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LMI Aerospace, Inc. Announces First Quarter 2013 Results

LMI Aerospace, Inc. Announces First Quarter 2013 Results

Company Updates Guidance for 2013

ST. LOUIS, May 10, 2013 (GLOBE NEWSWIRE) -- LMI Aerospace, Inc. (Nasdaq:LMIA),
a leading provider of design engineering services and supplier of structural
assemblies, kits and components to the aerospace and defense markets, today
announced its financial results for the first quarter ended March 31, 2013.

First Quarter 2013 Highlights

  *Sales were $106.1 million for the first quarter of 2013, a historical high
    for the company, up 58.9 percent from the first quarter of 2012.
    
  *Adjusted EBITDA was $14.2 million for the first quarter of 2013, up 45.8
    percent from the first quarter of 2012.
    
  *Firm backlog as of March 31, 2013, was a record $432.5 million.
    
  *The Engineering Services segment experienced weakness in demand.

First Quarter Results

Net sales for the first quarter of 2013 increased 58.9 percent to $106.1
million, compared to $66.7 million in the first quarter of 2012. Net income
for the first quarter of 2013 was $1.8 million, or $0.14 per diluted share
($0.30, excluding the impact of the inventory fair value step-up released in
the quarter and acquisition and integration expenses, net of tax), compared to
$4.8 million, or $0.41 per diluted share, in the first quarter of 2012. The
following table illustrates the company's net income excluding the impact of
the acquisition of Valent Aerostructures, LLC ("Valent") for comparative
purposes.

                                                                Per Diluted
                                                        Q1 2013  Share
                                                                
Net income                                               $1,837 $0.14
Interest expense, net of tax                             2,673   0.21
Acquisition and integration expenses, net of tax         320     0.03
Fair value Inventory step-up on acquired inventories,    1,623   0.13
net of tax
Valent net income                                        (1,716) (0.14)
Net income excluding Valent                              $4,737 $0.37

"Sales of our legacy Aerostructures products and at the recently acquired
Valent plants met our expectations with combined sales increasing from fourth
quarter 2012 levels," said Ronald S. Saks, Chief Executive Officer of LMI."We
anticipate growing revenue from this segment through 2013, based on both newly
awarded work commencing during the year, as well as customer production rate
increases scheduled later in 2013, notably for the Boeing 737 model.Revenue
in the quarter included $6.9 million of tooling for a development program in
which limited production is now starting. We also expect an additional $12.0
million of tooling revenue, about $9.0 million on this program, to be
completed in 2013.

"Revenues at our Engineering Services segment were lower than planned, as a
ramp down at our largest customer proved to be faster and deeper than
expected," Saks added."Currently, we are mitigating the effect by
transferring engineers to new customer programs and increasing our use of
engineers in our Aerostructures segment.Aerostructures has two design build
projects in the early production stage and the availability of these engineers
has assisted our plants in improving our manufacturing
processes.Aerostructures intends to continue this engineering engagement on a
permanent basis as new programs become ready for production.We reduced our
sales forecast for the Engineering Services segment, based on current demand
continuing for the balance of 2013, with a modest pickup later in the
year.However, recent announcements of new development program approvals by
some of our customers could result in future changes to this forecast.

"Net income in the first quarter of 2013 was reduced by continued losses on an
assembly program, which also impacted the fourth quarter of 2012.Supplied and
purchased tooling for this program was repaired and delivery met customer
requirements by the end of March 2013.A claim for $2.4 million was filed with
our customer in April 2013.No revenue from this claim has been recorded in
our operating results to date.We expect negotiations to commence shortly,
with recovery, if any, to occur in the third quarter of 2013."

