UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-Q





ý
            QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934


For the
quarterly period ended March 31, 2009.


or


 ̈
            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
              (State
      or other jurisdiction of
              incorporation
      or organization)
            43-1309065
              (I.R.S.
      Employer
              Identification
      No.)411
      Fountain Lakes Blvd.
              St.
      Charles, Missouri
              (Address
      of principal executive offices)
            63301
              (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 ý                                No
 ̈





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).





Yes  ̈                                No
 ̈





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.  See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.





Large
accelerated
filer                                                     ̈                      Accelerated
filer                                           ý


Non-accelerated
filer                                                       ̈                      Smaller reporting
company                          ̈


(Do not
check if a smaller reporting company)







Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).





Yes  ̈                                No
ý





Indicate
the number of shares outstanding of each of the issuer’s classes of common
stock, as of the latest practicable date.





On April
30, 2009, there were 11,617,429 shares of our common stock, par value $0.02 per
share outstanding.








LMI AEROSPACE,
INC.





QUARTERLY
REPORT ON FORM 10-Q


FOR
THE FISCAL QUARTER ENDING MARCH 31, 2009





PART I.  FINANCIAL
      INFORMATIONPage
      No.Item 1.
              Financial Statements.Condensed Consolidated Balance Sheets as of
      March 31, 2009 and December 31, 2008.
              2Condensed Consolidated Statements of
      Operations for the three months ended March 31, 2009 and
      2008.
              3Condensed Consolidated Statements of Cash
      Flows for the three months ended March 31, 2009 and
    2008.
              4Notes to Condensed Consolidated
      Financial Statements.
              5Item 2.
              Management’s Discussion and Analysis of
      Financial Condition and Results of Operations.
              13Item 3.
              Quantitative and Qualitative Disclosures
      About Market Risk.
              18Item 4.
              Controls and Procedures.
              18PART II.  OTHER
      INFORMATIONItem 1.
              Legal Proceedings.
              19Item 1A.
              Risk Factors.
              19Item 2.
              Unregistered Sales of Equity Securities
      and Use of Proceeds.
              19Item 3.
              Defaults Upon Senior
      Securities.
              19Item 4.
              Submission of Matters to a Vote of Security
      Holders.
              19Item 5.
              Other Information.
              19Item 6.
              Exhibits.
              19SIGNATURE PAGE
              20EXHIBIT INDEX
              21










PART
I


FINANCIAL INFORMATION


Item 1.  Financial
Statements.


LMI
      Aerospace, Inc.Condensed Consolidated Balance
      Sheets(Amounts
      in thousands, except share and per share data)(Unaudited)March
      31, 2009
                                  
                                  
                                  December
      31, 2008AssetsCurrent
      assets:Cash
      and cash equivalents
                                  
                                  $
                                  228
                                  
                                  
                                  $
                                  29Trade
      accounts receivable, net of allowance of $338 atMarch
      31, 2009 and $304 at December 31, 2008
                                  
                                  
                                  39,882
                                  
                                  
                                  
                                  26,887Inventories,
      net
                                  
                                  
                                  61,845
                                  
                                  
                                  
                                  62,393Prepaid
      expenses and other current assets
                                  
                                  
                                  2,813
                                  
                                  
                                  
                                  2,137Income
      taxes receivable
                                  
                                  
                                  304
                                  
                                  
                                  
                                  364Total
      current assets
                                  
                                  
                                  105,072
                                  
                                  
                                  
                                  91,810Property,
      plant and equipment, net
                                  
                                  
                                  20,306
                                  
                                  
                                  
                                  20,103Goodwill
                                  
                                  
                                  53,559
                                  
                                  
                                  
                                  46,258Intangible
      assets, net
                                  
                                  
                                  23,066
                                  
                                  
                                  
                                  17,861Deferred
      income taxes
                                  
                                  
                                  5,118
                                  
                                  
                                  
                                  5,148Other
      assets
                                  
                                  
                                  1,149
                                  
                                  
                                  
                                  1,167Total
      assets
                                  
                                  $
                                  208,270
                                  
                                  
                                  $
                                  182,347Liabilities
      and shareholders’ equityCurrent
      liabilities:Accounts
      payable
                                  
                                  $
                                  10,993
                                  
                                  
                                  $
                                  12,363Accrued
      expenses
                                  
                                  
                                  10,813
                                  
                                  
                                  
                                  9,936Short-term
      deferred gain on sale of real estate
                                  
                                  
                                  233
                                  
                                  
                                  
                                  233Current
      installments of long-term debt and capital lease
    obligations
                                  
                                  
                                  467
                                  
                                  
                                  
                                  498Total
      current liabilities
                                  
                                  
                                  22,506
                                  
                                  
                                  
                                  23,030Long-term
      deferred gain on sale of real estate
                                  
                                  
                                  3,471
                                  
                                  
                                  
                                  3,540Long-term
      debt and capital lease obligations, less current
    installments
                                  
                                  
                                  44,777
                                  
                                  
                                  
                                  25,536Deferred
      income taxes
                                  
                                  
                                  9,571
                                  
                                  
                                  
                                  7,441Other
      long-term liabilities
                                  
                                  
                                  1,235
                                  
                                  
                                  
                                  -Total
      long-term liabilities
                                  
                                  
                                  59,054
                                  
                                  
                                  
                                  36,517Shareholders’
      equity:Common
      stock, $0.02 par value per share; authorized 28,000,000shares;
      issued 11,980,617 shares and 11,926,309 shares atMarch
      31, 2009 and December 31, 2008, respectively
                                  
                                  
                                  240
                                  
                                  
                                  
                                  239Preferred
      stock, $0.02 par value per share; authorized 2,000,000shares;
      none issued at either date.
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -Additional
      paid-in capital
                                  
                                  
                                  70,408
                                  
                                  
                                  
                                  69,855Treasury
      stock, at cost, 363,188 shares at March 31, 2009and
      364,088 shares at December 31, 2008
                                  
                                  
                                  (1,723
                                  )
                                  
                                  
                                  (1,727
                                  )Retained
      earnings
                                  
                                  
                                  57,785
                                  
                                  
                                  
                                  54,433Total
      shareholders’ equity
                                  
                                  
                                  126,710
                                  
                                  
                                  
                                  122,800Total
      liabilities and shareholders’ equity
                                  
                                  $
                                  208,270
                                  
                                  
                                  $
                                  182,347See
      accompanying notes to condensed consolidated financial
      statements.










