SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

| X |     Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

For the quarterly period ended September 30, 2000.

|   |     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:   0-24293

LMI AEROSPACE, INC.

(Exact name of registrant as specified in its charter)

(636) 946-6525
(Registrant's Telephone Number, Including Area Code)

         Indicate by check mark whether the 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.

      Yes        X        No       

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

LMI AEROSPACE, INC.

QUARTERLY REPORT ON FORM 10-Q

FOR THE FISCAL QUARTER ENDING SEPTEMBER 30, 2000

PART I. FINANCIAL INFORMATION

Item 1.   FINANCIAL STATEMENTS (UNAUDITED)

Item 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
             CONDITION AND RESULTS OF OPERATIONS

PART II. OTHER INFORMATION

Item 6. EXHIBITS AND REPORTS ON Form 8-K

SIGNATURE PAGE

EXHIBIT INDEX

LMI Aerospace, Inc.

Condensed Consolidated Balance Sheets
(Amounts in thousands, except share and per share data)

LMI Aerospace, Inc.

Condensed Consolidated Statements of Operations
(Amounts in thousands, except per share data)
(Unaudited)

LMI Aerospace, Inc.

Condensed Consolidated Statements of Cash Flows
(Amounts in thousands)
(Unaudited)

LMI Aerospace, Inc.

Notes to Condensed Consolidated Financial Statements
(Dollar amounts in thousands, except share and per share data))
(Unaudited)
September 30, 2000

1.   Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair representation have been included. Operating results for the nine months ended September 30, 2000 are not necessarily indicative of the results that may be expected for the year ended December 31, 2000. These financial statements should be read in conjunction with the consolidated financial statements and accompanying footnotes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 1999 as filed with the SEC.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make certain estimates and assumptions. These estimates and assumptions affect the reported amounts in the financial statements and accompanying notes. Actual results could differ from those estimates.

2.   Acquisitions

On December 27, 1999, the Company acquired certain assets and liabilities of U.S. Hayakawa Industries, Inc. (“Hayakawa”), an aerospace sheet metal manufacturing and machining firm based in Mukilteo, Washington. Hayakawa had annual sales of approximately $3.5 million in 1999. The Company moved Hayakawa’s sheet metal production work and most of its machining work to the Company’s facility in Seattle, Washington, with the remainder of the machining work going to the Company’s facility in Irving, Texas. The purchase price was approximately $1,600 in cash. The excess of the purchase price over the fair market value of the net assets acquired, totaling $723, was allocated to goodwill, and is being amortized over a 10-year period on a straight-line basis.

3.   Inventories

4.   Property, Plant, and Equipment

On March 31, 1998, the Company obtained a $15,000 unsecured line of credit with a financial institution to fund various corporate needs. Interest is payable monthly based on a quarterly cash flow leverage calculation and the LIBOR rate. This facility matures on October 31, 2000 and requires compliance with certain non-financial and financial covenants including minimum tangible net worth and EBITDA. The Company is negotiating with a financial institution for a one-year revolving line of credit of $7,000 and expects to finalize these negotiations by year-end.

The Industrial Revenue Bond (“IRB”) bears interest at a variable rate, which is based on the existing market rates for comparable outstanding tax-exempt bonds (4.2 percent and 3.8 percent at December 31, 1999 and September 30, 2000, respectively), not to exceed 12 percent. The IRB is secured by a letter of credit by a financial institution, which holds 100 percent participation in the letter of credit and has a security interest in certain equipment. The bonds mature on November 1, 2000.

The Company entered into various notes payable for the purchase of certain equipment. The notes are payable in monthly installments including interest (ranging from 8.78 percent to 9.56 percent through November 2002). The notes payable are secured by equipment.

6.   Commitments and Contingencies

The Company is involved in various claims and legal actions arising in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the Company’s financial position.

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
             CONDITION AND RESULTS OF OPERATIONS

Except for the historical information contained herein, the following report contains forward-looking statements based on the beliefs of the Company and are subject to certain risks and uncertainties. The Company’s actual results could differ materially from those discussed here. Factors that could cause or contribute to such differences include, but are not limited to, those discussed below as well as those factors set forth in the Company’s other filings with the Securities and Exchange Commission.

Overview

LMI Aerospace, Inc. is a leader in fabricating, machining and integrating of formed, close tolerance aluminum, and specialty alloy components for use by the aerospace industry. The Company has been engaged in manufacturing components for a wide variety of aerospace applications. Components manufactured by the Company include leading edge wing slats, flaps and lens assemblies; cockpit window frame assemblies; fuselage skins and supports; and passenger and cargo door frames and supports. The Company maintains multi-year contracts with leading original equipment manufacturers and primary subcontractors of commercial, corporate, regional and military aircraft. Such contracts, which govern the majority of the Company’s sales, designate the Company as the sole supplier of the aerospace components sold under the contracts. Customers include Boeing, Lockheed Martin, Northrop Grumman, Gulfstream, Learjet, Canadair, DeHavilland and PPG. The Company manufactures more than 15,000 parts for integration into such models as Boeing’s 737, 747, 757, 767 and 777 commercial aircraft and F-15, F/A-18, C-17 military aircraft, Canadair’s RJ regional aircraft, Gulfstream’s G-IV and G-V corporate aircraft, and Lockheed Martin’s F-16 and C-130 military aircraft.

