-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, U4Os19w+W1216NEfFPBFM0vsT6dhsvpv7rEO09QvcY1SQK9Pf4y9/44vRKX/rE7U lavYsZpFE9Ju0G60fhlP0w== 0000950134-03-008679.txt : 20030529 0000950134-03-008679.hdr.sgml : 20030529 20030529171049 ACCESSION NUMBER: 0000950134-03-008679 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20021231 FILED AS OF DATE: 20030529 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LMI AEROSPACE INC CENTRAL INDEX KEY: 0001059562 STANDARD INDUSTRIAL CLASSIFICATION: AIRCRAFT PART & AUXILIARY EQUIPMENT, NEC [3728] IRS NUMBER: 431309065 STATE OF INCORPORATION: MO FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-24293 FILM NUMBER: 03724027 BUSINESS ADDRESS: STREET 1: 3600 MUELLER RD CITY: ST CHARLES STATE: MO ZIP: 63302 BUSINESS PHONE: 6369466525 MAIL ADDRESS: STREET 1: P O BOX 900 CITY: ST CHARLES STATE: MO ZIP: 63302 10-K/A 1 c76163a1e10vkza.txt AMENDMENT NO. 1 TO FORM 10-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-K/A (Amendment No. 1) [X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. For the fiscal year ended December 31, 2002 [] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. For the transition period from ________________ to ________________. Commission file number 000-24293 ------------------------------------------------ LMI AEROSPACE, INC. - -------------------------------------------------------------------------------- (Exact Name of Registrant as Specified in Its Charter) Missouri 43-1309065 ---------------------------------------- ------------------------- (State or Other Jurisdiction of (IRS Employer Incorporation or Organization) Identification No.) 3600 Mueller Road, St. Charles, Missouri 63301 ---------------------------------------- ------------------------- (Address of Principal Executive Officer) (ZIP Code) (636) 946-6525 - -------------------------------------------------------------------------------- (Registrant's Telephone Number, Including Area Code) Securities to be registered pursuant to Section 12(b) of the Act: None ----- Securities to be registered pursuant to Section 12(g) of the Act: Common stock, $0.02 par value - -------------------------------------------------------------------------------- (Title of Class) Indicate by check mark whether registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K [ ] Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). YES [ ] NO [X] The aggregate market value of the voting common equity held by non-affiliates computed by reference to the average bid and asked price of such common equity as of June 28, 2002, the last business day of the registrant's most recently completed second fiscal quarter, was $11,907,154. There were 8,181,786 total shares of common stock outstanding as of April 3, 2003 Documents Incorporated by Reference Part III incorporates by reference portions of the Proxy Statement for the Registrant's 2003 Annual Meeting. EXPLANATORY NOTE LMI Aerospace, Inc. (the "Company") hereby amends its Annual Report on Form 10-K for the year ended December 31, 2002 (the "Form 10-K") by correcting an addition error contained in the Company's Consolidated Balance Sheets included as part of Item 8 to the Form 10-K. In particular, the Company is hereby amending the Consolidated Balance Sheet to properly indicate that the Company's total long-term liabilities as of December 31, 2002 were $26,560,000, rather than $16,560,000. As required under SEC rules, this Amendment sets forth the complete text of "Item 8. Financial Statements and Supplementary Data" as amended. In addition, the Company also amended the Exhibit Index contained in the Form 10-K to indicate that Exhibit 3.3 was previously filed with the Company's Annual Report on Form 10-K for the year ended December 31, 2001. This Amendment continues to speak as of the date of the Form 10-K, and the Company has not updated the disclosure in this Amendment to speak to any later date. TABLE OF CONTENTS
Item No. Page - -------- ---- PART II 8 Financial Statements and Supplementary Data 1 PART IV 15 Exhibits, Financial Statement Schedules, and Reports on Form 8-K 25 Signatures 26 Certifications 27 Exhibit Index 29
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. The following financial statements are included in Item 8 of this report:
Financial Statement Page ------------------- ---- Report of Independent Auditors 2 Consolidated Balance Sheets as of December 31, 2001 and 2002 3 Consolidated Statements of Operations for the Years Ended December 31, 2000, 2001 and 2002 4 Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 2000, 2001 and 2002 5 Consolidated Statements of Cash Flows for the Years Ended December 31, 2000, 2001 and 2002 6 Notes to Consolidated Financial Statements 7
1 Report of Independent Auditors The Board of Directors and Stockholders LMI Aerospace, Inc. We have audited the accompanying consolidated balance sheets of LMI Aerospace, Inc. (the "Company") as of December 31, 2001 and 2002, and the related consolidated statements of operations, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 2002. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of LMI Aerospace, Inc. at December 31, 2001 and 2002, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2002, in conformity with accounting principles generally accepted in the United States. As described in Note 1 to the financial statements, in 2000 the Company changed its method of accounting for revenue recognition and in 2002 the Company changed its method of accounting for goodwill. /s/ Ernst & Young LLP St. Louis, Missouri April 15, 2003 2 LMI Aerospace, Inc. Consolidated Balance Sheets (Amounts in thousands, except share and per share data)
DECEMBER 31 2001 2002 ------------ ------------ ASSETS Current assets: Cash and cash equivalents $ 4,645 $ 1,182 Investments 643 -- Trade accounts receivable, net of allowance of $64 in 2001 and $334 in 2002 6,285 11,392 Inventories 23,045 25,181 Prepaid expenses 787 978 Deferred income taxes 886 1,389 Income taxes receivable -- 1,501 ------------ ------------ Total current assets 36,291 41,623 Property, plant, and equipment, net 24,014 25,986 Goodwill 7,420 5,653 Customer intangible assets, net -- 4,267 Other assets 277 336 ------------ ------------ $ 68,002 $ 77,865 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 3,547 $ 6,107 Accrued expenses 2,659 2,846 Current installments of long-term debt and capital lease obligations 2,334 4,616 ------------ ------------ Total current liabilities 8,540 13,569 Long-term debt and capital lease obligations, less current installments 12,621 24,621 Deferred income taxes 1,192 1,939 ------------ ------------ Total long-term liabilities 13,813 26,560 Stockholders' equity: Common stock of $.02 par value; authorized 28,000,000 shares; 8,734,422 and 8,736,427 shares issued in 2001 and 2002, respectively 175 175 Preferred stock; authorized 2,000,000 shares; none issued -- -- Additional paid-in capital 26,171 26,171 Treasury stock, at cost, 716,676 and 554,641 shares in 2001 and 2002, respectively (3,402) (2,632) Accumulated other comprehensive loss -- (17) Retained earnings 22,705 14,039 ------------ ------------ Total stockholders' equity 45,649 37,736 ------------ ------------ $ 68,002 $ 77,865 ============ ============
See accompanying notes 3 LMI Aerospace, Inc. Consolidated Statements of Operations (Amounts in thousands, except per share data)
YEAR ENDED DECEMBER 31 2000 2001 2002 ------------ ------------ ------------ Net sales $ 55,658 $ 70,823 $ 81,349 Cost of sales 48,255 54,809 69,185 ------------ ------------ ------------ Gross profit 7,403 16,014 12,164 Selling, general and administrative expenses 9,135 10,194 12,931 Goodwill impairment charges -- -- 5,104 ------------ ------------ ------------ Income (loss) from operations (1,732) 5,820 (5,871) Other income (expense): Interest expense (169) (843) (1,495) Other, net 179 (247) (525) ------------ ------------ ------------ 10 (1,090) (2,020) ------------ ------------ ------------ Income (loss) before income taxes (1,722) 4,730 (7,891) Provision for (benefit of) income taxes (603) 1,764 (691) ------------ ------------ ------------ Income (loss) before cumulative effect of change in accounting principle (1,119) 2,966 (7,200) Cumulative effect of change in accounting principle, net of income tax benefit of $88 in 2000 and $663 for 2002 (164) -- (1,104) ------------ ------------ ------------ Net income (loss) $ (1,283) $ 2,966 $ (8,304) ============ ============ ============ Amounts per common share: Income (loss) before cumulative effect of change in accounting principle $ (0.14) $ 0.37 $ (0.89) Cumulative effect of change in accounting principle (0.02) -- (0.14) ------------ ------------ ------------ Net income (loss) per common share $ (0.16) $ 0.37 $ (1.03) ============ ============ ============ Net income (loss) per common share - assuming dilution $ (0.16) $ 0.36 $ (1.03) ============ ============ ============ Weighted average common shares outstanding 8,190,525 8,059,682 8,077,293 ============ ============ ============ Weighted average dilutive stock options outstanding -- 98,444 -- ============ ============ ============