LMI
      Aerospace, Inc.Condensed Consolidated Statements of
      Operations(Amounts
      in thousands, except share and per share data)(Unaudited)Three
      Months EndedMarch
      31,2009
                        
                        
                        2008Sales
      and service revenuesProduct
      sales
                        
                        $
                        42,734
                        
                        
                        $
                        36,726Service
      revenues
                        
                        
                        21,268
                        
                        
                        
                        23,691Net
      sales
                        
                        
                        64,002
                        
                        
                        
                        60,417Cost
      of sales and service revenuesCost
      of product sales
                        
                        
                        31,566
                        
                        
                        
                        25,888Cost
      of service revenues
                        
                        
                        17,850
                        
                        
                        
                        18,906Cost
      of sales
                        
                        
                        49,416
                        
                        
                        
                        44,794Gross
      profit
                        
                        
                        14,586
                        
                        
                        
                        15,623Selling,
      general and administrative expenses
                        
                        
                        8,473
                        
                        
                        
                        8,056Severance
      and restructuring
                        
                        
                        362
                        
                        
                        
                        -Income
      from operations
                        
                        
                        5,751
                        
                        
                        
                        7,567Other
      income (expense):Interest
      income (expense), net
                        
                        
                        (422
                        )
                        
                        
                        (543
                        )Other,
      net
                        
                        
                        (41
                        )
                        
                        
                        (3
                        )Total
      other income (expense)
                        
                        
                        (463
                        )
                        
                        
                        (546
                        )Income
      before income taxes
                        
                        
                        5,288
                        
                        
                        
                        7,021Provision
      for income taxes
                        
                        
                        1,934
                        
                        
                        
                        2,545Net
      income
                        
                        $
                        3,354
                        
                        
                        $
                        4,476Amounts
      per common share:Net
      income per common share
                        
                        $
                        0.30
                        
                        
                        $
                        0.40Net
      income per common share assuming dilution
                        
                        $
                        0.30
                        
                        
                        $
                        0.40Weighted
      average common shares outstanding
                        
                        
                        11,277,789
                        
                        
                        
                        11,172,857Weighted
      average dilutive common sharesoutstanding
                        
                        
                        11,306,410
                        
                        
                        
                        11,292,151See
      accompanying notes to condensed consolidated financial
      statements.









LMI
      Aerospace, Inc.Condensed Statements of Cash
      Flows(Amounts
      in thousands, except share and per share data)(Unaudited)





Three
      Months Ended March 31,2009
                                                
                                                
                                                2008Operating
      activities:Net
      income
                                                
                                                $
                                                3,354
                                                
                                                
                                                $
                                                4,476Adjustments
      to reconcile net income tonet
      cash used by operating activities:Depreciation
      and amortization
                                                
                                                
                                                1,955
                                                
                                                
                                                
                                                1,603Charges
      for bad debt expense
                                                
                                                
                                                15
                                                
                                                
                                                
                                                61Charges
      for inventory obsolescence and valuation
                                                
                                                
                                                314
                                                
                                                
                                                
                                                339Restricted
      stock compensation
                                                
                                                
                                                526
                                                
                                                
                                                
                                                604Loss
      on sale of equipment
                                                
                                                
                                                13
                                                
                                                
                                                
                                                -Deferred
      tax provision
                                                
                                                
                                                30
                                                
                                                
                                                
                                                -Changes
      in operating assets and liabilities, net ofacquired
      businesses:Trade
      accounts receivable
                                                
                                                
                                                (12,447
                                                )
                                                
                                                
                                                (5,124
                                                )Inventories
                                                
                                                
                                                521
                                                
                                                
                                                
                                                (5,862
                                                )Prepaid
      expenses and other assets
                                                
                                                
                                                (668
                                                )
                                                
                                                
                                                (208
                                                )Current
      income taxes
                                                
                                                
                                                1,983
                                                
                                                
                                                
                                                2,865Accounts
      payable
                                                
                                                
                                                (1,553
                                                )
                                                
                                                
                                                (814
                                                )Accrued
      expenses
                                                
                                                
                                                (2,076
                                                )
                                                
                                                
                                                (1,906
                                                )Net
      cash used by operating activities
                                                
                                                
                                                (8,033
                                                )
                                                
                                                
                                                (3,966
                                                )Investing
      activities:Additions
      to property, plant and equipment
                                                
                                                
                                                (875
                                                )
                                                
                                                
                                                (1,535
                                                )Acquisitions,
      net of cash acquired
                                                
                                                
                                                (10,047
                                                )
                                                
                                                
                                                -Other,
      net
                                                
                                                
                                                (108
                                                )
                                                
                                                
                                                56Net
      cash used by investing activities
                                                
                                                
                                                (11,030
                                                )
                                                
                                                
                                                (1,479
                                                )Financing
      activities:Proceeds
      from issuance of debt
                                                
                                                
                                                -
                                                
                                                
                                                
                                                73Principal
      payments on long-term debt and notes payable
                                                
                                                
                                                (130
                                                )
                                                
                                                
                                                (228
                                                )Net
      advances on revolving line of credit
                                                
                                                
                                                19,340
                                                
                                                
                                                
                                                5,582Proceeds
      from exercise of stock options
                                                
                                                
                                                52
                                                
                                                
                                                
                                                24Net
      cash provided by financing activities
                                                
                                                
                                                19,262
                                                
                                                
                                                
                                                5,451Net
      increase in cash and cash equivalents
                                                
                                                
                                                199
                                                
                                                
                                                
                                                6Cash
      and cash equivalents, beginning of year
                                                
                                                
                                                29
                                                
                                                
                                                
                                                82Cash
      and cash equivalents, end of quarter
                                                
                                                $
                                                228
                                                
                                                
                                                $
                                                88Supplemental
      disclosures of cash flow information:Interest
      paid
                                                
                                                $
                                                462
                                                
                                                
                                                $
                                                223Income
      taxes paid (refunded), net
                                                
                                                $
                                                (60
                                                )
                                                
                                                $
                                                (320
                                                )See
      accompanying notes to condensed consolidated financial
      statements.









