Canadian dollars)
For the fiscal years ended March 31,
Notes
2024
2023
Items that may be reclassified to net income | ||||
Gains arising from translation of the financial statements of foreign operations | 22 | $ | 1,129 | $ 20,363 |
Cash flow hedges: | 22 | |||
Net gains (losses) on valuation of derivative financial instruments | 1,760 | (21,615) | ||
Net losses on derivative financial instruments transferred to net income | 3,386 | 7,193 | ||
Deferred income taxes | (1,359) | 3,808 | ||
3,787 | (10,614) | |||
Gains (losses) on hedges of net investments in foreign operations | 22 | 65 | (5,229) | |
Deferred income taxes | (9) | 687 | ||
56 | (4,542) | |||
Items that are never reclassified to net income | ||||
Defined benefit pension plans: | 24 | |||
Gains (losses) from remeasurement | 1,126 | (1,709) | ||
Deferred income taxes | (297) | 451 | ||
829 | (1,258) |
Other comprehensive income
- 5,801
- 3,949
Net income
Other comprehensive income
Comprehensive income
$ | 38,271 | $ | 13,825 | |
5,801 | 3,949 | |||
$ | 44,072 | $ | 17,774 | |
The accompanying notes are an integral part of these consolidated financial statements.
10 - HÉROUX-DEVTEKINC. - Fiscal 2024 Consolidated Financial Statements
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Heroux-Devtek Inc. published this content on 22 May 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 22 May 2024 11:02:07 UTC.