See accompanying notes. 4 LMI Aerospace, Inc. Consolidated Statements of Stockholders' Equity (Amounts in thousands, except share and per share data)
ACCUMULATED ADDITIONAL OTHER TOTAL COMMON PAID-IN RETAINED TREASURY COMPREHENSIVE STOCKHOLDERS' STOCK CAPITAL EARNINGS STOCK INCOME (LOSS) EQUITY ---------- ---------- ---------- ---------- ------------- ------------- Balance at December 31, 1999 $ 175 $ 26,164 $ 21,193 $ (3,046) $ -- $ 44,486 Comprehensive loss: Net loss -- -- (1,283) -- -- (1,283) Unrealized loss on available- for-sale securities, net of income tax benefit of $146 -- -- -- -- (272) (272) ---------- Comprehensive loss (1,555) Purchase of 152,000 shares of outstanding stock for treasury -- -- -- (382) -- (382) Issuance of 44,570 shares of treasury stock to profit sharing/401(k) plan -- -- (125) 254 -- 129 ---------- ---------- ---------- ---------- ---------- ---------- Balance at December 31, 2000 175 26,164 19,785 (3,174) (272) 42,678 ---------- ---------- ---------- ---------- ---------- ---------- Comprehensive income (loss): Net income -- -- 2,966 -- -- 2,966 Unrealized gain on available- for-sale securities, net of income tax of $40 -- -- -- -- 67 67 Reclassification adjustment for losses realized in net income, net of income tax benefit of $106 -- -- -- -- 205 205 ---------- Comprehensive income /(loss) 3,238 Exercise of options to purchase stock -- 7 -- -- -- 7 Purchase of 119,000 shares of outstanding stock for treasury -- -- -- (379) (379) Issuance of 30,928 shares of treasury stock to profit sharing/401(k) plan -- -- (46) 151 -- 105 ---------- ---------- ---------- ---------- ---------- ---------- Balance at December 31, 2001 175 26,171 22,705 (3,402) -- 45,649 ---------- ---------- ---------- ---------- ---------- ---------- Comprehensive income (loss): Net income -- -- (8,304) -- -- (8,304) Unrealized loss on available-for- sale securities, net of income tax benefit of $244 -- -- -- -- (399) (399) Reclassification adjustment for losses realized in net loss, net of income -- -- -- -- 399 399 tax benefit of $244 Exchange rate (loss) -- -- -- -- (17) (17) ---------- Comprehensive income (loss) (8,321) Issuance of stock - 90,000 shares of -- -- (218) 427 -- 209 common stock in connection with the acquisition of SSFF Purchase of 1,900 shares of outstanding stock for treasury -- -- -- (8) -- (8) Exercise of options to purchase stock -- -- (101) 196 -- 95 Issuance of 32,690 shares of treasury stock to profit sharing/401(k) plan -- -- (43) 155 -- 112 ---------- ---------- ---------- ---------- ---------- ---------- Balance at December 31, 2002 $ 175 $ 26,171 $ 14,039 $ (2,632) $ (17) $ 37,736 ---------- ---------- ---------- ---------- ---------- ----------
See accompanying notes. 5 LMI Aerospace, Inc. Consolidated Statements of Cash Flows (Amounts in thousands)
YEAR ENDED DECEMBER 31 2000 2001 2002 ---------- ---------- ---------- OPERATING ACTIVITIES Net income (loss) $ (1,283) $ 2,966 $ (8,304) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 3,650 4,208 4,433 Goodwill impairment charges -- -- 6,871 Non cash investment loss -- 311 643 Changes in operating assets and liabilities: Trade accounts receivable 314 2,810 (2,636) Inventories (598) (2,828) (847) Prepaid expenses and other assets (13) (432) (176) Income taxes 222 349 (2,026) Accounts payable (450) (612) 274 Accrued expenses 63 213 (274) ---------- ---------- ---------- Net cash (used by) from operating activities 1,905 6,985 (2,042) INVESTING ACTIVITIES Additions to property, plant, and equipment (2,776) (3,387) (2,293) Proceeds from sale of equipment 481 90 -- Purchases of investments (954) -- -- Acquisition of Versaform, net of cash acquired -- -- (10,458) Acquisition of Stretch Forming Corporation -- -- (825) Acquisition of Southern Stretch Forming and Fabrication -- -- (115) Acquisition of Tempco, net of cash acquired -- (14,908) (300) ---------- ---------- ---------- Net cash used by investing activities (3,249) (18,205) (13,991) FINANCING ACTIVITIES Proceeds from issuance of long-term debt 92 14,250 11,000 Net advances on revolving line of credit -- -- 4,417 Principal payments on long-term debt (2,598) (715) (2,918) Proceeds from equipment notes payable -- 1,027 -- Treasury stock transactions, net (382) (380) (7) Proceeds from exercise of stock options -- 7 95 ---------- ---------- ---------- Net cash from (used by) financing activities (2,888) 14,189 12,587 Effect of exchange rate changes on cash -- -- (17) Net increase (decrease) in cash and cash equivalents (4,232) 2,969 (3,463) Cash and cash equivalents, beginning of year 5,908 1,676 4,645 ---------- ---------- ---------- Cash and cash equivalents, end of year $ 1,676 $ 4,645 $ 1,182 ========== ========== ==========
See accompanying notes. 6 LMI Aerospace, Inc. Notes to Consolidated Financial Statements (Dollar amounts in thousands, except share and per share data) December 31, 2002 1. ACCOUNTING POLICIES DESCRIPTION OF BUSINESS LMI Aerospace, Inc. (the "Company") fabricates, machines, and integrates formed, close tolerance aluminum and specialty alloy components for use by the aerospace, semiconductor and medical products industries. The Company is a Missouri corporation with headquarters in St. Charles, Missouri. The Company maintains facilities in St. Charles, Missouri; Seattle, Washington; Tulsa, Oklahoma; Wichita, Kansas; Irving, Texas; Sun Valley, California; Oceanside, California; and Langley, British Columbia. The accompanying financial statements include the consolidated financial position, results of operations, and cash flows of the Company and its subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. OPERATING RESULTS AND MANAGEMENT'S PLAN The Company experienced net losses in the third and fourth quarters of 2002 primarily as a result of product issues associated with new work in the St. Charles plant which caused the Company to violate certain restrictive financial covenants in its bank credit agreement with its primary lender as of December 31, 2002. Additionally, subsequent to year end, the Company exhausted its available borrowings under its revolving credit facility of $7.0 million, peaking at $7.5 million. The Company provided forecasts of operations and cash flows to the bank and, in April 2003, negotiated revised covenants, secured an increase in its revolving credit facility to $10.0 million, subject to a borrowing base calculation, and extended the maturity date of the revolving credit facility to January 5, 2004. As a part of the negotiations, the bank also required an increase in the interest rate on the revolving credit facility of 0.25%, restrictions on capital expenditures, and a fee of $25,000. Additionally, the bank required the Company to retain a financial consultant to work with management to analyze operations and cash management. Independently, the Company has undertaken a plan to reduce operating expenses at all facilities with primary emphasis on the St. Charles facility. These immediate cost savings include reductions in overtime worked and controllable expenses. This plan may include, but is not limited to, headcount reductions, downsizing or closing of facilities, and elimination of or reduction in specific customers or production processes. Based on forecasted operating results and cash flows, management believes that cash flow from operations and the expanded capacity under the Revolving Credit Agreement, as described in Note 7, will be adequate to fund the Company's operations in 2003. The forecasted operating results and cash flows are dependent upon management's ability to improve performance in the St. Charles plant and accomplish certain expected reductions in operating expenses. While management believes this forecast is achievable, to the extent that management does not improve operating performance and reduce expenses, the Company may have to seek alternative sources of financing. There can be no assurances that the Company can obtain alternative financing on reasonable and acceptable terms. CUSTOMER AND SUPPLIER CONCENTRATION Direct sales to the Company's largest customer accounted for 48.0%, 40.0%, and 25.4% of the Company's total revenues in 2000, 2001 and 2002, respectively. Accounts receivable balances related to direct sales to this customer were 29.0% in 2001 and 7.8% in 2002. Indirect sales to the Company's largest customer accounted for 13.0%, 11.0%, and 8.7% of the Company's total sales in 2000, 2001, and 2002, respectively. Direct sales to the Company's second largest customer accounted for 10.4%, 4.6% and 17.5% of the Company's total revenues in 2000, 2001 and 2002 and represented 3.1% and 21.1% of the accounts receivable balance at December 31, 2001 and 2002, respectively. The Company purchased approximately 63% and 34% of the materials used in production from three suppliers in 2001 and 2002, respectively. USE OF ESTIMATES The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make certain