10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-K

þ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2013

¨ 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 Incorporation or Organization)	(IRS Employer Identification No.)
411 Fountain Lakes Blvd.,
St. Charles, Missouri	63301
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s telephone number, including area code    (636) 946-6525

Securities registered pursuant to Section 12(b) of the Act: 

Title of Each Class	Name of Each Exchange On Which Registered
Common stock, $0.02 par value per share	NASDAQ Global Market

Securities registered pursuant to Section 12(g) of the Act: 

None

(Title of Class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

¨ Yes                    þ No 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

¨ Yes                    þ No 

Note —Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Exchange Act from their obligations under those Sections.

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 (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

þ Yes                   ¨ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

þ Yes                   ¨ 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 a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ¨	Accelerated filer þ
Non-accelerated filer ¨ (Do not check if a smaller reporting company)	Smaller reporting company ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

¨ Yes                    þ No 

The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter ended June 30, 2013, was $194,485,960.

There were 12,838,586 shares of common stock outstanding as of March 11, 2014.

DOCUMENTS INCORPORATED BY REFERENCE

Part III incorporates by reference portions of the Proxy Statement for the Registrant’s 2014 Annual Meeting.

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TABLE OF CONTENTS

Item No.		Page
PART I
1	Business	5
1A	Risk Factors	18
1B	Unresolved Staff Comments	26
2	Properties	26
3	Legal Proceedings	27
4	Mine Safety Disclosures	28
PART II
5	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	29
6	Selected Financial Data	32
7	Management’s Discussion and Analysis of Financial Condition and Results of Operations	34
7A	Quantitative and Qualitative Disclosures About Market Risk	50
8	Financial Statements and Supplementary Data	52
9	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	82
9A	Controls and Procedures	82
9B	Other Information	83
PART III
10	Directors, Executive Officers, and Corporate Governance	83
11	Executive Compensation	84
12	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	84
13	Certain Relationships and Related Transactions, and Director Independence	85
14	Principal Accountant Fees and Services	85
PART IV
15	Exhibits and Financial Statement Schedules	86
Signatures		87
Exhibit Index		88

Forward-Looking Information

The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements.  LMI Aerospace, Inc. (“LMI Aerospace”, “we” or the “Company”) makes forward-looking statements in this Annual Report on Form 10-K (“Report”) and in the public documents that are incorporated herein by reference, which represent the Company’s expectations or beliefs about future events and financial performance.  These forward-looking statements are based on estimates, projections, beliefs and assumptions and are not guarantees of future events or results.  Such statements are subject to known and unknown risks, uncertainties and assumptions, including those referred to under “Item 1A.  Risk Factors” in this Report and otherwise described in the Company’s periodic filings and current reports filed with the Securities and Exchange Commission (the “SEC”).

All predictions as to future results contain a measure of uncertainty and, accordingly, actual results could differ.  Among the factors that could cause actual results to differ from those contemplated, projected or implied by the forward-looking statements (the order of which does not necessarily reflect their relative significance) are:

• difficulties with the implementation of the Company’s growth strategy, such as integration problems with respect to Valent Aerostructures, LLC (“Valent”), and other future acquisition targets, and unanticipated costs relating to the Company’s manufacture of new parts for its current customers and/or new customers;

• the Company’s ability to comply with its debt covenants and the increased leverage the Company incurred in connection with its acquisition of Valent;

• performing effectively in the face of record high production rates, including integrating new people, equipment, and processes;

• the Company’s ability to accurately estimate its costs under long-term, fixed-price contracts including contracts for design-build programs;

• competitive pressures, such as pricing, relating to low-cost foreign labor, industry participation commitments made by the Company’s customers to foreign governments, and customers requiring discounts to achieve program extensions;

• changes in the quality, costs and availability of the Company’s raw materials, principally aluminum;

• the Company’s ability to stay current with technological changes, such as the development of alternative aerospace materials, changes in manufacturing techniques and new engineering software;

• governmental funding for certain military programs that utilize the Company’s products;

• the effect of terrorism and other factors that adversely affect the commercial travel industry;

• a reduction in the number of suppliers and increases in competition resulting from consolidation within the aerospace industry;

• supply chain performance and support;

• inability to timely deliver new products and within quality specifications;

• asserted and unasserted claims, and in particular, the Company’s ability to successfully negotiate claims relating to cost over-runs of work performed under certain customer contracts;

• general economic conditions, particularly with respect to the availability of, terms of and access to credit and debt instruments;

• access to and retention of qualified workers and management;

• environmental matters;

• changes in accounting principles or new accounting standards;

• compliance with laws and regulations; and

• the political environment in Mexico, where the Company has manufacturing operations.

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In light of these risks, uncertainties and assumptions, the forward-looking events discussed may not occur.  Accordingly, investors are cautioned not to place undue reliance on the forward-looking statements.  Except as required by law, the Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.  Investors should, however, review additional disclosures made by the Company from time to time in its periodic filings with the SEC.

This Report and the documents incorporated herein by reference should be read completely and with the understanding that the Company’s actual future results may be materially different from what the Company expects.  All forward-looking statements made by the Company in this Report and in the Company’s other filings with the SEC are qualified by these cautionary statements.

PART I

ITEM 1. BUSINESS

General Overview

LMI Aerospace is a leading supplier of structural assemblies, kits and components, and design engineering services to the aerospace and defense markets.  The Company is comprised of talented and dedicated people committed to providing outstanding service to our customers.  We provide a broad array of manufacturing capabilities, as well as engineering and value-added services to the large commercial, corporate and regional, and military aircraft markets.  We also provide prototyping, testing and design capabilities to customers in support of new product development and in-service aircraft.  LMI Aerospace is a preferred supplier to aircraft original equipment manufacturers (“OEMs”) and Tier 1 aerospace suppliers.  In addition to aerospace products, we produce components and assemblies for laser equipment used by semiconductor equipment manufacturers, electronic and electrical wire harnesses, cable assemblies, and mechanical sub-assemblies for the air and rail traffic control, medical equipment, telecommunications, and heavy equipment industries.

Founded in 1948 as a manufacturer of components for the large commercial aircraft market of the aerospace industry, LMI Aerospace became a publicly-held company in 1998.  Historically, our business was primarily dependent on the large commercial aircraft market, specifically with one principal customer.  In order to diversify our product and customer base, we implemented an acquisition and marketing strategy in the late 1990’s that has broadened the number of industries to which we sell our products and services and, within the aerospace industry, diversified our customer base to reduce our dependence on any one principal customer.

In July 2007, we acquired San Diego, California-based D3 Technologies, Inc. (“D3”), a premier design and engineering services firm.  D3 performs engineering design and analysis work for manufacturers of commercial, corporate and regional, and military aircraft and provides the engineering expertise required to support design-build programs internal to LMI Aerospace.  D3’s engineers have worked on a range of design and analysis projects, including airframe, electro/mechanical and hydraulic/pneumatic systems, and have expertise in mechanical, structural and system design; stress and finite element analysis; tool design and engineering; computer numerical control (“CNC”) programming; technical publications, logistics and program support; and avionics software and hardware development.

In January 2009, we acquired Everett, Washington-based Integrated Technologies, Inc. (“Intec”), a provider of advanced materials testing, manufacturing and design services to the aerospace, defense and transportation industries.  Intec’s primary business is designed to support composite testing, manufacturing and research by analyzing new and existing materials, including organic matrix composites, ceramics, metal matrix composites and metal.  The acquisition of Intec, together with other initiatives, has provided composite assembly and component production capabilities, allowing LMI Aerospace to broaden its customer offerings and to transition to the production of non-metallic products.

In August 2012, we acquired Kirkland, Washington-based TASS Inc. (“TASS”), a premier after-market engineering and support services firm. TASS delivers high-end engineering solutions to aircraft manufacturers, airlines, Maintenance, Repair and Overhaul (“MRO”) services companies and leasing companies worldwide.  We believe the acquisition of TASS, whose expertise lies in engineering for aircraft repairs and modifications and providing airline fleet management services, will provide us with a global presence in the rapidly growing after-market engineering arena and build on our long and successful history with Boeing products.  TASS also provides the Company with the ability to internally source product support for parts manufactured by the Company to the global airline fleet.  See Note 2 of the Notes to Consolidated Financial Statements in Item 8 below.

In December 2012, we acquired Kansas City, Missouri-based Valent Aerostructures, LLC, a provider of complex, structural components, major sub-assemblies and machined parts for OEMs and Tier 1 airframe manufacturers in the aerospace and defense

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industries.  Valent provides significant content for several major commercial, business jet and military platforms including the Boeing 737, 747-8, 777, 787, V-22, F-15, F-18 and Gulfstream G650.  We believe the acquisition will position LMI Aerospace as an industry leading aerostructures supplier with significant scale.  The resulting increased scale, complementary product offerings and project management capabilities of Valent are expected to drive further growth from existing platforms by offering our customers more diversified product and service offerings, deeper customer relationships and greater leverage of our extensive manufacturing and supply chain network.  In addition, we believe Valent’s assembly and complex precision machining capabilities will allow the Company to compete for larger and more complex assemblies and design-build projects.  See Note 2 of the Notes to Consolidated Financial Statements in Item 8 below.

Our Strategy

Our current strategy focuses on organic growth of all of our businesses coupled with the integration of our new capabilities and processes from our acquisitions.  We expect the additional high speed and hard metal machining expertise, deepened program management skills and aftermarket support services from Valent and TASS will further expand our product offerings and will allow us to pursue additional complex assembly and design-build opportunities to capitalize on our strengths.

We believe that OEMs and Tier 1 aerospace suppliers will continue to outsource the design and manufacturing of components, assemblies and sub-systems to fewer preferred suppliers who are capable of meeting increasing market demands for on-time delivery and quality in a cost effective manner.  Accordingly, we continue to focus on remaining well positioned to benefit from these trends by:

• Building critical mass and enhanced capabilities to win larger and more complex assembly and design-build projects as a trusted and aligned supplier to our customers.

• Making project management the cornerstone of our competitive advantage.

• Providing unique integrated solutions to our aerospace customers through creative and value driven design and build processes throughout the product lifecycle.

• Achieving organic growth by executing our long-term business development strategy so that the engineering and fabrication segments continue to grow their expertise and sales while supporting our design-build operations.

• Investing in additional capacity to accommodate customer growth.

• Striving for more balance within our various markets, customers and platforms.

• Placing the highest priority on serving our external and internal customers with consistent emphasis on quality, delivery performance, integrity, ethical behavior and responsibility to our communities.

• Developing global low cost sources of supply through ownership or use of our supply chain to complement the engineering and build capabilities provided by our U.S. offices and factories, thus enabling us to better market to global customers.

• Enhancing those business processes necessary to effectively execute design-build projects.

• Preparing for a future enterprise resource planning system installation.

• Improving information and facility security, with emphasis on export control requirements.

• Investing in developing our work force by providing formal education support, skill training to provide flexibility and capability, and leadership training to enable us to reach our revenue growth targets and provide added management depth.

• Continuing to unify our divisions’ approaches in our dealings with our customers, suppliers and internal partners.

We believe these strategic actions will enhance our ability to successfully compete in the future.  Additionally, we continue to utilize defined strategic initiatives in our Aerostructures and Engineering Services segments with detailed action plans to further solidify the competitive position of each segment.

Financial Information About Our Business Segments

Financial information with respect to our business segments, including revenues and operating earnings, is contained in Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7 below, and in Note 19 of the Notes to Consolidated Financial Statements in Item 8 below.

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Description of Business by Segment

We operate in two business segments consisting of our Aerostructures segment and our Engineering Services segment.  Our Aerostructures segment fabricates, machines, finishes, integrates, assembles and kits machined and formed close tolerance aluminum, specialty alloy and composite components and higher level assemblies for use by the aerospace and defense industries.  We also offer our customers value-added services related to the design, production, assembly and distribution of aerospace components and deliver kits of products directly to customer points of use.  We believe these value-added services strengthen our position as a preferred supplier by improving overall production efficiencies and value for our customers.  With the acquisition of Valent, the Aerostructures segment broadened its capabilities in high speed machining, complex assemblies, processing and major program management.

Our Engineering Services segment 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 to leading OEMs and Tier 1 aerospace suppliers.  Our team of engineers has extensive experience across multiple disciplines, enabling us to creatively address the needs of our customers throughout the life-cycle of our customers’ programs.  We have the ability to work with OEM customers to launch new programs by assisting with preliminary and conceptual design, certification planning support, risk mitigation and producibility trade studies, and the development of high level program schedules and resource planning.  Working with our customers in the early stages better positions us to provide tooling design support in the fabrication stage as well as modifications and upgrades throughout the platform’s life-cycle.

Our Aerostructures and Engineering Services segments have combined their experience and expertise to form an integrated team that can provide customers with fully integrated, seamless, innovative and strategic design-build solutions.  Design-build projects require close collaboration from conception through production.  Our consolidated team is committed to a high level of customer service and works together to ensure each project progresses smoothly through the design-to-production process.

Additional Information

We are a Missouri corporation.  Our principal executive offices are located at 411 Fountain Lakes Blvd., St. Charles, Missouri  63301.  Our Internet address is www.lmiaerospace.com.  Interested readers can access our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).  These documents may be accessed free of charge on our corporate website at the following address: http://ir.lmiaerospace.com/sec.cfm.  These reports may also be obtained at the SEC’s public reference room at 100 F Street, N.E., Washington, DC 20549 and may be found through the SEC website at www.sec.gov.  Such reports are generally available on the day they are filed.  The public may obtain information on the operations of the public reference room by calling the SEC at 1-800-SEC-0330.  Additionally, we will furnish interested readers a paper copy of such reports, upon request, free of charge.  Information contained on or accessible through our corporate website or the SEC’s website is not part of this Report.

Interested readers can access our Code of Business Conduct and Ethics, our Corporate Governance Principles and the charters of the following committees of our Board of Directors: the Audit Committee, the Compensation Committee, and the Corporate Governance and Nominating Committee, free of charge on our corporate website at the following address: http://ir.lmiaerospace.com/governance.cfm.

Customers and Products & Services

Customers

Our principal customers are primarily leading OEMs and Tier 1 suppliers in the large commercial, corporate and regional, and military aircraft markets of the aerospace industry.  For the year ended December 31, 2013, direct sales to our six largest customers in terms of revenue (Spirit AeroSystems ("Spirit"), Gulfstream Aerospace Corporation, The Boeing Company, Aviation Partners Boeing, Triumph Group, and Bombardier) accounted for a total of approximately 72.6% of our sales.  The loss of, or substantial reduction of orders from, any of these customers could materially affect our sales and profitability.  See “Item 1A.  Risk Factors – Risks Related to Our Company – Sales to a limited number of customers represent a significant portion of our revenues and our long-term agreements with these customers are generally terminable upon written notice ” and Management’s Discussion and Analysis of Financial Condition and Results of Operations – Results of Operations – Year ended December 31, 2013 compared to year ended December 31, 2012– Aerostructures Segment in Item 7 below and Note 18 of the Notes to Consolidated Financial Statements in Item 8 below.

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We have entered into long-term agreements with many of our customers whereby the customer generally commits to purchase all of its requirements of a particular component from us, subject to termination rights.  When operating under these agreements, our customers issue purchase orders or provide a shipment signal to schedule delivery of products at a previously negotiated price.  Our products sold outside of long-term agreements are based upon previously negotiated pricing and specific terms and conditions on purchase orders.

Products & Services

Our Aerostructures segment manufactures more than 40,000 products for integration into a variety of aircraft platforms manufactured by leading OEMs and Tier 1 aerospace suppliers.  We are the sole-source provider, under long-term agreements, of many of the products that we manufacture.  Substantially all of our components and assemblies are based on designs and specifications prepared and furnished by our customers.  The primary aerospace products we manufacture and the platforms into which they are integrated, include:

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Product & Services	Models
Aerostructures Segment
Leading edge assemblies, wing slats and flap skins/components, ailerons	Gulfstream Aerospace Corporation: G-280, G-450, G-550, G-650 The Boeing Company: 737, 777, 787 Bombardier, Inc.: Learjet 45 & 60, Challenger 604/605, Dash 8, CRJ200/700/900/1000, Global Express Spirit AeroSystems: Gulfstream G-280, G-650 Embraer: KC-390
Winglet leading edges and modification kits	Aviation Partners Boeing: 737, 757, 767 FACC AG: Boeing 737, 757
Fuselage and wing skin	Gulfstream Aerospace Corporation: G-450, G-550, G-650 The Boeing Company: 737, 747, 767, 777, 787 Bombardier, Inc.: Learjet 45 & 60, Dash-8, CRJ200/700/900
Helicopter cabin and aft section components and assemblies	Sikorsky Aircraft: UH-60 Black Hawk, MH-60 Seahawk Triumph Group: UH-60 Black Hawk, MH-60 Seahawk
Wing panels	The Boeing Company: 747 Bombardier, Inc.: CRJ 200/700/900
Tail cone assemblies	Mitsubishi Aircraft Corporation (“MITAC”): Mitsubishi Regional Jet (“MRJ”)
Thrust reversers and engine nacelles/cowlings	Gulfstream Aerospace Corporation: G-450, G-650 Boeing Commercial: 737, 747, 777 Boeing Defense: B-52 Buffalo
Door components, assemblies and floor beams	Gulfstream Aerospace Corporation: G-450 The Boeing Company: 737, 747 Bombardier, Inc.: Challenger 604
Cockpit window frames and landing light lens assemblies	Gulfstream Aerospace Corporation: G-650 The Boeing Company: 737, 747, 767, 777, MD-80, KC-10 Bombardier, Inc.: Learjet 45 & 60, Challenger 300
Cockpit crew floor and bulkhead structure assemblies	Spirit Aerosystems: Boeing 737
Wheel well assemblies	The Boeing Company: 737 Spirit Aerosystems: Boeing 737
Detail interior components	Gulfstream Aerospace Corporation: G-450, G-550 The Boeing Company: 737, 747, 767, 777
Structural sheet metal, machined, milled and extruded components	Gulfstream Aerospace Corporation: G-450, G-550, G-650 Triumph Aerostructures – Vought Aircraft Division: Boeing 737, 747, 767, 777,  Gulfstream G-450, G-550 Boeing Commercial: 737, 747, 767, 777 Boeing Defense: F-15 Eagle, F/A-18 Hornet, C-17 Globemaster Bombardier, Inc.: CRJ 200/700/900 Spirit AeroSystems: Boeing 737, 777, 787

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Housings and assemblies for gun turrets	The Boeing Company: AH-64 Apache Alliant Techsystems, Inc .:  AH-64 Apache
Auxiliary power unit components	Gulfstream Aerospace Corporation: G-550 The Boeing Company: V-22 Osprey
Electronic rack assembly	Spirit Aerosystems:Boeing 787
Fans, heat exchangers and various assemblies	Cymer, Inc.: ELS 7000, ELS 6010, XLA 100
Assemblies and components for rail yard switching equipment	General Electric

Our Engineering Services segment provides a complete range of engineering design, analysis, repair, certification and program management services for the aerospace industry.  The following table describes some of the engineering services we provide as well as the platforms into which they are integrated:

Engineering Services Segment	Models
Structural design and analysis
Wing/wingbox, fixed and moveable leading edges/trailing edges, fuselage, empennage, tail cone design	Boeing Commercial : 777, 747-8, 787-8/-9 Spirit AeroSystems: Boeing 747-8, 787-8, Gulfstream G-280, G-650, Airbus A-350 Triumph Aerostructures - Vought Aircraft Division: Boeing 787-8, Bombardier Global 7000/8000 Lockheed Martin Aeronautics Company: JSF F-35 Bombardier, Inc.: Learjet L-85, C-Series MITAC: MRJ The Spaceship Company: Spaceship II, White Knight II General Dynamics OTS: Gulfstream G650
Winglet/wing mod design	Aviation Partners Boeing: 757, 767 Spirit AeroSystems: Gulfstream G-280, G-650
Nacelle, engine cowl, thrust reverser design	NORDAM: PD427 Fan Cowl (Hawker 400), Boeing 737 MAX
Weight improvement engineering	Boeing Commercial: 747-8, 787-8 Spirit AeroSystems: Boeing 787-8, Gulfstream G-280, G-650 Triumph Aerostructures - Vought Aircraft Division:  Boeing 787-8
Helicopter fuselage, cockpit, cabin frames, skins, longerons, beams	Spirit AeroSystems: Sikorsky CH53K
Aircraft modification engineering	Boeing Commercial: 747-LCF, 777-F Boeing Defense: F/A-18A/B/C/D Hornet, F/A-18E/F Super Hornet, EA-18G Growler
Systems design and integration	Boeing Commercial: 747-8, 787 The Spaceship Company: Spaceship II, White Knight II

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Tool design and fabrication	Boeing Commercial: 777, 747-8, 787 Boeing Defense: MMA, P-8A Spirit AeroSystems: Boeing 747-8 Triumph Aerostructures -Vought Aircraft Division:  Boeing 787, 747-8, C-17, Northrop Grumman Global Hawk AMRO Fabrication Corporation: Boeing 787-9       NORDAM:  Boeing 737
Manufacturing engineering	DCR/Lockheed:  JSF
After-market engineering and support services	Boeing Commercial and certain other airlines
Aviation training system	Northrop Grumman: C-2A Greyhound, E-2C Hawkeye, E-2D Advanced Hawkeye
Aviation maintenance engineering	USS Nimitz (CVN-68), USS Abraham Lincoln(CVN-72),  USS George Washington (CVN-73),USS John C Stennis (CVN-74), USS Carl Vinson (CVN-70) Naval Air Station: Lemoore, CA, Oceana, VA, Atsugi, Japan, Coronado, CA, Norfolk, VA, Jacksonville, FL Marine Corps Air Station: Cherry Point, NC, Beaufort, SC, Iwakuni, Japan, Miramar, CA
Aviation system software engineering	Northrop Grumman: Fire Scout, Sea Scout Sikorsky Aircraft: SH-60 Sea Hawk, HH-60 Jay Hawk,  MH-60 Black Hawk Space and Naval Warfare Systems Center (Pacific) Naval Air Station: Key West, FL, Jacksonville, FL

Manufacturing Process

Fabrication

We deliver a broad range of fabrication capabilities ranging from a single-piece component to complex, multiple-quantity orders.  Our abilities include coordinate measuring machine inspection, tooling and engineering.  We can bend, stretch, draw, stamp, punch and cut a myriad of materials, including aluminum alloys, stainless steel, titanium and other metals and non-metallic materials.  We organize our manufacturing facilities by value streams for a particular manufacturing process.  Depending on the component, we utilize either a forming process or a machining process.  Each value stream is staffed by a team of operators who are supported by a supervisor, lead operators and quality inspectors.  Throughout each stage of the manufacturing and finishing processes, we collect, maintain and evaluate data, including customer design inputs, process scheduling, material inventory, labor, inspection results and completion and delivery dates.  Our information systems employ this data to provide accurate pricing and scheduling information to our customers as well as to establish production standards used to measure internal performance.

We use several different processes in manufacturing components, including:

• fluid cell press;

• sheet metal and extrusion stretch;

• skin stretch;

• stretch draw;

• hot joggle;

• machining and turning;

• CNC brake forming and turret punch; and

• roll forming.

These processes shape or form aluminum, stainless steel or titanium sheet metal or other metals and non-metals and extrusion, known as a work piece, into components by applying pressure through impact, cutting, stretching or pressing, which causes the work piece to conform to a die.  The shapes may be simple with a single angle, bend or curve or may be complex with compound contours having multiple bends and angles.  Some processes incorporate heat to soften the metal prior to or during forming.

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Machining

Our machining capabilities include high speed mills, routers, lathes and water jets.  We operate over 100 CNC machines with RPM’s up to 33,000 and component sizes up to 235 inches.  The machining centers employ over 30 CNC programmers with proficiency in Catia, Unigraphics, Mastercam and Vericut.  We produce components using close-tolerance machining methods.  These methods involve the machining of various metals, such as stainless steel, aluminum, monel, inconnel, Kevlar, titanium and numerous varieties of steel.  We have the capability of machining aluminum and steel in both heat-treated and non-heat-treated conditions.

We machine parts through conventional and CNC machining methods from raw material and forgings.  In addition, complex machining of parts is accomplished through the use of engineered tools or programs to produce intricate and close tolerances with very restrictive finish requirements.  Each machining facility is also set up to complete turnkey research and development projects to better support customers’ engineering changes.

Value-Added Services

In addition to products, we offer various value-added services that are intended to result in both cost and time savings.  These services include:

• finishing;

• assembly;

• kitting;

• distribution;

• composite testing services;

• integrated testing services;

• engineered tool design, fabrication and repair; and

• prototyping and manufacturing producibility design.

Finishing

Our finishing plants are located in Tulsa, Oklahoma, Cuba, Missouri, and Mexicali, Mexico, and together offer chemical milling, processing, painting and polishing of components.  We deliver finished products that meet or exceed standards of our commercial, corporate and regional, and military aircraft customers.  We have received quality approvals from most major aircraft manufacturers in the United States and Canada.

Assembly

We believe we are an industry leader in the assembly of detail components into large sub-assemblies or finished-assemblies.  We apply this critical manufacturing step to a range of products in the commercial and corporate and regional aircraft markets, as well as military aircraft, for both fixed-wing and rotor craft.  The parts for assembly come from supply chain and LMI Aerospace’s fabrication and machining facilities.  The assembled product goes direct to the customer. Customers who receive our assemblies include: The Boeing Company, Spirit AeroSystems, Sikorsky Aircraft Corporation, Gulfstream Aerospace Corporation, and Triumph Group.

Kitting

In support of our customers’ lean and best practice initiatives, we offer kitting services to help streamline the flow of components to their assembly lines.  Our facility in Savannah, Georgia is designed to kit manufactured components and deliver to customer points of use in a just-in-time manner.  The location also serves as a warehousing and detail storage facility where finished goods may be stored and kitted to customer specifications upon demand.

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Distribution

We deliver value-added services to our customers through our distribution center located in Tulsa, Oklahoma.  This facility is designed with high-density storage systems that support storage and direct shipping of products to our customers’ points of use as well as cut to size programs of raw material for our internal plants.  This warehousing and just-in-time delivery supports and conforms to our customers’ lean manufacturing processes.  Additionally, we own a fleet of paneled trucks that are utilized for transporting product from our machining/fabrication facilities to our processing facilities, to our assembly facilities and then to our customers.

Composite Testing

Our composites testing organization provides material characterization and certification services for both basic materials as well as structural elements.  We utilize technical staff, with significant experience, to support customers like The Boeing Company, Lockheed Martin Aeronautics Company, Alliant Techsystems Inc., Cytec Industries Inc. and others with U.S. Federal Aviation Administration (“FAA”) certification programs, dynamic testing for full-scale fighter wings, development of material allowables, completion of Quality Assurance testing and other testing services utilizing state-of-the-art National Aerospace and Defense Contractors Accreditation Program (“NADCAP”) accredited (SAE 7101, ISO 17052) facilities.

Composite Manufacturing

In 2013, Integrated Technologies, Inc., a subsidiary of the Company, became qualified to Boeing BAC5578 Qualification of Sources for Composite Parts for composites parts found typically on Boeing 787 and future composite aircraft platforms.  At December 31, 2013, the Company was performing under this certification relative to material qualification testing and is in the bid process on manufacturing statements of work. Additionally, Integrated Technologies is currently in the certification cycle for additional composite manufacturing per BAC5317 for legacy aircraft composite components.  Intec is also qualified to NADCAP Non-metallic manufacturing (AC7118).

Integrated Testing Services

Our Composites Technical Center of Excellence integrates engineering expertise in composites development, design, and certification with our composites testing organization to provide turn-key support for testing requirements.  This coordination allows our customers to define their testing needs and have the engineering and testing of the required components provided as one integrated service.

Engineering Tool Design, Fabrication, and Repair

Our tooling organization provides tooling design, fabrication and repair services for a wide range of projects from components, small assembly and drill jigs to determinant assembly tooling and planning.  We maintain an Approved Supplier List for our tooling projects.  These suppliers have been audited and approved by our Quality Department and meet quality standards for delivery.

Prototyping and Manufacturing Producibility Design

We provide prototyping and manufacturing producibility services to commercial, corporate and regional, and military aircraft customers.  These services include manufacturing and inspection planning as well as producibility assessments and prototype support.

Backlog

As a service provider, our Engineering Services segment does not typically utilize backlog to monitor its operations, other than the fixed price backlog for the MRJ and Embraer design-build projects.  Our Aerostructures segment’s backlog, together with our Engineering Services segment’s fixed price backlog for the MRJ and Embraer design-build projects is displayed in the following table:

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	As of December 31,
	($ in millions)
	2013		2012
Total	$	470.6	$	371.4
Portion deliverable within 12 months	$	291.0	$	270.9

Our customers often modify purchase orders to accelerate or delay delivery dates.  The level of unfilled orders at any given time during the year will be materially affected by our customers’ purchasing policies, the timing of our receipt of orders and the speed with which those orders are filled.  Moreover, sales during any period may include sales that are not part of the backlog at the end of the prior period.  See “Item 1A.  Risk Factors – Risks Related to Our Company – We may not realize all of the sales expected from our existing backlog.”

Raw Materials and Procurement Practices

We manufacture the majority of our components from aerospace quality aluminum sheet metal, forgings and extrusion.  We also use steel, titanium, inconel, monel and other metals to support the balance of our components.  We purchase the majority of these materials and hardware through a contract we have negotiated with producers of aluminum products as well as some right to buy contracts with certain customers.  These contracts are designed to provide an adequate supply of material at predictable pricing levels.  If supply is not available through these agreements, we use a variety of mills and distributors to support our needs.  We believe that currently there are adequate alternative sources of supply.  For the year ended December 31, 2013, we purchased approximately 57.9% of the raw materials used in production from two suppliers.

In line with our customers’ demands for more sophisticated and complex products, we have expanded the amount of assembled products we provide.  As a result, we have experienced a greater need to subcontract with capable third party suppliers for strategic components.  To meet this challenge, we established a management procurement process designed to develop strategic relationships with key suppliers and to manage the supply chain to ensure the timely delivery of quality components.  For the year ended December 31, 2013, we purchased approximately 24.1% of the procured parts used in assembled products from two suppliers.

Quality Assurance and Control

Our Aerospace Quality Systems, which apply to both of our segments, are consistently reviewed and updated to comply with the current requirements of ISO9001, AS9100 and NADCAP special processes quality requirements.  The ongoing review and updating of our processes have allowed our fabrication facilities with third party ISO9001/AS9100 registrations to maintain those certifications for 2014 and beyond.

Our quality systems include the quality review of work order masters and outside purchase orders to ensure that the flow-down of our customer’s requirements is being addressed both internally and externally.  The quality review of the work order master also ensures that the necessary inspection operations are properly located within the work order to verify and control the outcome of the fabrication processes.  We use an ongoing employee training program and lean manufacturing techniques to assist employees in becoming familiar with any changes in our procedures or special customer requirements.  We use an internal auditing program for each of the facilities to ensure that the training is effective and to ensure ongoing compliance with industry and customer required standards.  The internal auditing is provided by a combination of quality engineer/auditors located in some of our facilities and corporate quality engineer/auditors traveling to our individual facilities from our headquarters to perform internal audits.  In addition, we utilize a first part buy-off at each operation during the fabrication and machining processes as well as final inspection of parts to verify their compliance with the customers’ configuration requirements.

As part of our quality systems, we also use the AS9102 Rev A standard and associated forms to perform First Article Inspections.  Our Corporate Quality Group maintains our Approved Supplier List (“ASL”) for all facilities.  This process includes reviewing surveys, performing on-site audits, and constantly monitoring customer ASLs to verify that suppliers are maintaining their customers’ direct approvals.

The deployment of our quality systems and the sharing of best practices is accomplished through a Quality Council composed of management from the Quality Departments across the enterprise.  The process ensures efficient implementation of customer and industry requirements, as well as increased visibility for changes to the quality system, both from internal and external influences.

In addition, our Engineering Services segment conducts quarterly management review meetings with the segment’s executive level team, analyzing internal processes and performance to ensure that we meet customer expectations with positive

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measurable results.  Suppliers of our Engineering Services segment are approved through our supplier rating system and are maintained in our ASL database.  Fabrication suppliers of our Engineering Services segment are reviewed on a continual basis with documented quality performance reviews and quality deliverable reviews.  Certification documentation is reviewed through preliminary design reviews and critical design reviews by our engineering department and is routed through our internal quality design verification group for verification and validation of data.  Engineering Services sites are required to go through a quality assurance internal audit program every year to ensure the effectiveness of our quality management system structure.  Final audit reports are reviewed by the segment’s executive level team, site director, and internal audit team to assess required process improvements.

This attention to quality systems and business processes, as well as our certifications, have allowed us to remain an approved supplier for many of the leading OEMs and Tier 1 suppliers such as Gulfstream Aerospace Corporation, The Boeing Company, Bombardier, Inc., United Technologies Corporation, Spirit AeroSystems, Lockheed Martin Aeronautics Company, Cessna Aircraft Company, Raytheon Company and others.

Sales and Marketing

Our Marketing and Business Development ("M&BD") team targets three market sectors: corporate and regional aircraft, large commercial aircraft, and military aircraft.  At each of our facilities, customer service representatives establish and maintain a business relationship between customers and our plants with a focus on customer satisfaction.

Awards of new work for the Aerostructures segment are generally processed by a Request for Quotation (“RFQ”).  Upon receipt, the RFQ is reviewed by a team consisting of M&BD, operations, Advanced Programs, estimating, supply chain, engineering, facility management and other personnel, as required.  A bid decision is made if the team determines that the project fits our strategic goals and is within our manufacturing and supply chain management capabilities, and a Proposal Response is developed.  The majority of new programs are awarded on a competitive bid basis.  If the project engineering is evolving and the effort spans multiple facilities, a Project Manager and a support team are assigned.  The project team will coordinate customer requirements, schedules and manufacturing approach across the organization.  On selected projects, the Aerostructures Program Management Office (“PMO”) provides performance data and metrics to the Project Manager.  PMO also coordinates with the project team on a regular basis for changes to be communicated with the customer.  There are multiple levels of communication with our customers that include the Executive Management, Program Manager (primarily for on-going efforts), the Project Manager, PMO (for development efforts) and corporate/plant engineering for clarification of requirements and resolution of issues.

Awards of new work for the Engineering Services segment and for design-build programs generally begin with a customer inquiry in the form of a Request for Proposal or similar vehicle.  Upon receipt, the opportunity is logged, and a cross-functional bid/no-bid decision is facilitated by the M&BD team to assure alignment with Company strategy, capability and capacity.  In the event of a bid decision, the proposal response is developed and managed within the M&BD team with assistance from a proposal team consisting of representatives from operations, Program Management, quality engineering, tooling, estimating and other disciplines as required.  The M&BD team also facilitates the cross-functional execution of our business strategy as it pertains to marketing and business development.

The M&BD team also serves as the main focal point for sales and marketing activities relating to the Aerostructures, Engineering Services and design-build programs, working in conjunction with the Program Managers, the Director of Advanced Programs, and other Company personnel to ensure seamless customer service and integrated responses to customer inquiries.  This team’s main areas of responsibility include establishing and maintaining ongoing business relationships with our customer base, identifying new customer opportunities and managing responses to all proposal activity.

The Aerostructures General Managers, Directors of Engineering Operations, members of the PMO and the organizations they oversee directly engage with existing customers and programs.  All internal organizations work together to maintain and expand new and existing customer relationships.

Competition

Our competitors in the aerospace industry consist of a large, fragmented group of companies, including certain business units or affiliates of our customers. We believe competition within the aerospace industry will increase substantially as a result of industry consolidation, trends favoring greater outsourcing of assemblies, components and design engineering, the reduction of the number of preferred suppliers and increased capabilities of foreign sources.  In all of our industries, some of our competitors, including business units affiliated with our customers, have financial, production and other resources that are substantially greater than ours.

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We believe participants in the aerospace industry compete primarily with respect to delivery, price and quality.  We also believe that foreign aerospace manufacturers and engineering service providers are becoming an increasing source of competition, due largely to foreign manufacturers’ and engineering service providers' access to low-cost labor.  Within the aerospace industry, the prevalence of industry participation commitments, pursuant to which domestic OEMs agree to award production work to foreign manufacturers in order to obtain orders for aircraft from airlines in that country, is also driving this trend.  See “Item 1A.  Risk Factors – Risks Related to Our Industry – We may not be able to maintain or improve our competitive position because of the intense competition in the markets we serve.”

Governmental Regulations and Environmental Compliance

Our operations are subject to extensive and frequently changing federal, state and local laws and substantial regulation by government agencies, including the U.S. Environmental Protection Agency (“EPA”), the U.S. Occupational Safety and Health Administration (“OSHA”), the Federal Aviation Administration ("FAA") and the U.S. Department of Defense.  Among other matters, these agencies impose requirements that:

• regulate the handling, transportation and disposal of hazardous materials generated or used by us during the normal course of our operations;

•govern the health and safety of our employees; and

•require that we meet standards and licensing requirements for aerospace components.

In addition, we may become liable for the costs of removal or remediation of hazardous substances released on or in our facilities without regard to whether we knew of, or caused, the release of such substances.  This extensive regulatory framework imposes significant compliance burdens and risks and, as a result, may substantially affect our operational costs.

Furthermore, we are subject to U.S. Export Regulations, including but not limited to the Arms Export Control Act (“AECA”) and the associated International Traffic in Arms Regulations (“ITAR”), as well as other federal regulations promulgated by various departments within the U.S. government, including the Foreign Corrupt Practices Act (FCPA).  See “Item 1A - Risk Factors - Risks Related to Our Industry - Compliance with and changes in environmental, health and safety laws and other laws that regulate the operation of our business and industry standards could increase the cost of production and expose us to regulatory claims.”

In November, 2013, the Attorney General of the State of Missouri (the “Missouri AG”) contacted LMI regarding allegations of violations of certain state environmental regulations by Ozark Mountain Technologies ("OMT"), a subsidiary of LMI, located in Cuba, Missouri (the “Missouri AG Matter”). The alleged violations, namely discharges of pollutants and water contaminants, are claimed to have occurred in 2011.  Although no charges have been filed against us and no monetary sanctions have been levied on the Company or OMT to date, the Company believes it is probable that the Missouri AG’s office will assess a penalty on the Company, which the Company currently estimates will be within a range of $0.2 to $0.3 million. That range is based upon our understanding of the current position of the Missouri AG’s office. The Company recognized a liability for this penalty of $0.2 million at December 31, 2013. Until we have a final agreement with the Missouri AG’s office, we cannot provide any assurance that our estimated range will not increase or that the Missouri AG’s office will not take other action, and any such increase or other action could have a material adverse effect on OMT and LMI.

In August 2013, the EPA and the U.S. Dept. of Justice (“DoJ”) commenced an investigation into allegations of low pH wastewater releases at OMT’s facility (the “Waste Water Allegations”). The Company was issued a subpoena and timely provided information responsive to the subpoena. In response to the EPA/DoJ investigation and to ensure OMT’s full compliance with both environmental and health and safety regulations, the Company initiated a voluntary, comprehensive internal audit of the facility, which was completed in October 2013 (the “OMT Audit”).

Based on recent discussions with the EPA and DoJ, we believe both agencies are reviewing the information provided pursuant to the subpoena, and we continue to cooperate with both agencies. To date, no charges have been filed against and no monetary sanctions have been levied on the Company or its OMT subsidiary, but the EPA and DoJ have raised the possibility of assessing a penalty. We do not, however, have sufficient information at this time to estimate the amount of any possible penalty. As we cannot estimate the amount of the possible penalty, the Company has not recognized a liability related to the EPA or DoJ penalty at December 31, 2013. Although we do not believe the Waste Water Allegations have substantial merit, we nevertheless cannot predict what action, if any, the EPA and/or DoJ will take or the outcome or impact of any such action. If we are unsuccessful in convincing the EPA and DoJ that the Waste Water Allegations are without merit, the EPA and DoJ may

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commence a proceeding against us and assess monetary penalties, both of which could have a material adverse effect on OMT and LMI.

In addition to information regarding the Waste Water Allegations, the OMT Audit uncovered other possible instances of environmental non-compliance.  On December 3, 2013, the Company voluntarily reported these matters (the “Voluntarily Disclosed Matters”) to the EPA as part of the EPA’s Audit Policy, and concurrently disclosed these matters to the Missouri Department of Natural Resources (“MDNR”).  Based on communications from the EPA and MDNR, we believe both agencies are reviewing the information voluntarily disclosed, and we continue to cooperate with both agencies. To date, no charges have been filed against and no monetary sanctions have been levied on the Company or OMT by the EPA or MDNR with respect to the Voluntarily Disclosed Matters. The EPA and MDNR have not yet indicated or suggested any proposed actions.  We cannot predict what action, if any, the EPA and/or MDNR will take or the outcome or impact of any such action.

OMT became a subsidiary of LMI as a result of LMI’s acquisition of Valent Aerostructures (“Valent”) in December 2012. The Company believes certain environmental representations set forth in the purchase agreement pursuant to which Valent acquired OMT; and the purchase agreement pursuant to which LMI acquired Valent, provide the Company with certain rights of indemnification with respect to the matters disclosed herein. The Company also has insurance policies that it believes covers various environmental issues at Valent and its subsidiaries, including OMT, and breaches by Valent and OMT of their respective environmental representations and warranties in each of the purchase agreements. As a result, the Company believes its rights of indemnification and insurance coverage may provide for a recovery of some or all of the costs associated with the matters disclosed herein. We cannot provide any assurance, however, that we will ultimately prevail in any claim for indemnification or secure insurance proceeds from our insurance policies.

In addition to the matters disclosed herein, there can be no assurance that our other prior activities did not create a material environmental situation for which we could be responsible or that future uses or conditions (including, without limitation, changes in applicable environmental laws and regulations or an increase in the amount of hazardous substances generated or used by our operations) will not result in any material environmental liability to us or result in a material adverse effect to our financial condition or results of operations.

Employees

As of December 31, 2013, we had approximately 2,330 full-time employees, of whom approximately 20 served in executive positions, 380 were engineers and engineering-related personnel, 250 served in administrative positions and 1,680 were engaged in manufacturing operations.  None of our employees are subject to a collective bargaining agreement, and we have not experienced any material business interruption as a result of labor disputes since our inception.  We believe that we have an excellent relationship with our employees.

We strive to continuously train and educate our employees, which enhances the skill and flexibility of our work force. Through the use of internally developed programs and our tuition reimbursement programs, we seek to attract, develop and retain the personnel necessary to achieve our growth and profitability objectives.  Our internally developed programs include formal classroom, on-the-job, hands-on training, and lean manufacturing training developed jointly with external resources.

Seasonality

We do not generally experience any seasonality in the demand for our products.

Foreign Operations

The Company has a manufacturing facility in Mexico and small engineering offices in England and Australia.  The Company's foreign sales were not greater than 10% of its total sales in 2013, 2012 or 2011.  The amounts of revenue, profitability and identifiable assets attributable to foreign sales activity were not material when compared with revenue, profitability and identifiable assets attributed to United States domestic operations during 2013, 2012 or 2011.  The Company is not subject to any significant foreign currency risks since significantly all sales are made in United States dollars.  See “Item 1A - Risk Factors – Risks Related to Our Company – Risks associated with foreign operations could adversely impact the Company.”

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ITEM 1A. RISK FACTORS

You should carefully consider the following risks and other information contained in or incorporated by reference in this Report when evaluating our business and financial condition.  These risks may adversely affect our business, financial condition and operating results.

Risks Related to Our Company

Our future success will depend, to a significant extent, on our ability to engineer and produce new and more sophisticated products to meet the needs of our customers.

We believe that the commercial aircraft, military and other markets in which we operate are changing toward more sophisticated manufacturing and system-integration techniques and capabilities using composite as well as metallic materials.  Accordingly, our future success depends to a significant extent, on our ability to acquire and/or develop and execute such sophisticated techniques and capabilities to meet the needs of our customers and to bring those products to market quickly and at cost-effective prices.  If we are unable to acquire and/or develop and execute such techniques and capabilities, we may experience an adverse effect to our business, financial condition or results of operation.

Our long-term success and growth strategy depend on our senior management, our ability to integrate our new senior management members and our ability to attract, integrate and retain additional qualified personnel.

In recent months, we have made significant changes within our senior management group. Notably, Lawrence E. Dickinson, the Company's long-time Chief Financial Officer, filled the position of President - Valent Operations that was vacated by the 2013 departures of Charlie and Henry Newell. Clifford C. Stebe, Jr., became the Chief Financial Officer in response to Mr. Dickinson's move. We also recently announced that as part of our succession plan, Ronald S. Saks, Chief Executive Officer for the past thirty years, will step down effective March 18, 2014, at which time, Daniel G. Korte will become our new Chief Executive Officer. The ability of these individuals to effectively integrate into their new roles will be critical to the success of our business. Although we have written employment agreements with all members of our senior management team and maintain key man life insurance policies on the lives of certain members of senior management, the loss of service of one or more of our senior management personnel could result in a loss of leadership and hinder our ability to successfully pursue our long-term growth strategy.

Because of the highly specialized and complex nature of our business, our success and future growth also depends on management's ability to attract, hire, train, integrate and retain skilled personnel in all areas of our business.  Competition for such personnel is intense, and our inability to adequately staff our operations with skilled personnel could render us less efficient and decrease our rate of production.  For example, our Engineering Services segment competes in a highly competitive market to attract and retain highly qualified and well-trained engineers.  Such a competitive market could put upward pressure on labor costs for engineering talent.  Although we have historically been able to pass through increases in engineering labor costs to our customers, there can be no assurance that we will be able to do so in the future.

In addition, rising costs associated with certain employee benefits, in particular employee health coverage, could limit our ability to provide certain employee benefits in the future.  If we are unable to provide a competitive employee benefits package, recruiting and retaining qualified personnel may become more difficult.

Sales to a limited number of customers represent a significant portion of our revenues, and our long-term agreements with these customers are generally terminable upon written notice.

For the year ended December 31, 2013, 72.6% of our aggregate sales were dependent upon relationships with six major customers: Spirit AeroSystems, Gulfstream Aerospace Corporation, The Boeing Company, Aviation Partners Boeing, Triumph Group and Bombardier. Although a majority of our sales, including sales to these customers, are made pursuant to long-term agreements, these agreements are generally terminable upon written notice by the customer and typically do not require the customer to purchase any specific quantity of products.  As a result, our sales under these agreements may not continue for the full term of the agreements or be consistent with historical sales levels.  Additionally, the loss of any one of these customers, a significant reduction in the amount of orders received from any one of these customers, or the failure to receive new program awards from any one of these customers, could cause a significant decrease in our net sales and profitability.  We anticipate that a small number of large customers will continue to represent a significant portion of our sales for the foreseeable future.  See “Item 1. Business – Customers and Products & Services – Customers.”

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Recent failures by OEMs to successfully outsource non-core capabilities and services on new platforms may cause our customers to reevaluate outsourcing strategies resulting in fewer design projects, design-build projects, machined and fabricated components and assemblies being outsourced.

The credit agreement governing our senior secured credit facilities contains financial covenants requiring us to maintain certain financial metrics and ratios and restrictive covenants that limit our flexibility. Non-compliance with these covenants could result in the amounts outstanding under the term loan facility and revolving credit facility becoming immediately due and payable.

The credit agreement for our revolving credit facility and term loan contains covenants that require us to comply with certain maximum leverage ratios and interest coverage ratios on a quarterly basis.  On August 21, 2013, we entered into an amendment of our revolving credit facility that, among other things, modified the interest coverage and the total leverage ratios in order to align these ratios with our expected ability to meet them, but only through the fourth quarter of 2014.

As previously disclosed, the Company's EBITDA and cash generation in 2013 was lower than originally expected. Without increased EBITDA and significant positive cash flow, the Company's risk of non-compliance with the required leverage ratio in the credit agreement will increase. Furthermore, our failure to control costs could negatively impact our ability to meet these financial covenants. If the covenants are not met and additional modifications or waivers cannot be obtained, the Company would not be in compliance with the terms of the credit agreement. If we are deemed to be non-compliant with the terms of our credit agreement, lenders could either refuse to lend additional funds to us or accelerate the repayment of any outstanding borrowings under the credit facilities. In the case of accelerated repayment, we might not have sufficient assets to satisfy our debt. If we are unable to repay the debt, the lenders could initiate proceedings against us with respect to our assets, all of which secure our debt under the credit facilities.

The credit agreement also contains certain restrictive covenants that limit and in some circumstances prohibit, our ability to, among other things, incur additional debt, sell, lease or transfer our assets, pay dividends, make investments, guarantee debt or obligations, create liens, enter into transactions with our affiliates and enter into certain merger, consolidation or other reorganization transactions.  This agreement also requires mandatory prepayments of excess cash at certain leverage levels.  These restrictions could limit our ability to obtain future financing, make acquisitions or needed capital expenditures, withstand the current or future downturns in our business or the economy in general, conduct operations or otherwise take advantage of business opportunities that may arise, any of which could place us at a competitive disadvantage relative to our competitors that have less debt and are not subject to such restrictions.

We may not be able to generate sufficient cash to service all of our indebtedness and may be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful.

Our ability to make scheduled payments on or to refinance our debt obligations depends on our financial condition and operating performance, which are subject to prevailing economic and competitive conditions and to certain financial, business and other factors beyond our control.  We may be unable to maintain a level of cash flows from operating activities sufficient to permit us to pay the principal, premium, if any, and interest on our indebtedness.

If our cash flows and capital resources are insufficient to fund our debt service obligations, we could face substantial liquidity problems and could be forced to reduce or delay investments and capital expenditures or to dispose of material assets or operations, seek additional debt or equity capital or restructure or refinance our indebtedness.  We may not be able to affect any such alternative measures, if necessary, on commercially reasonable terms or at all and, even if successful, such alternative actions may not allow us to meet our scheduled debt service obligations.  The credit agreement governing our senior secured credit facilities restricts our ability to dispose of assets and use the proceeds from any such dispositions.  We may not be able to consummate those dispositions or to obtain proceeds in an amount sufficient to meet any debt service obligations then due.

A downgrade, suspension or withdrawal, if any, of the rating assigned by a rating agency to our company or our senior secured credit facilities could adversely affect the price of our common stock.

