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 March 31, 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 March 31, 2000
--------------- ----------------------------
Common Stock, par value $.02 per share 8,208,248
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<PAGE>
LMI AEROSPACE, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE FISCAL QUARTER ENDING MARCH 31, 2000
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS (UNAUDITED)
Condensed Consolidated Balance Sheets as
of December 31, 1999 and March 31, 2000
Condensed Consolidated Statements of Income for the
three months ending March 31, 1999 and 2000
Condensed Consolidated Statements of Cash Flows for the three
months ending March 31, 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 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, March 31,
1999 2000
(unaudited)
-------------------------------
Assets
Current assets:
Cash and cash equivalents $ 5,908 $ 4,270
Investments -- 541
Trade accounts receivable 6,941 7,621
Inventories 15,311 15,168
Prepaid expenses 226 243
Other current assets 162 152
Income taxes receivable 794 897
Deferred income taxes 720 720
-------------------------------
Total current assets 30,062 29,612
Property, plant, and equipment, net 22,345 22,447
Other assets 2,262 2,188
-------------------------------
$ 54,669 $ 54,247
===============================
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 4,020 $ 3,648
Accrued expenses 2,028 2,162
Current installments of long-term debt 2,597 2,594
-------------------------------
Total current liabilities 8,645 8,404
Long-term debt, less current installments 134 112
Deferred income taxes 1,404 1,404
-------------------------------
Total noncurrent liabilities 1,538 1,516
Stockholders' equity:
Common stock of $.02 par value; authorized
28,000,000 shares; issued 8,734,422 at
December 31, 1999 and at March 31, 2000 175 175
Additional paid-in capital 26,164 26,164
Treasury Stock, at cost, 521,175 and
526,174 shares in 1999
and 2000 (3,046) (3,060)
Accumulated other comprehensive income -- 36
Retained earnings 21,193 21,012
-------------------------------
Total stockholders' equity 44,486 44,327
-------------------------------
$ 54,669 $ 54,247
===============================
See accompanying notes.
<PAGE>
LMI Aerospace, Inc.
Condensed Consolidated Statements of Operations
(Amounts in thousands, except per share data)
(Unaudited)
For the Three Months Ended March 31
1999 2000
-------------------------------------
Net sales $ 13,530 $ 14,761
Cost of sales 10,480 12,520
-------------------------------------
Gross profit 3,050 2,241
Selling, general, and
administrative expenses 1,896 2,535
-------------------------------------
Income (loss) from operations 1,154 (294)
Interest income 99 16
-------------------------------------
Income before income taxes 1,253 (278)
Provision for income taxes 438 (97)
-------------------------------------
Net income (loss) $ 815 $ (181)
=====================================
Net income (loss) per common share $ .10 $ (0.02)
=====================================
Net income (loss) per common share -
assuming dilution $ .10 $ (0.02)
=====================================
Weighted average common
shares outstanding 8,315,786 8,208,467
=====================================
Weighted average dilutive stock
options outstanding 132,639 --
=====================================
See accompanying notes.
<PAGE>
<TABLE>
<CAPTION>
LMI Aerospace, Inc.
Condensed Consolidated Statements of Cash Flows
(Amounts in thousands)
(Unaudited)
For the Three Months Ended March 31
1999 2000
-----------------------------------
<S> <C> <C>
Operating activities
Net income $ 815 $ (181)
Adjustments to reconcile net income to
net cash provided by operating activities:
Net cash provided by operating activities:
Depreciation and amortization 762 870
Changes in operating assets and liabilities:
Trade accounts receivable (1,114) (680)
Inventories (680) 143
Prepaid expenses and other assets (302) 44
Income taxes payable 319 (103)
Accounts payable (328) (372)
Accrued expenses (275) 129
-------------------------------------
Net cash used in operating activities (803) (150)
Investing activities
Additions to property, plant, and equipment, net (1,360) (1,140)
Proceeds from sale of property, plant and equipment -- 194
Purchases of investments (210) (504)
Proceeds from sale of investments, net 1,460 --
-------------------------------------
Net cash used in investing activities (110) (1,450)
Financing activities
Principal payments on long-term debt (45) (24)
Treasury stock transactions, net (318) (14)
Proceeds from exercise of stock options 6 --
-------------------------------------
Net cash used in financing activities (357) (38)
Activities
Net change in cash and cash equivalents (1,270) (1,638)
Cash and cash equivalents, beginning of period 11,945 5,908
-------------------------------------
Cash and cash equivalents, end of period $ 10,675 $ 4,270
=====================================
</TABLE>
See accompanying notes.