estimates and assumptions. These estimates and assumptions affect the reported amounts in the financial statements and accompanying notes. Actual results could differ from those estimates. CASH AND CASH EQUIVALENTS Cash and cash equivalents include cash on hand, amounts due from banks, and all highly liquid investment instruments with an initial maturity of three months or less. 7 LMI Aerospace, Inc. Notes to Consolidated Financial Statements - (Continued) (Dollar amounts in thousands, except share and per share data) December 31, 2002 INVENTORIES Inventories are stated at the lower of cost or market using actual cost for raw materials and average cost for work-in-process and finished goods. REVENUE RECOGNITION Revenues are recorded when services are delivered or when products are shipped, except for long-term contracts which are recorded on the percentage-of-completion method (units-of-delivery basis). Sales from long-term contracts were approximately 17% of sales in 2000, less than 10% in 2001, and zero in 2002. In the fourth quarter of 2000, the Company changed its method of accounting for revenue recognition in accordance with Staff Accounting Bulletin (SAB) No. 101, Revenue Recognition in Financial Statements. Previously, the Company recognized revenue on certain product prior to customer acceptance. The Company had performed testing to ensure the product met customer specifications and had routinely obtained customer acceptance in the past, but customer acceptance was required per the Company's contract with the customer. Under the new accounting method adopted retroactive to January 1, 2000, the Company now recognizes revenue upon customer acceptance. The cumulative effect of the change on prior years resulted in a charge to income of $164, net of income tax benefit of $88, which is included in income for the year ended December 31, 2000. The effect of the change on the year ended December 31, 2000 was to increase income before the cumulative effect of the accounting change by $89 ($.01 per share). Pro forma results for prior years are not disclosed due to immateriality. PROPERTY, PLANT, AND EQUIPMENT Property, plant and equipment are stated at cost. Equipment under capital leases is stated at the present value of the minimum lease payments. Depreciation is calculated using the straight-line method over the estimated useful lives of the related assets. Equipment held under capital leases and leasehold improvements are amortized using the straight-line method over the shorter of the lease term or estimated useful life of the asset. Estimated useful lives for buildings and machinery and equipment are 20 years and 4 to 10 years, respectively. LONG-LIVED ASSETS In accordance with Statement of Financial Accounting Standard (SFAS) No. 144, Accounting for the impairment or Disposal of Long Lived Assets, long lived assets held and used are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. 8 LMI Aerospace, Inc. Notes to Consolidated Financial Statements - (Continued) (Dollar amounts in thousands, except share and per share data) December 31, 2002 PRE-PRODUCTION COSTS The Company accounts for pre-production costs in accordance with (EITF) 99-5, Accounting for Pre-Production Costs Related to Long-Term Supply Arrangements. All design and development costs for products to be sold under long-term supply arrangements are expensed unless there is a contractual guarantee that provides for specific required payments for design and development costs. GOODWILL AND INTANGIBLE ASSETS Effective January 1, 2002, the Company adopted SFAS No. 142, Goodwill and Other Intangible Assets, under which goodwill will no longer be amortized but instead be tested upon adoption of the Statement and then at least annually for impairment and expensed to the extent the implied fair value of reporting units, including goodwill, is less than carrying value (see Note 6). Acquired intangible assets with finite lives are amortized over the useful life on a straight line basis. INCOME TAXES Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement and income tax basis of the Company's assets and liabilities. 9 LMI Aerospace, Inc. Notes to Consolidated Financial Statements - (Continued) (Dollar amounts in thousands, except share and per share data) December 31, 2002 STOCK-BASED COMPENSATION The Company accounts for its stock based compensation in accordance with Accounting Principles Board (APB) Opinion No. 25 and related interpretations and provides the pro forma disclosure provisions of SFAS No. 123. The Company applied APB Opinion No. 25 in accounting for its stock option plans, and accordingly, no compensation cost has been recognized for stock options granted at fair market value. Had the Company determined compensation cost based on the fair value at the grant date under SFAS No. 123, net income and earnings per share amounts would have been as follows:
2000 2001 2002 ---------- ---------- ---------- Net income (loss) as reported $ (1,283) $ 2,966 $ (8,304) Less: Total stock based employee compensation expense determined under fair value based method, net of tax effect (205) (225) (150) ---------- ---------- ---------- Pro forma net income (loss) (1,488) 2,741 (8,454) Net income per common share As reported (.16) .37 (1.03) Pro forma net income (loss) (.18) .34 (1.05) Net income per common share assuming dilution: As reported (.16) .36 (1.03) Pro forma net income (loss) (.18) .34 (1.05)
FINANCIAL INSTRUMENTS Fair values of the Company's long-term obligations approximate their carrying values based on discounted cash flow analysis. Available-for-sale securities are stated at fair value based on quoted market prices, with the unrealized gains and losses, net of tax, reported in other comprehensive income/loss. Realized gains and losses and declines in value determined to be other-than-temporary on available-for-sale securities are included in investment income. The cost of securities sold is based on the average cost method. Interest and dividends on securities classified as available-for-sale are included in other income. The Company's other financial instruments have fair values which approximate their respective carrying values due to their short maturities or variable rate characteristics. EARNINGS PER COMMON SHARE The Company follows SFAS No. 128, Earnings per Share, in calculating basic and fully diluted earnings per share. Earnings per share are computed by dividing net income by the weighted average number of common shares outstanding during the applicable periods. 10 LMI Aerospace, Inc. Notes to Consolidated Financial Statements - (Continued) (Dollar amounts in thousands, except share and per share data) December 31, 2002 2. ACQUISITIONS TEMPCO ENGINEERING On April 2, 2001, the Company acquired certain assets of Tempco Engineering, Inc. and Hyco Precision, Inc. ("Tempco"), two privately held related metal machining companies based in Southern California, funded by a secured note with the Company's lender. The acquisition has been accounted for under the purchase method, and accordingly, the results of operations were included in the Company's financial statements from the date of acquisition. Tempco produces components for photolithography equipment used in the manufacture of semiconductors, as well as components for the defense and commercial aerospace industries. Tempco's sales were approximately $16,000 in 2000. The purchase price for the net assets acquired, net of acquired cash, was approximately $15,200. The Company may pay additional contingent consideration of up to $1,250 if Tempco's EBITDA, as defined, exceeds certain limits for the two years ended March 31, 2003. At December 31, 2002 Tempco had not and does not expect to meet the financial thresholds that would obligate the Company to pay additional consideration at the end of the contingency period, March 31, 2003. The excess of the purchase price over the fair value of net assets acquired, $5,943, was allocated to goodwill. VERSAFORM On May 16, 2002, the Company acquired all of the outstanding stock of Versaform Corporation and BC 541775, Ltd., a holding company that owns 100% of the common stock of Versaform Canada Corporation (collectively, "Versaform") for approximately $11,787 consisting of cash and a note payable of $ 1.3 million. Versaform forms large sheet metal and extrusion components predominantly for the corporate, regional, and military aerospace markets from two facilities in Oceanside, California and one facility in Langley, British Columbia, Canada. The acquisition was accounted for as a purchase business combination, and accordingly, the results of operations were included in the Company's financial statements after May 16, 2002. The cost to acquire Versaform has been allocated to the assets acquired and liabilities assumed according to their estimated fair values at the time of the acquisition as follows: Working capital $ 400 Property, plant, and equipment 3,179 Assumed long-term liabilities (871) Customer-related intangible 3,975 Goodwill (nondeductible) 5,104 ---------- $ 11,787 ==========