Our senior secured credit facilities have been rated by nationally recognized statistical rating agencies and may in the future be rated by additional rating agencies.  We also have corporate ratings assigned by rating agencies.  We cannot assure you that any rating assigned will remain for any given period of time or that a rating will not be lowered or withdrawn entirely by a rating agency if, in that rating agency's judgment, circumstances relating to the basis of the rating, such as adverse changes in our business, so warrant.  Any downgrade, suspension or withdrawal of a rating by a rating agency could adversely affect the price of our common stock.

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Risks associated with acquisitions, including our completed TASS and Valent acquisitions, could result in increased costs and production inefficiencies.

Following our acquisitions of TASS and Valent completed during 2012, a key element of our growth strategy continues to be expansion of our business through the acquisition of complementary businesses involved in the aerospace industry and strategic acquisitions that will provide us with access to new industries, product lines and technology.  Our ability to successfully expand by acquisition is dependent upon, and may be limited by, the availability of suitable acquisition candidates, our capital resources and the availability of credit. We face additional risks with the acquisitions we have consummated, such as TASS and Valent, which risks include:

• difficulties in assimilating the operations and personnel of TASS, Valent and other companies we may acquire;

• unanticipated performance issues, such as loss of key customers;

• difficulties associated with implementing and integrating new product lines and meeting new tolerance requirements;

• difficulties in accurately pricing new products and fulfilling requirements of loss contracts;

• failure to realize potential cost savings or other financial and strategic benefits;

• incurrence of substantial unanticipated integration and other costs;

• potential loss of key employees of TASS, Valent and other companies we may acquire;

• incurrence of substantial, additional indebtedness in funding such acquisitions and cost of such indebtedness;

• potential legal matters that may arise as the result of events that occurred prior to acquisition;

• significant strain on our managerial, financial and other resources; and

• potential goodwill and intangible asset impairment.

In addition to the risks noted above, the departures of Charlie and Henry Newell, the former controlling principals of Valent, create additional uncertainty in our ongoing ability to integrate Valent. Although we expect our integration efforts will yield synergies and other cost savings in 2014, we cannot estimate the amount of these synergies and savings and whether, if at all, we will achieve them.

Furthermore, although we investigate the business operations and assets of entities that we acquire, there may be liabilities that we fail or are unable to discover and for which we, as a successor owner or operator, may be liable.  Also, the necessity of integrating our internal controls over financial reporting with businesses acquired by us in order to meet the requirements of Section 404 of the Sarbanes - Oxley Act of 2002 may add additional cost and expense to acquisitions and expose us to the risk that we may not be successful in integrating our internal controls over financial reporting with that of the acquired business or company on a timely basis.

Changes in future business conditions could cause business investments and/or recorded goodwill to become further impaired, resulting in substantial losses and write-downs.

Current accounting standards require a periodic review of goodwill and other intangible assets for impairment in value if circumstances indicate that the carrying amount will not be recoverable.  In assessing the recoverability of our goodwill and other intangible assets, management is required to make certain critical estimates and assumptions, particularly as to future growth rates in sales and backlog, manufacturing costs, labor costs, efficiencies and the achievement of reductions in operating costs. If any of these or other related estimates and assumptions are not realized in the future to the extent the Company cannot generate future cash flows at a level sufficient to recover the net book value of any of the Company's reporting units, the Company may be required to record future impairment charges. The impairment charges could significantly reduce future net income and earnings per share.

During the fourth quarter of 2013, the Company recorded a pre-tax, non-cash, goodwill impairment charge of $73.5 million within the Aerostructures segment related to the Valent acquisition. Goodwill accounts for $113.2 million, or 23.6%, of the Company’s total assets at December 31, 2013. At December 31, 2013, the fair value of all other reporting units exceeded or approximated their net book value. For the Engineering Services segment, fair value exceeded the net book value by approximately 10.1%. The 2013 goodwill impairment charge recorded for Valent results in remaining goodwill of $56.3 million which approximates the fair value of the entity at December 31, 2013. See Critical Accounting Policies under Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and Note 1, Summary of Significant

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Accounting Policies, to the Consolidated Financial Statements under Part II, Item 8, "Financial Statements and Supplementary Data," for additional disclosure related to these items.

Our long-term growth strategy depends on our ability to maintain a robust and effective supply-chain management system.

As we pursue our long-term growth strategy, we will be providing to our customers increasingly sophisticated components, assemblies and value-added services and design-build programs.  In addition, many OEMs are moving toward developing strategic partnerships with their larger suppliers, which are providing design, purchasing, warehousing and assembly services.  The increased complexity of our products, the expected increased outsourcing of non-core activities and the value-added services we are providing to our customers require us to maintain and manage an effective supply chain to assure timely delivery to us of quality components needed to meet our delivery schedules. Effective management of our supply chain may become more difficult if our customers' production rates increase.  Failure to continue to develop this capability or to procure from our suppliers quality components on a timely basis could decrease customer satisfaction, result in significant costs related to product recalls or charges for rework and thus our competitiveness, and could also result in lost revenue due to contractual penalties or lost sales.

We may experience cost over-runs related to orders for new products and changes to existing products, and we may be unable to recoup the resulting increased costs.

We generally sell our design-build projects, components, kits and assemblies under multi-year firm agreements on a fixed-price basis, regardless of variable production costs.  As a result, factors such as engineering changes, inaccurate pricing, manufacturing inefficiencies, start-up costs and increases in the cost of labor, materials or overhead may result in cost over-runs and losses on those agreements.  We may not succeed in obtaining the customer agreement to re-price a particular product, and we may not be able to recoup previous losses resulting from such issues as incomplete or inaccurate engineering data or out-of-tolerance tooling.

Our Engineering Services segment has historically provided the majority of its services under time and material arrangements.  However, recent changes in the industry and our strategic initiative to provide design-build capabilities have resulted in an increasing number of fixed-price arrangements.  Fixed-price development work inherently has more uncertainty than work pursuant to production or time and material contracts and, therefore, more variability in the estimates of the cost to complete such work.  Development programs have very complex designs, and as technical or quality issues arise, we may experience schedule delays and higher costs to complete.  Management uses its reasonable judgment to estimate the cost to perform the work and the price that we should charge.  While we believe the cost and price estimates incorporated in the financial statements are appropriate, future events could result in either upward or downward adjustments to those estimates. If we underestimate the cost of a project and are unable to adjust the price accordingly, our profit margin will be less than expected, or we could incur a loss on the project.

The Company’s failure to meet quality or delivery expectations of customers could adversely affect our business and financial results.

Both the Company’s customer base and their expectations with respect to the on-time delivery and quality of the Company’s products have increased and we expect both to continue to increase in the future.  Further, announced delivery rate increases over the next few years could put additional strain on the Company's quality and delivery performance which would require additional expenditures.  In some cases, the Company does not satisfy these customer expectations.  If the Company fails to meet the quality or delivery expectations of its customers, this failure could result in significant penalties, liquidated damages, recalls and costs to repair products not meeting our customer requirements. The loss of one or more significant customers of the Company could be damaging considering 72.6% of our aggregate sales for the most recently-ended fiscal year are dependent upon relationships with six major customers.

Demand for our defense-related products depends upon government spending.

A material portion of our sales, 18.7% in the year ended December 31, 2013, are derived from the military market.  The military market is largely dependent upon government budgets, particularly the U.S. defense budget.  The funding of government programs is subject to Congressional appropriation and the possibility of sequestration.  Although multi-year contracts may be authorized in connection with major procurements, the U.S. Congress generally appropriates funds on a fiscal year basis even though a program may be expected to continue for several years.  Consequently, programs, including those that require our components, may be only partially funded or may never enter full-scale production as expected.  As a result, future U.S. defense spending may not be allocated to programs that would benefit our business or at levels that we had anticipated.  A decrease in levels of defense spending or the government's termination of, or failure to fully fund, one or more of the contracts for the programs in which we participate would adversely impact our revenues and cash flow.

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Most U.S. government contracts for which we subcontract can be terminated by the U.S. government either for its convenience or if the prime contractor defaults by failing to perform under the contract. In addition, the prime contractor typically has the right to terminate our subcontract for its convenience or if we default by failing to perform under the subcontract. Termination for convenience provisions generally permit us to recover only our costs incurred or committed, plus settlement expenses and a reasonable profit, which may be different from what we bid or our historical profit rates, on the work completed prior to termination.

We may not realize all of the sales expected from our existing backlog.

As of December 31, 2013, we had approximately $470.6 million of order backlog, of which $467.1 million was related to our Aerostructures segment.  As a service provider, our Engineering Services segment does not typically utilize backlog to monitor its operations, other than the fixed price backlog for the MRJ and Embraer design-build projects. We consider backlog to be firm customer orders for future delivery.  From time to time, our OEM customers provide projections of components and assemblies that they anticipate purchasing in the future under new and existing programs.  These projections are not included in our backlog unless we have received a firm purchase order or order commitment from our customers.  Our customers may have the right, under certain circumstances and with certain penalties or consequences, to cancel, reduce or defer firm orders that we have in backlog.  If our customers cancel, reduce or defer firm orders, we may be protected from certain costs and losses, but our sales will nevertheless be adversely affected.

Given the nature of our industry and customers, there is always a risk that orders may be cancelled or rescheduled due to fluctuations in our customers' business needs, purchasing budgets or inventory management practices.  Moreover, our realization of sales from new and existing programs is inherently subject to a number of important risks and uncertainties, including the possibility that our customers will not launch programs on time, or at all, and the number of units that our customers will actually produce may change or the timing of production may be altered.  Also, until firm orders are committed, our customers generally have the right to discontinue a program, dual source or replace us with another supplier at any time without penalty.  Our failure to realize sales from new and existing programs would adversely impact our net sales, results of operations and cash flow.

We may be required to risk our capital to continue existing partnerships or develop new strategic partnerships with OEMs.

Many OEMs are moving toward developing strategic, and sometimes risk-sharing, partnerships with their larger suppliers.  Each strategic partner provides an array of integrated services, including purchasing, warehousing and assembly for OEM customers.  We have been designated as a strategic partner by some OEMs and are striving to become a strategic partner of other OEMs.  In order to maintain our current strategic partnerships and establish new ones, we will likely need to expand our existing capacities or capabilities.  We may not, however, have the financial ability or technical expertise to do so.

We use sophisticated equipment that is not easily repaired or replaced, and therefore, equipment failures could cause us to be unable to meet quality or delivery expectations of our customers.

Many of our manufacturing processes are dependent on sophisticated equipment used to meet the strict tolerance requirements of our customers.  Because sophisticated equipment generally is not easily repaired or replaced, unexpected failures of this equipment could result in production delays or the manufacturing of defective products. We currently lack redundancy with certain sophisticated equipment which could impact our ability to meet the expectations of our customers with respect to on-time delivery of quality products. More recently, commercial aerospace rate increases have caused a significant increase in demand for new equipment resulting in longer reorder lead times. Our failure to acquire new capacity and meet the quality or delivery expectations of our customers could lead to the loss of one or more of our significant customers or contracts.

The use by end-users of the product platforms into which our components are integrated could expose us to product liability claims.

We may be exposed to possible claims of personal injury, death, grounding costs, property damage or other liabilities that result from the failure or malfunction of a component or assembly fabricated or designed by us.  We currently have policies in place for general liability, aviation product liability and premise insurance, which we believe provide adequate coverage in amounts and on terms that are generally consistent with industry practice.  Nevertheless, to the extent a claim is made against us that is not covered in whole or in part by our current insurance, we may be subject to a material loss.  Moreover, any claims that are covered by our policies would likely cause our premiums to increase, and we might not be able to maintain adequate insurance coverage levels in the future. Additionally, since we do not carry product recall insurance we could be subject to recall expenses associated with any product failures determined to be our fault.

Risks associated with foreign operations could adversely impact the Company.

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The Company operates facilities in Mexico, the United Kingdom, and Australia.  Doing business in foreign countries is subject to various risks, including political instability, local economic conditions, foreign government regulatory requirements, trade tariffs and the potentially limited availability of skilled labor in proximity to the Company's facilities.  In addition, the Company has been operating its Mexican facility through a shelter arrangement under a contractual agreement with a Mexican company.  If the Company is unable to renew this agreement in future years on terms satisfactory to it, the Company may incur increased labor costs and/or experience a disruption in its operations in Mexico.

Our facilities are located in regions that are affected by natural disasters.

Several of our facilities are located in regions that have a higher than average risk of earthquake and tornado activity and one of our facilities has experienced damage due to floods.  Although we maintain earthquake and flood loss insurance where necessary, an earthquake, flood or other natural disaster could disrupt our business, result in significant recovery costs and cause our productivity and profits to decrease.

Certain newer aircraft platforms include fewer metal products and could, over time, limit our ability to grow.

Newer military aircraft, such as the Lockheed Martin F-35 Series, and newer aircraft designs for large commercial aircraft, such as the Boeing 787 and Airbus 350, include more composite and other non-metal components than previous models.  Additionally, redesigns of existing platforms could include greater amounts of non-metal components.  Although we are in the process of continuing to expand our development of non-metallic production capabilities, we currently do not have significant capacity to produce large quantities of non-metal components. If we are unsuccessful in developing or acquiring such production expertise, the trend toward the use of non-metal components could limit our opportunities for new work, cause the loss of certain existing work and increase the competitive environment with other suppliers of metal components.

Anti-takeover statutes and anti-takeover provisions in our organizational documents may discourage our acquisition by a third party, which could limit your opportunity to sell your shares at a premium.

Our restated articles of incorporation and amended and restated bylaws contain certain provisions that reduce the probability of a change of control or acquisition of our company.  These provisions include, among other things:

• the ability of our Board of Directors to issue preferred stock in one or more series with such rights, obligations and preferences as the Board of Directors may determine, without any further vote or action by our shareholders;

• advanced notice procedures for shareholders to nominate candidates for election of directors and for shareholders to submit proposals for consideration at shareholders’ meetings;

• the staggered election of our directors; and

• restrictions on the ability of shareholders to call special meetings of shareholders.

In addition, we are subject to Section 459 of the General and Business Corporation Law of Missouri, which, under certain circumstances, may prohibit a business combination with any shareholder holding 20% or more of our outstanding voting power.  This provision may have the effect of delaying, deterring or preventing certain potential acquisitions or a change of control of the Company.

If our directors and executive officers choose to act together, they will exercise significant influence over matters requiring approval by our shareholders.

As of December 31, 2013, our directors and executive officers collectively owned 17.9% of our common stock. In addition, the company has the sole power to vote an additional 4.4% of our common stock held by one of the Company's defined contribution plans. As a result, these shareholders and the Company, acting together, would be able to exert significant influence on all matters requiring approval by our shareholders, including the election of our directors and any merger, sale of assets or other change of control transaction.

We may sell more shares of common stock which could result in dilution and cause the stock price of our common stock to decline.

Our business plan anticipates the need for new capital to support the continued development of our design-build program and other more sophisticated product offerings, either through internal investment or acquisition.  Subject to any limitations set

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forth in our credit agreement, we may raise new capital through debt (including debt securities and/or bank borrowings), the issuance of additional shares of our common stock or the issuance of securities convertible into or exchangeable for shares of our common stock. Additionally, we may decide to raise capital to pay down some of the indebtedness we have incurred in connection with our acquisition of Valent.  Should we choose to raise capital by issuing or selling shares of our common stock (or securities convertible into or exchangeable for shares of common stock) for any reason, such issuance will likely have a dilutive effect on the holders of our common stock and/or could have a material negative impact on the market price of our common stock.

If we are unable to protect our information technology infrastructure against service interruptions, data corruption, cyber-based attacks or network security breaches, our operations could be disrupted.

We rely on information technology networks and systems to manage and support a variety of business activities, including procurement and supply chain, engineering support and manufacturing.  Our information technology systems may be susceptible to damage, disruptions or shutdowns due to failures during the process of upgrading or replacing software, databases or components of our technology.  These systems may also be subject to failures due to: power outages, hardware failures, computer viruses, computer hackers, telecommunication failures, user errors, or even catastrophic events.  In addition, security breaches could result in unauthorized disclosure of confidential information.  If our information technology systems suffer severe damage, disruption or shutdown and our business continuity plans do not effectively resolve the issues in a timely manner, our manufacturing process could be disrupted, resulting in late deliveries.

OEMs in the aerospace industry have significant pricing leverage over suppliers such as us, and may be able to achieve price reductions over time, which could adversely impact our profitability.

There is substantial and continuing pressure from OEMs in the aerospace industry on suppliers such as us to reduce prices for products and services. Such pricing pressure has continued due to excess capacity in the industry and the availability of competitive pricing from businesses in low-cost labor areas. If we are required to provide price reductions to our customers and are unable to offset these effects through operating cost reductions and other methods, our gross margins, profitability and cash flows could be reduced.

Access to funding through the capital markets and debt financing are essential to the execution of our business plan and, if we are unable to obtain such access, we could experience a material adverse effect on our business and financial results.

Our ability to invest in our businesses, fund our operations and contractual commitments and make strategic acquisitions requires access to the capital markets, access to term debt and/or sufficient bank credit lines to support short-term borrowings.  If we are unable to continue to access the capital markets and debt financing on terms acceptable to the Company as a result of, for example, disruption or declines in the capital markets and/or a decline in our financial performance, outlook, credit ratings or failure to meet bank covenants could cause us to experience difficulties in successfully executing our long-term growth strategy and/or a material adverse effect on our business and financial results.

Risks Related to Our Industry

We are subject to the cyclical nature of the aerospace industry, and any future downturn in the aerospace industry or general economic conditions could cause our sales and operating income to decrease.

For the year ended December 31, 2013, we derived approximately 96.0% of our revenue from the sale of services and components for the aerospace industry.  Consequently, our business is directly affected by certain characteristics of and trends in the aerospace industry or general economic conditions that affect our customers, such as:

• fluctuations in the aerospace industry’s business cycle;

• new programs in commercial, military, and general aviation have historically experienced significant delays and engineering changes which adversely impact our net sales, results of operations and cash flow;

• varying fuel and labor costs;

• intense price competition and regulatory scrutiny;

• certain trends, including a possible decrease in aviation activity, a decrease in outsourcing by aircraft manufacturers or the failure of projected market growth to materialize or continue;

• changes in military budgeting, sequestration and procurement for certain military aircraft;

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• sequestration may result in excess capacity potentially putting additional pressure on prices; and

• military trend toward utilizing more Unmanned Aerial Vehicles, reducing the demand for more traditional military aircraft (e.g. Boeing F-18, General Dynamics F-16 and Lockheed Martin F-35).

In the event that these characteristics and trends adversely affect customers in the aerospace industry, they will reduce the overall demand for our products and services, thereby decreasing our sales and operating income.

Terrorist attacks could reduce demand for our large commercial, corporate and regional products and services.

Acts of sabotage or terrorism or adverse results to the United States or its military conflicts, such as the current conflict in Afghanistan, would likely have an adverse impact on the large commercial and corporate and regional aircraft industries, which could lead to reduced demand for our products and services.  Prior industry downturns caused by such acts or results have negatively affected our Aerostructures segment's sales, gross margin, net income and cash flow.

We may not be able to maintain or improve our competitive position because of the intense competition in the markets we serve.

Our competitors in the aerospace industry consist of a large fragmented group of companies, including certain business units or affiliates of our customers.  We believe that competition within the aerospace industry will increase substantially as a result of industry consolidation, trends favoring greater outsourcing of components and a decrease in the number of preferred suppliers.  We also believe foreign aerospace manufacturers and engineering service providers and foreign divisions of domestic aerospace businesses will become an increasing source of competition, due largely to these businesses' access to low-cost labor and the increased prevalence of industry participation commitments, pursuant to which domestic OEMs agree to award production work to manufacturers from a foreign country in order to obtain orders from that country.  Some of our competitors have substantially greater financial, production and other resources than we have.  These competitors may:

• have the ability to adapt more quickly to changes in customer requirements and industry conditions or trends;

• have greater access to capital;

• have stronger relationships with customers and suppliers;

• have greater name recognition; and

• purchase critical suppliers and make them captive causing delays and potential price increases.

Future commitments to increase production rates depend on our ability to expand production at our manufacturing facilities.

Certain large commercial and corporate aircraft manufacturers have announced planned production rate increases for several of their major programs. In some cases, in order to meet these increases in production rates, we are making significant capital expenditures to expand our capacity and improve performance. Many of our suppliers and customers are investing significant amounts of capital in new facilities and equipment as well. If difficulty is experienced with effectively managing these expansion efforts to meet the planned increases in production rates, it could cause disruptions in our manufacturing lines or the manufacturing lines of our customers and suppliers, which could have a material adverse impact on our ability to meet commitments to our customers and on our future financial results.

Decreases in the availability or increases in the cost of our raw materials would increase our operating costs.

Most of our components are manufactured from aluminum products.  From time to time, we, and the aerospace components industry as a whole, have experienced shortages in the availability of aerospace quality aluminum. In addition, we utilize certain materials in the manufacture of our non-aerospace products that, in some cases, may be provided by a limited number of suppliers.  Raw material shortages could limit our ability to meet our production needs and adversely affect our ability to deliver products to our customers on a timely basis.  Also, raw material shortages and capacity constraints at our raw material producers are outside of our control and can cause the price of aluminum to increase.  Any significant shortage or price escalation of raw materials such as aluminum could increase our operating costs, which would likely have an adverse impact on our financial results.  Composite products have a higher percentage of raw material content and thus, are more susceptible to gross margin impacts. As rate increase on commercial aerospace platforms rise so do the lead times for certain raw material which makes reorder points a critical step in our manufacturing and planning process. One part missed in the process could result in a delivery being delayed and our ability to meet commitments to our customers and our future financial results.

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Compliance with and changes in environmental, health and safety laws and other laws that regulate the operation of our business and industry standards could increase the cost of production and expose us to regulatory claims.

Our operations are subject to extensive and frequently changing federal, state and local laws and substantial regulation by government agencies, including the EPA, OSHA, the FAA and the U.S. Department of Defense.  Among other matters, these agencies impose requirements that: 

• regulate the operation, handling, transportation and disposal of hazardous materials generated or used by us during the normal course of our operations;

• govern the health and safety of our employees; and

• require that we meet standards and licensing requirements for aerospace components.

In particular, we use and generate hazardous waste in our operations.  Consequently, we monitor hazardous waste management and applicable environmental permitting and reporting for compliance with applicable laws at our locations in the ordinary course of our business.  We may be subject to potential material liabilities relating to any investigation and cleanup of any contamination at our locations or properties where we deliver hazardous waste for handling or disposal and to claims alleging personal injury.  In addition, we have incurred, and expect to continue to incur, costs to comply with environmental laws and regulations.  The adoption of new laws and regulations, stricter enforcement of existing laws and regulations, the discovery of previously unknown contamination or the imposition of new cleanup requirements could require us to incur costs and become subject to new or increased liabilities that could increase our operating costs and adversely affect the manner in which we conduct our business.

We are involved with the Missouri AG with respects to the Missouri AG Matter, the EPA and DoJ with respect to the Waste Water Allegations and the EPA and MDNR with respect to the Voluntary Disclosed Matters. Any charges filed, monetary sanctions imposed or other actions taken by any of these agencies could result in a material adverse effect on the Company. For more information with respect to these matters, please see "Item 1. Business - Governmental Regulations and Environmental Compliance."

We are also subject to U.S. Export Regulations, including the AECA, associated ITAR and Export Administration Regulations and FCPA.  Failure to comply with such regulations could result in substantial fines, significant time and costs related to training personnel for cause and corrective action, penalties and limit our ability to export certain products.

While we require FAA certifications only to a limited extent, we typically are required to maintain third-party registrations with respect to industry specification standards, such as AS9100 and NADCAP, for our quality systems and processes.  In fact, many individual OEMs and Tier 1 suppliers require certifications or approvals of our work based on third-party registrations in order to engineer and serve the systems and components used in specific aircraft models.  If material OEM certifications or approvals were to be revoked or suspended, OEMs might cease purchasing our products.

Moreover, if in the future new or more stringent governmental regulations are adopted, or industry oversight heightened, such action could result in our incurrence of significant additional costs and have an adverse effect on our financial condition or results of operation.

Significant consolidation in the aerospace industry could adversely affect our business and financial results.

The aerospace industry is experiencing significant consolidation, including the Company's customers, competitors and suppliers.  Consolidation among the Company's customers may result in delays in the award of new contracts and losses of customer relationships which could impact our ability to win new projects.  Consolidation among our competitors may result in competitors with greater resources and market share, which could adversely affect the Company's ability to compete successfully.  Consolidation among the Company's suppliers may result in fewer sources of supply and increased cost to the Company.

ITEM 1B. UNRESOLVED STAFF COMMENTS.

None.

ITEM 2. PROPERTIES.

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We operate manufacturing plants and other facilities (including office, distribution, engineering and other service facilities) primarily in the United States and Mexico.  We lease twenty-three of our manufacturing plants and other facilities and own four.  We consider our major operating properties to be in good operating condition and suitable for their current use.  We believe that the productive capacity of our plants and other facilities is generally adequate for current operations.

The Company's principle facilities are as follows:

Location	Primary Operations Performed
St. Charles, Missouri	Assembly
Cottonwood Falls, Kansas	Assembly
Lenexa, Kansas	Assembly
St. Charles, Missouri	Fabrication
Auburn, Washington	Fabrication, Assembly
Everett, Washington	Fabrication
Mexicali, Mexico	Fabrication, Finishing
Vista, California	Fabrication
Wichita, Kansas	Fabrication
Tulsa, Oklahoma	Finishing
Cuba, Missouri	Finishing
Fredonia, Kansas	Machining
Fort Worth, Texas (1)	Machining
Sun Valley, California	Machining
Tulsa, Oklahoma	Machining
Washington, Missouri	Machining
Wichita, Kansas	Machining
Tulsa, Oklahoma	Distribution
Savannah, Georgia (2)	Kitting, Distribution, Machining
Dallas/Fort Worth, Texas	Engineering Services
Everett, Washington	Engineering Services
Greenville, South Carolina	Engineering Services
San Diego, California	Engineering Services
Stansted, Essex, England	Engineering Services
Melbourne, Australia	Engineering Services
St. Charles, Missouri	Offices
Kansas City, Missouri	Offices

(1) In November 2013, the Company announced the closing of its Fort Worth, Texas facility. The closure of the facility will be completed in the second quarter of 2014. Work performed at this location is in the process of being relocated to other facilities at December 31, 2013.

(2) In January 2014, the Company announced plans to relocate the work performed relative to machining operations at its Savannah, Georgia facility to other locations within the company. The Savannah facility will continue to perform kitting and assembly operations. 

ITEM 3. LEGAL PROCEEDINGS.

For a description of our proceedings and potential proceedings, see "Legal Contingencies" in Note 13 - "Commitments and Contingencies" in the Notes to our Consolidated Financial Statements, which is incorporated herein by reference.

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The Company is not a party to any other legal proceedings, excluding routine claims and lawsuits arising in the ordinary course of our business.  We do not believe such routine claims and lawsuits, individually or in the aggregate, will have a material adverse effect on our business.

ITEM 4. MINE SAFETY DISCLOSURES.

Not Applicable.

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PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

Market Information

The Company’s common stock is traded on the NASDAQ Global Market under the symbol “LMIA.”  The following table sets forth the range of high and low closing sale prices for the Company’s common stock for the periods indicated during the Company’s past two fiscal years:

Period	High		Low
Fiscal Year 2013
1st quarter	$	22.78	$	19.27
2nd quarter	22.50		17.83
3rd quarter	19.89		11.95
4th quarter	16.00		10.98
Fiscal Year 2012
1st quarter	21.26		17.26
2nd quarter	19.14		15.10
3rd quarter	20.91		17.14
4th quarter	20.87		17.61

Holders

As of March 11, 2014, there were approximately 104 holders of record of the Company’s common stock.

Dividends

We have not historically declared or paid cash dividends on our common stock, and we do not anticipate paying any cash dividends in the foreseeable future.  Our credit facilities prohibit us from declaring a dividend with respect to our common stock.  We currently intend to retain our earnings, if any, and reinvest them in the development of our business.

Securities Authorized for Issuance under Equity Compensation Plans

On July 7, 2005, our shareholders approved the LMI Aerospace, Inc. 2005 Long-term Incentive Plan (the “Plan”).  The Plan provides for the grant of non-qualified stock options, incentive stock options, shares of restricted stock, restricted stock units, stock appreciation rights, performance awards, and other stock-based awards and cash bonus awards to employees or directors.  Up to 1,200,000 shares of common stock are authorized for issuance under the Plan.  The following table summarizes information about our equity compensation plan as of December 31, 2013.  All outstanding awards relate to the Company’s common stock.

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Equity Compensation Plan Information

Plan Category	Number of Securities to be Issued upon Exercise of Outstanding Options, Warrants and Rights	Weighted- Average Exercise Price of Outstanding Options, Warrants and Rights	Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (excluding securities reflected in column (a))
	(a)(1)	(b)	(c)(2)
Equity compensation plans approved by security holders:
2005 Long-Term Incentive Plan	—	—	313,725
Equity compensation plans not approved by security holders	—	—	—
Total	—	—	313,725

(1) This column excludes 219,751 shares of unvested restricted stock outstanding with a $19.74 per share weighted-average grant date fair market value.

(2) This column includes securities remaining for issuance as restricted stock.

The Company made no purchases of its common stock during the year ended December 31, 2013, and the Company does not maintain an active repurchase program.

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Performance Graph

Set forth below is a line graph presentation comparing the yearly percentage change in cumulative total shareholder returns since December 31, 2008 on an indexed basis with the Standard & Poors (“S&P”) 500 Index and the S&P Small Cap Aerospace/Defense Index, which is a nationally recognized industry standard index.

The following graph assumes the investment of $100 in LMI Aerospace common stock, the S&P 500 Index and the S&P Small Cap Aerospace/Defense Index as well as the reinvestment of all dividends.  There can be no assurance that the performance of the Company’s common stock will continue into the future with a trend that is the same or similar to the trend depicted in the graph below.

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ITEM 6. SELECTED FINANCIAL DATA.

The selected financial data set forth below for the year ended December 31, 2013, and each of the four preceding fiscal years, should be read in conjunction with “Item 7.  Management’s Discussion and Analysis of Financial Condition and Results of Operations,” the consolidated financial statements, related notes and other financial information included herein.

(Dollar amounts in thousands, except share and per share data)

	2013			2012 (1)			2011			2010			2009
Statement of Operations Data:
Net sales	$	412,557		$	278,629		$	254,040		$	223,356		$	241,196
Cost of sales	332,695			210,321			194,390			171,856			188,245
Gross profit	79,862			68,308			59,650			51,500			52,951
Selling, general & administrative expenses	55,862			36,891			33,563			32,435			31,678
Impairment expense (2)	77,750			—			1,163			—			3,350
Contingent consideration write-off (3)	(7,950		)	—			—			—			—
Acquisition expense (4)	247			5,362			—			—			—
Severance and restructuring costs (5)	3,073			—			—			—			312
(Loss) income from operations	(49,120		)	26,055			24,924			19,065			17,611
Other income (expense)
Interest expense	(16,962		)	(1,771		)	(669		)	(696		)	(1,623		)
Other income (expense), net	618			356			(730		)	58			10
Total other expense	(16,344		)	(1,415		)	(1,399		)	(638		)	(1,613		)
(Loss) income before income taxes	(65,464		)	24,640			23,525			18,427			15,998
(Benefit) provision for income taxes (6)	(6,979		)	8,153			7,136			5,496			5,843
Net (loss) income	$	(58,485	)	$	16,487		$	16,389		$	12,931		$	10,155
Amounts per common share:
Net (loss) income - per common share	$	(4.64	)	$	1.41		$	1.42		$	1.13		$	0.90
Net (loss) income - assuming dilution	$	(4.64	)	$	1.39		$	1.40		$	1.11		$	0.90
Weighted average common shares outstanding	12,607,833			11,701,607			11,559,895			11,420,524			11,305,231
Weighted average dilutive common shares outstanding	12,607,833			11,839,182			11,741,513			11,636,385			11,341,312
Other Financial Data:
Capital expenditures (7)	$	24,149		$	19,529		$	10,267		$	7,151		$	3,938
Cash (used) provided by operating activities	(8,349		)	8,799			16,175			26,845			22,417
Cash used by investing activities	(22,253		)	(235,000		)	(9,997		)	(7,145		)	(13,853		)
Cash provided (used) by financing activities	27,827			222,680			(257		)	(17,784		)	(8,562		)
Gross profit margin	19.4		%	24.5		%	23.5		%	23.1		%	22.0		%
Balance Sheet Data:
Cash and cash equivalents	$	1,572		$	4,347		7,868			1,947			31
Working capital	150,995			113,233			83,988			68,118			71,425
Total assets	480,051			527,964			204,606			179,849			180,217
Total long-term debt, excluding current portion	285,369			255,067			—			28			17,210
Shareholders' equity	144,144			200,954			167,785			149,763			134,493

(1) Includes the operating results of TASS subsequent to the acquisition date, August 7, 2012, and the results of Valent subsequent to the acquisition date, December 28, 2012.

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(2) During the fourth quarter of fiscal 2013, in accordance with the Company’s accounting policy as described in Note 1 to the Consolidated Financial Statements, the Company performed the annual impairment analysis and determined that carrying value for goodwill for Valent was above its fair value. As a result, a non-cash goodwill impairment charge of $73,528 was recorded in the fourth quarter of 2013. The fair value for the remaining goodwill in Aerostructures exceeded its carrying value. (See ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations, Critical Accounting Policies, "Goodwill and Intangible Assets" and Note 1, "Goodwill and Intangible Assets"). In the second quarter of 2013, a triggering event occurred when the Company started an initiative to rebrand its core engineering business. As result of this initiative, the D3 Technologies name is no longer being used; thus, the $4,222 million indefinite lived intangible asset related to that trade name was deemed to be fully impaired.  During the first quarter of 2011, a triggering event occurred with regard to a certain proprietary technology intangible asset as a result of a failure to conclude a possible sale of a product line resulting in a non-cash charge of $1,163 related to Intec.  In the fourth quarter of 2009, the Company recorded a non-cash charge of $3,350 (relating to Tempco Engineering, Inc.) for the impairment of goodwill.  Impairment testing as of the fourth quarter of 2009 indicated that the book value of Tempco Engineering, Inc. exceeded the fair value of the business.

(3) In the second quarter of 2013, the Company realized a $7,950 non-cash benefit related to the write-off of the contingent consideration associated with the December 2012 purchase of Valent. The earnings levels required to be achieved by Valent in order for former Valent interest holders to be paid contingent consideration were not achieved by the required date of December 31, 2013.

(4) Includes investment banking, accounting, legal, tax and valuation expenses primarily as a direct result of the TASS and Valent acquisitions.

(5) Includes $453 related to the closure of the Precise Machine facility in Fort Worth, TX and $2,620 related to the separation agreement reached with key members of Valent Aerostructures, LLC.

(6) Includes a $17,718 valuation charge against deferred tax assets at December 31, 2013 related to the goodwill impairment at Valent noted in (2) above.

(7) Includes $411 and $746 related to equipment capital leases in 2013 and 2012, respectively.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Overview

We are a leading supplier of structural assemblies, kits and components and design engineering services to the aerospace and defense markets.  We primarily sell our products and services to the large commercial, corporate and regional, and military aircraft markets.    We believe that OEMs and Tier 1 aerospace companies will continue the trend of selecting their suppliers based upon the breadth of more complex and sophisticated design and manufacturing capabilities and value-added services and the ability of their suppliers to manage large production programs.

We are organized into two reportable segments: the Aerostructures segment and the Engineering Services segment.  Our Aerostructures segment fabricates, machines, finishes, integrates, assembles and kits machined and formed close tolerance aluminum, specialty alloy, composite components and higher level assemblies for use by the aerospace and defense industries.  Our Engineering Services segment 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.

On August 7, 2012, we acquired Kirkland, Washington-based TASS, a premier after-market engineering and support services firm.  TASS is included in the Engineering Services segment and delivers high-end engineering solutions to aircraft manufacturers, airlines, MRO services companies and leasing companies worldwide.  The acquisition of TASS, whose expertise lies in engineering for aircraft repairs and modifications and providing airline fleet management services, has provided us with a global presence in the rapidly growing after-market engineering arena and built on our long and successful history with Boeing products.  TASS also provides the Company with the ability to internally source product support for parts manufactured by the Company to the global airline fleet.

On December 28, 2012, we acquired Kansas City, Missouri-based Valent, a provider of complex, structural components, major sub-assemblies and machined parts for OEMs and Tier 1 airframe manufacturers in the aerospace and defense industries.  Valent is included in the Aerostructures segment and provides significant content for several major commercial, business jet and military platforms including the Boeing 737, 747-8, 777, 787, V-22, F-15, F-18 and Gulfstream G650.  The resulting increased content, complementary product offerings and enhanced project management capabilities of the acquisition are expected to drive further growth from existing platforms by offering our customers more diversified product and service offerings, deepened customer relationships and greater leverage of our extensive manufacturing and supply chain network.  In addition, we believe Valent’s assembly and high-end precision machining capabilities will allow the Company to compete for larger and more complex design-build projects.

During the fourth quarter of 2013, income from operations at Valent was below the Company's expectations. The decline in income was primarily due to significantly lower than expected performance on two long-term contracts and a determination that a loss contract existed at acquisition. During the fourth quarter of 2013, the Company also performed its annual impairment testing of the Valent reporting unit which resulted in a $73.5 million goodwill impairment. This impairment also required the review of our ability to realize our net deferred tax assets. Upon review, we established a $17.8 million dollar valuation allowance to reduce these net deferred taxes. Due to the goodwill impairment and resulting net loss, the Company determined it was appropriate to establish this reserve. (See Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations,"Critical Accounting Estimates.")

On February 21, 2014, Ronald S. Saks provided notice of his retirement and resignation as Chief Executive Officer and President of the Company, such resignation to be effective as of March 18, 2014. On February 21, 2014, the Board of Directors of the Company (the “Board”) appointed Mr. Saks as the non-executive Chairman of the Board to replace Joseph Burstein, the current Chairman, effective March 18, 2014. Mr. Burstein will continue to serve as a director on the Board. Also on February 21, 2014, on the recommendation of the Compensation Committee, the Board appointed Daniel G. Korte to succeed Mr. Saks as Chief Executive Officer and President of the Company effective March 18, 2014. Mr. Korte shall commence his employment with the Company on March 10, 2014 as Chief Executive Officer-Elect, a non-executive position, and begin serving as Chief Executive Officer and President on March 18, 2014. Mr. Korte plans to conduct a strategic review of the Company's operations.

Results of Operations

The post-acquisition results of the operations of Valent and TASS are included in the following information within the Aerostructures and Engineering Services segments, respectively.

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The following table illustrates the percentage of sales to primary industries and markets realized over the last three years.

Market	2013		2012		2011
Large commercial aircraft	47.4	%	36.7	%	38.4	%
Corporate and regional aircraft	25.9	%	32.0	%	30.8	%
Military	18.7	%	26.0	%	22.0	%
Other (1)	8.0	%	5.3	%	8.8	%
Total	100.0	%	100.0	%	100.0	%

(1) Includes technology, testing, commercial consulting services and various other products.

Year ended December 31, 2013 compared to year ended December 31, 2012

The following table provides the comparative data for 2013 and 2012:

	2013
	($ in millions)
	Aerostructures			Engineering Services			Elimination			Total
Net sales	$	331.7		$	83.7		$	(2.8	)	$	412.6
Cost of sales	263.6			71.6			(2.5		)	332.7
Gross profit	68.1			12.1			(0.3		)	79.9
S, G, & A and other charges (1)	114.2			14.8			—			129.0
(Loss)/income from operations	$	(46.1	)	$	(2.7	)	$	(0.3	)	$	(49.1	)

(1) Includes $73.5 million in the Aerostructures segment related to goodwill impairment and $4.2 million in the Engineering Services segment related to intangible asset impairment

	2012
	($ in millions)
	Aerostructures		Engineering Services		Elimination			Total
Net sales	$	175.0	$	105.6	$	(2.0	)	$	278.6
Cost of sales	127.1		85.3		(2.1		)	210.3
Gross profit	47.9		20.3		0.1			68.3
S, G, & A and other charges	32.4		9.8		—			42.2
Income from operations	$	15.5	$	10.5	$	0.1		$	26.1

Aerostructures Segment

Net Sales.   Net sales were $331.7 million in 2013, an increase of 89.5% from $175.0 million in 2012.   Included in the increase were sales of $120.9 attributable to the acquisition of Valent. Excluding Valent, Aerostructures sales increased $35.8 million, or 20.5% in 2013 versus 2012. The following table summarizes total sales for the segment and the percentage of total sales represented by the market served for each of the years ended December 31, 2013 and December 31, 2012:

Category	2013		% of Total		2012		% of Total
	($ in millions)
Large commercial aircraft	$	159.1	48.0	%	$	72.6	41.5	%
Corporate and regional aircraft	89.3		26.9	%	57.6		32.9	%
Military	57.1		17.2	%	35.7		20.4	%
Other	26.2		7.9	%	9.1		5.2	%
Total	$	331.7	100.0	%	$	175.0	100.0	%

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Large commercial aircraft generated net sales of $159.1 million in 2013 compared to $72.6 million in 2012, an increase of 119.1%.  Included in the increase were sales of $71.4 million attributable to the acquisition of Valent, of which $58.4 million were related to the 737 platform. Sales related to the 737 platform for legacy Aerostructures increased $4.5 million to $27.6 million in 2013 from $23.1 million in 2012 as demand increased on this aircraft. As production rates on this platform continue to increase, the Company expects this trend to continue in 2014. Sales for legacy Aerostructures related to wing modification kits on the 767 platform increased $7.8 million to $14.0 million in 2013 from $6.2 million in 2012. In 2014, the Company expects net sales for 767 wing modification kits to return to 2012 levels.

Net sales of components for corporate and regional aircraft were $89.3 million during 2013 compared to $57.6 million in 2012, an increase of 55.0%.  Included in the increase were sales of $11.8 million attributable to the acquisition of Valent, of which $6.5 million was attributable to the Gulfstream G650 platform.Legacy Aerostructures also realized growth on the G650 program in 2013 of $3.7 million, with total sales in the period of $17.0 million compared to $13.3 million in 2012. Sales for legacy Aerostructures also included $13.2 million primarily related to tooling on a development program in the business and regional jet market in 2013 with no sales in 2012.

Military products generated net sales of $57.1 million in 2013 compared to $35.7 million in 2012, an increase of 59.9%.  Included in the increase were sales of $19.2 million attributable to the acquisition of Valent of which $5.1 million, $4.3 million, and $2.8 million were related to the F-18, V-22 Osprey, and C-17 platforms, respectively. Legacy Aerostructures realized an increase in sales of $4.8 million related to the Embraer KC-390 program in 2013, which contributed $6.7 million in sales in the period compared to $1.9 million in 2012. The Blackhawk program generated sales of $26.9 million in 2013, compared to $28.4 million in 2012.

Other products generated net sales of $26.2 million in 2013 compared to $9.1 million in 2012, an increase of 187.9%.   Included in the increase were sales of $18.4 million attributable to the acquisition of Valent. Valent generated $6.3 million in processing revenues, $6.8 million in sales to the rail industry, and $4.0 million in sales of cables and wire harnesses.

Cost of Goods Sold.  Cost of goods sold for 2013 was $263.6 million (79.5% of net sales) compared to $127.1 million (72.6% of net sales) for 2012.  Cost of goods sold related to the Valent acquisition was $103.2 million in 2013, or 85.3% of sales. Included in cost of sales in 2013 for Valent was $2.5 million of non-recurring inventory step-up purchase accounting adjustments. Excluding the impact of the Valent acquisition, cost of goods sold increased$33.4 million, to $160.4 million, or 76.1% of sales. Subcontract tooling costs in support of several long-term contracts accounted for $14.5 million of that increase. In addition, direct costs including labor, material, processing, and manufacturing overhead increased $12.2 million due to volume growth, capacity expansion and support necessary on newer programs.

Cost of goods sold for the Aerostructures segment consists primarily of direct labor, materials, subcontract costs and manufacturing overhead, including indirect labor costs, depreciation, rent, supplies and other indirect costs.

Gross Profit.  Gross profit for 2013 was $68.1 million (20.5% of net sales) compared to $47.9 million (27.4% of net sales) for 2012.  In 2013, gross profit attributable to Valent was $17.8 million, or 14.7% of sales. The gross profit margin at Valent was adversely impacted by non-recurring inventory step up and performance on long-term contracts. Performance on these contracts was largely impacted by increases in indirect labor necessary to support them. Gross margin attributable to legacy Aerostructures was 23.9% in 2013 compared to 27.4% in 2012. Revenue growth of $20.0 million related to long-term contracts and tooling programs which realized gross margin of 18.2%, accounted for 0.8% of the margin reduction. Price concessions on key military work accounted for 0.5% of the margin decline in 2013 as compared to 2012.

Selling, General and Administrative Expenses and Other Charges.  Selling, general and administrative expenses were $114.2 million (34.4% of net sales) in 2013 compared to $32.4 million (18.5% of net sales) in 2012.  Included in expenses for the year ended December 31, 2013 were $92.3 million in expenses attributable to the inclusion of Valent, of which $73.5 million were related to goodwill impairment charges. These charges resulted from Company's annual impairment analysis which determined that carrying value for goodwill for Valent was above its fair value. This impairment was offset by an $8.0 million benefit related to the write-off of the contingent consideration associated with the December 2012 purchase of Valent. By the end of the second quarter of 2013, the earnings levels required in order for former Valent interest holders to be paid contingent consideration were deemed not likely to be achieved by the required date of December 31, 2013.

During the fourth quarter of 2013, the Company committed to a restructuring plan that will result in the closure of its Precise Machine facility located in Fort Worth, Texas with work transferring to other facilities. As a result, the Company recorded employee severance costs of $0.5 million in the fourth quarter of 2013. During the same quarter, the Company also reached a separation agreement with three key members of Valent Aerostructures, LLC, resulting in a charge of $2.6 million in separation-

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related expenses. The Company expects that the annual cost savings related to these restructuring plans will approximate $2.0 million.

The year ended December 31,2012 included $5.4 million of costs incurred related to acquisitions, with Valent specifically accounting for $4.9 million of those costs.  The increase in costs from the acquisitions exceeded the increase in sales, increasing the total selling general and administrative expenses expressed as a percentage of sales.

Selling, general and administrative expenses for Aerostructures segment consists primarily of labor, rent, depreciation and amortization, professional services and other administrative expenses.

Engineering Services Segment

Net Sales.  Net sales were $83.7 million in 2013, a decrease of 20.7% from $105.6 million in 2012.  Offsetting the decrease were sales of $10.3 million attributable to the inclusion of the TASS acquisition for the full year of 2013. Excluding TASS, Engineering Services sales decreased $31.8million, or 31.9% in 2013 versus 2012.The following table summarizes the segment’s total sales and the percentage of the segment’s total sales represented by the market served for each of the years ended December 31, 2013 and December 31, 2012, respectively:

Category	2013		% of Total		2012		% of Total
	($ in millions)
Large commercial aircraft	$	37.3	44.6	%	$	29.7	28.1	%
Corporate and regional aircraft	17.9		21.4	%	31.5		29.8	%
Military	19.9		23.8	%	37.0		35.1	%
Other	8.6		10.2	%	7.4		7.0	%
Total	$	83.7	100.0	%	$	105.6	100.0	%

Net sales of services for large commercial aircraft were approximately $37.3 million in 2013 compared to $29.7 million in 2012, an increase of 25.6%.  Included in the increase were sales of $10.3 million attributable to the acquisition of TASS. Excluding TASS, this category resulted in a net decline of $2.8 million. The sales for this segment were negatively impacted in 2013 by $11.0 million due to the winding down of several key programs, the most significant of which was the Boeing 787 that decreased $6.9 million in 2013 compared to 2012. These decreases were offset by a $4.3 million increase in revenue related to the Airbus A350 platform.

Net sales of services supporting corporate and regional aircraft were approximately $17.9 million during 2013 compared to $31.5 million in 2012, a decrease of 43.2%.  The decrease in sales was primarily related to reductions of $13.1 million in support of the Bombardier Learjet L-85, as the project is winding down.

Military programs generated net sales in 2013 of approximately $19.9 million compared to $37.0 million in 2012, a decrease of 46.2%.  The decrease from 2012 was primarily due to a $11.9 million reduction in sales on a project nearing completion in support of the Boeing Tanker program. In addition, the Embraer KC 390 program revenue declined $1.6 million, primarily due to an unfavorable cumulative long-term contract revenue adjustment of $0.8 million.

Sales related to the design and delivery of tooling on various programs supporting commercial aircraft were $8.6 million in 2013 compared to $7.4 million in 2012, an increase of 16.2%.  This increase was primarily due to an increase of $2.4 million in revenues generated from Boeing tooling projects, offset by a $0.8 million unfavorable cumulative long-term contract revenue adjustment on the 787 shipping fixture program.

Cost of Goods Sold.  Cost of goods sold for 2013 was $71.6 million (85.5% of net sales) compared to $85.3 million (80.8% of net sales) for 2012.  Lower sales volume in the base Engineering Services business led to the decrease in cost of goods sold, which was primarily comprised of lower direct labor costs and associated fringe benefits. Offsetting the decrease in cost of goods sold for the segment was an increase of $9.5 million attributable to inclusion of TASS for the full-year of 2013. The base Engineering Services business realized a decrease in cost of goods sold in 2013 when compared to 2012 of $22.9 million.

Cost of goods sold for the Engineering Services segment consists primarily of direct labor, subcontract costs and overhead, including rent, maintenance, and indirect costs.

Gross Profit. Gross profit for this segment was $12.1 million (14.5% of net sales) for 2013 compared to $20.3 million (19.2% of net sales) for 2012.  The decrease in gross profit percentage was primarily driven by a decrease in revenue, which

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increased fixed costs as a percentage of sales and the previously mentioned unfavorable cumulative long-term contract revenue adjustments.