<PAGE>
LMI Aerospace, Inc.
Notes to Condensed Consolidated Financial
Statements (Dollar amounts in thousands, except share and per share data)
(Unaudited)
March 31, 2000
1. Accounting Policies
Basis of Presentation
LMI Aerospace, Inc. (the "Company") is a fabricator, finisher, and integrator of
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 three months ended March 31, 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. The Company had recorded $481 in accounts receivable and
inventory as of December 31, 1999 and $717 in accounts receivable and inventory
at March 31, 2000 in excess of purchase order amounts for change orders or
claims from customers which management believes are fully recoverable.
During the quarter ended March 31, 2000, the company recorded a charge of $373
for exposure related to a customer implementing a reorganization plan.
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 and losses included, net of income taxes, in accumulated other
comprehensive income in shareholders' equity.
<PAGE>
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 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 $352, 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, March 31,
1999 2000
-----------------------------------
Raw materials $ 4,140 $ 3,935
Work in process 4,053 4,151
Finished goods 7,118 7,082
-----------------------------------
$ 15,311 $ 15,168
===================================
4. Property, Plant, and Equipment
Property, plant, and equipment consist of the following:
December 31, March 31,
1999 2000
-----------------------------------
Land $ 705 $ 705
Buildings 11,873 11,925
Machinery and equipment 24,522 24,566
Leasehold improvements 770 774
Construction in progress 114 903
Other assets 1,096 1,016
-----------------------------------
39,080 39,889
Less accumulated depreciation (16,735) (17,442)
-----------------------------------
$ 22,345 $ 22,447
===================================
<PAGE>
5. Long-Term Debt
Long-term debt consists of the following:
December 31, March 31,
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% 215 194
Capital lease obligations 16 12
----------------------------------
2,731 2,706
Less current installments 2,597 2,594
----------------------------------
$ 134 $ 112
==================================
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 March 31,
2000, there are no borrowings under the line of credit.
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
(5.6 percent and 4.1 percent at December 31, 1999 and March 31, 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.
<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 that involve 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 in the section entitled Management's Discussion and
Analysis of Financial Conditions and Results of Operations.
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-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.
Quarter Ended March 31, 2000 vs. March 31, 1999
Net Sales. Net sales for the quarter were $14.8 million, up 9.1% from the first
quarter of 1999. Shipments to customers for ultimate assembly into Boeing
commercial aircraft represented 56.8% in 1999 of net sales for the quarter.
During the quarter, shipments on the 737NG were $3.9 million, up $0.6 million
from the first quarter of 1999. The Company's strategic plan to diversify its
customer and aircraft base has begun to show some results. In the first quarter
of 2000, shipments on Gulfstream's G-IV and G-V were $2.0 million, up $1.2
million from 1999. Also, new contracts for tools and parts on Lockheed Martin's
F-16 contributed $0.8 million in 2000, up $0.5 million from 1999. Sales on
Boeing military aircraft were down $0.7 million in the first quarter of 2000 to
$0.5 million. Shut down of the F-15 production line accounted for $0.6 million
of this decrease.
