LMI Aerospace, Inc. Announces Second Quarter 2012 Results

ST. LOUIS, Aug. 8, 2012 (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, defense and technology markets, today announced financial results for the second quarter of 2012.

Second Quarter 2012 Highlights

Sales of $69.3 million, up 9.5 percent from the second quarter of 2011.

Income from operations of $8.1 million or 11.7 percent of sales.

Earnings per diluted share of $0.43.
Second Quarter Results

Net sales for the second quarter of 2012 increased 9.5 percent to $69.3 million compared to $63.3 million in the second quarter of 2011. Net income for the second quarter of 2012 was $5.1 million, or $0.43 per diluted share, compared to $4.0 million, or $0.34 per diluted share, in the second quarter of 2011. Second quarter 2011 results included a pre-tax charge of $0.7 million for cost growth on the Mitsubishi Regional Jet program and $0.6 million of non-recurring costs related to potential financing alternatives the company decided not to pursue. Excluding these charges, earnings per diluted share would have been $0.41.

“During the last few months, we have won additional business for both the Aerostructures and Engineering Services segments,” said Ronald S. Saks, Chief Executive Officer of LMI. “New programs starting in 2012 for Aerostructures include Boeing 737 assemblies valued at more than $30,000 per shipset in revenue with production expected to start in 2013 at a rate of seven to eight aircraft per month and an award on the Boeing 787 for assemblies with a per shipset revenue of $15,000. Additionally, we received awards on the Boeing 747-8 and Gulfstream G550 for components from Tier 1 customers. Engineering Services has also continued to grow with added business on the Learjet 85, Lockheed F-16 and some limited Airbus work, and additional growth is expected in 2013. This activity has led to hiring employees in both segments in order to handle present and expected demand.”

“Aerostructures operating performance was solid with demand increasing in most areas, offset by some continuing delays on a regional jet program and certain new program start ups. One large customer claim was successfully settled in the quarter and we expect a second should close in the third quarter, each providing some gross profit support. A remaining claim is expected to close by the end of the year. Engineering Services continues to outperform and is expected to maintain revenue and gross profit levels for the balance of 2012. We project results in the second half of 2012 to exceed those reached in the first half of the year.”

Aerostructures Segment

Increased production rates and new business on the Boeing 737 model drove a 10.4 percent increase in net sales of large commercial products and the Gulfstream G650 and G280 models contributed to a 19.2 percent rise in corporate and regional market net sales. Reduced sales related to the Blackhawk program due to customer inventory management drove the decline in military products, which the Company believes is temporary.

The segment generated gross profit of $11.7 million, or 26.7 percent of net sales, in the second quarter of 2012 versus $11.2 million, or 27.5 percent of net sales, in the second quarter of 2011. The sales mix shift primarily contributed to the decline in gross margin percentage with increased sales on less mature, less profitable work statements.

Selling, general and administrative expenses (SG&A) were largely unchanged at $6.8 million in the second quarter of 2012 versus $6.7 million in the second quarter of 2011.

Engineering Services Segment

Engineering Services has experienced increased demand due to growth in the number of new programs currently in development in the Company’s aerospace markets, resulting in an increase in the segment’s staff from 434 on December 31, 2011, to 459 as of June 30, 2012. Revenue for Engineering Services in support of the KC-46 tanker in the military market increased $4.0 million in the second quarter of 2012 from the second quarter of 2011, absorbing new hires and staffing transfers from commercial programs inside Boeing. Another key driver was support for the Learjet 85, which helped generate 26.9 percent growth in the corporate and regional market. Other net sales decreased as support for various Boeing tooling projects declined.

Gross profit for the segment was $5.3 million, or 20.3 percent of net sales, for the second quarter of 2012 up from $4.1 million, or 17.7 percent of net sales, for the prior year quarter due to the increase in revenue in the current quarter. The prior year quarter for Engineering Services included $0.5 million of the $0.7 million charge on the Mitsubishi Regional Jet previously mentioned.

