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 June 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)
Missouri 43-1309065
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
3600 Mueller Road
St. Charles, Missouri 63302
(Address of Principal Executive Offices) (ZIP Code)
(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.
Title of class Number of Shares outstanding
of Common Stock as of June 30, 2000
--------------- -----------------------------
Common Stock, par value 8,239,953
$.02 per share ---------
<PAGE>
LMI AEROSPACE, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE FISCAL QUARTER ENDING JUNE 30, 2000
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS (UNAUDITED)
Condensed Consolidated Balance Sheets as
of December 31, 1999 and June 30, 2000
Condensed Consolidated Statements of Operations for the three months
and the six months ending June 30, 1999 and 2000
Condensed Consolidated Statements of Cash Flows for the
six months ending June 30, 1999 and 2000
Notes to Unaudited Condensed Consolidated Financial Statements
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
PART II. OTHER INFORMATION
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Item 6. EXHIBITS AND REPORTS ON Form 8-K
SIGNATURE PAGE
EXHIBIT INDEX
<PAGE>
LMI Aerospace, Inc.
Condensed Consolidated Balance Sheets
(Amounts in thousands, except share and per share data)
December 31, June 30,
1999 2000
(unaudited)
----------------------------
Assets
Current assets:
Cash and cash equivalents $ 5,908 $ 4,217
Investments -- 839
Trade accounts receivable 6,947 7,884
Inventories 15,311 15,514
Prepaid expenses 226 305
Other current assets 956 311
Deferred income taxes 720 720
----------------------------
Total current assets 30,062 29,790
Property, plant, and equipment, net 22,345 21,521
Other assets 2,262 2,505
----------------------------
$ 54,669 $ 53,816
============================
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 4,020 $ 3,559
Accrued expenses 2,028 2,148
Current installments of long-term debt 2,597 2,590
----------------------------
Total current liabilities 8,645 8,297
Long-term debt, less current installments 134 90
Deferred income taxes 1,404 1,404
----------------------------
Total noncurrent liabilities 1,538 1,494
Stockholders' equity:
Common stock of $.02 par value; authorized
28,000,000 shares; issued
8,734,422 at December 31, 1999
and at June 30, 2000 175 175
Additional paid-in capital 26,164 26,164
Treasury Stock, at cost, 521,174 and
494,469 shares in 1999
and 2000 (3,046) (2,855)
Accumulated other comprehensive income (loss) -- (115)
Retained earnings 21,193 20,656
----------------------------
Total stockholders' equity 44,486 44,025
----------------------------
$ 54,669 $ 53,816
============================
See accompanying notes.
<PAGE>
<TABLE>
<CAPTION>
LMI Aerospace, Inc.
Condensed Consolidated Statements of Operations
(Amounts in thousands, except per share data)
(Unaudited)
For the Three Months For the Six Months
Ended June 30 Ended June 30
1999 2000 1999 2000
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $ 12,449 $ 13,735 $ 25,979 $ 28,496
Cost of sales 9,896 11,927 20,325 24,447
--------------------------------------------------------------------
Gross profit 2,553 1,808 5,654 4,049
Selling, general, and administrative
expenses 2,176 2,169 4,123 4,705
--------------------------------------------------------------------
Income (loss) from operations 377 (361) 1,531 (656)
Interest income (expense) 50 (19) 150 (2)
--------------------------------------------------------------------
Income (loss) before income taxes 437 (380) 1,681 (658)
Provision for (benefit from) income
taxes 42 (133) 482 (230)
--------------------------------------------------------------------
Net income (loss) $ 385 $ (247) $ 1,199 $ (428)
====================================================================
Net income (loss) per common share
$ .05 $ (0.03) $ .14 $ (0.05)
====================================================================
Net income (loss) per common share
- assuming dilution $ .05 $ (0.03) $ .14 $ (0.05)
====================================================================
Weighted average common shares
outstanding 8,258,720 8,203,395 8,276,591 8,205,932
====================================================================
Weighted average dilutive stock
options outstanding 116,181 0 122,507 0
====================================================================
See accompanying notes.
</TABLE>
<PAGE>
LMI Aerospace, Inc.
Condensed Consolidated Statements of Cash Flows
(Amounts in thousands)
(Unaudited)
For the Six Months
Ended June 30
1999 2000
--------------------------
Operating activities
Net income (loss) $ 1,199 $ (428)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Net cash provided by operating activities:
Depreciation and amortization 1,552 1,789
Changes in operating assets and liabilities:
Trade accounts receivable (227) (943)
Inventories (1,162) (204)
Prepaid expenses and other assets (307) (89)
Income taxes payable (469) 583
Accounts payable (652) (461)
Accrued expenses (379) 241
---------------------------
Net cash from operating activities (445) 488
Investing activities
Additions to property, plant, and equipment, net (2,735) (1,135)
Purchases of investments (210) (954)
Proceeds from sale of investments, net 1,460 --
--------------------------
Net cash from investing activities (1,485) (2,089)
Financing activities
Principal payments on long-term debt (82) (50)
Treasury stock transactions, net (1,151) (40)
Proceeds from exercise of stock options 12 --
--------------------------
Net cash from financing activities (1,221) (90)
Activities
Net change in cash and cash equivalents (3,151) (1,691)
Cash and cash equivalents, beginning of period 11,948 5,908
--------------------------
Cash and cash equivalents, end of period $ 8,794 $ 4,217
==========================
See accompanying notes.
