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LMI Aerospace, Inc. Announces Fourth Quarter and Full-Year 2014 Results
Highlights
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Net sales of
$88.8 million and$387.8 million for the fiscal 2014 fourth quarter and full year, respectively - Signed strategic supplier agreement with Spirit Aerosystems
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Generated
$49.1 million of operating cash flow in 2014, including$13.1 million in the fourth quarter -
Long-term debt reduced by
$21.6 million in 2014 -
Secured over
$225,000 per shipset of work on the 737 MAX
Fourth Quarter and Full-Year Results
Net sales were
Operating income for the fourth quarter of 2014, excluding
For the full-year 2014, net sales were
Operating income in 2014, excluding
The following table illustrates the impact of non-recurring items on the Company's operating loss for the three and twelve months ended
Operating Loss Excluding Non-Recurring Items | ||
(Amounts in thousands) | ||
Three Months Ended | Year Ended | |
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Operating loss, as reported |
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Non-recurring adjustments | ||
Goodwill impairment | 26,439 | 26,439 |
Integration expenses | 261 | 818 |
Restructuring expenses | 297 | 2,585 |
787 long-term contract adjustment | — | (5,267) |
Accelerated depreciation | 625 | 2,059 |
Environmental expenses | 29 | 1,025 |
Total non-recurring adjustments |
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Net operating income excluding non-recurring adjustments |
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"We accomplished a great deal in 2014 and now believe LMI is positioned for better performance in the years to come," said
"While we've made a significant amount of progress, there is still room to improve our operations. As previously announced, we needed to take a
Aerostructures Segment
Q4 | Q4 | |||
Net Sales | 2014 | % of Total | 2013 | % of Total |
Large commercial aircraft |
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51.4% |
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49.1% |
Corporate and regional aircraft | 17.8 | 23.1% | 19.8 | 25.1% |
Military | 12.3 | 16.0% | 13.2 | 16.8% |
Other | 7.3 | 9.5% | 7.1 | 9.0% |
Total |
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100.0% |
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100.0% |
Net sales of large commercial aircraft products increased slightly during the fourth quarter of 2014. This primarily relates to higher sales on the Boeing 737, 787, and 777 platforms of
The segment generated gross profit of
Selling, general and administrative expenses were
Engineering Services Segment
Q4 | Q4 | |||
Net Sales | 2014 | % of Total | 2013 | % of Total |
Large commercial aircraft |
|
54.1% |
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57.4% |
Corporate and regional aircraft | 1.8 | 14.8% | 3.3 | 18.0% |
Military | 3.0 | 24.6% | 2.8 | 15.3% |
Other | 0.8 | 6.5% | 1.7 | 9.3% |
Total |
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100.0% |
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100.0% |
Engineering services revenue decreased 33.3 percent from
Gross profit for the segment was
Selling, general and administrative expenses for the segment increased from
Non-Segment
Interest expense increased
The Company recognized an income tax benefit in the fourth quarter of 2014 of
Through the continued execution of its deleveraging strategy, the Company generated cash flow from operations of
Backlog as of
Outlook for 2015
The company provides the following guidance in relation to 2015:
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Revenue of between
$370.0 million and$385.0 million , consisting of Aerostructures revenue of between$315.0 million and$325.0 million and Engineering Services revenue of between$55.0 million and$60.0 million -
Operating profit of between
$18.0 million and $24.0 million -
Free cash flow of between
$10.0 million and$15.0 million
Conference Call and Webcast Information
In connection with this release and as previously announced, LMI will hold a conference call today,
A live webcast of the call can be accessed directly from
About
Cautionary Statements Regarding Forward-Looking Statements
