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SMALL BUSINESS
LMI Aerospace Announces Results for the Third Quarter of 2009
Reaffirms 2009 and 2010 Guidance
ST. LOUIS, Nov. 6, 2009 (GLOBE NEWSWIRE) -- LMI Aerospace, Inc. (Nasdaq:LMIA), a leading provider of design engineering services, structural components, assemblies and kits to the aerospace, defense and technology industries, today announced financial results for the third quarter of 2009.
Net sales in the quarter ended September 30, 2009, were $58.7 million compared to $61.9 million in the quarter ended September 30, 2008. Net income for the third quarter of 2009 was $2.8 million or $0.25 per diluted share versus $5.2 million, or $0.46, per diluted share in the third quarter of 2008.
"Late in the third quarter, our Aerostructures segment experienced an increase in demand for business jet and Blackhawk helicopter assemblies and components," said Ronald S. Saks, Chief Executive Officer of LMI Aerospace, Inc. "On the other hand, our Engineering Services segment experienced reduced demand for maturing development projects, including the Boeing 747-8 and the Gulfstream G650 models. We expect the positive demand trends in aerospace manufacturing to continue and expect higher demand for engineering services projects in the second half of 2010 as our design-build marketing efforts produce additional awards. Our Engineering Services segment responded to industry conditions in the quarter by reducing employee headcount and selectively adjusting salary levels in order to remain competitive. Our Aerostructures segment achieved our inventory reduction goal for the full-year 2009 by September 30, 2009, and is now rebuilding inventory in order to meet expected increased demand in 2010."
Net sales for the Aerostructures segment for the third quarters of 2009 and 2008 were as follows:
% of % of
Category Q3 2009 Total Q3 2008 Total
--------------------------------- ---------------- ----------------
($ in millions)
Corporate and regional aircraft $ 10.5 26.4% $ 13.9 35.3%
Large commercial aircraft 18.6 46.7% 11.3 28.7%
Military 9.5 23.9% 10.8 27.4%
Technology 0.4 1.0% 1.9 4.8%
Other 0.8 2.0% 1.5 3.8%
---------------- ----------------
Total $ 39.8 100.0% $ 39.4 100.0%
================ ================
The decrease in corporate and regional aircraft sales was mainly due to lower demand for large cabin components for Gulfstream, resulting from their first quarter announcement of production rate cuts, inventory adjustments related to the production cuts and Gulfstream's decision to cease manufacturing operations for four weeks in July. Large commercial aircraft sales benefited mainly from higher sales for the Boeing 767 wing modification and winglet program as well as increased sales related to the 737 and 747 programs. Continued inventory destocking by customers contributed to a decline in military sales on the Blackhawk program as did demand weakness on the Apache helicopter program. The decline in technology sales was due to the lower demand for semiconductor equipment components.
Net sales for the Engineering Services segment for the third quarters of 2009 and 2008 were as follows:
% of % of
Category Q3 2009 Total Q3 2008 Total
--------------------------------- ---------------- ----------------
($ in millions)
Corporate and regional aircraft $ 4.5 22.3% $ 7.6 33.3%
Large commercial aircraft 7.9 39.1% 11.0 48.2%
Military 7.4 36.6% 3.4 14.9%
Tooling 0.4 2.0% 0.8 3.6%
---------------- ----------------
Total $ 20.2 100.0% $ 22.8 100.0%
================ ================
Declines in demand for engineering services for the 747-8 and the G650 resulted from reduced revenue in large commercial and corporate aircraft. These declines were partially offset with the start of a new design build program with the Aerostructures segment and the reassignment of several engineers previously supporting the G650 program to the CH-53 program during the quarter. The overall reduction in demand has resulted in lower overtime and employment levels as total staffing fell to 368 at the end of the quarter from 430 at its peak in 2008.
Sales from the Engineering Services segment to the Aerostructures segment for the new design build program and other support were $1.3 million and $1.5 million for the three months and nine months ended September 30, 2009, respectively. These amounts are included in the tables above but eliminated in consolidation
Gross profit for the third quarter of 2009 was $12.3 million, or 21.0 percent of sales, compared to $16.9 million, or 27.3 percent of sales, in the third quarter of 2008. In the third quarter of 2009, gross profit for the Aerostructures segment was $8.5 million or 21.4 percent of sales versus $11.8 million or 29.9 percent of sales in the year-ago quarter. Lower staffing and work hours in the segment generated lower production levels as inventories fell substantially. This reduced level of output and reduced sales volume in the quarter resulted in lower productivity and inadequate coverage of fixed costs. Additionally, contributing to the decline were lower gross margins on the 767 wing modification kits, despite those margins coming in above company expectations. Gross profit for the Engineering Services segment for the third quarter of 2009 was $4.0 million or 19.8 percent of sales, versus $5.1 million, or 22.4 percent of sales, in the third quarter of 2008. The lower margin was due mainly to higher overhead rates resulting from fewer billable hours, lower sales volume and an increase in non-billable hours.
