LMI Aerospace, Inc. Announces First-Quarter 2014 Results

ST. LOUIS, May 7, 2014 (GLOBE NEWSWIRE) — LMI Aerospace, Inc. (Nasdaq:LMIA), a leading provider of design engineering services and supplier of structural assemblies, kits and components to the aerospace and defense markets, today announced its financial results for the first-quarter ended March 31, 2014.

First-quarter 2014 Highlights

Net sales of $95.8 million for the first-quarter of 2014 compared to net sales of $106.1 million for the first-quarter of 2013

Targeting $10.0 million in annual cost savings initiatives

$5.1 million of free cash flow generated in the first-quarter of 2014

Adjusted EBITDA of $10.2 million for the first-quarter of 2014

Significant win of new work on the 737-MAX platform
First-quarter Results

For the first-quarter 2014, net sales were $95.8 million, compared to $106.1 million in the first-quarter of 2013. A net loss of $0.4 million, or $0.03 per diluted share, was realized in the first-quarter of 2014, compared to net income of $1.8 million, or $0.14 per diluted share, in the first-quarter of 2013. First-quarter 2014 results included $0.4 million in charges for restructuring activities, $0.2 million in expenses related to integration activities and $0.4 million of other non-recurring project costs with respect to the previously disclosed restructuring and reorganization activities at two of our facilities. Pre-tax income for the first-quarter of 2014, excluding non-recurring, unusual items was $0.6 million.

“In my first eight weeks as CEO, I have toured each facility at LMI and have met with key customers and suppliers,” said Dan Korte, Chief Executive Officer of LMI. "I am excited about the opportunities I see, the capabilities we offer, and our ability to grow profitably in this marketplace.

“As we continue through 2014, we will focus our attention in a few key areas we have identified as critical for success. We will be refining our strategy and organizing our team around its execution. We need to integrate our Aerostructures business to realize its full benefits and improve our performance. Given the current competitive landscape, cost reduction is also required, so, we will look to new technologies, automation, lean practices, and engineering for manufacturability to remove cost from our products. We have already executed plans that are expected to remove over $4.0 million in annual costs and we have set a near-term goal for an additional annual savings of $6.0 million. The closure of our Fort Worth, Texas, plant and elimination of the machining center in Savannah are now substantially complete and we continue to drive efforts towards centers of excellence. We also plan to partner with our major customers to find new and creative solutions designed not only to lower costs, but to optimize the end product through overall value stream analysis,” Korte said.

Aerostructures Segment

Aerostructures revenue decreased 6.5 percent from $83.1 million in the first-quarter of 2013 to $77.7 million in the first-quarter of 2014.

Net sales of large commercial aircraft products increased 2.7 percent during the first-quarter of 2014. Growth in the Boeing 737 and 787 platforms contributed an increase of $4.1 million over the prior year quarter, offset by decreases of $3.3 million in the Boeing 747 and 767 platforms. The $5.0 million decline in the corporate and regional aircraft market was primarily due to tooling revenue related to a design build program in the first-quarter of 2013 that was not repeated in the first-quarter of 2014. The company expects additional tooling revenue later in 2014. Net sales to military customers decreased 13.6 percent primarily due to lower demand on the Black Hawk program.

The segment generated gross profit of $14.2 million, or 18.3 percent of net sales, in the first-quarter of 2014 versus $16.6 million, or 20.0 percent of net sales, in the first-quarter of 2013. A decrease in sales volume, primarily related to tooling, unfavorable sales mix and lower production levels contributed to the decline in gross margin in the first-quarter of 2014. Results were also negatively impacted by inefficiencies in the facilities being closed and the related startup of transferred production to other facilities. Expected performance on long-term contracts was stable from the previous quarter. The first-quarter of 2013 was unfavorably impacted by $2.5 million in costs related to a fair value step-up on acquired inventories from acquisitions.

Selling, general and administrative expenses were $11.4 million in the first-quarter of 2014 versus $11.1 million in the first-quarter of 2013, primarily related to increases of $0.4 million of restructuring expenses and $0.4 million of professional services, offset by decreases of $0.3 million in integration expenses and $0.2 million in acquisition expenses.

Engineering Services Segment

While Engineering Services revenue decreased 20.8 percent from $23.6 million in the first-quarter of 2013 to $18.7 million in the first-quarter of 2014, the segment has stabilized in the near-term, growing both sales and operating income in the first-quarter, as compared to the fourth-quarter of 2013, by $0.4 million and $0.7 million, respectively.

Net sales of services for large commercial aircraft increased $2.4 million primarily due to additional maintenance, repair and overhaul services, the Airbus 350 platform and a nacelle system project. Net sales of services related to corporate and regional aircraft decreased 45.2 percent primarily related to reductions in support of the Bombardier Learjet L-85 and the space travel program. Net sales of services for military programs declined $5.1 million primarily the result of the winding down of the program design phase on the Boeing Tanker program.

Gross profit for the segment was $3.3 million, or 17.6 percent of net sales, for the first-quarter of 2014, compared to $3.5 million, or 14.8 percent of net sales, for the prior year quarter. The increase in gross profit as a percentage of sales was the primarily the result of labor efficiencies in addition to reductions in overhead expenses.

Selling, general and administrative expenses for the segment decreased from $2.9 million in the first-quarter 2013 to $2.4 million in the first-quarter of 2014, primarily due to integration and cost reduction activities.

Non-Segment

The effective income tax rate for the first-quarter of 2014 was 3.5 percent compared to 24.7 percent in the first-quarter of 2013. The 2014 income tax rate reflects the full valuation allowance recorded on deferred tax benefits generated in the quarter. Interest expense increased $0.1 million in the first-quarter of 2014 compared to the first-quarter of 2013.

The company generated cash flow from operations of $10.0 million in the first-quarter of 2014 and funded capital expenditures of $4.9 million, resulting in positive free cash flow of $5.1 million.

Backlog at March 31, 2014, was $454.9 million compared to $432.5 million at March 31, 2013.

Financial Outlook for 2014

As announced in the prior quarter, the company is conducting a thorough review its current forecast, strategy and operations, and as a result, will not be providing guidance at this time.