SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K/A
(Amendment No. 1)
[X] Annual report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the fiscal year ended December 31, 2002
[] 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
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(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
3600 Mueller Road, St. Charles, Missouri 63301
---------------------------------------- -------------------------
(Address of Principal Executive Officer) (ZIP Code)
(636) 946-6525
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(Registrant's Telephone Number, Including Area Code)
Securities to be registered pursuant to Section 12(b) of the Act: None
-----
Securities to be registered pursuant to Section 12(g) of the Act:
Common stock, $0.02 par value
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(Title of Class)
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, and (2) has been subject to such filing requirements
for the past 90 days. YES [X] 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 an accelerated filer (as
defined in Exchange Act Rule 12b-2). YES [ ] NO [X]
The aggregate market value of the voting common equity held by non-affiliates
computed by reference to the average bid and asked price of such common equity
as of June 28, 2002, the last business day of the registrant's most recently
completed second fiscal quarter, was $11,907,154.
There were 8,181,786 total shares of common stock outstanding as of April 3,
2003
Documents Incorporated by Reference
Part III incorporates by reference portions of the Proxy Statement for
the Registrant's 2003 Annual Meeting.
EXPLANATORY NOTE
LMI Aerospace, Inc. (the "Company") hereby amends its Annual Report on Form 10-K
for the year ended December 31, 2002 (the "Form 10-K") by correcting an addition
error contained in the Company's Consolidated Balance Sheets included as part of
Item 8 to the Form 10-K. In particular, the Company is hereby amending the
Consolidated Balance Sheet to properly indicate that the Company's total
long-term liabilities as of December 31, 2002 were $26,560,000, rather than
$16,560,000. As required under SEC rules, this Amendment sets forth the complete
text of "Item 8. Financial Statements and Supplementary Data" as amended.
In addition, the Company also amended the Exhibit Index contained in the Form
10-K to indicate that Exhibit 3.3 was previously filed with the Company's Annual
Report on Form 10-K for the year ended December 31, 2001.
This Amendment continues to speak as of the date of the Form 10-K, and the
Company has not updated the disclosure in this Amendment to speak to any later
date.
TABLE OF CONTENTS
<Table>
<Caption>
Item No. Page
- -------- ----
PART II
8 Financial Statements and Supplementary Data 1
PART IV
15 Exhibits, Financial Statement Schedules, and Reports on Form 8-K 25
Signatures 26
Certifications 27
Exhibit Index 29
</Table>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The following financial statements are included in Item 8 of this report:
<Table>
<Caption>
Financial Statement Page
------------------- ----
Report of Independent Auditors 2
Consolidated Balance Sheets as of December 31, 2001 and 2002 3
Consolidated Statements of Operations for the Years Ended
December 31, 2000, 2001 and 2002 4
Consolidated Statements of Stockholders' Equity for the Years
Ended December 31, 2000, 2001 and 2002 5
Consolidated Statements of Cash Flows for the Years Ended
December 31, 2000, 2001 and 2002 6
Notes to Consolidated Financial Statements 7
</Table>
1
Report of Independent Auditors
The Board of Directors and Stockholders
LMI Aerospace, Inc.
We have audited the accompanying consolidated balance sheets of LMI Aerospace,
Inc. (the "Company") as of December 31, 2001 and 2002, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the three years in the period ended December 31, 2002. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of LMI Aerospace,
Inc. at December 31, 2001 and 2002, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 31, 2002, in conformity with accounting principles generally accepted
in the United States.
As described in Note 1 to the financial statements, in 2000 the Company changed
its method of accounting for revenue recognition and in 2002 the Company changed
its method of accounting for goodwill.
/s/ Ernst & Young LLP
St. Louis, Missouri
April 15, 2003
2
LMI Aerospace, Inc.
Consolidated Balance Sheets
(Amounts in thousands, except share and per share data)
<Table>
<Caption>
DECEMBER 31
2001 2002
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents $ 4,645 $ 1,182
Investments 643 --
Trade accounts receivable, net of allowance of $64 in 2001
and $334 in 2002 6,285 11,392
Inventories 23,045 25,181
Prepaid expenses 787 978
Deferred income taxes 886 1,389
Income taxes receivable -- 1,501
------------ ------------
Total current assets 36,291 41,623
Property, plant, and equipment, net 24,014 25,986
Goodwill 7,420 5,653
Customer intangible assets, net -- 4,267
Other assets 277 336
------------ ------------
$ 68,002 $ 77,865
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,547 $ 6,107
Accrued expenses 2,659 2,846
Current installments of long-term debt and capital lease
obligations 2,334 4,616
------------ ------------
Total current liabilities 8,540 13,569
Long-term debt and capital lease obligations, less current
installments 12,621 24,621
Deferred income taxes 1,192 1,939
------------ ------------
Total long-term liabilities 13,813 26,560
Stockholders' equity:
Common stock of $.02 par value; authorized 28,000,000
shares; 8,734,422 and 8,736,427 shares issued in
2001 and 2002, respectively 175 175
Preferred stock; authorized 2,000,000 shares; none
issued -- --
Additional paid-in capital 26,171 26,171
Treasury stock, at cost, 716,676 and 554,641 shares in 2001
and 2002, respectively (3,402) (2,632)
Accumulated other comprehensive loss -- (17)
Retained earnings 22,705 14,039
------------ ------------
Total stockholders' equity 45,649 37,736
------------ ------------
$ 68,002 $ 77,865
============ ============
</Table>
See accompanying notes
3
LMI Aerospace, Inc.
Consolidated Statements of Operations
(Amounts in thousands, except per share data)
<Table>
<Caption>
YEAR ENDED DECEMBER 31
2000 2001 2002
------------ ------------ ------------
Net sales $ 55,658 $ 70,823 $ 81,349
Cost of sales 48,255 54,809 69,185
------------ ------------ ------------
Gross profit 7,403 16,014 12,164
Selling, general and administrative expenses 9,135 10,194 12,931
Goodwill impairment charges -- -- 5,104
------------ ------------ ------------
Income (loss) from operations (1,732) 5,820 (5,871)
Other income (expense):
Interest expense (169) (843) (1,495)
Other, net 179 (247) (525)
------------ ------------ ------------
10 (1,090) (2,020)
------------ ------------ ------------
Income (loss) before income taxes (1,722) 4,730 (7,891)
Provision for (benefit of) income taxes (603) 1,764 (691)
------------ ------------ ------------
Income (loss) before cumulative effect of
change in accounting principle (1,119) 2,966 (7,200)
Cumulative effect of change in accounting
principle, net of income tax benefit of
$88 in 2000 and $663 for 2002 (164) -- (1,104)
------------ ------------ ------------
Net income (loss) $ (1,283) $ 2,966 $ (8,304)
============ ============ ============
Amounts per common share:
Income (loss) before cumulative effect of
change in accounting principle $ (0.14) $ 0.37 $ (0.89)
Cumulative effect of change in accounting
principle (0.02) -- (0.14)
------------ ------------ ------------
Net income (loss) per common share $ (0.16) $ 0.37 $ (1.03)
============ ============ ============
Net income (loss) per common share -
assuming dilution $ (0.16) $ 0.36 $ (1.03)
============ ============ ============
Weighted average common shares
outstanding 8,190,525 8,059,682 8,077,293
============ ============ ============
Weighted average dilutive stock options
outstanding -- 98,444 --
============ ============ ============
</Table>
See accompanying notes.
4
LMI Aerospace, Inc.