Results of Operations

Quarter ended September 30, 2000 versus September 30, 1999

Net Sales. Net sales for the quarter ended September 30, 2000 were $12.9 million, up $0.5 million from the prior year. This rise was due to increased sales on Boeing commercial aircraft which generated $7.7 million (59.7% of net sales) in the quarter compared to $6.8 million (54.8% of net sales) in 1999. Sales for the 747 were up $0.5 million ($1.7 million in 2000 compared to $1.2 million in 1999) and the 767 generated $0.4 million of additional sales ($1.0 million in 2000 compared to $0.6 million in 1999). The increase in the 747 sales reflects the relatively low sales in 1999 as Boeing was adjusting inventory levels. The increase in 767 sales is primarily the result of a contract for various fuselage assemblies the Company won late in 1999.

Net sales on military aircraft were down for the quarter. Sales on Boeing’s military aircraft were $0.2 million in 2000 compared to $0.8 million in 1999 due to a lack of re-orders for the F-18. Offsetting this decline was an increase in sales on Lockheed Martin’s F-16, rising to $0.4 million in the quarter, up from $0.2 million in 1999, due primarily to orders for additional components the Company was awarded early in 2000.

Gross Profit. Gross profit for the quarter was $0.7 million (5.5% of net sales), down from $1.0 million (8.4% of net sales) in 1999. During the quarter, the Company continued to be negatively impacted by the low level of net sales, which reduces the Company’s ability to cover its fixed costs.

Selling, General, and Administrative Expenses. Selling, general, and administrative expenses were up $0.2 million in the quarter, rising to $2.2 million. This increase is primarily attributable to payroll expenses.

Nine Months ended September 30, 2000 versus September 30, 1999

Net Sales. Net sales for the first nine months of 2000 were $41.4 million, up $3.0 million from 1999. Boeing commercial aircraft provided an additional $3.2 million of net sales, rising to $23.6 million (57.0% of net sales) in 2000 from $20.4 million (53.1% of net sales) in 1999. Increased production rates on the 737 NG generated an additional $1.4 million of net sales ($11.0 million in 2000 compared to $9.6 million in 1999). Sales on the 747 were $5.3 million in 2000 compared to $4.2 million in 1999, primarily the result of a return to normal ordering patterns for this aircraft from lower levels in 1999 as Boeing adjusted its inventory levels to lower production rates. A new contract in 2000 with Vought Aircraft for fuselage assemblies on the 767 added $0.8 million of net sales, raising total net sales on that aircraft in 2000 to $2.8 million.

The Company benefited from a new contract to produce steel components for Gulfstream’s G-IV and GV, increasing net sales on that program to $5.6 million for the first nine months of 2000, up from $3.7 million in 1999. Sales on the F-16 more than doubled to $1.9 million in 2000 from $0.8 million, the result of contract awards for components not previously produced by the Company. Sales on Boeing military aircraft were down $2.1 million in 2000 to $1.0 million, primarily due to the shut down of the F-15 line at Boeing St. Louis and a lack of re-orders on the F-18 program.

Gross Profit. Gross profit was $4.8 million (11.5% of net sales) in 2000, down from $6.7 million (17.4% of net sales) in 1999. Gross profit continues to be negatively impacted by inadequate revenue on certain programs, including assemblies for the 767 fuselage. The Company is in varying stages of discussion with certain customers to either increase pricing or return the work. Additionally, short lead times from customers and new work requiring new processes and tooling have caused the Company to increase purchases from subcontractors, increasing manufacturing costs by $1.3 million. The Company is facilitizing, where appropriate, to reduce purchases of these subcontracted items.

Selling, General, and Administrative Expenses. Selling, general, and administrative expenses were $7.0 million in 2000, up from $6.2 million in 1999. The primary cause of this increase was a $0.4 million reserve established for a bankrupt customer and an increase in payroll expenses of $0.2 million.

Income Taxes. The Company’s provision for income taxes was calculated at a rate of 35% in both 1999 and 2000. However, the Company recognized a benefit of state tax refunds of $0.1 million in 1999.

Liquidity and Capital Resources

Cash decreased $2.5 million during the nine months ended September 30, 2000. Capital expenditures moderated in the third quarter, bringing year to date spending to $1.4 million. The Company has ordered equipment it expects to receive in the fourth quarter of $1.0 million for added capability for tooling and commercial sheet metal production.

Cash flow from operations was $0.1 million. Accounts payable dropped $1.2 million in 2000, principally due to a change in funding for health insurance. The Company moved to a self-insured health insurance plan which reduced payables by approximately $0.6 million and increased accrued liabilities by $0.2 million.

Subsequent to September 30, 2000, the Company funded the $2.5 million of industrial revenue bonds due November 1, 2000 from its corporate accounts. In addition, the Company is in negotiations to extend its lending agreement with its current lender to fund general corporate needs.

PART II

OTHER INFORMATION

Item 6.   EXHIBITS AND REPORTS ON FORM 8-K.

SIGNATURES

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

EXHIBIT INDEX