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, 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: 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 63301
(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 of Number of Shares outstanding
Common Stock as of March 31, 2002
Common Stock, par value $.02 per share 8,026,886
LMI AEROSPACE, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE FISCAL QUARTER ENDING March 31, 2002
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS (UNAUDITED)
Condensed Consolidated Balance Sheets as of December 31, 2001
and March 31, 2002
Condensed Consolidated Statements of Income for the three months
ending March 31, 2001 and 2002
Condensed Consolidated Statements of Cash Flows for the
three months ended March 31, 2001 and 2002
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 5. OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
SIGNATURE PAGE
EXHIBIT INDEX
LMI Aerospace, Inc.
Condensed Consolidated Balance Sheets
(Amounts in thousands, except share and per share data)
December 31, March 31,
2000 2002
(unaudited)
-----------------------------------------
Assets
Current assets:
Cash and cash equivalents $ 4,645 $ 2,693
Investments 643 528
Trade accounts receivable, net 6,285 8,078
Inventories 23,045 23,630
Prepaid expenses 787 1,366
Deferred income taxes 886 886
-----------------------------------------
Total current assets 36,291 37,181
Property, plant, and equipment, net 24,014 23,514
Other assets 277 309
Goodwill, net 7,420 7,422
-----------------------------------------
$ 68,002 $ 68,426
=========================================
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 3,547 $ 4,552
Accrued expenses 2,659 2,309
Current installments of long-term debt 2,334 2,312
-----------------------------------------
Total current liabilities 8,540 9,173
Long-term debt, less current installments 12,621 12,048
Deferred income taxes 1,192 1,191
-----------------------------------------
Total noncurrent liabilities 13,813 13,239
Stockholders' equity:
Common stock of $.02 par value; authorized 28,000,000 shares; issued
8,736,427 and 8,736,427 at December 31, 2001
and at March 31, 2002, respectively 175 175
Additional paid-in capital 26,171 26,171
Treasury Stock, at cost, 716,676 and 709,541 shares at
December 31, 2001 and March 31, 2002, respectively (3,402) (3,366)
Accumulated other comprehensive loss - (115)
Retained earnings 22,705 23,150
-----------------------------------------
Total stockholders' equity 45,649 46,014
-----------------------------------------
$ 68,002 $ 68,426
=========================================
<FN>
See accompanying notes.
</FN>
LMI Aerospace, Inc.
Condensed Consolidated Statements of Operations
(Amounts in thousands, except per share data)
(Unaudited)
For the Three Months Ended March 31
2001 2002
-----------------------------------------
Net sales $ 16,048 $ 17,908
Cost of sales 12,345 14,102
-----------------------------------------
Gross profit 3,703 3,806
Selling, general and administrative
expenses 2,342 2,792
-----------------------------------------
Income from operations 1,361 1,014
Interest income (expense) (4) (271)
-----------------------------------------
Income before income taxes 1,357 743
Provision for income taxes 475 279
-----------------------------------------
Net Income $ 882 464
=========================================
Amounts per common share:
Net income per common share $ .11 $ .06
=========================================
Net income per common share -
assuming dilution $ .11 $ .06
=========================================
Weighted average common shares
outstanding 8,080,969 8,023,930
=========================================
Weighted average dilutive stock
options outstanding 11,593 123,053
=========================================
<FN>
See accompanying notes.
</FN>
LMI Aerospace, Inc.
Condensed Consolidated Statements of Cash Flows
(Amounts in thousands)
(Unaudited)
For the Six Months Ended March 31
2001 2002
-----------------------------------------
Operating activities
Net income (loss) $ 882 $ 464
Adjustments to reconcile net income to
net cash generated from (used by) operating activities:
Depreciation and amortization 868 980
Changes in operating assets and liabilities:
Trade accounts receivable (1,075) (1,793)
Inventories (36) (585)
Prepaid expenses and other assets (130) (613)
Income taxes payable 527 (25)
Accounts payable (135) 876
Accrued expenses 180 (196)
----------------------------------------
Net cash generated from operating activities 1,081 (892)
Investing activities
Additions to property, plant, and equipment, net (958) (480)
----------------------------------------
Net cash used by investing activities (958) (480)
Financing activities
Principal payments on long-term debt (25) (596)
Treasury stock transactions, net (89) 16
-----------------------------------------
Net cash used by financing activities (114) (580)
Net change in cash and cash equivalents 9 (1,952)
Cash and cash equivalents, beginning of period 1,676 4,645
-----------------------------------------
Cash and cash equivalents, end of period $ 1,685 $ 2,693
=========================================
LMI Aerospace, Inc.
Notes to Condensed Consolidated Financial Statements (Dollar
amounts in thousands, except share and per share data))
(Unaudited)
March 31, 2002
1. Accounting Policies
Basis of Presentation
LMI Aerospace, Inc. (the Company) fabricates, machines, and integrates formed,
close tolerance aluminum and specialty alloy components for use by the aerospace
and laser equipment 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; and Sun Valley, California.