Selling, general and administrative expenses were $7.5 million in the third quarter of 2009, or 12.8 percent of sales, reduced from $8.3 million, or 13.4 percent of sales, in the year-ago quarter due to reductions in personnel costs and professional services.
Net interest expense was $0.4 million in the third quarters of 2009 and 2008, reflecting lower interest rates offset by increased borrowings due to the Intec acquisition in January 2009. Income taxes in the third quarter of 2009 were $1.6 million compared to $3.0 million in the year-ago quarter. The effective tax rate for both periods was approximately 36.5 percent.
The backlog at September 30, 2009, was $228 million versus $210 million at September 30, 2008.
For the nine months ended September 30, 2009, net sales were $185.6 million compared to $187.3 million in the nine months ended September 30, 2008. Net income for the first three quarters of 2009 was $9.4 million, or $0.83 per diluted share, versus $14.7 million, or $1.30 per diluted share, for the first three quarters of 2008.
The company confirmed its guidance for 2009 and 2010. For 2010, on a consolidated basis, net sales are projected in the range of $255 million to $270 million; gross margin at 21.9 percent to 22.8 percent; selling, general and administrative expenses between $31.4 million and $33.6 million; and interest expense of $0.8 million to $1.0 million. The income tax rate is expected to be 36.5 percent. Expectations for the Aerostructures and Engineering Service segments in 2010 are as follows:
Aerostructures -------------- * Net sales to range between $185 million and $195 million. * Gross profit to be between 23.5 percent and 24.5 percent. * Selling, general and administrative expenses to be between $24 million and $26 million. Engineering Services -------------------- * Net sales to range between $70 million and $75 million. * Gross profit to be between 17.5 percent and 18.5 percent. * Selling, general and administrative expenses to be between $7.4 million and $7.6 million.
"One of our objectives this year was to substantially increase free cash flow by reducing inventories and operational costs and limiting capital expenditures," Saks added. "During the third quarter of 2009, free cash flow was approximately $10 million, positioning us to meet our goal of $15 million to $20 million in 2009. We used these funds to pay down debt and ended the quarter with $2.5 million of cash and a revolving credit balance of $30.0 million, or net debt of $27.5 million. By the end of October, 2009, additional inventory reductions helped reduce net debt to $20.3 million."
"We are optimistic that increased demand for our Aerostructures products and our plan to reduce inventories modestly in 2010 will result in increasing gross profit margins as we take advantage of our continuing investments to improve manufacturing efficiency and retain our skilled workforce," Saks said. "New awards in 2009 on certain military and large commercial aircraft programs, especially the Boeing 747-8 and 777 models, as well as increased shipset value received on the Gulfstream G650 as a result of a transfer of work from a failing supplier, should provide steadily growing revenue in 2010."
"At this time, we have turned our attention from possible plant consolidations to transferring significant work statement to our Mexicali operation, as approvals of the Mexicali plant's quality system and heat treat processes were recently received from two major customers," said Saks. "We plan to invest in a finishing line at the Mexicali plant in the first quarter of 2010, and will expand the clean room at our Intec division in order to increase our composite manufacturing capacity. We are also negotiating the acquisition of a sheet-metal work statement from another supplier, which we will use to maintain the revenue stream at our U.S. facilities as we transfer work to Mexico."
LMI Aerospace, Inc. is a leading provider of design engineering services, structural components, assemblies and kits to the aerospace, defense and technology industries. Through its Aerostructures segment, the company primarily fabricates machines, finishes and integrates formed, close-tolerance aluminum and specialty alloy components and sheet-metal products, for large commercial, corporate and military aircraft. It manufactures more than 30,000 products for integration into a variety of aircraft platforms manufactured by leading original equipment manufacturers and Tier 1 aerospace suppliers. Through its Engineering Services segment, operated by its D3 Technologies, Inc subsidiary, the company provides a complete range of design, engineering and program management services, supporting aircraft lifecycles from conceptual design, analysis and certification through production support, fleet support and service-life extensions.