LMI
Aerospace, Inc.


Notes to Condensed Consolidated Financial
Statements


(Dollar
amounts in thousands, except share and per share data)


(Unaudited)


March 31,
2009







1.  Summary
of Significant Accounting Policies







Basis
of Presentation





The
accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States of America 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 of America 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, 2009 are not necessarily indicative of the results that
may be expected for the year ended December 31, 2009.  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, 2008, as filed with the Securities and
Exchange Commission.





Use
of Estimates




The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America 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 these estimates.







New Accounting
Standards




In
January 2009, the Company adopted SFAS No. 141 (revised 2007), “Business
Combinations” (“SFAS No. 141(R)”), which continues the evolution toward
fair value reporting and significantly changes the accounting for acquisitions
that closed beginning in 2009, both at the acquisition date and in subsequent
periods. SFAS No. 141(R) introduces new accounting concepts and valuation
complexities, and many of the changes have the potential to generate greater
earnings volatility after an acquisition. SFAS No. 141(R) did not have a
material effect on the Company’s results of operations and financial
position.





The
Company adopted the remaining provisions of SFAS No. 157, “Fair Value
Measurements” (“SFAS No. 157”), in January 2009, which defines fair value,
establishes a framework for measuring fair value and expands disclosures about
fair value measurements. The adoption of SFAS No. 157 did not have a
material effect on the Company’s results of operations and financial
position.





Also in
January 2009, the Company adopted SFAS No. 161, “Disclosures about Derivative
Instruments and Hedging Activities, an amendment of FASB Statement No. 133”
(“SFAS 161”).  SFAS 161 requires, among other things, enhanced
disclosure about the volume and nature of derivative and hedging activities and
a tabular summary showing the fair value of derivative instruments included in
the statement of financial position and statement of operations.  SFAS
161 also requires expanded disclosure of contingencies included in derivative
instruments related to credit risk.  The adoption of SFAS 161 did not
have a material effect on the Company’s financial statements.






5


LMI
Aerospace, Inc.
 Notes to Condensed Consolidated Financial
Statements
 (Dollar
amounts in thousands, except share and per share data)
 (Unaudited)
 March 31,
2009


In April
2009, the FASB issued FSP FAS 107-1 and APB 28-1, Interim Disclosures about Fair
Value of Financial Instruments. This FSP expands to interim periods the existing
annual requirement to disclose the fair value of financial instruments that are
not reflected on the balance sheet at fair value. The FSP will be effective and
could potentially require additional disclosures in interim periods after the
Company's fiscal year ending 2009.




In April
2009, the FASB issued Staff Position No. FAS 157-4, "Determining Fair Value When
the Volume and Level of Activity for the Asset or Liability Have Significantly
Decreased and Identifying Transactions That Are Not Orderly" ("FSP 157-4"). This
FSP provides additional guidance for estimating fair value in accordance with
FASB Statement No.157, "Fair Value Measurements" ("SFAS 157"), when the volume
and level of activity for the asset or liability have significantly decreased.
The FSP also includes guidance on identifying circumstances that indicate a
transaction is not orderly. In those cases, further analysis of transactions or
quoted prices is required, and a significant adjustment may be necessary to
estimate fair value in accordance with SFAS 157. FSP 157-4 also amends SFAS 157
to require disclosure in interim and annual periods of the inputs and valuation
techniques used to measure fair value and a discussion of changes in valuation
techniques and related inputs, if any, during the period. FSP 157-4 is effective
for interim and annual reporting periods ending after June 15, 2009 and does not
require disclosures for earlier periods presented for comparative purposes at
initial adoption. We will adopt FSP 157-4 beginning our second fiscal quarter of
2009, and we do not expect the adoption of FSP 157-4 to have a significant
impact on the Company’s financial statements.




2.  Acquisition
of Integrated Technologies, Inc.





In
January 2009, the Company acquired all of the shares of capital stock of
Integrated Technologies, Inc. (“Intec”), an Everett, Washington-based provider
of advanced materials testing, manufacturing and design services to the
aerospace, defense and transportation industries.  Intec’s primary
business is designed to support composite testing, manufacturing and research,
by analyzing new and existing materials, including organic matrix composites,
ceramics, metal matrix composites and metal.  The acquisition was
funded by drawing upon the Company’s line of credit.  Management
believes the acquisition of Intec, together with other initiatives, will provide
significant composite assembly and component production capabilities to the
Company, which will allow the Company to broaden its customer offerings and to
use its skilled workforce in both the Aerostructures and Engineering Services
segments to transition to production of non-metallic products.  This
acquisition was accounted for in accordance with SFAS
141(R).  Operating results of Intec have been included in the
Company’s Aerostructures segment from the date of acquisition, and acquisition
related costs were expensed.  The pro-forma operating results, as if
the Company had completed the acquisition at the beginning of the periods
presented, are not significant to the Company’s operations and are not
presented.





3.  Inventories





Inventories
consist of the following:





March
      31, 2009
                    
                    
                    December
      31, 2008Raw
      materials
                    
                    $
                    10,066
                    
                    
                    $
                    9,078Work
      in progress
                    
                    
                    9,492
                    
                    
                    
                    12,765Manufactured
      and purchased components
                    
                    
                    16,989
                    
                    
                    
                    16,437Finished
      goods
                    
                    
                    25,298
                    
                    
                    
                    24,113Total
      inventories
                    
                    $
                    61,845
                    
                    
                    $
                    62,393






6


LMI
Aerospace, Inc.
 Notes to Condensed Consolidated Financial
Statements
 (Dollar
amounts in thousands, except share and per share data)
 (Unaudited)
 March 31,
2009


These
amounts include reserves for obsolete and slow-moving inventory of $1,768 and
$1,838 and a reserve for lower of cost or market of $187 and $135 at March 31,
2009 and December 31, 2008, respectively.