<PAGE>
LMI Aerospace, Inc.
Notes to Condensed Consolidated Financial Statements
(Dollar amounts in thousands, except share and per share data))
(Unaudited)
June 30, 2000
1. Accounting Policies
Basis of Presentation
LMI Aerospace, Inc. (the Company) fabricates, machines, and integrates formed,
close tolerance aluminum and specialty alloy components for use by the aerospace
industry. The Company is a Missouri corporation with headquarters in St.
Charles, Missouri. The Company maintains facilities in St. Charles, Missouri;
Seattle, Washington; Tulsa, Oklahoma; Wichita, Kansas; and Irving, Texas.
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 six months ended June 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.
<PAGE>
Investments
The Company's investments in marketable equity securities are classified as
"available-for-sale" and are carried at fair market value, with the unrealized
gains or losses included, in accumulated other comprehensive income (loss) in
shareholder's equity.
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 $3,500 in 1999. The Company moved Hayakawa's sheet
metal production work and most of its machining work to the Company's facility
in Auburn, 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
Inventories consist of the following:
December 31, June 30,
1999 2000
------------------------------------
Raw materials $ 4,140 $ 4,021
Work in process 4,053 3,941
Finished goods 7,118 7,552
------------------------------------
$ 15,311 $ 15,514
====================================
<PAGE>
4. Property, Plant, and Equipment
Property, plant, and equipment consist of the following:
December 31, June 30,
1999 2000
----------------------------------
Land $ 705 $ 705
Buildings 11,873 11,938
Machinery and equipment 24,522 24,766
Leasehold improvements 770 792
Construction in progress 114 476
Other assets 1,096 1,018
----------------------------------
39,080 39,695
Less accumulated depreciation 16,735 18,174
----------------------------------
$ 22,345 $ 21,521
==================================
5. Long-Term Debt
Long-term debt consists of the following:
December 31, June 30,
1999 2000
----------------------------------
Industrial Development Revenue Bond,
interest payable monthly,
at a variable rate $ 2,500 $ 2,500
Notes payable, principal and interest
payable monthly, at fixed rates,
ranging from 8.78% to 9.56%
215 175
Capital lease obligations 16 5
----------------------------------
2,731 2,680
Less current installments 2,597 2,590
----------------------------------
$ 134 $ 90
==================================
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 credit facility prohibits the payment of cash dividends on common
stock without the financial institution's prior written consent. At June 30,
2000, there were no borrowings under the line of credit.
The Industrial Development Revenue Bond ("IRB") bears interest at a variable
rate, which is based on the existing market rates for comparable outstanding
tax-exempt bonds (5.6 percent and 3.8 percent at December 31, 1999 and June 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 bond
matures in November 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.
7. Profit Sharing Contribution
On June 6, 2000, the Company fulfilled its 1999 profit sharing obligation by
transferring 40,105 shares of stock out its treasury account to the financial
institution that acts as the trustee of the profit sharing trust.
<PAGE>
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. These statements can be identified
by forward-looking words such as "expect", "believe", anticipate", "goal",
"plan", "intend", "estimate", "may", "will", or similar words. 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 June 30, 2000 vs. the Quarter ended June 30, 1999
Net Sales. Net sales for the quarter ended June 30, 2000 were $13.7 million, up
from $12.4 million in 1999. Total shipments on Boeing commercial aircraft were
$7.8 million (56.9% of net sales) in the second quarter of 2000 compared with
$6.3 million (50.8% of net sales) in 1999. Net sales increased on most Boeing
models, led by sales on the 737 NG, which contributed $3.7 million in the
quarter, up from $2.9 million in 1999. The increased sales on the 737 NG were
primarily the result of an increase in the production rate to 24 ship sets per
month and new parts the Company is producing for Boeing Kansas. Sales were also
higher on the 747 model, which generated $1.9 million in 2000 compared to $1.4
million in 1999. Looking ahead, the Company was notified during the 2nd quarter
that its contract to produce the leading edge wing components for the 737 NG
with Boeing Tulsa will not be renewed. The project accounted for approximately
$2.4 million during the second quarter of 2000, or 16% of total revenues for
that period, and approximately $2 million in 1999, or 15% of the Company's total
revenues for that period. Production under this contract is expected to end in
the 2nd quarter of 2001, and the Company is now actively marketing this
capacity.