Consolidated Statements of Stockholders' Equity
(Amounts in thousands, except share and per share data)
<Table>
<Caption>
ACCUMULATED
ADDITIONAL OTHER TOTAL
COMMON PAID-IN RETAINED TREASURY COMPREHENSIVE STOCKHOLDERS'
STOCK CAPITAL EARNINGS STOCK INCOME (LOSS) EQUITY
---------- ---------- ---------- ---------- ------------- -------------
Balance at December 31, 1999 $ 175 $ 26,164 $ 21,193 $ (3,046) $ -- $ 44,486
Comprehensive loss:
Net loss -- -- (1,283) -- -- (1,283)
Unrealized loss on available-
for-sale securities, net of
income tax benefit of $146 -- -- -- -- (272) (272)
----------
Comprehensive loss (1,555)
Purchase of 152,000 shares of
outstanding stock for treasury -- -- -- (382) -- (382)
Issuance of 44,570 shares of treasury
stock to profit sharing/401(k) plan -- -- (125) 254 -- 129
---------- ---------- ---------- ---------- ---------- ----------
Balance at December 31, 2000 175 26,164 19,785 (3,174) (272) 42,678
---------- ---------- ---------- ---------- ---------- ----------
Comprehensive income (loss):
Net income -- -- 2,966 -- -- 2,966
Unrealized gain on available-
for-sale securities, net of
income tax of $40 -- -- -- -- 67 67
Reclassification adjustment for
losses realized in net income,
net of income tax benefit of $106 -- -- -- -- 205 205
----------
Comprehensive income /(loss) 3,238
Exercise of options to purchase stock -- 7 -- -- -- 7
Purchase of 119,000 shares of
outstanding stock for treasury -- -- -- (379) (379)
Issuance of 30,928 shares of treasury
stock to profit sharing/401(k) plan -- -- (46) 151 -- 105
---------- ---------- ---------- ---------- ---------- ----------
Balance at December 31, 2001 175 26,171 22,705 (3,402) -- 45,649
---------- ---------- ---------- ---------- ---------- ----------
Comprehensive income (loss):
Net income -- -- (8,304) -- -- (8,304)
Unrealized loss on available-for-
sale securities, net of income
tax benefit of $244 -- -- -- -- (399) (399)
Reclassification adjustment for losses
realized in net loss, net of income -- -- -- -- 399 399
tax benefit of $244
Exchange rate (loss) -- -- -- -- (17) (17)
----------
Comprehensive income (loss) (8,321)
Issuance of stock - 90,000 shares of -- -- (218) 427 -- 209
common stock in connection with the
acquisition of SSFF
Purchase of 1,900 shares of
outstanding stock for treasury -- -- -- (8) -- (8)
Exercise of options to purchase stock -- -- (101) 196 -- 95
Issuance of 32,690 shares of treasury
stock to profit sharing/401(k) plan -- -- (43) 155 -- 112
---------- ---------- ---------- ---------- ---------- ----------
Balance at December 31, 2002 $ 175 $ 26,171 $ 14,039 $ (2,632) $ (17) $ 37,736
---------- ---------- ---------- ---------- ---------- ----------
</Table>
See accompanying notes.
5
LMI Aerospace, Inc.
Consolidated Statements of Cash Flows
(Amounts in thousands)
<Table>
<Caption>
YEAR ENDED DECEMBER 31
2000 2001 2002
---------- ---------- ----------
OPERATING ACTIVITIES
Net income (loss) $ (1,283) $ 2,966 $ (8,304)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization 3,650 4,208 4,433
Goodwill impairment charges -- -- 6,871
Non cash investment loss -- 311 643
Changes in operating assets and liabilities:
Trade accounts receivable 314 2,810 (2,636)
Inventories (598) (2,828) (847)
Prepaid expenses and other assets (13) (432) (176)
Income taxes 222 349 (2,026)
Accounts payable (450) (612) 274
Accrued expenses 63 213 (274)
---------- ---------- ----------
Net cash (used by) from operating activities 1,905 6,985 (2,042)
INVESTING ACTIVITIES
Additions to property, plant, and equipment (2,776) (3,387) (2,293)
Proceeds from sale of equipment 481 90 --
Purchases of investments (954) -- --
Acquisition of Versaform, net of cash acquired -- -- (10,458)
Acquisition of Stretch Forming Corporation -- -- (825)
Acquisition of Southern Stretch Forming and Fabrication -- -- (115)
Acquisition of Tempco, net of cash acquired -- (14,908) (300)
---------- ---------- ----------
Net cash used by investing activities (3,249) (18,205) (13,991)
FINANCING ACTIVITIES
Proceeds from issuance of long-term debt 92 14,250 11,000
Net advances on revolving line of credit -- -- 4,417
Principal payments on long-term debt (2,598) (715) (2,918)
Proceeds from equipment notes payable -- 1,027 --
Treasury stock transactions, net (382) (380) (7)
Proceeds from exercise of stock options -- 7 95
---------- ---------- ----------
Net cash from (used by) financing activities (2,888) 14,189 12,587
Effect of exchange rate changes on cash -- -- (17)
Net increase (decrease) in cash and cash equivalents (4,232) 2,969 (3,463)
Cash and cash equivalents, beginning of year 5,908 1,676 4,645
---------- ---------- ----------
Cash and cash equivalents, end of year $ 1,676 $ 4,645 $ 1,182
========== ========== ==========
</Table>
See accompanying notes.
6
LMI Aerospace, Inc.
Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except share and per share data)
December 31, 2002
1. ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
LMI Aerospace, Inc. (the "Company") fabricates, machines, and integrates formed,
close tolerance aluminum and specialty alloy components for use by the
aerospace, semiconductor and medical products industries. 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; Irving, Texas; Sun Valley, California; Oceanside,
California; and Langley, British Columbia.
The accompanying financial statements include the consolidated financial
position, results of operations, and cash flows of the Company and its
subsidiaries. All significant intercompany balances and transactions have been
eliminated in consolidation.
OPERATING RESULTS AND MANAGEMENT'S PLAN
The Company experienced net losses in the third and fourth quarters of 2002
primarily as a result of product issues associated with new work in the St.
Charles plant which caused the Company to violate certain restrictive financial
covenants in its bank credit agreement with its primary lender as of December
31, 2002. Additionally, subsequent to year end, the Company exhausted its
available borrowings under its revolving credit facility of $7.0 million,
peaking at $7.5 million. The Company provided forecasts of operations and cash
flows to the bank and, in April 2003, negotiated revised covenants, secured an
increase in its revolving credit facility to $10.0 million, subject to a
borrowing base calculation, and extended the maturity date of the revolving
credit facility to January 5, 2004. As a part of the negotiations, the bank also
required an increase in the interest rate on the revolving credit facility of
0.25%, restrictions on capital expenditures, and a fee of $25,000. Additionally,
the bank required the Company to retain a financial consultant to work with
management to analyze operations and cash management. Independently, the Company
has undertaken a plan to reduce operating expenses at all facilities with
primary emphasis on the St. Charles facility. These immediate cost savings
include reductions in overtime worked and controllable expenses. This plan may
include, but is not limited to, headcount reductions, downsizing or closing of
facilities, and elimination of or reduction in specific customers or production
processes.
Based on forecasted operating results and cash flows, management believes that
cash flow from operations and the expanded capacity under the Revolving Credit
Agreement, as described in Note 7, will be adequate to fund the Company's
operations in 2003. The forecasted operating results and cash flows are
dependent upon management's ability to improve performance in the St. Charles
plant and accomplish certain expected reductions in operating expenses. While
management believes this forecast is achievable, to the extent that management
does not improve operating performance and reduce expenses, the Company may have
to seek alternative sources of financing. There can be no assurances that the
Company can obtain alternative financing on reasonable and acceptable terms.