4.  Goodwill
and Intangible Assets





Goodwill




Goodwill
balance at March 31, 2009 consisted of $7,301 from the acquisition of Intec in
January 2009, $42,908 from acquisition of D3 Technologies, Inc. (“D3
Technologies”) in July 2007 and $3,350 from the acquisition of Tempco
Engineering, Inc. in April 2001. Goodwill balance at December 31, 2008 consisted
of $42,908 from the acquisition of D3 Technologies and $3,350 from the
acquisition of Tempco Engineering, Inc.




The
Company accounts for goodwill and intangible assets in accordance with Statement
of Financial Accounting Standards No. 142, “Goodwill and Other Intangible
Assets” (“SFAS No. 142”). The carrying value of goodwill and intangible
assets with indefinite lives are assessed at least annually and an impairment
charge is recorded if appropriate.




Intangible
Assets




Intangible
assets primarily consist of trademarks and customer intangibles resulting from
the acquisitions of Intec, D3 Technologies and Versaform Corporation. The
trademark that resulted from the acquisition of D3 Technologies was determined
to have an indefinite life. Customer intangibles have an original estimated
useful life of 15 years.  The carrying values were as
follows:




March
      31, 2009
                      
                      
                      December
      31, 2008Trademarks
                      
                      $
                      4,582
                      
                      
                      $
                      4,222Customer
      intangible assets
                      
                      
                      21,515
                      
                      
                      
                      16,610Other
                      
                      
                      582
                      
                      
                      
                      160Accumulated
      amortization
                      
                      
                      (3,613
                      )
                      
                      
                      (3,131
                      )Intangible
      assets, net
                      
                      $
                      23,066
                      
                      
                      $
                      17,861







Intangibles
amortization expense was $481 and $360 for the three months ended March 31, 2009
and 2008, respectively.   Estimated annual amortization expense
for the balance of 2009 and the next five years is as follows:




Year
      ending December 31,2009
      (1)
                    
                    $
                    1,4492010
                    
                    
                    1,9902011
                    
                    
                    1,9862012
                    
                    
                    1,9752013
                    
                    
                    1,8912014
                    
                    
                    1,773Thereafter
                    
                    
                    7,780$
                    18,844(1)
      Represents amortization expense for the remainder
      of 2009.






7


LMI
Aerospace, Inc.
 Notes to Condensed Consolidated Financial
Statements
 (Dollar
amounts in thousands, except share and per share data)
 (Unaudited)
 March
31, 2009


5.  Long-Term
Debt and Capital Lease Obligations





Long-term
debt and capital lease obligations consist of the following:





March
      31, 2009
                  
                  
                  December
      31, 2008Capital
      lease obligations
                  
                  $
                  322
                  
                  
                  $
                  347Revolving
      line of credit
                  
                  
                  44,340
                  
                  
                  
                  25,000Notes
      payable, principal and interest payableat
      fixed rates, ranging from 1.67% to 10.70%at
      March 31, 2009 and December 31, 2008
                  
                  
                  582
                  
                  
                  
                  687Total
      debt
                  
                  $
                  45,244
                  
                  
                  $
                  26,034Less
      current installments
                  
                  
                  467
                  
                  
                  
                  498Total
                  
                  $
                  44,777
                  
                  
                  $
                  25,536





The
Company has entered into a senior secured revolving credit facility in an
aggregate principal amount of up to $80,000 of which $43,700 was utilized at
March 31, 2009.  Borrowings under the credit facility are secured by
substantially all of the Company’s assets and bear interest at either (a) the
“base rate” (the higher of the federal funds rate plus one-half of one percent
or the prime commercial lending rate) plus the applicable interest margin
ranging from 0.125% to 1.0%, depending upon the Company’s total leverage ratio
at the end of each quarter, or (b) the LIBOR rate plus an applicable interest
margin ranging from 1.125% to 2.0%, depending upon the Company’s total leverage
ratio at the end of each quarter.  If the Company elects to borrow
under the LIBOR rate, interest periods range from one to twelve months. The
maturity date of the credit facility, which is subject to acceleration upon
breach of the financial covenants (consisting of a maximum total leverage ratio
and a minimum fixed charge coverage ratio) and other customary non-financial
covenants contained in the credit agreement, is July 31, 2012. In addition, the
Company entered into a line of credit agreement providing a revolving credit
facility in the amount of up to $1,000 at the base rate plus 1.125%, of which
$640 was utilized at March 31, 2009.





The
Company has also entered into various notes payable and capital lease agreements
for the purchase of certain equipment and software. The notes are secured by
certain equipment and software and payable in monthly installments including
interest rates ranging from 1.67% - 10.70% through January 2012. The capital
lease agreements expire between October 2010 and March 2012.




8


LMI
Aerospace, Inc.
 Notes to Condensed Consolidated Financial
Statements
 (Dollar
amounts in thousands, except share and per share data)
 (Unaudited)
 March
31, 2009


6.  Earnings
Per Common Share





Basic net
income per common share is based upon the weighted average number of common
shares outstanding.  Diluted net income per common share is based upon
the weighted average number of common shares outstanding, including the dilutive
effect of stock options and restricted stock, using the treasury stock and
if-converted methods.  The number of dilutive shares as of March 31,
2009 attributable to stock options was 28,621. A
weighted average of 76,812 incremental shares, calculated using the treasury
stock method, relating to non-vested restricted stock under the Company’s
share-based compensation plan was excluded from the computation of 2009 diluted
net income per common share because the grant date fair value was greater than
the average market price of the common shares for the three month-period ended
March 31, 2009, causing such shares to have an anti-dilutive effect on earnings
per share.  The number of dilutive shares as of March 31, 2008 attributable
to stock options and restricted shares was 119,294.





