LMI Aerospace announces Q2 2017 results

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LMI Aerospace Inc., a leading provider of design and aftermarket engineering services, and supplier of structural assemblies, kits and components to the aerospace and defense markets, announced its financial results for the first quarter ended March 31, 2017.

First Quarter Results

For the first quarter of 2017, net sales were $83.8 million, compared to $87.3 million in the first quarter of 2016. A net loss of $6.5 million, or $0.49 per diluted share, was realized in the first quarter of 2017, compared to a net loss of $1.8 million, or $0.14 per diluted share, in the first quarter of 2016.

Operating income for the first quarter of 2017, excluding $2.6 million of net unfavorable, non-recurring items, was $1.7 million. Non-recurring items in the first quarter of 2017 included $2.5 million of expenses related to the Company’s pending merger with Sonaca. Diluted loss per share, excluding the impact of non-recurring items, was $0.29 in the first quarter of 2017. Operating income for the first quarter of 2016, excluding $1.1 million of net unfavorable, non-recurring items, was $4.5 million. Non-recurring items in the first quarter of 2016 included $0.9 million of restructuring expenses. Diluted loss per share, excluding the impact of non-recurring items, was $0.05 in the first quarter of 2016.

“Expected sales growth within our Aerostructures segment began to materialize in the first quarter of 2017,” said LMI Aerospace Chief Executive Officer Dan Korte. “We secured additional work on the Boeing 777X platform, bringing our total new content up to $224,000 per ship set. Even with this significant expansion of our content on this aircraft, we see opportunities to continue to grow our 777 work through new bids and by extending existing content.”

“Rate readiness remains a key area of focus for us as we begin production ramp-ups on key commercial and business jet programs. In the first quarter, we made further investments in critical equipment and saw an increase in inventory spend to support anticipated demand, impacting cash flow. We remain on track to serve these key growth platforms.

“We look forward to the special shareholder meeting on June 8 for the vote to approve Sonaca’s acquisition of all shares of LMI stock, a key milestone in our progression toward closing the merger transaction.”

Aerostructures Segment

Sales of $2.4 million on the Gulfstream G500/600 program and $1.6 million on the Bombardier C-Series program. Sales in the first quarter of 2017 on the Gulfstream G450/550 program decreased $1.8 million when compared to the prior-year period.

The Aerostructures segment generated gross profit of $13.0 million, or 16.4 percent of net sales, in the first quarter of 2017 versus $14.8 million, or 19.2 percent of net sales, in the first quarter of 2016.  The reduction in gross profit margin was primarily attributable to start-up and learning related to new programs, and inefficiencies integrating work from a rationalized facility.

Selling, general and administrative expenses were $12.4 million in the first quarter of 2017 versus $11.3 million in the first quarter of 2016. Excluding the impact of $2.5 million of legal and other transaction costs related to the merger with Sonaca, selling general and administrative expenses decreased $1.4 million in the first quarter of 2017 when compared to the first quarter of 2016 on lower restructuring costs and salary and related expenses of $1.0 million and $0.7 million, respectively.

Engineering Services Segment

Engineering Services revenue decreased 55.9 percent to $4.9 million in the first quarter of 2017 from $11.1 million in the first quarter of 2016. The decline in net sales was primarily due to a decrease in maintenance and repair revenues of $2.3 million in addition to an overall decrease in demand for engineering services.

Gross loss for the segment was $0.5 million, or 10.2 percent of net sales, for the first quarter of 2017, compared to gross profit of $1.7 million, or 15.3 percent of net sales, for the prior-year period.  Lower volume and cost overruns on firm, fixed-price contracts negatively impacted the first quarter of 2017 when compared to the prior-year period.

Selling, general and administrative expenses for the segment were $0.9 million in the first quarter of 2017 compared to $1.5 million in the first quarter of 2016. Intangible asset amortization and salary and wage expenses were each lower in the first quarter of 2017 by $0.2 million when compared to the prior-year period.

Non-Segment

Interest expense was $5.2 million in the first quarter of 2017 compared to $5.3 million in the first quarter of 2016.

The Company recorded income tax expense of $0.01 million for the first quarter of 2017, compared to an income tax benefit of $0.2 million in the first quarter of 2016.

Increases in product inventory and capital spending to support expected higher demand in future periods unfavorably impacted cash flow and contributed to an increase in borrowings of $23.5 million on the Company’s revolving credit facility in the first quarter of 2017. The Company’s operations used cash of $16.4 million in the first quarter of 2017 and funded net capital expenditures of $8.1 million, resulting in negative free cash flow of $24.5 million. In the first quarter of 2016, the Company’s operations used cash of $7.2 million and funded net capital expenditures of $2.4 million, resulting in negative free cash flow of $9.7 million.

 

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