The LMI Aerospace, Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=4971
This news release includes forward-looking statements related to LMI Aerospace, Inc.'s, outlook for 2009, which are based on current management expectations. Such forward-looking statements are subject to various risks and uncertainties, many of which are beyond the control of LMI Aerospace, Inc. Actual results could differ materially from the forward-looking statements as a result of, among other things, the factors detailed from time to time in LMI Aerospace, Inc.'s filings with the Securities and Exchange Commission. Please refer to the Risk Factors contained in the company's Annual Report on Form 10-K for the year ended December 31, 2008, and any risk factors set forth in our other subsequent filings with the Securities and Exchange Commission.
LMI Aerospace, Inc.
Condensed Consolidated Balance Sheets
(Amounts in thousands, except share and per share data)
(Unaudited)
Sept. 30, Dec. 31,
2009 2008
-------- --------
Assets
Current assets:
Cash and cash equivalents $ 2,479 $ 29
Trade accounts receivable, net of allowance of
$284 at September 30, 2009 and $304 at
December 31, 2008 37,500 26,887
Inventories, net 51,008 62,393
Prepaid expenses and other current assets 2,087 2,137
Income taxes receivable 472 364
Deferred income taxes 3,120 3,519
-------- --------
Total current assets 96,666 95,329
Property, plant and equipment, net 19,414 20,103
Goodwill 53,404 46,258
Intangible assets, net 22,102 17,861
Other assets 1,082 1,167
-------- --------
Total assets $192,668 $180,718
======== ========
Liabilities and shareholders' equity
Current liabilities:
Accounts payable $ 5,285 $ 12,363
Accrued expenses 10,708 9,936
Short-term deferred gain on sale of real estate 233 233
Current installments of long-term debt and
capital lease obligations 388 498
-------- --------
Total current liabilities 16,614 23,030
Long-term deferred gain on sale of real estate 3,365 3,540
Long-term debt and capital lease obligations,
less current installments 30,272 25,536
Deferred income taxes 7,942 5,812
Other long-term liabilities 1,235 --
-------- --------
Total long-term liabilities 42,814 34,888
Shareholders' equity:
Common stock, $0.02 par value per share;
authorized 28,000,000 shares; issued 12,002,240
shares and 11,926,309 shares at September 30,
2009 and December 31, 2008, respectively 240 239
Preferred stock, $0.02 par value per share;
authorized 2,000,000 shares; none issued at
either date -- --
Additional paid-in capital 70,927 69,855
Treasury stock, at cost, 360,688 shares at
September 30, 2009 and 364,088 shares at
December 31, 2008 (1,711) (1,727)
Retained earnings 63,784 54,433
-------- --------
Total shareholders' equity 133,240 122,800
-------- --------
Total liabilities and shareholders' equity $192,668 $180,718
======== ========
See accompanying notes to condensed consolidated financial statements.
LMI Aerospace, Inc.
Condensed Consolidated Statements of Operations
(Amounts in thousands, except share and per share data)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2009 2008 2009 2008
---------- ---------- ---------- ----------
Sales and service
revenues
Product sales $ 38,212 $ 38,975 $ 120,789 $ 116,931
Service revenues 20,537 22,966 64,791 70,331
---------- ---------- ---------- ----------
Net sales 58,749 61,941 185,580 187,262
---------- ---------- ---------- ----------
Cost of sales and
service revenues
Cost of product
sales 30,055 26,919 92,556 81,486
Cost of service
revenues 16,386 18,139 52,747 56,599
---------- ---------- ---------- ----------
Cost of sales 46,441 45,058 145,303 138,085
---------- ---------- ---------- ----------
Gross profit 12,308 16,883 40,277 49,177
Selling, general and
administrative
expenses 7,515 8,329 23,927 24,714
Severance and
restructuring (50) -- 312 --
---------- ---------- ---------- ----------
Income from operations 4,843 8,554 16,038 24,463
Other income
(expense):
Interest expense,
net (443) (407) (1,278) (1,366)
Other, net (3) 3 (27) (5)
---------- ---------- ---------- ----------
Total other income
(expense) (446) (404) (1,305) (1,371)
---------- ---------- ---------- ----------
Income before income
taxes 4,397 8,150 14,733 23,092
Provision for income
taxes 1,609 2,970 5,382 8,409
---------- ---------- ---------- ----------
Net income $ 2,788 $ 5,180 $ 9,351 $ 14,683
========== ========== ========== ==========
Amounts per common
share:
Net income per common
share $ 0.25 $ 0.46 $ 0.83 $ 1.31
========== ========== ========== ==========
Net income per common
share assuming
dilution $ 0.25 $ 0.46 $ 0.83 $ 1.30
========== ========== ========== ==========
Weighted average
common shares
outstanding 11,320,527 11,196,861 11,296,544 1,227,970
========== ========== ========== ==========
Weighted average
dilutive common
shares outstanding 11,348,333 11,326,771 11,324,697 1,350,022
========== ========== ========== ==========
See accompanying notes to condensed consolidated financial statements.
