CONDENSED CONSOLIDATING FINANCIAL INFORMATION

LMI Aerospace, Inc. excluding its subsidiaries (“LMIA”) is the parent company, issuer and obligor of the second-priority senior notes due July 15, 2019 (the “Notes”). The payment obligations of LMIA under the Notes are guaranteed and secured by LMIA and all of its subsidiaries other than minor subsidiaries as further described below.

These Notes are guaranteed on a second-priority senior secured basis, jointly and severally, by LMIA (“Guarantor Parent”) and all of its existing and future 100% owned subsidiaries (collectively, the “Guarantor Subsidiaries”) other than minor subsidiaries. Such guaranties are full and unconditional. LMIA conducts substantially all of its business through and derives virtually all of its income from its subsidiaries. Therefore, its ability to make required principal and interest payments with respect to its indebtedness depends on the earnings of subsidiaries and its ability to receive funds from its subsidiaries.

The Notes are secured on a second-priority basis by liens on substantially all of LMIA’s and the Guarantor Subsidiaries’ assets, subject to certain exceptions and permitted liens. The liens securing the Notes are contractually subordinated to the liens that secure indebtedness under the revolving credit facility as a result of the lien subordination provisions of the intercreditor agreement to the extent of the value of the collateral securing such indebtedness as well as being subordinated by other existing indebtedness, including industrial revenue bonds, capital leases and other notes payable, to the extent of the value of the collateral that secures such existing indebtedness. As a consequence of this lien subordination and existing indebtedness the notes and the guarantees are effectively subordinated to the extent of the value of the collateral that secures them. Decisions regarding the maintenance and release of the collateral secured by the collateral agreement are made by the lenders under the modified revolving credit facility, and neither the indenture trustee nor the holders of the Notes have control of decisions regarding the release of collateral.

We have not presented separate financial statements and separate disclosures have not been provided concerning the Guarantor Subsidiaries due to the presentation of condensed consolidating financial information set forth in this Note, consistent with the Securities and Exchange Commission (the “SEC”) rules governing reporting on guarantor financial information.

Supplemental condensed consolidating financial information of the Company, including such information for the Guarantor Subsidiaries, is presented below. Investments in subsidiaries are presented using the equity method of accounting. The principal elimination entries eliminate investments in subsidiaries and inter-company balances and transactions.

CONDENSED CONSOLIDATING BALANCE SHEET

December 31, 2016

(Amounts in thousands)



	LMIA(Guarantor Parent)		Guarantor Subsidiaries		Consolidating/Eliminating Entries			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	2,382	$	109	$	—		$	2,491
Trade accounts receivable, net	660		50,609		—			51,269
Intercompany receivables	244,792		312,332		(557,124		)	—
Inventories	—		122,761		—			122,761
Prepaid expenses and other current assets	1,548		2,038		—			3,586
Total current assets	249,382		487,849		(557,124		)	180,107

Property, plant and equipment, net	6,490		93,025		—			99,515
Investments in subsidiaries	375,738		—		(375,738		)	—
Goodwill	—		62,482		—			62,482
Intangible assets, net	—		38,852		—			38,852
Other assets	1,790		886		—			2,676
Total assets	$	633,400	$	683,094	$	(932,862	)	$	383,632

Liabilities and shareholders’ equity
Current liabilities:
Accounts payable	$	410	$	28,968	$	—		$	29,378
Accrued expenses	13,912		11,631		—			25,543
Intercompany Payables	310,644		246,480		(557,124		)	—
Current installments of long-term debt and capital lease obligations	89		2,566		—			2,655
Total current liabilities	325,055		289,645		(557,124		)	57,576

Long-term debt and capital lease obligations, less current installments	221,101		16,297		—			237,398
Other long-term liabilities	1,703		1,414		—			3,117
Total long-term liabilities	222,804		17,711		—			240,515