The intangible asset relates to acquired customer relationships and is being amortized over 15 years on a straight line basis. Based on the terms of the purchase agreement, the Company is obligated to pay additional consideration if sales to a specific customer exceed certain annual 11 LMI Aerospace, Inc. Notes to Consolidated Financial Statements - (Continued) (Dollar amounts in thousands, except share and per share data) December 31, 2002 thresholds over the three years following the acquisition. As of December 31, 2002, sales to the specific customer did not meet these thresholds and is not expected to meet the thresholds for the remainder of the three year contingency period. The purchase agreement allows for certain adjustments to the purchase price for claims in excess of $100. The Company has filed a claim for reimbursement of certain liabilities existing at the closing date and has recorded a receivable from the seller of $196. The Company expects to resolve the purchase price adjustment in the second quarter of 2003. Versaform's sales were approximately $12,000 in 2001. SOUTHERN STRETCH FORMING AND FABRICATION, INC. On September 30, 2002, the Company acquired certain assets and assumed certain liabilities of Southern Stretch Forming and Fabrication, Inc. ("SSFF"). The former owner of Versaform, currently a director of the Company, held a 50% interest in SSFF. Following the Company's acquisition of Versaform, the director purchased the remaining 50% interest in SSFF and sold SSFF to the Company. (See related party transactions at Note 12) The assets consisted primarily of inventory, machinery and equipment. The acquisition was accounted for as a purchase business combination, and accordingly, the related results of operations have been included in the consolidated statement of operations after September 30, 2002. The purchase price of $444, which includes the assumption of debt and direct costs of the transaction, consisted of $235 in cash and 90,000 shares of LMI common stock, with a market value of $209. The cost to acquire these assets has been allocated to the assets according to their fair values and consisted of inventory of $115, and equipment and machinery of $718, and assumed liabilities of $389. Net sales for SSFF for 2001 were approximately $3,820, of which approximately $1,739 were to the Company. STRETCH FORMING CORPORATION On June 12, 2002, the Company acquired certain assets of Stretch Forming Corporation ("SFC"), based in Southern California. The purchase price of $950 was allocated to the assets acquired based on their fair value and consisted of working capital of $465, equipment of $66, and an intangible asset of $419 related to production backlog, to be amortized over 3.5 years on a straight line basis. 3. TREASURY STOCK TRANSACTIONS The Board of Directors authorized the Company to repurchase shares of its common stock and place these shares in a Treasury Stock account for use at management's discretion. The Company purchased 119,000 shares and 1,900 shares in 2001 and 2002, respectively, in the open market at prices ranging from $4.48 to $2.00 per share. In addition, the Company issued 30,928 shares in 2001 and 32,690 shares in 2002 in conjunction with contributions to and purchases by the Company's benefit plans. These transactions were recorded at cost in stockholders' equity. A portion of the consideration for SSFF consisted of 90,000 shares of treasury stock recorded at fair value. 12 LMI Aerospace, Inc. Notes to Consolidated Financial Statements - (Continued) (Dollar amounts in thousands, except share and per share data) December 31, 2002 4. INVENTORIES Inventories consist of the following:
2001 2002 ---------- ---------- Raw materials $ 3,742 $ 4,469 Work in process 6,127 5,576 Finished goods 13,176 15,136 ---------- ---------- $ 23,045 $ 25,181 ========== ==========
During the third and fourth quarter of 2002, the Company encountered production difficulties and inefficiencies on new programs with two significant customers due to several factors including inadequate tooling, poor performance of a critical subcontractor, and changes in customer acceptance criteria. At December 31, 2002, the Company recorded a lower of cost or market reserve of $1,957 on work in process primarily related to these programs of which approximately $696 relates to completion costs to be incurred in 2003. The Company has presented claims for certain costs incurred and has requested re-pricing of several components. As the claim has not been accepted or approved by the customer, no claim recovery has been recorded in the December 31, 2002 financial statement. 5. PROPERTY, PLANT, AND EQUIPMENT Property, plant, and equipment consist of the following:
2001 2002 ---------- ---------- Land $ 705 $ 705 Buildings 12,395 12,689 Machinery and equipment 31,061 36,493 Leasehold improvements 808 918 Software and other 1,496 1,608 Construction in progress 390 552 ---------- ---------- 46,855 52,965 Less accumulated depreciation 22,841 26,979 ---------- ---------- $ 24,014 $ 25,986 ========== ==========
Depreciation expense (including amortization expense on software) recorded by the Company totaled $3,216, $3,730, and $4,284 for 2000, 2001 and 2002, respectively. 13 LMI Aerospace, Inc. Notes to Consolidated Financial Statements - (Continued) (Dollar amounts in thousands, except share and per share data) December 31, 2002 6. GOODWILL AND INTANGIBLES As required by SFAS No. 142, the Company performed the initial phase of its transitional impairment test as of January 1, 2002 during the first six months following adoption and determined that its operating segments constitute reporting units. Additionally, the Company determined that the carrying value of its Sheet Metal segment exceeded its fair value. The initial phase of the transitional test indicated potential impairment of the Sheet Metal segment's goodwill with a carrying value of $1,767 reflecting the current industry conditions and estimates of aerospace industry spending in the foreseeable future. The Company engaged valuation experts to assist in performing a review of the fair value of the Sheet Metal segment's tangible and intangible assets, including goodwill, as of January 1, 2002. Based upon the valuation completed in the fourth quarter of 2002, relying primarily on a discounted cash flow valuation technique, the Company recorded a $1,767 charge ($1,104 net of tax) for the impairment of the Sheet Metal segment's goodwill. The charge is reflected as the cumulative effect of adopting the new accounting standard as of January 1, 2002. In the fourth quarter 2002, the Company performed the required annual impairment test under SFAS No. 142. The initial phase of the required annual test indicated potential impairment of the Sheet Metal segment's goodwill with a carrying value of $5,104, all of which related to the May 2002 acquisition of Versaform. These impairment indicators arose from poor operating performance at the other operations in the Sheet Metal segment reflecting further deterioration in the industry conditions and estimates of aerospace industry spending in the foreseeable future. The Company engaged valuation experts to assist in performing a review of the fair value of the Sheet Metal segment's tangible and intangible assets, including goodwill, as of October 1, 2002. Based upon the valuation, relying primarily on a discounted cash flow valuation technique, the Company recorded a $5,104 charge as a component of operating income in the fourth quarter of 2002. The changes in the carrying amount of goodwill for the fiscal years ended 2000, 2001, and 2002 were as follows:
2000 2001 2002 ---------- ---------- ---------- Beginning of the year $ 1,725 $ 1,888 $ 7,420 Additions 279 5,943 5,104 Amortization (116) (411) -- Impairment Cumulative effect of accounting change -- -- (1,767) Annual impairment assessment -- -- (5,104) ---------- ---------- ---------- End of the year $ 1,888 $ 7,420 $ 5,653 ========== ========== ==========
Goodwill at December 31, 2002 relates to the Machining and Technology segment. 14 LMI Aerospace, Inc. Notes to Consolidated Financial Statements - (Continued) (Dollar amounts in thousands, except share and per share data) December 31, 2002 The changes in the carrying amount of customer related intangibles for the year ended December 31, 2002 were as follows (There were no customers related intangibles prior to 2002):
Stretch Versaform Forming Corporation Total ------------ ------------------- ------------ January 1, 2002 $ -- $ -- $ -- Additions 3,975 419 4,394 Amortization (66) (61) (127) ------------ ------------ ------------ December 31, 2002 $ 3,909 $ 358 $ 4,267 ============ ============ ============
Prior to the adoption of SFAS No. 142, amortization expense was recorded for goodwill. The following table sets forth a reconciliation of net income and earnings per share information for fiscal years 2000 and 2001 adjusted for non-amortization provisions of SFAS No. 142.