LMI Aerospace, Inc.
Condensed Consolidated Statements of Cash Flows
(Amounts in thousands)
(Unaudited)
Nine Months Ended
September 30,
2009 2008
-------- --------
Operating activities:
Net income $ 9,351 $ 14,683
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 5,567 4,950
Charges for inventory obsolescence and valuation 1,521 814
Restricted stock compensation 1,290 1,736
Other noncash items 603 316
Changes in operating assets and liabilities,
net of acquired businesses:
Trade accounts receivable (10,018) (157)
Inventories 10,151 (13,105)
Prepaid expenses and other assets 180 45
Current income taxes 1,039 954
Accounts payable (7,261) (1,578)
Accrued expenses (1,487) 956
-------- --------
Net cash provided by operating activities 10,936 9,614
Investing activities:
Additions to property, plant and equipment (2,648) (6,061)
Acquisitions, net of cash acquired (10,047) --
Other, net (285) (28)
-------- --------
Net cash used by investing activities (12,980) (6,089)
Financing activities:
Proceeds from issuance of debt -- 73
Principal payments on long-term debt and notes
payable (374) (628)
Advances on revolving lines of credit 43,819 33,520
Payments on revolving lines of credit (38,819) (36,439)
Other, net (132) 89
-------- --------
Net cash provided (used) by financing
activities 4,494 (3,385)
-------- --------
Net increase in cash and cash equivalents 2,450 140
Cash and cash equivalents, beginning of year 29 82
-------- --------
Cash and cash equivalents, end of quarter $ 2,479 $ 222
======== ========
See accompanying notes to condensed consolidated financial statements.
LMI Aerospace, Inc.
Selected Non-GAAP Disclosures
(Amounts in thousands)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2009 2008 2009 2008
-------- -------- -------- --------
Non-GAAP Financial Information
Adjusted Earnings Before Interest, Taxes,
Depreciation, and Amortization (EBITDA)(1):
Net Income $ 2,788 $ 5,180 $ 9,351 $ 14,683
Income tax expense 1,609 2,970 5,382 8,409
Interest expense 443 407 1,278 1,366
Other expenses 3 (3) 27 5
Depreciation and
amortization 1,777 1,680 5,567 4,950
Stock based compensation 367 528 1,290 1,736
Severance and restructuring
costs (50) -- 312 --
Acquisition costs -- -- 239 --
TCA wind-up costs -- -- 249 --
-------- -------- -------- --------
Adjusted EBITDA $ 6,937 $ 10,762 $ 23,695 $ 31,149
======== ======== ======== ========
Free Cash Flow (2):
Net cash provided by
operating activities $ 11,176 $ 6,586 $ 10,936 $ 9,614
Less:
Capital expenditures (1,435) (2,784) (2,648) (6,061)
-------- -------- -------- --------
Free cash flow $ 9,741 $ 3,802 $ 8,288 $ 3,553
======== ======== ======== ========
1. We believe Adjusted EBITDA is a measure important to many investors
as an indication of operating performance by the business. We feel this
measure provides additional transparency to investors that augments, but
does not replace the GAAP reporting of net income and provides a good
comparative measure. Adjusted EBITDA is not a measure of performance
defined by GAAP and should not be used in isolation or as a substitute
for the related GAAP measure of net income.
2. We believe Free Cash Flow is a measure of the operating cash flow of
the Company that is useful to investors. Free Cash Flow is a measure of
cash generated by the Company for such purposes as repaying debt or
funding acquisitions. Free Cash Flow is not a measure of performance
defined by GAAP and should not be used in isolation or as a substitute
for the related GAAP measure of cash generated (used) by operating
activities.
CONTACT: LMI Aerospace, Inc.
Ed Dickinson, Chief Financial Officer
636.916.2150