CUSTOMER AND SUPPLIER CONCENTRATION
Direct sales to the Company's largest customer accounted for 48.0%, 40.0%, and
25.4% of the Company's total revenues in 2000, 2001 and 2002, respectively.
Accounts receivable balances related to direct sales to this customer were 29.0%
in 2001 and 7.8% in 2002. Indirect sales to the Company's largest customer
accounted for 13.0%, 11.0%, and 8.7% of the Company's total sales in 2000, 2001,
and 2002, respectively.
Direct sales to the Company's second largest customer accounted for 10.4%, 4.6%
and 17.5% of the Company's total revenues in 2000, 2001 and 2002 and represented
3.1% and 21.1% of the accounts receivable balance at December 31, 2001 and 2002,
respectively.
The Company purchased approximately 63% and 34% of the materials used in
production from three suppliers in 2001 and 2002, respectively.
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States 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.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash on hand, amounts due from banks, and all
highly liquid investment instruments with an initial maturity of three months or
less.
7
LMI Aerospace, Inc.
Notes to Consolidated Financial Statements - (Continued)
(Dollar amounts in thousands, except share and per share data)
December 31, 2002
INVENTORIES
Inventories are stated at the lower of cost or market using actual cost for raw
materials and average cost for work-in-process and finished goods.
REVENUE RECOGNITION
Revenues are recorded when services are delivered or when products are shipped,
except for long-term contracts which are recorded on the
percentage-of-completion method (units-of-delivery basis). Sales from long-term
contracts were approximately 17% of sales in 2000, less than 10% in 2001, and
zero in 2002.
In the fourth quarter of 2000, the Company changed its method of accounting for
revenue recognition in accordance with Staff Accounting Bulletin (SAB) No. 101,
Revenue Recognition in Financial Statements. Previously, the Company recognized
revenue on certain product prior to customer acceptance. The Company had
performed testing to ensure the product met customer specifications and had
routinely obtained customer acceptance in the past, but customer acceptance was
required per the Company's contract with the customer. Under the new accounting
method adopted retroactive to January 1, 2000, the Company now recognizes
revenue upon customer acceptance. The cumulative effect of the change on prior
years resulted in a charge to income of $164, net of income tax benefit of $88,
which is included in income for the year ended December 31, 2000. The effect of
the change on the year ended December 31, 2000 was to increase income before the
cumulative effect of the accounting change by $89 ($.01 per share). Pro forma
results for prior years are not disclosed due to immateriality.
PROPERTY, PLANT, AND EQUIPMENT
Property, plant and equipment are stated at cost. Equipment under capital leases
is stated at the present value of the minimum lease payments. Depreciation is
calculated using the straight-line method over the estimated useful lives of the
related assets. Equipment held under capital leases and leasehold improvements
are amortized using the straight-line method over the shorter of the lease term
or estimated useful life of the asset. Estimated useful lives for buildings and
machinery and equipment are 20 years and 4 to 10 years, respectively.
LONG-LIVED ASSETS
In accordance with Statement of Financial Accounting Standard (SFAS) No. 144,
Accounting for the impairment or Disposal of 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.
8
LMI Aerospace, Inc.
Notes to Consolidated Financial Statements - (Continued)
(Dollar amounts in thousands, except share and per share data)
December 31, 2002
PRE-PRODUCTION COSTS
The Company accounts for pre-production costs in accordance with (EITF) 99-5,
Accounting for Pre-Production Costs Related to Long-Term Supply Arrangements.
All design and development costs for products to be sold under long-term supply
arrangements are expensed unless there is a contractual guarantee that provides
for specific required payments for design and development costs.
GOODWILL AND INTANGIBLE ASSETS
Effective January 1, 2002, the Company adopted SFAS No. 142, Goodwill and Other
Intangible Assets, under which goodwill will no longer be amortized but instead
be tested upon adoption of the Statement and then at least annually for
impairment and expensed to the extent the implied fair value of reporting units,
including goodwill, is less than carrying value (see Note 6). Acquired
intangible assets with finite lives are amortized over the useful life on a
straight line basis.
INCOME TAXES
Deferred tax assets and liabilities are recognized for the estimated future tax
consequences attributable to differences between the financial statement and
income tax basis of the Company's assets and liabilities.
9
LMI Aerospace, Inc.
Notes to Consolidated Financial Statements - (Continued)
(Dollar amounts in thousands, except share and per share data)
December 31, 2002
STOCK-BASED COMPENSATION
The Company accounts for its stock based compensation in accordance with
Accounting Principles Board (APB) Opinion No. 25 and related interpretations and
provides the pro forma disclosure provisions of SFAS No. 123. The Company
applied APB Opinion No. 25 in accounting for its stock option plans, and
accordingly, no compensation cost has been recognized for stock options granted
at fair market value. Had the Company determined compensation cost based on the
fair value at the grant date under SFAS No. 123, net income and earnings per
share amounts would have been as follows:
<Table>
<Caption>
2000 2001 2002
---------- ---------- ----------
Net income (loss) as reported $ (1,283) $ 2,966 $ (8,304)
Less: Total stock based employee
compensation expense determined under fair
value based method, net of tax effect (205) (225) (150)
---------- ---------- ----------
Pro forma net income (loss) (1,488) 2,741 (8,454)
Net income per common share
As reported (.16) .37 (1.03)
Pro forma net income (loss) (.18) .34 (1.05)
Net income per common share assuming dilution:
As reported (.16) .36 (1.03)
Pro forma net income (loss) (.18) .34 (1.05)
</Table>
FINANCIAL INSTRUMENTS
Fair values of the Company's long-term obligations approximate their carrying
values based on discounted cash flow analysis.
Available-for-sale securities are stated at fair value based on quoted market
prices, with the unrealized gains and losses, net of tax, reported in other
comprehensive income/loss. Realized gains and losses and declines in value
determined to be other-than-temporary on available-for-sale securities are
included in investment income. The cost of securities sold is based on the
average cost method. Interest and dividends on securities classified as
available-for-sale are included in other income.
The Company's other financial instruments have fair values which approximate
their respective carrying values due to their short maturities or variable rate
characteristics.
EARNINGS PER COMMON SHARE
The Company follows SFAS No. 128, Earnings per Share, in calculating basic and
fully diluted earnings per share. Earnings per share are computed by dividing
net income by the weighted average number of common shares outstanding during
the applicable periods.
10
LMI Aerospace, Inc.
Notes to Consolidated Financial Statements - (Continued)
(Dollar amounts in thousands, except share and per share data)
December 31, 2002
2. ACQUISITIONS
TEMPCO ENGINEERING
On April 2, 2001, the Company acquired certain assets of Tempco Engineering,
Inc. and Hyco Precision, Inc. ("Tempco"), two privately held related metal
machining companies based in Southern California, funded by a secured note with
the Company's lender. The acquisition has been accounted for under the purchase
method, and accordingly, the results of operations were included in the
Company's financial statements from the date of acquisition. Tempco produces
components for photolithography equipment used in the manufacture of
semiconductors, as well as components for the defense and commercial aerospace
industries. Tempco's sales were approximately $16,000 in 2000. The purchase
price for the net assets acquired, net of acquired cash, was approximately
$15,200. The Company may pay additional contingent consideration of up to $1,250
if Tempco's EBITDA, as defined, exceeds certain limits for the two years ended
March 31, 2003. At December 31, 2002 Tempco had not and does not expect to meet
the financial thresholds that would obligate the Company to pay additional
consideration at the end of the contingency period, March 31, 2003. The excess
of the purchase price over the fair value of net assets acquired, $5,943, was
allocated to goodwill.
