LMI Aerospace Inc. is a leading fabricator finisher and integrator offormed close tolerance aluminum and specialty alloy components for use by the aerospace industry. For approximately 50 years the Company has been engaged in manufacturing components for a wide variety of aerospace applications. Components manufactured by the Company include leading edge wing slats flaps and lens assemblies; cockpit window frame assemblies; fuselage skins and supports; and passenger and cargo door frames and supports. Lmi Aerospace Inc. has a market cap of $136.6 million; its shares were traded at around $11.37 with a P/E ratio of 8.6 and P/S ratio of 0.5.
Highlight of Business Operations:Net sales of components for corporate and regional aircraft were $10.5 million for the third quarter of 2009 compared to $13.9 million for the third quarter of 2008, a decrease of $3.4 million, or 24.5%. The decrease in sales in this sector was primarily attributable to a decrease in sales of large cabin components for Gulfstream due to production rate cuts announced by Gulfstream in March 2009 and the resulting inventory adjustments implemented in connection with these production cuts. Additionally, Gulfstream s manufacturing operations were closed for four weeks in July 2009, which further limited demand for our products. The decline in production was offset by a design-build project in collaboration with our Engineering Services segment that contributed $1.2 million of sales in the current quarter.
Net sales of products used in large commercial aircraft were $18.6 million for the third quarter of 2009 compared to $11.3 million for the third quarter of 2008, an increase of $7.3 million, or 64.6%. The increase in net sales to this market was driven by aftermarket support for the 767 wing modification and winglet program, which began full production in 2009 and generated $6.9 million of sales in the third quarter of 2009 compared to $0.5 million in the third quarter of 2008, an increase of $6.4 million. In addition, sales related to the 737 and 747 programs increased $0.6 million and $0.4 million, respectively, from $5.6 million and $3.2 million, respectively, in the third quarter of 2008 to $6.2 million and $3.6 million, respectively, in the third quarter of 2009. Sales related to the 787 slightly decreased from $0.2 million in the third quarter of 2008 to $0.1 million in the third quarter of 2009.
Military products generated $9.5 million of net sales in the third quarter of 2009 compared to $10.8 million in the third quarter of 2008, a decrease of $1.3 million, or 12.0%. This decrease partially resulted from a decline of $0.9 million in sales for the Apache Helicopter program from $1.5 million in the third quarter of 2008 to $0.6 million in the third quarter of 2009, primarily due to changes made in the customer s inventory management process. In addition, Blackhawk sales declined by $0.6 million from $8.4 million in the third quarter of 2008 to $7.8 million in the third quarter of 2009, primarily due to continued inventory destocking by our customers.
Gross Profit. Gross profit for the third quarter of 2009 was $8.5 million (21.4% of net sales) compared to $11.8 million (29.9% of net sales) in the third quarter of 2008. During the third quarter, the Company reduced raw material and finished goods inventories by $1.3 million and $6.3 million, respectively, and experienced lower sales volume which resulted in lower production levels. This lower production resulted in inefficiencies and an inability to cover fixed costs effectively. An increase in obsolescence costs and health insurance costs also contributed to the decline in gross profit. Additionally, although the 767 wing modification kit is expected to provide a lower gross profit margin than other Aerostructures products, the program did operate above expectations in the quarter.
Net sales for the Engineering Services segment were $20.2 million for the third quarter of 2009 compared to $22.8 million for the third quarter of 2008, a decrease of $2.6 million, or 11.4%. This decrease resulted from lower demand for services in 2009 compared to 2008. Approximately $18.8 million, or 93.1% of the segment s revenues, were recorded under reimbursement type contracts for engineering services for the third quarter of 2009 compared to $22.3 million, or 97.8% of the segment s revenues, for the third quarter of 2008, a decrease of $3.5 million or 15.7%. These revenues are generated from labor hours incurred at varying, pre-negotiated rates and other direct costs plus an administrative fee. Net sales under these reimbursement contracts are primarily for commercial, corporate and military markets.
Net sales for services for large commercial aircraft were $7.9 million in the third quarter of 2009, down $3.1 million, or 28.2%, from $11.0 million in the third quarter of 2008. These revenues are primarily from design programs supporting Boeing s 747-8, 767 and 787 platforms. In addition to decreases in overtime requirements, large commercial aircraft revenue declined due to the completion of some of the related engineering tasks.
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