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States 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 accounting principles generally
accepted in the United States 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, 2002 are not necessarily indicative
of the results that may be expected for the year ended December 31, 2002. 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, 2001 as filed with the SEC.
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.
2. Acquisitions
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. The purchase was funded by a
secured note with the Company's lender. 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, including the final
purchase price adjustment of $300 which the Company expects to pay in the second
quarter of 2002. The company may pay additional contingent consideration of up
to $1,250 if Tempco's EBITDA, as defined, exceeds certain limits at the end of
each quarter beginning June 30, 2001 and ending March 31, 2002 or for the two
years ended March 31, 2003. No contingent consideration was due for the period
ending March 31, 2002. The excess of the purchase price over the fair market
value of net assets acquired, totaling $5,943, was allocated to goodwill. This
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.
3. Adoption of FASB Statement No. 142
Effective January 1, 2002 the company adopted SFAS No.142, "Goodwill and Other
tangible Assets," which establishes new accounting and reporting requirements
for goodwill and other intangible assets. Under SFAS No. 142, all goodwill
amortization ceased effective January 1, 2002. As of March 31, 2002, the Company
has not completed its initial impairment test. The Company will complete the
impairment test prior to June 30, 2002. Any impairment resulting from this
initial analysis will be reflected as a cumulative effect of accounting change
at January 1, 2002 and will require restatement of the first quarter of 2002.
Actual results of operations for the three months ended March 31, 2002 and pro
forma results of operations for the three months ended March 31, 2001 had we
applied the non amortization provisions of SFAS 142 in that period follow.
Three Months Ended March 31
2001 2002
------------------------------------------
Reported net income $ 882 $ 464
Add: Goodwill amortization, net of tax 19 -
------------------------------------------
Adjusted net income $ 901 $ 464
==========================================
Basic earnings per share
Reported net income $ .11 $ .06
Goodwill amortization - -
------------------------------------------
Adjusted net income $ .11 $ .06
==========================================
Diluted earnings per share
Reported net income $ .11 $ .06
Goodwill amortization - -
------------------------------------------
Adjusted net income $ .11 $ .06
==========================================
4. Inventories
Inventories consist of the following:
December 31, March 31,
2001 2002
------------------------------------------
Raw materials $ 3,742 $ 4,036
Work in process 6,127 6,456
Finished goods 13,176 13,138
------------------------------------------
$ 23,045 $ 23,630
==========================================
5. Long-Term Debt
Long-term debt consists of the following:
December 31, March 31,
2001 2002
-----------------------------------------
Term loan $ 13,741 $ 13,232
Notes payable, principal and interest payable monthly, at
fixed rates, ranging from 4.98% to 9.00% 1,100 1,026
Capital lease obligations 114 102
-----------------------------------------
14,955 14,360
Less current installments 2,334 2,312
-----------------------------------------
$ 12,621 $ 12,048
=========================================
In order to facilitate the acquisition of Tempco, the Company amended its
current loan agreement with Union Planters entering into a three-year Borrowing
Agreement ("Borrowing Agreement") on April 1, 2001. This Borrowing Agreement
provides financing up to $15,500 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
March 31, 2002. The Company drew $14,250 on this Borrowing Agreement on April 1,
2001. Interest payments are due monthly. Principal is due monthly beginning in
October, 2001, using a seven year amortization. The Borrowing Agreement is
secured by all assets of the Company, excluding real property, and contains
financial covenants requiring minimum levels of cash flow coverage, EBITDA, and
tangible net worth. Under the Borrowing 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).
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% - 9.0% 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 at
4.98% through February, 2004.
On October 31, 2000, the Company obtained a $7,000 secured line of credit with
Union Planters Bank 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 May 31, 2003, and requires compliance with certain
non-financial and financial covenants including minimum tangible net worth and
EBITDA, as defined, requirements. The line of credit is secured by the
inventories and accounts receivable of the Company. The credit facility
prohibits the payment of cash dividends on common stock without the prior
written consent of Union Planters. The Company has not drawn upon this line at
March 31, 2002.
6. Comprehensive Income
LMI Aerospace's total comprehensive income (loss) is as follows:
Three Months Ended March 31,
2001 2002
------------------------------------------
Net income (loss) $ 882 $ 464
Other comprehensive income (loss):
Unrealized gain (loss) on investments 28 (115)
------------------------------------------
Total comprehensive income (loss) $ 910 $ 349
==========================================
Basic earnings per share
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Except for the historical information contained herein, the following report
contains forward-looking statements based on the beliefs of the Company and are
subject to certain risks and uncertainties. These statements can be identified
by forward-looking words such as "expect", "believe", anticipate", "goal",
"plan", "intend", "estimate", "may", "will", or similar words. The Company's
actual results could differ materially from those discussed here. Factors that
could cause or contribute to such differences include, but are not limited to,
those discussed below as well as those factors set forth in the Company's other
filings with the Securities and Exchange Commission.