Aerostructures Segment

                   Q1      %                      %        Q1      %
Net Sales           2013    of Total Valent  Legacy  of Total 2012    of Total
                   ($ in millions)
Large commercial    $37.5 45.1%    $18.5 $19.0 36.2%    $16.5 39.8%
aircraft
Corporate and       25.8   31.1%    2.5    23.3   44.4%    13.4   32.3%
regional aircraft
Military            14.0   16.8%    5.3    8.7    16.5%    9.1    21.9%
Other               5.8    7.0%     4.3    1.5    2.9%     2.5    6.0%
Total               $83.1 100.0%   $30.6 $52.5 100.0%   $41.5 100.0%

The increase in sales is primarily attributable to the acquisition of Valent,
which contributed $18.5 million to large commercial aircraft, including $14.7
million for the Boeing 737 platform, $2.5 million to corporate and regional
aircraft, $5.3 million to military and $4.3 million to other.In legacy
Aerostructures, increased demand for Boeing 737 wing modification kits and
growth on the Boeing 777 and 787 platforms contributed an additional 10.8
percent increase in net sales of large commercial aircraft products.

Corporate and regional aircraft revenues in the legacy Aerostructures group
were higher as the first quarter of 2013 included revenue of $6.9 million from
tooling on a new customer development program and $3.3 million in additional
revenue from deliveries for the Gulfstream G650, G450/G550 and G280
models.Military products revenue decreased for legacy Aerostructures as
revenues on the KC-390 program and growth on the Apache helicopter were not
enough to offset reduced sales related to the Blackhawk program.

The Aerostructures segment generated gross profit of $16.6 million, or 20.0
percent of net sales, in the first quarter of 2013 versus $11.8 million, or
28.4 percent of net sales, in the first quarter of 2012.The acquisition of
Valent reduced the gross profit margin.Valent's gross profit margin for the
first quarter of 2013 was 11.5 percent.Excluding the aforementioned inventory
step-up, the gross profit margin would have been approximately 19.6 percent,
and the overall Aerostructures segment gross profit would have been 22.9
percent.As previously mentioned, an assembly program that began in 2012
continued to negatively impact earnings, as the company lost $1.0 million with
respect to this program in the first quarter of 2013.

Selling, general and administrative expenses ("SG&A") were $11.1 million in
the first quarter of 2013 versus $7.0 million in the first quarter of
2012.Included in these expenses for the first quarter of 2013 was $3.7
million in SG&A related to Valent.The balance of the increase was due to
increased personnel costs, integration expense and professional fees related
to the Valent acquisition.

Engineering Services Segment

Net Sales                       Q1 2013 % of Total Q1 2012 % of Total
                               ($ in millions)
Large commercial aircraft       $7.5  31.8%      $7.7  30.2%
Corporate and regional aircraft 6.2    26.3%      8.0    31.4%
Military                        7.5    31.8%      8.1    31.8%
Other                           2.4    10.1%      1.7    6.6%
Total                           $23.6 100.0%     $25.5 100.0%

The Engineering Services segment net sales in the first quarter of 2013
included $3.8 million generated by TASS, Inc. ("TASS"), acquired in the third
quarter of 2012, all of which is included in large commercial aircraft
sales.Excluding the TASS acquisition, sales of services for large commercial
aircraft declined on both the Boeing 787 and a nacelle system
project.Declining support for Bombardier's Learjet 85 was primarily
responsible for the decline in the corporate and regional market.Increased
revenue in support of the Embraer KC-390 was not enough to offset declines in
the KC-46 tanker and support for naval aircraft, resulting in a decline in the
military market in the first quarter of 2013 from the prior year quarter.

Gross profit for the segment was $3.5 million, or 14.8 percent of net sales,
for the first quarter of 2013 down from $4.7 million or 18.4 percent of net
sales for the prior year quarter.The acquisition of TASS added $0.6 million
of gross profit or 15.8 percent of TASS net sales.Excluding TASS, lower sales
and lower productivity contributed to the decrease in gross profit.

SG&A for the segment increased from $2.1 million in the first quarter of 2012
to $2.9 million in the first quarter of 2013.This increase is attributable
entirely to TASS.

Non-Segment

The effective income tax rate for the first quarter of 2013 was 24.7 percent
and in 2012 was 35.3 percent.During the first quarter of 2013, the company
recognized a benefit of $0.3 million resulting from the enactment of the
American Taxpayer Relief Act in January 2013, which extended the federal
research and development credit retroactively to January 1, 2012, through
December 31, 2013.Interest expense increased $3.9 million primarily due to
the new credit agreement to support the acquisition of Valent.