VERSAFORM
On May 16, 2002, the Company acquired all of the outstanding stock of Versaform
Corporation and BC 541775, Ltd., a holding company that owns 100% of the common
stock of Versaform Canada Corporation (collectively, "Versaform") for
approximately $11,787 consisting of cash and a note payable of $ 1.3 million.
Versaform forms large sheet metal and extrusion components predominantly for the
corporate, regional, and military aerospace markets from two facilities in
Oceanside, California and one facility in Langley, British Columbia, Canada.
The acquisition was accounted for as a purchase business combination, and
accordingly, the results of operations were included in the Company's financial
statements after May 16, 2002. The cost to acquire Versaform has been allocated
to the assets acquired and liabilities assumed according to their estimated fair
values at the time of the acquisition as follows:
<Table>
Working capital $ 400
Property, plant, and equipment 3,179
Assumed long-term liabilities (871)
Customer-related intangible 3,975
Goodwill (nondeductible) 5,104
----------
$ 11,787
==========
</Table>
The intangible asset relates to acquired customer relationships and is being
amortized over 15 years on a straight line basis. Based on the terms of the
purchase agreement, the Company is obligated to pay additional consideration if
sales to a specific customer exceed certain annual
11
LMI Aerospace, Inc.
Notes to Consolidated Financial Statements - (Continued)
(Dollar amounts in thousands, except share and per share data)
December 31, 2002
thresholds over the three years following the acquisition. As of December 31,
2002, sales to the specific customer did not meet these thresholds and is not
expected to meet the thresholds for the remainder of the three year contingency
period. The purchase agreement allows for certain adjustments to the purchase
price for claims in excess of $100. The Company has filed a claim for
reimbursement of certain liabilities existing at the closing date and has
recorded a receivable from the seller of $196. The Company expects to resolve
the purchase price adjustment in the second quarter of 2003. Versaform's sales
were approximately $12,000 in 2001.
SOUTHERN STRETCH FORMING AND FABRICATION, INC.
On September 30, 2002, the Company acquired certain assets and assumed certain
liabilities of Southern Stretch Forming and Fabrication, Inc. ("SSFF"). The
former owner of Versaform, currently a director of the Company, held a 50%
interest in SSFF. Following the Company's acquisition of Versaform, the director
purchased the remaining 50% interest in SSFF and sold SSFF to the Company. (See
related party transactions at Note 12) The assets consisted primarily of
inventory, machinery and equipment. The acquisition was accounted for as a
purchase business combination, and accordingly, the related results of
operations have been included in the consolidated statement of operations after
September 30, 2002. The purchase price of $444, which includes the assumption of
debt and direct costs of the transaction, consisted of $235 in cash and 90,000
shares of LMI common stock, with a market value of $209.
The cost to acquire these assets has been allocated to the assets according to
their fair values and consisted of inventory of $115, and equipment and
machinery of $718, and assumed liabilities of $389. Net sales for SSFF for 2001
were approximately $3,820, of which approximately $1,739 were to the Company.
STRETCH FORMING CORPORATION
On June 12, 2002, the Company acquired certain assets of Stretch Forming
Corporation ("SFC"), based in Southern California. The purchase price of $950
was allocated to the assets acquired based on their fair value and consisted of
working capital of $465, equipment of $66, and an intangible asset of $419
related to production backlog, to be amortized over 3.5 years on a straight line
basis.
3. TREASURY STOCK TRANSACTIONS
The Board of Directors authorized the Company to repurchase shares of its common
stock and place these shares in a Treasury Stock account for use at management's
discretion. The Company purchased 119,000 shares and 1,900 shares in 2001 and
2002, respectively, in the open market at prices ranging from $4.48 to $2.00 per
share. In addition, the Company issued 30,928 shares in 2001 and 32,690 shares
in 2002 in conjunction with contributions to and purchases by the Company's
benefit plans. These transactions were recorded at cost in stockholders' equity.
A portion of the consideration for SSFF consisted of 90,000 shares of treasury
stock recorded at fair value.
12
LMI Aerospace, Inc.
Notes to Consolidated Financial Statements - (Continued)
(Dollar amounts in thousands, except share and per share data)
December 31, 2002
4. INVENTORIES
Inventories consist of the following:
<Table>
<Caption>
2001 2002
---------- ----------
Raw materials $ 3,742 $ 4,469
Work in process 6,127 5,576
Finished goods 13,176 15,136
---------- ----------
$ 23,045 $ 25,181
========== ==========
</Table>
During the third and fourth quarter of 2002, the Company encountered production
difficulties and inefficiencies on new programs with two significant customers
due to several factors including inadequate tooling, poor performance of a
critical subcontractor, and changes in customer acceptance criteria. At December
31, 2002, the Company recorded a lower of cost or market reserve of $1,957 on
work in process primarily related to these programs of which approximately $696
relates to completion costs to be incurred in 2003.
The Company has presented claims for certain costs incurred and has requested
re-pricing of several components. As the claim has not been accepted or approved
by the customer, no claim recovery has been recorded in the December 31, 2002
financial statement.
5. PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment consist of the following:
<Table>
<Caption>
2001 2002
---------- ----------
Land $ 705 $ 705
Buildings 12,395 12,689
Machinery and equipment 31,061 36,493
Leasehold improvements 808 918
Software and other 1,496 1,608
Construction in progress 390 552
---------- ----------
46,855 52,965
Less accumulated depreciation 22,841 26,979
---------- ----------
$ 24,014 $ 25,986
========== ==========
</Table>
Depreciation expense (including amortization expense on software) recorded by
the Company totaled $3,216, $3,730, and $4,284 for 2000, 2001 and 2002,
respectively.
13
LMI Aerospace, Inc.
Notes to Consolidated Financial Statements - (Continued)
(Dollar amounts in thousands, except share and per share data)
December 31, 2002
6. GOODWILL AND INTANGIBLES
As required by SFAS No. 142, the Company performed the initial phase of its
transitional impairment test as of January 1, 2002 during the first six months
following adoption and determined that its operating segments constitute
reporting units. Additionally, the Company determined that the carrying value of
its Sheet Metal segment exceeded its fair value.
The initial phase of the transitional test indicated potential impairment of the
Sheet Metal segment's goodwill with a carrying value of $1,767 reflecting the
current industry conditions and estimates of aerospace industry spending in the
foreseeable future. The Company engaged valuation experts to assist in
performing a review of the fair value of the Sheet Metal segment's tangible and
intangible assets, including goodwill, as of January 1, 2002. Based upon the
valuation completed in the fourth quarter of 2002, relying primarily on a
discounted cash flow valuation technique, the Company recorded a $1,767 charge
($1,104 net of tax) for the impairment of the Sheet Metal segment's goodwill.
The charge is reflected as the cumulative effect of adopting the new accounting
standard as of January 1, 2002.
In the fourth quarter 2002, the Company performed the required annual impairment
test under SFAS No. 142. The initial phase of the required annual test indicated
potential impairment of the Sheet Metal segment's goodwill with a carrying value
of $5,104, all of which related to the May 2002 acquisition of Versaform. These
impairment indicators arose from poor operating performance at the other
operations in the Sheet Metal segment reflecting further deterioration in the
industry conditions and estimates of aerospace industry spending in the
foreseeable future. The Company engaged valuation experts to assist in
performing a review of the fair value of the Sheet Metal segment's tangible and
intangible assets, including goodwill, as of October 1, 2002. Based upon the
valuation, relying primarily on a discounted cash flow valuation technique, the
Company recorded a $5,104 charge as a component of operating income in the
fourth quarter of 2002.