Overview
LMI Aerospace, Inc. is a leader in fabricating, machining and integrating of
formed close tolerance aluminum and specialty alloy components for use by the
aerospace and laser cutting industries. The Company has been engaged in
manufacturing components for a wide variety of applications. Aerospace
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. Non aerospace
components are critical components in the chamber section of lasers used in the
production of semiconductors and cutting equipment used in preparation for Lasic
surgery. 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, PPG, Litton,
Cymer, and InterLase. The Company manufactures more than 15,000 parts for
integration into Boeing's 737, 747, 757, 767 and 777 commercial aircraft and
F-15, F/A-18, C-17 military aircraft, Canadair's RJ regional aircraft,
Gulfstream's G-IV and G-V corporate aircraft, Lockheed Martin's F-16 and C-130
military aircraft, Litton Industries guidance control systems, Cymer lasers for
cutting silicon wafers, and IntraLase lasers used in Lasik surgery
Results of Operations
Quarter Ended March 31, 2002 versus March 31, 2001
Net Sales. Net sales for the quarter ended March 31, 2002 were $17.9 million
compared to $16.0 million in the same quarter of the prior year, an increase of
11.9% Net sales for the current quarter were aided by the acquisition of Tempco,
which added $5.7 million (31.8% of net sales). Excluding the acquisition, net
sales were $12.2 million in the quarter, a decrease of 23.8%.
Net sales on Boeing commercial aircraft were $6.7 million (37.4% of net sales)
in the current quarter, down from $9.4 million in the prior year. Net sales of
components during the quarter for the 737 were $3.7 million, a decrease from
$3.9 million in the prior year. Additionally, the Company experienced net sales
declines on all Boeing models on which it participates, consistent with the
overall reduction in production rates of Boeing Aircraft.
Net sales for military programs were $4.6 million (25.7% of net sales) in the
quarter, an increase from $2.4 million in the prior year. The acquisition of
Tempco added $2.2 million in the current quarter.
The Company's net sales during the quarter on corporate and regional aircraft
platforms totaled $1.9 million (10.6% of net sales), down from $3.1 million
(17.3% of net sales), primarily due to reduction at Learjet and Gulfstream.
Tempco generated net sales of $2.9 million (16.2% of net sales) for components
used by laser equipment manufacturers serving the technology and medical
markets.
Gross Profit. The Company's gross profit was $3.8 million (21.3% of net sales)
in the current quarter, compared to $3.7 million (23.1% of net sales) in 2001.
The acquisition of Tempco added $1.2 million (27.0% of Tempco's net sales).
Excluding the acquisition, gross profit declined to $2.6 million (18.5% of net
sales). The decline in sales, excluding Tempco, caused the Company's fixed costs
to become a larger percentage of overall manufacturing costs.
Selling, General, and Administrative Expenses. Selling, general, and
administrative expenses increased to $2.8 million (15.6% of net sales) in the
quarter ended March 31, 2002 from $2.3 million (14.5% of net sales) in the prior
year. Approximately $0.3 million was attributable to the additional expenses at
Tempco.
Interest Expense. Net interest expense was $0.3 million in the first quarter of
2002, up from $0.0 million in 2001. This increase in interest expense is
attributable to the debt incurred to acquire Tempco
Liquidity and Capital Resources
The Company had a net use of cash by operations in the first quarter of 2002.
The Company's increased sales from the fourth quarter of 2001 resulted in an
increase of accounts receivable of $1.8 million, offsetting the benefits of its
earnings, depreciation and amortization. Capital expenditures for the quarter
were $0.5 million, down from the first quarter of the prior year total of $1.0
million. Low financing rate opportunities have led the Company to utilize
certain operating leases that will reduce its capital expenditure total for the
year. The Company has not borrowed under its $7.0 million revolving credit
facility, which expires on May 31, 2003. The Company anticipates executing an
agreement prior to that date to extend the revolving credit facility for a
minimum of one year. The Company feels its ability to generate cash flow from
operations and its availability under the revolving credit facility provide
adequate flexibility to support its operations
PART II
OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibit No. Description
10.1 Seventh Amendment to Loan Agreement
(b) The Company filed a report on Form 8-K during quarter ended March 31,
2002:
(i) On August 2, 2002, the Company filed a Report on Form 8-K
relating to the issuance of a press release relating to its financial
performance during the fourth quarter of 2001;
(ii) On August 8, 2001, the Company filed a Report on Form 8-K
relating to its financial outlook for 2002.
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 14, 2002 By: /s/ Lawrence E. Dickinson
------------------------------
Lawrence E. Dickinson
Chief Financial Officer and Secretary
EXHIBIT INDEX
Exhibit No. Description
10.1 Seventh Amendment to Loan Agreement