The company used cash flow from operations of $10.5 million in the first
quarter of 2013 and funded capital expenditures of $12.6 million, resulting in
negative free cash flow of $23.1 million.The cash flow used in operations was
largely driven by growth in accounts receivable and inventory balances in the
first quarter of 2013.

Backlog as of March 31, 2013, was $432.5 million, including $124.9 million in
backlog at Valent, compared to $214.6 million at the end of the prior year
quarter.

Outlook for 2013

The company also announced that it has updated guidance for 2013, as follows:

Consolidated Operations

  *Net sales between $459.0 million and $483.0 million
    
  *Gross profit between 22.3 percent and 23.1 percent
    
  *SG&A between $55.7 million and $58.6 million
    
  *Interest and other expenses between $16.0 million and $17.0 million
    
  *Effective income tax rate between 34.0 percent and 35.0 percent
    
  *Capital expenditures between $27.0 million and $30.0 million
    
  *Depreciation, amortization and stock compensation expense between $20.1
    million and $20.9 million

The expectations for each segment are as follows:

Aerostructures

  *Net sales between $362.0 million and $382.0 million, including between
    $139.0 million and $145.0 million for Valent
    
  *Gross profit between 23.8 percent and 24.5 percent, including a one-time
    $2.5 million charge representing the Valent inventory step-up
    
  *SG&A between $43.7 million and $46.1 million

Engineering Services

  *Net sales between $97.0 million and $101.0 million
    
  *Gross profit between 16.5 percent and 17.5 percent
    
  *SG&A between $12.0 million and $12.5 million

The company provided the following estimates for Adjusted EBITDA guidance for
2013, exclusive of any expected synergies:

                                                         Consolidated
                                                         ($ in millions)
Operating Income                                        46.5 - 52.8
                                                         
Depreciation, Amortization and Stock Based Compensation 20.1 - 20.9
                                                         
Step-up in Inventory to Cost of Goods Sold               2.5 - 2.5
                                                         
Acquisition and Integration Expense                      0.5 - 0.5
                                                         
Adjusted EBITDA                                           69.6 - 76.7

"The additions of Valent to our Aerostructures segment and TASS to our
Engineering Services segment have resulted in a number of new business
opportunities," said Saks."Our TASS employees have recently joined our D3
Technologies team in newly rented offices in Everett, Washington, causing us
to accelerate the integration of administrative and marketing
functions.Valent's St. Louis plant has moved into space in a legacy LMI
building, and in Wichita, selected Valent operations are being moved across
town to a legacy LMI plant.Integration of tactical functions has commenced,
with a job transfer team identifying opportunities for insourcing of some work
in our supply chains, as well as transfers of work packages between legacy LMI
and Valent plants.Purchasing is in the process of contracting for lower
pricing when combining legacy LMI and Valent needs, and D3 and TASS are
growing the Sri Lanka office to provide lower cost engineering services to our
customers.We expect to achieve actual synergies of $1.5 million by the end of
2013 and to reach an annual run rate of at least $3.0 million in savings by
December 31.

"We believe our relationships with key customers continue to strengthen, and
we have the resolve to integrate these new companies at a pace we can
reasonably handle, while maintaining on time delivery and exceptional quality
performance.Accordingly, we are adding people, equipment and plant capacity
needed to handle the revenue growth in our existing business, including a
major customer development program in Aerostructures, which has required
significant capital investment in 2012 and 2013.

"We continue now as a larger company to drive cost reduction and efficiency
improvement every day, and are optimistic the positive trends of the
commercial aerospace market should continue throughout 2013 and beyond.We are
committed to continuing as the supplier of choice to our key customers."