The changes in the carrying amount of goodwill for the fiscal years ended 2000,
2001, and 2002 were as follows:
<Table>
<Caption>
2000 2001 2002
---------- ---------- ----------
Beginning of the year $ 1,725 $ 1,888 $ 7,420
Additions 279 5,943 5,104
Amortization (116) (411) --
Impairment
Cumulative effect of accounting change -- -- (1,767)
Annual impairment assessment -- -- (5,104)
---------- ---------- ----------
End of the year $ 1,888 $ 7,420 $ 5,653
========== ========== ==========
</Table>
Goodwill at December 31, 2002 relates to the Machining and Technology segment.
14
LMI Aerospace, Inc.
Notes to Consolidated Financial Statements - (Continued)
(Dollar amounts in thousands, except share and per share data)
December 31, 2002
The changes in the carrying amount of customer related intangibles for the year
ended December 31, 2002 were as follows (There were no customers related
intangibles prior to 2002):
<Table>
<Caption>
Stretch
Versaform Forming Corporation Total
------------ ------------------- ------------
January 1, 2002 $ -- $ -- $ --
Additions 3,975 419 4,394
Amortization (66) (61) (127)
------------ ------------ ------------
December 31, 2002 $ 3,909 $ 358 $ 4,267
============ ============ ============
</Table>
Prior to the adoption of SFAS No. 142, amortization expense was recorded for
goodwill. The following table sets forth a reconciliation of net income and
earnings per share information for fiscal years 2000 and 2001 adjusted for
non-amortization provisions of SFAS No. 142.
<Table>
<Caption>
Year ended December 31,
2000 2001
------------ ------------
Reported net income (loss) $ (1,283) $ 2,966
Goodwill amortization 203 411
------------ ------------
Adjusted net income (loss) $ (1,080) $ 3,377
============ ============
Earnings /(loss) per share - basic $ (.16) $ .37
Goodwill amortization expense, net of tax .02 .05
------------ ------------
Adjusted earnings per share - basic $ (.14) $ .42
============ ============
Reported earnings/(loss) per share - diluted $ (.16) $ .36
Goodwill amortization expense, net of tax .02 .03
------------ ------------
Adjusted earnings per share-diluted $ (.14) $ .41
============ ============
</Table>
15
LMI Aerospace, Inc.
Notes to Consolidated Financial Statements - (Continued)
(Dollar amounts in thousands, except share and per share data)
December 31, 2002
7. LONG-TERM DEBT
Long-term debt consists of the following:
<Table>
<Caption>
2001 2002
------------ ------------
Term Loans:
Tempco $ 13,741 $ 11,705
Versaform -- 10,738
Revolving line of credit -- 4,417
Note payable to Director, principal and interest
payable monthly at 7% -- 1,003
Note payable, principal and interest payable monthly, at
fixed rates, ranging from 6.99% to 10.00% 1,100 1,212
Capital lease obligations 114 162
------------ ------------
14,955 29,237
Less current installments 2,334 4,616
------------ ------------
$ 12,621 $ 24,621
============ ============
</Table>
The Company has a loan agreement ("Loan Agreement") with Union Planters Bank,
NA. The Loan Agreement consists of a revolving line of credit ("Revolver"), a
term loan to finance the purchase of Tempco ("Tempco Term Loan"), and a term
loan to finance the purchase of Versaform ("Versaform Term Loan"). The Company's
Loan Agreement is secured by all the domestic assets of the Company and requires
compliance with certain non-financial and financial covenants including minimum
levels of EBITDA and tangible net worth.
At December 31, 2002, the Company was in violation of certain financial
covenants of the Loan Agreement, due to the operating losses and negative cash
flow from operations in 2002 (See Note 1). On April 15, 2003, the Company
obtained a waiver of the December 31, 2002 violations and an amendment to the
Loan Agreement from its lender. The amended Loan Agreement extends the maturity
of the line of credit to January 2004, increases the capacity under the line of
credit by $3 million and eased the quarterly financial covenant requirements
through December 31, 2003.
The Company's amended Revolver allows for a $10,000 line of credit, subject to a
borrowing base calculation, to fund various corporate needs. Interest is payable
with an interest rate of 3.6% monthly based on a quarterly cash flow leverage
calculation and the LIBOR rate. This facility matures in January 2004. The
credit facility prohibits the payment of cash dividends on common stock without
the prior written consent of Union Planters. The Company had $4,417 outstanding
on this line at December 31, 2002.
The Company drew $14,250 on the Tempco Term Loan on April 2, 2001. The Tempco
Term Loan requires monthly principal and interest payments over three years
using a seven year amortization and bears interest at ninety day LIBOR plus 3%,
subject to a cap of 8.5% and a floor of 7.0%. The interest rate was 7.0% at
December 31, 2002. Under the Loan Agreement, the Company has $1,250 available to
fund any additional contingent consideration which may be required under the
terms of the Tempco acquisition (see Note 2).
16
LMI Aerospace, Inc.
Notes to Consolidated Financial Statements - (Continued)
(Dollar amounts in thousands, except share and per share data)
December 31, 2002
The Versaform Term Loan was issued for $11,000 on May 15, 2002. The Versaform
Term Loan requires monthly principal and interest payments over three years
using a seven year amortization and bears interest at the ninety day LIBOR plus
3%. The interest rate was 4.4% at December 31, 2002.
The Company entered into a note payable for $1,300 with the prior owner of
Versaform in connection with the acquisition. The prior owner has since become a
member of the board of directors of the Company. This note is payable monthly
over three years and bears interest at 7.0%. This note is secured by 65% of the
stock of the Company's Canadian subsidiary.
The Company entered into various notes payable for the purchase of certain
equipment. The notes are payable in monthly installments including interest
ranging from 6.99% - 10.0% through November 2006. The notes payable are secured
by equipment.
The Company entered into capital lease agreements for the purchase of certain
equipment. The leases are payable in monthly installments including interest
ranging from 4.98% - 9.15% through August 2005.
The aggregate maturities of long-term debt as of December 31, 2002 are as
follows:
<Table>
<Caption>
Year ending December 31:
2003 $ 4,616
2004 16,401
2005 8,048
2006 172
2007 --
------------
$ 29,237
============
</Table>
17
LMI Aerospace, Inc.
Notes to Consolidated Financial Statements - (Continued)
(Dollar amounts in thousands, except share and per share data)
December 31, 2002
8. LEASES
The Company leases certain facilities and equipment under various noncancelable
operating lease agreements which expire at various dates through 2009. At
December 31, 2002, the future minimum lease payments under operating leases with
initial noncancelable terms in excess of one year are as follows:
<Table>
<Caption>
Year ending December 31:
2003 $ 1,933
2004 1,608
2005 1,218
2006 654
2007 265
Thereafter 223
------------
$ 5,901
============
</Table>
Rent expense totaled $1,044, $1,354, and $2,107 in 2000, 2001, and 2002
respectively.
9. DEFINED CONTRIBUTION PLANS
The Company has a noncontributory profit sharing plan and a contributory 401(k)
plan which covers substantially all full-time employees. Employees are eligible
to participate in both plans after reaching 1,000 hours of accredited service.
Contributions to the profit sharing plan are at the discretion of management and
become fully vested after seven years. Contributions by the Company to the
profit sharing plan totaled $105, $121 and $0 for 2000, 2001 and 2002
respectively. Contributions by the Company to the 401(k) plan, which are fully
vested to the employees immediately upon contribution, are based upon a
percentage of employee contributions. The Company's contributions to the 401(k)
plan totaled $88, $86 and $229 for 2000, 2001, and 2002 respectively. In
addition, at December 31, 2002, the Company had 600,000 common shares of its
stock reserved for contributions to the 401(k) plan.