Selling, General and Administrative Expenses and Other Charges. Selling, general and administrative expenses were $14.8 million (17.7% of net sales) in 2013 compared to $9.8 million (9.3% of net sales) for 2012.  The increase was primarily due to the inclusion of the full year TASS’s selling, general, and administrative expenses of $1.2 million and a $4.2 million impairment of the D3 trade name intangible asset. During 2013, a triggering event occurred when the Company started an initiative to rebrand its core engineering business. As result of this initiative, the D3 Technologies name is no longer being used, thus, the $4.2 million indefinite lived intangible asset related to that trade name was deemed to be fully impaired.

Selling, general and administrative expenses for Engineering Services segment consists primarily of labor, rent, depreciation and amortization, professional services and other administrative expenses.

Non-segment Expenses

Interest Expense.   Interest expense was $17.0 million for 2013 compared to $1.8 million for 2012.  This change was primarily due to interest incurred of $13.1 million related to the credit facilities that were primarily used to acquire Valent and fund working capital needs, a $1.3 million increase in the amortization of prepaid financing expenses and an additional $0.9 million in interest expense related to debt acquired with the Valent acquisition.

Other Income (Expense), Net.  Other income was $0.6 million for 2013 compared to other income of $0.4 million for 2012. 

Income Tax Expense.  An income tax benefit was realized for 2013 of $7.0 million compared to $8.2 million of income tax expense for 2012.  During 2013, our effective income tax rate was 10.7% compared to 33.1% in 2012 with the change primarily due to a $17.6 million deferred tax charge for valuation allowance established during the fourth quarter of 2013 as we are now in a three year cumulative loss position. For further discussion see Critical Accounting Policies included in Item7.  

Year ended December 31, 2012 compared to year ended December 31, 2011

The following table provides the comparative data for 2012 and 2011:

	2012
	($ in millions)
	Aerostructures		Engineering Services		Elimination			Total
Net sales	$	175.0	$	105.6	$	(2.0	)	$	278.6
Cost of sales	127.1		85.3		(2.1		)	210.3
Gross profit	47.9		20.3		0.1			68.3
S, G, & A and other charges	32.4		9.8		—			42.2
Income from operations	$	15.5	$	10.5	$	0.1		$	26.1

	2011
	($ in millions)
	Aerostructures		Engineering Services		Elimination			Total
Net sales	$	168.1	$	87.5	$	(1.6	)	$	254.0
Cost of sales	123.2		72.9		(1.7		)	194.4
Gross profit	44.9		14.6		0.1			59.6
S, G, & A and other charges	26.6		8.1		—			34.7
Income from operations	$	18.3	$	6.5	$	0.1		$	24.9

Aerostructures Segment

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Net Sales.   Net sales were $175.0 million in 2012, an increase of 4.1% from $168.1 million in 2011.  The following table summarizes the segment’s total sales and the percentage of the segment’s total sales represented by the market served for each of the years ended December 31, 2012 and December 31, 2011, respectively:

Category	2012		% of Total		2011		% of Total
	($ in millions)
Large commercial aircraft	$	72.6	41.5	%	$	65.9	39.2	%
Corporate and regional aircraft	57.6		32.9	%	53.4		31.8	%
Military	35.7		20.4	%	36.3		21.6	%
Other	9.1		5.2	%	12.5		7.4	%
Total	$	175.0	100.0	%	$	168.1	100.0	%

Large commercial aircraft generated net sales of $72.6 million in 2012 compared to $65.9 million in 2011, an increase of 10.2%.  Sales related to the 747 platform increased $4.7 million to $17.8 million in 2012 from $13.1 million in 2011 as new work statement and production rates increased for this aircraft.  Wing modification kits related to the 737 platform increased $3.7 million to $7.5 million in 2012 from $3.8 million in 2011.  Sales related to the 787 platform increased $1.3 million to $2.8 million in 2012 from $1.5 million in 2011.  The 777 program increased $1.6 million with sales in 2012 of $9.8 million compared to $8.2 million in 2011, due to increases in production rates and additions to the Company’s work statement.  Sales related to the 737, excluding wing modification programs, were the same for both years at $23.0 million.  The increases have been partially offset by a $6.3 million decline to $6.2 million in 2012 from $12.5 million in 2011 in the wing modification kits related to the 757 and 767 platforms as demand slowed for these aftermarket products.

Net sales of components for corporate and regional aircraft were $57.6 million during 2012 compared to $53.4 million in 2011, an increase of 7.9%.  This increase was primarily driven by increases in the production levels of and our work statement with respect to the G650 aircraft at Gulfstream, resulting in net sales reaching $13.3 million in 2012 compared to $8.0 million in 2011, a $5.3 million increase in sales.  The increase was also driven by higher net sales for the G280 Gulfstream aircraft which increased $1.9 million to $3.3 million in 2012 from $1.4 million in 2011.  These increases were partially offset by a decrease in net sales related to tooling for the Mitsubishi Regional Jet program, which generated $0.8 million in 2012 compared to $4.0 million in 2011, a $3.2 million decrease as program delays continue.  The large cabin G450 and G550 aircraft at Gulfstream continued to perform strongly with net sales of $37.4 million in 2012 compared to $37.5 million in 2011.

Military products generated net sales of $35.7 million in 2012 compared to $36.3 million in 2011, a decrease of 1.7%.  This decrease was primarily due to volume decreases in the Blackhawk helicopter program, which generated $28.4 million in 2012 compared to $30.4 million in 2011, a decrease of $2.0 million and a $1.9 million decline in other military projects.  These decreases were offset by the new Embraer KC-390 program which had $1.9 million in revenue in 2012 and an increase in the Apache helicopter program of $1.5 million from $0.8 million in 2011 to $2.3 million in 2012.

Other products generated net sales of $9.1 million in 2012 compared to $12.5 million in 2011, a decrease of 27.2%.  This decrease was primarily due to the Company discontinuing sales related to one program at the Company’s Mexicali plant during 2012 which generated $2.9 million in 2011, but did not continue into 2012.

Cost of Goods Sold.  Cost of goods sold for 2012 was $127.1 million (72.6% of net sales) compared to $123.2 million (73.3% of net sales) for 2011.  The $3.9 million increase in cost of sales was primarily driven by higher sales in 2012 compared to 2011.  Production efficiencies helped to offset higher costs.

Cost of goods sold for the Aerostructures segment consists primarily of direct labor, materials, subcontract costs and manufacturing overhead, including indirect labor costs, depreciation, rent, supplies and other indirect costs.

Gross Profit.  Gross profit for 2012 was $47.9 million (27.4% of net sales) compared to $44.9 million (26.7% of net sales) for 2011.  The improvement in gross profit resulted from the increased sales mentioned above and increased production levels to support higher sales levels and future production rate increases.  The increase in production caused fixed costs to be allocated to a larger amount of production, thus decreasing product costs and increasing gross profit percentage.

Selling, General and Administrative Expenses and Other Charges.  Selling, general and administrative expenses were $32.4 million (18.5% of net sales) in 2012 compared to $26.6 million (15.8% of net sales) in 2011.  The increase was mainly due to $5.4 million of costs incurred related to acquisitions in 2012, with Valent specifically accounting for $4.9 million of those costs.  The increase in costs from the acquisitions exceeded the increase in sales, increasing the total selling general and administrative expenses expressed as a percentage of sales.

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Selling, general and administrative expenses for Aerostructures segment consists primarily of labor, rent, depreciation and amortization, professional services and other administrative expenses.

Engineering Services Segment

Net Sales.  Net sales were $105.6 million in 2012, an increase of 20.7% from $87.5 million in 2011. The following table summarizes the segment’s total sales and the percentage of the segment’s total sales represented by the market served for each of the years ended December 31, 2012 and December 31, 2011, respectively:

Category	2012		% of Total		2011		% of Total
	($ in millions)
Large commercial aircraft	$	29.7	28.1	%	$	31.1	35.5	%
Corporate and regional aircraft	31.5		29.8	%	25.0		28.6	%
Military	37.0		35.1	%	20.3		23.2	%
Other	7.4		7.0	%	11.1		12.7	%
Total	$	105.6	100.0	%	$	87.5	100.0	%

Net sales of services for large commercial aircraft were approximately $29.7 million in 2012 compared to $31.1 million in 2011, a decrease of 4.5%.  The decrease was largely due to the winding down of several programs: the Boeing 747-8 program decreased $3.7 million, the Airbus A350 program decreased $1.4 million, the 787 programs decreased $2.5 million and the Boeing Integrated Test program decreased $1.2 million.  These declines were offset by the inclusion of $6.1 million of sales from the TASS subsidiary since the acquisition on August 7, 2012, and increased revenues from the nacelle systems development program of $1.4 million.  TASS revenues were primarily from sales to Boeing.

Net sales of services supporting corporate and regional aircraft were approximately $31.5 million during 2012 compared to $25.0 million in 2011, an increase of 26.0%.  The increase in sales was primarily related to support of the Bombardier Learjet L-85 of $10.8 million, $2.4 million for sales related to space travel and $1.3 million for sales to Triumph.  This increase was offset by a $3.0 million reduction in support requirements on the Mitsubishi Regional Jet program and a $3.4 million reduction on another program due to design maturation.

Military programs had net sales in 2012 of approximately $37.0 million compared to $20.3 million in 2011, an increase of 82.3%.  The increase from 2011 resulted primarily from increased services in support of the Boeing Tanker program of $13.0 million and the Embraer KC 390 program of $4.7 million, partially offset by the absence of $2.9 million in revenues from the Joint Strike Fighter program which was completed in 2011.

Sales related to the design and delivery of tooling on various programs supporting commercial aircraft were $7.4 million in 2012 compared to $11.1 million in 2011, a decrease of 33.3%.  This decrease was primarily due to a $2.5 million decrease in revenue in 2012 on 787 shipping fixtures and a decline of $0.9 million in revenues for other Boeing tooling projects.

Cost of Goods Sold.  Cost of goods sold for 2012 was $85.3 million (80.8% of net sales) compared to $72.9 million (83.3% of net sales) for 2011.  Increased sales demand led the Company to hire additional project engineers, which resulted in an increase of $8.1 million in salary and fringe costs.  Also, the acquisition of TASS resulted in an additional $3.6 million in salary and fringe costs.

Cost of goods sold for the Engineering Services segment consists primarily of direct labor, subcontract costs and overhead, including rent, maintenance, and indirect costs.

Gross Profit. Gross profit for this segment was $20.3 million (19.2% of net sales) for 2012 compared to $14.6 million (16.7% of net sales) for 2011.  The increase in gross profit percentage was primarily driven by an increase in revenue, which reduced fixed costs as a percentage of sales.  Additionally, there were reductions in direct sub-contract services in 2012 compared to 2011.  These improvements were slightly offset by direct labor costs that were a higher percentage of sales in 2012 compared to 2011.

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Selling, General and Administrative Expenses and Other Charges. Selling, general and administrative expenses were $9.8 million (9.3% of net sales) in 2012 compared to $8.1 million (9.3% of net sales) for 2011, an increase of $1.7 million.  The increase was primarily due to the inclusion of TASS’s selling, general, and administrative expenses.

Selling, general and administrative expenses for Engineering Services segment consists primarily of labor, rent, depreciation and amortization, professional services and other administrative expenses.

Non-segment Expenses

Interest Expense.  Interest expense was $1.8 million for 2012 compared to $0.7 million for 2011.  The change was primarily due to the refinancing of our credit facility on December 28, 2012 which resulted in a $0.6 million charge to expense related to deferred financing costs for the closed credit facility, and also from interest incurred of $0.2 million on the borrowings to acquire Valent.

Other Income (Expense), Net.  Other income was $0.4 million for 2012 compared to other expense of $0.7 million for 2011.  This change was primarily due to the absence of $0.8 million of non-recurring costs related to abandoned financing transactions that were present in 2011.  The increase in income was also driven by realized net foreign currency transaction gains in 2012 of $0.2 million compared to $0.2 million of expense in 2011.

Income Tax Expense.  Income tax expense for 2012 was $8.2 million compared to $7.1 million for 2011.  During 2012 our effective income tax rate was 33.1% compared to 30.3% in 2011 with the increase primarily due to research and development tax credits that were not extended for 2012 prior to December 31, 2012.  The income tax rate for2013 will include the tax benefit for research and development tax credits for 2012 and 2013 and as such, we expect our rate to be between 33% and 34%.

Non-GAAP Financial Measures

When viewed with our financial results prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and accompanying reconciliations, we believe earnings before interest, taxes, depreciation and amortization ("EBITDA") and Adjusted EBITDA provide additional useful information to clarify and enhance the understanding of the factors and trends affecting our past performance and future prospects. We define these measures, explain how they are calculated and provide reconciliations of these measures to the most comparable GAAP measure in the tables below. EBITDA, Adjusted EBITDA and the related financial ratios, as presented in this Form 10-K, are supplemental measures of our performance that are not required by, or presented in accordance with, GAAP.  They are not a measurement of our financial performance under GAAP and should not be considered as alternatives to net income or any other performance measures derived in accordance with GAAP, or as an alternative to net cash provided by operating activities as measures of our liquidity.  The presentation of these measures should not be interpreted to mean that our future results will be unaffected by unusual or nonrecurring items.

We use EBITDA and Adjusted EBITDA non-GAAP operating performance measures internally as complementary financial measures to evaluate the performance and trends of our businesses.  We present EBITDA, Adjusted EBITDA and the related financial ratios, as applicable, because we believe that measures such as these provide useful information with respect to our ability to meet our future debt service, capital expenditures, working capital requirements and overall operating performance.

EBITDA and Adjusted EBITDA have limitations as analytical tools, and you should not consider them in isolation or as substitutes for analysis of our results as reported under GAAP.  Some of these limitations are:

• They do not reflect our cash expenditures, future expenditures for capital expenditures or contractual commitments;

• They do not reflect changes in, or cash requirements for, our working capital needs;

• They do not reflect the significant interest expense or the cash requirements necessary to service interest or principal payments on our debt;

• Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and EBITDA and Adjusted EBITDA do not reflect any cash requirements for such replacements;

• They are not adjusted for all non-cash income or expense items that are reflected in our statement of cash flows;

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• They do not reflect the impact on earnings of charges resulting from matters unrelated to our ongoing operations; and

• Other companies in our industry may calculate EBITDA and Adjusted EBITDA differently, limiting their usefulness as comparative measures.

Because of these limitations, EBITDA, Adjusted EBITDA and the related financial ratios should not be considered as measures of discretionary cash available to us to invest in the growth of our business or as a measure of cash that will be available to us to meet our obligations.  You should compensate for these limitations by relying primarily on our GAAP results and use EBITDA and Adjusted EBITDA only as a supplement to this information.  See our consolidated financial statements contained in this Report.

However, in spite of the above limitations, we believe that EBITDA and Adjusted EBITDA are useful to an investor in evaluating our results of operations because these measures:

• Are widely used by investors to measure a company’s operating performance without regard to items excluded from the calculation of such terms, which can vary substantially from company to company depending upon accounting methods and book value of assets, capital structure and the method by which assets were acquired, among other factors;

• Help investors evaluate and compare the results of our operations from period to period by removing the effect of our capital structure from our operating performance; and

• Are used by our management team for various other purposes in presentations to our Board of Directors as a basis for strategic planning and forecasting.

We have expanded our operations significantly through the Valent Acquisition. As a result, our operating income included significant charges for acquisition-related expenses in 2012.  Operating income in 2013 included charges for goodwill impairment, restructuring, acquisition costs, intangible asset impairment, and integration expenses in addition to the recognition of fair value step up on the inventory acquired from the Valent acquisition. These charges were partially offset by the write-off of contingent consideration association with the Valent acquisition. EBITDA and Adjusted EBITDA exclude these charges, as applicable, and provide meaningful information about the operating performance of our businesses apart from the acquisition-related expenses, as well as interest and tax expenses.

The following financial items have been added back to our net income when calculating EBITDA:

• Depreciation;

• Amortization expense;

• Goodwill and intangible asset impairment;

• Interest expense; and

• Income tax expense.

The following financial items have been added back to our net income when calculating Adjusted EBITDA:

• Stock-based compensation;

• Acquisition and integration expenses;

• Fair value step-up on acquired inventories;

• Restructuring expenses;

• Contingent consideration write-off; and

• Other (net).

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Reconciliations of net income to EBITDA and Adjusted EBITDA and the presentation of Adjusted EBITDA as a percentage of net sales were as follows:

	(In Thousands) Years Ended December 31,
	2013			2012			2011
Net (loss) income	$	(58,485	)	$	16,487		$	16,389
Depreciation and amortization (1)	20,560			7,994			7,241
Goodwill and intangible asset impairment (2)	77,750			—			1,163
Interest expense (3)	16,962			1,771			669
Income tax (benefit) expense (4)	(6,979		)	8,153			7,136
EBITDA	49,808			34,405			32,598
Stock-based compensation	1,615			1,494			1,254
Restructuring Expense (5)	3,073			—			—
Integration Expense	1,265			—			—
Fair value step up on acquired inventories	2,497			—			—
Acquisition expenses (6)	247			5,362			—
Contingent consideration write-off (7)	(7,950		)	—			(1,235		)
Other (net)	(618		)	(356		)	730
	129			6,500			749
Adjusted EBITDA	$	49,937		$	40,905		$	33,347

(1) Includes amortization of intangibles and depreciation expense.

(2) In 2013, the annual impairment test conducted by the Company resulted in an impairment of goodwill associated with the Valent acquisition of $73,528. Also in 2013, a triggering event occurred which resulted in the impairment of the indefinite lived D3 trade name asset of $4,222. In addition, in 2011, a triggering event occurred with regard to a certain proprietary technology intangible asset as a result of a failure to conclude a possible sale of a product line of $1,163.

(3) Includes deferred financing costs in connection with closed credit facility in 2012.

(4) Includes a $17,718 valuation charge against deferred tax assets at December 31, 2013 related to the goodwill impairment at Valent noted in (1) above.

(5) Includes costs associated with severance related to the Precise Machine facility closure and separation costs associated with key members of Valent Aerostructures, LLC.

(6) Includes investment banking, accounting, legal, tax and valuation expenses for acquisitions.

(7) Included in accrued liabilities as of December 31, 2012 was $7,950 of contingent consideration, representing the fair value of the amount payable to former members of Valent Aerostructures, LLC if certain sales targets were achieved by December 31, 2013. Included in accrued liabilities as of December 31, 2010 was $1,235 of contingent consideration, representing the fair value of the amount payable to former Intec shareholders if certain sales targets were achieved by Intec or if proceeds from the sale of certain portions of Intec exceeded a pre-established threshold by March 31, 2011.

Liquidity and Capital Resources

The Company's operations used cash of $8.3 million in 2013. The Company generated cash of $8.8 million in 2012 and $16.2 million in 2011.  The net operating cash outflow in 2013 was primarily driven by increases in inventory to support investment in new programs, $6.2 million in tooling on a development program and higher interest cost. Net cash provided by operating activities in 2012 was unfavorably impacted by increases in trade accounts receivable, primarily related to program investment and inventories needed to support future production rate increases in Aerostructures’ large commercial aircraft and corporate and regional aircraft sectors.

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Net cash used in investing activities for the year ended December 31, 2013 was $22.3 million compared to $235.0 million and $10.0 million for the years ended December 31, 2012 and 2011, respectively.  The Company used $206.5 million, net of cash acquired, in the 2012 acquisition of Valent which was funded from our credit facility.  We paid $9.8 million, net of cash acquired, in the 2012 acquisition of TASS funded with available cash.  We spent $23.7 million in 2013 on capital expenditures, compared to $18.8 million and $10.3 million during 2012 and 2011, respectively, consistent with the Company’s plan to increase capital spending in support of anticipated growth and the additional capital needs for our acquired businesses.

Cash provided by financing activities was $27.8 million in 2013 and $222.7 million in 2012, compared to cash used of $0.3 million in 2011.  The Company borrowed $29.8 million against its revolving credit facility in 2012. Funds provided by financing activities of $225.0 million in borrowings on a term loan in 2012 were primarily used for the acquisition of Valent and to fund the Company's other working capital needs. The Company also incurred $3.0 million in loans for equipment and $6.2 million in borrowings against our revolving credit facility in 2012.  In addition, we paid $12.7 million in financing costs related to the loan agreement. By the beginning of 2011, the Company had paid down all of its outstanding revolving line of credit, and there was no significant activity during the year.

As discussed in Item 1. Business, the Company is involved in ongoing investigations by government agencies with regard to allegations of violations of environmental regulations. The Company believes certain environmental representations set forth in the purchase agreement pursuant to which the associated facility was acquired and the purchase agreement pursuant to which the Company acquired the associated facility, provide the Company with certain rights of indemnification with respect to the matters disclosed herein. The Company also has insurance policies that it believes covers various environmental issues at the associated facility, and breaches by former owners of the associated facility of their respective environmental representations and warranties in each of the purchase agreements. As a result, the Company believes its rights of indemnification and insurance coverage may provide for a recovery of some or all of the costs associated with the matters disclosed herein. We cannot provide any assurance, however, that we will ultimately prevail in any claim for indemnification or secure insurance proceeds from our insurance policies or in what time frame such proceeds, if any, may be secured. Even if the Company does prevail with regard to claims against other parties and/or insurance, the Company will be required to use cash to fund related expenses prior to receipt of any offsetting recoveries. As such, cash flow could be negatively impacted in the interim. The Company does not have sufficient information at this time to estimate the range of possible losses with respect to this matter.

During the fourth quarter of 2012, the Company entered into a credit agreement to provide senior secured credit facilities to finance the Valent acquisition, refinance existing debt, and fund working capital requirements.  As of December 31, 2013 these credit facilities include a term loan facility of $225.0 million and a revolving credit facility in the original amount of up to $125.0 million.  The maturity dates of the revolving credit facility and term loan are December 28, 2017 and December 28, 2018, respectively.  The credit agreement for our revolving credit facility and term loan requires us to maintain both a certain leverage ratio and interest coverage ratio on a quarterly basis as well as compliance with various restrictive covenants that limit our ability to incur additional debt, guarantee debt or obligations, create liens, enter into certain merger, consolidation or other reorganization transactions, make investments, sell, lease or transfer our assets and enter into transactions with our affiliates and prohibit our ability to pay dividends.  These agreements also require mandatory prepayments of excess cash at certain leverage levels.   The Company's EBITDA and cash generation over the past year has been lower than originally expected. Without improved EBITDA and cash generation, the Company's risk of non-compliance with the required leverage ratio in the credit agreement will increase. If covenants are not met and modifications or waivers cannot be obtained, it will result in non-compliance with the credit agreement, the occurrence of which could result in the amounts outstanding under the term loan facility and revolving credit facility becoming immediately due and payable. As of December 31, 2013, the Company was, and expects to continue to be in 2014, in compliance with all of its financial and non-financial covenants under these senior secured credit facilities. 

We expect to meet our ongoing working capital, acquisition, debt service, and capital expenditure needs presently and for the next twelve months from a combination of cash on hand, cash flow from operating activities and cash available under our revolving credit facility. The Company continues to market for design-build programs, which may require additional capital investments.

Off-Balance Sheet Arrangements

Our off-balance sheet arrangements consist primarily of operating leases as reflected under “Contractual Obligations and Commitments” below.

Contractual Obligations and Commitments

We had the following contractual obligations and commitments for debt and non-cancelable operating lease payments:

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	Total (3)		Less Than 1 year		1-3 years		3 - 5 years		More than 5 years
	($ in thousands)
Debt (1)	$	290,616	$	5,242	$	10,556	$	259,853	$	14,965
Interest on Long-term debt (2)	$	65,556	13,779		26,985		23,805		987
Operating Leases (3)	$	51,187	6,909		12,084		9,829		22,365
Total	$	407,359	$	25,930	$	49,625	$	293,487	$	38,317

(1) Balances include obligations under capital leases

(2) Interest expense assumes the balances of long-term debt at the end of the period and current effective interest rate.

(3) We have not committed to any significant current or long-term purchase obligations for our operations and have no other significant long-term liabilities reflected on our balance sheet under generally accepted accounting principles.

Critical Accounting Estimates

Certain accounting issues require management estimates and judgments for the preparation of financial statements.  We believe that the estimates, assumptions and judgments involved in the accounting policies described below have the greatest potential impact on our financial statements.  Therefore, we consider these to be our critical accounting estimates.  Our management has discussed the development and selection of these critical accounting estimates with the Audit Committee of our Board of Directors, and the Audit Committee has reviewed our disclosure relating to these estimates.  However, these methods, assumptions and estimates could create materially different results under different conditions or using different assumptions.

Inventory.  Except for inventories related to long-term contracts accounted for under contract accounting as discussed below, we value our product inventories at the lower of cost or market using actual cost for raw materials and average cost for work in process, manufactured and purchased components and finished goods.  In assessing the ultimate realization of inventories, we make judgments as to future demand requirements based upon customer orders in backlog, historical customer orders, customer and industry analyst estimates of aircraft production rates, and other market data available to us.  Additionally, in the aviation industry, these future demand requirements depend on estimates of aircraft lives and the need for spare parts over the course of the aircraft life.  We have recorded charges in recent periods due to discontinuances of product lines, losses of customer contracts, lack of order activity, or changes in expectations of future requirements.

We sell many of our products under fixed-price arrangements.  Occasionally, costs of production may exceed the market values of certain products and product families, which require us to adjust our inventory value.  In these circumstances, management is required to make estimates of costs not yet incurred to determine the ultimate cost of these products that are in work in process.  Changes in the assumptions and estimates of such factors as expected scrap, costs of material, labor and outside services and the amount of labor required to complete the products may result in changes in inventory value.

At times, we accept new orders for products from our customers where actual production costs may differ from our expectations when we quoted the product.  Additionally, customers may request engineering changes or quality acceptance changes in products that may alter the cost of products produced by us.  In the latter circumstances, we notify the customer of these issues and seek reimbursement for costs incurred over and above the selling price of the products, as well as a re-pricing of the product on future deliveries.  For certain fixed price contracts requiring development or delivery of multiple units of complex product over more than one year, we incur and defer, as part of the inventory, certain costs that are specific to a particular contract and which we expect to recoup as part of the unit cost charged to the customer under the contract.  Such costs are charged to cost of product sales ratably as the manufactured units are shipped or costs are incurred pursuant to the contract.  Changes in the estimated number of units expected to be delivered under the contract result in prospective adjustments of the ratable charge-off of deferred inventoriable costs per unit shipped.  Should the remaining inventoriable costs plus estimated costs of production of units yet to be shipped under the contract exceed estimated future contract revenues, the resulting full loss is recognized in the period it becomes probable and estimable.  See Note 1 of the Notes to Consolidated Financial Statements in Item 8 below.

Revenue and Profit Recognition.  Except as described below, the Company recognizes revenue for sales of products and related services in accordance with Financial Accounting Standards Board, (“FASB”) Accounting Standards Codification (“ASC”) Topic 605-15 Products and Topic 605-20 Services.. The Company sells products under long term supply contracts and

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purchase orders where the product is built to the customer specifications based on firm purchase orders from the customer. The purchase orders tend to be of a relatively short duration and customers place orders on a periodic basis.  The pricing is generally fixed for some length of time and the quantities are based on individual purchase orders. Revenue is recognized when title passes and services are rendered, the price is fixed or determinable, and collection is reasonably assured. Approximately 80-90% of the total revenue the Company recognizes in any given quarter is accounted for in accordance with Topics 15 and 20. The remainder of the revenue is accounted for using percentage of completion accounting methods consistent with the ASC Topic 605-35 Construction -Type and Production-Type Contracts.

The percentage of completion method used to account for contracts depends on the nature of the products provided under the contract. For example, for contracts that require us to perform a significant level of development effort, in comparison to the total value of the contract, sales are recorded using the cost to cost method to measure progress toward completion. Under the cost to cost method of accounting, we recognize sales and estimated profit as costs are incurred based on the proportion that the incurred costs bare compared to total estimated costs. For contracts that require us to provide a substantial number of similar items without a significant level of development, we record sales and estimated profit on a percentage of completion basis using units of delivery as the basis to measure progress toward completing the contract. Under both methods, profit recognized is based on the total expected profit margin percentage multiplied by revenue recognized to date.

The Company periodically reviews all estimates to complete as required by the authoritative guidance and the estimated total cost and expected gross profit are revised as required over the life of the contract.  Any revisions to the estimated total cost are accounted for as a change of an estimate.  A cumulative catch-up adjustment is recorded in the period of the change of the estimated costs to complete the contract.  Therefore, gross profit in a period includes (a) a cumulative catch-up adjustment to reflect the adjustment of previously recognized profit associated with all prior period revenue recognized based on the current estimate of gross profit margin, as appropriate, and (b) an entry to record the current period costs of sales and related gross profit margin based on the current period sales multiplied by the current estimate of the gross profit margin on the contract. 

The primary cumulative catch-up adjustments in 2013 relate to two contracts. The first contract relates to a design program on the 787 platform on which the Company was unable to pass through as much of the engineering changes incurred to the customer as originally estimated. The Company recorded a reduction of contract revenue of $0.8 million for this program in 2013. The Company continues to pursue claims related to this contract but has not estimated a recovery in the estimate at completion. The total revenue recognized on this program at December 31, 2013 was $13.4 million. The second contract relates to part production for the Embraer KC-390 program. In 2013, an unfavorable adjustment of $0.7 million was recorded to reflect a revision in the expected labor hours necessary to complete the program. Total revenue recognized on the program at December 31, 2013 was $17.1 million.

In addition, should total estimated costs at completion exceed the estimated total revenue, the anticipated full loss is recognized in the period in which the anticipated loss is determined.  The loss is reported as a component of cost of sales. The cumulative gross profit margin recognized through the end of the current period on a contract with an estimated loss will equal the current estimate of the gross profit margin on the contract multiplied by the contract revenues recognized through the end of the current period plus the provision for the additional loss on contract revenues yet to be recognized.  The current period cost of sales on a contract with a loss reserve will equal current period sales, thus, gross profit on those sales will be recognized at a 0% margin. In accordance with ASC 605-35-45-1&2, the provisions for anticipated losses on contracts are accounted for as additional contract cost and recognized as part of cost of sales. Provisions for losses are recorded as a reduction of related contract costs recorded in inventory. Any excess loss provision is recorded as a current liability.

The Company does not have any cost to cost contracts in a loss contract position. The Company does have a contract being accounted for using the units of delivery method which was acquired during the Valent acquisition where estimated costs exceed the total contract revenue. The provision for anticipated loss was established during 2013 for $5.2 million at acquisition and was treated as measurement period change and, as such, increased the goodwill related to the Valent acquisition. At December 31, 2013, this loss was recorded in the balance sheet as a $2.0 million reduction in inventory and a $3.2 million provision in current liabilities.

For contracts accounted for using the percentage of completion method, management’s estimates of total units to be produced, and material, labor and overhead costs on long-term contracts are critical to the Company.  Due to the size, length of time and nature of many of our contracts, the estimation of revenue and costs through completion is complicated and subject to many variables.

Total contract revenue estimates are based on negotiated contract prices, customer change orders, claims (when a legal basis exists) and estimated cost to produce the product or service plus a profit in some instances. The contract revenue estimates consider customer purchase orders, projections and industry guidance. In addition, claims and unpriced change orders will impact the estimate of total revenues and profits. In the ordinary course of business, the Company may receive requests from its customers

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to perform tasks not specified in its contracts.  When this occurs on a long-term contract using the cost-to-cost method of percentage of completion accounting, the Company may record revenue for claims or unpriced change orders to be negotiated with customers.  As of December 31, 2013, approximately 0.5% of revenue represented amounts associated with claims and unpriced change orders.

Total contract cost estimates are primarily based on our current cost of production, purchase order terms negotiated or estimated by our supply chain. These costs include negotiated or estimated material costs, historical labor performance trends, business base and other economic projections. Factors that influence these estimates include inflationary trends, technical and schedule risk, performance trends, asset utilization, and anticipated labor rates.

The development of a contract revenue and gross margin percentage involves utilization of detailed procedures by a team of operational and financial personnel that provides information on the status of the contracts.  Estimates of each significant contract’s revenue and cost are reviewed and approved by the team on a quarterly basis.  Any approved changes in these estimates are analyzed to determine if they result in recognition of cumulative adjustments to the contract profit in the period in which changes are made.  

Due to the significance of the judgment in the estimation process described above, it is possible that materially different margins could be recorded if we used different assumptions or if the underlying circumstances were to change.  Changes in underlying assumptions/estimates or circumstances may adversely or positively affect financial performance in future periods.  Consistent with our business strategy of growing design-build and complex assembly capabilities, we expect significant increases in programs calling for long-term contracts in the future.

Goodwill and Intangible Assets.  Goodwill is not amortized; rather, it is tested annually in accordance with FASB ASC Topic 350, Intangibles-Goodwill and Other (“ASC 350”). The Company exercises its judgment in evaluating its goodwill and intangible assets for possible impairment.  The Company performs goodwill and indefinite-lived intangible asset impairment testing annually in the fourth quarter of each fiscal year as well as whenever events or changes in circumstances during the fiscal year indicate that the carrying amount may not be recoverable. The Company evaluates whether any triggering events have occurred during the fiscal year, such as a significant decrease in expected cash flows at a reporting unit or changes in market or other business conditions that may indicate a potential impairment of goodwill or other intangible assets.

The Company has the option to first assess qualitative factors to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount.  If it is, the quantitative tests require comparing recorded values to estimated fair values for the assets under review.  If it is not, no additional analysis is required. If the Company choses, it may decide to perform a quantitative assessment of the fair value.

        The Company's goodwill balances were $113.2 million and $179.3 million, at December 31, 2013 and 2012, respectively. Under guidelines established by FASB ASC Topic 280, Segment Reporting (“ASC 280”) the Company operates in two operating segments. However, the Company has recorded its goodwill and conducts testing for potential goodwill impairment at a reporting unit level.   The reporting units represent a business for which discrete financial information is available, and segment management regularly reviews the operating results.  There are three reporting units within the Company that have goodwill recorded with 55.2% of the goodwill reported within the Aerostructures operating segment and the remaining 44.8% reported in the Engineering Services Segment. The Aerostructures operating segment has three reporting units of which only two have goodwill. In the Aerostructures segment the Valent reporting unit has $56.3 million of goodwill and the Fabrication reporting unit has $6.2 million of goodwill at December 31, 2013. The Engineering Services reporting unit goodwill balance was $50.7 million at December 31, 2013.

Fabrication Reporting Unit: The Company performed the annual test of goodwill and indefinite-lived intangible assets for the Fabrication unit by performing the qualitative assessment option and concluded it was more likely than not that the fair value of the unit exceeded carrying value, and thus, no impairment charge was recorded.  A significant amount of judgment is involved in determining if an indicator of impairment has occurred.  Such indicators may include deterioration in general economic conditions, negative developments in equity and credit markets, adverse changes in the markets in which an unit operates, increases in input costs that have a negative effect on earnings and cash flows, or a trend of negative or declining cash flows over multiple periods, among others.  The fair value that could be realized in an actual transaction may differ from that used to evaluate the impairment of goodwill.  

The Company chose to perform the quantitative test of the fair values of goodwill and indefinite lived intangibles relating to the Engineering Services and Valent reporting units. The fair values for goodwill testing are estimated using a combination of the income and market approach unless circumstances indicate that a better estimate of fair value is available. The income approach utilizes the discounted cash flow model (“DCF model”) and the market approach is based on the market data for a group of guideline companies.

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Using the DCF model requires the Company to forecast operating cash flows, including future sales growth, operating costs, tax rates, capital spending, and working capital changes. These assumptions may vary significantly among the reporting units. In addition estimates are required for the discount rate, and the terminal value.  The discount rate represents the expected return on capital and is based on the estimated weighted average cost of capital for a market participant. The discount rate considers the risk inherent in the projections used to estimate the fair value of the reporting unit.  This rate takes into account the uncertainty about the expected revenue growth of the reporting unit and expected operating margins as well as the past performance of the reporting unit.  The cash flow forecasts of the reporting units are based upon management’s long-term view of the Company’s markets.  The Company has not materially changed its methodology for goodwill impairment testing for the years presented. Due to the many variables inherent in the estimation of a reporting unit's fair value and the relative size of the Company's recorded goodwill, differences in assumptions may have a material effect on the results of the Company's impairment analysis.

The Company also used the market approach to estimate the fair value of the reporting unit.  The Company utilizes the guideline public company method in which valuation pricing multiples are derived from the market share prices of stocks of companies that are engaged in the same or similar lines of business as the reporting unit, and that are actively traded on a free and open market.  The derived multiples are then applied to the reporting unit’s financial metrics producing indications of value, which are correlated to reach a final indication of value. The Company used Earnings before Interest Depreciation and Amortization (“EBITDA”) multiples based on the last 12 months and for the next 12 months to EBITDA to estimate fair value using a market approach. 

Engineering Services Reporting unit: The Company's 2013 annual impairment test did not result in an impairment of the $50.7 million of goodwill associated with this reporting unit. The fair value exceeded the net book value by approximately 10.1%, or $7.2 million. The following is a summary analysis of the significant assumptions used by the Company to estimate the fair value of this reporting unit using the income approach and how the assumptions were developed:

• Discount rate:  The discount rate used in determining the fair value was 12.9% which was consistent with the rate used in testing in prior.   An increase in the discount rate of 1% would indicate that the fair value of the reporting unit remains in excess of the carrying value of the unit.

• Revenue growth assumptions:  Projected annual growth assumptions are based on the Company’s and its peers historical operating performance adjusted for current and expected competitive and economic factors. The Company used a terminal growth rate of 4.0% to calculate the terminal value in the discounted cash flow analysis.

• Operating profit margin assumptions:  The forecasted operating profit used in the income approach is expected to improve in the future years as a result of leveraging of the cost of sales as a significant portion of this unit’s costs are fixed in nature.

• Working Capital assumptions and capital expenditures:  Working capital requirements were forecasted based on the reporting unit’s historical performance.  Capital expenditures were forecasted based on current spending plans for the forecast period and expected to moderate as sales growth slows in the terminal year.

The Company also used the market approach to estimate the fair value of the reporting unit.  The Company used EBITDA multiples based on the last 12 months and for the next 12 months to estimate fair value using a market approach.  These multiple used in the valuation was 9.5 times EBITDA. In addition, the Company included a control premium in this analysis. This resulted in a market value that was within 5% of the estimated fair value using the income approach. If any of these or other related estimates and assumptions are not realized in the future, to the extent the reporting unit cannot generate future cash flows at a level sufficient to recover the net book value, the Company may be required to record future impairment charges. The impairment charges would reduce future net income and earnings per share.

Valent Reporting unit: The Company's 2013 annual impairment test (“Step One”) did indicate that the fair value of this reporting unit was below its carry value by 20.9%. During the fourth quarter of 2013, income from operations at Valent was below the Company's expectations. The decline in income was primarily due to performance on three long-term production contracts. As a result, the second step (“Step two”) of the impairment test was required for the Valent reporting unit. The tangible and intangible assets were revalued according to ASC 350 and resulted in a pre-tax impairment of goodwill of $73.5 million. The impairment was driven by a decline in expected operating performance of the unit. The key assumptions used in the Step One test are as follows:

• Discount rate:  The discount rate used in determining the fair value of the reporting unit was 12.5% which was slightly lower than rate of 12.9% used in purchase accounting valuation.

• Revenue growth assumptions:  Projected annual growth assumptions are based on the Company’s and its peers historical operating performance adjusted for current and expected competitive and economic factors surrounding the aerospace and defense industry (the “industry”).  The growth rates used were approximately 7.5% per year primarily driven by expected long term contract growth. The Company used a terminal growth rate of 3.0% to calculate the terminal value in the discounted cash flow analysis.

48

• Operating profit margin assumptions:  The forecasted operating profit used in the income approach is expected to improve in the future years as a result of leveraging additional sales, and improved operating synergies.

• Working Capital assumptions and capital expenditures:  Working capital requirements were forecasted based on the reporting unit’s historical performance.  Capital expenditures were forecasted based on current spending plans for the forecast period and are expected to moderate as sales growth slows in the terminal year.

The Company also used the market approach to estimate the fair value of the reporting unit. The Company used EBITDA multiples based on the last 12 months and for the next 12 months to estimate fair value using a market approach. The multiple used in the valuation was approximately 10.5 times EBITDA. In addition, the Company included a control premium in this analysis. This resulted in a market value that was within 7% of the estimated fair value using the income approach.

During the Step 2 analysis, the implied fair value of goodwill was calculated by measuring the fair value of assets and liabilities at the time of the impairment test in accordance with ASC 805. The difference between the fair value determined in Step 1 and the fair values assigned to the individual assets including deferred taxes is the implied fair value of goodwill. The Step 2 analysis resulted in a $73.5 million impairment of goodwill. The Valent reporting unit had $56.3 million of goodwill at December 31, 2013. If any of these or other related estimates and assumptions are not realized in the future, to the extent the reporting unit cannot generate future cash flows at a level sufficient to recover the net book value, the Company may be required to record further impairment charges. The impairment charges would reduce future net income and earnings per share.

As of December 31, 2013, and in further support of our analysis, our net book value for the entire Company (i.e., shareholders’ equity) was $144.1 million, and our market capitalization was approximately $189.4 million.

Other Intangibles. Customer-related intangible assets on the balance sheet were $55.5million and $64.3 million, at December 31, 2013 and 2012, respectively. The assets resulted from the acquisitions of Versaform Corporation, D3, Intec, TASS and Valent have an original estimated useful lives ranging from five to 22 years.  The trademark that resulted from the D3 acquisition was determined to have an indefinite life.  Other intangible assets resulting from the acquisition of Intec, TASS and Valent have an original estimated useful life of two to seven years.  The assumptions and judgments used in determining the useful lives of the intangible assets included in the period of time over which the Company expects to use the asset, expected duration of revenue that will be generated from the asset and how relationships with customers will create future propensity to purchase services from the Company. Valent intangible assets are amortized using on the straight-line method. All other remaining intangibles assets are not material.

We test the indefinite lived intangible asset for impairment, at least annually, by comparing its carrying value over the amount of discounted cash flows attributable to the intangible asset.  We test the finite lived intangible assets for impairment by assessing the current period cash flows of each asset group.  Events or changes in circumstances, including loss of a significant customer, a significant decrease in the level of business with a customer or a long-term contract not being extended, would indicate that the carrying amount of any of these intangible assets may not be recoverable and a change in the remaining useful life could be required. If that is the case, an undiscounted cash flow test will be performed and, if necessary, an impairment charge will be recognized for the amount by which the carrying amount of these assets exceeds its fair value. The trademark related to the D3 acquisition for $4.2 million was determined to be impaired and was written off in 2013. The other intangible assets relating to the Valent acquisition were tested during the Step Two annual impairment test above and were not deemed to be impaired.

Income Taxes.  The objective of accounting for income taxes is to recognize the amount of taxes payable or refundable for the current year and deferred tax liabilities and assets based on the future tax consequences of events that have been recognized in our financial statements or tax returns. Deferred tax assets are also required to be reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax asset will not be realized.

We record an income tax expense or benefit based on the net income earned or net loss incurred in each tax jurisdiction and the tax rate applicable to that income or loss. In the ordinary course of business, there are transactions for which the ultimate tax outcome is uncertain. The final tax outcome for these matters may be different from management’s original estimates made in determining the income tax provision. A change to these estimates could impact the effective tax rate and net income or loss subsequent periods.

A valuation allowance, if needed, reduces deferred tax assets to the amount expected to be realized. When determining the amount of net deferred tax assets that are more likely than not to be realized, management assesses all available positive and negative evidence. This evidence includes, but is not limited to, prior earnings history, expected future earnings, carry-back and carry-forward periods and the feasibility of ongoing tax strategies that could potentially enhance the likelihood of the realization of a deferred tax asset. The weight given to the positive and negative evidence is commensurate with the extent the evidence may

49

be objectively verified. As such, it is generally difficult for positive evidence regarding projected future taxable income exclusive of reversing taxable temporary differences to outweigh objective negative evidence of recent financial reporting losses.

Based on these criteria and the relative weighting of both the positive and negative evidence available, and in particular the activity surrounding the Company's loss in 2013, management determined that it was necessary to establish a valuation allowance against all of its net U.S. deferred tax assets at December 31, 2013. This determination was made as the Company entered into a cumulative loss position in the year ended December 31, 2013, due to the recording of a goodwill impairment of $73.5 million related to Valent. Once the Company entered into a cumulative loss position, it passed the threshold after which there is a presumption that it should no longer rely solely on projected future income when determining whether the deferred tax asset is more likely than not to be realized. While the Company does project future income, the objectively verifiable negative evidence of the recent loss and risk related to those projections outweighs the positive evidence.

The valuation allowance was increased by $17.8 million to fully reserve the U.S. net deferred tax asset. As of December 31, 2013, the total net deferred tax liability was $0.2 million. This includes an $18.1 million valuation allowance on net deferred tax assets, of which $17.8 million related to US assets and $0.3 related to other foreign operations. The Company will continue to monitor its deferred tax position and may adjust the valuation allowance, if necessary, for utilization of the underlying deferred tax assets through current taxable income or as available evidence changes.

Recent Accounting Pronouncements

For information related to recently issued accounting standards, see Note 1 of the Notes to Consolidated Financial Statements in Item 8 below.

ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

We are exposed to market risks, including interest rates, inflation, and foreign currency exchange rates.

Interest Rate Sensitivity

We are exposed to market risk primarily due to fluctuations in interest rates.  We are required to enter into a hedging instrument to fix not less than 50% of the outstanding amount of the Term Loan for a three year period, at a minimum, to manage our interest rate risk.  We estimate that a 1% change in the interest rates of our floating-rate debt outstanding as of December 31, 2013 would change interest expense on an annual basis by approximately $2.6 million.  This amount is determined by calculating the effect of a hypothetical interest rate change on our floating-rate debt.  As of December 31, 2013, we had $31.9 million in carrying value of fixed-rate debt, primarily consisting of notes payable and Industrial Revenue Bonds, with a fair value of approximately the same.

 On March 28, 2013, and November 15, 2013, in compliance with its credit agreement, the Company purchased option and swap derivative contracts to hedge against the potential impact on earnings from an increase in market interest rates associated with the interest payments on its variable rate term credit facility.  The objective of the hedge transactions is to reduce the variability of cash flows due to changes in the designated benchmark interest rate on the term debt.  The purchased options have a strike price of 1.25%, based on 30-day LIBOR with maturity dates each month from April 28, 2013 through December 31, 2014 and payment dates coinciding directly with the term debt.  The interest rate swap entered into on March 28, 2013 is effective from December 31, 2014 through December 31, 2015 and effectively swaps a notional amount of $112,500 from the floating LIBOR interest rate with a floor of 1.25% for a 1.63% fixed interest rate.  The interest rate swaps entered into on November 15, 2013 are effective from December 31, 2014 through December 31, 2015 and December 31, 2015 through December 31, 2016, respectively, and effectively swap a notional amount of $80,000 and $100,000, respectively, from the floating LIBOR interest rate with a floor of 1.25% for a 1.565% fixed interest rate and a floor of 1.25% for a 1.99% fixed interest rate, respectively.

Inflation Risk

The Company experiences risk related to commodity prices as some of the raw materials and operating supplies are subject to price and supply fluctuations caused by the market.  We strive to mitigate the impact of commodity price risk and participate in Boeing and Spirit Aerosystems' collective raw material sourcing contracts, which allow us to obtain raw materials at pre-negotiated rates.  This mitigates the exposure to market volatility of certain raw materials used in the aerospace industry.  Our supply agreements with The Boeing Company allow us to pass on certain unusual increases in raw material costs to The Boeing Company; however, in limited scenarios, we may not be fully compensated for the increased costs.  We have long-term supply

50

agreements with several of our primary suppliers.  We do not enter into forward contracts or other financial instruments to hedge commodity price risk; however, we do focus on strategic risk management of all raw material commodities.

Foreign Currency Exchange Risk

Certain of our operations outside of the United States use the related local currency as their functional currency.  We translate revenue and expense at average rates of exchange during the period.  We translate assets and liabilities at the rates of exchange as of the consolidated balance sheet dates and include foreign currency translation gains and losses as a component of accumulated other comprehensive income.  Due to the nature of our operations and our corporate structure, we also have subsidiaries that have transactions in foreign currencies other than their functional currency.  We record transaction gains and losses in our consolidated statements of operations related to the recurring re-measurement and settlement of such transactions.  A 10% change in foreign currency exchange rates would not have a material impact to our consolidated financial position or results of operations.

51

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

The following financial statements are included in Item 8 of this report:

Financial Statements	Page
Report of Independent Registered Public Accounting Firm	53
Consolidated Balance Sheets as of December 31, 2013 and 2012	54
Consolidated Statements of Comprehensive Income (Loss) for the Years Ended December 31, 2013, 2012, and 2011	55
Consolidated Statements of Shareholders’ Equity for the Years Ended December 31, 2013, 2012, and 2011	56
Consolidated Statements of Cash Flows for the Years Ended December 31, 2013, 2012, 2011	57
Notes to Consolidated Financial Statements	58
Schedule II – Valuation and Qualifying Accounts	81

52

Report of Independent Registered Public Accounting Firm

Tothe Board of Directors and Stockholders of LMI Aerospace, Inc.:

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of comprehensive income (loss), of shareholders' equity and of cash flows present fairly, in all material respects, the financial position of LMI Aerospace, Inc. and its subsidiaries at December 31, 2013 and 2012, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2013, in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the index appearing under Item 15 presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2013, based on criteria established in Internal Control - Integrated Framework1992 issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company's management is responsible for these financial statements, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in Report of Management Regarding Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on these financial statements and on the Company's internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ PricewaterhouseCoopers LLP

Saint Louis, Missouri

March 17, 2014

53

LMI AEROSPACE, INC.