The Company's participation on Gulfstream's G-IV and G-V aircraft increased to
$1.8 million in 2000 from $1.4 million in 1999, primarily the result of a
contract for steel components the Company won in 1999. Sales for the Lockheed
F-16 were $0.7 million in 2000, up from $0.3 million in 1999 due to new
components awarded to the Company in late 1999. The Company's sales on Boeing
military aircraft, which were negatively impacted by the shut down of production
of the F-15, were $0.3 million in 2000, down from $1.3 million in 1999.
Gross Profit. The Company's gross profit was $1.8 million (13.2% of net sales)
in 2000, down from $2.6 million (20.5% of net sales) in 1999. Margins were
adversely affected by higher raw material costs relative to sales, higher sub
contracted costs, the impact of negotiated price reductions, and losses on two
start-up contracts.
Selling, General, and Administrative Expenses. Selling, general, and
administrative expenses were unchanged in 2000 as compared to 1999.
Income Taxes. The Company continues to record income taxes at a rate of 35%.
However, in the 2nd quarter of 1999, the Company recorded a benefit of $0.1
million in state tax refunds.
<PAGE>
Six Months ended June 30, 2000 vs. the Six Months ended June 30, 1999
Net Sales. Net sales for the six months ended June 30, 2000 were $28.5 million,
up 9.7% from 1999. Sales on Boeing commercial models contributed $15.9 million
in 2000, up from $14.0 million in 1999. Shipments on the 737 NG were $7.5
million in 2000, up from $6.3 million in 1999. Included in the sales for the 737
NG was $4.8 million in 2000 and $4.0 million from the contract with Boeing Tulsa
that the Company expects to terminate in the 2nd quarter of 2001. Please see the
discussion of net sales for the second quarter of 2000 for more information on
the Boeing Tulsa contract. The Company's contract with Vought Aircraft to
provide various assemblies used in the fuselage of the 767 increased sales on
that aircraft to $1.9 million in 2000, up from $1.4 million in 1999.
Sales on Gulfstream's G-IV and G-V increased to $3.8 million in 2000 from $2.2
million in 1999. Also, sales on the F-16 increased to $1.5 million in 2000 from
$0.6 million in 1999. The drop in sales on Boeing's military aircraft was $1.7
million, dipping to $0.8 million. The majority of this decline, $1.1 million was
due to the shut down of the F-15 production line.
Gross Profit. The Company's gross profit declined to $4.0 million in 2000 from
$5.7 million in 1999. Margins were adversely affected by higher raw material
costs relative to sales, higher sub contracted costs, the impact of negotiated
price reductions, and losses on two start-up contracts.
Selling, General, and Administrative Expenses. Selling, general and
administrative expenses increased to $4.7 million during 2000 from $4.1 million
in 1999. This increase was primarily caused by a loss reserve established by the
Company or $0.4 million to cover the bankruptcy of a customer.
Liquidity and Capital Resources
During the six months ended June 30, 2000, the Company's cash balance decreased
$1.7 million. Of significant impact were capital expenditures of $1.1 million,
marketable securities of $0.9 million, and operating cash generated of $0.5
million.
The Company has significantly curtailed capital expenditures. Included in the
$1.1 million of additions this year is a $0.6 million replacement of a bladder
press in the Company's Wichita, KS facility that was unplanned. Even with this
unexpected replacement, the Company intends to restrict capital expenditures
below $2.0 million for the year.
The Company's line of credit expires at the end of the 3rd quarter of 2000.
Negotiations for a new line of credit are under way and are expected to be
finalized prior to the expiration date.
The Company has a $2.5 million bond payment due in November 2000 and intends to
pay this balance from its' current cash balance.
<PAGE>
PART II
OTHER INFORMATION
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Shareholders was held on May 24, 2000.
At the Meeting, the shareholders voted for the election of both persons
nominated by management to be Class II Directors. The votes for these
nominated Directors were as follows:
Name Votes For Votes Withheld
---- --------- --------------
Thomas M. Gunn 7,052,075 58,600
Alfred H. Kerth III 7,052,075 58,600
Thomas Unger 7,052,075 58,600
At the Meeting, the shareholders also voted for a proposal to adopt the
Amended and Restated LMI Aerospace, Inc. 1998 Stock Option Plan
Votes For Votes Withheld
--------- --------------
7,033,275 77,400
At the Meeting, the shareholders also voted for the ratification of the
selection of Ernst & Young LLP to serve as the Company's independent
auditor. The votes for such ratification were as follows:
Votes For Votes Withheld
--------- --------------
7,104,475 6,200
Item 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) See Exhibit Index.
(b) No current reports on Form 8-K have been filed by the Company
during the quarter ended June 30, 2000.
<PAGE>
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.
LMI AEROSPACE, INC.
Date: August 14, 2000 By: /s/ Lawrence E. Dickinson
--------------------------------------
Lawrence E. Dickinson
Chief Financial Officer and Secretary
<PAGE>
EXHIBIT INDEX
Exhibit Number Description
-------------- -----------
27 Financial Data Schedule