18
LMI Aerospace, Inc.
Notes to Consolidated Financial Statements - (Continued)
(Dollar amounts in thousands, except share and per share data)
December 31, 2002
10. STOCK OPTIONS
The Company's 1998 Employee Stock Option Plan provides options for up to 900,000
shares to be granted to key employees at exercise prices greater than or equal
to the fair market value per share on the date the option is granted. Options
issued under the Plan are at the discretion of management and may be in the form
of Incentive Stock Options or Non-Qualified Stock Options. Vesting periods may
apply.
At December 31, 2002, a total of 1,157,822 shares of authorized and unissued
common stock were reserved for issuance of stock awards and options granted or
authorized to be granted.
<Table>
<Caption>
2000 2001 2002
-------------------------- -------------------------- --------------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
NUMBER OF EXERCISE NUMBER OF EXERCISE NUMBER OF EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
---------- ---------- ---------- ---------- ---------- ----------
Options outstanding at
beginning of year 324,950 4.00 404,235 3.62 470,295 3.09
Granted 145,280 3.00 146,700 2.38 89,500 4.76
Exercised -- -- (2,005) 2.75 (40,645) 2.31
Canceled/expired (65,995) 4.15 (78,635) 4.38 (18,675) 4.23
---------- ---------- ----------
Options outstanding at end
of year 404,235 3.62 470,295 3.09 500,475 3.41
========== ========== ========== ========== ========== ==========
</Table>
The number of options exercisable and the related range of exercise prices
December 31, 2000, 2001, and 2002 were 213,885 shares, with a range of exercise
prices from $2.75 to $6.25, 276,170 shares, with a range of exercise prices from
$2.00 to $5.93, and, 404,200 shares, with a range of exercise prices from $2.00
to $6.06, respectively.
The fair value for options was estimated at the date of grant using a
Black-Scholes option pricing model with the following weighted-average
assumptions for 2000, 2001 and 2002, respectively: risk-free interest rates of
5.1%, 4.78% and 3.36%; dividend yields of 0%, 0% and 0%; volatility factors of
the expected market price of the Company's common stock of 57%; 104%, and 83%
and a weighted average expected life of the option of four years for 2000 and
six years for 2001 and 2002. The weighted average fair value of options granted
during 2000, 2001 and 2002 was $1.46, $1.96 and $3.40, respectively
The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
the Company's employee stock options have characteristics significantly
different from those of traded options and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.
19
LMI Aerospace, Inc.
Notes to Consolidated Financial Statements - (Continued)
(Dollar amounts in thousands, except share and per share data)
December 31, 2002
11. INCOME TAXES
The temporary differences between the tax basis of assets and liabilities and
their financial reporting amounts that give rise to the deferred tax assets and
liabilities are as follows:
<Table>
<Caption>
2001 2002
---------- ----------
Deferred tax assets:
Accrued vacation $ 247 $ 295
Inventory 496 828
State tax credits 113 129
Goodwill -- 466
Other 30 138
---------- ----------
Total deferred tax assets 886 1,856
Deferred tax liabilities:
Depreciation (1,192) (2,399)
Other -- (7)
---------- ----------
Total deferred tax liabilities (1,192) (2,405)
---------- ----------
Net deferred tax liability $ (306) $ (550)
========== ==========
</Table>
20
LMI Aerospace, Inc.
Notes to Consolidated Financial Statements - (Continued)
(Dollar amounts in thousands, except share and per share data)
December 31, 2002
The Company's income tax provision (benefit) attributable to income before
income taxes and cumulative effect of change in accounting principle consisted
of the following for the year ended December 31:
<Table>
<Caption>
2000 2001 2002
------------ ------------ ------------
Federal:
Current $ (554) $ 1,820 $ (171)
Deferred (32) (188) (468)
------------ ------------ ------------
(586) 1,632 (639)
Canadian:
Current -- -- 22
State:
Current (14) 150 (50)
Deferred (3) (18) (24)
------------ ------------ ------------
(17) 132 (74)
------------ ------------ ------------
$ (603) $ 1,764 $ (691)
============ ============ ============
</Table>
The reconciliation of income tax computed at the U.S. federal statutory tax
rates to income tax expense attributable to income before cumulative effect of
change in accounting principle is as follows:
<Table>
<Caption>
2000 2001 2002
------------ ------------ ------------
Federal taxes (benefit) $ (586) $ 1,608 $ (2,683)
State and local taxes, net of federal benefit (51) 140 (74)
Non deductible goodwill -- -- 1,758
Valuation allowance for capital loss on
available for sale securities -- -- 241
Other 34 16 67
------------ ------------ ------------
Provision (benefit) for income taxes $ (603) $ 1,764 $ (691)
============ ============ ============
</Table>
12. RELATED PARTY TRANSACTIONS
The Company has entered into certain acquisition transactions with Brian Geary,
a member of the Company's Board of Directors, related to his former ownership of
Versaform and SSFF (See Note 2 for further description of these acquisitions).
As a part of the acquisition of Versaform, the consideration included a note
payable of $1.3 million to Mr. Geary which bears interest at 7% and is payable
in monthly installments through May 2005. In addition, a relative of Mr. Geary
retained ownership of a building and property where Versaform operates and
leases the facility to the Company for approximately $86 per year.
Prior to appointment as a Director of the Company, Mr. Geary owned 50% of SSFF.
Subsequently, Mr. Geary purchased the remaining 50% of SSFF and sold the entity
to the Company. Prior to approving the purchase of
21
SSFF, the Company's Audit Committee, at the request of the Board of Directors,
considered the potential conflict of interest regarding the acquisition of SSFF.
The Audit Committee concluded that the above transaction was negotiated on an
arms length basis, consummated on terms generally similar to those prevailing
with unrelated third parties, and were fair and in the best interest of the
Company and its shareholders.
The Company leases the two Tempco operating facilities from entities in which a
relative of Ernest Star, an officer of the Company, is a principal beneficiary.
In addition, Ernest Star is a trustee of a trust that serves as a landlord for
one of these leases. The leases governing the Company's occupancy of these
facilities were entered into at the time of the Tempco acquisition, prior to Mr.
Star's appointment as an officer, and were negotiated on an arms length basis at
terms generally similar to those prevailing with unrelated third parties.
13. 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.
14. BUSINESS SEGMENT INFORMATION
As set forth in the criteria of statement of SFAS No. 131, Disclosures about
Segments of an Enterprise and Related Information, the Company is organized into
two reportable segments: Sheet Metal and Machining and Technology. The Sheet
Metal segment fabricates, finishes, and integrates close tolerance aluminum and
specialty alloy components primarily for the aerospace industry. The Machining
and Technology segment machines close tolerance aluminum and specialty alloy
components for the aerospace, semiconductor, and medical products industries.
The segments presented for the year ended December 31, 2002 differ from the
segments previously presented. For the year ended December 31, 2001 and prior,
the Company reported as one segment as it intended to fully integrate the
Machining and Technology business acquired in 2001 into its existing Sheet Metal
business. During 2002, operating activity of Machining and Technology evolved
and integration has been limited due to the significant growth in non-aerospace
business, which grew to over 50% of segment revenue in 2002. During 2002,
the Company determined that its Machining and Technology met the definition of a
reportable segment in accordance with SFAS No. 131 given its management
reporting structure and differences in products and customers. Prior period
reporting has been restated to conform to the new segment reporting.
22
LMI Aerospace, Inc.