CONSOLIDATED BALANCE SHEETS

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

	December 31,
	2013			2012
Assets
Current assets:
Cash and cash equivalents	$	1,572		$	4,347
Trade accounts receivable, net	72,853			69,159
Inventories	113,178			90,039
Prepaid expenses and other current assets	4,411			5,655
Deferred income taxes	2,693			3,839
Total current assets	194,707			173,039
Property, plant and equipment, net	103,375			96,218
Goodwill	113,223			179,314
Intangible assets, net	55,465			64,334
Other assets	13,281			15,059
Total assets	$	480,051		$	527,964
Liabilities and shareholders’ equity
Current liabilities:
Accounts payable	$	19,388		$	30,471
Accrued expenses	19,082			23,703
Current installments of long-term debt and capital lease obligations	5,242			5,632
Total current liabilities	43,712			59,806
Long-term debt and capital lease obligations, less current installments	285,369			255,067
Other long-term liabilities	3,915			3,405
Deferred income taxes	2,911			8,732
Total long-term liabilities	292,195			267,204
Shareholders’ equity:
Common stock, $0.02 par value per share; authorized 28,000,000 shares; issued 12,873,208 and 12,860,023 shares at December 31, 2013 and December 31, 2012, respectively	257			257
Preferred stock, $0.02 par value per share; authorized 2,000,000 shares; none issued at either date	—			—
Additional paid-in capital	92,692			90,839
Accumulated other comprehensive loss	(507		)	(49		)
Treasury stock, at cost, 22,321 shares at December 31, 2013 and 101,622 shares at December 31, 2012	(202		)	(482		)
Retained earnings	51,904			110,389
Total shareholders’ equity	144,144			200,954
Total liabilities and shareholders’ equity	$	480,051		$	527,964

See accompanying notes to consolidated financial statements.

54

LMI AEROSPACE, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

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

	Year Ended December 31,
	2013			2012			2011
Sales and service revenue
Product sales	$	324,133		$	168,943		$	161,435
Service revenues	88,424			109,686			92,605
Net sales	412,557			278,629			254,040
Cost of sales and service revenue
Cost of product sales	255,261			121,247			117,368
Cost of service revenues	77,434			89,074			77,022
Cost of sales	332,695			210,321			194,390
Gross profit	79,862			68,308			59,650
Selling, general and administrative expenses	55,862			36,891			33,563
Goodwill and intangible asset impairment	77,750			—			1,163
Contingent consideration write-off	(7,950		)	—			—
Restructuring expense	3,073			—			—
Acquisitions expense	247			5,362			—
(Loss) income from operations	(49,120		)	26,055			24,924
Other income (expense):
Interest expense	(16,962		)	(1,771		)	(669		)
Other, net	618			356			(730		)
Total other expense	(16,344		)	(1,415		)	(1,399		)
(Loss) income before income taxes	(65,464		)	24,640			23,525
(Benefit) provision for income taxes	(6,979		)	8,153			7,136
Net (loss) income	(58,485		)	16,487			16,389
Other comprehensive income (loss):
Change in foreign currency translation adjustment	(23		)	(49		)	—
Unrealized loss on interest rate hedges	(435		)	—			—
Total comprehensive (loss) income	$	(58,943	)	$	16,438		$	16,389
Amounts per common share:
Net (loss) income per common share	$	(4.64	)	$	1.41		$	1.42
Net (loss) income per common share assuming dilution	$	(4.64	)	$	1.39		$	1.40
Weighted average common shares outstanding	12,607,833			11,701,607			11,559,895
Weighted average dilutive common shares outstanding	12,607,833			11,839,182			11,741,513

See accompanying notes to consolidated financial statements.

55

LMI AEROSPACE, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(Amounts in thousands, except share data)

	Common Stock			Additional Paid-In Capital			Treasury Stock			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total Share- holders' Equity
Balance at December 31, 2010	$	242		$	73,440		$	(1,432	)	$	77,513		$	—		$	149,763
Net income	—			—			—			16,389			—			16,389
Other comprehensive income (loss)	—			—			—			—			—			—
Issuance of stock
7,850 shares in connection with exercise of options	—			57			4			—			—			61
76,458 shares of restricted stock	—			(25		)	24			—			—			(1		)
401k plan contribution	—			589			222			—			—			811
Restricted stock compensation	—			1,254			—			—			—			1,254
Other	—			(492		)	—			—			—			(492		)
Balance at December 31, 2011	242			74,823			(1,182		)	93,902			—			167,785
Net income	—			—			—			16,487			—			16,487
Other comprehensive loss	—			—			—			—			(49		)	(49		)
Issuance of stock
108,646 shares of restricted stock	—			(515		)	515			—			—			—
401k plan contribution	—			582			211			—			—			793
783,798 shares for Valent acquisition	16			14,984			—			—			—			15,000
Restricted stock compensation	—			1,494			—			—			—			1,494
Other	(1		)	(529		)	(26		)	—			—			(556		)
Balance at December 31, 2012	257			90,839			(482		)	110,389			(49		)	200,954
Net loss	—			—			—			(58,485		)	—			(58,485		)
Other comprehensive loss	—			—			—			—			(458		)	(458		)
Issuance of stock
67,996 shares of restricted stock	—			(237		)	237			—			—			—
401k plan contribution	—			707			194			—			—			901
Restricted stock compensation	—			1,615			—			—			—			1,615
Other	—			(232		)	(151		)	—			—			(383		)
Balance at December 31, 2013	$	257		$	92,692		$	(202	)	$	51,904		$	(507	)	$	144,144

See accompanying notes to consolidated financial statements.

56

LMI AEROSPACE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

	Year Ended December 31,
	2013			2012			2011
Operating activities:
Net (loss)/income	$	(58,485	)	$	16,487		$	16,389
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation and amortization	20,560			7,994			7,241
Goodwill and intangible asset impairment	77,750			—			1,163
Contingent consideration write-off	(7,950		)	—			(1,235		)
Restricted stock compensation	1,615			1,494			1,254
Deferred taxes	(6,060		)	(1,062		)	341
Other non-cash items	(420		)	(317		)	(227		)
Changes in operating assets and liabilities, net of acquired businesses:
Trade accounts receivable	(4,678		)	(8,093		)	(8,871		)
Inventories	(23,063		)	(10,980		)	(5,933		)
Prepaid expenses and other assets	2,828			1,186			(1,080		)
Current income taxes	1,939			(1,168		)	1,731
Accounts payable	(11,276		)	3,062			4,354
Accrued expenses	(1,109		)	196			1,048
Net cash (used)/provided by operating activities	(8,349		)	8,799			16,175
Investing activities:
Additions to property, plant and equipment	(23,738		)	(18,783		)	(10,267		)
Acquisitions, net of cash acquired	(504		)	(216,398		)	—
Proceeds from sale of equipment	1,989			181			270
Net cash used by investing activities	(22,253		)	(235,000		)	(9,997		)
Financing activities:
Proceeds from issuance of debt	5,751			229,124			—
Principal payments on long-term debt and notes payable	(5,863		)	(118		)	(180		)
Advances on revolving line of credit	107,000			40,278			—
Payments on revolving line of credit	(77,236		)	(34,042		)	—
Prepaid financing costs	(1,817		)	(12,736		)	—
Other, net	(8		)	174			(77		)
Net cash provided (used) by financing activities	27,827			222,680			(257		)
Net (decrease) increase in cash and cash equivalents	(2,775		)	(3,521		)	5,921
Cash and cash equivalents, beginning of year	4,347			7,868			1,947
Cash and cash equivalents, end of year	$	1,572		$	4,347		$	7,868
Cash payments for:
Interest paid	$	13,161		$	585		$	490
Income taxes paid, net of refunds received	$	(2,683	)	$	10,261		$	5,032
Supplemental disclosure of non-cash transactions:
Fair value of common stock issued to acquire Valent	$	—		$	15,000		$	—
Contingent consideration	$	(7,950	)	$	7,950		$	—
Equipment acquired under capital lease	$	411		$	746		$	—

See accompanying notes to consolidated financial statements.

57

LMI AEROSPACE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except share and per share data)

December 31, 2013

1. ACCOUNTING POLICIES

Principles of Consolidation

The Consolidated Financial Statements included in this report have been prepared by management of LMI Aerospace, Inc.  All significant intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 these estimates.

Revenue and Profit Recognition

Except as described below, the Company recognizes revenue for sales of products and related services in accordance with Financial Accounting Standards Board, (“FASB”) Accounting Standards Codification (“ASC”) Topic 605-15 Products and Topic 605-20 Services. The Company sells products under long term supply contracts and purchase orders where the product is built to the customer specifications based on firm purchase orders from the customer. The purchase orders tend to be of a relatively short duration and customers place orders on a periodic basis.  The pricing is generally fixed for some length of time and the quantities are based on individual purchase orders. Revenue is recognized when title passes and services are rendered, the price is fixed or determinable, and collection is reasonably assured. Approximately 80.0% to 90.0% of the total revenue the Company recognized in any given quarter is accounted for in accordance with Topics 15 and 20. The remainder of the revenue is accounted for using methods consistent with ASC Topic 605-35 Construction-Type and Production-Type Contracts.

The percentage of completion method used to account for contracts depends on the nature of the products provided under the contract. For example, for contracts that require us to perform a significant level of development effort, in comparison to the total value of the contract, sales are recorded using the cost to cost method to measure progress toward completion. Under the cost to cost method of accounting, we recognize sales and estimated profit as costs are incurred based on the proportion that the incurred costs bare compared to total estimated costs. For contracts that require us to provide a substantial number of similar items without a significant level of development, we record sales and estimated profit on a percentage of completion basis using units of delivery as the basis to measure progress toward completing the contract. Under both methods, profit recognized is based on the total expected profit margin percentage multiplied by revenue recognized to date.

The Company periodically reviews all estimates to complete as required by the authoritative guidance and the estimated total cost and expected gross profit are revised as required over the life of the contract.  Any revisions to the estimated total cost are accounted for as a change of an estimate.  A cumulative catch-up adjustment is recorded in the period of the change of the estimated costs to complete the contract.  

In addition, should total estimated costs at completion exceed the estimated total revenue, the anticipated full loss is recognized in the period in which the anticipated loss is determined.  The loss is reported as a component of cost of sales. The Company does not have any cost to cost contracts with an anticipated loss. The Company does have a contract being accounted for using the units of delivery method which was acquired during the Valent acquisition and where estimated costs exceed the total contract revenue. The provision for anticipated loss was established in 2013 for $5,267 and was treated as a measurement period change and as such increased the goodwill related to the Valent acquisition.

Cumulative catch-up adjustments had the following impact to operating income in the years presented:

58

LMI AEROSPACE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except share and per share data)

December 31, 2013

	2013		2012		2011
Favorable adjustments	106		587		492
Unfavorable adjustments	(1,609	)	(519	)	(779	)
Net operating income adjustments	(1,503	)	68		(287	)

The negative cumulative catch-up adjustments in 2013 relate primarily to two contracts. The first contract relates to a design program on the 787 platform on which the Company was unable to pass through as much of the engineering changes incurred to the customer as originally estimated. The Company recorded a reduction of contact revenue of $811 for this program in 2013. The Company continues to pursue claims related to this contract but has not estimated a recovery in the estimate at completion. The total revenue recognized on this program at December 31, 2013 was $13,397. The second contract relates to part production for the Embraer KC-390 program. In 2013, an adjustment of $706 was recorded to reflect a revision in the expected labor hours necessary to complete the program. Total revenue recognized on the program at December 31, 2013 was $17,131.

For contracts accounted for using the percentage of completion method, management’s estimates of total units to be produced, and material, labor and overhead costs on long-term contracts are critical to the Company.  Due to the size, length of time and nature of many of our contracts, the estimation of revenue and costs through completion is complicated and subject to many variables. Claims and unpriced change orders will impact the estimate of total revenues and profits. In the ordinary course of business, the Company may receive requests from its customers to perform tasks not specified in its contracts.  When this occurs on a long-term contract using the cost-to-cost method of percentage of completion accounting, the Company may record revenue for claims or unpriced change orders to be negotiated with customers.  Approximately 0.5% of the Company's revenue recognized in 2013 represented amounts associated with claims and unpriced change orders. Total contract cost estimates are largely based our current cost of production, purchase order terms negotiated or estimated by our supply chain.

The development of a contract revenue and gross margin percentage involves utilization of detailed procedures by a team of operational and financial personnel that provides information on the status of the contracts.  Estimates of revenue and costs associated with each significant contract are reviewed and approved by the team on a quarterly basis.  

Due to the significance of the judgment in the estimation process described above, it is possible that materially different margins could be recorded if we used different assumptions or if the underlying circumstances were to change.  

Pre-Contract and Pre-Production Costs under Long-Term Supply Contracts

In certain circumstances, the Company capitalizes costs incurred prior to the execution of a contract with the customer.  These circumstances are limited to instances in which the Company has substantially negotiated the terms and conditions of the anticipated contract with its customers and concluded that their recoverability from the anticipated contract is probable.  As these costs are directly associated with a specific anticipated contract and they are concluded to be recoverable under that anticipated contract, the Company has capitalized these amounts.

The Company may incur design and development costs prior to the production phase of contracts that are outside the scope of the contract accounting method.  These pre-production costs are generally related to costs the Company incurs to design and build tooling that is owned by the customer and design and engineering services.  The Company receives the non-cancellable right to use these tools to build the parts as specified in a contractual agreement and therefore has capitalized these costs.  In certain instances, the Company enters into agreements with its customers that provide it a contractual guarantee for reimbursement of design and engineering services incurred prior to the production phase of a contract.  Due to the contractual guarantee, the Company capitalizes the costs of these services.  The pre-production costs are amortized to cost of sales over the shorter of the life of the contractual agreement or the related tooling.

Cash and Cash Equivalents

59

LMI AEROSPACE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except share and per share data)

December 31, 2013

Cash and cash equivalents include cash on hand, deposits in transit and all highly liquid investment instruments with an initial maturity of three months or less.

Inventories

The Company’s inventories are stated at the lower of cost or market and utilize actual costs for raw materials and an average cost for work in process, manufactured and purchased components and finished goods.  The Company evaluates the inventory carrying value and reduces the carrying costs based on customer activity, estimated future demand, price deterioration, and other relevant information. The Company’s customer demand is unpredictable and may fluctuate due to factors beyond the Company’s control.  In addition, inventoried costs include capitalized contract costs relating to programs and contracts with long-term production cycles, a portion of which is not expected to be realized within one year.  See further discussion regarding deferred long-term contract costs under “Revenue and Profit Recognition” and “Pre-Contract and Pre-Production Costs under Long-Term Supply Contracts.”

Allowance for Doubtful Accounts

The allowance for doubtful accounts receivable reflects the Company’s best estimate of probable losses inherent in its accounts receivable.  The basis used to determine this value is derived from historical experience, specific allowances for known troubled customers and other known information.

Property, Plant and Equipment

Property, plant and equipment are stated at cost.  Depreciation is calculated using the straight-line method over the estimated useful lives of the related assets.  Leasehold improvements are amortized using the straight-line method over the shorter of the lease term or the estimated useful lives of the assets.  Estimated useful lives for buildings, machinery and equipment, and purchased software are 20 to 35 years, 4 to 10 years and 3 to 4 years, respectively.  Amortization incurred under capital leases is reported with depreciation expense.

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.

Goodwill and Intangible Assets

The Company’s acquisitions involve the purchase of tangible and intangible assets and the assumption of certain liabilities.   As part of the purchase price allocation, the Company allocates the purchase price to the tangible assets acquired and liabilities assumed based on estimated fair market values, and the remainder of the purchase price is allocated to intangibles and goodwill.  Goodwill and intangible assets with indefinite lives are not amortized but are subject to an impairment assessment at least annually in relation to their fair value.   Under guidelines established by FASB ASC Topic 280, the Company operates in two operating segments. However, the Company has recorded its goodwill and conducts testing for potential goodwill impairment at a reporting unit level.   The reporting units represent a business for which discrete financial information is available, and segment management regularly reviews the operating results.  As part of this process, the Company first assesses qualitatively whether it is necessary to perform the quantitative test.  The qualitative assessment involves evaluating relevant events or circumstances to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount.  If it is, the Company can bypass the quantitative assessment of goodwill.  If it is not, or if the Company has elected to bypass the qualitative assessment process, the quantitative assessment of goodwill utilizes a two-step process, where the carrying value of the reporting unit is compared to its fair value.  If the carrying value is less than the fair value, no impairment exists, and the second step is not performed.  However, if the carrying value is greater than the fair value, the second step is performed.  An impairment charge would be recognized for the amount that the carrying value of the goodwill exceeds its fair value. The fair values for goodwill testing are estimated using a combination of the income and market approach unless circumstances indicate that a better estimate of fair value is available. The income approach utilizes the discounted cash flow model (“DCF model”) and the market approach is based on the market data for a group of guideline companies.

Deferred Gain on Sale of Real Estate

60

LMI AEROSPACE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except share and per share data)

December 31, 2013

On December 28, 2006, the Company entered into an agreement with a third party to sell and lease back certain of its real estate properties for $10,250.  The amount of the sale price in excess of book value for these properties of $4,242 was deferred and is being amortized over the 18 year term of the leases on a straight-line basis.

Share-Based Compensation

The Company recognizes compensation expense for share-based payment transactions in the financial statements at their fair value.  The expense is measured at the grant date, based on the calculated fair value of the share-based award, and is recognized over the requisite service period (generally the vesting period of the equity award).

Income Taxes

Provisions for federal and state income taxes are calculated on reported net income before income taxes based on current tax law and also include, in the current period, the cumulative effect of any changes in tax rates from those used previously in determining deferred tax assets and liabilities.  Such provisions differ from the amounts currently receivable or payable because certain items of income and expense are recognized in different time periods for financial reporting purposes than for income tax purposes.  Significant judgment is required in determining income tax provisions and evaluating tax positions.

A valuation allowance, if needed, reduces deferred tax assets to the amount expected to be realized. When determining the amount of net deferred tax assets that are more likely than not to be realized, Management assesses all available positive and negative evidence. This evidence includes, but is not limited to, prior earnings history, expected future earnings, carry-back and carry-forward periods and the feasibility of ongoing tax strategies that could potentially enhance the likelihood of the realization of a deferred tax asset. The weight given to the positive and negative evidence is commensurate with the extent the evidence may be objectively verified. As such, it is generally difficult for positive evidence regarding projected future taxable income exclusive of reversing taxable temporary differences to outweigh objective negative evidence of recent financial reporting losses.

        Based on these criteria and the relative weighting of both the positive and negative evidence available, and in particular the activity surrounding the Company's significant loss in 2013, management determined that it was necessary to establish a valuation allowance against all of its net U.S. deferred tax assets at December 31, 2013. This determination was made as the Company entered into a cumulative loss position over the three year period ended December 31, 2013 primarily due to the recording a goodwill impairment of $73,528 related to Valent. Once the Company entered into a cumulative loss position it has passed the threshold after which there is a presumption that a company should no longer rely solely on projected future income in determining whether the deferred tax asset is more likely than not to be realized. The Company will continue to monitor its deferred tax position and may adjust the valuation allowance, if necessary, for utilization of the underlying deferred tax assets through current taxable income or as available evidence changes.

The accounting for uncertainty in income taxes requires a more-likely-than-not threshold for financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return.  The Company records a liability for the difference between the benefit recognized and measured for financial statement purposes and the tax position taken or expected to be taken on our tax return.  To the extent that management’s assessment of such tax positions changes, the change in estimate is recorded in the period in which the determination is made.

The Company’s unrecognized tax benefits as of December 31, 2013 and 2012 are immaterial.  The Company expects no significant increases or decreases in unrecognized tax benefits due to changes in tax positions within one year of December 31, 2013.  The Company has no material interest or penalties relating to income taxes recognized on the Consolidated Balance Sheet as of December 31, 2013 and 2012.  As of December 31, 2013, returns for calendar years 2010 through 2012 remain subject to examination by the Internal Revenue Service and/or various state tax jurisdictions.

Financial Instruments

Fair values of the Company’s long-term obligations approximate their carrying values as the applicable interest rates approximate the current market rates or have variable rate characteristics.  The Company’s other financial instruments have fair values that approximate their respective carrying values due to their short maturities.

61

LMI AEROSPACE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except share and per share data)

December 31, 2013

Reclassifications

Certain reclassifications have been made to prior period financial statements in order to conform to current period presentation.

Recent Accounting Pronouncements

In March 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2013-5, "Foreign Currency Matters". The amendments in ASU 2013-5 resolve the diversity in practice about whether current literature applies to the release of the cumulative translation adjustment into net income when a parent either sells a part or all of its investment in a foreign entity or no longer holds a controlling financial interest in a subsidiary or group of assets that is a nonprofit activity or a business within a foreign entity. In addition, the amendments in ASU 2013-5 resolve the diversity in practice for the treatment of business combinations achieved in stages (sometimes also referred to as step acquisitions) involving a foreign entity. ASU 2013-5 is effective prospectively for fiscal years, and interim reporting periods within those years, beginning after December 15, 2013. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial statements.

In July 2013, FASB issued ASU 2013-10, “Inclusion of the Fed Funds Effective Swap Rate (or Overnight Index Swap Rate) as a Benchmark Interest Rate for Hedge Accounting Purposes”, which amends the current accounting requirements in Topic 815 “Derivatives and Hedging”. Before the amendments in this update, only interest rates on direct Treasury obligations of the U.S. government (“UST”) and, for practical reasons, the London Interbank Offered Rate (“LIBOR”) swap rate were considered benchmark interest rates in the United States. Due the increased importance of OIS (“Overnight Index Swap Rate” or also referred to as the “Fed Funds Effective Swap Rate”), the objective of this update is to provide for the inclusion of OIS as a U.S. benchmark interest rate for hedge accounting purposes, in addition to UST and LIBOR. This amendment became effective for qualifying new or redesignated hedging relationships entered into on or after July 17, 2013. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements.

In July 2013, FASB issued ASU 2013-11, “Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists”. ASU 2013-11 requires entities to net its liability for unrecognized tax positions against a net operating loss carryforward, a similar tax loss or a tax credit carryforward when settlement in this manner is available under the tax law. The provisions of this new guidance are effective as of the beginning of the Company’s first quarter of 2014. The adoption of this standard is not expected to have a material impact on the Company's consolidated financial statements.

2. ACQUISITIONS

On December 28, 2012, the Company acquired all of the outstanding equity of Valent Aerostructures, LLC, (“Valent”), a provider of complex sub-assemblies and machined parts to airframe manufacturers in the commercial aerospace, business and regional, and military industries, is headquartered in Kansas City, Missouri, and was accounted for under the acquisition method of accounting.  Concurrent with the acquisition, the Company entered into a new credit agreement to fund the majority of the purchase price as described in Note 9. "Long-term Debt and Capital Lease Obligations."  The Company also issued $15,000 in restricted common stock.  Fifty percent of the shares issued for the acquisition are eligible to be converted in June of 2014, with the remaining shares eligible for conversion in December of 2015.

The operating results of Valent have been included in the Company’s Aerostructures segment from the date of acquisition and acquisition related costs of $5,107 have been included in acquisitions expense.  The following table presents unaudited pro-forma consolidated operating results for the Company for the years ended December 31, 2012 and 2011, as if Valent had been acquired as of the beginning of the periods presented:

	December 31,
	2012		2011
Net sales	$	386,402	$	340,551
Net income	12,899		10,152

62

LMI AEROSPACE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except share and per share data)

December 31, 2013

Management believes the integration of Valent with its business may provide synergistic benefits, including increased scale, complementary product offerings, the ability to compete for larger and more complex design-build projects and enhanced project management capabilities, allowing the Company to drive further growth from existing platforms.

The following table summarizes the final purchase price allocation for Valent at the date of acquisition:

Cash	$	44
Accounts receivable	16,769
Inventory	28,053
Prepaid expenses and other current assets	640
Fixed assets	56,075
Intangible assets	46,546
Other long-term assets	1,576
Goodwill	129,816
Current liabilities assumed	(25,187		)
Long-term liabilities assumed	(23,080		)
Cost of acquisition	$	231,252

Of the $46,546 of acquired intangible assets, $45,600 was assigned to customer relationships with a weighted average useful life of 20.3 years; and the remaining $946 consists of trade names, trademarks and other intangibles and have a weighted average useful life of 5.5 years.  The fair value of the customer relationships was determined using the multi-period excess earnings method.  The fair value of trade names and trademarks was determined using the cost method. These assets are being amortized using the straight-line method, which is expected to approximate the pattern of economic benefit of each intangible asset.

Establishment of the customer relationship asset at Valent considered an ongoing contract in place with Spirit AeroSystems. The terms of the contract do not provide for any minimum volumes to be ordered and include a termination for convenience clause in favor of the customer whereby the customer can exit the relationship with minimal notice. Given the contract with Spirit AeroSystems can be terminated at any time, the Company manages the customer contract-in-place and the customer relationship as an aggregate  asset, and we believe the value of the contract-in-place is not separable from the value of the long-standing customer relationship asset.

The customer relationship with Spirit AeroSystems intangible asset was valued separately from Valent’s other customer relationship intangible assets. As part of the valuation of Valent’s customer relationship with Spirit AeroSystems intangible asset, the contractual nature of the relationship was considered and incorporated into the valuation. The contractual nature of the relationship was a factor in the selected discount rate (used in the multi-period excess earnings method), although the significance of the contract was modest due to the aforementioned contract provisions that provide no meaningful assurances of future business under the contract (i.e., no minimum volumes, and termination for convenience clause). These contractual provisions coupled with our review of historical contract renewal rates led to the life ultimately determined for the intangible asset.

On August 7, 2012, the Company acquired all of the shares of capital stock of TASS Inc. (“TASS”), an after-market engineering and support services firm.  Headquartered in Kirkland, Washington, TASS delivers engineering solutions to aircraft manufacturers, airlines, Maintenance, Repair and Overhaul companies and leasing companies worldwide.  The acquisition was funded by internal cash and by entering into a $1,000 note payable and was accounted for under the acquisition method of accounting.  The pro-forma operating results, as if the Company had completed the acquisition at the beginning of the periods presented, are not material to the Company’s operations and are not presented.

Management believes the acquisition of TASS, together with other initiatives, will augment the Company’s long and successful history with Boeing products and provide the Company with a global presence in the aftermarket engineering arena.  TASS also provides the Company the ability to internally source product support for parts manufactured by the Company in the global airline fleet.

63

LMI AEROSPACE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except share and per share data)

December 31, 2013

The Company performed a valuation analysis to determine amounts allocated to the acquired assets and assumed liabilities, including various intangible assets.  The following table summarizes the purchase price allocation for TASS at the date of acquisition:

Cash	$	617
Accounts receivable	1,979
Other assets	175
Fixed assets	196
Intangible assets	2,247
Goodwill	6,313
Current liabilities assumed	(1,247		)
Cost of acquisition	$	10,280

Of the $2,247 acquired intangible assets, $1,876 was assigned to customer relationships with a weighted average useful life of 11.9 years; and the remaining $371 consists of trademarks and other intangibles and have a weighted average useful life of 2.9 years.  The fair value of the customer relationships was determined using the discounted cash flow method.  The fair value of the trademarks was determined using the relief from royalty method.

3. ASSETS AND LIABILITIES MEASURED AT FAIR VALUE

Fair value is the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.  A fair value hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements).  The three levels of the fair value hierarchy are described below:

Level 1: Quoted prices in active markets for identical assets or liabilities.

Level 2: Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The asset or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.  The valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.  There have been no changes in the methodologies used at December 31, 2013.  There were no transfers between levels during 2013 and 2012.

64

LMI AEROSPACE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except share and per share data)

December 31, 2013

									2013
	Assets and Liabilities at Fair Value								Total
	as of December 31, 2013								Gains
	Total		(Level 1)		(Level 2)		(Level 3)		(Losses)
Recurring Fair Value Measurement:
Asset:
Interest rate derivatives (1)	$	18	$	—	$	18	$	—	$	—
Liabilities:
Interest rate derivatives (1)	$	392	$	—	$	392	$	—	$	—
Non-recurring Fair Value Measurements:
Asset:
Intangible assets, net (3,4)	$	55,465	$	—	$	—	$	55,465	$	(4,222	)
Goodwill (5)	$	113,223	$	—	$	—	$	113,223	$	(73,528	)
Liabilities
Contingent Consideration (2)	—		$	—	—		$	—	$	7,950
									$	(69,800	)

									2012
	Assets at Fair Value								Total
	as of December 31, 2012								Gains
	Total		(Level 1)		(Level 2)		(Level 3)		(Losses)
Recurring Fair Value Measurement:
Contingent Consideration (2)	$	7,950	$	—	$	—	$	7,950	$	—
Non-recurring Fair Value Measurements:
Intangible assets, net (4)	$	48,793	—		—		48,793		$	—
									—

(1) The fair values of interest rate derivatives are the amount the company would receive or pay to terminate the contracts, considering quoted market prices of comparable agreements. (Also see Note 10 to the Consolidated Financial Statements)

(2) The Monte Carlo simulation was used with a normal probability distribution of the best estimate of EBITDA for 2013 to approximate fair value. At June 30, 2013, the EBITDA target was not expected to occur and, as such, the $7,950 of contingent consideration was deemed unlikely to be paid, and a benefit was recorded on a separate line in the Condensed Consolidated Statements of Operations for the year ended December 31, 2013.

(3) During the second quarter of 2013, a triggering event occurred when the Company commenced an initiative to rebrand its core engineering business. Under this initiative, the D3 Technologies name became obsolete and the $4,222 indefinite lived intangible asset related to that trade name was deemed to be fully impaired and a loss was recorded in the Consolidated Statements of Operations for the year ended December 31, 2013

(4) The fair values of intangibles relating to the 2012 acquisitions of TASS and Valent were determined by third parties in connection with the purchase and recorded at those values.

65

LMI AEROSPACE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except share and per share data)

December 31, 2013

(5) During the fourth quarter of 2013, the Company performed its annual impairment analysis of goodwill. As a result of this analysis, the goodwill related to the Valent acquisition was deemed impaired, and a $73,528 impairment charge was recorded in the Consolidated Statements of Operations for the year ended December 31, 2013.

4. ACCOUNTS RECEIVABLE NET

Accounts receivable, net consists of the following:

	December 31,
	2013			2012
Trade receivables	$	63,804		$	50,876
Unbilled revenue	7,256			12,372
Other receivables	1,973			6,198
	73,033			69,446
Less: Allowance for doubtful accounts	(180		)	(287		)
Accounts receivable, net	$	72,853		$	69,159

Under long-term contract accounting unbilled revenue on long-term contracts arise when the sales or revenues based on performance attainment, though appropriately recognized, cannot be billed yet under terms of the contract as of the balance sheet date.  Accounts receivable expected to be collected after one year are not material.

5. INVENTORIES

Inventories consist of the following:

	December 31,
	2013		2012
Raw materials	$	17,099	$	14,946
Work in progress	21,605		20,012
Manufactured and purchased components	21,675		18,898
Finished goods	40,572		30,792
Product inventory	100,951		84,648
Capitalized contract costs (1)	12,227		5,391
Total inventories	$	113,178	$	90,039

(1) 2013 includes a reduction to inventory of $2,057 related to a loss reserve on a long-term production contract.

In accordance with ASC 605-35-45-1&2, the provisions for anticipated losses on contracts are accounted for as additional contract cost and recognized as part of cost of sales. Provisions for losses are recorded as a reduction of related contract costs recorded in inventory.

Inventoried costs include capitalized contract costs relating to programs and contracts with long-term production cycles, substantially all of which is not expected to be realized within one year.  The Company believes these amounts will be fully recovered over the life of the contracts.

66

LMI AEROSPACE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except share and per share data)

December 31, 2013

For December 31, 2012, the Company has revised the classification of $5,505 in inventory between raw materials and manufactured and purchased components for a misclassification as previously reported at December 31, 2012.

6. PROPERTY, PLANT AND EQUIPMENT

Depreciation expense (including amortization expense on software) recorded by the Company totaled $15,913, $5,894 and $5,219 for 2013, 2012 and 2011, respectively.

	December 31,
	2013			2012
Land	$	1,455		$	1,455
Buildings and improvements	23,692			18,676
Machinery and equipment	122,132			108,391
Leasehold improvements	14,421			10,559
Software and other	11,403			10,629
Construction in progress	5,031			7,168
Total gross property, plant and equipment	178,134			156,878
Less accumulated depreciation	(74,759		)	(60,660		)
Total net property, plant and equipment	$	103,375		$	96,218

See discussion in Note 9 to the Consolidated Financial Statements regarding property, plant and equipment recorded as a result of capital leases.

7. GOODWILL AND INTANGIBLE ASSETS

Goodwill

The following table summarizes the net carrying amount of goodwill by segment at December 31, 2013 and 2012, respectively:

							Engineering
	Aerostructures						Services				Total
	2013			2012			2013		2012		2013			2012
Balance at December 31,
Gross Goodwill	$	141,663		$	135,431		$	50,741	$	49,536	$	192,404		$	184,967
Accumulated impairment loss	(79,181		)	(5,653		)	—		—		(79,181		)	(5,653		)
Net Goodwill	$	62,482		$	129,778		$	50,741	$	49,536	$	113,223		$	179,314

The change in the net goodwill balance for Aerostructures was primarily related to the acquisition of Valent in December 2012, with Valent accounting for $56,288 and $123,584 of the balance at December 31, 2013 and 2012, respectively. Under ASC 805, the acquiring entity has a period of time, referred to as the measurement period, to finalize the accounting for a business combination. The increase in gross goodwill from December 2012 to December 2013 in Aerostructures is due to measurement period changes related to the acquisition of Valent. The material adjustments recorded in 2013 were related to a loss reserve on a long-term contract of $5,267 and a reduction in the value of fixed assets $482 which were offset by a working capital settlement adjustment of $1,219. The Company determined that an acquired contract on the Boeing 787 program was under-priced related to the level of effort required, resulting in a loss contract. In addition, during the fourth quarter of fiscal 2013, in accordance with the Company’s accounting policy as described in Note 1 to the Consolidated Financial Statements, the Company performed the annual impairment analysis and determined that carrying value for goodwill for Valent was above its fair value. As a result, a goodwill impairment charge of $73,528 was recorded in the fourth quarter of 2013. The fair value for the remaining goodwill in Aerostructures exceeded its carrying value.

67

LMI AEROSPACE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except share and per share data)

December 31, 2013

The net goodwill balance at December 31, 2013 also consisted of $44,428 from the acquisition of D3 Technologies, Inc. (“D3”) in July 2007, $6,194 from the acquisition of Intec in January 2009 and $6,313 from the acquisition of TASS in August 2012. The net goodwill balance at December 31, 2012 consisted of $42,908 for the acquisition of D3, $6,194 from the acquisition of Intec, $6,628 from the acquisition of TASS and $123,584 from the acquisition of Valent. The increase in goodwill related to D3 resulted from the correction of a deferred tax liability that should have been recorded at acquisition on an indefinite lived intangible asset. Goodwill and deferred tax liability were increased by $1,520 to reflect the correction.

During the fourth quarter of fiscal 2013, in accordance with the Company’s accounting policy as described in Note 1 to the Consolidated Financial Statements, the Company also performed the annual impairment analysis on the Engineering Services group and the fair value exceeded the carrying value of the reporting unit.

Goodwill recorded as a result of the D3 and Intec acquisitions is not deductible for tax purposes, while goodwill recorded as a result of the Valent and TASS acquisitions is deductible for tax purposes. 

Intangible Assets

Intangible assets primarily consist of trademarks and customer intangibles resulting from the acquisitions of Versaform Corporation, D3, Intec, TASS, and Valent.  The trademark of $4,222 that resulted from acquisition of D3 was determined to have an indefinite life.  During the second quarter of 2013, a triggering event occurred when the Company commenced an initiative to rebrand its core engineering business. Under this initiative, the D3 Technologies name will no longer be used and the $4,222 indefinite lived intangible asset related to that trade name was deemed to be fully impaired. The amount was calculated using the income approach with a level 3 valuation. The impairment loss was recognized in the Engineering Services segment in a separate line in the selling, general and administrative expenses of the Consolidated Statements of Comprehensive Income for the year ended December 31, 2013.

The remaining trademarks resulted from the acquisitions of Intec, TASS, and Valent and have a weighted average useful life of 4.5 years.  Customer intangibles have a weighted average useful life of 18.5 years.   Other intangible assets have a weighted average useful life of 5.3 years.  The carrying values were as follows:

	December 31,
	2013			2012
Trademarks	$	778		$	5,000
Customer intangible assets	68,991			68,991
Other	1,481			1,481
Accumulated amortization	(15,785		)	(11,138		)
Intangible assets, net	$	55,465		$	64,334

68

LMI AEROSPACE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except share and per share data)

December 31, 2013

Intangibles amortization expense for 2013, 2012 and 2011 was $4,647, $3,185 and $2,137, respectively.  Amortization expense for 2011 includes $1,163 for an impairment loss. During the first quarter of 2011, a triggering event occurred with regard to a certain proprietary technology intangible asset as a result of a failure to conclude a possible sale of a product line.  The impairment loss was recognized in the Aerostructures segment in a separate line in the selling, general and administrative expenses of the Consolidated Statements of Comprehensive Income.

Estimated annual amortization expense for these intangibles is as follows:

Year ending December 31,
2014	$	4,524
2015	4,359
2016	4,134
2017	3,915
2018	3,563
Thereafter	34,970
	$	55,465

8. ACCRUED EXPENSES

Accrued expenses consist of the following:

	December 31,
	2013		2012
Accrued payroll	$	3,286	$	3,362
Accrued bonus	958		1,493
Accrued vacation & holiday	3,516		3,257
Accrued employee benefits	1,847		1,815
Accrued operating lease obligations	2,002		1,706
Contingent consideration	—		7,950
Accrued professional fees	1,253		754
Loss reserve on long-term production contracts	3,165		—
Other	3,055		3,366
Total accrued expenses	$	19,082	$	23,703

In the second quarter of 2013, the Company realized a $7,950 benefit related to the write-off of the contingent consideration associated with the December 2012 purchase of Valent. During the second quarter of 2013, it was deemed unlikely that the earnings levels required to be achieved for former Valent interest holders to be paid contingent consideration would not be achieved by the required date of December 31, 2013. As such, the contingent consideration was recorded as a benefit in the year ended December 31, 2013.

In the fourth quarter of 2013, the Company recorded a loss reserve of $5,267 related to a long-term production contract at Valent. This loss was treated as a measurement period adjustment for the Valent purchase price allocation. (See Note 1, Accounting Policies and Note 7, Goodwill and Intangible Assets). At December 31, 2013, the loss reserve balance was $5,222 of which $3,165 is included in accrued expenses with the remainder recorded as a reduction of related contract inventory.

9. LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS

Long-term debt and capital lease obligations consist of the following:

69

LMI AEROSPACE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except share and per share data)

December 31, 2013

	December 31,
	2013		2012
Revolver under credit agreement, variable	$	36,000	$	6,236
Term loan under credit agreement, variable	222,750		225,000
Missouri IRBs at fixed rate of 2.80% at December 31, 2013	7,756		8,113
Capital Leases, at fixed rates ranging from 2.04% to 7.73% at December 31, 2013 and 3.00% to 7.73% at December 31, 2012	14,572		15,316
Notes payable, principal and interest payable monthly, at fixed rates, up to 3.60% and 3.25% at December 31, 2013 and 2012, respectively	9,533		6,034
Total debt	290,611		260,699
Less current installments	5,242		5,632
Total long-term debt and capital lease obligations	$	285,369	$	255,067

On December 28, 2012, the Company entered into a credit agreement to provide senior secured credit facilities to finance the Valent acquisition, refinance existing debt, and fund working capital requirements.  The credit agreement was amended on February 7, 2013 in conjunction with its completed syndication, increasing the Company's borrowing limit and reducing its rates. These credit facilities include a revolving credit facility of up to $125,000 and a term loan facility of $225,000.   The agreement was amended again on August 21, 2013 to provide more flexibility on the financial covenants through 2014. Borrowings under the facilities are secured by substantially all of the Company’s assets and bear interest at either the LIBOR rate plus a margin of up to 3.50% and 4.00%, respectively, with a LIBOR floor of 1.25% or the alternate base rate (“ABR”) which is the highest of the following plus a margin of up to 2.50% and 3.00%, respectively, with the applicable margin for the revolving credit facility subject to a a step-down grid, based on the total leverage ratio of the company effective with the start of the second quarter of 2013:

• Prime rate,

• Federal funds rate plus 0.5%

• The adjusted Eurodollar rate for an interest period of one month plus 1% or

• The 2.25% ABR rate floor

The Company is required to pay a commitment fee of between 0.375% and 0.625% on the unused portion of the revolving credit facility based on the ratio of consolidated net debt to consolidated EBITDA. At December 31, 2013, the commitment fee required was 0.625%.

The maturity dates are subject to acceleration upon breach of the financial covenants (consisting of a maximum total leverage ratio and senior leverage ratio and a minimum fixed charge coverage ratio) and other customary non-financial covenants contained in the credit agreement.  These financial covenants were eased in the amendment dated August 21, 2013 but will align with the levels in the original credit agreement by January 1, 2015. The Company's EBITDA and cash generation over the past year has been lower than originally expected. Without improved EBITDA and cash generation, the Company's risk of non-compliance with the required leverage ratio in the credit agreement will increase. If covenants are not met and modifications or waivers cannot be obtained, it will result in non-compliance with the credit agreement, the occurrence of which could result in the amounts outstanding under the term loan facility and revolving credit facility becoming immediately due and payable. As of December 31, 2013, the Company was in compliance with all of its financial and non-financial covenants.  The revolving credit and term loan facilities mature on the fifth and sixth year anniversary dates of December 28, 2017 and 2018, respectively.

The credit agreement also contains certain restrictive covenants that limit and in some circumstances prohibit, our ability to, among other things, incur additional debt, sell, lease or transfer our assets, pay dividends, make investments, guarantee debt or obligations, create liens, enter into transactions with our affiliates and enter into certain merger, consolidation or other reorganization transactions.  This agreement also requires mandatory prepayments of excess cash at certain leverage levels.  These restrictions could limit our ability to obtain future financing, make acquisitions or needed capital expenditures, withstand the current or future downturns in our business or the economy in general, conduct operations or otherwise take advantage of business opportunities that may arise, any of which could place us at a competitive disadvantage relative to our competitors that have less debt and are not subject to such restrictions.

70

LMI AEROSPACE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except share and per share data)

December 31, 2013

As part of the acquisition of Valent, the Company assumed debt and capital leases for buildings and equipment that were underwritten to service underlying Industrial Revenue Bonds (“IRBs”) with the City of Washington, Missouri and Fredonia, Kansas.  Monthly payments are scheduled in an amount sufficient to service the total principal and interest of the underlying bonds.  Interest ranges from 2.80% to 7.73% and mature between September 2020 and June 2032.  In addition, the Company assumed a note payable to a prior minority shareholder for $2,000 payable in monthly installments over 36 months.

The Company entered into various notes payable and a capital lease agreement for the purchase of certain equipment in 2012.  The notes are secured by certain equipment and payable in monthly installments including interest ranging from 2.45% to 3.60% through November 2019.  In connection with its acquisition of TASS on August 7, 2012, as discussed in Note 2 above, the company entered into a $1,000 note payable which was paid in full in August 2013 plus interest at 3.25%. In December 2012, the Company entered into a commitment to finance a warehouse in Tulsa, Oklahoma through a $2,200 promissory note.  The note carries a 2.95% fixed rate payable in monthly payments of principal and interest with a balloon payment at maturity on December 28, 2017.  The note is secured by the property and guaranteed by the Company. On March 28, 2013, the Company entered into a $3,550 promissory note at a 3.60% fixed interest rate to finance the purchase of a corporate aircraft.

The gross amount of assets recorded under capital leases totaled $17,845 as of December 31, 2013 and is included in the related property, plant and equipment categories.  The Company has appropriately split the deferred financing fees between the revolving credit facility and term loan facility and will amortize the fees over their respective terms.  The long-term debt and capital lease payment obligations including the current portion thereof required in each of the next five years and thereafter are as follows:

Year ending December 31,	Long-Term Debt (1)		Capital Leases
2014	$	4,079	$	1,715
2015	4,112		1,946
2016	3,536		1,915
2017	41,390		1,963
2018	214,982		2,223
Thereafter	7,940		7,672
Total	276,039		17,434
Less:  imputed interest	—		(2,862		)
Total	$	276,039	$	14,572

(1) Includes principal only

10. DERIVATIVE FINANCIAL INSTRUMENTS

The Company has interest rate risk with respect to interest expense on variable rate debt.  At December 31, 2013, the Company had $258,750 of variable rate debt outstanding.  On March 28, 2013, and November 15, 2013, in compliance with its credit agreement, the Company purchased option and swap derivative contracts to hedge against the potential impact on earnings from an increase in market interest rates associated with the interest payments on its variable rate term credit facility.  The objective of the hedge transactions is to reduce the variability of cash flows due to changes in the designated benchmark interest rate on the term debt.  The purchased options have a strike price of 1.25%, based on 30-day LIBOR with maturity dates each month from April 28, 2013 through December 31, 2014 and payment dates coinciding directly with the term debt. The interest rate swap entered into on March 28, 2013 is effective from December 31, 2014 through December 31, 2015 and effectively swaps a notional amount of $112,500 from the floating LIBOR interest rate with a floor of 1.25% for a 1.63% fixed interest rate.  The interest rate swaps entered into on November 15, 2013 are effective from December 31, 2014 through December 31, 2015 and December 31, 2015 through December 31, 2016, respectively, and effectively swap a notional amount of $80,000 and $100,000, respectively, from the floating LIBOR interest rate with a floor of 1.25% for a 1.565% fixed interest rate and a floor of 1.25% for a 1.99% fixed

71

LMI AEROSPACE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except share and per share data)

December 31, 2013

interest rate, respectively. The derivatives are recognized in the Condensed Consolidated Balance Sheet at fair value, as of December 31, 2013 as follows:

Derivative Assets and Liabilities	Location in Condensed Consolidated Balance Sheet	December 31, 2013
Derivative designated as hedging instrument:
Interest rate purchased options at fair value	Other current assets	$	18
Derivative designated as hedging instrument:
Interest rate swaps at fair value	Other long term liabilities	$	392

The Company has designated and accounts for this swap and purchased options as cash flow hedges of interest rate risk. For a cash flow hedge, the Company reports the gain or loss, net of taxes, from the effective portion of the hedge as a component of Accumulated Other Comprehensive Income (“AOCI”) deferring it and reclassifying it into earnings in the same period or periods in which the hedged transaction affects earnings and in the same line item on the Condensed Consolidated Statements of Comprehensive Income as the impact of the hedged transaction.  Amounts reported in AOCI related to these derivatives are reclassified from AOCI to earnings as interest payments are made on the Company’s term credit facility debt in amounts necessary to convert the floating rate interest expense into fixed rate interest expense.  The terms of these derivatives and the variable rate debt coincide making it highly effective so no amounts were excluded from the assessment of hedge effectiveness and any ineffectiveness portion has not been, and is not expected to be, significant.  The Company does not use derivative instruments for trading or speculative purposes.

The following amounts are included in AOCI and earnings for the year ended December 31, 2013:

	Net of Tax
Derivatives in Cash Flow Hedging Relationship	Effective portion of (Gain) Loss Recognized in AOCI on Derivative		Effective Portion of (Gain) Loss Reclassified from AOCI into Earnings(1)
Year ended December 31, 2013
Interest rate derivatives	$	278	$	—

(1) No amounts related to the interest rate derivatives were reclassified from AOCI to interest expense during the period.

11. TREASURY STOCK TRANSACTIONS

The Company issued from treasury stock 38,397 and 102,986 shares, net of forfeitures, in 2013 and 2012, respectively, and 5,860 shares in 2011, in conjunction with the exercise of certain employees’ options and grants of restrictive stock, but did not purchase any shares during those years.  The Company also utilized approximately 40,904, 44,474 and 46,830 shares from treasury stock to match employee contributions in the Company’s 401(k) Plan in 2013, 2012 and 2011, respectively.

12. (LOSS) EARNINGS PER COMMON SHARE

Basic net income per common share is based upon the weighted average number of common shares outstanding.  Diluted net income per common share is based upon the weighted average number of common shares outstanding, including the dilutive effect of restricted stock, using the if-converted methods.

The following table shows a reconciliation of the numerators and denominators used in calculating basic and diluted earnings per share.

72

LMI AEROSPACE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except share and per share data)

December 31, 2013

	Year ended December 31,
	2013			2012		2011
Numerators
Net (loss) income	$	(58,485	)	$	16,487	$	16,389
Denominators
Weighted average common shares - basic	12,607,833			11,701,607		11,559,895
Dilutive effect of restricted stock	—			137,575		181,618
Weighted average common shares - diluted	12,607,833			11,839,182		11,741,513
Basic earnings per share	$	(4.64	)	$	1.41	$	1.42
Diluted earnings per share	$	(4.64	)	$	1.39	$	1.40

For the twelve months ended December 31, 2013, 111,976 shares are not included in the calculation of diluted earnings per share, as their inclusion would have been anti-dilutive. These securities could be dilutive in future periods.

13. COMMITMENTS AND CONTINGENCIES

The Company leases certain facilities and equipment under various non-cancelable operating lease agreements that expire at various dates through 2025.  At December 31, 2013, the future minimum lease payments under operating leases with initial non-cancelable terms in excess of one year are as follows:

2014	$	6,909
2015	6,327
2016	5,757
2017	4,997
2018	4,832
Thereafter	22,365
	$	51,187

Rent expense totaled $8,496, $6,789 and $6,546 in 2013, 2012 and 2011, respectively.

The Company has entered into employment agreements with certain members of senior management, the terms of which expire on January 15, 2016 through January 1, 2017.  The terms of these agreements are up to 3 years, include non-compete and non-disclosure provisions, and provide for defined severance payments in the event of termination.

Legal Contingencies

The Company has been named as a defendant in certain pending lawsuits in the normal course of business (the “Pending Lawsuits”). Also, the Company may become the subject of proceedings by the Environmental Protection Agency and Department of Justice as a result of the Waste Water Allegations and by the Environmental Protection Agency and Missouri Department of Natural Resources as a result of the Voluntarily Disclosed Matters related to its Cuba, Missouri facility ("OMT").   It is the policy of management to disclose the amount or range of reasonably possible losses.  In the opinion of management, after consulting with legal counsel, the losses, if any, resulting from the Pending Lawsuits should not have a material effect on the Company’s financial position or results of operations, and the losses, if any, resulting from the Waste Water Allegations and Voluntarily Disclosed Matters cannot be estimated because the actions to be taken, if any, by the relevant government agencies remains uncertain.