LMI Aerospace, Inc. ("LMI") is a leading supplier of structural assemblies,
kits and components and provider of design engineering services to the
aerospace and defense markets.Through its Aerostructures segment, the company
primarily fabricatesmachines, finishes, integrates, assembles and kits
machined and formed close tolerance aluminum, specialty alloy and composite
components and higher level assemblies for use by the aerospace and defense
industries.It manufactures more than 40,000 products for integration into a
variety of aircraft platforms manufactured by leading original equipment
manufacturers and Tier 1 aerospace suppliers.Through its Engineering Services
segment, operated by its D3 Technologies, Inc. subsidiary, the company
provides a complete range of design, engineering and program management
services, supporting aircraft product lifecycles from conceptual design,
analysis and certification through production support, fleet support and
service life extensions via a complete turnkey engineering solution.

This news release includes forward-looking statements related to LMI's outlook
for 2013 and beyond, which are based on current management expectations.Such
forward-looking statements are subject to various risks and uncertainties,
many of which are beyond the control of LMI.Actual results could differ
materially from the forward-looking statements as a result of, among other
things, difficulties integrating Valent, managing the increased leverage
incurred by LMI in connection with its acquisition of Valent and complying
with new debt covenants with respect to such indebtedness, as well as the
factors detailed from time to time in LMI's filings with the Securities and
Exchange Commission.Please refer to the Risk Factors contained in the
company's Annual Report on Form 10-K for the year ended December 31, 2012, and
any risk factors set forth in our other filings with the Securities and
Exchange Commission.

LMI Aerospace, Inc.
Condensed Consolidated Balance Sheets
(Amounts in thousands, except share and per share data)
(Unaudited)
                                                      March 31,  December 31,
                                                      2013       2012
Assets                                                          
Current assets:                                                 
Cash and cash equivalents                              $771     $4,347
Accounts receivable, net                               83,081    69,159
Inventories                                            97,614    90,039
Prepaid expenses and other current assets              5,751     5,655
Deferred income taxes                                  3,839     3,839
Total current assets                                  191,056   173,039
                                                                
Property, plant and equipment, net                    104,080   96,218
Goodwill                                              179,592   179,314
Intangible assets, net                                63,172    64,334
Other assets                                          14,114    15,059
Total assets                                          $552,014 $527,964
                                                                
Liabilities and shareholders' equity                            
Current liabilities:                                            
Accounts payable                                       $31,621  $30,471
Accrued expenses                                       25,847    23,703
Current installments of long-term debt and capital     6,093     5,632
lease obligations
Total current liabilities                             63,561    59,806
                                                                
Long-term liabilities:                                          
Long-term debt and capital lease obligations, less     272,629   255,067
current installments
Other long-term liabilities                           3,347     3,405
Deferred income taxes                                  8,732     8,732
Total long-term liabilities                           284,708   267,204
                                                                
Shareholders' equity:                                           
Common stock, $0.02 par value per share; authorized
28,000,000 shares; issued 12,860,023 shares at March   257       257
31, 2013 and December 31, 2012
Preferred stock, $0.02 par value per share; authorized --        --
2,000,000 shares; none issued at either date
Additional paid-in capital                             91,646    90,839
Accumulated other comprehensive loss                   (331)     (49)
Treasury stock, at cost, 11,168 shares at March 31,    (53)      (482)
2013 and 101,622 shares at December 31, 2012
Retained earnings                                      112,226   110,389
Total shareholders' equity                            203,745   200,954
Total liabilities and shareholders' equity            $552,014 $527,964
                                                                

LMI Aerospace, Inc.
Condensed Consolidated Statements of Comprehensive Income
(Amounts in thousands, except share and per share data)
(Unaudited)

                                                      Three Months Ended
                                                      March 31,
                                                      2013        2012
                                                                 
Sales and service revenue                                         
Product sales                                          $82,114   $40,165
Service revenues                                       23,952     26,584
Net sales                                              106,066    66,749
Cost of sales and service revenue                                 
Cost of product sales                                  65,138     27,385
Cost of service revenues                               20,874     22,846
Cost of sales                                          86,012     50,231
Gross profit                                           20,054     16,518
                                                                 
Selling, general and administrative expenses           13,981     9,080
Income from operations                                 6,073      7,438
                                                                 
Other income (expense):                                           
Interest expense                                       (4,113)    (201)
Other, net                                             480        169
Total other expense                                    (3,633)    (32)
                                                                 