Notes to Consolidated Financial Statements - (Continued)
(Dollar amounts in thousands, except share and per share data)
December 31, 2002
The accounting policies of the segments are the same as those described in Note
1. Sales between segments are insignificant. Corporate assets, liabilities, and
expenses related to the Company's corporate offices are allocated to the
segments, except for income taxes and certain corporate office fixed assets and
enterprise wide software. The table below presents information about reported
segments for years ended December 31, on the basis used internally to evaluate
segment performance (Machining and Technology are presented beginning April,
2001, the date of acquisition):
<Table>
<Caption>
DECEMBER 31
2000 2001 2002
---------- ---------- ----------
Net sales:
Sheet Metal $ 55,658 $ 60,552 $ 61,397
Machining and Technology -- 10,271 19,952
---------- ---------- ----------
$ 55,658 $ 70,823 $ 81,349
========== ========== ==========
Income (loss) before income taxes:
Sheet Metal $ (1,722) $ 4,353 $ (10,465)
Machining and Technology -- 377 2,574
---------- ---------- ----------
$ (1,722) $ 4,730 $ (7,891)
========== ========== ==========
Interest Expense:
Sheet Metal $ 169 $ 64 $ 591
Machining and Technology -- 779 904
---------- ---------- ----------
$ 169 $ 843 $ 1,495
========== ========== ==========
Capital expenditures:
Sheet Metal $ 2,505 $ 2,615 $ 1,496
Machining and Technology -- 123 277
Corporate 271 649 520
---------- ---------- ----------
$ 2,776 $ 3,387 $ 2,293
========== ========== ==========
Depreciation and amortization:
Sheet Metal $ 3,650 $ 3,665 $ 4,062
Machining and Technology -- 543 371
---------- ---------- ----------
$ 3,650 $ 4,208 $ 4,433
---------- ---------- ----------
</Table>
<Table>
<Caption>
AS OF DECEMBER 31
Total Assets: 2001 2002
------------ ------------
Sheet Metal $ 44,770 $ 56,422
Machining and Technology 15,942 16,319
Corporate 7,290 5,124
------------ ------------
$ 68,002 $ 77,865
============ ============
</Table>
23
LMI Aerospace, Inc.
Notes to Consolidated Financial Statements - (Continued)
(Dollar amounts in thousands, except share and per share data)
December 31, 2002
15. QUARTERLY FINANCIAL DATA (UNAUDITED)
<Table>
<Caption>
2001 First Second Third Fourth
----------- ----------- ----------- -----------
Net Sales $ 16,048 $ 19,105 $ 19,558 $ 16,112
Gross Profit 3,703 4,176 4,622 3,513
Net income (loss) 882 943 1,030 111
=========== =========== =========== ===========
Amounts per common share:
Net income (loss) $ 0.11 $ 0.12 $ 0.13 $ 0.01
=========== =========== =========== ===========
Net income (loss) - assuming dilution $ 0.11 $ 0.12 $ 0.13 $ 0.01
=========== =========== =========== ===========
</Table>
<Table>
<Caption>
2002 First (1) Second Third Fourth
----------- ----------- ----------- -----------
Net sales $ 17,908 $ 20,355 $ 21,258 $ 21,828
Gross profit 3,806 4,097 3,532 729
Income (loss) before cumulative effect
of change in accounting principle 464 462 (420) (7,706)
Cumulative effect of change in
accounting principle, net of tax (1,104) -- -- --
Net income (loss) after accounting
changes $ (640) $ 462 $ (420) $ (7,706)
=========== =========== =========== ===========
Amounts per common share:
Net income (loss) $ (0.08) $ 0.06 $ (0.05) $ (0.94)
=========== =========== =========== ===========
Net income (loss) - assuming dilution $ (0.08) $ 0.06 $ (0.05) $ (0.94)
=========== =========== =========== ===========
</Table>
(1) First quarter 2002 results have been restated to reflect the cumulative
effect of change in accounting principle related to the adoption of SFAS No. 142
24
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) 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. 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) Reports on Form 8-K:
(i) On November 14, 2002, the Company filed a Report on
Form 8-K announcing third quarter results.
(ii) On October 2, 2002, the Company filed a Report on
Form 8-K announcing the acquisitions of the Aerospace
Operations of Southern Stretch Forming and
Fabrication, Inc.
(c) Exhibits:
See Exhibit Index
(d) 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.
25
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 28th day of May, 2003.
LMI AEROSPACE, INC.
By: /s/ Ronald S. Saks
-----------------------------------------
Ronald S. Saks
President and 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.
<Table>
<Caption>
Signature Title Date
/s/ Ronald S. Saks
- ----------------------------------- Chief Executive Officer, May 28, 2003
Ronald S. Saks President, and Director
/s/ Joseph Burstein
- ----------------------------------- Chairman of the Board, and May 28, 2003
Joseph Burstein Director
/s/ Lawrence E. Dickinson Chief Financial Officer and May 28, 2003
- ----------------------------------- Secretary
Lawrence E. Dickinson
/s/ Duane Hahn Vice President, Regional May 28, 2003
- ----------------------------------- Manager and Director
Duane Hahn
/s/ Sanford S. Neuman Assistant Secretary and May 28, 2003
- ----------------------------------- Director
Sanford S. Neuman
/s/ Thomas Unger Director May 28, 2003
- -----------------------------------
Thomas Unger
Director
- -----------------------------------
Brian D. Geary
</Table>
26
CERTIFICATIONS
I, Ronald S. Saks, certify that:
1. I have reviewed this annual report on Form 10-K as amended of LMI
Aerospace, Inc.;
2. Based on my knowledge, this annual 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
annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual 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 annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures 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 annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in
this annual report whether there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: May 28, 2003 /s/ Ronald S. Saks
-------------------------------------
Ronald S. Saks
Chief Executive Officer and President
27
CERTIFICATIONS
I, Lawrence E. Dickinson, certify that:
1. I have reviewed this annual report on Form 10-K as amended of LMI
Aerospace, Inc.;
2. Based on my knowledge, this annual 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
annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual 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 annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures 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 annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in
this annual report whether there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: May 28, 2003 /s/ Lawrence E. Dickinson
-------------------------------------
Lawrence E. Dickinson
Chief Financial Officer and Secretary
28
EXHIBIT INDEX
<Table>
<Caption>
Exhibit
Number Description
- ------- -----------
2.1 Asset Purchase Agreement by and among Tempco Engineering, Inc.
and Hyco Precision, Inc., the shareholders of Tempco
Engineering, Inc. and Hyco Precision, Inc. and Metal
Corporation, dated as of March 28, 2001, filed as Exhibit 2.1
to the Registrant's Form 8K filed April 17, 2001 and
incorporated herein by reference.
2.2 Stock Purchase Agreement between LMI Aerospace, Inc. and Brian
Geary dated as of May 15, 2002, filed as Exhibit 2.1 to the
Registrant's Form 8-K filed May 16, 2002 and incorporated
herein by reference.
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 June 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 previously filed as Exhibit 3.3 to the
Registrant's Form 10-K for the fiscal year ended December 31,
2001, 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+ Employment Agreement, dated January 1, 1997, between the
Registrant and Ronald S. Saks, as previously filed as Exhibit
10.2 to the Form S-1 and incorporated herein by reference.
10.2 Lease Agreement, dated November 25, 1991, between the
Registrant and Roy R. Thoele and Madonna J. Thoele, including
all amendments (Leased premises at 3000 Highway 94 North),
previously filed as Exhibit 10.8 to the Form S-1 and
incorporated herein by reference.
10.3 Lease Agreement, dated June 28, 1988, between the Registrant
and J & R Sales, including all amendments (Leased premises at
204 H Street), previously filed as Exhibit 10.9 to the Form
S-1 and incorporated herein by reference.