Total shareholders’ equity	85,541		375,738		(375,738		)	85,541
Total liabilities and shareholders’ equity	$	633,400	$	683,094	$	(932,862	)	$	383,632

CONDENSED CONSOLIDATING BALANCE SHEET

December 31, 2015

(Amounts in thousands)



	LMIA(Guarantor Parent)		Guarantor Subsidiaries		Consolidating/Eliminating Entries			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	10,251	$	253	$	—		$	10,504
Trade accounts receivable, net	1,220		47,271		—			48,491
Intercompany receivables	196,496		203,128		(399,624		)	—
Inventories	—		114,775		—			114,775
Prepaid expenses and other current assets	2,224		1,923		—			4,147
Total current assets	210,191		367,350		(399,624		)	177,917

Property, plant and equipment, net	5,430		95,539		—			100,969
Investments in subsidiaries	387,868		—		(387,868		)	—
Goodwill	—		86,784		—			86,784
Intangible assets, net	—		46,582		—			46,582
Other assets	2,135		1,593		—			3,728
Total assets	$	605,624	$	597,848	$	(787,492	)	$	415,980

Liabilities and shareholders’ equity
Current liabilities:
Accounts payable	$	1,393	$	11,763	$	—		$	13,156
Accrued expenses	17,009		13,006		—			30,015
Intercompany Payables	237,548		162,076		(399,624		)	—
Current installments of long-term debt and capital lease obligations	85		2,277		—			2,362
Total current liabilities	256,035		189,122		(399,624		)	45,533

Long-term debt and capital lease obligations, less current installments	229,752		17,881		—			247,633
Other long-term liabilities	1,881		2,441		—			4,322
Deferred income taxes	—		536		—			536
Total long-term liabilities	231,633		20,858		—			252,491

Total shareholders’ equity	117,956		387,868		(387,868		)	117,956
Total liabilities and shareholders’ equity	$	605,624	$	597,848	$	(787,492	)	$	415,980

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

December 31, 2016

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



	LMIA(Guarantor Parent)			Guarantor Subsidiaries			Consolidating/Eliminating Entries			Consolidated
Sales and service revenue
Product sales	$	(170	)	$	307,954		$	305		$	308,089
Service revenues	40,864			38,217			(40,990		)	38,091
Net sales	40,694			346,171			(40,685		)	346,180
Cost of sales and service revenue
Cost of product sales	86			248,836			305			249,227
Cost of service revenues	42,749			35,391			(40,990		)	37,150
Cost of sales	42,835			284,227			(40,685		)	286,377
Gross profit	(2,141		)	61,944			—			59,803
Selling, general and administrative expenses	—			44,541			—			44,541
Restructuring expense	431			781			—			1,212
Goodwill and intangible asset impairment	—			28,368			—			28,368
Loss from operations	(2,572		)	(11,746		)	—			(14,318		)
Other income (expense):
Interest expense	(20,336		)	(835		)	—			(21,171		)
Other, net	5			(357		)	—			(352		)
(Loss) income from equity investments in subsidiaries	(12,275		)	—			12,275			—
Total other (expense) income	(32,606		)	(1,192		)	12,275			(21,523		)
(Loss) income before income taxes	(35,178		)	(12,938		)	12,275			(35,841		)
Benefit for income taxes	—			(734		)	—			(734		)
Net (loss) income	(35,178		)	(12,204		)	12,275			(35,107		)
Other comprehensive (loss) income:
Change in foreign currency translation adjustment	—			(71		)	—			(71		)
Total comprehensive (loss) income	$	(35,178	)	(12,275		)	$	12,275		$	(35,178	)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