Gross Profit. Gross profit during the first quarter of 2000 was $2.2 million
(15.2% of net sales), down from $3.1 million (22.5% of net sales). Manufacturing
costs were negatively impacted by start up costs on newer contracts, including
components and assemblies for the under-wing fuselage of the 767 and winglets
for the 737NG. The start-up of this new work has also required the Company to
sub-contract certain components and tooling to meet customer delivery dates,
driving up manufacturing costs by $0.4 million.
Selling, General and Administrative Expenses. Selling, general and
administrative ("SG&A") expenses increased in the first quarter of 2000 by $0.6
million. Included in SG&A is a one-time charge of $0.4 million to establish a
reserve for exposure related to a customer implementing a reorganization plan.
An increase in professional services accounted for $0.1 million.
Liquidity and Capital Resources
The Company decreased its cash reserves during the first quarter of 2000 by $1.1
million, net of investments in marketable equity securities purchased of $0.5
million. Cash flow used by operations was $0.2 million as the increased revenue
during the quarter caused a growth in accounts receivable of $0.7 million.
Accounts payable decreased by $0.4 million, mainly attributable to payments for
property taxes.
Capital expenditures were higher than expected as the Company replaced a bladder
press in its Wichita facility at a total cost of $0.6 million. The old bladder
press is being repaired and will likely be offered for sale during 2000. The
Company also purchased four drop hammers for $0.2 million to support a new
program. The Company expects to limit capital expenditures to $1.5 million for
the balance of the year.
Impact of Year 2000
The advent of the year 2000 posed certain technological challenges resulting
from concern that computer technologies that recognized and processed calendar
years by the last two digits rather than all four digits of each year (e.g. "98"
for "1998") would not properly process the year 2000 and subsequent years. The
risks to the Company and the Company's Year 2000 plan and related mitigation
efforts had been described in the Company's most recent quarterly report on Form
10-Q for the quarter ended September 30, 1999.
<PAGE>
In late 1999, the Company completed its plan, including all remediation
and testing of systems. As a result of those planning and implementation
efforts, the Company experienced no significant disruptions in mission critical
information technology and non-information technology systems and believes those
systems successfully responded to the Year 2000 date change. The Company
expensed less than $0.1 million during 1999 in connection with remediating its
systems. The Company is not aware of any material problems resulting from Year
2000 issues, either with its products, its internal systems or the products and
services of third parties. However, because the Company's continued compliance
in calendar 2000 is dependent on the continued compliance of third parties,
there can be no assurance that the Company's efforts alone have resolved all
Year 2000 issues or that key third parties will not experience Year 2000
compliance failures as calendar 2000 progresses. The Company will continue to
monitor its mission critical computer applications and those of its suppliers
and vendors throughout the year 2000 to ensure that any latent Year 2000 matters
that may arise are addressed promptly.
PART II
OTHER INFORMATION
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 March 31, 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: May 15, 2000 By: /s/ Lawrence E. Dickinson
-----------------------------------------
Lawrence E. Dickinson
Chief Financial Officer and Secretary
<PAGE>
EXHIBIT INDEX
Exhibit Number Description
-------------- -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 4,270
<SECURITIES> 541
<RECEIVABLES> 7,621
<ALLOWANCES> 0
<INVENTORY> 15,168
<CURRENT-ASSETS> 29,612
<PP&E> 39,889
<DEPRECIATION> (17,442)
<TOTAL-ASSETS> 54,247
<CURRENT-LIABILITIES> 8,404
<BONDS> 2,706
0
0
<COMMON> 175
<OTHER-SE> 44,152
<TOTAL-LIABILITY-AND-EQUITY> 54,247
<SALES> 14,761
<TOTAL-REVENUES> 14,761
<CGS> 12,520
<TOTAL-COSTS> 12,520
<OTHER-EXPENSES> 2,535
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16
<INCOME-PRETAX> (278)
<INCOME-TAX> (97)
<INCOME-CONTINUING> (181)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (181)
<EPS-BASIC> (.02)
<EPS-DILUTED> (.02)
</TABLE>