The Company believes a proceeding by the Missouri Attorney General is contemplated with respect to the Missouri AG Matter as further disclosed in Item 3 - Legal Proceedings. In the opinion of management, after consulting with legal counsel and based on the discussions the Company has had with the Missouri Attorney General’s office, the Company has established a loss contingency of $167, which represents management’s current estimate of the minimum penalty the Missouri Attorney General is contemplating assessing on the Company.

73

LMI AEROSPACE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except share and per share data)

December 31, 2013

OMT became a subsidiary of LMI as a result of LMI’s acquisition of Valent Aerostructures (“Valent”) in December 2012. The Company believes certain environmental representations set forth in the purchase agreement pursuant to which Valent acquired OMT, and the purchase agreement pursuant to which LMI acquired Valent, provide the Company with certain rights of indemnification with respect to the matters disclosed herein. The Company also has insurance policies that it believes covers various environmental issues at Valent and its subsidiaries, including OMT, and breaches by Valent and OMT of their respective environmental representations and warranties in each of the purchase agreements. As a result, the Company believes its rights of indemnification and insurance coverage may provide for a recovery of some or all of the costs associated with the matters disclosed herein. We cannot provide any assurance, however, that we will ultimately prevail in any claim for indemnification or secure insurance proceeds from our insurance policies.

14. DEFINED CONTRIBUTION PLANS

The Company sponsored three defined contribution plans in 2013:  the LMI Profit Sharing and Savings Plan (the “LMI Plan”), the Valent 401(k) plan the (“Valent Plans”) and the TASS Inc. 401(k) Plan, the (“TASS Plan”).  The LMI Plan covers virtually all of the employees of the Company, except the employees of Valent and TASS, and is a profit sharing plan that allows discretionary profit sharing contributions by the Company.  The LMI Plan also includes a 401(k) component that allows employee deferrals and a discretionary matching contribution component, under which the Company may make contributions based upon a percentage of employee contributions up to a maximum of $1 annually per employee.  Employee deferrals and matching contributions to the LMI Plan are fully vested to the employee immediately upon contribution.  Profit sharing contributions by the Company to the LMI Plan become vested over time and are fully vested after 6 years.  No profit sharing contributions have been made to the LMI Plan for 2013, 2012, or 2011.  The Company recognized costs for matching contributions to the LMI Plan totaling $830, $882, and $806 in 2013, 2012, and 2011, respectively.  In addition, the Company recognized cost for matching contributions for the Valent Plan of $745 in 2013. The Company’s matching contributions to the LMI Plan are determined and approved by the Board of Directors, which can be settled in cash or shares of LMI common stock.  For the years ended December 31, 2013, 2012, and 2011, the Company made matching contributions of 50% for each one dollar contributed by each participant up to a maximum employer matching contribution of $1 per employee.  In 2013, 2012, and 2011 the contribution was made in shares of the Company’s common stock.  The amount of the expense is calculated based on the formula described above and is not impacted by the value of the common stock, as the shares given are based on the dollar amount of the matching contribution.

The Valent Plan covers essentially all full-time employees of Valent.  Under this plan, participants may elect to have a portion of their salary contributed to the respective plans within certain limits.  Under the plan, the Company may contribute a discretionary matching contribution.  The exact percentage, if any, will be determined each year and shall not exceed 3% of a participant’s compensation for the year.

The TASS Plan covers all of the employees of TASS effective on the first day of full-time employment.  Under this plan, participants may elect to have a portion of their salary contributed to the plan within certain limits. Under the plan, the Company may contribute a discretionary profit sharing and / or matching contribution to the plan.  The exact percentage, if any, will be determined each year and is not limited by the plan. Contributions by the Company to the plan become vested over time and are fully vested after 5 years.  The Company has not made any profit sharing contribution or matching contribution to the plan during the period in 2013 subsequent to the acquisition of TASS on August 7, 2012.

15. STOCK-BASED COMPENSATION

On July 7, 2005, the Company’s shareholders approved the LMI Aerospace, Inc. 2005 Long-term Incentive Plan (the “Plan”).  The Plan provides for the grant of non-qualified stock options, incentive stock options, shares of restricted stock, restricted stock units, stock appreciation rights, performance awards and other share-based grants and cash bonus awards to employees and directors.  All share-based grants or awards are subject to a time-based vesting schedule.  The company has only issued restricted stock in the periods presented.

All outstanding stock options were exercisable at December 31, 2010 and were exercised on or before January 19, 2011 at an exercise price of $2.00 per share.  The aggregate intrinsic value of options exercised during the year ended December 31, 2011, based upon the market price on exercise date, was $126.

74

LMI AEROSPACE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except share and per share data)

December 31, 2013

A summary of the activity for non-vested restricted stock awards under the Company’s share-based compensation plans is presented below: 

	2013
Restricted Stock Awards	Shares		Weighted Average Grant Date Fair Value
Outstanding at January 1	189,828		$	18.76
Granted	67,996		21.42
Vested	(35,323	)	17.67
Forfeited	(2,750	)	20.20
Outstanding at December 31	219,751		$	19.74

Common stock compensation expense related to restricted stock awards granted under the Plan was $1,615, $1,494 and $1,254 for the years ended December 31, 2013, 2012 and 2011, respectively. Total unrecognized compensation costs related to non-vested share-based awards granted or awarded under the Plan were $1,857 and $2,071 as of December 31, 2013 and December 31, 2012, respectively.  These costs are expected to be recognized over a weighted average period of 1.2 and 1.6 years as of December 31, 2013 and 2012, respectively. The fair value of restricted stock awards that vested during the years ended December 31, 2013, 2012 and 2011, based on the market price on the vesting date, was $602, $3,199 and $2,149, respectively.

16. INCOME TAXES

The temporary differences between the tax basis of assets and liabilities and their financial reporting amounts that give rise to the deferred income tax assets and liabilities are as follows:

	December 31,
	2013			2012
Current deferred tax assets (liabilities):
Inventories	$	3,871		$	1,888
Accrued vacation	912			705
Stock award	891			522
Obligation under operating leases	733			587
Other	164			137
Net current deferred tax asset	6,571			3,839
Long-term deferred tax assets (liabilities):
Goodwill	20,904			215
Depreciation	(6,178		)	(6,151		)
Long-term contract costs	(4,475		)	(1,941		)
Amortization of intangibles	(3,265		)	(3,646		)
Professional fees	1,852			1,946
Gain on sale of real estate	954			1,022
NOL Carryforwards	1,031			261
Other	525			(177		)
Net long-term deferred tax assets (liabilities)	11,348			(8,471		)
Less: valuation allowance	(18,137		)	(261		)
Net deferred tax assets (liabilities)	$	(218	)	$	(4,893	)

 Based on our current and anticipated future pre-tax earnings, we believe it is more likely than not that our federal and state deferred tax assets, including benefits related to net operating loss carry forwards, will not be realized based on the measurement

75

LMI AEROSPACE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except share and per share data)

December 31, 2013

standards required under ASC 740, Accounting for Income Taxes. We established a valuation allowance of $17,876 and $261 in 2013 and 2012, respectively. The federal net operating losses expire in the year 2033. We evaluated all significant available positive and negative evidence, including the existence of losses in the current year in assessing the need for a valuation allowance.

The Company’s income tax (benefit) provision attributable to income before taxes consisted of the following for the years ended December 31, 2013, 2012 and 2011:

	2013			2012			2011
Federal:
Current	$	(676	)	$	7,926		$	5,658
Deferred	(6,066		)	(109		)	1,149
	(6,742		)	7,817			6,807
State:
Current	120			346			225
Deferred	(357		)	(10		)	104
	(237		)	336			329
(Benefit) provision for income taxes	$	(6,979	)	$	8,153		$	7,136

The reconciliation of income tax computed at the U.S. federal statutory tax rates to income tax expense is as follows:

	2013			2012			2011
Federal taxes	$	(22,912	)	$	8,627		$	8,235
State and local taxes, net of federal benefit	(1,119		)	336			329
Production deduction	—			(530		)	(508		)
Valuation allowance	17,718			—			—
Research and experimental and other tax credits	(634		)	(300		)	(665		)
Other	(32		)	20			(255		)
(Benefit) provision for income taxes	$	(6,979	)	$	8,153		$	7,136

17. RESTRUCTURING

During the fourth quarter of 2013, the Company committed to a restructuring plan that will result in the closure of its Precise Machine facility located in Fort Worth, Texas. As a result, the Company recognized severance expense in year ended December 31, 2013 related to the closure of $453. These restructuring expenses were reflected in the selling, general, and administrative section on a separate line of the Consolidated Statements of Comprehensive Income. This restructuring plan had no material impact on cash flow for the year. The Company expects the restructuring plan to be completed in the second quarter of 2014.

In addition, during the fourth quarter of 2013, the Company reached a separation agreement with key members of Valent Aerostructures, LLC. This agreement resulted in recognition of $2,620 in incremental expenses and a $2,620 unfavorable impact to operating cash flow in the year ended December 31, 2013. These restructuring expenses were reflected on a separate line of the Consolidated Statements of Comprehensive Income.

The following table summarizes the incurred and expected charges associated with these restructuring activities:

76

LMI AEROSPACE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except share and per share data)

December 31, 2013

	Incurred in Year		Remaining		Total Expense
	Ended		Expense to be		Expected to be
	December 31, 2013		Incurred		Incurred
			(In Thousands)
Employee severance arrangement - Precise closure	$	453	$	116	$	569
Employee separation agreement - Valent	2,616		—		2,616
Lease termination costs - Precise closure	—		165		165
Other	4		125		129
Total	$	3,073	$	406	$	3,479

In addition to the restructuring expenses detailed in the table above, the Company expects to incur additional restructuring and other project expenses of approximately $600 primarily associated with the integration of the work previously performed at the Precise Machine facility. The Company expects this reorganization to be completed by the second quarter of 2014.

The following table summarizes restructuring activity related to the Precise Machine facility closure and the Valent Aerostructures, LLC separation agreement:

	Employee
	Severance			Other			Total
				(In Thousands)
Accrued restructuring balance as of December 31, 2012	$	—		$	—		$	—
Accrual additions	3,069			4			3,073
Cash payments	(2,647		)	(4		)	(2,651		)
Accrued restructuring balance as of December 31, 2013	$	422		$	—		$	422

18. CUSTOMER AND SUPPLIER CONCENTRATION

Direct sales to our top three customers, Spirit AeroSystems, Gulfstream Aerospace Corporation, and The Boeing Company accounted for 28.5%, 14.6% and 14.4% of our total revenues in 2013, respectively.  These revenues are reported by both the Aerostructures and Engineering Services segments.  Accounts receivable balances related to these customers were 27.8%, 8.5%, and 5.7%, of the accounts receivable balance at December 31, 2013, respectively.

Direct sales to our top four customers, The Boeing Company, Gulfstream Aerospace Corporation, Spirit AeroSystems and Bombardier accounted for 20.8%, 16.1%, 13.0% and 10.1% of our total revenues in 2012, respectively.  These revenues are reported by both the Aerostructures and Engineering Services segments.  Accounts receivable balances related to these customers were 11.3%, 5.6%, 27.9% and 6.4% of the accounts receivable balance at December 31, 2012, respectively.

Direct sales to our top three customers, The Boeing Company, Gulfstream Aerospace Corporation and Spirt AeroSystems, accounted for 18.3%, 16.5% and 13.7% of our total revenues in 2011, respectively.  These revenues are reported by both the Aerostructures and Engineering Services segments, except Gulfstream Aerospace Corporation, with respect to which revenues are reported by the Aerostructures segment only.

The Company did not have any sales to a foreign country greater than 10.0% of its total sales in 2013, 2012 and 2011, respectively.  The amounts of profitability and identifiable assets attributable to foreign sales activity are not material when

77

LMI AEROSPACE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except share and per share data)

December 31, 2013

compared with revenue, profitability, and identifiable assets attributed to United States domestic operations during 2013, 2012 and 2011.

The Company purchased approximately 58% of the raw materials used in production from two suppliers in 2013. The Company purchased approximately 51% and 59% of the raw materials used in production from two suppliers in 2012 and three suppliers in 2011, respectively.  The Company has increased its capability to integrate components into higher level aerospace assemblies and to provide point of use kitting.  As a result, there was an increase in the use of third party suppliers for the purchase of strategic components.  During 2013 we purchased approximately 24% of the procured parts used in assembled products from two suppliers.  We purchased approximately 49% and 61% of the procured parts used in assembled products from three suppliers in 2012 and four suppliers in 2011, respectively.

19. BUSINESS SEGMENT INFORMATION

The Company is organized into two reportable segments: the Aerostructures segment and the Engineering Services segment.  The Aerostructures segment, which includes the recently acquired Valent, fabricates, machines, finishes, integrates, assembles and kits formed and machined close tolerance aluminum, specialty alloy and composite components for use by the aerospace and defense industries.  The Engineering Services segment, which includes the recently acquired TASS, provides a complete range of design, engineering and program management services supporting aircraft lifecycles from conceptual design, analysis and certification through production support, fleet support and service life extensions via a complete turnkey engineering solution.

Corporate assets, liabilities and expenses related to the Company’s corporate offices, except for interest expense and income taxes, primarily support the Aerostructures segment.  The table below presents information about reported segments on the basis used internally to evaluate segment performance:

	December 31,
	2013			2012			2011
Net sales:
Aerostructures	$	331,654		$	174,983		$	168,145
Engineering Services	83,717			105,607			87,527
Eliminations	(2,814		)	(1,961		)	(1,632		)
	$	412,557		$	278,629		$	254,040
Gross profit:
Aerostructures	$	68,088		$	47,947		$	44,966
Engineering Services	12,145			20,270			14,615
Eliminations	(371		)	91			69
	$	79,862		$	68,308		$	59,650
(Loss) income from operations:
Aerostructures	$	(46,050	)	$	15,484		$	18,334
Engineering Services	(2,699		)	10,480			6,522
Eliminations	(371		)	91			68
	$	(49,120	)	$	26,055		$	24,924
Depreciation, amortization and other non-cash charges:
Aerostructures (1)	$	91,557		$	5,532		$	6,013
Engineering Services (2)	6,754			2,462			2,391
Corporate (3)	$	(7,950	)	$	—		$	—
	$	90,361		$	7,994		$	8,404

78

LMI AEROSPACE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except share and per share data)

December 31, 2013

(1)Includes a $73,528 for goodwill impairment in 2013 and $1,163 charge for impairment of intangible in 2011.

(2)Includes a $4,222 charge for impairment of intangible 2013.

(3)Includes write-off of contingent consideration of $7,950 in 2013.

	December 31,
	2013		2012		2011
Interest expense:
Aerostructures	$	1,054	$	23	$	5
Engineering Services	53		25		12
Corporate (1)	15,855		1,723		652
	$	16,962	$	1,771	$	669

(1) Includes a $580 charge for deferred financing costs for the closed credit facility in 2012.

	December 31,
	2013		2012		2011
Capital expenditures:
Aerostructures (1)	$	23,600	$	18,649	$	8,716
Engineering Services	549		880		1,551
	$	24,149	$	19,529	$	10,267

(1) Includes $411 and $746 for capital leases in 2013 and 2012, respectively.

	December 31,
	2013		2012
Total assets:
Aerostructures	$	405,779	$	446,902
Engineering	74,272		81,062
	$	480,051	$	527,964

20. QUARTERLY FINANCIAL DATA (UNAUDITED)

The results of any single quarter are not necessarily indicative of the Company’s results for the full year.  Earnings per share data is computed independently for each of the periods presented.  As a result, the sum of the earnings per share amounts for the quarter may not equal the total for the year.

79

LMI AEROSPACE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except share and per share data)

December 31, 2013

2013	First (1)		Second (2)		Third		Fourth (3)
Net sales	$	106,066	$	105,465	$	104,656	$	96,370
Gross profit (1)	$	20,054	$	21,841	$	20,418	$	17,549
Net income (loss) (2),(3),(4)	$	1,837	$	4,664	$	2,075	$	(67,061	)
Amounts per common share:
Net income (loss)	$	0.15	$	0.37	$	0.16	$	(5.31	)
Net income (loss) - assuming dilution	$	0.14	$	0.37	$	0.16	$	(5.31	)
2012	First		Second		Third		Fourth (4)
Net sales	$	66,749	$	69,327	$	70,636	$	71,917
Gross profit	$	16,518	$	16,967	$	18,584	$	16,239
Net income (3)	$	4,792	$	5,105	$	5,639	$	951
Amounts per common share:
Net income	$	0.41	$	0.44	$	0.48	$	0.08
Net income - assuming dilution	$	0.41	$	0.43	$	0.48	$	0.08

(1) The first quarter 2013 includes $2,497 of non-recurring inventory step-up related to the Valent acquisition.

(2) The second quarter of 2013 includes a trade name impairment of $4,222 related to D3 Technologies offset by a contingent consideration write-off of $7,950 related to Valent.

(3) The fourth quarter of 2013 includes a goodwill impairment charge of $73,528 related to the Valent acquisition, $17,718 related to income tax valuation allowance, $2,620 related to a separation agreement reached with key members of Valent Aerostructures, LLC. and $453 of restructuring expenses related to the closure of the Precise Machine facility. In addition, Valent gross profit was unfavorably impacted by $955 in cumulative catch-up adjustments, the result of higher levels of indirect costs required to meet customer demand.

(4) The fourth quarter of 2012 includes $4,860 in acquisition fees related to Valent.

21. SUBSEQUENT EVENTS

On January 23, 2014, the Company announced plans to relocate the work performed relative to machining operations at its Savannah, Georgia facility to other locations within the company. The Savannah facility will continue to perform kitting and assembly operations. As a result, severance expense of $66 was recognized in the first quarter of 2014. In addition, the Company expects to recognize approximately $500 in other project costs largely related to accelerated depreciation on capital in the first two quarters of 2014. It is expected that this reorganization will be completed by the end of the second quarter of 2014.

On February 21, 2014, Ronald S. Saks provided notice of his retirement and resignation as Chief Executive Officer and President of the Company, such resignation to be effective as of March 18, 2014. On February 21, 2014, the Board of Directors of the Company (the “Board”) appointed Mr. Saks as the non-executive Chairman of the Board to replace Joseph Burstein, the current Chairman, effective March 18, 2014. Mr. Burstein will continue to serve as a director on the Board. Also on February 21, 2014, on the recommendation of the Compensation Committee, the Board appointed Daniel G. Korte to succeed Mr. Saks as Chief Executive Officer and President of the Company effective March 18, 2014. Mr. Korte shall commence his employment with the Company on March 10, 2014 as Chief Executive Officer-Elect, a non-executive position, and begin serving as Chief Executive Officer and President on March 18, 2014.

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LMI AEROSPACE, INC.

SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

(Dollar amounts in thousands)

December 31, 2013

	Beginning Balance		Charge to Cost/ Expense			Other Charge to Cost/ Expense		Write-offs net of Recoveries			Ending Balance
Reserve for Accounts Receivable
Year ended December 31, 2011	$	253	$	157		$	—	$	(51	)	$	359
Year ended December 31, 2012	$	359	$	(140	)	$	86	$	(18	)	$	287
Year ended December 31, 2013	$	287	$	(27	)	$	—	$	(80	)	$	180
Income Tax Valuation Allowance
Year ended December 31, 2011	$	—	$	—		$	—	$	—		$	—
Year ended December 31, 2012	$	—	$	261		$	—	$	—		$	261
Year ended December 31, 2013	$	261	$	17,876		$	—	$	—		$	18,137

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

None.

ITEM 9A. CONTROLS AND PROCEDURES.

Our management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, carried out an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined by Rules 13a-15(e) and 15d-15(c) promulgated under the Exchange Act, as of December 31, 2013.  Based upon and as of the date of this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that such disclosure controls and procedures were effective to ensure that the information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act (a) is recorded, processed, summarized and reported within the time period specified in the SEC’s rules and forms and (b) is accumulated and communicated to the Company's management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

Report of Management Regarding Internal Control Over Financial Reporting

The management of LMI Aerospace is responsible for the preparation, integrity, and fair presentation of the consolidated financial statements included in this Report.  The consolidated financial statements and notes included in this Report have been prepared in conformity with accounting principles generally accepted in the United States of America and necessarily include some amounts that are based on management’s best estimates and judgments.

In order to produce reliable financial statements, management, under the supervision and with the participation of the Company’s Principal Executive Officer and Principal Financial Officer, is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) promulgated under the Exchange Act.  Management evaluates the effectiveness of internal control over financial reporting and tests for reliability of recorded financial information through a program of ongoing internal audits.  Any system of internal control, no matter how well designed, has inherent limitations, including the possibility that a control can be circumvented or overridden and misstatements due to error or fraud may occur and not be detected.  Also, because of changes in conditions, internal control effectiveness may vary over time.  Accordingly, even an effective system of internal control will provide only reasonable assurance with respect to financial statement preparation.

Management, under the supervision and with the participation of the Company’s Principal Executive Officer and Principal Financial Officer, assessed the Company’s internal control over financial reporting as of December 31, 2013, as required by Section 404 of the Sarbanes-Oxley Act of 2002, based on the criteria for effective internal control over financial reporting described in the “Internal Control-Integrated Framework,” adopted by the Committee of Sponsoring Organizations of the Treadway Commission 1992. Based on this assessment, management believes that, as of December 31, 2013, the Company’s internal control over financial reporting was effective.

PricewaterhouseCoopers LLP, our independent registered public accounting firm, has issued an audit report on our internal control over financial reporting which is included in Item 8.

Changes in Internal Control Over Financial Reporting

No change in our internal control over financial reporting occurred during the three month period ending December 31, 2013, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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ITEM 9B. OTHER INFORMATION.

None.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

The information regarding our directors required by Item 401 of Regulation S-K and the information regarding compliance with Section 16(a) of the Exchange Act required by Item 405 of Regulation S-K will be included in the Company’s definitive proxy statement to be filed pursuant to Regulation 14A for the Company’s 2014 Annual Meeting of Shareholders and is incorporated herein by reference.

The following is a list of our current executive officers, their ages, their positions with us and their principal occupations for at least the past five years.

Name	Age	Position
Ronald S. Saks	70	Chief Executive Officer and Director
Daniel G. Korte	53	Chief Executive Officer-Elect
Richard Johnson	63	President of Engineering Services, a wholly-owned subsidiary of the Company
Lawrence E. Dickinson	54	President of Valent, a wholly-owned subsidiary of the Company
Clifford C. Stebe, Jr.	37	Chief Financial Officer
Robert T. Grah	59	Chief Operating Officer – Aerostructures Segment
Michael J. Biffignani	58	Chief Information Officer
Cynthia G. Maness	63	Vice President of Human Resources and Organizational Development

Set forth below are biographies of each of our executive officers.

Ronald S. Saks.  Mr. Saks has served as our Chief Executive Officer and as a director since 1984.  Prior to his employment with the Company, Mr. Saks was an Executive Vice President with Associated Transports, Inc. for eight years and was a Tax Manager with Peat Marwick Mitchell & Co., now known as KPMG LLP, for the eight years prior thereto. On February 21, 2014, Ronald S. Saks provided notice of his retirement and resignation as Chief Executive Officer and President of the Company, such resignation to be effective as of March 18, 2014.

Daniel G. Korte. Mr. Korte was appointed Chief Executive Officer-Elect of LMI Aerospace, Inc., a non-executive position, on February 21, 2013, and will begin serving as Chief Executive Officer and President on March 18, 2014. Prior to joining the Company, Mr. Korte served as President of Defense Aerospace at Rolls-Royce and, prior thereto, as Vice President and General Manager for Global Strike Systems, a division of the Boeing Military Aircraft business. Mr. Korte began his career at McDonnell Douglas Corporation (now merged into Boeing) in 1985 as an electronics engineer and then held a series of increasingly senior positions, including V-22 Program Manager and Vice President-Supplier Management & Procurement.

Richard Johnson.  Mr. Johnson joined D3 as President in 2010.  Prior to his employment with the Company, Mr. Johnson was Vice President of Engineering with Gulfstream Aerospace where he was employed for 30 years.  Prior to Gulfstream, he was employed at Lockheed-Georgia as a structural engineering specialist.

83

Lawrence E. Dickinson.  Mr. Dickinson was appointed President of Valent in November of 2013. Prior to this appointment, Mr. Dickinson had been the Company's Chief Financial Officer since 1993.  He served as a Financial Analyst and Controller for LaBarge, Inc. from 1984 to 1993 and as a Cost Accountant with Monsanto from 1981 to 1984.

Clifford C. Stebe, Jr.. Mr. Stebe was appointed Chief Financial Officer in November of 2013. Prior to this appointment, Mr. Stebe served as LMI’s Corporate Controller for three years after several years as a Senior Manager at PricewaterhouseCoopers, LLP.

Robert T. Grah.  Mr. Grah was appointed Chief Operating Officer – Aerostructures segment in 2010 and served as Vice President - Central Region from December 2002 until January 2010.  Mr. Grah joined the Company in 1984 as Production Control Manager.  Mr. Grah has held various management positions with us, including Purchasing and Contracts Manager, Maintenance Manager, Facilities Manager and General Manager of LMI Finishing, Inc. until December 2002.  Prior to joining us, Mr. Grah was a supervisor for Associated Transports, Inc. and a manager for Beneficial Finance.

Michael J. Biffignani.   Mr. Biffignani has served as our Chief Information Officer since 1999 and currently is responsible for information technology and the program management office to support readiness of the design-build projects.  He has also served as the Director of Supplier Management and Procurement.  Prior to joining us, Mr. Biffignani held several positions at The Boeing Company in Information Technology and Business Management and prior thereto he served as an engineer and materials manager for the Sony Corporation from 1979 to 1983.

Cynthia G. Maness.  Ms. Maness has been our Vice President of Human Resources and Organizational Development since 2008.  Ms. Maness joined the Company in 1990 as Human Resources Manager for Leonard’s Metal, Inc. Prior to joining us, Ms. Maness served in human resources management roles for the law firm of Peper, Martin, Jensen, Maichel & Hetlage, the City of Ballwin, and Fontbonne College.

The Company has adopted a Code of Business Conduct and Ethics that applies to all of our executive officers and employees and our Board of Directors, including our Chief Executive Officer (our principal executive officer) and Chief Financial Officer (our principal financial and principal accounting officer).

The Board of Directors has established an Audit Committee within the meaning of Section 3(a)(58)(A) of the Exchange Act.  The Audit Committee currently consists of Mr. John M. Roeder (Chairman), Mr. John S. Eulich and Ms. Judith W. Northup, each an independent director in accordance with NASDAQ Rule 5605(a)(2).  In addition, the Board of Directors has determined that each member of the Audit Committee is independent under the standards of Rule 10A-3 promulgated under the Exchange Act and the requirements of NASDAQ Rule 5605(c)(2) and that Mr. Roeder qualifies as an audit committee financial expert under Item 407(d)(5) of Regulation S-K.

ITEM 11. EXECUTIVE COMPENSATION.

The information required by Item 402 of Regulation S-K regarding the compensation of the Company’s directors and executive officers will be included in its definitive proxy statement to be filed pursuant to Regulation 14A for the Company’s 2013 Annual Meeting of Shareholders and is incorporated herein by reference.

The information required by Item 407(e)(4) and (e)(5) of Regulation S-K will be included in the Company’s definitive proxy statement to be filed pursuant to Regulation 14A for the Company’s 2014 Annual Meeting of Shareholders under the captions “Compensation Committee Interlocks and Insider Participation” and “Compensation Committee Report” and is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

The information required by Item 403 of Regulation S-K regarding the security ownership of our beneficial owners and our management and the information required by Item 201(d) of Regulation S-K regarding our equity compensation plans will be included in the Company’s definitive proxy statement to be filed pursuant to Regulation 14A for the Company’s 2014 Annual Meeting of Shareholders and is incorporated herein by this reference.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

The information required by Item 407(a) of Regulation S-K regarding director independence and Item 404 regarding transactions with related persons will be included in the Company’s definitive proxy statement to be filed pursuant to Regulation 14A for the Company’s 2014 Annual Meeting of Shareholders and is incorporated herein by reference.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

The information contained under the caption “Fees Billed by Independent Registered Public Accounting Firm” in the Company’s definitive proxy statement to be filed pursuant to Regulation 14A for the Company’s 2014 Annual Meeting of Shareholders, which involves the election of directors, is incorporated herein by this reference.

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PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

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. Other than Schedule II - Valuation and Qualifying Accounts, 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) See Exhibit Index below.

(c) Other than Schedule II - Valuation and Qualifying Accounts, 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.

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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 17th day of March, 2014.

LMI AEROSPACE, INC.
By:	/s/ Ronald S. Saks
	Ronald S. Saks
	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
Ronald S. Saks	Chief Executive Officer and Director (Principal Executive Officer)	March 17, 2014
/s/ Clifford C. Stebe, Jr.
Clifford C. Stebe, Jr.	Chief Financial Officer	March 17, 2014
/s/ Joseph Burstein
Joseph Burstein	Chairman of the Board and Director	March 17, 2014
/s/ Sanford S. Neuman
Sanford S. Neuman	Assistant Secretary and Director	March 17, 2014
/s/ John M. Roeder
John M. Roeder	Director	March 17, 2014
/s/ John S. Eulich
John S. Eulich	Director	March 17, 2014
/s/ Judith W. Northup
Judith W. Northup	Director	March 17, 2014

87

EXHIBIT INDEX

Exhibit Number	Description
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 April 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 filed as Exhibit 3.3 to the Registrant’s Form 10-K for the fiscal year ended December 31, 2001 and filed April 1, 2002 and incorporated herein by reference.
3.4	Amendment to the Registrant’s Amended and Restated Bylaws filed as Exhibit 3.1 to the Registrant’s Form 8-K filed June 26, 2009 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	Lease Agreement dated December 7, 2005 between Inmobiliaria LA Rumorosa S.A. de C.V.  and Ivemsa S.A. de C.V., including all amendments, for the premises located at A.V. Eucalipto, #2351, Col. Rivera, Modulo Cy D, C.P. 21259, Mexicali, Baja California, Mexico and filed as Exhibit 10.2 to the Registrant’s Form 10-K for the fiscal year ended December 31, 2008 and filed March 16, 2009 and incorporated herein by reference.
10.2	Lease Agreement dated May 19, 2008 between Precise Machine Company and Acquiport DFWIP, Inc. for the premises located at 14813 Trinity Blvd., Fort Worth, Texas and filed as Exhibit 10.3 to the Registrant’s Form 10-K for the fiscal year ended December 31, 2008 and filed March 16, 2009 and incorporated herein by reference.
10.3	Lease Agreement dated May 2, 2006 between LMI Finishing, Inc. and Port Partnership, LLP for the premises located at 5270 N. Skiatook, Catoosa, Oklahoma and filed as Exhibit 10.4 to the Registrant’s Form 10-K for the fiscal year ended December 31, 2008 and filed March 16, 2009 and incorporated herein by reference.
10.4	Lease Agreement dated September 4, 2003 between LMI Aerospace, Inc. and Kole Warehouses, including all amendments, for the premises located at 101 Coleman, Savannah, Georgia and filed as Exhibit 10.5 to the Registrant’s Form 10-K for the fiscal year ended December 31, 2008 and filed March 16, 2009 and incorporated herein by reference, as restated by that certain Restated Lease Agreement dated as of September 14, 2012 between Kole Warehouses, Inc. and LMI Kitting, LLC.
10.5	Lease Agreement dated March 24, 1997, including all amendments, between D3 Technologies, Inc. and H.G. Fenton Company for the premises located at 4838 Ronson Court, San Diego, California and filed as Exhibit 10.6 to the Registrant’s Form 10-K for the fiscal year ended December 31, 2008 and filed March 16, 2009 and incorporated herein by reference.
10.6	Lease Agreement dated June 23, 2005, including all amendments, between D3 Technologies, Inc. and Quadrant Park for the premises located at 8217-8223 44 th Avenue, Mukilteo, Washington and filed as Exhibit 10.7 to the Registrant’s Form 10-K for the fiscal year ended December 31, 2008 and filed March 16, 2009 and incorporated herein by reference.
10.7	Lease Agreement dated February 13, 2007 between LMI Finishing, Inc. and Angelo Gordon, successor in interest to CIT CRE LLC, for the premises located at 2104 N. 170 th St. East, Tulsa, Oklahoma and filed as Exhibit 10.8 to the Registrant’s Form 10-K for the fiscal year ended December 31, 2008 and filed March 16, 2009 and incorporated herein by reference.

88

10.8*	Master Agreement between the Registrant and Aviation Partners Boeing, LLC, dated October 25, 2007 filed as Exhibit 10.9 to the Registrant’s Form 10-K for the fiscal year ended December 31, 2008 and filed March 16, 2009 and incorporated herein by reference.
10.9*	Purchase Order Number 801538 as Master Agreement between the Registrant and Vought Aircraft Industries, Inc. filed as Exhibit 10.10 to the Registrant’s Form 10-K for the fiscal year ended December 31, 2008 and filed March 16, 2009 and incorporated herein by reference.
10.10	Lease Agreement dated May 6, 1997 between the Registrant and Victor Enterprises, LLC, including all amendments, for the premises located at 101 Western Avenue S., Auburn, Washington previously filed as Exhibit 10.10 to the Form S-1/A and incorporated herein by reference.
10.11	Lease Agreement dated February 1, 1995 between the Registrant and RFS Investments for the premises located at 2621 West Esthner Court, Wichita, Kansas previously filed as Exhibit 10.11 to the Form S-1/A and incorporated herein by reference.
10.12+	Profit Sharing and Savings Plan and Trust, restated effective January 1, 2009, including amendments previously filed as Exhibit 10.12 to the Form S-1/A and incorporated herein by reference.
10.13	Business Reformation Agreement between Leonard’s Metal, Inc. and Lockheed Martin Aeronautics Company dated September 21, 2001 previously filed as Exhibit 10.1 to the Registrant’s Form 10-Q filed November 14, 2001 and incorporated by reference..
10.14	Lease Agreement dated April 2, 2001 between Peter Holz and Anna L. Holz, Trustees of the Peter and Anna L. Holz Trust dated 2/8/89, including all amendments, 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 (now Tempco Engineering, Inc.) for the premises located at 11011-11021 Olinda Street, Sun Valley, California previously filed as Exhibit 10.27 to the Registrant’s Form 10-K for the fiscal year ended December 31, 2001 filed April 1, 2002 and incorporated herein by reference.
10.15	Lease Agreement dated April 2, 2001 between Tempco Engineering, Inc. and Metal Corporation for the premises located at 8866 Laurel Canyon Blvd., Sun Valley, California previously filed as Exhibit 10.28 to the Registrant’s Form 10-K for the fiscal year ended December 31, 2001 filed April 1, 2002 and incorporated herein by reference.
10.16	Lease Agreement between Versaform Corp. and Nonar Enterprises, including all amendments, dated September 12, 2003 for the premises located at 1345 Specialty Drive Suites A-E, 1391 Specialty Drive Suite B, 1351 Specialty Drive and 1377 Specialty Drive, Suites A, B, and C, Vista, California previously filed as Exhibit 10.1 to the Registrant’s Form 10-Q filed November 14, 2003 and incorporated herein by reference.
10.17+	LMI Aerospace, Inc. 2005 Long-Term Incentive Plan, approved and adopted by shareholders of LMI Aerospace, Inc. on July 7, 2005, to enable LMI Aerospace, Inc. to provide long-term incentives to those directors, officers, employees and other individuals with significant responsibility for, or potential impact on, the success and growth of LMI Aerospace, Inc. and its subsidiaries, divisions and affiliated businesses, previously filed as Exhibit 10.1 in the Registrant’s Form 8-K filed July 13, 2005 and incorporated herein by reference.
10.18	General Terms Agreement between Spirit AeroSystems, Inc. (Tulsa Facility) and LMI Aerospace, Inc. dated October 14, 2005 previously filed as Exhibit 10.1 to the Registrant’s Form 10-Q filed May 18, 2006 and incorporated herein by reference.
10.19	Special Business Provisions between Spirit AeroSystems, Inc. and LMI Aerospace, Inc. dated April 19, 2006 previously filed as Exhibit 10.2 to the Registrant’s Form 10-Q filed May 18, 2006 and incorporated herein by reference.
10.20	Lease Agreement between Leonard’s Metal, Inc. and Welsh Fountain Lakes, L.L.C., including all amendments dated June 9, 2006, for the premises located at 401-411 Fountain Lakes Blvd., St. Charles, Missouri previously filed as Exhibit 10.1 to the Registrant’s Form 8-K filed June 15, 2006 and incorporated herein by reference.

89

10.21	Memorandum of Agreement effective as of December 22, 2010 between LMI Aerospace, Inc. and Gulfstream Aerospace Corporation
10.22	Lease Agreement between Leonard’s Metal, Inc. and Angelo Gordon, successor in interest to CIT CRE LLC, dated as of December 28, 2006, including all amendments, for the premises located at 2629-2635 Esthner Court, Wichita, Kansas, 3600 Mueller Road, St. Charles, Missouri, and 3030-3050 North Highway 94, St. Charles, Missouri previously filed as Exhibit 10.3 to the Registrant’s Form 8-K filed January 3, 2007 and incorporated herein by reference.
10.23.1	Credit Agreement dated as of December 28, 2012, among the Registrant, certain subsidiaries of the Registrant, the lenders party thereto, Royal Bank of Canada, as Administrative Agent, and Wells Fargo Bank, National Association, as Syndication Agent, previously filed as Exhibit 10.1 to the Registrant’s Form 8-K filed January 4, 2013 and incorporated herein by reference.
10.23.2	Amendment No. 1 dated as of February 5, 2013, to the Credit Agreement and Other Loan Documents dated as of December 28, 2012, among the Registrant, certain subsidiaries of the Registrant, the lenders party thereto, Royal Bank of Canada, as Administrative Agent, and Wells Fargo Bank, National Association, as Syndication Agent, previously filed as Exhibit 10.1 to the Registrant’s Form 8-K/A filed February 7, 2013 and incorporated herein by reference.
10.23.3	Amendment No.2 to Credit Agreement, dated as of August 22, 2013, by and among the Registrant, the Lenders part thereto and Royal Bank of Canada, as Administrative Agent for the Lenders, previously filed as Exhibit 10.1 to the Registrant's Form 8-K/A filed August 22, 2013 and incorporated herein by reference.
10.24	Lease Agreement dated January 16, 2009 between Integrated Holdings, LLC and Integrated Technologies, Inc. for the premises located at 1910 Merrill Creek Parkway, Everett, WA 98203 and filed as Exhibit 10.2 of the Registrant’s Form 10-Q filed May 11, 2009 and incorporated herein by reference.
10.25	Lease agreement dated August 19, 2011 between D3 Technologies Inc. and JLM & Associates, LLC for the premises located at 1045 Keys Drive, Greenville, South Carolina, 29615.
10.26.1	Membership Interest Purchase Agreement, dated as of December 5, 2012, among the Registrant, Valent Aerostructures, LLC, and the members of Valent Aerostructures, LLC, previously filed as Exhibit 2.1 to the Registrant’s Form 8-K filed December 6, 2012 and incorporated herein by reference.
10.26.2	Amendment to Escrow Agreement dated as of October 31, 2013, by and among Charlie Newell, the Registrant and Deutsche Bank National Trust Company filed as Exhibit 10.2 to the Registrant's Form 8-K filed November 4, 2013 and incorporated herein by reference.
10.27	Lease agreement dated July 15, 2012 between the City of Coweta and Accu-Tec Enterprises, Ltd., regarding the real property commonly referred to as 26730 East 111th Street South, Coweta, Oklahoma including the Estoppel Certificate, dated November 9, 2009, executed by the city of Coweta.
10.28	Lease agreement dated April 1, 2012 between City of Fredonia, KS and Valent Acrostructures, LLC
10.29	Lease, dated October 11, 2001, as amended by the First Amendment to Lease, dated July 17, 2003, the Second Amendment to Lease, dated November 15, 2003, the Third Amendment to Lease, dated December 31, 2008, the Fourth Amendment to Lease, dated March 1, 2010, and the Fifth Amendment to Lease, dated May 24, 2011, between College Crossing Associates, LLC (as successor to Welsh Lenexa II, LLC) and Valent Aerostructures-Lenexa, LLC (as successor to CT Systems, L.LC. as successor to Cable-Tech Industries, L.L.C.), regarding certain real property located at 11064 Strang Line Road, Lenexa, Kansas.
10.30	Sublease Agreement dated September 3, 2010 between Washington Civic Industrial Corp. and Valent Aerostructures, LLC, regarding certain real property located at 6325 Avantha Drive, Washington, Missouri 63090.

90

10.31	General contract provisions of Spirit Aerosystems, Inc and Master Order Agreements, Special Business Provisions, Customer Specific Supplemental Terms and other contracts that contain additional general terms between Spirit Aerosystems, Inc and Valent Aerostructures, LLC or a subsidiary thereof.
10.32	Mutual Release and Settlement Agreement made and entered into on the 31st day of October 2013 by and among Charles M. Newell, as the Sellers’ Representative, for and on behalf of the former members of Valent Aerostructures, LLC, on the one hand, and the Registrant, on the other hand., filed as Exhibit 10.1 to the Registrant’s Form 8-K filed November 4, 2013 and incorporated herein by reference.
10.33	Independent Contractor Agreement dated as of October 31, 2013 by and between the Registrant and Charles M. Newell filed as Exhibit 10.3 to the Registrant’s Form 8-K filed November 4, 2013 and incorporated herein by reference.
10.34	Independent Contractor Agreement dated as of October 31, 2013 by and between the Registrant and Henry H. Newell filed as Exhibit 10.4 to the Registrant’s Form 8-K filed November 4, 2013 and incorporated herein by reference.
10.35	Resignation Agreement and General Release dated as of October 31, 2013 by and between Charles M. Newell and the Registrant filed as Exhibit 10.5 to the Registrant’s Form 8-K filed November 4, 2013 and incorporated herein by reference
10.36	Resignation Agreement and General Release dated as of October 31, 2013 by and between Henry H. Newell and the Registrant filed as Exhibit 10.6 to the Registrant’s Form 8-K filed November 4, 2013 and incorporated herein by reference.
10.37+	Employment Agreement dated as of February 21, 2014, by and between the Registrant and Daniel G. Korte, filed as Exhibit 10.1 to the Registrant’s Form 8-K filed February 26, 2014 and incorporated herein by reference.
10.38+	Employment Agreement dated as of February 25, 2014, by and between the Registrant and Michael Biffignani, filed as Exhibit 10.2 to the Registrant’s Form 8-K filed February 26, 2014 and incorporated herein by reference.
10.39+	Employment Agreement dated as of February 25, 2014, by and between the Registrant and Lawrence Dickinson, filed as Exhibit 10.3 to the Registrant’s Form 8-K filed February 26, 2014 and incorporated herein by reference.
10.40+	Employment Agreement dated as of February 25, 2014, by and between the Registrant and Robert Grah, filed as Exhibit 10.4 to the Registrant’s Form 8-K filed February 26, 2014 and incorporated herein by reference.
10.41+	Employment Agreement dated as of February 25, 2014, by and between the Registrant and Richard L. Johnson, filed as Exhibit 10.5 to the Registrant’s Form 8-K filed February 26, 2014 and incorporated herein by reference.
10.42+	Employment Agreement dated as of February 25, 2014, by and between the Registrant and Cynthia G. Maness, filed as Exhibit 10.6 to the Registrant’s Form 8-K filed February 26, 2014 and incorporated herein by reference.

91

10.43+	Employment Agreement dated as of February 25, 2014, by and between the Registrant and Clifford Stebe, Jr., filed as Exhibit 10.7 to the Registrant’s Form 8-K filed February 26, 2014 and incorporated herein by reference
14	Code of Business Conduct and Ethics, filed as Exhibit 14.1 to the Registrant’s Form 10-K/A for the fiscal year ended December 31, 2003 filed May 6, 2004 and incorporated herein by reference.
21.1	List of Subsidiaries of the Registrant filed herewith.
23.1	Consent of PricewaterhouseCoopers LLP filed herewith.
31.1	Rule 13a-14(a) Certification of the Chief Executive Officer filed herewith.
31.2	Rule 13a-14(a) Certification of the Chief Financial Officer filed herewith.
32.1	Certification of the Chief Executive Officer, pursuant to 18 U.S.C Section 1350 as adopted pursuant to Section 906 of Sarbanes-Oxley Act of 2002 filed herewith.
32.2	Certification of the Chief Financial Officer, pursuant to 18 U.S.C Section 1350 as adopted pursuant to Section 906 of Sarbanes-Oxley Act of 2002 filed herewith.
101.ins	Instance Document
101.sch	XBRL Taxonomy Extension Schema Document
101.cal	XBRL Taxonomy Extension Calculation Linkbase Document
101.def	XBRL Taxonomy Extension Definition Linkbase Document
101.lab	XBRL Taxonomy Extension Label Linkbase Document
101.pre	XBRL Taxonomy Extension Presentation Linkbase Document

+ Management contract or compensatory plan or arrangement required to be filed as exhibit to this report.

* The Company has received confidential treatment of the redacted portions of this exhibit pursuant to Rule  24b-2, under the Exchange Act and has separately filed a complete copy of this exhibit with the SEC.

92

EX-21

Subsidiaries of Registrant

Subsidiary	Jurisdiction
LMI Finishing, Inc.	Missouri
LMI Kitting, LLC	Delaware
Leonard’s Metal, Inc.	Missouri
Integrated Technologies, Inc.	Washington
Precise Machine Company	Missouri
Tempco Engineering, Inc.	Missouri
Versaform Corporation	California
D3 Technologies, Inc.	California
TASS Holdings, Inc.	Delaware
TASS, Inc.	Washington
TASS European Union Ltd.	United Kingdom
TASS Asia Pacific Pty. Ltd.	Australia
Valent Aerostructures, LLC	Delaware
Valent Aerostructures - Wichita, LLC	Delaware
Valent Aerostructures - Tulsa, LLC	Delaware
Valent Aerostructures - Washington, LLC	Delaware
Valent Aerostructures - Lenexa, LLC	Kansas
Valent Aerostructures - St. Louis, Inc.	Missouri
Ozark Mountain Technologies, LLC	Delaware

EX-23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (No. 333-126768) and Form S-3 (No. 333-170454) of LMI Aerospace, Inc. of our report dated March 17, 2014, relating to the financial statements, financial statement schedule and the effectiveness of internal control over financial reporting, which appears in this Form 10-K.

/s/ PricewaterhouseCoopers LLP

Saint Louis, Missouri

March 17, 2014

EX-31.1

Exhibit 31.1

CERTIFICATIONS

I, Ronald S. Saks, certify that:

1.I have reviewed this annual report on Form 10-K of LMI Aerospace, Inc.;

2.Based on my knowledge, this 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 report;

3.Based on my knowledge, the financial statements, and other financial information included in this 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 report:

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 report is being prepared;

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s independent certified public accountants and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 17, 2014	/s/ Ronald S. Saks
	Ronald S. Saks
	Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATIONS

I, Clifford C. Stebe, Jr. certify that:

1.I have reviewed this annual report on Form 10-K of LMI Aerospace, Inc.;

2.Based on my knowledge, this 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 report;

3.Based on my knowledge, the financial statements, and other financial information included in this 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 report:

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 report is being prepared;

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s independent certified public accountants and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 17, 2014	/s/ Clifford C. Stebe, Jr.
	Clifford C. Stebe, Jr.
	Chief Financial Officer

EX-32.1

EXHIBIT 32.1

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 for the year ended December 31, 2013, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned officers of the Company, does hereby 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 Annual 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 results of operations of the Company.

Date: March 17, 2014	/s/ Ronald S. Saks
	Ronald S. Saks
	Chief Executive Officer
	(Principal Executive Officer)

A signed original of this written statement required by Section 906 has been provided to LMI Aerospace, Inc. and will be retained by LMI Aerospace, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

EXHIBIT 32.1

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 for the year ended December 31, 2013, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned officers of the Company, does hereby 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 Annual 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 results of operations of the Company.

Date: March 17, 2014	/s/ Clifford C. Stebe, Jr.
	Clifford C. Stebe, Jr.
	Chief Financial Officer
	(Principal Financial Officer and Principal Accounting Officer)

A signed original of this written statement required by Section 906 has been provided to LMI Aerospace, Inc. and will be retained by LMI Aerospace, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

XML

LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS (Tables)

12 Months Ended

Dec. 31, 2013

Debt Disclosure [Abstract]

Long-term debt

Long-term debt and capital lease obligations consist of the following:

	December 31,
	2013		2012
Revolver under credit agreement, variable	$	36,000	$	6,236
Term loan under credit agreement, variable	222,750		225,000
Missouri IRBs at fixed rate of 2.80% at December 31, 2013	7,756		8,113
Capital Leases, at fixed rates ranging from 2.04% to 7.73% at December 31, 2013 and 3.00% to 7.73% at December 31, 2012	14,572		15,316
Notes payable, principal and interest payable monthly, at fixed rates, up to 3.60% and 3.25% at December 31, 2013 and 2012, respectively	9,533		6,034
Total debt	290,611		260,699
Less current installments	5,242		5,632
Total long-term debt and capital lease obligations	$	285,369	$	255,067

Five year maturities of long-term debt

The long-term debt and capital lease payment obligations including the current portion thereof required in each of the next five years and thereafter are as follows:

Year ending December 31,	Long-Term Debt (1)		Capital Leases
2014	$	4,079	$	1,715
2015	4,112		1,946
2016	3,536		1,915
2017	41,390		1,963
2018	214,982		2,223
Thereafter	7,940		7,672
Total	276,039		17,434
Less:  imputed interest	—		(2,862		)
Total	$	276,039	$	14,572

(1) Includes principal only

XML

ACCOUNTS RECEIVABLE NET (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Accounts Receivable, Net [Abstract]
Trade receivables	$ 63,804	$ 50,876
Unbilled revenue	7,256	12,372
Other receivables	1,973	6,198
Accounts receivable, gross	73,033	69,446
Less: Allowance for doubtful accounts	(180)	(287)
Accounts receivable, net	$ 72,853	$ 69,159

XML

ACCOUNTING POLICIES (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013		Dec. 31, 2006	Dec. 28, 2006
Accounting Policies [Abstract]
Revenue recognition, percentage of revenue subject to guidance in ASC 605-15 and 605-20, minimum	80.00%
Revenue recognition, percentage of revenue subject to guidance in ASC 605-15 and 605-20, maximum	90.00%
Percentage of revenue associated with claims and unpriced change orders	0.50%
Sell and lease back of real estate properties			$ 10,250
Amount of the sale price in excess of book value				4,242
Impairment loss on goodwill	$ 73,528	[1]
Lease term of property			18 years

[1] During the fourth quarter of 2013, the Company performed its annual impairment analysis of goodwill. As a result of this analysis, the goodwill related to the Valent acquisition was deemed impaired, and a $73,528 impairment charge was recorded in the Consolidated Statements of Operations for the year ended December 31, 2013.

