8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): March 10, 2015

LMI AEROSPACE, INC.

(Exact Name of Registrant as Specified in Its Charter)

Missouri

(State or Other Jurisdiction of Incorporation)

0-24293	43-1309065
(Commission File Number)	(IRS Employer Identification No.)
411 Fountain Lakes Blvd., St. Charles, Missouri	63301
(Address of Principal Executive Offices)	(Zip Code)

(636) 946-6525

(Registrant's Telephone Number, Including Area Code)

(Former Name or Former Address, If Changed Since Last Report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Section 2 – Financial Information

Item 2.02.  Results of Operations and Financial Condition

On March 10, 2015, LMI Aerospace, Inc. (the “Company”) issued a press release (the “Earnings Press Release”) announcing, among other things, its financial performance for the fourth quarter and year ended December 31, 2014.  The full text of the Earnings Press Release is attached as Exhibit 99.1 hereto and incorporated herein by reference.

As previously announced, a conference call to discuss the financial results will be held on Tuesday, March 10, 2015 at 9:00 a.m. CDT, which will be hosted by Daniel G. Korte, Chief Executive Officer, and Clifford C. Stebe, Jr. Chief Financial Officer.

The information furnished pursuant to Item 2.02 above shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing.

Section 9 – Financial Statements and Exhibits

Item 9.01.  Financial Statements and Exhibits

(d) Exhibits . See the Exhibit Index which is hereby incorporated by reference.

2

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Dated:  March 10, 2015

LMI AEROSPACE, INC.
By:	/s/ Clifford C. Stebe, Jr.
	Clifford C. Stebe, Jr.
	Chief Financial Officer

EXHIBIT INDEX

Exhibit Number	Description
99.1	Text of earnings press release issued by the Company dated March 10, 2015.

3

EX-99.1

Exhibit 99.1

Contact:

Cliff Stebe

Chief Financial Officer, 636.946.6525

FOR IMMEDIATE RELEASE

LMI Aerospace, Inc. Announces Fourth Quarter and Full-Year 2014 Results

ST. LOUIS, March 10, 2015 -- LMI Aerospace, Inc. (Nasdaq:LMIA), a leading provider of design engineering services and supplier of structural assemblies, kits and components to the aerospace and defense markets, today announced its financial results for the fourth quarter and the twelve months ended December 31, 2014.

Highlights

• 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

• 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 $88.8 million for the fourth quarter of 2014, compared to $96.4 million in the fourth quarter of 2013.  A net loss of $22.5 million, or $1.76 per diluted share, was realized in the fourth quarter of 2014, compared to a net loss of $67.1 million, or $5.31 per diluted share, in the fourth quarter of 2013.  Fourth quarter 2014 results include the previously announced $26.4 million charge related to goodwill impairment in the Engineering Services segment. Fourth quarter 2013 results include a $73.5 million charge related to goodwill impairment associated with the Valent reporting unit.

Operating income for the fourth quarter of 2014, excluding $27.7 million of net unfavorable, non-recurring items was $4.2 million, compared to $4.0 million, excluding the impact of $77.3 million in unfavorable, non-recurring items, in the fourth quarter of 2013.

For the full-year 2014, net sales were $387.8 million, compared to $412.6 million in 2013.  A net loss of $29.0 million, or $2.28 per diluted share, was realized in 2014, compared to a net loss of $58.5 million, or $4.64 per diluted share, in 2013. 

Operating income in 2014, excluding $27.7 million of net unfavorable, non-recurring items was $18.8 million, compared to $27.9 million, excluding the impact of $77.0 million in unfavorable, non-recurring items in 2013.

The following table illustrates the impact of non-recurring items on the Company's operating loss for the three and twelve months ended December 31, 2014:

Operating Loss Excluding Non-Recurring Items
(Amounts in thousands)
	Three Months Ended			Year Ended
	December 31, 2014			December 31, 2014
Operating loss, as reported	$	(23,438	)	$	(8,858	)
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	$	27,651		$	27,659
Net operating income excluding non-recurring adjustments	$	4,213		$	18,801

“We accomplished a great deal in 2014 and now believe LMI is positioned for better performance in the years to come,” said Dan Korte, Chief Executive Officer of LMI Aerospace, Inc. “From a cost perspective, we removed $12 million in annual expenses from the business primarily through plant closures, realignments, and restructuring initiatives meant to improve asset utilization. We continue to focus on strengthening LMI's balance sheet and we made headway in deleveraging the Company, generating a record $49 million in cash from operations and paying down over $21 million in debt. We have also received several new key awards from Gulfstream and, subsequent to year end, we signed a long-term supply agreement with Spirit Aerosystems covering all Boeing, Airbus, Bombardier and Mitsubishi aircraft. We are excited about the new awards we recently received as well as the announced production rate increases on the Boeing 737 and 787 which we expect will lead to meaningful, long-term growth for the Company.