Year ended December 31, 2000 2001 ------------ ------------ Reported net income (loss) $ (1,283) $ 2,966 Goodwill amortization 203 411 ------------ ------------ Adjusted net income (loss) $ (1,080) $ 3,377 ============ ============ Earnings /(loss) per share - basic $ (.16) $ .37 Goodwill amortization expense, net of tax .02 .05 ------------ ------------ Adjusted earnings per share - basic $ (.14) $ .42 ============ ============ Reported earnings/(loss) per share - diluted $ (.16) $ .36 Goodwill amortization expense, net of tax .02 .03 ------------ ------------ Adjusted earnings per share-diluted $ (.14) $ .41 ============ ============
15 LMI Aerospace, Inc. Notes to Consolidated Financial Statements - (Continued) (Dollar amounts in thousands, except share and per share data) December 31, 2002 7. LONG-TERM DEBT Long-term debt consists of the following:
2001 2002 ------------ ------------ Term Loans: Tempco $ 13,741 $ 11,705 Versaform -- 10,738 Revolving line of credit -- 4,417 Note payable to Director, principal and interest payable monthly at 7% -- 1,003 Note payable, principal and interest payable monthly, at fixed rates, ranging from 6.99% to 10.00% 1,100 1,212 Capital lease obligations 114 162 ------------ ------------ 14,955 29,237 Less current installments 2,334 4,616 ------------ ------------ $ 12,621 $ 24,621 ============ ============
The Company has a loan agreement ("Loan Agreement") with Union Planters Bank, NA. The Loan Agreement consists of a revolving line of credit ("Revolver"), a term loan to finance the purchase of Tempco ("Tempco Term Loan"), and a term loan to finance the purchase of Versaform ("Versaform Term Loan"). The Company's Loan Agreement is secured by all the domestic assets of the Company and requires compliance with certain non-financial and financial covenants including minimum levels of EBITDA and tangible net worth. At December 31, 2002, the Company was in violation of certain financial covenants of the Loan Agreement, due to the operating losses and negative cash flow from operations in 2002 (See Note 1). On April 15, 2003, the Company obtained a waiver of the December 31, 2002 violations and an amendment to the Loan Agreement from its lender. The amended Loan Agreement extends the maturity of the line of credit to January 2004, increases the capacity under the line of credit by $3 million and eased the quarterly financial covenant requirements through December 31, 2003. The Company's amended Revolver allows for a $10,000 line of credit, subject to a borrowing base calculation, to fund various corporate needs. Interest is payable with an interest rate of 3.6% monthly based on a quarterly cash flow leverage calculation and the LIBOR rate. This facility matures in January 2004. The credit facility prohibits the payment of cash dividends on common stock without the prior written consent of Union Planters. The Company had $4,417 outstanding on this line at December 31, 2002. The Company drew $14,250 on the Tempco Term Loan on April 2, 2001. The Tempco Term Loan requires monthly principal and interest payments over three years using a seven year amortization and bears interest at ninety day LIBOR plus 3%, subject to a cap of 8.5% and a floor of 7.0%. The interest rate was 7.0% at December 31, 2002. Under the Loan Agreement, the Company has $1,250 available to fund any additional contingent consideration which may be required under the terms of the Tempco acquisition (see Note 2). 16 LMI Aerospace, Inc. Notes to Consolidated Financial Statements - (Continued) (Dollar amounts in thousands, except share and per share data) December 31, 2002 The Versaform Term Loan was issued for $11,000 on May 15, 2002. The Versaform Term Loan requires monthly principal and interest payments over three years using a seven year amortization and bears interest at the ninety day LIBOR plus 3%. The interest rate was 4.4% at December 31, 2002. The Company entered into a note payable for $1,300 with the prior owner of Versaform in connection with the acquisition. The prior owner has since become a member of the board of directors of the Company. This note is payable monthly over three years and bears interest at 7.0%. This note is secured by 65% of the stock of the Company's Canadian subsidiary. The Company entered into various notes payable for the purchase of certain equipment. The notes are payable in monthly installments including interest ranging from 6.99% - 10.0% through November 2006. The notes payable are secured by equipment. The Company entered into capital lease agreements for the purchase of certain equipment. The leases are payable in monthly installments including interest ranging from 4.98% - 9.15% through August 2005. The aggregate maturities of long-term debt as of December 31, 2002 are as follows:
Year ending December 31: 2003 $ 4,616 2004 16,401 2005 8,048 2006 172 2007 -- ------------ $ 29,237 ============
17 LMI Aerospace, Inc. Notes to Consolidated Financial Statements - (Continued) (Dollar amounts in thousands, except share and per share data) December 31, 2002 8. LEASES The Company leases certain facilities and equipment under various noncancelable operating lease agreements which expire at various dates through 2009. At December 31, 2002, the future minimum lease payments under operating leases with initial noncancelable terms in excess of one year are as follows:
Year ending December 31: 2003 $ 1,933 2004 1,608 2005 1,218 2006 654 2007 265 Thereafter 223 ------------ $ 5,901 ============
Rent expense totaled $1,044, $1,354, and $2,107 in 2000, 2001, and 2002 respectively. 9. DEFINED CONTRIBUTION PLANS The Company has a noncontributory profit sharing plan and a contributory 401(k) plan which covers substantially all full-time employees. Employees are eligible to participate in both plans after reaching 1,000 hours of accredited service. Contributions to the profit sharing plan are at the discretion of management and become fully vested after seven years. Contributions by the Company to the profit sharing plan totaled $105, $121 and $0 for 2000, 2001 and 2002 respectively. Contributions by the Company to the 401(k) plan, which are fully vested to the employees immediately upon contribution, are based upon a percentage of employee contributions. The Company's contributions to the 401(k) plan totaled $88, $86 and $229 for 2000, 2001, and 2002 respectively. In addition, at December 31, 2002, the Company had 600,000 common shares of its stock reserved for contributions to the 401(k) plan. 18 LMI Aerospace, Inc. Notes to Consolidated Financial Statements - (Continued) (Dollar amounts in thousands, except share and per share data) December 31, 2002 10. STOCK OPTIONS The Company's 1998 Employee Stock Option Plan provides options for up to 900,000 shares to be granted to key employees at exercise prices greater than or equal to the fair market value per share on the date the option is granted. Options issued under the Plan are at the discretion of management and may be in the form of Incentive Stock Options or Non-Qualified Stock Options. Vesting periods may apply. At December 31, 2002, a total of 1,157,822 shares of authorized and unissued common stock were reserved for issuance of stock awards and options granted or authorized to be granted.