SG&A for the segment increased from $1.8 million in the second quarter 2011 to $2.1 million in the second quarter of 2012 due primarily to increased labor costs.

Non-Segment

The effective income tax rate for the second quarter of 2012 was 34.0 percent compared to 34.1 percent in the year-ago quarter. The company had no debt outstanding on its revolving line of credit as of June 30, 2012.

The company was slightly positive on free cash flow in the second quarter of 2012 compared to $3.5 million generated in the second quarter of 2011. There was significant use of cash in the second quarter of 2012 due to new program investment of $2.4 million, inventory growth to support future rate increases and increased capital spending to increase capacity and capabilities. Free cash flow for 2012 is expected to be an outflow of approximately $6.0 million based on growth in the company’s full year capital expenditures.

Backlog at June 30, 2012, was $231.4 million compared to $231.7 million at the end of the prior year quarter.

Outlook for 2012

The company has updated its previous guidance for 2012, as follows:

Consolidated Operations

Net sales between $282.0 million and $298.0 million

Gross profit between 24.3 percent and 25.5 percent

SG&A between $36.2 million and $37.1 million

Interest and other expenses of $1.0 million

Effective income tax rate of 35.0 percent

Capital expenditures between $22.0 million and $24.0 million. The company’s forecasted capital spend has increased due to building and production expansion at our Tulsa, Oklahoma, facility. The company plans to execute a sale and lease back transaction on the expanded Tulsa facilities in mid-2013 and execute several equipment financing transactions over 2012 and 2013.

Depreciation, amortization and stock compensation expense of $9.5 million
The expectations for each segment are as follows:

Aerostructures

Net sales between $182.0 million and $194.0 million

Gross profit between 27.2 percent and 28.4 percent

SG&A between $28.0 million and $28.5 million
Engineering Services

Net sales between $100.0 million and $104.0 million

Gross profit between 19.0 percent and 20.0 percent

SG&A between $8.2 million and $8.6 million
Outlook for 2013

The company is providing guidance for 2013 as follows:

Consolidated Operations

Net sales between $314.0 million and $332.0 million

Gross profit between 24.3 percent and 25.5 percent

SG&A between $38.3 million and $40.7 million

Interest and other expenses of $2.1 million

Effective income tax rate of 35.0 percent

Capital expenditures between $16.0 million and $20.0 million

Depreciation, amortization and stock compensation expense of $10.0 million

The expectations for each segment are as follows:

Aerostructures

Net sales between $202.0 million and $216.0 million

Gross profit between 27.2 percent and 28.4 percent

SG&A between $29.5 million and $31.5 million
Engineering Services

Net sales between $112.0 million and $116.0 million

Gross profit between 19.0 percent and 20.0 percent

SG&A between $8.8 million and $9.2 million
“We continue to expect record revenues and operating income at both segments in 2012 from organic growth, including added awards of design build programs. We are also actively pursuing strategic acquisitions designed to provide added capability and capacity in order to handle expanding customer demand,” added Saks.

On a somber note, the company wishes to recognize the dedicated service of its long time friend and lead director, Tom Unger, who passed away on July 20, 2012. Tom served as a director since 1999 and was instrumental in helping us design and execute our business strategy. He was a positive, informed and talented leader of the Board of Directors. Tom also interfaced with senior management and provided support and direction to many who respected his talent, his patience and his judgment. He will be missed by all of us who considered him both a mentor and a friend.

LMI Aerospace, Inc. is a leading provider of design engineering services and supplier of structural assemblies, kits and components to the aerospace, defense and technology markets. Through its Aerostructures segment, the company primarily fabricates, machines, finishes, integrates, assembles and kits formed close tolerance aluminum and specialty alloy and composite components and higher level assemblies for use by the aerospace, defense and technology industries. 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 product lifecycles from conceptual design, analysis and certification through production support, fleet support and service life extensions via a complete turnkey engineering solution.