Income before income taxes                             2,440      7,406
Provision for income taxes                             603        2,614
Net income                                             1,837      4,792
Other comprehensive income (expense):                             
Change in foreign currency translation adjustment      (122)      --
Unrealized loss on interest rate hedge net of tax of   (161)      --
$94
Other comprehensive income (expense):                  (283)      --
Total comprehensive income                             $1,554    $4,792
                                                                 
Amounts per common share:                                        
Net income per common share                            $0.15     $0.41
                                                                 
Net income per common share assuming dilution          $0.14     $0.41
                                                                 
Weighted average common shares outstanding             12,582,207 11,618,008
                                                                 
Weighted average dilutive common shares outstanding    12,693,657 11,783,241
                                                                 

LMI Aerospace, Inc.
Condensed Consolidated Statements of Cash Flows
(Amounts in thousands)
(Unaudited)
                                                           Three Months Ended
                                                           March 31,
                                                           2013      2012
Operating activities:                                                
Net income                                                  $1,837  $4,792
Adjustments to reconcile net income to net cash (used)               
provided by operating activities:
Depreciation and amortization                               4,791    1,936
Restricted stock compensation                               360      375
Other noncash items                                         (258)    (150)
Changes in operating assets and liabilities, net of                  
acquired businesses:
Accounts receivable                                         (13,653) (4,678)
Inventories                                                 (7,469)  (4,311)
Prepaid expenses and other assets                           (558)    (1,291)
Current income taxes                                       972      2,466
Accounts payable                                            947      (822)
Accrued expenses                                            2,569    2,111
Net cash (used) provided by operating activities           (10,462) 428
Investing activities:                                                
Additions to property, plant and equipment                 (12,592) (2,909)
Other, net                                                  1,866    27
Net cash used by investing activities                      (10,726) (2,882)
Financing activities:                                                
Proceeds from issuance of debt                              5,750    --
Principal payments on long-term debt and notes payable      (1,138)  --
Advances on revolving line of credit                        29,500   --
Payments on revolving line of credit                        (16,500) --
Other, net                                                  --      80
Net cash provided by financing activities                   17,612   80
Net decrease in cash and cash equivalents                   (3,576)  (2,374)
Cash and cash equivalents, beginning of period              4,347    7,868
Cash and cash equivalents, end of period                    $771    $5,494
                                                                    

LMI Aerospace, Inc.
Selected Non-GAAP Disclosures
(Amounts in thousands)
(Unaudited)
                                        Three Months Ended
                                        March 31,
                                        2013                2012
Non-GAAP Financial Information                              
Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization
(EBITDA)(1):
                                                           
Net Income                               $1,837            $4,792
                                                           
Depreciation and amortization            4,791              1,936
Interest expense                         4,113              201
Income tax expense                       603                2,614
Stock based compensation                 360                375
Acquisition and integration expenses     493                --
Fair value step-up on acquired           2,497              --
inventories
Other, net                               (480)              (169)
                                                           
Adjusted EBITDA                          $14,214           $9,749
                                                           
Free Cash Flow (2):                                         
                                                           
Net cash (used) provided by operating    $(10,462)         $428
activities
Less capital expenditures                (12,592)           (2,909)
                                                           
Free cash flow                           $(23,054)         $(2,481)
                                                           
1. We believe Adjusted EBITDA is a measure important to many investors as an
indication of operating performance by the business. We feel this measure
provides additional transparency to investors that augments but does not
replace the GAAP reporting of net income and provides a good comparative
measure. Adjusted EBITDA is not a measure of performance defined by GAAP and
should not be used in isolation or as a substitute for the related GAAP
measure of net income.
                                                           
2. We believe Free Cash Flow is a measure of the operating cash flow of the
Company that is useful to investors. Free Cash Flow is a measure of cash
generated by the Company for such purposes as repaying debt or funding
acquisitions. Free Cash Flow is not a measure of performance defined by GAAP
and should not be used in isolation or as a substitute for the related GAAP
measure of cash provided by operating activities.

CONTACT: Ed Dickinson
         Chief Financial Officer, 636.916.2150

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