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DEFINED CONTRIBUTIONS PLANS (Details) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Defined Benefit Plan Disclosure [Line Items]
Number of company sponsored defined contribution plans	3
LMI Profit Sharing and Savings Plan [Member]
Defined Benefit Plan Disclosure [Line Items]
Maximum annual contribution per employee amount	$ 1,000
Defined contribution plan vesting period	6 years
Recognized cost for matching contributions	830,000	882,000	806,000
Employer matching contribution percentage (in hundredths)	50.00%	50.00%	50.00%
Valent Plans [Member]
Defined Benefit Plan Disclosure [Line Items]
Recognized cost for matching contributions	$ 745,000
Employer matching contribution threshold	3.00%
TASS Plan [Member]
Defined Benefit Plan Disclosure [Line Items]
Defined contribution plan vesting period	5 years

XML

INVENTORIES (Details) (USD $)	Dec. 31, 2013		Dec. 31, 2012
Inventories [Abstract]
Raw materials	$ 17,099,000		$ 14,946,000
Work in progress	21,605,000		20,012,000
Manufactured and purchased components	21,675,000		18,898,000
Finished goods	40,572,000		30,792,000
Product inventory	100,951,000		84,648,000
Capitalized contract costs	12,227,000	[1]	5,391,000	[1]
Total inventories	113,178,000		90,039,000
Loss on Long-term Production Contracts [Member]
Inventories [Abstract]
Loss reserve	(2,057)
Correction of Inventory Classification [Member]
Inventories [Abstract]
Raw materials			(5,505,000)
Manufactured and purchased components			$ 5,505,000

[1] 2013 includes a reduction to inventory of $2,057 related to a loss reserve on a long-term production contract.

XML

QUARTERLY FINANCIAL DATA (UNAUDITED), ACQUISITION-RELATED (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended					3 Months Ended						12 Months Ended
	Dec. 31, 2013		Dec. 31, 2012		Dec. 31, 2011	Dec. 31, 2013 Precise Machine [Member]	Jun. 30, 2013 D3 Technologies, Inc. [Member] Trademarks [Member]	Dec. 31, 2013 Valent Aerostructures, LLC [Member]	Jun. 30, 2013 Valent Aerostructures, LLC [Member]	Mar. 31, 2013 Valent Aerostructures, LLC [Member]	Dec. 31, 2012 Valent Aerostructures, LLC [Member]	Dec. 31, 2013 Valent Aerostructures, LLC [Member]
Business Acquisition [Line Items]
Non-recurring inventory step-up										$ 2,497
Impairment loss on intangible assets	4,222	[1],[2]	0	[1]	1,163		4,222
Contingent consideration write-off	7,950		0		1,235				7,950
Impairment loss on goodwill	73,528	[3]						73,528
Valuation allowance	17,718		0		0
Restructuring cost incurred in period						453		2,620
Unfavorable adjustments								955
Acquisition fees	$ 247		$ 5,362		$ 0						$ 4,860	$ 5,107

[1] The fair values of intangibles relating to the 2012 acquisitions of TASS and Valent were determined by third parties in connection with the purchase and recorded at those values.

[2] During the second quarter of 2013, a triggering event occurred when the Company commenced an initiative to rebrand its core engineering business. Under this initiative, the D3 Technologies name became obsolete and the $4,222 indefinite lived intangible asset related to that trade name was deemed to be fully impaired and a loss was recorded in the Consolidated Statements of Operations for the year ended December 31, 2013

[3] During the fourth quarter of 2013, the Company performed its annual impairment analysis of goodwill. As a result of this analysis, the goodwill related to the Valent acquisition was deemed impaired, and a $73,528 impairment charge was recorded in the Consolidated Statements of Operations for the year ended December 31, 2013.

XML

BUSINESS SEGMENT INFORMATION (Tables)

12 Months Ended

Dec. 31, 2013

Segment Reporting [Abstract]

Information about reported segments on the basis used internally to evaluate segment performance

The table below presents information about reported segments on the basis used internally to evaluate segment performance:

	December 31,
	2013			2012			2011
Net sales:
Aerostructures	$	331,654		$	174,983		$	168,145
Engineering Services	83,717			105,607			87,527
Eliminations	(2,814		)	(1,961		)	(1,632		)
	$	412,557		$	278,629		$	254,040
Gross profit:
Aerostructures	$	68,088		$	47,947		$	44,966
Engineering Services	12,145			20,270			14,615
Eliminations	(371		)	91			69
	$	79,862		$	68,308		$	59,650
(Loss) income from operations:
Aerostructures	$	(46,050	)	$	15,484		$	18,334
Engineering Services	(2,699		)	10,480			6,522
Eliminations	(371		)	91			68
	$	(49,120	)	$	26,055		$	24,924
Depreciation, amortization and other non-cash charges:
Aerostructures (1)	$	91,557		$	5,532		$	6,013
Engineering Services (2)	6,754			2,462			2,391
Corporate (3)	$	(7,950	)	$	—		$	—
	$	90,361		$	7,994		$	8,404

(1)Includes a $73,528 for goodwill impairment in 2013 and $1,163 charge for impairment of intangible in 2011.

(2)Includes a $4,222 charge for impairment of intangible 2013.

(3)Includes write-off of contingent consideration of $7,950 in 2013.

	December 31,
	2013		2012		2011
Interest expense:
Aerostructures	$	1,054	$	23	$	5
Engineering Services	53		25		12
Corporate (1)	15,855		1,723		652
	$	16,962	$	1,771	$	669

(1) Includes a $580 charge for deferred financing costs for the closed credit facility in 2012.

	December 31,
	2013		2012		2011
Capital expenditures:
Aerostructures (1)	$	23,600	$	18,649	$	8,716
Engineering Services	549		880		1,551
	$	24,149	$	19,529	$	10,267

(1) Includes $411 and $746 for capital leases in 2013 and 2012, respectively.

	December 31,
	2013		2012
Total assets:
Aerostructures	$	405,779	$	446,902
Engineering	74,272		81,062
	$	480,051	$	527,964

XML

ASSETS AND LIABILITIES MEASURED AT FAIR VALUE (Tables)

12 Months Ended

Dec. 31, 2013

Fair Value Disclosures [Abstract]

Valuation methodologies used for assets measured at fair value

The asset or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.  The valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.  There have been no changes in the methodologies used at December 31, 2013.  There were no transfers between levels during 2013 and 2012.

									2013
	Assets and Liabilities at Fair Value								Total
	as of December 31, 2013								Gains
	Total		(Level 1)		(Level 2)		(Level 3)		(Losses)
Recurring Fair Value Measurement:
Asset:
Interest rate derivatives (1)	$	18	$	—	$	18	$	—	$	—
Liabilities:
Interest rate derivatives (1)	$	392	$	—	$	392	$	—	$	—
Non-recurring Fair Value Measurements:
Asset:
Intangible assets, net (3,4)	$	55,465	$	—	$	—	$	55,465	$	(4,222	)
Goodwill (5)	$	113,223	$	—	$	—	$	113,223	$	(73,528	)
Liabilities
Contingent Consideration (2)	—		$	—	—		$	—	$	7,950
									$	(69,800	)

									2012
	Assets at Fair Value								Total
	as of December 31, 2012								Gains
	Total		(Level 1)		(Level 2)		(Level 3)		(Losses)
Recurring Fair Value Measurement:
Contingent Consideration (2)	$	7,950	$	—	$	—	$	7,950	$	—
Non-recurring Fair Value Measurements:
Intangible assets, net (4)	$	48,793	—		—		48,793		$	—
									—

(1) The fair values of interest rate derivatives are the amount the company would receive or pay to terminate the contracts, considering quoted market prices of comparable agreements. (Also see Note 10 to the Consolidated Financial Statements)

(2) The Monte Carlo simulation was used with a normal probability distribution of the best estimate of EBITDA for 2013 to approximate fair value. At June 30, 2013, the EBITDA target was not expected to occur and, as such, the $7,950 of contingent consideration was deemed unlikely to be paid, and a benefit was recorded on a separate line in the Condensed Consolidated Statements of Operations for the year ended December 31, 2013.

(3) During the second quarter of 2013, a triggering event occurred when the Company commenced an initiative to rebrand its core engineering business. Under this initiative, the D3 Technologies name became obsolete and the $4,222 indefinite lived intangible asset related to that trade name was deemed to be fully impaired and a loss was recorded in the Consolidated Statements of Operations for the year ended December 31, 2013

(4) The fair values of intangibles relating to the 2012 acquisitions of TASS and Valent were determined by third parties in connection with the purchase and recorded at those values.

(5) During the fourth quarter of 2013, the Company performed its annual impairment analysis of goodwill. As a result of this analysis, the goodwill related to the Valent acquisition was deemed impaired, and a $73,528 impairment charge was recorded in the Consolidated Statements of Operations for the year ended December 31, 2013.

XML

SUBSEQUENT EVENTS (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended				3 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2013 Employee Severance [Member]	Mar. 17, 2014 Relocation of Machining Operations from Savannah Facility [Member] Employee Severance [Member] Subsequent Event [Member]	Mar. 17, 2014 Relocation of Machining Operations from Savannah Facility [Member] Accelerated Depreciation [Member] Subsequent Event [Member]
Subsequent Event [Line Items]
Restructuring expense	$ 3,073	$ 0	$ 0	$ 3,069	$ 66
Remaining expense expected to be incurred	$ 406					$ 500

XML

RESTRUCTURING (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2013
Restructuring Cost and Reserve [Line Items]
Incurred in year ending December 31, 2013		$ 3,073
Remaining expense expected to be incurred		406
Total expense expected to be incurred		3,479
Unfavorable impact to operating cash flow		2,651
Precise Machine [Member]
Restructuring Cost and Reserve [Line Items]
Restructuring cost incurred in period	453
Remaining expense expected to be incurred		600
Valent Aerostructures, LLC [Member]
Restructuring Cost and Reserve [Line Items]
Restructuring cost incurred in period		2,620
Unfavorable impact to operating cash flow		2,620
Employee Severance [Member]
Restructuring Cost and Reserve [Line Items]
Unfavorable impact to operating cash flow		2,647
Employee Severance [Member] | Precise Machine [Member]
Restructuring Cost and Reserve [Line Items]
Incurred in year ending December 31, 2013		453
Remaining expense expected to be incurred		116
Total expense expected to be incurred		569
Employee Severance [Member] | Valent Aerostructures, LLC [Member]
Restructuring Cost and Reserve [Line Items]
Incurred in year ending December 31, 2013		2,616
Remaining expense expected to be incurred		0
Total expense expected to be incurred		2,616
Lease Termination [Member] | Precise Machine [Member]
Restructuring Cost and Reserve [Line Items]
Incurred in year ending December 31, 2013		0
Remaining expense expected to be incurred		165
Total expense expected to be incurred		165
Other [Member]
Restructuring Cost and Reserve [Line Items]
Incurred in year ending December 31, 2013		4
Remaining expense expected to be incurred		125
Total expense expected to be incurred		129
Unfavorable impact to operating cash flow		4
Selling, General and Administrative Expenses [Member] | Employee Severance [Member] | Precise Machine [Member]
Restructuring Cost and Reserve [Line Items]
Restructuring cost incurred in period		$ 453

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GOODWILL AND INTANGIBLE ASSETS, GOODWILL (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended														3 Months Ended	12 Months Ended
	Dec. 31, 2013		Dec. 31, 2012	Dec. 31, 2013 Aerostructures [Member]	Dec. 31, 2012 Aerostructures [Member]	Dec. 31, 2013 Engineering Services [Member]	Dec. 31, 2012 Engineering Services [Member]	Dec. 31, 2013 D3 Technologies, Inc. [Member]	Dec. 31, 2012 D3 Technologies, Inc. [Member]	Dec. 31, 2013 Integrated Technologies, Inc. [Member]	Dec. 31, 2012 Integrated Technologies, Inc. [Member]	Dec. 31, 2013 TASS, Inc. [Member]	Dec. 31, 2012 TASS, Inc. [Member]	Aug. 07, 2012 TASS, Inc. [Member]	Dec. 31, 2013 Valent Aerostructures, LLC [Member]	Dec. 31, 2013 Valent Aerostructures, LLC [Member]	Dec. 31, 2012 Valent Aerostructures, LLC [Member]	Dec. 28, 2012 Valent Aerostructures, LLC [Member]	Dec. 31, 2013 Valent Aerostructures, LLC [Member] Aerostructures [Member]	Dec. 31, 2012 Valent Aerostructures, LLC [Member] Aerostructures [Member]	Dec. 31, 2013 Unrecorded Deferred Tax Liability [Member] Restatement Adjustment [Member] D3 Technologies, Inc. [Member]
Goodwill [Line Items]
Gross Goodwill	$ 192,404		$ 184,967	$ 141,663	$ 135,431	$ 50,741	$ 49,536
Accumulated impairment loss	(79,181)		(5,653)	(79,181)	(5,653)	0	0
Net Goodwill	113,223		179,314	62,482	129,778	50,741	49,536	44,428	42,908	6,194	6,194	6,313	6,628	6,313			123,584	129,816	56,288	123,584	1,520
Adjustment to loss provision on long-term production contract															5,267	5,267
Adjustment to fixed assets during measurement period																482
Adjustment to working capital																1,219
Impairment loss on goodwill	73,528	[1]													73,528
Deferred tax liability attributable to error correction	$ 3,265		$ 3,646																		$ 1,520

[1] During the fourth quarter of 2013, the Company performed its annual impairment analysis of goodwill. As a result of this analysis, the goodwill related to the Valent acquisition was deemed impaired, and a $73,528 impairment charge was recorded in the Consolidated Statements of Operations for the year ended December 31, 2013.

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BUSINESS SEGMENT INFORMATION (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended												12 Months Ended
	Dec. 31, 2013		Sep. 30, 2013	Jun. 30, 2013		Mar. 31, 2013		Dec. 31, 2012		Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2013 segment		Dec. 31, 2012		Dec. 31, 2011
Segment Reporting [Abstract]
Number of reportable segments													2
Information about reported segments on the basis used internally to evaluate segment performance [Abstract]
Net sales	$ 96,370	[1]	$ 104,656	$ 105,465	[2]	$ 106,066	[3]	$ 71,917	[4]	$ 70,636	$ 69,327	$ 66,749	$ 412,557		$ 278,629		$ 254,040
Gross profit	17,549	[1]	20,418	21,841	[2]	20,054	[3]	16,239	[4]	18,584	16,967	16,518	79,862		68,308		59,650
(Loss) income from operations													(49,120)		26,055		24,924
Depreciation, amortization and other non-cash charges													90,361		7,994		8,404
Interest expense													16,962		1,771		669
Capital expenditures													24,149		19,529		10,267
Total assets	480,051							527,964					480,051		527,964
Impairment loss on goodwill													73,528	[5]
Impairment loss on intangible assets													4,222	[6],[7]	0	[6]	1,163
Deferred financing costs															580
Equipment acquired under capital lease													411		746		0
Aerostructures [Member]
Information about reported segments on the basis used internally to evaluate segment performance [Abstract]
Net sales													331,654		174,983		168,145
Gross profit													68,088		47,947		44,966
(Loss) income from operations													(46,050)		15,484		18,334
Depreciation, amortization and other non-cash charges													91,557	[8]	5,532	[8]	6,013	[8]
Interest expense													1,054		23		5
Capital expenditures													23,600	[9]	18,649	[9]	8,716	[9]
Total assets	405,779							446,902					405,779		446,902
Impairment loss on intangible assets																	1,163
Equipment acquired under capital lease													411		746
Engineering Services [Member]
Information about reported segments on the basis used internally to evaluate segment performance [Abstract]
Net sales													83,717		105,607		87,527
Gross profit													12,145		20,270		14,615
(Loss) income from operations													(2,699)		10,480		6,522
Depreciation, amortization and other non-cash charges													6,754	[10]	2,462	[10]	2,391	[10]
Interest expense													53		25		12
Capital expenditures													549		880		1,551
Total assets	74,272							81,062					74,272		81,062
Impairment loss on intangible assets													4,222
Eliminations [Member]
Information about reported segments on the basis used internally to evaluate segment performance [Abstract]
Net sales													(2,814)		(1,961)		(1,632)
Gross profit													(371)		91		69
(Loss) income from operations													(371)		91		68
Corporate [Member]
Information about reported segments on the basis used internally to evaluate segment performance [Abstract]
Depreciation, amortization and other non-cash charges													(7,950)	[11]	0	[11]	0	[11]
Interest expense													$ 15,855	[12]	$ 1,723	[12]	$ 652	[12]

[1] The fourth quarter of 2013 includes a goodwill impairment charge of $73,528 related to the Valent acquisition, $17,718 related to income tax valuation allowance, $2,620 related to a separation agreement reached with key members of Valent Aerostructures, LLC. and $453 of restructuring expenses related to the closure of the Precise Machine facility.

[2] The second quarter of 2013 includes a trade name impairment of $4,222 related to D3 Technologies offset by a contingent consideration write-off of $7,950 related to Valent.

[3] The first quarter 2013 includes $2,497 of non-recurring inventory step-up related to the Valent acquisition.

[4] The fourth quarter of 2012 includes $4,860 in acquisition fees related to Valent.

[5] During the fourth quarter of 2013, the Company performed its annual impairment analysis of goodwill. As a result of this analysis, the goodwill related to the Valent acquisition was deemed impaired, and a $73,528 impairment charge was recorded in the Consolidated Statements of Operations for the year ended December 31, 2013.

[6] The fair values of intangibles relating to the 2012 acquisitions of TASS and Valent were determined by third parties in connection with the purchase and recorded at those values.

[7] During the second quarter of 2013, a triggering event occurred when the Company commenced an initiative to rebrand its core engineering business. Under this initiative, the D3 Technologies name became obsolete and the $4,222 indefinite lived intangible asset related to that trade name was deemed to be fully impaired and a loss was recorded in the Consolidated Statements of Operations for the year ended December 31, 2013

[8] Includes a $73,528 for goodwill impairment in 2013 and $1,163 charge for impairment of intangible in 2011.

[9] Includes $411 and $746 for capital leases in 2013 and 2012, respectively.

[10] Includes a $4,222 charge for impairment of intangible 2013.

[11] Includes write-off of contingent consideration of $7,950 in 2013.

[12] Includes a $580 charge for deferred financing costs for the closed credit facility in 2012.

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QUARTERLY FINANCIAL DATA (UNAUDITED) (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended												12 Months Ended
	Dec. 31, 2013		Sep. 30, 2013	Jun. 30, 2013		Mar. 31, 2013		Dec. 31, 2012		Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Selected Quarterly Financial Information [Abstract]
Net sales	$ 96,370	[1]	$ 104,656	$ 105,465	[2]	$ 106,066	[3]	$ 71,917	[4]	$ 70,636	$ 69,327	$ 66,749	$ 412,557	$ 278,629	$ 254,040
Gross profit	17,549	[1]	20,418	21,841	[2]	20,054	[3]	16,239	[4]	18,584	16,967	16,518	79,862	68,308	59,650
Net income (loss)	$ (67,061)	[1]	$ 2,075	$ 4,664	[2]	$ 1,837	[3]	$ 951	[4]	$ 5,639	$ 5,105	$ 4,792	$ (58,485)	$ 16,487	$ 16,389
Amounts per common share:
Net income (loss) (in dollars per share)	$ (5.31)	[1]	$ 0.16	$ 0.37	[2]	$ 0.15	[3]	$ 0.08	[4]	$ 0.48	$ 0.44	$ 0.41	$ (4.64)	$ 1.41	$ 1.42
Net income (loss) - assuming dilution (in dollars per share)	$ (5.31)	[1]	$ 0.16	$ 0.37	[2]	$ 0.14	[3]	$ 0.08	[4]	$ 0.48	$ 0.43	$ 0.41	$ (4.64)	$ 1.39	$ 1.40

[1] The fourth quarter of 2013 includes a goodwill impairment charge of $73,528 related to the Valent acquisition, $17,718 related to income tax valuation allowance, $2,620 related to a separation agreement reached with key members of Valent Aerostructures, LLC. and $453 of restructuring expenses related to the closure of the Precise Machine facility.

[2] The second quarter of 2013 includes a trade name impairment of $4,222 related to D3 Technologies offset by a contingent consideration write-off of $7,950 related to Valent.

[3] The first quarter 2013 includes $2,497 of non-recurring inventory step-up related to the Valent acquisition.

[4] The fourth quarter of 2012 includes $4,860 in acquisition fees related to Valent.

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STOCK BASED COMPENSATION (Details) (USD $) In Thousands, except Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Weighted Average Grant Date Fair Value
Compensation expense	$ 1,615	$ 1,494	$ 1,254
Stock Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Exercise price per share (in dollars per share)	$ 2.00
Aggregate intrinsic value of options exercised		126
Restricted Stock Awards [Member]
Shares
Outstanding beginning balance (in shares)	189,828
Granted (in shares)	67,996
Vested (in shares)	(35,323)
Forfeited (in shares)	(2,750)
Outstanding ending balance (in shares)	219,751	189,828
Weighted Average Grant Date Fair Value
Outstanding beginning balance (in dollars per share)	$ 18.76
Granted (in dollars per share)	$ 21.42
Vested (in dollars per share)	$ 17.67
Forfeited (in dollars per share)	$ 20.20
Outstanding ending balance (in dollars per share)	$ 19.74	$ 18.76
Unrecognized compensation costs	1,857	2,071
Costs are expected to be recognized over a weighted average period	1 year 2 months 12 days	1 year 7 months 6 days
Fair value of restricted stock awards that vested	$ 602	$ 3,199	$ 2,149

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CUSTOMER AND SUPPLIER CONCENTRATION

12 Months Ended

Dec. 31, 2013

Risks and Uncertainties [Abstract]

CUSTOMER AND SUPPLIER CONCENTRATION

CUSTOMER AND SUPPLIER CONCENTRATION

Direct sales to our top three customers, Spirit AeroSystems, Gulfstream Aerospace Corporation, and The Boeing Company accounted for 28.5%, 14.6% and 14.4% of our total revenues in 2013, respectively.  These revenues are reported by both the Aerostructures and Engineering Services segments.  Accounts receivable balances related to these customers were 27.8%, 8.5%, and 5.7%, of the accounts receivable balance at December 31, 2013, respectively.

Direct sales to our top four customers, The Boeing Company, Gulfstream Aerospace Corporation, Spirit AeroSystems and Bombardier accounted for 20.8%, 16.1%, 13.0% and 10.1% of our total revenues in 2012, respectively.  These revenues are reported by both the Aerostructures and Engineering Services segments.  Accounts receivable balances related to these customers were 11.3%, 5.6%, 27.9% and 6.4% of the accounts receivable balance at December 31, 2012, respectively.

Direct sales to our top three customers, The Boeing Company, Gulfstream Aerospace Corporation and Spirt AeroSystems, accounted for 18.3%, 16.5% and 13.7% of our total revenues in 2011, respectively.  These revenues are reported by both the Aerostructures and Engineering Services segments, except Gulfstream Aerospace Corporation, with respect to which revenues are reported by the Aerostructures segment only.

The Company did not have any sales to a foreign country greater than 10.0% of its total sales in 2013, 2012 and 2011, respectively.  The amounts of profitability and identifiable assets attributable to foreign sales activity are not material when compared with revenue, profitability, and identifiable assets attributed to United States domestic operations during 2013, 2012 and 2011.

The Company purchased approximately 58% of the raw materials used in production from two suppliers in 2013. The Company purchased approximately 51% and 59% of the raw materials used in production from two suppliers in 2012 and three suppliers in 2011, respectively.  The Company has increased its capability to integrate components into higher level aerospace assemblies and to provide point of use kitting.  As a result, there was an increase in the use of third party suppliers for the purchase of strategic components.  During 2013 we purchased approximately 24% of the procured parts used in assembled products from two suppliers.  We purchased approximately 49% and 61% of the procured parts used in assembled products from three suppliers in 2012 and four suppliers in 2011, respectively.

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ACCOUNTING POLICIES, CHANGE IN ACCOUNTING ESTIMATE (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013 contract	Dec. 31, 2012	Dec. 31, 2011
Contracts Accounted for under Percentage of Completion [Member]
Change in Accounting Estimate [Line Items]
Favorable adjustments	$ 106	$ 587	$ 492
Unfavorable adjustments	1,609	519	779
Net operating income adjustments	(1,503)	68	(287)
Number of contracts with negative cumulative catch-up adjustments	2
B-787 Dreamliner [Member]
Change in Accounting Estimate [Line Items]
Program revenue	13,397
B-787 Dreamliner [Member] | Contracts Accounted for under Percentage of Completion [Member]
Change in Accounting Estimate [Line Items]
Unfavorable adjustments	811
EMB-KC390 [Member]
Change in Accounting Estimate [Line Items]
Program revenue	17,131
EMB-KC390 [Member] | Contracts Accounted for under Percentage of Completion [Member]
Change in Accounting Estimate [Line Items]
Unfavorable adjustments	$ 706

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COMMITMENTS AND CONTINGENCIES (Tables)

12 Months Ended

Dec. 31, 2013

Commitments and Contingencies Disclosure [Abstract]

Schedule of future minimum lease payments under operating leases

At December 31, 2013, the future minimum lease payments under operating leases with initial non-cancelable terms in excess of one year are as follows:

2014	$	6,909
2015	6,327
2016	5,757
2017	4,997
2018	4,832
Thereafter	22,365
	$	51,187

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CUSTOMER AND SUPPLIER CONCENTRATION (Details)	12 Months Ended
	Dec. 31, 2013 customer	Dec. 31, 2012	Dec. 31, 2011 customer
Revenue and Accounts Receivable, Major Customer [Line Items]
Number of top customers	3	4	3
Supplier Concentration Risk [Member] | Raw Materials [Member]
Revenue and Accounts Receivable, Major Customer [Line Items]
Number of suppliers	2	2	3
Percentage of materials attributable to supplier (in hundredths)	58.00%	51.00%	59.00%
Supplier Concentration Risk [Member] | Procured Parts [Member]
Revenue and Accounts Receivable, Major Customer [Line Items]
Number of suppliers	2	3	4
Percentage of materials attributable to supplier (in hundredths)	24.00%	49.00%	61.00%
Boeing [Member] | Sales Revenue, Goods, Net [Member]
Revenue and Accounts Receivable, Major Customer [Line Items]
Percentage attributable to customer (in hundredths)	14.40%	20.80%	18.30%
Boeing [Member] | Accounts Receivable [Member]
Revenue and Accounts Receivable, Major Customer [Line Items]
Percentage attributable to customer (in hundredths)	5.70%	11.30%
Gulfstream [Member] | Sales Revenue, Goods, Net [Member]
Revenue and Accounts Receivable, Major Customer [Line Items]
Percentage attributable to customer (in hundredths)	14.60%	16.10%	16.50%
Gulfstream [Member] | Accounts Receivable [Member]
Revenue and Accounts Receivable, Major Customer [Line Items]
Percentage attributable to customer (in hundredths)	8.50%	5.60%
Spirit [Member] | Sales Revenue, Goods, Net [Member]
Revenue and Accounts Receivable, Major Customer [Line Items]
Percentage attributable to customer (in hundredths)	28.50%	13.00%	13.70%
Spirit [Member] | Accounts Receivable [Member]
Revenue and Accounts Receivable, Major Customer [Line Items]
Percentage attributable to customer (in hundredths)	27.80%	27.90%
Bombardier [Member] | Sales Revenue, Goods, Net [Member]
Revenue and Accounts Receivable, Major Customer [Line Items]
Percentage attributable to customer (in hundredths)		10.10%
Bombardier [Member] | Accounts Receivable [Member]
Revenue and Accounts Receivable, Major Customer [Line Items]
Percentage attributable to customer (in hundredths)		6.40%

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GOODWILL AND INTANGIBLE ASSETS (Tables)

12 Months Ended

Dec. 31, 2013

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of goodwill

The following table summarizes the net carrying amount of goodwill by segment at December 31, 2013 and 2012, respectively:

							Engineering
	Aerostructures						Services				Total
	2013			2012			2013		2012		2013			2012
Balance at December 31,
Gross Goodwill	$	141,663		$	135,431		$	50,741	$	49,536	$	192,404		$	184,967
Accumulated impairment loss	(79,181		)	(5,653		)	—		—		(79,181		)	(5,653		)
Net Goodwill	$	62,482		$	129,778		$	50,741	$	49,536	$	113,223		$	179,314

Finite and infinite lived intangible assets

The carrying values were as follows:

	December 31,
	2013			2012
Trademarks	$	778		$	5,000
Customer intangible assets	68,991			68,991
Other	1,481			1,481
Accumulated amortization	(15,785		)	(11,138		)
Intangible assets, net	$	55,465		$	64,334

Estimated annual amortization expense

Estimated annual amortization expense for these intangibles is as follows:

Year ending December 31,
2014	$	4,524
2015	4,359
2016	4,134
2017	3,915
2018	3,563
Thereafter	34,970
	$	55,465

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ACQUISITIONS (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended			0 Months Ended	3 Months Ended	12 Months Ended			0 Months Ended	12 Months Ended	0 Months Ended	12 Months Ended	0 Months Ended	12 Months Ended		0 Months Ended	12 Months Ended	0 Months Ended	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011	Dec. 28, 2012 Valent Aerostructures, LLC [Member]	Dec. 31, 2012 Valent Aerostructures, LLC [Member]	Dec. 31, 2013 Valent Aerostructures, LLC [Member]	Dec. 31, 2012 Valent Aerostructures, LLC [Member]	Dec. 31, 2011 Valent Aerostructures, LLC [Member]	Dec. 28, 2012 Valent Aerostructures, LLC [Member] Customer Relationships [Member]	Dec. 31, 2013 Valent Aerostructures, LLC [Member] Customer Relationships [Member]	Dec. 28, 2012 Valent Aerostructures, LLC [Member] Trademarks and Other Intangibles [Member]	Dec. 31, 2013 Valent Aerostructures, LLC [Member] Trademarks and Other Intangibles [Member]	Aug. 07, 2012 TASS, Inc. [Member]	Dec. 31, 2013 TASS, Inc. [Member]	Dec. 31, 2012 TASS, Inc. [Member]	Aug. 07, 2012 TASS, Inc. [Member] Customer Relationships [Member]	Dec. 31, 2013 TASS, Inc. [Member] Customer Relationships [Member]	Aug. 07, 2012 TASS, Inc. [Member] Trademarks and Other Intangibles [Member]	Dec. 31, 2013 TASS, Inc. [Member] Trademarks and Other Intangibles [Member]	Dec. 31, 2013 Restricted Stock [Member] Valent Aerostructures, LLC [Member]
Business Acquisition [Line Items]
Acquisition date						Dec. 28, 2012								Aug. 07, 2012
Equity interests issued		$ 15,000				$ 15,000
Percentage of stock eligible for conversion in June 2014																				50.00%
Acquisition related costs	247	5,362	0		4,860	5,107
Acquired intangible assets				46,546					45,600		946		2,247			1,876		371
Weighted average estimated useful life										20 years 3 months 18 days		5 years 6 months					11 years 10 months 24 days		2 years 10 months 24 days
Notes payable													1,000
Business Acquisition, Pro Forma Information [Abstract]
Net sales							386,402	340,551
Net income							12,899	10,152
Summary of purchase price allocation [Abstract]
Cash				44									617
Accounts receivable				16,769									1,979
Inventory				28,053
Prepaid expenses and other current assets				640
Other assets													175
Fixed assets				56,075									196
Intangible assets				46,546									2,247
Other long-term assets				1,576
Goodwill	113,223	179,314		129,816	123,584		123,584						6,313	6,313	6,628
Current liabilities assumed				(25,187)									(1,247)
Long-term liabilities assumed				(23,080)
Cost of acquisition				$ 231,252									$ 10,280

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(LOSS) EARNINGS PER COMMON SHARE (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended												12 Months Ended
	Dec. 31, 2013		Sep. 30, 2013	Jun. 30, 2013		Mar. 31, 2013		Dec. 31, 2012		Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Numerators [Abstract]
Net (loss)/income	$ (67,061)	[1]	$ 2,075	$ 4,664	[2]	$ 1,837	[3]	$ 951	[4]	$ 5,639	$ 5,105	$ 4,792	$ (58,485)	$ 16,487	$ 16,389
Denominators [Abstract]
Weighted average common shares - basic (in shares)													12,607,833	11,701,607	11,559,895
Dilutive effect of restricted stock (in shares)													0	137,575	181,618
Weighted average common shares - diluted (in shares)													12,607,833	11,839,182	11,741,513
Basic earnings per share (in dollars per share)	$ (5.31)	[1]	$ 0.16	$ 0.37	[2]	$ 0.15	[3]	$ 0.08	[4]	$ 0.48	$ 0.44	$ 0.41	$ (4.64)	$ 1.41	$ 1.42
Diluted earnings per share (in dollars per share)	$ (5.31)	[1]	$ 0.16	$ 0.37	[2]	$ 0.14	[3]	$ 0.08	[4]	$ 0.48	$ 0.43	$ 0.41	$ (4.64)	$ 1.39	$ 1.40
Antidilutive securities excluded from computation of earnings per share (in shares)													111,976

[1] The fourth quarter of 2013 includes a goodwill impairment charge of $73,528 related to the Valent acquisition, $17,718 related to income tax valuation allowance, $2,620 related to a separation agreement reached with key members of Valent Aerostructures, LLC. and $453 of restructuring expenses related to the closure of the Precise Machine facility.

[2] The second quarter of 2013 includes a trade name impairment of $4,222 related to D3 Technologies offset by a contingent consideration write-off of $7,950 related to Valent.

[3] The first quarter 2013 includes $2,497 of non-recurring inventory step-up related to the Valent acquisition.

[4] The fourth quarter of 2012 includes $4,860 in acquisition fees related to Valent.

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LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended		12 Months Ended		12 Months Ended				12 Months Ended		0 Months Ended	12 Months Ended			1 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2013 Revolver Under Credit Agreement, Variable [Member]	Dec. 31, 2012 Revolver Under Credit Agreement, Variable [Member]	Dec. 31, 2013 Term Loan Under Credit Agreement, Variable [Member]	Dec. 31, 2012 Term Loan Under Credit Agreement, Variable [Member]	Dec. 31, 2013 Missouri IRBs [Member]	Dec. 31, 2012 Missouri IRBs [Member]	Dec. 31, 2013 Capital Leases [Member]	Dec. 31, 2012 Capital Leases [Member]	Aug. 07, 2012 Notes Payable [Member]	Dec. 31, 2013 Notes Payable [Member]	Dec. 31, 2012 Notes Payable [Member]	Dec. 31, 2013 Notes Payable to Prior Minority Shareholder [Member]	Dec. 31, 2012 Promissory Note to Finance Building [Member]	Mar. 28, 2013 Promissory Note to Finance Purchase of Corporate Aircraft [Member]
Debt Instrument [Line Items]
Long-term debt, gross			$ 36,000	$ 6,236	$ 222,750	$ 225,000	$ 7,756	$ 8,113	$ 14,572	$ 15,316	$ 1,000	$ 9,533	$ 6,034
Long-term debt, total	290,611	260,699
Current installments of long-term debt and capital lease obligations	5,242	5,632
Long-term debt and capital lease obligations, less current installments	285,369	255,067
Fixed interest rate (in hundredths)							2.80%				3.25%				2.95%	3.60%
Debt instrument, face amount														2,000	2,200	3,550
Fixed interest rate, minimum (in hundredths)	2.80%								2.04%	3.00%		2.45%
Fixed interest rate, maximum (in hundredths)	7.73%								7.73%	7.73%		3.60%	3.25%
Maturity dates			Dec. 28, 2017		Dec. 28, 2018						Aug. 31, 2013				Dec. 28, 2017
Period over which monthly installments due														36 months
Gross amount of assets recorded under capital leases	$ 17,845

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QUARTERLY FINANCIAL DATA (UNAUDITED) (Tables)

12 Months Ended

Dec. 31, 2013

Quarterly Financial Information Disclosure [Abstract]

Schedule of quarterly financial data

Earnings per share data is computed independently for each of the periods presented.  As a result, the sum of the earnings per share amounts for the quarter may not equal the total for the year.

2013	First (1)		Second (2)		Third		Fourth (3)
Net sales	$	106,066	$	105,465	$	104,656	$	96,370
Gross profit (1)	$	20,054	$	21,841	$	20,418	$	17,549
Net income (loss) (2),(3),(4)	$	1,837	$	4,664	$	2,075	$	(67,061	)
Amounts per common share:
Net income (loss)	$	0.15	$	0.37	$	0.16	$	(5.31	)
Net income (loss) - assuming dilution	$	0.14	$	0.37	$	0.16	$	(5.31	)
2012	First		Second		Third		Fourth (4)
Net sales	$	66,749	$	69,327	$	70,636	$	71,917
Gross profit	$	16,518	$	16,967	$	18,584	$	16,239
Net income (3)	$	4,792	$	5,105	$	5,639	$	951
Amounts per common share:
Net income	$	0.41	$	0.44	$	0.48	$	0.08
Net income - assuming dilution	$	0.41	$	0.43	$	0.48	$	0.08

(1) The first quarter 2013 includes $2,497 of non-recurring inventory step-up related to the Valent acquisition.

(2) The second quarter of 2013 includes a trade name impairment of $4,222 related to D3 Technologies offset by a contingent consideration write-off of $7,950 related to Valent.

(3) The fourth quarter of 2013 includes a goodwill impairment charge of $73,528 related to the Valent acquisition, $17,718 related to income tax valuation allowance, $2,620 related to a separation agreement reached with key members of Valent Aerostructures, LLC. and $453 of restructuring expenses related to the closure of the Precise Machine facility. In addition, Valent gross profit was unfavorably impacted by $955 in cumulative catch-up adjustments, the result of higher levels of indirect costs required to meet customer demand.

(4) The fourth quarter of 2012 includes $4,860 in acquisition fees related to Valent.

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ACQUISITIONS

12 Months Ended

Dec. 31, 2013

Business Combinations [Abstract]

ACQUISITIONS

ACQUISITIONS

On December 28, 2012, the Company acquired all of the outstanding equity of Valent Aerostructures, LLC, (“Valent”), a provider of complex sub-assemblies and machined parts to airframe manufacturers in the commercial aerospace, business and regional, and military industries, is headquartered in Kansas City, Missouri, and was accounted for under the acquisition method of accounting.  Concurrent with the acquisition, the Company entered into a new credit agreement to fund the majority of the purchase price as described in Note 9. "Long-term Debt and Capital Lease Obligations."  The Company also issued $15,000 in restricted common stock.  Fifty percent of the shares issued for the acquisition are eligible to be converted in June of 2014, with the remaining shares eligible for conversion in December of 2015.

The operating results of Valent have been included in the Company’s Aerostructures segment from the date of acquisition and acquisition related costs of $5,107 have been included in acquisitions expense.  The following table presents unaudited pro-forma consolidated operating results for the Company for the years ended December 31, 2012 and 2011, as if Valent had been acquired as of the beginning of the periods presented:

	December 31,
	2012		2011
Net sales	$	386,402	$	340,551
Net income	12,899		10,152

Management believes the integration of Valent with its business may provide synergistic benefits, including increased scale, complementary product offerings, the ability to compete for larger and more complex design-build projects and enhanced project management capabilities, allowing the Company to drive further growth from existing platforms.

The following table summarizes the final purchase price allocation for Valent at the date of acquisition:

Cash	$	44
Accounts receivable	16,769
Inventory	28,053
Prepaid expenses and other current assets	640
Fixed assets	56,075
Intangible assets	46,546
Other long-term assets	1,576
Goodwill	129,816
Current liabilities assumed	(25,187		)
Long-term liabilities assumed	(23,080		)
Cost of acquisition	$	231,252

Of the $46,546 of acquired intangible assets, $45,600 was assigned to customer relationships with a weighted average useful life of 20.3 years; and the remaining $946 consists of trade names, trademarks and other intangibles and have a weighted average useful life of 5.5 years.  The fair value of the customer relationships was determined using the multi-period excess earnings method.  The fair value of trade names and trademarks was determined using the cost method. These assets are being amortized using the straight-line method, which is expected to approximate the pattern of economic benefit of each intangible asset.

Establishment of the customer relationship asset at Valent considered an ongoing contract in place with Spirit AeroSystems. The terms of the contract do not provide for any minimum volumes to be ordered and include a termination for convenience clause in favor of the customer whereby the customer can exit the relationship with minimal notice. Given the contract with Spirit AeroSystems can be terminated at any time, the Company manages the customer contract-in-place and the customer relationship as an aggregate  asset, and we believe the value of the contract-in-place is not separable from the value of the long-standing customer relationship asset.

The customer relationship with Spirit AeroSystems intangible asset was valued separately from Valent’s other customer relationship intangible assets. As part of the valuation of Valent’s customer relationship with Spirit AeroSystems intangible asset, the contractual nature of the relationship was considered and incorporated into the valuation. The contractual nature of the relationship was a factor in the selected discount rate (used in the multi-period excess earnings method), although the significance of the contract was modest due to the aforementioned contract provisions that provide no meaningful assurances of future business under the contract (i.e., no minimum volumes, and termination for convenience clause). These contractual provisions coupled with our review of historical contract renewal rates led to the life ultimately determined for the intangible asset.

On August 7, 2012, the Company acquired all of the shares of capital stock of TASS Inc. (“TASS”), an after-market engineering and support services firm.  Headquartered in Kirkland, Washington, TASS delivers engineering solutions to aircraft manufacturers, airlines, Maintenance, Repair and Overhaul companies and leasing companies worldwide.  The acquisition was funded by internal cash and by entering into a $1,000 note payable and was accounted for under the acquisition method of accounting.  The pro-forma operating results, as if the Company had completed the acquisition at the beginning of the periods presented, are not material to the Company’s operations and are not presented.

Management believes the acquisition of TASS, together with other initiatives, will augment the Company’s long and successful history with Boeing products and provide the Company with a global presence in the aftermarket engineering arena.  TASS also provides the Company the ability to internally source product support for parts manufactured by the Company in the global airline fleet.

The Company performed a valuation analysis to determine amounts allocated to the acquired assets and assumed liabilities, including various intangible assets.  The following table summarizes the purchase price allocation for TASS at the date of acquisition:

Cash	$	617
Accounts receivable	1,979
Other assets	175
Fixed assets	196
Intangible assets	2,247
Goodwill	6,313
Current liabilities assumed	(1,247		)
Cost of acquisition	$	10,280

Of the $2,247 acquired intangible assets, $1,876 was assigned to customer relationships with a weighted average useful life of 11.9 years; and the remaining $371 consists of trademarks and other intangibles and have a weighted average useful life of 2.9 years.  The fair value of the customer relationships was determined using the discounted cash flow method.  The fair value of the trademarks was determined using the relief from royalty method.

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LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS, LINE OF CREDIT FACILITY (Details) (USD $)	0 Months Ended		12 Months Ended
	Dec. 31, 2013		Dec. 31, 2013
Line of Credit Facility [Line Items]
Mandatory prepayments description			The maturity dates are subject to acceleration upon breach of the financial covenants (consisting of a maximum total leverage ratio and senior leverage ratio and a minimum fixed charge coverage ratio) and other customary non-financial covenants contained in the credit agreement
Long-term Debt, Fiscal Year Maturity [Abstract]
Year ending December 31, 2014	$ 4,079,000	[1]	$ 4,079,000	[1]
Year ending December 31, 2015	4,112,000	[1]	4,112,000	[1]
Year ending December 31, 2016	3,536,000	[1]	3,536,000	[1]
Year ending December 31, 2017	41,390,000	[1]	41,390,000	[1]
Year ending December 31, 2018	214,982,000	[1]	214,982,000	[1]
Thereafter	7,940,000	[1]	7,940,000	[1]
Long-term debt, total	276,039,000	[1]	276,039,000	[1]
Less: imputed interest	0	[1]	0	[1]
Long-term debt, five year maturities	276,039,000	[1]	276,039,000	[1]
Capital Leases, Fiscal Year Maturity [Abstract]
Year ending December 31, 2014	1,715,000		1,715,000
Year ending December 31, 2015	1,946,000		1,946,000
Year ending December 31, 2016	1,915,000		1,915,000
Year ending December 31, 2017	1,963,000		1,963,000
Year ending December 31, 2018	2,223,000		2,223,000
Thereafter	7,672,000		7,672,000
Capital leases, total	17,434,000		17,434,000
Less: imputed interest	(2,862,000)		(2,862,000)
Total capital leases, five year maturities	14,572,000		14,572,000
LIBOR [Member]
Line of Credit Facility [Line Items]
Variable rate floor (in hundredths)	1.25%		1.25%
Minimum [Member]
Line of Credit Facility [Line Items]
Maturity dates			Sep. 30, 2020
Maximum [Member]
Line of Credit Facility [Line Items]
Maturity dates			Jun. 30, 2032
Revolver Under Credit Agreement, Variable [Member]
Line of Credit Facility [Line Items]
Maximum borrowing capacity	125,000,000		125,000,000
Commitment fee (in hundredths)	0.625%
Maturity dates			Dec. 28, 2017
Revolver Under Credit Agreement, Variable [Member] | Alternate base rate [Member]
Line of Credit Facility [Line Items]
Variable rate floor (in hundredths)	2.25%		2.25%
Revolver Under Credit Agreement, Variable [Member] | Federal Funds Rate [Member]
Line of Credit Facility [Line Items]
Spread over reference rate (in hundredths)			0.50%
Revolver Under Credit Agreement, Variable [Member] | One Month Eurodollar [Member]
Line of Credit Facility [Line Items]
Spread over reference rate (in hundredths)			1.00%
Revolver Under Credit Agreement, Variable [Member] | Minimum [Member]
Line of Credit Facility [Line Items]
Commitment fee (in hundredths)			0.375%
Revolver Under Credit Agreement, Variable [Member] | Maximum [Member]
Line of Credit Facility [Line Items]
Commitment fee (in hundredths)			0.625%
Revolver Under Credit Agreement, Variable [Member] | Maximum [Member] | LIBOR [Member]
Line of Credit Facility [Line Items]
Spread over reference rate (in hundredths)			3.50%
Revolver Under Credit Agreement, Variable [Member] | Maximum [Member] | Alternate base rate [Member]
Line of Credit Facility [Line Items]
Spread over reference rate (in hundredths)			2.50%
Term Loan Under Credit Agreement, Variable [Member]
Line of Credit Facility [Line Items]
Maximum borrowing capacity	$ 225,000,000		$ 225,000,000
Maturity dates			Dec. 28, 2018
Term Loan Under Credit Agreement, Variable [Member] | Maximum [Member] | LIBOR [Member]
Line of Credit Facility [Line Items]
Spread over reference rate (in hundredths)			4.00%
Term Loan Under Credit Agreement, Variable [Member] | Maximum [Member] | Alternate base rate [Member]
Line of Credit Facility [Line Items]
Spread over reference rate (in hundredths)			3.00%

[1] Includes principal only

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STOCK BASED COMPENSATION (Tables)

12 Months Ended

Dec. 31, 2013

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Summary of the activity for non-vested restricted stock awards

A summary of the activity for non-vested restricted stock awards under the Company’s share-based compensation plans is presented below: 

	2013
Restricted Stock Awards	Shares		Weighted Average Grant Date Fair Value
Outstanding at January 1	189,828		$	18.76
Granted	67,996		21.42
Vested	(35,323	)	17.67
Forfeited	(2,750	)	20.20
Outstanding at December 31	219,751		$	19.74

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SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS

12 Months Ended

Dec. 31, 2013

Valuation and Qualifying Accounts [Abstract]

SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

LMI AEROSPACE, INC.

SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

(Dollar amounts in thousands)

December 31, 2013

	Beginning Balance		Charge to Cost/ Expense			Other Charge to Cost/ Expense		Write-offs net of Recoveries			Ending Balance
Reserve for Accounts Receivable
Year ended December 31, 2011	$	253	$	157		$	—	$	(51	)	$	359
Year ended December 31, 2012	$	359	$	(140	)	$	86	$	(18	)	$	287
Year ended December 31, 2013	$	287	$	(27	)	$	—	$	(80	)	$	180
Income Tax Valuation Allowance
Year ended December 31, 2011	$	—	$	—		$	—	$	—		$	—
Year ended December 31, 2012	$	—	$	261		$	—	$	—		$	261
Year ended December 31, 2013	$	261	$	17,876		$	—	$	—		$	18,137

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SUBSEQUENT EVENTS

12 Months Ended

Dec. 31, 2013

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

SUBSEQUENT EVENTS

On January 23, 2014, the Company announced plans to relocate the work performed relative to machining operations at its Savannah, Georgia facility to other locations within the company. The Savannah facility will continue to perform kitting and assembly operations. As a result, severance expense of $66 was recognized in the first quarter of 2014. In addition, the Company expects to recognize approximately $500 in other project costs largely related to accelerated depreciation on capital in the first two quarters of 2014. It is expected that this reorganization will be completed by the end of the second quarter of 2014.

On February 21, 2014, Ronald S. Saks provided notice of his retirement and resignation as Chief Executive Officer and President of the Company, such resignation to be effective as of March 18, 2014. On February 21, 2014, the Board of Directors of the Company (the “Board”) appointed Mr. Saks as the non-executive Chairman of the Board to replace Joseph Burstein, the current Chairman, effective March 18, 2014. Mr. Burstein will continue to serve as a director on the Board. Also on February 21, 2014, on the recommendation of the Compensation Committee, the Board appointed Daniel G. Korte to succeed Mr. Saks as Chief Executive Officer and President of the Company effective March 18, 2014. Mr. Korte shall commence his employment with the Company on March 10, 2014 as Chief Executive Officer-Elect, a non-executive position, and begin serving as Chief Executive Officer and President on March 18, 2014.