This news release includes forward-looking statements, including statements related to LMI's strategy and outlook for 2015 and beyond, and other statements based on current management expectations, estimates and projections. Such forward-looking statements are not guarantees and are inherently subject to various risks and uncertainties that could cause actual results and events to differ materially from the forward-looking statements. These risks and uncertainties include, among other things, difficulties implementing the Company's growth strategy, continued decline in demand in the Engineering Services segment, managing the increased leverage resulting from our notes and revolving credit facility, complying with debt covenants with respect to such indebtedness and competitive pressures, as well as those Risk Factors detailed in the company's Annual Report on Form 10-K for the year
ended
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Condensed Consolidated Balance Sheets | ||
(Amounts in thousands, except share and per share data) | ||
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Assets | ||
Current assets: | ||
Cash and cash equivalents |
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Trade accounts receivable, net | 58,234 | 72,853 |
Inventories | 114,279 | 113,178 |
Prepaid expenses and other current assets | 10,255 | 4,411 |
Deferred income taxes | 3,913 | 2,693 |
Total current assets | 194,608 | 194,707 |
Property, plant and equipment, net | 99,482 | 103,375 |
Goodwill | 86,784 | 113,223 |
Intangible assets, net | 50,940 | 55,465 |
Other assets | 10,622 | 13,281 |
Total assets |
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Liabilities and shareholders' equity | ||
Current liabilities: | ||
Accounts payable |
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Accrued expenses | 26,072 | 18,566 |
Current installments of long-term debt and capital lease obligations | 3,424 | 5,242 |
Total current liabilities | 51,251 | 43,712 |
Long-term debt and capital lease obligations, less current installments | 265,554 | 285,369 |
Other long-term liabilities | 3,289 | 3,915 |
Deferred income taxes | 4,207 | 2,911 |
Total long-term liabilities | 273,050 | 292,195 |
Shareholders' equity: | ||
Common stock, |
262 | 257 |
Preferred stock, |
— | — |
Additional paid-in capital | 95,460 | 92,692 |
Accumulated other comprehensive loss | (170) | (507) |
Treasury stock, at cost, 28,396 shares at |
(359) | (202) |
Retained earnings | 22,942 | 51,904 |
Total shareholders' equity | 118,135 | 144,144 |
Total liabilities and shareholders' equity |
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Condensed Consolidated Statements of Comprehensive Income (Loss) | ||||
(Amounts in thousands, except share and per share data) | ||||
(Unaudited) | ||||
Three Months Ended | Year Ended | |||
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2014 | 2013 | 2014 | 2013 | |
Sales and service revenue | ||||
Product sales | $ 75,935 | $ 77,791 | $ 321,284 | $ 324,133 |
Service revenues | 12,859 | 18,580 | 66,533 | 88,424 |
Net sales | 88,794 | 96,371 | 387,817 | 412,557 |
Cost of sales and service revenue | ||||
Cost of product sales | 59,605 | 62,473 | 254,775 | 255,261 |
Cost of service revenue | 12,457 | 16,348 | 57,672 | 77,434 |
Cost of sales | 72,062 | 78,821 | 312,447 | 332,695 |
Gross profit | 16,732 | 17,550 | 75,370 | 79,862 |
Selling, general and administrative expenses | 13,434 | 14,215 | 55,204 | 55,862 |
Goodwill and intangible asset impairment | 26,439 | 73,528 | 26,439 | 77,750 |
Contingent consideration write-off | — | — | — | (7,950) |
Restructuring expense | 297 | 3,073 | 2,585 | 3,073 |
Acquisitions expense | — | 32 | — | 247 |
Loss from operations | (23,438) | (73,298) | (8,858) | (49,120) |
Other (expense) income: | ||||
Interest expense | (5,480) | (4,477) | (29,280) | (16,962) |
Other, net | 18 | 168 | 223 | 618 |
Total other expense | (5,462) | (4,309) | (29,057) | (16,344) |
Loss before income taxes | (28,900) | (77,607) | (37,915) | (65,464) |
Provision for income taxes | (6,396) | (10,546) | (8,953) | (6,979) |
Net loss | (22,504) | (67,061) | (28,962) | (58,485) |
Other comprehensive (loss) income | ||||
Change in foreign currency translation adjustment | (81) | (4) | (98) | (23) |