December 31, 2015

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



	LMIA(Guarantor Parent)			Guarantor Subsidiaries			Consolidating/Eliminating Entries			Consolidated
Sales and service revenue
Product sales	$	239		$	323,337		$	35		$	323,611
Service revenues	36,184			51,720			(36,419		)	51,485
Net sales	36,423			375,057			(36,384		)	375,096
Cost of sales and service revenue
Cost of product sales	248			259,327			35			259,610
Cost of service revenues	35,952			47,166			(36,418		)	46,700
Cost of sales	36,200			306,493			(36,383		)	306,310
Gross profit	223			68,564			(1		)	68,786
Selling, general and administrative expenses	—			45,678			—			45,678
Restructuring expense	340			1,982			—			2,322
(Loss) income from operations	(117		)	20,904			(1		)	20,786
Other income (expense):
Interest expense	(21,449		)	(990		)	—			(22,439		)
Other, net	—			(236		)	—			(236		)
Income (loss) from equity investments in subsidiaries	19,284			—			(19,284		)	—
Total other expense	(2,165		)	(1,226		)	(19,284		)	(22,675		)
(Loss) income before income taxes	(2,282		)	19,678			(19,285		)	(1,889		)
Provision for income taxes	—			352			—			352
Net (loss) income	(2,282		)	19,326			(19,285		)	(2,241		)
Other comprehensive (loss) income:
Change in foreign currency translation adjustment	—			(41		)	—			(41		)
Total comprehensive (loss) income	$	(2,282	)	$	19,285		$	(19,285	)	$	(2,282	)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

December 31, 2014

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



	LMIA(Guarantor Parent)			Guarantor Subsidiaries			Consolidating/Eliminating Entries			Consolidated
Sales and service revenue
Product sales	$	466		$	321,286		$	(468	)	$	321,284
Service revenues	36,181			66,543			(36,191		)	66,533
Net sales	36,647			387,829			(36,659		)	387,817
Cost of sales and service revenue
Cost of product sales	699			254,544			(468		)	254,775
Cost of service revenues	35,998			57,864			(36,190		)	57,672
Cost of sales	36,697			312,408			(36,658		)	312,447
Gross profit	(50		)	75,421			(1		)	75,370
Selling, general and administrative expenses	792			54,412			—			55,204
Goodwill and intangible asset impairment	—			26,439			—			26,439
Restructuring expense	1,012			1,573			—			2,585
Loss from operations	(1,854		)	(7,003		)	(1		)	(8,858		)
Other (expense) income:
Interest expense	(28,224		)	(1,056		)	—			(29,280		)
Other, net	11			212			—			223
(Loss) income from equity investments in subsidiaries	(8,860		)	—			8,860			—
Total other (expense) income	(37,073		)	(844		)	8,860			(29,057		)
(Loss) income before income taxes	(38,927		)	(7,847		)	8,859			(37,915		)
(Benefit) provision for income taxes	(9,867		)	914			—			(8,953		)
Net (loss) income	(29,060		)	(8,761		)	8,859			(28,962		)
Other comprehensive (loss) income:
Change in foreign currency translation adjustment	—			(98		)	—			(98		)
Reclassification adjustment for losses on interest rate hedges included in net earnings	278			—			—			278
Total comprehensive (loss) income	$	(28,782	)	$	(8,859	)	$	8,859		$	(28,782	)

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

For the Year ended December 31, 2016

(Amounts in thousands)



	LMIA(Guarantor Parent)			Guarantor Subsidiaries			Consolidating/Eliminating Entries			Consolidated
Operating activities:
Net (loss) income	$	(35,178	)	$	(12,204	)	$	12,275		$	(35,107	)
Adjustments for non-cash items	16,955			45,304			(12,275		)	49,984
Net changes in operating assets and liabilities, net of acquired businesses	(1,566		)	1,240			—			(326		)
Intercompany activity	24,800			(24,800		)	—			—
Net cash provided by operating activities	5,011			9,540			—			14,551
Investing activities:
Additions to property, plant and equipment	(2,639		)	(9,174		)	—			(11,813		)
Proceeds from sale of equipment	—			639			—			639
Net cash used by investing activities	(2,639		)	(8,535		)	—			(11,174		)
Financing activities:
Proceeds from issuance of debt	—			1,465			—			1,465
Principal payments on long-term debt and notes payable	(10,085		)	(2,614		)	—			(12,699		)
Advances on revolving line of credit	60,000			—			—			60,000
Payments on revolving line of credit	(60,000		)	—			—			(60,000		)
Payments for debt issuance cost	(156		)	—			—			(156		)
Net cash used by financing activities	(10,241		)	(1,149		)	—			(11,390		)
Net (decrease) in cash and cash equivalents	(7,869		)	(144		)	—			(8,013		)
Cash and cash equivalents, beginning of year	10,251			253			—			10,504
Cash and cash equivalents, end of year	$	2,382		$	109		$	—		$	2,491

