LMI Aerospace, Inc. (LCUT)
Q3 2008 Earnings Call Transcript
November 06, 2008, 09:00 am ET
Ron Saks - CEO and President
Ed Dickinson - CFO
Alex Hamilton - Jesup & Lamont
Gary Liebowitz - Wachovia Securities
Tyler Hojo - Sidoti & Company
Ed Keller - Oppenheimer
Stan Manny - Manny Family Investments
Chris McDonald - Kennedy Capital Management
Myles Walton - Oppenheimer
Previous Statements by LMIA
» LMI Aerospace, Inc. Q3 2009 Earnings Call Transcript
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» LMI Aerospace, Inc. Q4 2008 Earnings Call Transcript
Actual results may differ from these forward-looking statements as a result, among other things, of the factors detailed from time to time in our filings with the Securities and Exchange Commission, including those described in our annual report Form 10-K for the year ended December 31, 2007.
At this time, I would like to turn the conference over to the Chief Executive Officer, Mr. Ron Saks. Please go ahead, sir.
Thank you, Laurie. Good morning, everyone. Thanks for joining our call. I'm Ron Saks, CEO of LMI Aerospace, and with me today in St. Louis is Ed Dickinson, our CFO. Ryan Bogan, CEO and President of D3 Technologies, will not be joining us today.
Here, normally, I start out with a description of what went on in the press release; but as I was driving in this morning, something occurred to me, because we're going to be talking a good bit in today's environment about risk mitigation and one evidence of that with respect to LMI is we have this call about an hour earlier than expected, because I was going to be attending the opening of a composite facility with a potential customer called [Dare Corp] in Nogales, Mexico.
However, when I was in California recently, I heard they were shooting one another in the streets of Nogales. So, if you’re wondering about whether LMI is going to mitigate its risk, I am sitting here in St. Louis, safely awaiting some thunder stocks.
In our press release issued yesterday, we announced record net income for the third quarter of 2008. Our revenues declined a bit from the second quarter, which was stronger than expected, at both our Aerostructures and Engineering Services segments, with Aerostructures impacted by the Boeing strike which began in September, and D3 experiencing mix changes and reduced overtime. Net income, however, was higher at both divisions, but gross margin improvement at both as well.
As we progressed through the third quarter and to the present, credit markets tightened and global economic performance began to deteriorate. Accordingly, we met with our largest customers, both OEMs and Tier 1s, in order to assess the validity of our current purchase orders and requested their view of the potential production changes which could occur in the next one to two years.
In addition, we tightened our review of capital expenditure requests and adjusted our current throughput goals in order to level production and provide productive work for our Aerostructures employees.
Our operating results for the third quarter were outstanding and we are taking steps to assure that we improve liquidity and optimize earnings while retaining our current workforce, despite the impact of the Boeing strike.
I would like Ed Dickinson to review the financial results and our press release with you, and then I will have more comments about our prospects for 2009, plans to improve free cash flow, and our acquisition strategy. Ed?
Morning everybody, again as Ron said, obviously, there is a lot going on in our industry and the overall economy. I would just say that we were still pleased with the results we saw, even given some of the events in our environment.
Before we address the financials, as usual I will give the cautionary note that the acquisition of D3 in July of last year makes comparing the numbers year-to-year a little difficult. The third quarter and the year-to-date '07 only have two months of the contribution of D3 and also, as a reminder, the legacy LMI businesses make up the Aerostructures segment; and D3 comprises the entire portion of the Engineering Services segment.
As Ron said, on a consolidated level revenue in the quarter was $61.9 million compared to $47.8 million to prior year and our net income was $5.2 million or $1.30 per share compared to $9.3 million or $0.83 per share.
The Aerostructures group generated $39.4 million in revenue in the current quarter, up 10% from $35.8 million in the prior year. However, the sales were down from $41.6 million generated in the second quarter of '08. The third quarter was negatively impacted by approximately $1.5 million due to the recently settled IAM strike at Boeing.
Last quarter, we spoke of certain offload work that we were expecting to generate revenue in the third and fourth quarters, but it has not materialized at the levels that we expected due to the strike. This shortfall is not included in the $1.5 million we referenced.
As both Boeing and their Tier 1s get production schedules aligned, we expect to see continued impacts through the fourth quarter of 2008. This uncertainty has led us to withdraw our guidance for 2008.