2000 2001 2002 -------------------------- -------------------------- -------------------------- WEIGHTED WEIGHTED WEIGHTED AVERAGE AVERAGE AVERAGE NUMBER OF EXERCISE NUMBER OF EXERCISE NUMBER OF EXERCISE SHARES PRICE SHARES PRICE SHARES PRICE ---------- ---------- ---------- ---------- ---------- ---------- Options outstanding at beginning of year 324,950 4.00 404,235 3.62 470,295 3.09 Granted 145,280 3.00 146,700 2.38 89,500 4.76 Exercised -- -- (2,005) 2.75 (40,645) 2.31 Canceled/expired (65,995) 4.15 (78,635) 4.38 (18,675) 4.23 ---------- ---------- ---------- Options outstanding at end of year 404,235 3.62 470,295 3.09 500,475 3.41 ========== ========== ========== ========== ========== ==========
The number of options exercisable and the related range of exercise prices December 31, 2000, 2001, and 2002 were 213,885 shares, with a range of exercise prices from $2.75 to $6.25, 276,170 shares, with a range of exercise prices from $2.00 to $5.93, and, 404,200 shares, with a range of exercise prices from $2.00 to $6.06, respectively. The fair value for options was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted-average assumptions for 2000, 2001 and 2002, respectively: risk-free interest rates of 5.1%, 4.78% and 3.36%; dividend yields of 0%, 0% and 0%; volatility factors of the expected market price of the Company's common stock of 57%; 104%, and 83% and a weighted average expected life of the option of four years for 2000 and six years for 2001 and 2002. The weighted average fair value of options granted during 2000, 2001 and 2002 was $1.46, $1.96 and $3.40, respectively The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because the Company's employee stock options have characteristics significantly different from those of traded options and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options. 19 LMI Aerospace, Inc. Notes to Consolidated Financial Statements - (Continued) (Dollar amounts in thousands, except share and per share data) December 31, 2002 11. INCOME TAXES The temporary differences between the tax basis of assets and liabilities and their financial reporting amounts that give rise to the deferred tax assets and liabilities are as follows:
2001 2002 ---------- ---------- Deferred tax assets: Accrued vacation $ 247 $ 295 Inventory 496 828 State tax credits 113 129 Goodwill -- 466 Other 30 138 ---------- ---------- Total deferred tax assets 886 1,856 Deferred tax liabilities: Depreciation (1,192) (2,399) Other -- (7) ---------- ---------- Total deferred tax liabilities (1,192) (2,405) ---------- ---------- Net deferred tax liability $ (306) $ (550) ========== ==========
20 LMI Aerospace, Inc. Notes to Consolidated Financial Statements - (Continued) (Dollar amounts in thousands, except share and per share data) December 31, 2002 The Company's income tax provision (benefit) attributable to income before income taxes and cumulative effect of change in accounting principle consisted of the following for the year ended December 31:
2000 2001 2002 ------------ ------------ ------------ Federal: Current $ (554) $ 1,820 $ (171) Deferred (32) (188) (468) ------------ ------------ ------------ (586) 1,632 (639) Canadian: Current -- -- 22 State: Current (14) 150 (50) Deferred (3) (18) (24) ------------ ------------ ------------ (17) 132 (74) ------------ ------------ ------------ $ (603) $ 1,764 $ (691) ============ ============ ============
The reconciliation of income tax computed at the U.S. federal statutory tax rates to income tax expense attributable to income before cumulative effect of change in accounting principle is as follows:
2000 2001 2002 ------------ ------------ ------------ Federal taxes (benefit) $ (586) $ 1,608 $ (2,683) State and local taxes, net of federal benefit (51) 140 (74) Non deductible goodwill -- -- 1,758 Valuation allowance for capital loss on available for sale securities -- -- 241 Other 34 16 67 ------------ ------------ ------------ Provision (benefit) for income taxes $ (603) $ 1,764 $ (691) ============ ============ ============
12. RELATED PARTY TRANSACTIONS The Company has entered into certain acquisition transactions with Brian Geary, a member of the Company's Board of Directors, related to his former ownership of Versaform and SSFF (See Note 2 for further description of these acquisitions). As a part of the acquisition of Versaform, the consideration included a note payable of $1.3 million to Mr. Geary which bears interest at 7% and is payable in monthly installments through May 2005. In addition, a relative of Mr. Geary retained ownership of a building and property where Versaform operates and leases the facility to the Company for approximately $86 per year. Prior to appointment as a Director of the Company, Mr. Geary owned 50% of SSFF. Subsequently, Mr. Geary purchased the remaining 50% of SSFF and sold the entity to the Company. Prior to approving the purchase of 21 SSFF, the Company's Audit Committee, at the request of the Board of Directors, considered the potential conflict of interest regarding the acquisition of SSFF. The Audit Committee concluded that the above transaction was negotiated on an arms length basis, consummated on terms generally similar to those prevailing with unrelated third parties, and were fair and in the best interest of the Company and its shareholders. The Company leases the two Tempco operating facilities from entities in which a relative of Ernest Star, an officer of the Company, is a principal beneficiary. In addition, Ernest Star is a trustee of a trust that serves as a landlord for one of these leases. The leases governing the Company's occupancy of these facilities were entered into at the time of the Tempco acquisition, prior to Mr. Star's appointment as an officer, and were negotiated on an arms length basis at terms generally similar to those prevailing with unrelated third parties. 13. COMMITMENTS AND CONTINGENCIES The Company is involved in various claims and legal actions arising in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the Company's financial position. 14. BUSINESS SEGMENT INFORMATION As set forth in the criteria of statement of SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information, the Company is organized into two reportable segments: Sheet Metal and Machining and Technology. The Sheet Metal segment fabricates, finishes, and integrates close tolerance aluminum and specialty alloy components primarily for the aerospace industry. The Machining and Technology segment machines close tolerance aluminum and specialty alloy components for the aerospace, semiconductor, and medical products industries. The segments presented for the year ended December 31, 2002 differ from the segments previously presented. For the year ended December 31, 2001 and prior, the Company reported as one segment as it intended to fully integrate the Machining and Technology business acquired in 2001 into its existing Sheet Metal business. During 2002, operating activity of Machining and Technology evolved and integration has been limited due to the significant growth in non-aerospace business, which grew to over 50% of segment revenue in 2002. During 2002, the Company determined that its Machining and Technology met the definition of a reportable segment in accordance with SFAS No. 131 given its management reporting structure and differences in products and customers. Prior period reporting has been restated to conform to the new segment reporting. 22 LMI Aerospace, Inc. Notes to Consolidated Financial Statements - (Continued) (Dollar amounts in thousands, except share and per share data) December 31, 2002 The accounting policies of the segments are the same as those described in Note 1. Sales between segments are insignificant. Corporate assets, liabilities, and expenses related to the Company's corporate offices are allocated to the segments, except for income taxes and certain corporate office fixed assets and enterprise wide software. The table below presents information about reported segments for years ended December 31, on the basis used internally to evaluate segment performance (Machining and Technology are presented beginning April, 2001, the date of acquisition):