7.  Stock-Based
Compensation





On July
7, 2005, the Company’s shareholders approved the LMI Aerospace, Inc. 2005
Long-term Incentive Plan (the “Plan”). The Plan is the Company’s only
compensation plan under which shares of the Company’s common stock are
authorized for issuance to employees or directors. The Plan provides for the
grant of non-qualified stock options, incentive stock options, shares of
restricted stock, restricted stock units, stock appreciation rights, performance
awards and other share-based grants and cash bonus awards.





The
Company did not make any share-based grants or awards, except for restricted
stock awards as disclosed below, for the three months ended March 31, 2009 and
2008, respectively.  A summary of stock option activity under the
Company’s share-based compensation plan for the three months ended
March 31, 2009 is presented below:





Stock
      Options
                  
                  Shares
                  
                  
                  Weighted
                    Average
      Exercise PriceOutstanding
      at January 1, 2009
                  
                  
                  63,890
                  
                  
                  $
                  2.81Granted
                  
                  
                  -
                  
                  
                  
                  -Exercised
                  
                  
                  (18,255
                  )
                  
                  
                  2.86Forfeited
      or expired
                  
                  
                  (1,100
                  )
                  
                  
                  4.75Outstanding
      at March 31, 2009
                  
                  
                  44,535
                  
                  
                  $
                  2.74





All
outstanding stock options were exercisable at March 31, 2009.  The
aggregate intrinsic value of vested stock options was $254 at March 31, 2009,
which options had a weighted average remaining life of 1.3 years at March 31,
2009.  The aggregate intrinsic value of options exercised during the
three months ended March 31, 2009 and 2008, based upon the market price on the
exercise date, was approximately $51 and $100, respectively.





The
following table summarizes information about stock options outstanding at
March 31, 2009:




9


LMI
Aerospace, Inc.
 Notes to Condensed Consolidated Financial
Statements
 (Dollar
amounts in thousands, except share and per share data)
 (Unaudited)
 March 31,
2009


Range
      of
                          Exercise
      Prices
                        Number
      of
                          Outstanding
                          Options
                        Weighted
      Average
                          Remaining
                          Contractual
      Life
                        
                        Weighted
                          Average
                          Exercise
      Price$1.96
      - $2.90
                        41,835
                        1.23
                        $
                        2.54$2.91
      - $4.35
                        200
                        0.67
                        
                        3.13$4.36
      - $6.06
                        2,500
                        3.13
                        
                        6.06Total
                        44,535
                        1.34
                        $
                        2.74





A summary
of the activity for non-vested restricted stock awards as of March 31, 2009
and changes during the three-month period is presented below:





Restricted
      Stock Awards
                        
                        Shares
                        
                        
                        Weighted
      Average Grant
                          Date
      Fair
                          ValueOutstanding
      at January 1, 2009
                        
                        
                        294,774
                        
                        
                        $
                        22.78Granted
                        
                        
                        38,885
                        
                        
                        
                        11.70Vested
                        
                        
                        (7,439
                        )
                        
                        
                        16.48Forfeited
                        
                        
                        -
                        
                        
                        
                        -Outstanding
      at March 31, 2009
                        
                        
                        326,220
                        
                        
                        $
                        21.60





Common
stock compensation expense related to restricted stock awards granted under the
Plan was $526 and $604 for the three-month periods ended March 31, 2009 and
2008, respectively.





Total
unrecognized compensation costs related to non-vested share-based compensation
awards granted or awarded under the Plan were $3,899 and $3,972 at March 31,
2009 and December 31, 2008, respectively. These costs are expected to be
recognized over a weighted average period of 2.1 years and 2.2 years,
respectively.





8.  Business
Segment Information





As a
result of acquiring D3 Technologies on July 31, 2007 and in accordance with the
criteria set forth in SFAS No. 131, “Disclosures about Segments of an Enterprise
and Related Information,”the Company is
organized into two reportable segments: the Aerostructures segment and the
Engineering Services segment.  The Aerostructures segment, comprised of all of the
Company’s operations other than those of D3 Technologies, primarily
assembles, kits, fabricates, machines,
finishes and integrates formed, close-tolerance aluminum and specialty alloy
components and sheet metal products primarily for use by the aerospace,
semiconductor and medical technology products industries. The Engineering
Services segment,
comprised of the operations of D3 Technologies, provides a complete range
of design, engineering and program management services supporting aircraft
lifecycles from conceptual design, analysis and certification through production
support, fleet support and service life extensions via a complete turnkey
engineering solution.





Corporate
assets, liabilities and expenses related to the Company’s corporate offices,
except for interest expense and income taxes, primarily support the
Aerostructures segment. The table below presents information about reported
segments on the basis used internally to evaluate segment
performance:




10


LMI
Aerospace, Inc.
 Notes to Condensed Consolidated Financial
Statements
 (Dollar
amounts in thousands, except share and per share data)
 (Unaudited)
 March 31,
2009


Three
      Months Ended March 31,2009
                                      
                                      
                                      2008Net
      sales:Aerostructures
                                      
                                      $
                                      43,326
                                      
                                      
                                      $
                                      37,110Engineering
      Services
                                      
                                      
                                      20,839
                                      
                                      
                                      
                                      23,307Eliminations
                                      
                                      
                                      (163
                                      )
                                      
                                      
                                      -$
                                      64,002
                                      
                                      
                                      $
                                      60,417Income
      from operations:Aerostructures
                                      
                                      $
                                      4,129
                                      
                                      
                                      $
                                      4,904Engineering
      Services
                                      
                                      
                                      1,535
                                      
                                      
                                      
                                      2,663Eliminations
                                      
                                      
                                      87$
                                      5,751
                                      
                                      
                                      $
                                      7,567Depreciation
      and amortization:Aerostructures
                                      
                                      $
                                      1,191
                                      
                                      
                                      $
                                      1,015Engineering
      Services
                                      
                                      
                                      764
                                      
                                      
                                      
                                      588$
                                      1,955
                                      
                                      
                                      $
                                      1,603Interest
      income (expense):Aerostructures
                                      
                                      $
                                      -
                                      
                                      
                                      $
                                      -Engineering
      Services
                                      
                                      
                                      (3
                                      )
                                      