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PROPERTY, PLANT AND EQUIPMENT (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Property, Plant and Equipment [Line Items]
Depreciation and amortization	$ 15,913	$ 5,894	$ 5,219
Property, Plant and Equipment, Net [Abstract]
Gross property, plant and equipment	178,134	156,878
Less accumulated depreciation	(74,759)	(60,660)
Total net property, plant and equipment	103,375	96,218
Land [Member]
Property, Plant and Equipment, Net [Abstract]
Gross property, plant and equipment	1,455	1,455
Buildings and Improvements [Member]
Property, Plant and Equipment, Net [Abstract]
Gross property, plant and equipment	23,692	18,676
Machinery and Equipment [Member]
Property, Plant and Equipment, Net [Abstract]
Gross property, plant and equipment	122,132	108,391
Leasehold Improvements [Member]
Property, Plant and Equipment, Net [Abstract]
Gross property, plant and equipment	14,421	10,559
Software and Other [Member]
Property, Plant and Equipment, Net [Abstract]
Gross property, plant and equipment	11,403	10,629
Construction in Progress [Member]
Property, Plant and Equipment, Net [Abstract]
Gross property, plant and equipment	$ 5,031	$ 7,168

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INCOME TAXES (Tables)

12 Months Ended

Dec. 31, 2013

Income Tax Disclosure [Abstract]

Schedule of deferred tax assets and liabilities

The temporary differences between the tax basis of assets and liabilities and their financial reporting amounts that give rise to the deferred income tax assets and liabilities are as follows:

	December 31,
	2013			2012
Current deferred tax assets (liabilities):
Inventories	$	3,871		$	1,888
Accrued vacation	912			705
Stock award	891			522
Obligation under operating leases	733			587
Other	164			137
Net current deferred tax asset	6,571			3,839
Long-term deferred tax assets (liabilities):
Goodwill	20,904			215
Depreciation	(6,178		)	(6,151		)
Long-term contract costs	(4,475		)	(1,941		)
Amortization of intangibles	(3,265		)	(3,646		)
Professional fees	1,852			1,946
Gain on sale of real estate	954			1,022
NOL Carryforwards	1,031			261
Other	525			(177		)
Net long-term deferred tax assets (liabilities)	11,348			(8,471		)
Less: valuation allowance	(18,137		)	(261		)
Net deferred tax assets (liabilities)	$	(218	)	$	(4,893	)

Schedule of income tax provision attributable to income before income taxes

The Company’s income tax (benefit) provision attributable to income before taxes consisted of the following for the years ended December 31, 2013, 2012 and 2011:

	2013			2012			2011
Federal:
Current	$	(676	)	$	7,926		$	5,658
Deferred	(6,066		)	(109		)	1,149
	(6,742		)	7,817			6,807
State:
Current	120			346			225
Deferred	(357		)	(10		)	104
	(237		)	336			329
(Benefit) provision for income taxes	$	(6,979	)	$	8,153		$	7,136

Schedule of effective income tax rate reconciliation

The reconciliation of income tax computed at the U.S. federal statutory tax rates to income tax expense is as follows:

	2013			2012			2011
Federal taxes	$	(22,912	)	$	8,627		$	8,235
State and local taxes, net of federal benefit	(1,119		)	336			329
Production deduction	—			(530		)	(508		)
Valuation allowance	17,718			—			—
Research and experimental and other tax credits	(634		)	(300		)	(665		)
Other	(32		)	20			(255		)
(Benefit) provision for income taxes	$	(6,979	)	$	8,153		$	7,136

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ACCOUNTING POLICIES (Policies)

12 Months Ended

Dec. 31, 2013

Accounting Policies [Abstract]

Principles of Consolidation

Principles of Consolidation

The Consolidated Financial Statements included in this report have been prepared by management of LMI Aerospace, Inc.  All significant intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 these estimates.

Revenue Recognition

Revenue and Profit Recognition

Except as described below, the Company recognizes revenue for sales of products and related services in accordance with Financial Accounting Standards Board, (“FASB”) Accounting Standards Codification (“ASC”) Topic 605-15 Products and Topic 605-20 Services. The Company sells products under long term supply contracts and purchase orders where the product is built to the customer specifications based on firm purchase orders from the customer. The purchase orders tend to be of a relatively short duration and customers place orders on a periodic basis.  The pricing is generally fixed for some length of time and the quantities are based on individual purchase orders. Revenue is recognized when title passes and services are rendered, the price is fixed or determinable, and collection is reasonably assured. Approximately 80.0% to 90.0% of the total revenue the Company recognized in any given quarter is accounted for in accordance with Topics 15 and 20. The remainder of the revenue is accounted for using methods consistent with ASC Topic 605-35 Construction-Type and Production-Type Contracts.

The percentage of completion method used to account for contracts depends on the nature of the products provided under the contract. For example, for contracts that require us to perform a significant level of development effort, in comparison to the total value of the contract, sales are recorded using the cost to cost method to measure progress toward completion. Under the cost to cost method of accounting, we recognize sales and estimated profit as costs are incurred based on the proportion that the incurred costs bare compared to total estimated costs. For contracts that require us to provide a substantial number of similar items without a significant level of development, we record sales and estimated profit on a percentage of completion basis using units of delivery as the basis to measure progress toward completing the contract. Under both methods, profit recognized is based on the total expected profit margin percentage multiplied by revenue recognized to date.

The Company periodically reviews all estimates to complete as required by the authoritative guidance and the estimated total cost and expected gross profit are revised as required over the life of the contract.  Any revisions to the estimated total cost are accounted for as a change of an estimate.  A cumulative catch-up adjustment is recorded in the period of the change of the estimated costs to complete the contract.  

In addition, should total estimated costs at completion exceed the estimated total revenue, the anticipated full loss is recognized in the period in which the anticipated loss is determined.  The loss is reported as a component of cost of sales. The Company does not have any cost to cost contracts with an anticipated loss. The Company does have a contract being accounted for using the units of delivery method which was acquired during the Valent acquisition and where estimated costs exceed the total contract revenue.

For contracts accounted for using the percentage of completion method, management’s estimates of total units to be produced, and material, labor and overhead costs on long-term contracts are critical to the Company.  Due to the size, length of time and nature of many of our contracts, the estimation of revenue and costs through completion is complicated and subject to many variables. Claims and unpriced change orders will impact the estimate of total revenues and profits. In the ordinary course of business, the Company may receive requests from its customers to perform tasks not specified in its contracts.  When this occurs on a long-term contract using the cost-to-cost method of percentage of completion accounting, the Company may record revenue for claims or unpriced change orders to be negotiated with customers.  Approximately 0.5% of the Company's revenue recognized in 2013 represented amounts associated with claims and unpriced change orders. Total contract cost estimates are largely based our current cost of production, purchase order terms negotiated or estimated by our supply chain.

The development of a contract revenue and gross margin percentage involves utilization of detailed procedures by a team of operational and financial personnel that provides information on the status of the contracts.  Estimates of revenue and costs associated with each significant contract are reviewed and approved by the team on a quarterly basis.  

Due to the significance of the judgment in the estimation process described above, it is possible that materially different margins could be recorded if we used different assumptions or if the underlying circumstances were to change.

Pre-Contract and Pre-Production Costs under Long-Term Supply Contracts

Pre-Contract and Pre-Production Costs under Long-Term Supply Contracts

In certain circumstances, the Company capitalizes costs incurred prior to the execution of a contract with the customer.  These circumstances are limited to instances in which the Company has substantially negotiated the terms and conditions of the anticipated contract with its customers and concluded that their recoverability from the anticipated contract is probable.  As these costs are directly associated with a specific anticipated contract and they are concluded to be recoverable under that anticipated contract, the Company has capitalized these amounts.

The Company may incur design and development costs prior to the production phase of contracts that are outside the scope of the contract accounting method.  These pre-production costs are generally related to costs the Company incurs to design and build tooling that is owned by the customer and design and engineering services.  The Company receives the non-cancellable right to use these tools to build the parts as specified in a contractual agreement and therefore has capitalized these costs.  In certain instances, the Company enters into agreements with its customers that provide it a contractual guarantee for reimbursement of design and engineering services incurred prior to the production phase of a contract.  Due to the contractual guarantee, the Company capitalizes the costs of these services.  The pre-production costs are amortized to cost of sales over the shorter of the life of the contractual agreement or the related tooling.

Cash and Cash Equivalents

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand, deposits in transit and all highly liquid investment instruments with an initial maturity of three months or less.

Inventories

Inventories

The Company’s inventories are stated at the lower of cost or market and utilize actual costs for raw materials and an average cost for work in process, manufactured and purchased components and finished goods.  The Company evaluates the inventory carrying value and reduces the carrying costs based on customer activity, estimated future demand, price deterioration, and other relevant information. The Company’s customer demand is unpredictable and may fluctuate due to factors beyond the Company’s control.  In addition, inventoried costs include capitalized contract costs relating to programs and contracts with long-term production cycles, a portion of which is not expected to be realized within one year.  See further discussion regarding deferred long-term contract costs under “Revenue and Profit Recognition” and “Pre-Contract and Pre-Production Costs under Long-Term Supply Contracts.”

Allowance for Doubtful Accounts

Allowance for Doubtful Accounts

The allowance for doubtful accounts receivable reflects the Company’s best estimate of probable losses inherent in its accounts receivable.  The basis used to determine this value is derived from historical experience, specific allowances for known troubled customers and other known information.

Property, Plant and Equipment

Property, Plant and Equipment

Property, plant and equipment are stated at cost.  Depreciation is calculated using the straight-line method over the estimated useful lives of the related assets.  Leasehold improvements are amortized using the straight-line method over the shorter of the lease term or the estimated useful lives of the assets.  Estimated useful lives for buildings, machinery and equipment, and purchased software are 20 to 35 years, 4 to 10 years and 3 to 4 years, respectively.  Amortization incurred under capital leases is reported with depreciation expense.

Long-Lived Assets

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.

Goodwill and Intangible Assets

Goodwill and Intangible Assets

The Company’s acquisitions involve the purchase of tangible and intangible assets and the assumption of certain liabilities.   As part of the purchase price allocation, the Company allocates the purchase price to the tangible assets acquired and liabilities assumed based on estimated fair market values, and the remainder of the purchase price is allocated to intangibles and goodwill.  Goodwill and intangible assets with indefinite lives are not amortized but are subject to an impairment assessment at least annually in relation to their fair value.   Under guidelines established by FASB ASC Topic 280, the Company operates in two operating segments. However, the Company has recorded its goodwill and conducts testing for potential goodwill impairment at a reporting unit level.   The reporting units represent a business for which discrete financial information is available, and segment management regularly reviews the operating results.  As part of this process, the Company first assesses qualitatively whether it is necessary to perform the quantitative test.  The qualitative assessment involves evaluating relevant events or circumstances to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount.  If it is, the Company can bypass the quantitative assessment of goodwill.  If it is not, or if the Company has elected to bypass the qualitative assessment process, the quantitative assessment of goodwill utilizes a two-step process, where the carrying value of the reporting unit is compared to its fair value.  If the carrying value is less than the fair value, no impairment exists, and the second step is not performed.  However, if the carrying value is greater than the fair value, the second step is performed.  An impairment charge would be recognized for the amount that the carrying value of the goodwill exceeds its fair value. The fair values for goodwill testing are estimated using a combination of the income and market approach unless circumstances indicate that a better estimate of fair value is available. The income approach utilizes the discounted cash flow model (“DCF model”) and the market approach is based on the market data for a group of guideline companies.

Deferred Gain on Sale of Real Estate

Deferred Gain on Sale of Real Estate

On December 28, 2006, the Company entered into an agreement with a third party to sell and lease back certain of its real estate properties for $10,250.  The amount of the sale price in excess of book value for these properties of $4,242 was deferred and is being amortized over the 18 year term of the leases on a straight-line basis.

Share-based Compensation

Share-Based Compensation

The Company recognizes compensation expense for share-based payment transactions in the financial statements at their fair value.  The expense is measured at the grant date, based on the calculated fair value of the share-based award, and is recognized over the requisite service period (generally the vesting period of the equity award).

Income Taxes

Income Taxes

Provisions for federal and state income taxes are calculated on reported net income before income taxes based on current tax law and also include, in the current period, the cumulative effect of any changes in tax rates from those used previously in determining deferred tax assets and liabilities.  Such provisions differ from the amounts currently receivable or payable because certain items of income and expense are recognized in different time periods for financial reporting purposes than for income tax purposes.  Significant judgment is required in determining income tax provisions and evaluating tax positions.

A valuation allowance, if needed, reduces deferred tax assets to the amount expected to be realized. When determining the amount of net deferred tax assets that are more likely than not to be realized, Management assesses all available positive and negative evidence. This evidence includes, but is not limited to, prior earnings history, expected future earnings, carry-back and carry-forward periods and the feasibility of ongoing tax strategies that could potentially enhance the likelihood of the realization of a deferred tax asset. The weight given to the positive and negative evidence is commensurate with the extent the evidence may be objectively verified. As such, it is generally difficult for positive evidence regarding projected future taxable income exclusive of reversing taxable temporary differences to outweigh objective negative evidence of recent financial reporting losses.

        Based on these criteria and the relative weighting of both the positive and negative evidence available, and in particular the activity surrounding the Company's significant loss in 2013, management determined that it was necessary to establish a valuation allowance against all of its net U.S. deferred tax assets at December 31, 2013. This determination was made as the Company entered into a cumulative loss position over the three year period ended December 31, 2013 primarily due to the recording a goodwill impairment of $73,528 related to Valent. Once the Company entered into a cumulative loss position it has passed the threshold after which there is a presumption that a company should no longer rely solely on projected future income in determining whether the deferred tax asset is more likely than not to be realized. The Company will continue to monitor its deferred tax position and may adjust the valuation allowance, if necessary, for utilization of the underlying deferred tax assets through current taxable income or as available evidence changes.

The accounting for uncertainty in income taxes requires a more-likely-than-not threshold for financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return.  The Company records a liability for the difference between the benefit recognized and measured for financial statement purposes and the tax position taken or expected to be taken on our tax return.  To the extent that management’s assessment of such tax positions changes, the change in estimate is recorded in the period in which the determination is made.

Financial Instruments

Financial Instruments

Fair values of the Company’s long-term obligations approximate their carrying values as the applicable interest rates approximate the current market rates or have variable rate characteristics.  The Company’s other financial instruments have fair values that approximate their respective carrying values due to their short maturities.

Reclassifications

Reclassifications

Certain reclassifications have been made to prior period financial statements in order to conform to current period presentation.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In March 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2013-5, "Foreign Currency Matters". The amendments in ASU 2013-5 resolve the diversity in practice about whether current literature applies to the release of the cumulative translation adjustment into net income when a parent either sells a part or all of its investment in a foreign entity or no longer holds a controlling financial interest in a subsidiary or group of assets that is a nonprofit activity or a business within a foreign entity. In addition, the amendments in ASU 2013-5 resolve the diversity in practice for the treatment of business combinations achieved in stages (sometimes also referred to as step acquisitions) involving a foreign entity. ASU 2013-5 is effective prospectively for fiscal years, and interim reporting periods within those years, beginning after December 15, 2013. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial statements.

In July 2013, FASB issued ASU 2013-10, “Inclusion of the Fed Funds Effective Swap Rate (or Overnight Index Swap Rate) as a Benchmark Interest Rate for Hedge Accounting Purposes”, which amends the current accounting requirements in Topic 815 “Derivatives and Hedging”. Before the amendments in this update, only interest rates on direct Treasury obligations of the U.S. government (“UST”) and, for practical reasons, the London Interbank Offered Rate (“LIBOR”) swap rate were considered benchmark interest rates in the United States. Due the increased importance of OIS (“Overnight Index Swap Rate” or also referred to as the “Fed Funds Effective Swap Rate”), the objective of this update is to provide for the inclusion of OIS as a U.S. benchmark interest rate for hedge accounting purposes, in addition to UST and LIBOR. This amendment became effective for qualifying new or redesignated hedging relationships entered into on or after July 17, 2013. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements.

In July 2013, FASB issued ASU 2013-11, “Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists”. ASU 2013-11 requires entities to net its liability for unrecognized tax positions against a net operating loss carryforward, a similar tax loss or a tax credit carryforward when settlement in this manner is available under the tax law. The provisions of this new guidance are effective as of the beginning of the Company’s first quarter of 2014. The adoption of this standard is not expected to have a material impact on the Company's consolidated financial statements.

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ACCOUNTING POLICIES (Tables)

12 Months Ended

Dec. 31, 2013

Accounting Policies [Abstract]

Summary of catch-up adjustments

Cumulative catch-up adjustments had the following impact to operating income in the years presented:

	2013		2012		2011
Favorable adjustments	106		587		492
Unfavorable adjustments	(1,609	)	(519	)	(779	)
Net operating income adjustments	(1,503	)	68		(287	)

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ACCOUNTING POLICIES

12 Months Ended

Dec. 31, 2013

Accounting Policies [Abstract]

ACCOUNTING POLICIES

ACCOUNTING POLICIES

Principles of Consolidation

The Consolidated Financial Statements included in this report have been prepared by management of LMI Aerospace, Inc.  All significant intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 these estimates.

Revenue and Profit Recognition

Except as described below, the Company recognizes revenue for sales of products and related services in accordance with Financial Accounting Standards Board, (“FASB”) Accounting Standards Codification (“ASC”) Topic 605-15 Products and Topic 605-20 Services. The Company sells products under long term supply contracts and purchase orders where the product is built to the customer specifications based on firm purchase orders from the customer. The purchase orders tend to be of a relatively short duration and customers place orders on a periodic basis.  The pricing is generally fixed for some length of time and the quantities are based on individual purchase orders. Revenue is recognized when title passes and services are rendered, the price is fixed or determinable, and collection is reasonably assured. Approximately 80.0% to 90.0% of the total revenue the Company recognized in any given quarter is accounted for in accordance with Topics 15 and 20. The remainder of the revenue is accounted for using methods consistent with ASC Topic 605-35 Construction-Type and Production-Type Contracts.

The percentage of completion method used to account for contracts depends on the nature of the products provided under the contract. For example, for contracts that require us to perform a significant level of development effort, in comparison to the total value of the contract, sales are recorded using the cost to cost method to measure progress toward completion. Under the cost to cost method of accounting, we recognize sales and estimated profit as costs are incurred based on the proportion that the incurred costs bare compared to total estimated costs. For contracts that require us to provide a substantial number of similar items without a significant level of development, we record sales and estimated profit on a percentage of completion basis using units of delivery as the basis to measure progress toward completing the contract. Under both methods, profit recognized is based on the total expected profit margin percentage multiplied by revenue recognized to date.

The Company periodically reviews all estimates to complete as required by the authoritative guidance and the estimated total cost and expected gross profit are revised as required over the life of the contract.  Any revisions to the estimated total cost are accounted for as a change of an estimate.  A cumulative catch-up adjustment is recorded in the period of the change of the estimated costs to complete the contract.  

In addition, should total estimated costs at completion exceed the estimated total revenue, the anticipated full loss is recognized in the period in which the anticipated loss is determined.  The loss is reported as a component of cost of sales. The Company does not have any cost to cost contracts with an anticipated loss. The Company does have a contract being accounted for using the units of delivery method which was acquired during the Valent acquisition and where estimated costs exceed the total contract revenue. The provision for anticipated loss was established in 2013 for $5,267 and was treated as a measurement period change and as such increased the goodwill related to the Valent acquisition.

Cumulative catch-up adjustments had the following impact to operating income in the years presented:

	2013		2012		2011
Favorable adjustments	106		587		492
Unfavorable adjustments	(1,609	)	(519	)	(779	)
Net operating income adjustments	(1,503	)	68		(287	)

The negative cumulative catch-up adjustments in 2013 relate primarily to two contracts. The first contract relates to a design program on the 787 platform on which the Company was unable to pass through as much of the engineering changes incurred to the customer as originally estimated. The Company recorded a reduction of contact revenue of $811 for this program in 2013. The Company continues to pursue claims related to this contract but has not estimated a recovery in the estimate at completion. The total revenue recognized on this program at December 31, 2013 was $13,397. The second contract relates to part production for the Embraer KC-390 program. In 2013, an adjustment of $706 was recorded to reflect a revision in the expected labor hours necessary to complete the program. Total revenue recognized on the program at December 31, 2013 was $17,131.

For contracts accounted for using the percentage of completion method, management’s estimates of total units to be produced, and material, labor and overhead costs on long-term contracts are critical to the Company.  Due to the size, length of time and nature of many of our contracts, the estimation of revenue and costs through completion is complicated and subject to many variables. Claims and unpriced change orders will impact the estimate of total revenues and profits. In the ordinary course of business, the Company may receive requests from its customers to perform tasks not specified in its contracts.  When this occurs on a long-term contract using the cost-to-cost method of percentage of completion accounting, the Company may record revenue for claims or unpriced change orders to be negotiated with customers.  Approximately 0.5% of the Company's revenue recognized in 2013 represented amounts associated with claims and unpriced change orders. Total contract cost estimates are largely based our current cost of production, purchase order terms negotiated or estimated by our supply chain.

The development of a contract revenue and gross margin percentage involves utilization of detailed procedures by a team of operational and financial personnel that provides information on the status of the contracts.  Estimates of revenue and costs associated with each significant contract are reviewed and approved by the team on a quarterly basis.  

Due to the significance of the judgment in the estimation process described above, it is possible that materially different margins could be recorded if we used different assumptions or if the underlying circumstances were to change.  

Pre-Contract and Pre-Production Costs under Long-Term Supply Contracts

In certain circumstances, the Company capitalizes costs incurred prior to the execution of a contract with the customer.  These circumstances are limited to instances in which the Company has substantially negotiated the terms and conditions of the anticipated contract with its customers and concluded that their recoverability from the anticipated contract is probable.  As these costs are directly associated with a specific anticipated contract and they are concluded to be recoverable under that anticipated contract, the Company has capitalized these amounts.

The Company may incur design and development costs prior to the production phase of contracts that are outside the scope of the contract accounting method.  These pre-production costs are generally related to costs the Company incurs to design and build tooling that is owned by the customer and design and engineering services.  The Company receives the non-cancellable right to use these tools to build the parts as specified in a contractual agreement and therefore has capitalized these costs.  In certain instances, the Company enters into agreements with its customers that provide it a contractual guarantee for reimbursement of design and engineering services incurred prior to the production phase of a contract.  Due to the contractual guarantee, the Company capitalizes the costs of these services.  The pre-production costs are amortized to cost of sales over the shorter of the life of the contractual agreement or the related tooling.

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand, deposits in transit and all highly liquid investment instruments with an initial maturity of three months or less.

Inventories

The Company’s inventories are stated at the lower of cost or market and utilize actual costs for raw materials and an average cost for work in process, manufactured and purchased components and finished goods.  The Company evaluates the inventory carrying value and reduces the carrying costs based on customer activity, estimated future demand, price deterioration, and other relevant information. The Company’s customer demand is unpredictable and may fluctuate due to factors beyond the Company’s control.  In addition, inventoried costs include capitalized contract costs relating to programs and contracts with long-term production cycles, a portion of which is not expected to be realized within one year.  See further discussion regarding deferred long-term contract costs under “Revenue and Profit Recognition” and “Pre-Contract and Pre-Production Costs under Long-Term Supply Contracts.”

Allowance for Doubtful Accounts

The allowance for doubtful accounts receivable reflects the Company’s best estimate of probable losses inherent in its accounts receivable.  The basis used to determine this value is derived from historical experience, specific allowances for known troubled customers and other known information.

Property, Plant and Equipment

Property, plant and equipment are stated at cost.  Depreciation is calculated using the straight-line method over the estimated useful lives of the related assets.  Leasehold improvements are amortized using the straight-line method over the shorter of the lease term or the estimated useful lives of the assets.  Estimated useful lives for buildings, machinery and equipment, and purchased software are 20 to 35 years, 4 to 10 years and 3 to 4 years, respectively.  Amortization incurred under capital leases is reported with depreciation expense.

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.

Goodwill and Intangible Assets

The Company’s acquisitions involve the purchase of tangible and intangible assets and the assumption of certain liabilities.   As part of the purchase price allocation, the Company allocates the purchase price to the tangible assets acquired and liabilities assumed based on estimated fair market values, and the remainder of the purchase price is allocated to intangibles and goodwill.  Goodwill and intangible assets with indefinite lives are not amortized but are subject to an impairment assessment at least annually in relation to their fair value.   Under guidelines established by FASB ASC Topic 280, the Company operates in two operating segments. However, the Company has recorded its goodwill and conducts testing for potential goodwill impairment at a reporting unit level.   The reporting units represent a business for which discrete financial information is available, and segment management regularly reviews the operating results.  As part of this process, the Company first assesses qualitatively whether it is necessary to perform the quantitative test.  The qualitative assessment involves evaluating relevant events or circumstances to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount.  If it is, the Company can bypass the quantitative assessment of goodwill.  If it is not, or if the Company has elected to bypass the qualitative assessment process, the quantitative assessment of goodwill utilizes a two-step process, where the carrying value of the reporting unit is compared to its fair value.  If the carrying value is less than the fair value, no impairment exists, and the second step is not performed.  However, if the carrying value is greater than the fair value, the second step is performed.  An impairment charge would be recognized for the amount that the carrying value of the goodwill exceeds its fair value. The fair values for goodwill testing are estimated using a combination of the income and market approach unless circumstances indicate that a better estimate of fair value is available. The income approach utilizes the discounted cash flow model (“DCF model”) and the market approach is based on the market data for a group of guideline companies.

Deferred Gain on Sale of Real Estate

On December 28, 2006, the Company entered into an agreement with a third party to sell and lease back certain of its real estate properties for $10,250.  The amount of the sale price in excess of book value for these properties of $4,242 was deferred and is being amortized over the 18 year term of the leases on a straight-line basis.

Share-Based Compensation

The Company recognizes compensation expense for share-based payment transactions in the financial statements at their fair value.  The expense is measured at the grant date, based on the calculated fair value of the share-based award, and is recognized over the requisite service period (generally the vesting period of the equity award).

Income Taxes

Provisions for federal and state income taxes are calculated on reported net income before income taxes based on current tax law and also include, in the current period, the cumulative effect of any changes in tax rates from those used previously in determining deferred tax assets and liabilities.  Such provisions differ from the amounts currently receivable or payable because certain items of income and expense are recognized in different time periods for financial reporting purposes than for income tax purposes.  Significant judgment is required in determining income tax provisions and evaluating tax positions.

A valuation allowance, if needed, reduces deferred tax assets to the amount expected to be realized. When determining the amount of net deferred tax assets that are more likely than not to be realized, Management assesses all available positive and negative evidence. This evidence includes, but is not limited to, prior earnings history, expected future earnings, carry-back and carry-forward periods and the feasibility of ongoing tax strategies that could potentially enhance the likelihood of the realization of a deferred tax asset. The weight given to the positive and negative evidence is commensurate with the extent the evidence may be objectively verified. As such, it is generally difficult for positive evidence regarding projected future taxable income exclusive of reversing taxable temporary differences to outweigh objective negative evidence of recent financial reporting losses.

        Based on these criteria and the relative weighting of both the positive and negative evidence available, and in particular the activity surrounding the Company's significant loss in 2013, management determined that it was necessary to establish a valuation allowance against all of its net U.S. deferred tax assets at December 31, 2013. This determination was made as the Company entered into a cumulative loss position over the three year period ended December 31, 2013 primarily due to the recording a goodwill impairment of $73,528 related to Valent. Once the Company entered into a cumulative loss position it has passed the threshold after which there is a presumption that a company should no longer rely solely on projected future income in determining whether the deferred tax asset is more likely than not to be realized. The Company will continue to monitor its deferred tax position and may adjust the valuation allowance, if necessary, for utilization of the underlying deferred tax assets through current taxable income or as available evidence changes.

The accounting for uncertainty in income taxes requires a more-likely-than-not threshold for financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return.  The Company records a liability for the difference between the benefit recognized and measured for financial statement purposes and the tax position taken or expected to be taken on our tax return.  To the extent that management’s assessment of such tax positions changes, the change in estimate is recorded in the period in which the determination is made.

The Company’s unrecognized tax benefits as of December 31, 2013 and 2012 are immaterial.  The Company expects no significant increases or decreases in unrecognized tax benefits due to changes in tax positions within one year of December 31, 2013.  The Company has no material interest or penalties relating to income taxes recognized on the Consolidated Balance Sheet as of December 31, 2013 and 2012.  As of December 31, 2013, returns for calendar years 2010 through 2012 remain subject to examination by the Internal Revenue Service and/or various state tax jurisdictions.

Financial Instruments

Fair values of the Company’s long-term obligations approximate their carrying values as the applicable interest rates approximate the current market rates or have variable rate characteristics.  The Company’s other financial instruments have fair values that approximate their respective carrying values due to their short maturities.

Reclassifications

Certain reclassifications have been made to prior period financial statements in order to conform to current period presentation.

Recent Accounting Pronouncements

In March 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2013-5, "Foreign Currency Matters". The amendments in ASU 2013-5 resolve the diversity in practice about whether current literature applies to the release of the cumulative translation adjustment into net income when a parent either sells a part or all of its investment in a foreign entity or no longer holds a controlling financial interest in a subsidiary or group of assets that is a nonprofit activity or a business within a foreign entity. In addition, the amendments in ASU 2013-5 resolve the diversity in practice for the treatment of business combinations achieved in stages (sometimes also referred to as step acquisitions) involving a foreign entity. ASU 2013-5 is effective prospectively for fiscal years, and interim reporting periods within those years, beginning after December 15, 2013. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial statements.

In July 2013, FASB issued ASU 2013-10, “Inclusion of the Fed Funds Effective Swap Rate (or Overnight Index Swap Rate) as a Benchmark Interest Rate for Hedge Accounting Purposes”, which amends the current accounting requirements in Topic 815 “Derivatives and Hedging”. Before the amendments in this update, only interest rates on direct Treasury obligations of the U.S. government (“UST”) and, for practical reasons, the London Interbank Offered Rate (“LIBOR”) swap rate were considered benchmark interest rates in the United States. Due the increased importance of OIS (“Overnight Index Swap Rate” or also referred to as the “Fed Funds Effective Swap Rate”), the objective of this update is to provide for the inclusion of OIS as a U.S. benchmark interest rate for hedge accounting purposes, in addition to UST and LIBOR. This amendment became effective for qualifying new or redesignated hedging relationships entered into on or after July 17, 2013. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements.

In July 2013, FASB issued ASU 2013-11, “Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists”. ASU 2013-11 requires entities to net its liability for unrecognized tax positions against a net operating loss carryforward, a similar tax loss or a tax credit carryforward when settlement in this manner is available under the tax law. The provisions of this new guidance are effective as of the beginning of the Company’s first quarter of 2014. The adoption of this standard is not expected to have a material impact on the Company's consolidated financial statements.

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ACQUISITIONS (Tables)

12 Months Ended

Dec. 31, 2013

Business Acquisition [Line Items]

Pro forma consolidated operating results

The following table presents unaudited pro-forma consolidated operating results for the Company for the years ended December 31, 2012 and 2011, as if Valent had been acquired as of the beginning of the periods presented:

	December 31,
	2012		2011
Net sales	$	386,402	$	340,551
Net income	12,899		10,152

Valent Aerostructures, LLC [Member]

Business Acquisition [Line Items]

Summary of purchase price allocation

The following table summarizes the final purchase price allocation for Valent at the date of acquisition:

Cash	$	44
Accounts receivable	16,769
Inventory	28,053
Prepaid expenses and other current assets	640
Fixed assets	56,075
Intangible assets	46,546
Other long-term assets	1,576
Goodwill	129,816
Current liabilities assumed	(25,187		)
Long-term liabilities assumed	(23,080		)
Cost of acquisition	$	231,252

TASS, Inc. [Member]

Business Acquisition [Line Items]

Summary of purchase price allocation

The following table summarizes the purchase price allocation for TASS at the date of acquisition:

Cash	$	617
Accounts receivable	1,979
Other assets	175
Fixed assets	196
Intangible assets	2,247
Goodwill	6,313
Current liabilities assumed	(1,247		)
Cost of acquisition	$	10,280

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DERIVATIVE FINANCIAL INSTRUMENTS (Tables)

12 Months Ended

Dec. 31, 2013

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivatives recognized in the Condensed Consolidated Balance Sheet

The derivatives are recognized in the Condensed Consolidated Balance Sheet at fair value, as of December 31, 2013 as follows:

Derivative Assets and Liabilities	Location in Condensed Consolidated Balance Sheet	December 31, 2013
Derivative designated as hedging instrument:
Interest rate purchased options at fair value	Other current assets	$	18
Derivative designated as hedging instrument:
Interest rate swaps at fair value	Other long term liabilities	$	392

Derivatives recognized in AOCI and earnings

The following amounts are included in AOCI and earnings for the year ended December 31, 2013:

	Net of Tax
Derivatives in Cash Flow Hedging Relationship	Effective portion of (Gain) Loss Recognized in AOCI on Derivative		Effective Portion of (Gain) Loss Reclassified from AOCI into Earnings(1)
Year ended December 31, 2013
Interest rate derivatives	$	278	$	—

(1) No amounts related to the interest rate derivatives were reclassified from AOCI to interest expense during the period.

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ASSETS AND LIABILITIES MEASURED AT FAIR VALUE (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended	12 Months Ended
	Jun. 30, 2013	Dec. 31, 2013		Dec. 31, 2012		Dec. 31, 2011
Liabilities at Fair Value [Abstract]
Impairment loss on intangible assets		$ 4,222	[1],[2]	$ 0	[1]	$ 1,163
Impairment loss on goodwill		73,528	[3]
Fair value adjustment of liability		7,950	[4]
Total gains (losses)		(69,800)		0
Contingent consideration write-off	7,950	7,950		0		0
Recurring Fair Value Measurement [Member]
Liabilities at Fair Value [Abstract]
Contingent consideration				7,950	[4]
Recurring Fair Value Measurement [Member] | Level 1 [Member]
Liabilities at Fair Value [Abstract]
Contingent consideration		0	[4]	0	[4]
Recurring Fair Value Measurement [Member] | Level 2 [Member]
Liabilities at Fair Value [Abstract]
Contingent consideration				0	[4]
Recurring Fair Value Measurement [Member] | Level 3 [Member]
Liabilities at Fair Value [Abstract]
Contingent consideration		0	[4]	7,950	[4]
Non-recurring Fair Value Measurement [Member]
Assets at Fair Value [Abstract]
Intangible assets, net		55,465	[1],[2]	48,793	[1]
Goodwill		113,223	[3]
Non-recurring Fair Value Measurement [Member] | Level 1 [Member]
Assets at Fair Value [Abstract]
Intangible assets, net		0	[1],[2]	0	[1]
Goodwill		0	[3]
Non-recurring Fair Value Measurement [Member] | Level 2 [Member]
Assets at Fair Value [Abstract]
Intangible assets, net		0	[1],[2]	0	[1]
Goodwill		0	[3]
Non-recurring Fair Value Measurement [Member] | Level 3 [Member]
Assets at Fair Value [Abstract]
Intangible assets, net		55,465	[1],[2]	48,793	[1]
Goodwill		113,223	[3]
Interest Rate Derivatives [Member] | Recurring Fair Value Measurement [Member]
Assets at Fair Value [Abstract]
Interest rate derivatives		18	[5]
Liabilities at Fair Value [Abstract]
Interest rate derivatives		392	[5]
Interest Rate Derivatives [Member] | Recurring Fair Value Measurement [Member] | Level 1 [Member]
Assets at Fair Value [Abstract]
Interest rate derivatives		0	[5]
Liabilities at Fair Value [Abstract]
Interest rate derivatives		0	[5]
Interest Rate Derivatives [Member] | Recurring Fair Value Measurement [Member] | Level 2 [Member]
Assets at Fair Value [Abstract]
Interest rate derivatives		18	[5]
Liabilities at Fair Value [Abstract]
Interest rate derivatives		392	[5]
Interest Rate Derivatives [Member] | Recurring Fair Value Measurement [Member] | Level 3 [Member]
Assets at Fair Value [Abstract]
Interest rate derivatives		0	[5]
Liabilities at Fair Value [Abstract]
Interest rate derivatives		$ 0	[5]

[1] The fair values of intangibles relating to the 2012 acquisitions of TASS and Valent were determined by third parties in connection with the purchase and recorded at those values.

[2] During the second quarter of 2013, a triggering event occurred when the Company commenced an initiative to rebrand its core engineering business. Under this initiative, the D3 Technologies name became obsolete and the $4,222 indefinite lived intangible asset related to that trade name was deemed to be fully impaired and a loss was recorded in the Consolidated Statements of Operations for the year ended December 31, 2013

[3] During the fourth quarter of 2013, the Company performed its annual impairment analysis of goodwill. As a result of this analysis, the goodwill related to the Valent acquisition was deemed impaired, and a $73,528 impairment charge was recorded in the Consolidated Statements of Operations for the year ended December 31, 2013.

[4] The Monte Carlo simulation was used with a normal probability distribution of the best estimate of EBITDA for 2013 to approximate fair value. At June 30, 2013, the EBITDA target was not expected to occur and, as such, the $7,950 of contingent consideration was deemed unlikely to be paid, and a benefit was recorded on a separate line in the Condensed Consolidated Statements of Operations for the year ended December 31, 2013.

[5] The fair values of interest rate derivatives are the amount the company would receive or pay to terminate the contracts, considering quoted market prices of comparable agreements. (Also see Note 10 to the Consolidated Financial Statements)

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INCOME TAXES (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Current deferred tax assets (liabilities):
Inventories	$ 3,871	$ 1,888
Accrued vacation	912	705
Stock award	891	522
Obligation under operating leases	733	587
Other	164	137
Net current deferred tax asset	6,571	3,839
Long-term deferred tax assets (liabilities):
Goodwill	20,904	215
Depreciation	(6,178)	(6,151)
Long-term contract costs	(4,475)	(1,941)
Amortization of intangibles	(3,265)	(3,646)
Professional fees	1,852	1,946
Gain on sale of real estate	954	1,022
NOL Carryforwards	1,031	261
Other	525	(177)
Net long-term deferred tax assets (liabilities)	11,348	(8,471)
Less: valuation allowance	(18,137)	(261)
Net deferred tax assets (liabilities)	(218)	(4,893)
Increase in valuation allowance to fully reserve the U.S. net deferred tax asset	(17,876)
Federal [Abstract]
Current	(676)	7,926	5,658
Deferred	(6,066)	(109)	1,149
Provision for federal income taxes	(6,742)	7,817	6,807
State [Abstract]
Current	120	346	225
Deferred	(357)	(10)	104
Provision for state income taxes	(237)	336	329
Income Tax Reconciliation [Abstract]
Federal taxes	(22,912)	8,627	8,235
State and local taxes, net of federal benefit	(1,119)	336	329
Production deduction	0	(530)	(508)
Valuation allowance	17,718	0	0
Research and experimental and other tax credits	(634)	(300)	(665)
Other	(32)	20	(255)
(Benefit) provision for income taxes	$ (6,979)	$ 8,153	$ 7,136

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CONSOLIDATED BALANCE SHEETS (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Current assets:
Cash and cash equivalents	$ 1,572	$ 4,347
Trade accounts receivable, net	72,853	69,159
Inventories	113,178	90,039
Prepaid expenses and other current assets	4,411	5,655
Deferred income taxes	2,693	3,839
Total current assets	194,707	173,039
Property, plant and equipment, net	103,375	96,218
Goodwill	113,223	179,314
Intangible assets, net	55,465	64,334
Other assets	13,281	15,059
Total assets	480,051	527,964
Current liabilities:
Accounts payable	19,388	30,471
Accrued expenses	19,082	23,703
Current installments of long-term debt and capital lease obligations	5,242	5,632
Total current liabilities	43,712	59,806
Long-term debt and capital lease obligations, less current installments	285,369	255,067
Other long-term liabilities	3,915	3,405
Deferred income taxes	2,911	8,732
Total long-term liabilities	292,195	267,204
Shareholders’ equity:
Common stock, $0.02 par value per share; authorized 28,000,000 shares; issued 12,873,208 and 12,860,023 shares at December 31, 2013 and December 31, 2012, respectively	257	257
Preferred stock, $0.02 par value per share; authorized 2,000,000 shares; none issued at either date	0	0
Additional paid-in capital	92,692	90,839
Accumulated other comprehensive loss	(507)	(49)
Treasury stock, at cost, 22,321 shares at December 31, 2013 and 101,622 shares at December 31, 2012	(202)	(482)
Retained earnings	51,904	110,389
Total shareholders’ equity	144,144	200,954
Total liabilities and shareholders’ equity	$ 480,051	$ 527,964

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RESTRUCTURING (Tables)

12 Months Ended

Dec. 31, 2013

Restructuring and Related Activities [Abstract]

Summary of incurred and expected restructuring charges

The following table summarizes the incurred and expected charges associated with these restructuring activities:

	Incurred in Year		Remaining		Total Expense
	Ended		Expense to be		Expected to be
	December 31, 2013		Incurred		Incurred
			(In Thousands)
Employee severance arrangement - Precise closure	$	453	$	116	$	569
Employee separation agreement - Valent	2,616		—		2,616
Lease termination costs - Precise closure	—		165		165
Other	4		125		129
Total	$	3,073	$	406	$	3,479

Summary of restructuring activity

The following table summarizes restructuring activity related to the Precise Machine facility closure and the Valent Aerostructures, LLC separation agreement:

	Employee
	Severance			Other			Total
				(In Thousands)
Accrued restructuring balance as of December 31, 2012	$	—		$	—		$	—
Accrual additions	3,069			4			3,073
Cash payments	(2,647		)	(4		)	(2,651		)
Accrued restructuring balance as of December 31, 2013	$	422		$	—		$	422

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CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Parenthetical)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Issuance of stock
Shares in connection with exercise of options (in shares)			7,850
Shares of restricted stock (in shares)	67,996	108,646	76,548
Shares in connection with Valent acquisition (in shares)		783,798

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ACCRUED EXPENSES (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Accrued Liabilities [Abstract]
Accrued payroll	$ 3,286	$ 3,362
Accrued bonus	958	1,493
Accrued vacation & holiday	3,516	3,257
Accrued employee benefits	1,847	1,815
Accrued operating lease obligations	2,002	1,706
Contingent consideration	0	7,950
Accrued professional fees	1,253	754
Loss reserve on long-term production contracts	3,165	0
Other	3,055	3,366
Total accrued expenses	$ 19,082	$ 23,703

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INVENTORIES (Tables)

12 Months Ended

Dec. 31, 2013

Inventory Disclosure [Abstract]

Inventories

Inventories consist of the following:

	December 31,
	2013		2012
Raw materials	$	17,099	$	14,946
Work in progress	21,605		20,012
Manufactured and purchased components	21,675		18,898
Finished goods	40,572		30,792
Product inventory	100,951		84,648
Capitalized contract costs (1)	12,227		5,391
Total inventories	$	113,178	$	90,039

(1) 2013 includes a reduction to inventory of $2,057 related to a loss reserve on a long-term production contract.

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DERIVATIVE FINANCIAL INSTRUMENTS, FAIR VALUE BY INCOME STATEMENT LOCATION (Details) (Interest Rate Swap [Member], Cash Flow Hedging [Member], USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013
Interest Rate Swap [Member] | Cash Flow Hedging [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Effective portion of (Gain) Loss Recognized in AOCI on Derivative	$ 278
Effective Portion of (Gain) Loss Reclassified from AOCI into Earnings	$ 0	[1]

[1] No amounts related to the interest rate derivatives were reclassified from AOCI to interest expense during the period.

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STOCK BASED COMPENSATION

12 Months Ended

Dec. 31, 2013

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

STOCK BASED COMPENSATION

STOCK-BASED COMPENSATION

On July 7, 2005, the Company’s shareholders approved the LMI Aerospace, Inc. 2005 Long-term Incentive Plan (the “Plan”).  The Plan provides for the grant of non-qualified stock options, incentive stock options, shares of restricted stock, restricted stock units, stock appreciation rights, performance awards and other share-based grants and cash bonus awards to employees and directors.  All share-based grants or awards are subject to a time-based vesting schedule.  The company has only issued restricted stock in the periods presented.

All outstanding stock options were exercisable at December 31, 2010 and were exercised on or before January 19, 2011 at an exercise price of $2.00 per share.  The aggregate intrinsic value of options exercised during the year ended December 31, 2011, based upon the market price on exercise date, was $126.

A summary of the activity for non-vested restricted stock awards under the Company’s share-based compensation plans is presented below: 

	2013
Restricted Stock Awards	Shares		Weighted Average Grant Date Fair Value
Outstanding at January 1	189,828		$	18.76
Granted	67,996		21.42
Vested	(35,323	)	17.67
Forfeited	(2,750	)	20.20
Outstanding at December 31	219,751		$	19.74

Common stock compensation expense related to restricted stock awards granted under the Plan was $1,615, $1,494 and $1,254 for the years ended December 31, 2013, 2012 and 2011, respectively. Total unrecognized compensation costs related to non-vested share-based awards granted or awarded under the Plan were $1,857 and $2,071 as of December 31, 2013 and December 31, 2012, respectively.  These costs are expected to be recognized over a weighted average period of 1.2 and 1.6 years as of December 31, 2013 and 2012, respectively. The fair value of restricted stock awards that vested during the years ended December 31, 2013, 2012 and 2011, based on the market price on the vesting date, was $602, $3,199 and $2,149, respectively.

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PROPERTY, PLANT AND EQUIPMENT (Tables)

12 Months Ended

Dec. 31, 2013

Property, Plant and Equipment [Abstract]

Schedule of property, plant and equipment

Depreciation expense (including amortization expense on software) recorded by the Company totaled $15,913, $5,894 and $5,219 for 2013, 2012 and 2011, respectively.

	December 31,
	2013			2012
Land	$	1,455		$	1,455
Buildings and improvements	23,692			18,676
Machinery and equipment	122,132			108,391
Leasehold improvements	14,421			10,559
Software and other	11,403			10,629
Construction in progress	5,031			7,168
Total gross property, plant and equipment	178,134			156,878
Less accumulated depreciation	(74,759		)	(60,660		)
Total net property, plant and equipment	$	103,375		$	96,218

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RESTRUCTURING

12 Months Ended

Dec. 31, 2013

Restructuring and Related Activities [Abstract]

RESTRUCTURING

RESTRUCTURING

During the fourth quarter of 2013, the Company committed to a restructuring plan that will result in the closure of its Precise Machine facility located in Fort Worth, Texas. As a result, the Company recognized severance expense in year ended December 31, 2013 related to the closure of $453. These restructuring expenses were reflected in the selling, general, and administrative section on a separate line of the Consolidated Statements of Comprehensive Income. This restructuring plan had no material impact on cash flow for the year. The Company expects the restructuring plan to be completed in the second quarter of 2014.

In addition, during the fourth quarter of 2013, the Company reached a separation agreement with key members of Valent Aerostructures, LLC. This agreement resulted in recognition of $2,620 in incremental expenses and a $2,620 unfavorable impact to operating cash flow in the year ended December 31, 2013. These restructuring expenses were reflected on a separate line of the Consolidated Statements of Comprehensive Income.

The following table summarizes the incurred and expected charges associated with these restructuring activities:

	Incurred in Year		Remaining		Total Expense
	Ended		Expense to be		Expected to be
	December 31, 2013		Incurred		Incurred
			(In Thousands)
Employee severance arrangement - Precise closure	$	453	$	116	$	569
Employee separation agreement - Valent	2,616		—		2,616
Lease termination costs - Precise closure	—		165		165
Other	4		125		129
Total	$	3,073	$	406	$	3,479

In addition to the restructuring expenses detailed in the table above, the Company expects to incur additional restructuring and other project expenses of approximately $600 primarily associated with the integration of the work previously performed at the Precise Machine facility. The Company expects this reorganization to be completed by the second quarter of 2014.