DECEMBER 31 2000 2001 2002 ---------- ---------- ---------- Net sales: Sheet Metal $ 55,658 $ 60,552 $ 61,397 Machining and Technology -- 10,271 19,952 ---------- ---------- ---------- $ 55,658 $ 70,823 $ 81,349 ========== ========== ========== Income (loss) before income taxes: Sheet Metal $ (1,722) $ 4,353 $ (10,465) Machining and Technology -- 377 2,574 ---------- ---------- ---------- $ (1,722) $ 4,730 $ (7,891) ========== ========== ========== Interest Expense: Sheet Metal $ 169 $ 64 $ 591 Machining and Technology -- 779 904 ---------- ---------- ---------- $ 169 $ 843 $ 1,495 ========== ========== ========== Capital expenditures: Sheet Metal $ 2,505 $ 2,615 $ 1,496 Machining and Technology -- 123 277 Corporate 271 649 520 ---------- ---------- ---------- $ 2,776 $ 3,387 $ 2,293 ========== ========== ========== Depreciation and amortization: Sheet Metal $ 3,650 $ 3,665 $ 4,062 Machining and Technology -- 543 371 ---------- ---------- ---------- $ 3,650 $ 4,208 $ 4,433 ---------- ---------- ----------
AS OF DECEMBER 31 Total Assets: 2001 2002 ------------ ------------ Sheet Metal $ 44,770 $ 56,422 Machining and Technology 15,942 16,319 Corporate 7,290 5,124 ------------ ------------ $ 68,002 $ 77,865 ============ ============
23 LMI Aerospace, Inc. Notes to Consolidated Financial Statements - (Continued) (Dollar amounts in thousands, except share and per share data) December 31, 2002 15. QUARTERLY FINANCIAL DATA (UNAUDITED)
2001 First Second Third Fourth ----------- ----------- ----------- ----------- Net Sales $ 16,048 $ 19,105 $ 19,558 $ 16,112 Gross Profit 3,703 4,176 4,622 3,513 Net income (loss) 882 943 1,030 111 =========== =========== =========== =========== Amounts per common share: Net income (loss) $ 0.11 $ 0.12 $ 0.13 $ 0.01 =========== =========== =========== =========== Net income (loss) - assuming dilution $ 0.11 $ 0.12 $ 0.13 $ 0.01 =========== =========== =========== ===========
2002 First (1) Second Third Fourth ----------- ----------- ----------- ----------- Net sales $ 17,908 $ 20,355 $ 21,258 $ 21,828 Gross profit 3,806 4,097 3,532 729 Income (loss) before cumulative effect of change in accounting principle 464 462 (420) (7,706) Cumulative effect of change in accounting principle, net of tax (1,104) -- -- -- Net income (loss) after accounting changes $ (640) $ 462 $ (420) $ (7,706) =========== =========== =========== =========== Amounts per common share: Net income (loss) $ (0.08) $ 0.06 $ (0.05) $ (0.94) =========== =========== =========== =========== Net income (loss) - assuming dilution $ (0.08) $ 0.06 $ (0.05) $ (0.94) =========== =========== =========== ===========
(1) First quarter 2002 results have been restated to reflect the cumulative effect of change in accounting principle related to the adoption of SFAS No. 142 24 PART IV ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K. (a) 1. For a list of the Consolidated Financial Statements of the Company included as part of this report, see the index at Item 8. 2. All schedules have been omitted as the required information is not present in sufficient amounts or the required information is included elsewhere in the Consolidated Financial Statement or notes thereto. 3. Exhibits: See Exhibit Index (each management contract or compensatory plan or arrangement listed therein is identified). (b) Reports on Form 8-K: (i) On November 14, 2002, the Company filed a Report on Form 8-K announcing third quarter results. (ii) On October 2, 2002, the Company filed a Report on Form 8-K announcing the acquisitions of the Aerospace Operations of Southern Stretch Forming and Fabrication, Inc. (c) Exhibits: See Exhibit Index (d) All schedules have been omitted as the required information is not present in sufficient amounts or the required information is included elsewhere in the Consolidated Financial Statement or notes thereto. 25 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the County of St. Charles and State of Missouri on the 28th day of May, 2003. LMI AEROSPACE, INC. By: /s/ Ronald S. Saks ----------------------------------------- Ronald S. Saks President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature Title Date /s/ Ronald S. Saks - ----------------------------------- Chief Executive Officer, May 28, 2003 Ronald S. Saks President, and Director /s/ Joseph Burstein - ----------------------------------- Chairman of the Board, and May 28, 2003 Joseph Burstein Director /s/ Lawrence E. Dickinson Chief Financial Officer and May 28, 2003 - ----------------------------------- Secretary Lawrence E. Dickinson /s/ Duane Hahn Vice President, Regional May 28, 2003 - ----------------------------------- Manager and Director Duane Hahn /s/ Sanford S. Neuman Assistant Secretary and May 28, 2003 - ----------------------------------- Director Sanford S. Neuman /s/ Thomas Unger Director May 28, 2003 - ----------------------------------- Thomas Unger Director - ----------------------------------- Brian D. Geary
26 CERTIFICATIONS I, Ronald S. Saks, certify that: 1. I have reviewed this annual report on Form 10-K as amended of LMI Aerospace, Inc.; 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: May 28, 2003 /s/ Ronald S. Saks ------------------------------------- Ronald S. Saks Chief Executive Officer and President 27 CERTIFICATIONS I, Lawrence E. Dickinson, certify that: 1. I have reviewed this annual report on Form 10-K as amended of LMI Aerospace, Inc.; 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: May 28, 2003 /s/ Lawrence E. Dickinson ------------------------------------- Lawrence E. Dickinson Chief Financial Officer and Secretary 28 EXHIBIT INDEX
Exhibit Number Description - ------- ----------- 2.1 Asset Purchase Agreement by and among Tempco Engineering, Inc. and Hyco Precision, Inc., the shareholders of Tempco Engineering, Inc. and Hyco Precision, Inc. and Metal Corporation, dated as of March 28, 2001, filed as Exhibit 2.1 to the Registrant's Form 8K filed April 17, 2001 and incorporated herein by reference. 2.2 Stock Purchase Agreement between LMI Aerospace, Inc. and Brian Geary dated as of May 15, 2002, filed as Exhibit 2.1 to the Registrant's Form 8-K filed May 16, 2002 and incorporated herein by reference. 3.1 Restated Articles of the Registrant previously filed as Exhibit 3.1 to the Registrant's Form S-1 (File No. 333-51357) dated as of June 29, 1998 (the "Form S-1") and incorporated herein by reference. 3.2 Amended and Restated By-Laws of the Registrant previously filed as Exhibit 3.2 to the Form S-1 and incorporated herein by reference. 3.3 Amendment to Restated Articles of Incorporation dated as of July 9, 2001 previously filed as Exhibit 3.3 to the Registrant's Form 10-K for the fiscal year ended December 31, 2001, and incorporated herein by reference. 4.1 Form of the Registrant's Common Stock Certificate previously filed as Exhibit 4.1 to the Form S-1 and incorporated herein by reference. 10.1+ Employment Agreement, dated January 1, 1997, between the Registrant and Ronald S. Saks, as previously filed as Exhibit 10.2 to the Form S-1 and incorporated herein by reference. 10.2 Lease Agreement, dated November 25, 1991, between the Registrant and Roy R. Thoele and Madonna J. Thoele, including all amendments (Leased premises at 3000 Highway 94 North), previously filed as Exhibit 10.8 to the Form S-1 and incorporated herein by reference. 10.3 Lease Agreement, dated June 28, 1988, between the Registrant and J & R Sales, including all amendments (Leased premises at 204 H Street), previously filed as Exhibit 10.9 to the Form S-1 and incorporated herein by reference. 10.4 Lease Agreement, dated May 6, 1997, between the Registrant and Victor Enterprises, LLC, including all amendments (Leased premises at 101 Western Avenue S), previously filed as Exhibit 10.10 to the Form S-1 and incorporated herein by reference. 10.5 Lease Agreement, dated February 1, 1995, between the Registrant and RFS Investments (Leased premises at 2621 West Esthner Court) previously filed as Exhibit 10.11 to the Form S-1 and incorporated herein by reference. 10.6+ Profit Sharing and Savings Plan and Trust, including amendments nos. 1 through 6, previously filed as Exhibit 10.12 to the Form S-1 and incorporated herein by reference.