                                      
                                      -Corporate
                                      
                                      
                                      (419
                                      )
                                      
                                      
                                      (543
                                      )$
                                      (422
                                      )
                                      
                                      $
                                      (543
                                      )Capital
      expenditures:Aerostructures
                                      
                                      $
                                      537
                                      
                                      
                                      $
                                      1,302Engineering
      Services
                                      
                                      
                                      338
                                      
                                      
                                      
                                      233$
                                      875
                                      
                                      
                                      $
                                      1,535





March
      31, 2009
                          
                          
                          December
      31, 2008Goodwill:Aerostructures
                          
                          $
                          10,651
                          
                          
                          $
                          3,350Engineering
                          
                          
                          42,908
                          
                          
                          
                          42,908$
                          53,559
                          
                          
                          $
                          46,258Total
      assets:Aerostructures
                          
                          $
                          136,265
                          
                          
                          $
                          110,481Engineering
                          
                          
                          72,005
                          
                          
                          
                          71,866$
                          208,270
                          
                          
                          $
                          182,347




11


LMI
Aerospace, Inc.


Notes to Condensed Consolidated Financial
Statements


(Dollar
amounts in thousands, except share and per share data)


(Unaudited)


March 31,
2009





9.  Customer
Concentration





Direct
sales, through both of its business segments, to the Company’s largest customer
accounted for 23.8% and 22.4% of the Company’s total revenues at March 31, 2009
and 2008, respectively. Accounts receivable balances related to the largest
customer based on direct sales were 25.8% and 25.7% of the accounts receivable
balance at March 31, 2009 and December 31, 2008, respectively.




Direct
sales, through both of its business segments, to the Company’s second largest
customer accounted for 15.8% and 20.5% of the Company’s total revenues at March
31, 2009 and 2008, respectively. Accounts receivable balances related to the
second largest customer based on direct sales represented 6.0% and 15.3% of the
accounts receivable balance at March 31, 2009 and December 31, 2008,
respectively.




Direct
sales, through both of its business segments, to the Company’s third largest
customer accounted for 13.9% and 19.1% of the Company’s total revenues at March
31, 2009 and 2008, respectively. Accounts receivable balances related to the
third largest customer based on direct sales were 10.6% and 9.2% of the accounts
receivable balance at March 31, 2009 and December 31, 2008,
respectively.




12


Item 2.  Management’s Discussion and
Analysis of Financial Condition and Results of Operations.





The
Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for
forward-looking statements. The Company makes forward-looking statements in the
“Management’s Discussion and Analysis of Financial Condition and Results of
Operations” section of this Quarterly Report on Form 10-Q, which represent the
Company’s expectations or beliefs about future events and financial performance.
When used in this report, the words “expect,” “believe,” “anticipate,” “goal,”
“plan,” “intend,” “estimate,” “may,” “will” or similar words are intended to
identify forward-looking statements. These forward-looking statements are based
on estimates, projections, beliefs and assumptions and are not guarantees of
future events or results.  Such statements are subject to known and
unknown risks, uncertainties and assumptions, including those referred to under
“Risk Factors” in the Company’s Annual Report on Form 10-K and otherwise
described in the Company’s periodic filings and current reports filed with the
Securities and Exchange Commission.




In light
of these risks, uncertainties and assumptions, the forward-looking events
discussed may not occur.  In addition, actual results could differ
materially from those suggested by the forward-looking
statements.  Accordingly, investors are cautioned not to place undue
reliance on the forward-looking statements.  Except as required by
law, the Company undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise.  Investors should, however, review additional
disclosures made by the Company from time to time in its periodic filings with
the Securities and Exchange Commission.




This
Quarterly Report on Form 10-Q should be read completely and with the
understanding that the Company’s actual future results may be materially
different from what the Company expects.  All forward-looking
statements made by the Company in this Form 10-Q and in the Company’s other
filings with the Securities and Exchange Commission are qualified by these
cautionary statements.





The
condensed consolidated financial statements are prepared in accordance with
accounting principles generally accepted in the United States of America, which
require the Company to make estimates and assumptions. (See Note 1 of the
Condensed Consolidated Financial Statements included as part of this Quarterly
Report on Form 10-Q.)





The
Company believes that certain significant accounting estimates have the
potential to have a more significant impact on the financial statements either
because of the significance of the financial statements to which they relate or
because they involve a higher degree of judgment and complexity.  A
summary of such critical accounting estimates can be found in the section
entitled “Management’s Discussion and Analysis of Financial Condition and
Results of Operations” contained in the Company’s Annual Report on Form 10-K for
the fiscal year ended December 31, 2008.




Overview





We are a
leading provider of design engineering services, structural components,
assemblies and kits to the aerospace, defense and technology industries. We
primarily sell our products and services to the large commercial aircraft,
military, corporate and regional aircraft, and technology
markets.  Historically, our business was primarily dependent on the
large commercial aircraft market, specifically with one principal customer. In
order to diversify our product and customer base, we implemented an acquisition
and marketing strategy in the late 1990s that has broadened the number of
industries to which we sell our products and services and, within the aerospace
industry, diversified our customer base to reduce our dependence on any one
principal customer. Our acquisition of D3 Technologies in 2007 was in
furtherance of our growth strategy of increasing the array of value-added
services and solutions that we offer to our customers.  We believe
that OEM and Tier 1 aerospace companies will continue the trend of selecting
their suppliers based upon the breadth of more complex and sophisticated design
and manufacturing capabilities and value-added services as well as the ability
of their suppliers to manage large production programs.





13




In
January 2009, the Company acquired Intec, an Everett, Washington-based provider
of advanced materials testing, manufacturing and design services to the
aerospace, defense and transportation industries.  Intec’s primary
business is designed to support composite testing, manufacturing and research,
by analyzing new and existing materials including organic matrix composites,
ceramics, metal matrix composites and metal.  We believe the acquistion of
Intec, together with other initiatives, will provide significant composite
assembly and component production capabilities, which will allow us to broaden
our customer offerings and to use our skilled workforce in both the
Aerostructures and Engineering Services segments to transition to production of
non-metallic product.