“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 $26.4 million non-cash goodwill impairment charge in the fourth quarter for our Engineering Services unit. Our new leadership team will spend more time in 2015 looking to drive growth and margin enhancement in that segment. In 2015, we will also face a challenging environment in the Aerostructures segment from lower aftermarket and corporate jet demand. However, we believe our efforts have begun to position LMI for higher growth going forward, namely, by winning new programs, expanding content, and becoming a key partner on a number of strategic new aircraft. We expect 2015 will build upon our successes of last year, and anticipate that LMI will be a stronger Company heading into 2016.”

Aerostructures Segment

	Q4				Q4
Net Sales	2014		% of Total		2013		% of Total
Large commercial aircraft	$	39.5	51.4	%	$	38.7	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	$	76.9	100.0	%	$	78.8	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 $2.1 million, $2.0 million and $0.5 million, respectively, partially offset by a decrease in the delivery of wing modification products of $4.2 million. In the corporate and regional aircraft market, revenue decreased on the Gulfstream G450/550 by

$1.0 million and the Mitsubishi Regional Jet by $1.0 million. The decrease in sales in the military market was primarily due to lower demand on the Black Hawk program.

The segment generated gross profit of $16.4 million, or 21.4 percent of net sales, in the fourth quarter of 2014 versus $15.2 million, or 19.3 percent of net sales, in the fourth quarter of 2013.  Gross profit margin was favorably impacted by increased production levels which were the direct benefit of plant rationalization efforts taken earlier in 2014 and the transition of production to more strategically-aligned facilities. This benefit was partially offset by unfavorable sales mix in the fourth quarter of 2014 when compared to 2013.

Selling, general and administrative expenses were $11.5 million in the fourth quarter of 2014 versus $88.3 million in the fourth quarter of 2013. A goodwill impairment charge of $73.5 million related to the Valent acquisition was recognized in the fourth quarter of 2013 in addition to $3.1 million in restructuring costs primarily related to Valent management changes. The fourth quarter of 2014 included $0.4 million of accelerated depreciation expenses and $0.3 million of restructuring charges. Excluding non-recurring items, selling, general, and administrative expenses were lower in the fourth quarter of 2014 by $0.9 million when compared to the fourth quarter of 2013.

Engineering Services Segment

	Q4				Q4
Net Sales	2014		% of Total		2013		% of Total
Large commercial aircraft	$	6.6	54.1	%	$	10.5	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	$	12.2	100.0	%	$	18.3	100.0	%

Engineering services revenue decreased33.3 percent from $18.3 million in the fourth quarter of 2013 to $12.2 million in the fourth quarter of 2014. Sales on large commercial aircraft platforms for Airbus decreased $1.7 million in addition to decreases in sales on the Nacelle programs of $1.4 million. Sales decreases of $1.6 million relative to Bombardier programs, most notably the L-85 program, were the primary driver of the decrease in sales in the corporate and regional market in 2014 versus 2013. In addition, an unfavorable sales adjustment of $0.8 million was recorded on a long-term design build program for the Mitsubishi Regional Jet in the fourth quarter of 2014.

Gross profit for the segment was $0.3 million, or 2.6 percent of net sales, for the fourth quarter of 2014, compared to $2.7 million, or 15.0 percent of net sales, for the prior-year quarter.  Gross profit was negatively impacted by lower sales and the $0.8 million unfavorable cumulative catch-up adjustment related to the Mitsubishi Regional Jet program.

Selling, general and administrative expenses for the segment increased from $2.5 million in the fourth quarter 2013 to $28.7 million in the fourth quarter of 2014, primarily due to a goodwill impairment recorded of $26.4 million. The goodwill impairment was largely caused by a decline in demand and resulting profits for the segment, which accelerated in the second half of 2014. Excluding non-recurring items, selling, general, and administrative expenses were lower in the fourth quarter of 2014 by $0.2 million when compared to the fourth quarter of 2013.

Non-Segment

Interest expense increased $1.0 million in the fourth quarter of 2014, primarily the result of increased average interest rates. During 2014, the Company refinanced its primary debt source from a term loan to higher interest rate notes.