29 10.7 Loan Agreement between the Registrant and Magna Bank, N.A. dated August 15, 1996, including amendments nos. 1 through 3, previously filed as Exhibit 10.13 to the Form S-1 and incorporated herein by reference. 10.8 Indenture of Trust and Loan Agreement, both with the Industrial Development Authority of St. Charles County, Missouri and dated as of September 1, 1990 previously filed as Exhibit 10.14 to the Form S-1 and incorporated herein by reference. 10.9 General Terms Agreement, Special Terms Agreement and Warranty Agreements, between the Registrant and Boeing Seattle previously filed as Exhibit 10.15 to the Form S-1 and incorporated herein by reference. 10.10 Form of Master Order Agreement covering Boeing 777 and 747 Programs and Master Order Agreement covering Boeing 737 Leading Edge Program, both between the Registrant and Boeing North American, previously filed as Exhibit 10.16 to the Form S-1 and incorporated herein by reference. 10.11 Form of Contract between the Registrant and Boeing Wichita previously filed as Exhibit 10.17 to the Form S-1 and incorporated herein by reference. 10.12 General Conditions (Fixed Price - Non-Governmental) for the G-14/F100 Program, General Conditions for the Wing Stub/Lower 45 Program Boeing Model 767 Commercial Aircraft and Form of Master Agreement, all with Vought previously filed as Exhibit 10.18 to the Form S-1 and incorporated herein by reference. 10.13+ Amended and Restated 1998 Stock Option Plan, previously filed as Exhibit 10.37 to the Registrant's Form S-8 (File No. 333-38090) dated as of May 24, 2000 and incorporated herein by reference. 10.14 General Terms Agreement between Boeing Company and Leonard's Metal, Inc. with Special Business Provision attached, previously filed as Exhibit 10.15 to the Registrant's Form 10-Q dated as of November 16, 1998 and incorporated herein by reference. 10.15 Lease Agreement between Mother Goose Corporation and Precise Machine Partners L.L.P. (Leased premises at 2205 and 2215 River Hill Road, Irving, Texas) dated August 25, 1998, previously filed as Exhibit 10.24 to the Registrant's Form 10-K for the fiscal year ended December 31, 1999, and incorporated herein by reference. 10.16+ Employment Agreement effective as of January 24, 2000, between LMI Aerospace, Inc. and Tom D. Baker, previously filed as Exhibit 10.30 to the Registrant's Form 10-K for the fiscal year ended December 31, 2000, and incorporated herein by reference. 10.17+ Employment Agreement effective as of January 1, 2000, between LMI Aerospace, Inc. and Lawrence E. Dickinson, previously filed as Exhibit 10.32 to the Form 10-K for the fiscal year ended December 31, 2000, and incorporated herein by reference. 10.18+ Employment Agreement effective as of January 1, 2000, between LMI Aerospace, Inc. and Bradley L. Nelson, previously filed as Exhibit 10.35 to the Form 10-K for the fiscal year ended December 31, 2000, and incorporated herein by reference.
30 10.19 Fourth Amendment to Loan Agreement dated as of October 30, 2000, previously filed as Exhibit 10.37 to the Registrant's Form 8-K dated December 26, 2000 and incorporated herein by reference. 10.20 Fifth Amendment to and Restatement of Loan Agreement dated as of April 2, 2001, previously filed as Exhibit 10.1 to the Registrant's Form 10-Q dated August 9, 2001, and incorporated herein by reference. 10.21+ Employment Agreement between Tempco Engineering, Inc. and Ernest R. Star dated April 2, 2001, filed as exhibit 10.2 to the Registrant's From 10-Q dated August 9, 2001 and incorporated herein by reference. 10.22 Sixth Amendment to Loan Agreement dated as of October 30, 2001, filed as Exhibit 10.2 to the Registrant's Form 10-Q dated November 14, 2001, and incorporated herein by reference. 10.23 Business Reformation Agreement between Leonard; Metal, Inc. and Lockheed Martin Aeronautics Company dated September 21, 2001, filed as Exhibit 10.1 to the Registrant's Form 10-Q dated November 14, 2001, and incorporated by reference. 10.24+ Employment Agreement effective as of January 1, 2002, between LMI Aerospace, Inc. and Philip A. Lajeunesse, filed as Exhibit 10.26 to the Registrant's Form 10-K for the fiscal year ended December 31, 2001, and incorporated herein by reference. 10.25 Lease dated April 2, 2001 by and between Peter Holz and Anna L. Holz Trustees of the Peter and Anna L. Holz Trust dated 2/8/89, as to an undivided one-half interest, and Ernest R .Star and Linda Ann Zoettl, Trustees under the Ernest L. Star and Elizabeth H. Star 1978 Trust dated August 25, 1978, as to an undivided one-half interest and Metal Corporation, filed as Exhibit 10.27 to the Registrant's Form 10-K for the fiscal year ended December 31, 2001, and incorporated herein by reference. 10.26 Lease dated April 2, 2001, between Tempco Engineering, Inc. and Metal Corporation, filed as Exhibit 10.28 to the Registrant's Form 10-K for the fiscal year ended December 31, 2001, and incorporated herein by reference. 10.27+ Employment Agreement Effective as of January 1, 2002 between LMI Aerospace, Inc. and Robert T. Grah, filed as Exhibit 10.29 to the Registrant's Form 10-K for the fiscal year ended December 31, 2001, and incorporated herein by reference. 10.28+ Employment Agreement Effective as of January 1, 2002 between LMI Aerospace, Inc. and Duane Hahn, filed as Exhibit 10.30 to the Registrant's Form 10-K for the fiscal year ended December 31, 2001, and incorporated herein by reference. 10.29+ Employment Agreement Effective as of January 1, 2002 between LMI Aerospace, Inc. and Michael J. Biffignani, filed as Exhibit 10.31 to the Registrant's Form 10-K for the fiscal year ended December 31, 2001, and incorporated herein by reference. 10.30 Seventh Amendment to and Restatement of Loan Agreement dated November 30, 2001, filed as Exhibit 10.1 to the Registrant's Form 10-Q filed May 15, 2002 and incorporated herein by reference.
31 10.31 Eighth Amendment to and Restatement of Loan Agreement dated May 15, 2002, filed as Exhibit 10.1 to the Registrant's Form 8-K filed May 16, 2002 and incorporated herein by reference. 10.32 Ninth Amendment to Loan Agreement dated June 30, 2002, filed as Exhibit 10.1 to the Registrant's Form 10-Q filed August 14, 2002 and incorporated herein by reference. 21.1 List of Subsidiaries of the Registrant (filed herewith). 23.1 Consent of Independent Auditors (filed herewith). 99.1 Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Statement of the Chief Executive Officer. 99.2 Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Statement of the Chief Financial Officer.
- ---------- + Management contract or compensatory plan or arrangement required to be filed as exhibit to this report. 32 EX-23.1 3 c76163a1exv23w1.txt CONSENT OF INDEPENDENT AUDITORS EXHIBIT 23.1 Consent of Independent Auditors We consent to the incorporation by reference in the Registration Statements (Form S-8 No. 333-70259 and No. 333-38090) pertaining to the LMI Aerospace, Inc. Profit Sharing and Savings Plan and Trust, the Amended and Restated LMI Aerospace, Inc. 1998 Stock Option Plan, and the 1989 Employee Incentive Stock Option Plan of our report dated April 15, 2003, with respect to the consolidated financial statements, as amended, of LMI Aerospace, Inc. included in the Annual Report (Form 10-K/A) for the year ended December 31, 2002. /s/ Ernst & Young LLP St. Louis, Missouri May 23, 2003 EX-99.1 4 c76163a1exv99w1.txt CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 EXHIBIT 99.1 LMI AEROSPACE, INC. CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of LMI Aerospace, Inc. (the "Company") on Form 10-K as amended for the period ending December 31, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Ronald S. Saks, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. /s/ Ronald S. Saks - --------------------------------------- Ronald S. Saks Chief Executive Officer and President May 28, 2003 This certification is made solely for purposes of 18 U.S.C. Section 1350, and not for any other purpose. EX-99.2 5 c76163a1exv99w2.txt CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 EXHIBIT 99.2 LMI AEROSPACE, INC. CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of LMI Aerospace, Inc. (the "Company") on Form 10-K as amended for the period ending December 31, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Lawrence E. Dickinson, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. /s/ Lawrence E. Dickinson - -------------------------------------- Lawrence E. Dickinson Chief Financial Officer and Secretary May 28, 2003 This certification is made solely for purposes of 18 U.S.C. Section 1350, and not for any other purpose. -----END PRIVACY-ENHANCED MESSAGE-----