Results
of Operations




Three
months ended March 31, 2009 compared to March 31, 2008





The
following table is a summary of our operating results for the three months ended
March 31, 2009 and 2008, respectively:





Three
      Months EndedMarch
      31, 2009($
      in millions)Aerostructures
                  
                  
                  Engineering
                    Services
                  
                  
                  Eliminations
                  
                  
                  TotalNet
      sales
                  
                  $
                  43.3
                  
                  
                  $
                  20.8
                  
                  
                  $
                  (0.1
                  )
                  
                  $
                  64.0Cost
      of sales
                  
                  
                  32.3
                  
                  
                  
                  17.3
                  
                  
                  
                  (0.2
                  )
                  
                  
                  49.4Gross
      profit
                  
                  
                  11.0
                  
                  
                  
                  3.5
                  
                  
                  
                  0.1
                  
                  
                  
                  14.6S,G
      & A
                  
                  
                  6.4
                  
                  
                  
                  2.0
                  
                  
                  
                  -
                  
                  
                  
                  8.4Severance
      and restructuring
                  
                  
                  0.4
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  0.4Income
      from operations
                  
                  $
                  4.2
                  
                  
                  $
                  1.5
                  
                  
                  $
                  0.1
                  
                  
                  $
                  5.8Three
      Months EndedMarch
      31, 2008($
      in millions)Aerostructures
                  
                  
                  Engineering
                    Services
                  
                  
                  Eliminations
                  
                  
                  TotalNet
      sales
                  
                  $
                  37.1
                  
                  
                  $
                  23.3
                  
                  
                  $
                  -
                  
                  
                  $
                  60.4Cost
      of sales
                  
                  
                  26.3
                  
                  
                  
                  18.5
                  
                  
                  
                  -
                  
                  
                  
                  44.8Gross
      profit
                  
                  
                  10.8
                  
                  
                  
                  4.8
                  
                  
                  
                  -
                  
                  
                  
                  15.6S,G
      & A
                  
                  
                  6.0
                  
                  
                  
                  2.1
                  
                  
                  
                  -
                  
                  
                  
                  8.1Income
      from operations
                  
                  $
                  4.8
                  
                  
                  $
                  2.7
                  
                  
                  $
                  -
                  
                  
                  $
                  7.5








Aerostructures
Segment





Net Sales.  The
following table specifies the amount of the Aerostructures segment’s net sales
by category for the first quarter of 2009 and 2008 and the percentage of total
net sales for each period represented by each category.




14





Three
      Months EndedCategory
                                        
                                        March
      31, 2009
                                        
                                        
                                        %
      of Total
                                        
                                        
                                        March
      31, 2008
                                        
                                        
                                        %
      of Total($
      in millions)Corporate
      and regional aircraft
                                        
                                        $
                                        15.8
                                        
                                        
                                        
                                        36.5
                                        %
                                        
                                        $
                                        13.4
                                        
                                        
                                        
                                        36.1
                                        %Large
      commercial aircraft
                                        
                                        
                                        14.7
                                        
                                        
                                        
                                        33.9
                                        
                                        
                                        
                                        10.7
                                        
                                        
                                        
                                        28.8Military
                                        
                                        
                                        11.1
                                        
                                        
                                        
                                        25.6
                                        
                                        
                                        
                                        9.9
                                        
                                        
                                        
                                        26.7Technology
                                        
                                        
                                        0.2
                                        
                                        
                                        
                                        0.5
                                        
                                        
                                        
                                        2.2
                                        
                                        
                                        
                                        6.0Other
      (1)
                                        
                                        
                                        1.5
                                        
                                        
                                        
                                        3.5
                                        
                                        
                                        
                                        0.9
                                        
                                        
                                        
                                        2.4Total
                                        
                                        $
                                        43.3
                                        
                                        
                                        
                                        100.0
                                        %
                                        
                                        $
                                        37.1
                                        
                                        
                                        
                                        100.0
                                        %





(1) Primarily
consists of testing and processing services in 2009 and consulting services and
various aerospace products in 2008.





Net sales
for the first quarter of 2009 were $43.3 million, up 16.7% from $37.1 million in
the first quarter of 2008.  The increase in net sales occurred in the
corporate and regional aircraft, large commercial aircraft and military
sectors.  The increase was due, in part, to $5.3 million in tooling
sales in the first quarter of 2009, including tooling sales of $2.8 million on
the G250, $1.1 million on the CRJ-1000, $0.9 million on the G650 and $0.4
million on the 747-8.





Net sales
of components for corporate and regional aircraft were $15.8 million for the
first quarter of 2009 compared to $13.4 million for the first quarter of 2008,
an increase of $2.4 million or 17.9%.  This increase was primarily
attributable to $4.7 million in tooling sales, which are not expected to be
sustained at that rate through the remainder of the year, offset by a $2.8
million decrease in sales of large cabin components for
Gulfstream.  This reduction is primarily a result of production rate
cuts announced by Gulfstream in March 2009 and the resulting inventory
adjustments implemented in connection with these rate cuts.





Net sales
of products used in large commercial aircraft were $14.7 million for the first
quarter of 2009 compared to $10.7 million for the first quarter of 2008, an
increase of $4.0 million or 37.4%.  The increase in net sales to this
market was driven by support for the 767 wing modification and winglet program,
which generated $5.0 million of sales.    We also increased
net sales for the Boeing 747 by $1.4 million to $3.1 million in the first
quarter of 2009 from $1.7 million in the first quarter of 2008. These increases
were partially offset by a $2.0 million decrease in sales for the Boeing 737
from $6.7 million in the first quarter of 2008 to $4.7 million in the first
quarter of 2009 and a $0.5 million decrease in other large commercial aircraft
products from $1.7 million in the first quarter of 2008 to $1.2 million in the
first quarter of 2009, primarily as a residual impact of the Boeing strike in
the fourth quarter of 2008 and a late March inventory assessment by a Tier 1
customer that deferred March sales of $0.5 million into April 2009.