10.4 Lease Agreement, dated May 6, 1997, between the Registrant and
Victor Enterprises, LLC, including all amendments (Leased
premises at 101 Western Avenue S), previously filed as Exhibit
10.10 to the Form S-1 and incorporated herein by reference.
10.5 Lease Agreement, dated February 1, 1995, between the
Registrant and RFS Investments (Leased premises at 2621 West
Esthner Court) previously filed as Exhibit 10.11 to the Form
S-1 and incorporated herein by reference.
10.6+ Profit Sharing and Savings Plan and Trust, including
amendments nos. 1 through 6, previously filed as Exhibit 10.12
to the Form S-1 and incorporated herein by reference.
</Table>
29
<Table>
10.7 Loan Agreement between the Registrant and Magna Bank, N.A.
dated August 15, 1996, including amendments nos. 1 through 3,
previously filed as Exhibit 10.13 to the Form S-1 and
incorporated herein by reference.
10.8 Indenture of Trust and Loan Agreement, both with the
Industrial Development Authority of St. Charles County,
Missouri and dated as of September 1, 1990 previously filed as
Exhibit 10.14 to the Form S-1 and incorporated herein by
reference.
10.9 General Terms Agreement, Special Terms Agreement and Warranty
Agreements, between the Registrant and Boeing Seattle
previously filed as Exhibit 10.15 to the Form S-1 and
incorporated herein by reference.
10.10 Form of Master Order Agreement covering Boeing 777 and 747
Programs and Master Order Agreement covering Boeing 737
Leading Edge Program, both between the Registrant and Boeing
North American, previously filed as Exhibit 10.16 to the Form
S-1 and incorporated herein by reference.
10.11 Form of Contract between the Registrant and Boeing Wichita
previously filed as Exhibit 10.17 to the Form S-1 and
incorporated herein by reference.
10.12 General Conditions (Fixed Price - Non-Governmental) for the
G-14/F100 Program, General Conditions for the Wing Stub/Lower
45 Program Boeing Model 767 Commercial Aircraft and Form of
Master Agreement, all with Vought previously filed as Exhibit
10.18 to the Form S-1 and incorporated herein by reference.
10.13+ Amended and Restated 1998 Stock Option Plan, previously filed
as Exhibit 10.37 to the Registrant's Form S-8 (File No.
333-38090) dated as of May 24, 2000 and incorporated herein by
reference.
10.14 General Terms Agreement between Boeing Company and Leonard's
Metal, Inc. with Special Business Provision attached,
previously filed as Exhibit 10.15 to the Registrant's Form
10-Q dated as of November 16, 1998 and incorporated herein by
reference.
10.15 Lease Agreement between Mother Goose Corporation and Precise
Machine Partners L.L.P. (Leased premises at 2205 and 2215
River Hill Road, Irving, Texas) dated August 25, 1998,
previously filed as Exhibit 10.24 to the Registrant's Form
10-K for the fiscal year ended December 31, 1999, and
incorporated herein by reference.
10.16+ Employment Agreement effective as of January 24, 2000, between
LMI Aerospace, Inc. and Tom D. Baker, previously filed as
Exhibit 10.30 to the Registrant's Form 10-K for the fiscal
year ended December 31, 2000, and incorporated herein by
reference.
10.17+ Employment Agreement effective as of January 1, 2000, between
LMI Aerospace, Inc. and Lawrence E. Dickinson, previously
filed as Exhibit 10.32 to the Form 10-K for the fiscal year
ended December 31, 2000, and incorporated herein by reference.
10.18+ Employment Agreement effective as of January 1, 2000, between
LMI Aerospace, Inc. and Bradley L. Nelson, previously filed as
Exhibit 10.35 to the Form 10-K for the fiscal year ended
December 31, 2000, and incorporated herein by reference.
</Table>
30
<Table>
10.19 Fourth Amendment to Loan Agreement dated as of October 30,
2000, previously filed as Exhibit 10.37 to the Registrant's
Form 8-K dated December 26, 2000 and incorporated herein by
reference.
10.20 Fifth Amendment to and Restatement of Loan Agreement dated as
of April 2, 2001, previously filed as Exhibit 10.1 to the
Registrant's Form 10-Q dated August 9, 2001, and incorporated
herein by reference.
10.21+ Employment Agreement between Tempco Engineering, Inc. and
Ernest R. Star dated April 2, 2001, filed as exhibit 10.2 to
the Registrant's From 10-Q dated August 9, 2001 and
incorporated herein by reference.
10.22 Sixth Amendment to Loan Agreement dated as of October 30,
2001, filed as Exhibit 10.2 to the Registrant's Form 10-Q
dated November 14, 2001, and incorporated herein by reference.
10.23 Business Reformation Agreement between Leonard; Metal, Inc.
and Lockheed Martin Aeronautics Company dated September 21,
2001, filed as Exhibit 10.1 to the Registrant's Form 10-Q
dated November 14, 2001, and incorporated by reference.
10.24+ Employment Agreement effective as of January 1, 2002, between
LMI Aerospace, Inc. and Philip A. Lajeunesse, filed as Exhibit
10.26 to the Registrant's Form 10-K for the fiscal year ended
December 31, 2001, and incorporated herein by reference.
10.25 Lease dated April 2, 2001 by and between Peter Holz and Anna
L. Holz Trustees of the Peter and Anna L. Holz Trust dated
2/8/89, 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, filed as
Exhibit 10.27 to the Registrant's Form 10-K for the fiscal
year ended December 31, 2001, and incorporated herein by
reference.
10.26 Lease dated April 2, 2001, between Tempco Engineering, Inc.
and Metal Corporation, filed as Exhibit 10.28 to the
Registrant's Form 10-K for the fiscal year ended December 31,
2001, and incorporated herein by reference.
10.27+ Employment Agreement Effective as of January 1, 2002 between
LMI Aerospace, Inc. and Robert T. Grah, filed as Exhibit 10.29
to the Registrant's Form 10-K for the fiscal year ended
December 31, 2001, and incorporated herein by reference.
10.28+ Employment Agreement Effective as of January 1, 2002 between
LMI Aerospace, Inc. and Duane Hahn, filed as Exhibit 10.30 to
the Registrant's Form 10-K for the fiscal year ended December
31, 2001, and incorporated herein by reference.
10.29+ Employment Agreement Effective as of January 1, 2002 between
LMI Aerospace, Inc. and Michael J. Biffignani, filed as
Exhibit 10.31 to the Registrant's Form 10-K for the fiscal
year ended December 31, 2001, and incorporated herein by
reference.
10.30 Seventh Amendment to and Restatement of Loan Agreement dated
November 30, 2001, filed as Exhibit 10.1 to the Registrant's
Form 10-Q filed May 15, 2002 and incorporated herein by
reference.
</Table>
31
<Table>
10.31 Eighth Amendment to and Restatement of Loan Agreement dated
May 15, 2002, filed as Exhibit 10.1 to the Registrant's Form
8-K filed May 16, 2002 and incorporated herein by reference.
10.32 Ninth Amendment to Loan Agreement dated June 30, 2002, filed
as Exhibit 10.1 to the Registrant's Form 10-Q filed August 14,
2002 and incorporated herein by reference.
21.1 List of Subsidiaries of the Registrant (filed herewith).
23.1 Consent of Independent Auditors (filed herewith).
99.1 Certification pursuant to 18 U.S.C. Section 1350 as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Statement of the Chief Executive Officer.
99.2 Certification pursuant to 18 U.S.C. Section 1350 as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Statement of the Chief Financial Officer.
</Table>
- ----------
+ Management contract or compensatory plan or arrangement
required to be filed as exhibit to this report.
32