The following table summarizes restructuring activity related to the Precise Machine facility closure and the Valent Aerostructures, LLC separation agreement:

	Employee
	Severance			Other			Total
				(In Thousands)
Accrued restructuring balance as of December 31, 2012	$	—		$	—		$	—
Accrual additions	3,069			4			3,073
Cash payments	(2,647		)	(4		)	(2,651		)
Accrued restructuring balance as of December 31, 2013	$	422		$	—		$	422

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COMMITMENTS AND CONTINGENCIES (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Commitments and Contingencies Disclosure [Abstract]
Lease expiration date	Dec. 31, 2025
Future minimum lease payments under operating leases [Abstract]
2014	$ 6,909
2015	6,327
2016	5,757
2017	4,997
2018	4,832
Thereafter	22,365
Total	51,187
Operating lease rent expense	$ 8,496	$ 6,789	$ 6,546
Maximum term of employment agreement	3 years

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CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Operating activities:
Net (loss)/income	$ (58,485)	$ 16,487	$ 16,389
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation and amortization	20,560	7,994	7,241
Goodwill and intangible asset impairment	77,750	0	1,163
Contingent consideration write-off	(7,950)	0	(1,235)
Restricted stock compensation	1,615	1,494	1,254
Deferred taxes	(6,060)	(1,062)	341
Other non-cash items	(420)	(317)	(227)
Changes in operating assets and liabilities, net of acquired businesses:
Trade accounts receivable	(4,678)	(8,093)	(8,871)
Inventories	(23,063)	(10,980)	(5,933)
Prepaid expenses and other assets	2,828	1,186	(1,080)
Current income taxes	1,939	(1,168)	1,731
Accounts payable	(11,276)	3,062	4,354
Accrued expenses	(1,109)	196	1,048
Net cash (used)/provided by operating activities	(8,349)	8,799	16,175
Investing activities:
Additions to property, plant and equipment	(23,738)	(18,783)	(10,267)
Acquisitions, net of cash acquired	(504)	(216,398)	0
Proceeds from sale of equipment	1,989	181	270
Net cash used by investing activities	(22,253)	(235,000)	(9,997)
Financing activities:
Proceeds from issuance of debt	5,751	229,124	0
Principal payments on long-term debt and notes payable	(5,863)	(118)	(180)
Advances on revolving line of credit	107,000	40,278	0
Payments on revolving line of credit	(77,236)	(34,042)	0
Prepaid financing costs	(1,817)	(12,736)	0
Other, net	(8)	174	(77)
Net cash provided (used) by financing activities	27,827	222,680	(257)
Net (decrease) increase in cash and cash equivalents	(2,775)	(3,521)	5,921
Cash and cash equivalents, beginning of year	4,347	7,868	1,947
Cash and cash equivalents, end of year	1,572	4,347	7,868
Cash payments for:
Interest paid	13,161	585	490
Income taxes paid, net of refunds received	(2,683)	10,261	5,032
Supplemental disclosure of non-cash transactions:
Fair value of common stock issued to acquire Valent	0	15,000	0
Contingent consideration	(7,950)	7,950	0
Equipment acquired under capital lease	$ 411	$ 746	$ 0

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CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)	Dec. 31, 2013	Dec. 31, 2012
Shareholders’ equity:
Common stock, par value (in dollars per share)	$ 0.02	$ 0.02
Common stock, authorized shares (in shares)	28,000,000	28,000,000
Common stock, shares issued (in shares)	12,873,208	12,860,023
Preferred stock, par value (in dollars per share)	$ 0.02	$ 0.02
Preferred stock, authorized shares (in shares)	2,000,000	2,000,000
Preferred stock, shares issued (in shares)	0	0
Treasury stock, at cost (in shares)	22,321	101,622

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DERIVATIVE FINANCIAL INSTRUMENTS

12 Months Ended

Dec. 31, 2013

Derivative Instruments and Hedging Activities Disclosure [Abstract]

DERIVATIVE FINANCIAL INSTRUMENTS

DERIVATIVE FINANCIAL INSTRUMENTS

The Company has interest rate risk with respect to interest expense on variable rate debt.  At December 31, 2013, the Company had $258,750 of variable rate debt outstanding.  On March 28, 2013, and November 15, 2013, in compliance with its credit agreement, the Company purchased option and swap derivative contracts to hedge against the potential impact on earnings from an increase in market interest rates associated with the interest payments on its variable rate term credit facility.  The objective of the hedge transactions is to reduce the variability of cash flows due to changes in the designated benchmark interest rate on the term debt.  The purchased options have a strike price of 1.25%, based on 30-day LIBOR with maturity dates each month from April 28, 2013 through December 31, 2014 and payment dates coinciding directly with the term debt. The interest rate swap entered into on March 28, 2013 is effective from December 31, 2014 through December 31, 2015 and effectively swaps a notional amount of $112,500 from the floating LIBOR interest rate with a floor of 1.25% for a 1.63% fixed interest rate.  The interest rate swaps entered into on November 15, 2013 are effective from December 31, 2014 through December 31, 2015 and December 31, 2015 through December 31, 2016, respectively, and effectively swap a notional amount of $80,000 and $100,000, respectively, from the floating LIBOR interest rate with a floor of 1.25% for a 1.565% fixed interest rate and a floor of 1.25% for a 1.99% fixed interest rate, respectively. The derivatives are recognized in the Condensed Consolidated Balance Sheet at fair value, as of December 31, 2013 as follows:

Derivative Assets and Liabilities	Location in Condensed Consolidated Balance Sheet	December 31, 2013
Derivative designated as hedging instrument:
Interest rate purchased options at fair value	Other current assets	$	18
Derivative designated as hedging instrument:
Interest rate swaps at fair value	Other long term liabilities	$	392

The Company has designated and accounts for this swap and purchased options as cash flow hedges of interest rate risk. For a cash flow hedge, the Company reports the gain or loss, net of taxes, from the effective portion of the hedge as a component of Accumulated Other Comprehensive Income (“AOCI”) deferring it and reclassifying it into earnings in the same period or periods in which the hedged transaction affects earnings and in the same line item on the Condensed Consolidated Statements of Comprehensive Income as the impact of the hedged transaction.  Amounts reported in AOCI related to these derivatives are reclassified from AOCI to earnings as interest payments are made on the Company’s term credit facility debt in amounts necessary to convert the floating rate interest expense into fixed rate interest expense.  The terms of these derivatives and the variable rate debt coincide making it highly effective so no amounts were excluded from the assessment of hedge effectiveness and any ineffectiveness portion has not been, and is not expected to be, significant.  The Company does not use derivative instruments for trading or speculative purposes.

The following amounts are included in AOCI and earnings for the year ended December 31, 2013:

	Net of Tax
Derivatives in Cash Flow Hedging Relationship	Effective portion of (Gain) Loss Recognized in AOCI on Derivative		Effective Portion of (Gain) Loss Reclassified from AOCI into Earnings(1)
Year ended December 31, 2013
Interest rate derivatives	$	278	$	—

(1) No amounts related to the interest rate derivatives were reclassified from AOCI to interest expense during the period.

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Document and Entity Information (USD $)	12 Months Ended
	Dec. 31, 2013	Mar. 11, 2014	Jun. 30, 2013
Document and Entity Information [Abstract]
Entity Registrant Name	LMI AEROSPACE INC
Entity Central Index Key	0001059562
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Accelerated Filer
Entity Public Float			$ 194,485,960
Entity Common Stock, Shares Outstanding		12,838,586
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	FY
Document Type	10-K
Amendment Flag	false
Document Period End Date	Dec. 31, 2013

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TREASURY STOCK TRANSACTIONS

12 Months Ended

Dec. 31, 2013

Equity [Abstract]

TREASURY STOCK TRANSACTIONS

TREASURY STOCK TRANSACTIONS

The Company issued from treasury stock 38,397 and 102,986 shares, net of forfeitures, in 2013 and 2012, respectively, and 5,860 shares in 2011, in conjunction with the exercise of certain employees’ options and grants of restrictive stock, but did not purchase any shares during those years.  The Company also utilized approximately 40,904, 44,474 and 46,830 shares from treasury stock to match employee contributions in the Company’s 401(k) Plan in 2013, 2012 and 2011, respectively.

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SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Reserve for Accounts Receivable [Member]
Movement in Valuation Allowances and Reserves [Roll Forward]
Beginning Balance	$ 287	$ 359	$ 253
Charge to Cost/Expense	(27)	(140)	157
Other Charge to Cost/Expense	0	86	0
Write-offs net of Recoveries	(80)	(18)	(51)
Ending Balance	180	287	359
Valuation Allowance of Deferred Tax Assets [Member]
Movement in Valuation Allowances and Reserves [Roll Forward]
Beginning Balance	261	0	0
Charge to Cost/Expense	17,876	261	0
Other Charge to Cost/Expense	0	0	0
Write-offs net of Recoveries	0	0	0
Ending Balance	$ 18,137	$ 261	$ 0

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (USD $) In Thousands, except Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Sales and service revenue
Product sales	$ 324,133	$ 168,943	$ 161,435
Service revenues	88,424	109,686	92,605
Net sales	412,557	278,629	254,040
Cost of sales and service revenue
Cost of product sales	255,261	121,247	117,368
Cost of service revenues	77,434	89,074	77,022
Cost of sales	332,695	210,321	194,390
Gross profit	79,862	68,308	59,650
Selling, general and administrative expenses	55,862	36,891	33,563
Goodwill and intangible asset impairment	77,750	0	1,163
Contingent consideration write-off	(7,950)	0	0
Restructuring expense	3,073	0	0
Acquisitions expense	247	5,362	0
(Loss) income from operations	(49,120)	26,055	24,924
Other income (expense):
Interest expense	(16,962)	(1,771)	(669)
Other, net	618	356	(730)
Total other expense	(16,344)	(1,415)	(1,399)
(Loss) income before income taxes	(65,464)	24,640	23,525
(Benefit) provision for income taxes	(6,979)	8,153	7,136
Net (loss) income	(58,485)	16,487	16,389
Other comprehensive income (loss):
Change in foreign currency translation adjustment	(23)	(49)	0
Unrealized loss on interest rate hedges	(435)	0	0
Total comprehensive (loss) income	$ (58,943)	$ 16,438	$ 16,389
Amounts per common share:
Net (loss) income per common share (in dollars per share)	$ (4.64)	$ 1.41	$ 1.42
Net (loss) income per common share assuming dilution (in dollars per share)	$ (4.64)	$ 1.39	$ 1.40
Weighted average common shares outstanding (in shares)	12,607,833	11,701,607	11,559,895
Weighted average dilutive common shares outstanding (in shares)	12,607,833	11,839,182	11,741,513

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INVENTORIES

12 Months Ended

Dec. 31, 2013

Inventory Disclosure [Abstract]

INVENTORIES

INVENTORIES

Inventories consist of the following:

	December 31,
	2013		2012
Raw materials	$	17,099	$	14,946
Work in progress	21,605		20,012
Manufactured and purchased components	21,675		18,898
Finished goods	40,572		30,792
Product inventory	100,951		84,648
Capitalized contract costs (1)	12,227		5,391
Total inventories	$	113,178	$	90,039

(1) 2013 includes a reduction to inventory of $2,057 related to a loss reserve on a long-term production contract.

In accordance with ASC 605-35-45-1&2, the provisions for anticipated losses on contracts are accounted for as additional contract cost and recognized as part of cost of sales. Provisions for losses are recorded as a reduction of related contract costs recorded in inventory.

Inventoried costs include capitalized contract costs relating to programs and contracts with long-term production cycles, substantially all of which is not expected to be realized within one year.  The Company believes these amounts will be fully recovered over the life of the contracts.

For December 31, 2012, the Company has revised the classification of $5,505 in inventory between raw materials and manufactured and purchased components for a misclassification as previously reported at December 31, 2012.

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ACCOUNTS RECEIVABLE NET

12 Months Ended

Dec. 31, 2013

Receivables [Abstract]

ACCOUNTS RECEIVABLE NET

ACCOUNTS RECEIVABLE NET

Accounts receivable, net consists of the following:

	December 31,
	2013			2012
Trade receivables	$	63,804		$	50,876
Unbilled revenue	7,256			12,372
Other receivables	1,973			6,198
	73,033			69,446
Less: Allowance for doubtful accounts	(180		)	(287		)
Accounts receivable, net	$	72,853		$	69,159

Under long-term contract accounting unbilled revenue on long-term contracts arise when the sales or revenues based on performance attainment, though appropriately recognized, cannot be billed yet under terms of the contract as of the balance sheet date.  Accounts receivable expected to be collected after one year are not material.

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INCOME TAXES

12 Months Ended

Dec. 31, 2013

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

The temporary differences between the tax basis of assets and liabilities and their financial reporting amounts that give rise to the deferred income tax assets and liabilities are as follows:

	December 31,
	2013			2012
Current deferred tax assets (liabilities):
Inventories	$	3,871		$	1,888
Accrued vacation	912			705
Stock award	891			522
Obligation under operating leases	733			587
Other	164			137
Net current deferred tax asset	6,571			3,839
Long-term deferred tax assets (liabilities):
Goodwill	20,904			215
Depreciation	(6,178		)	(6,151		)
Long-term contract costs	(4,475		)	(1,941		)
Amortization of intangibles	(3,265		)	(3,646		)
Professional fees	1,852			1,946
Gain on sale of real estate	954			1,022
NOL Carryforwards	1,031			261
Other	525			(177		)
Net long-term deferred tax assets (liabilities)	11,348			(8,471		)
Less: valuation allowance	(18,137		)	(261		)
Net deferred tax assets (liabilities)	$	(218	)	$	(4,893	)

 Based on our current and anticipated future pre-tax earnings, we believe it is more likely than not that our federal and state deferred tax assets, including benefits related to net operating loss carry forwards, will not be realized based on the measurement standards required under ASC 740, Accounting for Income Taxes. We established a valuation allowance of $17,876 and $261 in 2013 and 2012, respectively. The federal net operating losses expire in the year 2033. We evaluated all significant available positive and negative evidence, including the existence of losses in the current year in assessing the need for a valuation allowance.

The Company’s income tax (benefit) provision attributable to income before taxes consisted of the following for the years ended December 31, 2013, 2012 and 2011:

	2013			2012			2011
Federal:
Current	$	(676	)	$	7,926		$	5,658
Deferred	(6,066		)	(109		)	1,149
	(6,742		)	7,817			6,807
State:
Current	120			346			225
Deferred	(357		)	(10		)	104
	(237		)	336			329
(Benefit) provision for income taxes	$	(6,979	)	$	8,153		$	7,136

The reconciliation of income tax computed at the U.S. federal statutory tax rates to income tax expense is as follows:

	2013			2012			2011
Federal taxes	$	(22,912	)	$	8,627		$	8,235
State and local taxes, net of federal benefit	(1,119		)	336			329
Production deduction	—			(530		)	(508		)
Valuation allowance	17,718			—			—
Research and experimental and other tax credits	(634		)	(300		)	(665		)
Other	(32		)	20			(255		)
(Benefit) provision for income taxes	$	(6,979	)	$	8,153		$	7,136

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(LOSS) EARNINGS PER COMMON SHARE

12 Months Ended

Dec. 31, 2013

Earnings Per Share [Abstract]

EARNINGS PER COMMON SHARE

EARNINGS PER COMMON SHARE

Basic net income per common share is based upon the weighted average number of common shares outstanding.  Diluted net income per common share is based upon the weighted average number of common shares outstanding, including the dilutive effect of restricted stock, using the if-converted methods.

The following table shows a reconciliation of the numerators and denominators used in calculating basic and diluted earnings per share.

	Year ended December 31,
	2013			2012		2011
Numerators
Net (loss) income	$	(58,485	)	$	16,487	$	16,389
Denominators
Weighted average common shares - basic	12,607,833			11,701,607		11,559,895
Dilutive effect of restricted stock	—			137,575		181,618
Weighted average common shares - diluted	12,607,833			11,839,182		11,741,513
Basic earnings per share	$	(4.64	)	$	1.41	$	1.42
Diluted earnings per share	$	(4.64	)	$	1.39	$	1.40

For the twelve months ended December 31, 2013, 111,976 shares are not included in the calculation of diluted earnings per share, as their inclusion would have been anti-dilutive. These securities could be dilutive in future periods.

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ACCRUED EXPENSES

12 Months Ended

Dec. 31, 2013

Payables and Accruals [Abstract]

ACCRUED EXPENSES

ACCRUED EXPENSES

Accrued expenses consist of the following:

	December 31,
	2013		2012
Accrued payroll	$	3,286	$	3,362
Accrued bonus	958		1,493
Accrued vacation & holiday	3,516		3,257
Accrued employee benefits	1,847		1,815
Accrued operating lease obligations	2,002		1,706
Contingent consideration	—		7,950
Accrued professional fees	1,253		754
Loss reserve on long-term production contracts	3,165		—
Other	3,055		3,366
Total accrued expenses	$	19,082	$	23,703

In the second quarter of 2013, the Company realized a $7,950 benefit related to the write-off of the contingent consideration associated with the December 2012 purchase of Valent. During the second quarter of 2013, it was deemed unlikely that the earnings levels required to be achieved for former Valent interest holders to be paid contingent consideration would not be achieved by the required date of December 31, 2013. As such, the contingent consideration was recorded as a benefit in the year ended December 31, 2013.

In the fourth quarter of 2013, the Company recorded a loss reserve of $5,267 related to a long-term production contract at Valent. This loss was treated as a measurement period adjustment for the Valent purchase price allocation. (See Note 1, Accounting Policies and Note 7, Goodwill and Intangible Assets). At December 31, 2013, the loss reserve balance was $5,222 of which $3,165 is included in accrued expenses with the remainder recorded as a reduction of related contract inventory.

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ACCRUED EXPENSES, ACQUISITION-RELATED (Details) (USD $) In Thousands, unless otherwise specified			3 Months Ended	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2013 Valent Aerostructures, LLC [Member]	Dec. 31, 2013 Valent Aerostructures, LLC [Member]	Dec. 31, 2013 Accrued Liabilities, Current [Member] Valent Aerostructures, LLC [Member]
Business Acquisition [Line Items]
Adjustment to loss provision on long-term production contract			$ 5,267	$ 5,267
Loss reserve on long-term production contracts	$ 3,165	$ 0	$ 5,222	$ 5,222	$ 3,165

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PROPERTY, PLANT AND EQUIPMENT

12 Months Ended

Dec. 31, 2013

Property, Plant and Equipment [Abstract]

PROPERTY PLANT AND EQUIPMENT

PROPERTY, PLANT AND EQUIPMENT

Depreciation expense (including amortization expense on software) recorded by the Company totaled $15,913, $5,894 and $5,219 for 2013, 2012 and 2011, respectively.

	December 31,
	2013			2012
Land	$	1,455		$	1,455
Buildings and improvements	23,692			18,676
Machinery and equipment	122,132			108,391
Leasehold improvements	14,421			10,559
Software and other	11,403			10,629
Construction in progress	5,031			7,168
Total gross property, plant and equipment	178,134			156,878
Less accumulated depreciation	(74,759		)	(60,660		)
Total net property, plant and equipment	$	103,375		$	96,218

See discussion in Note 9 to the Consolidated Financial Statements regarding property, plant and equipment recorded as a result of capital leases.

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GOODWILL AND INTANGIBLE ASSETS

12 Months Ended

Dec. 31, 2013

Goodwill and Intangible Assets Disclosure [Abstract]

GOODWILL AND INTANGIBLE ASSETS

GOODWILL AND INTANGIBLE ASSETS

Goodwill

The following table summarizes the net carrying amount of goodwill by segment at December 31, 2013 and 2012, respectively:

							Engineering
	Aerostructures						Services				Total
	2013			2012			2013		2012		2013			2012
Balance at December 31,
Gross Goodwill	$	141,663		$	135,431		$	50,741	$	49,536	$	192,404		$	184,967
Accumulated impairment loss	(79,181		)	(5,653		)	—		—		(79,181		)	(5,653		)
Net Goodwill	$	62,482		$	129,778		$	50,741	$	49,536	$	113,223		$	179,314

The change in the net goodwill balance for Aerostructures was primarily related to the acquisition of Valent in December 2012, with Valent accounting for $56,288 and $123,584 of the balance at December 31, 2013 and 2012, respectively. Under ASC 805, the acquiring entity has a period of time, referred to as the measurement period, to finalize the accounting for a business combination. The increase in gross goodwill from December 2012 to December 2013 in Aerostructures is due to measurement period changes related to the acquisition of Valent. The material adjustments recorded in 2013 were related to a loss reserve on a long-term contract of $5,267 and a reduction in the value of fixed assets $482 which were offset by a working capital settlement adjustment of $1,219. The Company determined that an acquired contract on the Boeing 787 program was under-priced related to the level of effort required, resulting in a loss contract. In addition, during the fourth quarter of fiscal 2013, in accordance with the Company’s accounting policy as described in Note 1 to the Consolidated Financial Statements, the Company performed the annual impairment analysis and determined that carrying value for goodwill for Valent was above its fair value. As a result, a goodwill impairment charge of $73,528 was recorded in the fourth quarter of 2013. The fair value for the remaining goodwill in Aerostructures exceeded its carrying value.

The net goodwill balance at December 31, 2013 also consisted of $44,428 from the acquisition of D3 Technologies, Inc. (“D3”) in July 2007, $6,194 from the acquisition of Intec in January 2009 and $6,313 from the acquisition of TASS in August 2012. The net goodwill balance at December 31, 2012 consisted of $42,908 for the acquisition of D3, $6,194 from the acquisition of Intec, $6,628 from the acquisition of TASS and $123,584 from the acquisition of Valent. The increase in goodwill related to D3 resulted from the correction of a deferred tax liability that should have been recorded at acquisition on an indefinite lived intangible asset. Goodwill and deferred tax liability were increased by $1,520 to reflect the correction.

During the fourth quarter of fiscal 2013, in accordance with the Company’s accounting policy as described in Note 1 to the Consolidated Financial Statements, the Company also performed the annual impairment analysis on the Engineering Services group and the fair value exceeded the carrying value of the reporting unit.

Goodwill recorded as a result of the D3 and Intec acquisitions is not deductible for tax purposes, while goodwill recorded as a result of the Valent and TASS acquisitions is deductible for tax purposes. 

Intangible Assets

Intangible assets primarily consist of trademarks and customer intangibles resulting from the acquisitions of Versaform Corporation, D3, Intec, TASS, and Valent.  The trademark of $4,222 that resulted from acquisition of D3 was determined to have an indefinite life.  During the second quarter of 2013, a triggering event occurred when the Company commenced an initiative to rebrand its core engineering business. Under this initiative, the D3 Technologies name will no longer be used and the $4,222 indefinite lived intangible asset related to that trade name was deemed to be fully impaired. The amount was calculated using the income approach with a level 3 valuation. The impairment loss was recognized in the Engineering Services segment in a separate line in the selling, general and administrative expenses of the Consolidated Statements of Comprehensive Income for the year ended December 31, 2013.

The remaining trademarks resulted from the acquisitions of Intec, TASS, and Valent and have a weighted average useful life of 4.5 years.  Customer intangibles have a weighted average useful life of 18.5 years.   Other intangible assets have a weighted average useful life of 5.3 years.  The carrying values were as follows:

	December 31,
	2013			2012
Trademarks	$	778		$	5,000
Customer intangible assets	68,991			68,991
Other	1,481			1,481
Accumulated amortization	(15,785		)	(11,138		)
Intangible assets, net	$	55,465		$	64,334

Intangibles amortization expense for 2013, 2012 and 2011 was $4,647, $3,185 and $2,137, respectively.  Amortization expense for 2011 includes $1,163 for an impairment loss. During the first quarter of 2011, a triggering event occurred with regard to a certain proprietary technology intangible asset as a result of a failure to conclude a possible sale of a product line.  The impairment loss was recognized in the Aerostructures segment in a separate line in the selling, general and administrative expenses of the Consolidated Statements of Comprehensive Income.

Estimated annual amortization expense for these intangibles is as follows:

Year ending December 31,
2014	$	4,524
2015	4,359
2016	4,134
2017	3,915
2018	3,563
Thereafter	34,970
	$	55,465

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LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS

12 Months Ended

Dec. 31, 2013

Debt Disclosure [Abstract]

LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS

LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS

Long-term debt and capital lease obligations consist of the following:

	December 31,
	2013		2012
Revolver under credit agreement, variable	$	36,000	$	6,236
Term loan under credit agreement, variable	222,750		225,000
Missouri IRBs at fixed rate of 2.80% at December 31, 2013	7,756		8,113
Capital Leases, at fixed rates ranging from 2.04% to 7.73% at December 31, 2013 and 3.00% to 7.73% at December 31, 2012	14,572		15,316
Notes payable, principal and interest payable monthly, at fixed rates, up to 3.60% and 3.25% at December 31, 2013 and 2012, respectively	9,533		6,034
Total debt	290,611		260,699
Less current installments	5,242		5,632
Total long-term debt and capital lease obligations	$	285,369	$	255,067

On December 28, 2012, the Company entered into a credit agreement to provide senior secured credit facilities to finance the Valent acquisition, refinance existing debt, and fund working capital requirements.  The credit agreement was amended on February 7, 2013 in conjunction with its completed syndication, increasing the Company's borrowing limit and reducing its rates. These credit facilities include a revolving credit facility of up to $125,000 and a term loan facility of $225,000.   The agreement was amended again on August 21, 2013 to provide more flexibility on the financial covenants through 2014. Borrowings under the facilities are secured by substantially all of the Company’s assets and bear interest at either the LIBOR rate plus a margin of up to 3.50% and 4.00%, respectively, with a LIBOR floor of 1.25% or the alternate base rate (“ABR”) which is the highest of the following plus a margin of up to 2.50% and 3.00%, respectively, with the applicable margin for the revolving credit facility subject to a a step-down grid, based on the total leverage ratio of the company effective with the start of the second quarter of 2013:

• Prime rate,

• Federal funds rate plus 0.5%

• The adjusted Eurodollar rate for an interest period of one month plus 1% or

• The 2.25% ABR rate floor

The Company is required to pay a commitment fee of between 0.375% and 0.625% on the unused portion of the revolving credit facility based on the ratio of consolidated net debt to consolidated EBITDA. At December 31, 2013, the commitment fee required was 0.625%.

The maturity dates are subject to acceleration upon breach of the financial covenants (consisting of a maximum total leverage ratio and senior leverage ratio and a minimum fixed charge coverage ratio) and other customary non-financial covenants contained in the credit agreement.  These financial covenants were eased in the amendment dated August 21, 2013 but will align with the levels in the original credit agreement by January 1, 2015. The Company's EBITDA and cash generation over the past year has been lower than originally expected. Without improved EBITDA and cash generation, the Company's risk of non-compliance with the required leverage ratio in the credit agreement will increase. If covenants are not met and modifications or waivers cannot be obtained, it will result in non-compliance with the credit agreement, the occurrence of which could result in the amounts outstanding under the term loan facility and revolving credit facility becoming immediately due and payable. As of December 31, 2013, the Company was in compliance with all of its financial and non-financial covenants.  The revolving credit and term loan facilities mature on the fifth and sixth year anniversary dates of December 28, 2017 and 2018, respectively.

The credit agreement also contains certain restrictive covenants that limit and in some circumstances prohibit, our ability to, among other things, incur additional debt, sell, lease or transfer our assets, pay dividends, make investments, guarantee debt or obligations, create liens, enter into transactions with our affiliates and enter into certain merger, consolidation or other reorganization transactions.  This agreement also requires mandatory prepayments of excess cash at certain leverage levels.  These restrictions could limit our ability to obtain future financing, make acquisitions or needed capital expenditures, withstand the current or future downturns in our business or the economy in general, conduct operations or otherwise take advantage of business opportunities that may arise, any of which could place us at a competitive disadvantage relative to our competitors that have less debt and are not subject to such restrictions.

As part of the acquisition of Valent, the Company assumed debt and capital leases for buildings and equipment that were underwritten to service underlying Industrial Revenue Bonds (“IRBs”) with the City of Washington, Missouri and Fredonia, Kansas.  Monthly payments are scheduled in an amount sufficient to service the total principal and interest of the underlying bonds.  Interest ranges from 2.80% to 7.73% and mature between September 2020 and June 2032.  In addition, the Company assumed a note payable to a prior minority shareholder for $2,000 payable in monthly installments over 36 months.

The Company entered into various notes payable and a capital lease agreement for the purchase of certain equipment in 2012.  The notes are secured by certain equipment and payable in monthly installments including interest ranging from 2.45% to 3.60% through November 2019.  In connection with its acquisition of TASS on August 7, 2012, as discussed in Note 2 above, the company entered into a $1,000 note payable which was paid in full in August 2013 plus interest at 3.25%. In December 2012, the Company entered into a commitment to finance a warehouse in Tulsa, Oklahoma through a $2,200 promissory note.  The note carries a 2.95% fixed rate payable in monthly payments of principal and interest with a balloon payment at maturity on December 28, 2017.  The note is secured by the property and guaranteed by the Company. On March 28, 2013, the Company entered into a $3,550 promissory note at a 3.60% fixed interest rate to finance the purchase of a corporate aircraft.

The gross amount of assets recorded under capital leases totaled $17,845 as of December 31, 2013 and is included in the related property, plant and equipment categories.  The Company has appropriately split the deferred financing fees between the revolving credit facility and term loan facility and will amortize the fees over their respective terms.  The long-term debt and capital lease payment obligations including the current portion thereof required in each of the next five years and thereafter are as follows:

Year ending December 31,	Long-Term Debt (1)		Capital Leases
2014	$	4,079	$	1,715
2015	4,112		1,946
2016	3,536		1,915
2017	41,390		1,963
2018	214,982		2,223
Thereafter	7,940		7,672
Total	276,039		17,434
Less:  imputed interest	—		(2,862		)
Total	$	276,039	$	14,572

(1) Includes principal only

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DERIVATIVE FINANCIAL INSTRUMENT, FAIR VALUE BY BALANCE SHEET LOCATION (Details) (Designated as Hedging Instrument [Member], USD $) In Thousands, unless otherwise specified	Dec. 31, 2013
Interest Rate Purchase Option [Member] | Other Current Assets [Member]
Derivatives, Fair Value [Line Items]
Interest rate purchased options at fair value	$ 18
Interest Rate Swap [Member] | Other Long Term Liabilities [Member]
Derivatives, Fair Value [Line Items]
Interest rate swaps at fair value	$ 392

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TREASURY STOCK TRANSACTIONS (Details)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Equity [Abstract]
Shares reissued from treasury (in shares)	38,397	102,986	5,860
Shares reissued from treasury for 401(k) plan (in shares)	40,904	44,474	46,830

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DERIVATIVE FINANCIAL INSTRUMENTS (Details) (USD $)	Dec. 31, 2013	Mar. 28, 2013	Mar. 28, 2013 London Interbank Offered Rate (LIBOR) [Member] Interest Rate Swap One [Member]	Nov. 15, 2013 London Interbank Offered Rate (LIBOR) [Member] Interest Rate Swap Two [Member]	Nov. 15, 2013 London Interbank Offered Rate (LIBOR) [Member] Interest Rate Swap Three [Member]
Derivative [Line Items]
Variable rate debt	$ 258,750,000
Notional amount			$ 112,500,000	$ 80,000,000	$ 100,000,000
Floor interest rate (in hundredths)		1.25%	1.25%	1.25%	1.25%
Fixed interest rate (in hundredths)			1.63%	1.565%	1.99%

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ACCOUNTS RECEIVABLE NET (Tables)

12 Months Ended

Dec. 31, 2013

Receivables [Abstract]

Schedule of accounts receivable, net

Accounts receivable, net consists of the following:

	December 31,
	2013			2012
Trade receivables	$	63,804		$	50,876
Unbilled revenue	7,256			12,372
Other receivables	1,973			6,198
	73,033			69,446
Less: Allowance for doubtful accounts	(180		)	(287		)
Accounts receivable, net	$	72,853		$	69,159

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ACCOUNTING POLICIES ACCOUNTING POLICIES, PROPERTY, PLANT AND EQUIPMENT (Details)	12 Months Ended
	Dec. 31, 2013
Building [Member] | Maximum [Member]
Property, Plant and Equipment [Line Items]
Estimated useful lives	35 years
Building [Member] | Minimum [Member]
Property, Plant and Equipment [Line Items]
Estimated useful lives	20 years
Machinery and Equipment [Member] | Maximum [Member]
Property, Plant and Equipment [Line Items]
Estimated useful lives	10 years
Machinery and Equipment [Member] | Minimum [Member]
Property, Plant and Equipment [Line Items]
Estimated useful lives	4 years
Computer Software, Intangible Asset [Member] | Maximum [Member]
Property, Plant and Equipment [Line Items]
Estimated useful lives	4 years
Computer Software, Intangible Asset [Member] | Minimum [Member]
Property, Plant and Equipment [Line Items]
Estimated useful lives	3 years

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DEFINED CONTRIBUTIONS PLANS

12 Months Ended

Dec. 31, 2013

Defined Contribution Pension and Other Postretirement Plans Disclosure [Abstract]

DEFINED CONTRIBUTIONS PLANS

DEFINED CONTRIBUTION PLANS

The Company sponsored three defined contribution plans in 2013:  the LMI Profit Sharing and Savings Plan (the “LMI Plan”), the Valent 401(k) plan the (“Valent Plans”) and the TASS Inc. 401(k) Plan, the (“TASS Plan”).  The LMI Plan covers virtually all of the employees of the Company, except the employees of Valent and TASS, and is a profit sharing plan that allows discretionary profit sharing contributions by the Company.  The LMI Plan also includes a 401(k) component that allows employee deferrals and a discretionary matching contribution component, under which the Company may make contributions based upon a percentage of employee contributions up to a maximum of $1 annually per employee.  Employee deferrals and matching contributions to the LMI Plan are fully vested to the employee immediately upon contribution.  Profit sharing contributions by the Company to the LMI Plan become vested over time and are fully vested after 6 years.  No profit sharing contributions have been made to the LMI Plan for 2013, 2012, or 2011.  The Company recognized costs for matching contributions to the LMI Plan totaling $830, $882, and $806 in 2013, 2012, and 2011, respectively.  In addition, the Company recognized cost for matching contributions for the Valent Plan of $745 in 2013. The Company’s matching contributions to the LMI Plan are determined and approved by the Board of Directors, which can be settled in cash or shares of LMI common stock.  For the years ended December 31, 2013, 2012, and 2011, the Company made matching contributions of 50% for each one dollar contributed by each participant up to a maximum employer matching contribution of $1 per employee.  In 2013, 2012, and 2011 the contribution was made in shares of the Company’s common stock.  The amount of the expense is calculated based on the formula described above and is not impacted by the value of the common stock, as the shares given are based on the dollar amount of the matching contribution.

The Valent Plan covers essentially all full-time employees of Valent.  Under this plan, participants may elect to have a portion of their salary contributed to the respective plans within certain limits.  Under the plan, the Company may contribute a discretionary matching contribution.  The exact percentage, if any, will be determined each year and shall not exceed 3% of a participant’s compensation for the year.

The TASS Plan covers all of the employees of TASS effective on the first day of full-time employment.  Under this plan, participants may elect to have a portion of their salary contributed to the plan within certain limits. Under the plan, the Company may contribute a discretionary profit sharing and / or matching contribution to the plan.  The exact percentage, if any, will be determined each year and is not limited by the plan. Contributions by the Company to the plan become vested over time and are fully vested after 5 years.  The Company has not made any profit sharing contribution or matching contribution to the plan during the period in 2013 subsequent to the acquisition of TASS on August 7, 2012.

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BUSINESS SEGMENT INFORMATION

12 Months Ended

Dec. 31, 2013

Segment Reporting [Abstract]

BUSINESS SEGMENT INFORMATION

BUSINESS SEGMENT INFORMATION

The Company is organized into two reportable segments: the Aerostructures segment and the Engineering Services segment.  The Aerostructures segment, which includes the recently acquired Valent, fabricates, machines, finishes, integrates, assembles and kits formed and machined close tolerance aluminum, specialty alloy and composite components for use by the aerospace and defense industries.  The Engineering Services segment, which includes the recently acquired TASS, provides a complete range of design, engineering and program management services supporting aircraft lifecycles from conceptual design, analysis and certification through production support, fleet support and service life extensions via a complete turnkey engineering solution.

Corporate assets, liabilities and expenses related to the Company’s corporate offices, except for interest expense and income taxes, primarily support the Aerostructures segment.  The table below presents information about reported segments on the basis used internally to evaluate segment performance:

	December 31,
	2013			2012			2011
Net sales:
Aerostructures	$	331,654		$	174,983		$	168,145
Engineering Services	83,717			105,607			87,527
Eliminations	(2,814		)	(1,961		)	(1,632		)
	$	412,557		$	278,629		$	254,040
Gross profit:
Aerostructures	$	68,088		$	47,947		$	44,966
Engineering Services	12,145			20,270			14,615
Eliminations	(371		)	91			69
	$	79,862		$	68,308		$	59,650
(Loss) income from operations:
Aerostructures	$	(46,050	)	$	15,484		$	18,334
Engineering Services	(2,699		)	10,480			6,522
Eliminations	(371		)	91			68
	$	(49,120	)	$	26,055		$	24,924
Depreciation, amortization and other non-cash charges:
Aerostructures (1)	$	91,557		$	5,532		$	6,013
Engineering Services (2)	6,754			2,462			2,391
Corporate (3)	$	(7,950	)	$	—		$	—
	$	90,361		$	7,994		$	8,404

(1)Includes a $73,528 for goodwill impairment in 2013 and $1,163 charge for impairment of intangible in 2011.

(2)Includes a $4,222 charge for impairment of intangible 2013.

(3)Includes write-off of contingent consideration of $7,950 in 2013.

	December 31,
	2013		2012		2011
Interest expense:
Aerostructures	$	1,054	$	23	$	5
Engineering Services	53		25		12
Corporate (1)	15,855		1,723		652
	$	16,962	$	1,771	$	669

(1) Includes a $580 charge for deferred financing costs for the closed credit facility in 2012.

	December 31,
	2013		2012		2011
Capital expenditures:
Aerostructures (1)	$	23,600	$	18,649	$	8,716
Engineering Services	549		880		1,551
	$	24,149	$	19,529	$	10,267

(1) Includes $411 and $746 for capital leases in 2013 and 2012, respectively.

	December 31,
	2013		2012
Total assets:
Aerostructures	$	405,779	$	446,902
Engineering	74,272		81,062
	$	480,051	$	527,964

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ACCOUNTING POLICIES, ACQUISITIONS (Details) (Valent Aerostructures, LLC [Member], USD $) In Thousands, unless otherwise specified	3 Months Ended	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2013
Valent Aerostructures, LLC [Member]
Business Acquisition [Line Items]
Adjustment to loss provision on long-term production contract	$ 5,267	$ 5,267

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(LOSS) EARNINGS PER COMMON SHARE (Tables)

12 Months Ended

Dec. 31, 2013

Earnings Per Share [Abstract]

Calculation of basic and diluted earnings per share

The following table shows a reconciliation of the numerators and denominators used in calculating basic and diluted earnings per share.

	Year ended December 31,
	2013			2012		2011
Numerators
Net (loss) income	$	(58,485	)	$	16,487	$	16,389
Denominators
Weighted average common shares - basic	12,607,833			11,701,607		11,559,895
Dilutive effect of restricted stock	—			137,575		181,618
Weighted average common shares - diluted	12,607,833			11,839,182		11,741,513
Basic earnings per share	$	(4.64	)	$	1.41	$	1.42
Diluted earnings per share	$	(4.64	)	$	1.39	$	1.40

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CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (USD $) In Thousands, unless otherwise specified	Total	Common Stock [Member]	Additional Paid-In Capital [Member]	Treasury Stock [Member]	Retained Earnings [Member]	Accumulated Other Comprehensive Income (Loss) [Member]
Balance at Dec. 31, 2010	$ 149,763	$ 242	$ 73,440	$ (1,432)	$ 77,513
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income (loss)	16,389				16,389
Other comprehensive income (loss)	0					0
Issuance of stock
7,850 shares in connection with exercise of options	61		57	4
Shares of restricted stock	(1)		(25)	24
401k plan contribution	811		589	222
Restricted stock compensation	1,254		1,254
Other	(492)		(492)
Balance at Dec. 31, 2011	167,785	242	74,823	(1,182)	93,902
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income (loss)	16,487				16,487
Other comprehensive income (loss)	(49)					(49)
Issuance of stock
Shares of restricted stock	0		(515)	515
401k plan contribution	793		582	211
783,798 shares for Valent acquisition	15,000	16	14,984
Restricted stock compensation	1,494		1,494
Other	(556)	(1)	(529)	(26)
Balance at Dec. 31, 2012	200,954	257	90,839	(482)	110,389	(49)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income (loss)	(58,485)				(58,485)
Other comprehensive income (loss)	(458)					(458)
Issuance of stock
Shares of restricted stock	0		(237)	237
401k plan contribution	901		707	194
Restricted stock compensation	1,615		1,615	0
Other	(383)		(232)	(151)
Balance at Dec. 31, 2013	$ 144,144	$ 257	$ 92,692	$ (202)	$ 51,904	$ (507)

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ASSETS AND LIABILITIES MEASURED AT FAIR VALUE

12 Months Ended

Dec. 31, 2013

Fair Value Disclosures [Abstract]

ASSETS AND LIABILITIES MEASURED AT FAIR VALUE

ASSETS AND LIABILITIES MEASURED AT FAIR VALUE

Fair value is the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.  A fair value hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements).  The three levels of the fair value hierarchy are described below:

Level 1: Quoted prices in active markets for identical assets or liabilities.

Level 2: Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The asset or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.  The valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.  There have been no changes in the methodologies used at December 31, 2013.  There were no transfers between levels during 2013 and 2012.

									2013
	Assets and Liabilities at Fair Value								Total
	as of December 31, 2013								Gains
	Total		(Level 1)		(Level 2)		(Level 3)		(Losses)
Recurring Fair Value Measurement:
Asset:
Interest rate derivatives (1)	$	18	$	—	$	18	$	—	$	—
Liabilities:
Interest rate derivatives (1)	$	392	$	—	$	392	$	—	$	—
Non-recurring Fair Value Measurements:
Asset:
Intangible assets, net (3,4)	$	55,465	$	—	$	—	$	55,465	$	(4,222	)
Goodwill (5)	$	113,223	$	—	$	—	$	113,223	$	(73,528	)
Liabilities
Contingent Consideration (2)	—		$	—	—		$	—	$	7,950
									$	(69,800	)

									2012
	Assets at Fair Value								Total
	as of December 31, 2012								Gains
	Total		(Level 1)		(Level 2)		(Level 3)		(Losses)
Recurring Fair Value Measurement:
Contingent Consideration (2)	$	7,950	$	—	$	—	$	7,950	$	—
Non-recurring Fair Value Measurements:
Intangible assets, net (4)	$	48,793	—		—		48,793		$	—
									—

(1) The fair values of interest rate derivatives are the amount the company would receive or pay to terminate the contracts, considering quoted market prices of comparable agreements. (Also see Note 10 to the Consolidated Financial Statements)

(2) The Monte Carlo simulation was used with a normal probability distribution of the best estimate of EBITDA for 2013 to approximate fair value. At June 30, 2013, the EBITDA target was not expected to occur and, as such, the $7,950 of contingent consideration was deemed unlikely to be paid, and a benefit was recorded on a separate line in the Condensed Consolidated Statements of Operations for the year ended December 31, 2013.

(3) During the second quarter of 2013, a triggering event occurred when the Company commenced an initiative to rebrand its core engineering business. Under this initiative, the D3 Technologies name became obsolete and the $4,222 indefinite lived intangible asset related to that trade name was deemed to be fully impaired and a loss was recorded in the Consolidated Statements of Operations for the year ended December 31, 2013

(4) The fair values of intangibles relating to the 2012 acquisitions of TASS and Valent were determined by third parties in connection with the purchase and recorded at those values.

(5) During the fourth quarter of 2013, the Company performed its annual impairment analysis of goodwill. As a result of this analysis, the goodwill related to the Valent acquisition was deemed impaired, and a $73,528 impairment charge was recorded in the Consolidated Statements of Operations for the year ended December 31, 2013.

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GOODWILL AND INTANGIBLE ASSETS (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended							3 Months Ended		12 Months Ended
	Dec. 31, 2013		Dec. 31, 2012		Dec. 31, 2011	Dec. 31, 2013 Customer Intangible Assets [Member]	Dec. 31, 2013 Other [Member]	Jun. 30, 2013 D3 Technologies, Inc. [Member] Trademarks [Member]	Dec. 31, 2013 D3 Technologies, Inc. [Member] Trademarks [Member]	Dec. 31, 2013 Intec, TASS and Valent [Member] Trademarks [Member]
Intangible Assets [Abstract]
Indefinite-lived trademarks									$ 4,222
Weighted average estimated useful life						18 years 6 months	5 years 3 months 18 days			4 years 6 months
Trademarks	778		5,000
Customer intangible assets	68,991		68,991
Other	1,481		1,481
Accumulated amortization	(15,785)		(11,138)
Intangible assets, net	55,465		64,334
Amortization expense on intangible assets	4,647		3,185		2,137
Impairment loss on intangible assets	4,222	[1],[2]	0	[1]	1,163			4,222
Estimated annual amortization expense for these intangibles [Abstract]
2014	4,524
2015	4,359
2016	4,134
2017	3,915
2018	3,563
Thereafter	34,970
Intangible assets, net	$ 55,465		$ 64,334

[1] The fair values of intangibles relating to the 2012 acquisitions of TASS and Valent were determined by third parties in connection with the purchase and recorded at those values.

[2] During the second quarter of 2013, a triggering event occurred when the Company commenced an initiative to rebrand its core engineering business. Under this initiative, the D3 Technologies name became obsolete and the $4,222 indefinite lived intangible asset related to that trade name was deemed to be fully impaired and a loss was recorded in the Consolidated Statements of Operations for the year ended December 31, 2013

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COMMITMENTS AND CONTINGENCIES, LOSS CONTINGENCIES (Details) (Missouri AG Environmental Matter [Member], USD $) In Thousands, unless otherwise specified	Dec. 31, 2013
Missouri AG Environmental Matter [Member]
Loss Contingencies [Line Items]
Loss contingency accrual	$ 167

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QUARTERLY FINANCIAL DATA (UNAUDITED)

12 Months Ended

Dec. 31, 2013

Quarterly Financial Information Disclosure [Abstract]

QUARTERLY FINANCIAL DATA (UNAUDITED)

QUARTERLY FINANCIAL DATA (UNAUDITED)

The results of any single quarter are not necessarily indicative of the Company’s results for the full year.  Earnings per share data is computed independently for each of the periods presented.  As a result, the sum of the earnings per share amounts for the quarter may not equal the total for the year.

2013	First (1)		Second (2)		Third		Fourth (3)
Net sales	$	106,066	$	105,465	$	104,656	$	96,370
Gross profit (1)	$	20,054	$	21,841	$	20,418	$	17,549
Net income (loss) (2),(3),(4)	$	1,837	$	4,664	$	2,075	$	(67,061	)
Amounts per common share:
Net income (loss)	$	0.15	$	0.37	$	0.16	$	(5.31	)
Net income (loss) - assuming dilution	$	0.14	$	0.37	$	0.16	$	(5.31	)
2012	First		Second		Third		Fourth (4)
Net sales	$	66,749	$	69,327	$	70,636	$	71,917
Gross profit	$	16,518	$	16,967	$	18,584	$	16,239
Net income (3)	$	4,792	$	5,105	$	5,639	$	951
Amounts per common share:
Net income	$	0.41	$	0.44	$	0.48	$	0.08
Net income - assuming dilution	$	0.41	$	0.43	$	0.48	$	0.08

(1) The first quarter 2013 includes $2,497 of non-recurring inventory step-up related to the Valent acquisition.

(2) The second quarter of 2013 includes a trade name impairment of $4,222 related to D3 Technologies offset by a contingent consideration write-off of $7,950 related to Valent.

(3) The fourth quarter of 2013 includes a goodwill impairment charge of $73,528 related to the Valent acquisition, $17,718 related to income tax valuation allowance, $2,620 related to a separation agreement reached with key members of Valent Aerostructures, LLC. and $453 of restructuring expenses related to the closure of the Precise Machine facility. In addition, Valent gross profit was unfavorably impacted by $955 in cumulative catch-up adjustments, the result of higher levels of indirect costs required to meet customer demand.

(4) The fourth quarter of 2012 includes $4,860 in acquisition fees related to Valent.

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RESTRUCTURING, ROLLFORWARD (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Restructuring Reserve [Roll Forward]
Accrued restructuring balance, beginning	$ 0
Accrual additions	3,073	0	0
Cash payments	(2,651)
Accrued restructuring balance, ending	422	0
Employee Severance [Member]
Restructuring Reserve [Roll Forward]
Accrued restructuring balance, beginning	0
Accrual additions	3,069
Cash payments	(2,647)
Accrued restructuring balance, ending	422
Other [Member]
Restructuring Reserve [Roll Forward]
Accrued restructuring balance, beginning	0
Accrual additions	4
Cash payments	(4)
Accrued restructuring balance, ending	$ 0

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ACCRUED EXPENSES (Tables)

12 Months Ended

Dec. 31, 2013

Payables and Accruals [Abstract]

Schedule of accrued expenses

Accrued expenses consist of the following:

	December 31,
	2013		2012
Accrued payroll	$	3,286	$	3,362
Accrued bonus	958		1,493
Accrued vacation & holiday	3,516		3,257
Accrued employee benefits	1,847		1,815
Accrued operating lease obligations	2,002		1,706
Contingent consideration	—		7,950
Accrued professional fees	1,253		754
Loss reserve on long-term production contracts	3,165		—
Other	3,055		3,366
Total accrued expenses	$	19,082	$	23,703

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COMMITMENTS AND CONTINGENCIES

12 Months Ended

Dec. 31, 2013

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES

The Company leases certain facilities and equipment under various non-cancelable operating lease agreements that expire at various dates through 2025.  At December 31, 2013, the future minimum lease payments under operating leases with initial non-cancelable terms in excess of one year are as follows:

2014	$	6,909
2015	6,327
2016	5,757
2017	4,997
2018	4,832
Thereafter	22,365
	$	51,187

Rent expense totaled $8,496, $6,789 and $6,546 in 2013, 2012 and 2011, respectively.

The Company has entered into employment agreements with certain members of senior management, the terms of which expire on January 15, 2016 through January 1, 2017.  The terms of these agreements are up to 3 years, include non-compete and non-disclosure provisions, and provide for defined severance payments in the event of termination.

Legal Contingencies

The Company has been named as a defendant in certain pending lawsuits in the normal course of business (the “Pending Lawsuits”). Also, the Company may become the subject of proceedings by the Environmental Protection Agency and Department of Justice as a result of the Waste Water Allegations and by the Environmental Protection Agency and Missouri Department of Natural Resources as a result of the Voluntarily Disclosed Matters related to its Cuba, Missouri facility ("OMT").   It is the policy of management to disclose the amount or range of reasonably possible losses.  In the opinion of management, after consulting with legal counsel, the losses, if any, resulting from the Pending Lawsuits should not have a material effect on the Company’s financial position or results of operations, and the losses, if any, resulting from the Waste Water Allegations and Voluntarily Disclosed Matters cannot be estimated because the actions to be taken, if any, by the relevant government agencies remains uncertain.

The Company believes a proceeding by the Missouri Attorney General is contemplated with respect to the Missouri AG Matter as further disclosed in Item 3 - Legal Proceedings. In the opinion of management, after consulting with legal counsel and based on the discussions the Company has had with the Missouri Attorney General’s office, the Company has established a loss contingency of $167, which represents management’s current estimate of the minimum penalty the Missouri Attorney General is contemplating assessing on the Company.

OMT became a subsidiary of LMI as a result of LMI’s acquisition of Valent Aerostructures (“Valent”) in December 2012. The Company believes certain environmental representations set forth in the purchase agreement pursuant to which Valent acquired OMT, and the purchase agreement pursuant to which LMI acquired Valent, provide the Company with certain rights of indemnification with respect to the matters disclosed herein. The Company also has insurance policies that it believes covers various environmental issues at Valent and its subsidiaries, including OMT, and breaches by Valent and OMT of their respective environmental representations and warranties in each of the purchase agreements. As a result, the Company believes its rights of indemnification and insurance coverage may provide for a recovery of some or all of the costs associated with the matters disclosed herein. We cannot provide any assurance, however, that we will ultimately prevail in any claim for indemnification or secure insurance proceeds from our insurance policies.