The Company recognized an income tax benefit in the fourth quarter of 2014 of $6.4 million, compared to an income tax benefit of $10.5 million in the fourth quarter of 2013. The Company's $6.4 million income tax benefit in the fourth quarter of 2014 was the result of a decision to carry the 2014 tax loss back to previous years.

Through the continued execution of its deleveraging strategy, the Company generated cash flow from operations of $13.1 million in the fourth quarter of 2014 and funded net capital expenditures of $3.8 million, resulting in positive free cash flow of $9.3 million.

Backlog as of December 31, 2014 was $418.0 million compared to $451.2 million at September 30, 2014.

Outlook for 2015

The company provides the following guidance in relation to 2015:

• 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, March 10, 2015, at 9:00 A.M., CST. LMI Chief Executive Officer Daniel G. Korte and Chief Financial Officer Clifford C. Stebe, Jr. will host the call. To participate in the call, please dial 866-307-3343 approximately five minutes before the conference call time stated above.

A live webcast of the call can be accessed directly from LMI Aerospace website at http://ir.lmiaerospace.com/events.cfm and clicking on the appropriate link. A recording of the call will be available for a limited time on the Company's website upon completion of the call.

About LMI Aerospace

LMI Aerospace, Inc. (“LMI”) is a leading supplier of structural assemblies, kits and components and provider of design engineering services to the aerospace and defense markets.  Through its Aerostructures segment, LMI primarily fabricates, machines, finishes, integrates, assembles and kits formed close tolerance aluminum, specialty alloy and composite components and higher level assemblies for use by the aerospace and defense industries. It manufactures more than 40,000 products for integration into a variety of aircraft platforms manufactured by leading original equipment manufacturers and Tier 1 aerospace suppliers. Through its Engineering Services segment, LMI provides a complete range of design, engineering and program management services, supporting aircraft product lifecycles from conceptual design, analysis and certification through production support, fleet support and service life extensions via a complete turnkey engineering solution.

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 December 31, 2014, and any risk factors set forth in our other filings with the Securities and Exchange Commission. The forward-looking statements included in this document are only made as of the date of this document and we disclaim any obligation to publicly update any forward-looking statement to reflect subsequent events or circumstances.

LMI Aerospace, Inc.

Condensed Consolidated Balance Sheets

(Amounts in thousands, except share and per share data)

	December 31, 2014			December 31, 2013
Assets
Current assets:
Cash and cash equivalents	$	7,927		$	1,572
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	$	442,436		$	480,051
Liabilities and shareholders’ equity
Current liabilities:
Accounts payable	$	21,755		$	19,904
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, $0.02 par value per share; authorized 28,000,000 shares; issued 13,089,003 and 12,873,208 shares at December 31, 2014 and December 31, 2013, respectively		262			257
Preferred stock, $0.02 par value per share; authorized 2,000,000 shares; none issued at either date		—			—
Additional paid-in capital		95,460			92,692
Accumulated other comprehensive loss		(170	)		(507	)
Treasury stock, at cost, 28,396 shares at December 31, 2014 and 22,321 shares at December 31, 2013		(359	)		(202	)
Retained earnings		22,942			51,904
Total shareholders’ equity		118,135			144,144
Total liabilities and shareholders’ equity	$	442,436		$	480,051

LMI Aerospace, Inc.

Condensed Consolidated Statements of Comprehensive Income (Loss)

(Amounts in thousands, except share and per share data)

	(Unaudited)
	Three Months Ended December 31,						Year Ended December 31,
	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 $0, $0, $157 and $0		—			—			278			—
Unrealized loss on interest rate hedges, net of tax of $0, ($42), $0, and ($157)		—			(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

LMI Aerospace, Inc.

Condensed Consolidated Statements of Cash Flows

(Amounts in thousands)

	Year Ended
	December 31,
	2014			2013
Operating activities:
Net loss	$	(28,962	)	$	(58,485	)
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	$	7,927		$	1,572

LMI Aerospace, Inc.

Selected Non-GAAP Disclosures

(Amounts in thousands)

(Unaudited)

	Three Months Ended						Year Ended
	December 31,						December 31,
	2014			2013			2014			2013
Non-GAAP Financial Information
Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA)(1):
Net loss	$	(22,504	)	$	(67,061	)	$	(28,962	)	$	(58,485	)
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	$	10,130		$	9,807		$	47,587		$	50,767
Free Cash Flow (2):
Net cash provided/(used) by operating activities	$	13,101		$	10,247		$	49,117		$	(8,349	)
Less:
Net capital expenditures		(3,790	)		(2,461	)		(13,111	)		(21,749	)
Free cash flow	$	9,311		$	7,786		$	36,006		$	(30,098	)

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.