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

For the Year ended December 31, 2015

(Amounts in thousands)



	LMIA(Guarantor Parent)			Guarantor Subsidiaries			Consolidating/Eliminating Entries			Consolidated
Operating activities:
Net (loss) income	$	(2,282	)	$	19,326		$	(19,285	)	$	(2,241	)
Adjustments for non-cash items	(14,546		)	18,416			19,285			23,155
Net changes in operating assets and liabilities, net of acquired businesses	10,420			1,028			—			11,448
Intercompany activity	22,874			(22,874		)	—			—
Net cash provided by operating activities	16,466			15,896			—			32,362
Investing activities:
Additions to property, plant and equipment	(1,903		)	(14,696		)	—			(16,599		)
Proceeds from sale of equipment	—			285			—			285
Net cash (used) by investing activities	(1,903		)	(14,411		)	—			(16,314		)
Financing activities:
Principal payments on long-term debt and notes payable	(11,160		)	(2,116		)	—			(13,276		)
Advances on revolving line of credit	99,000			—			—			99,000
Payments on revolving line of credit	(99,000		)	—			—			(99,000		)
Payments for debt issuance cost	(210		)	15			—			(195		)
Net cash used by financing activities	(11,370		)	(2,101		)	—			(13,471		)
Net increase (decrease) in cash and cash equivalents	3,193			(616		)	—			2,577
Cash and cash equivalents, beginning of year	7,058			869			—			7,927
Cash and cash equivalents, end of year	$	10,251		$	253		$	—		$	10,504

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

For the Year ended December 31, 2014

(Amounts in thousands)



	LMIA(Guarantor Parent)			Guarantor Subsidiaries			Consolidating/Eliminating Entries			Consolidated
Operating activities:
Net (loss) income	$	(29,060	)	$	(8,761	)	$	8,859		$	(28,962	)
Adjustments for non-cash items	21,714			46,496			(8,859		)	59,351
Net changes in operating assets and liabilities, net of acquired businesses	19,977			(1,249		)	—			18,728
Intercompany activity	17,663			(17,663		)	—			—
Net cash used by operating activities	30,294			18,823			—			49,117
Investing activities:
Additions to property, plant and equipment	(715		)	(15,975		)	—			(16,690		)
Proceeds from sale of equipment	2,558			1,021			—			3,579
Net cash provided (used) by investing activities	1,843			(14,954		)	—			(13,111		)
Financing activities:
Proceeds from issuance of debt	250,000			—			—			250,000
Principal payments on long-term debt and notes payable	(231,466		)	(4,167		)	—			(235,633		)
Advances on revolving line of credit	66,000			—			—			66,000
Payments on revolving line of credit	(102,000		)	—			—			(102,000		)
Payments for debt issuance cost	(8,018		)	—			—			(8,018		)
Net cash used by financing activities	(25,484		)	(4,167		)	—			(29,651		)
Net increase (decrease) in cash and cash equivalents	6,653			(298		)	—			6,355
Cash and cash equivalents, beginning of year	405			1,167			—			1,572
Cash and cash equivalents, end of year	$	7,058		$	869		$	—		$	7,927