Reclassification adjustment for losses on interest rate hedges included in net earnings, net of tax of |
— | — | 278 | — |
Unrealized loss on interest rate hedges, net of tax of |
— | (73) | — | (278) |
Total comprehensive loss | $ (22,585) | $ (67,138) | $ (28,782) | $ (58,786) |
Amounts per common share: | ||||
Net loss per common share | $ (1.76) | $ (5.31) | $ (2.28) | $ (4.64) |
Net loss per common share assuming dilution | $ (1.76) | $ (5.31) | $ (2.28) | $ (4.64) |
Weighted average common shares outstanding | 12,753,795 | 12,619,107 | 12,716,976 | 12,607,833 |
Weighted average dilutive common shares outstanding | 12,753,795 | 12,619,107 | 12,716,976 | 12,607,833 |
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Condensed Consolidated Statements of Cash Flows | ||
(Amounts in thousands) | ||
Year Ended | ||
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2014 | 2013 | |
Operating activities: | ||
Net loss |
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Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 22,459 | 20,560 |
Goodwill and intangible asset impairment | 26,439 | 77,750 |
Contingent consideration write-off | — | (7,950) |
Stock based compensation | 2,018 | 1,615 |
Debt issuance cost write-off | 8,466 | — |
Payments to settle interest rate derivatives | (793) | — |
Deferred taxes | 76 | (6,060) |
Other noncash items | 686 | (420) |
Changes in operating assets and liabilities, net of acquired business: | ||
Trade accounts receivable | 14,270 | (4,678) |
Inventories | (1,101) | (23,063) |
Prepaid expenses and other assets | 2,264 | 2,828 |
Current income taxes | (5,908) | 1,939 |
Accounts payable | 307 | (10,760) |
Accrued expenses | 8,896 | (1,625) |
Net cash provided/(used) by operating activities | 49,117 | (8,349) |
Investing activities: | ||
Additions to property, plant and equipment | (16,690) | (23,738) |
Acquisitions, net of cash acquired | — | (504) |
Proceeds from sale of equipment | 3,579 | 1,989 |
Net cash used by investing activities | (13,111) | (22,253) |
Financing activities: | ||
Proceeds from issuance of debt | 250,000 | 5,751 |
Principal payments on long-term debt and notes payable | (235,633) | (5,863) |
Advances on revolving line of credit | 66,000 | 107,000 |
Payments on revolving line of credit | (102,000) | (77,236) |
Payments for debt issuance cost | (8,018) | (1,817) |
Other, net | — | (8) |
Net cash (used)/provided by financing activities | (29,651) | 27,827 |
Net decrease in cash and cash equivalents | 6,355 | (2,775) |
Cash and cash equivalents, beginning of year | 1,572 | 4,347 |
Cash and cash equivalents, end of year |
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Selected Non-GAAP Disclosures | ||||
(Amounts in thousands) | ||||
(Unaudited) | ||||
Three Months Ended | Year Ended | |||
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2014 | 2013 | 2014 | 2013 | |
Non-GAAP Financial Information | ||||
Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA)(1): | ||||
Net loss |
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Income tax benefit | (6,396) | (10,546) | (8,953) | (6,979) |
Depreciation and amortization | 5,457 | 5,331 | 22,459 | 20,560 |
Goodwill and intangible asset impairment | 26,439 | 73,528 | 26,439 | 77,750 |
Contingent consideration write-off | — | — | — | (7,950) |
Stock based compensation | 717 | 630 | 2,748 | 2,445 |
Interest expense | 5,480 | 4,477 | 29,280 | 16,962 |
Fair value step up on acquired inventories | — | — | — | 2,497 |
Restructuring expense | 297 | 3,073 | 2,585 | 3,073 |
Integration expense | 261 | 512 | 818 | 1,265 |
Acquisition expense | — | 32 | — | 247 |
Other, net | 379 | (169) | 1,173 | (618) |
Adjusted EBITDA |
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Free Cash Flow (2): | ||||
Net cash provided/(used) by operating activities |
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Less: | ||||
Net capital expenditures | (3,790) | (2,461) | (13,111) | (21,749) |
Free cash flow |
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1. The Company believes 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. The Company believes 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 provided by operating activities.
CONTACT:Source:Cliff Stebe Chief Financial Officer 636.946.6525
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