Military
products generated $11.1 million of net sales in the first quarter of 2009
compared to $9.9 million in the first quarter of 2008, an increase of $1.2
million or 12.1%.  This increase resulted from net sales for the
Sikorsky Blackhawk program which generated $8.6 million of net sales in the
first quarter of 2009 compared to $7.0 million in the first quarter of 2008. An
increase also resulted from net sales for the Boeing Apache helicopter of $1.9
million in the first quarter of 2009 compared to $1.3 million in the first
quarter of 2008.  These increases were offset by a slight decline in
other military products from $1.5 million in the first quarter of 2008 to $0.7
million in the first quarter of 2009.





Technology
products net sales declined by 90.9% in the first quarter of 2009 to $0.2
million from $2.2 million for the first quarter of 2008.  This
decrease was due to lower demand in semiconductor equipment.





The
backlog at March 31, 2009 was $236 million, of which $179 million is due in the
next twelve months.  The backlog at March 31, 2008 was $157
million.





15




Gross Profit.  Gross
profit for the first quarter of 2009 was $11.0 million (25.4% of net sales)
compared to $10.8 million (29.1% of net sales) in the first quarter of
2008.  Gross profit was negatively impacted by lower margins on both
the 767 wing modification program and tooling sales.





Selling, General and Administrative
Expenses.Selling, general and administrative expenses,
including severance and restructuring costs, for the first quarter of 2009
were $6.8 million (15.7% of net sales) compared to $6.0 million (16.2% of net
sales) in the first quarter of 2008.  The increase was primarily due
to severance and restructuring costs of $0.4 million and the acquisition costs
expensed under FAS 141(R) relating to the Intec Acquisition of $0.3
million.   In addition, Intec added $0.4 million of expense for
the 2009 quarter subsequent to its acquisition.





Engineering Services
Segment





Net
Sales.The following
table specifies the amount of the Engineering Services segment’s net sales by
category for the first quarter of 2009 and 2008 and the percentage of the
segment’s total net sales represented by each category.




Three
      Months EndedCategory
                                    March
      31, 2009
                                    
                                    
                                    %
      of Total
                                    
                                    
                                    March
      31, 2008
                                    
                                    
                                    %
      of Total($
      in millions)Corporate
      and regional aircraft
                                    
                                    $
                                    4.9
                                    
                                    
                                    
                                    23.6
                                    %
                                    
                                    $
                                    7.2
                                    
                                    
                                    
                                    30.9
                                    %Large
      commercial aircraft
                                    
                                    
                                    9.6
                                    
                                    
                                    
                                    46.1
                                    
                                    
                                    
                                    11.1
                                    
                                    
                                    
                                    47.7Military
                                    
                                    
                                    5.8
                                    
                                    
                                    
                                    27.9
                                    
                                    
                                    
                                    3.5
                                    
                                    
                                    
                                    15.0Tooling
                                    
                                    
                                    0.5
                                    
                                    
                                    
                                    2.4
                                    
                                    
                                    
                                    1.5
                                    
                                    
                                    
                                    6.4Total
                                    
                                    $
                                    20.8
                                    
                                    
                                    
                                    100.0
                                    %
                                    
                                    $
                                    23.3
                                    
                                    
                                    
                                    100.0
                                    %




Net sales
for the Engineering Services segment were $20.8 million for the first quarter of
2009 compared to $23.3 million for the first quarter of 2008, a decrease of $2.5
million or 10.7%. This decrease resulted from three fewer work days in
the first quarter of 2009 compared to the first quarter of 2008 as well as lower
client overtime requirements in 2009 compared to 2008.  Approximately
$20.6 million, or 99.0% of the segment’s revenues, were recorded under
reimbursement type contracts for engineering services compared to $22.2 million
for the first quarter of 2008, a decrease of 7.2%. These revenues are
generated from labor hours incurred at varying, pre-negotiated rates and other
direct costs plus an administrative fee.  Net sales under these
reimbursement contracts are primarily for commercial, corporate and military
markets.





Net sales
for services supporting corporate and regional aircraft, the majority of which
relate to the development of new and redesigned aircraft, were approximately
$4.9 millionin the
first quarter of 2009 compared to $7.2 million for the first quarter of 2008, a
decrease of $2.3 million or 31.9%. Net sales for services for large
commercial aircraft were approximately $9.6 millionin the first quarter of
2009, down $1.5 million, or 13.5%, from $11.1 million in the first quarter of
2008. These revenues are primarily from design programs supporting
Boeing’s 747-8 and 787 platforms.  In addition to the factors
discussed above, these decreases resulted from the winding down of certain
programs, including the 777 Freighter and G650.  Net sales of services
for military programs were $5.8 million in the first quarter of
2009, up $2.3 million or 65.7% from $3.5 million in the first quarter of
2008. These military revenues were derived from support provided on
multiple Navy programs, as well as the F-35, the CH-53 helicopter and other
programs.  The increased sales of services for military programs are
consistent with management’s strategy for growth and have helped offset the
decreases of sales experienced in other major categories.





Approximately
$0.5 million, or 2.4% of net sales, for the first quarter of
2009, was primarily related to design and delivery of tooling on various
programs supporting commercial aircraft, compared to $1.5 million,
or 6.4% of net sales, in the first quarter of 2008.  This $1.0
million decrease, or 66.7%, resulted from the decrease in work days discussed
above and the completion of some of the engineering requirements that generated
sales during 2008.





16




Gross Profit.  Gross
profit for the first
quarter of 2009 was $3.5 million (16.8% of net sales) compared to $4.8 million
(20.6% of net sales) in the first quarter of 2008.  The
decrease in gross profit during the first quarter of 2009 is due to a number of
factors, including higher overhead rates resulting from fewer work days,
lower sales volume and an increase in non-billable hours.





Selling, General and Administrative
Expenses.  Selling, general and administrative expenses for the first quarter of
2009 were $2.0 million (9.6% of net sales) compared to $2.1 million
(9.0% of net sales) in the first quarter of 2008. These costs primarily
include salaries, wages and benefits costs of approximately $1.4 million, $0.3
million of stock based compensation, and amortization of intangibles of $0.3
million valued in connection with the acquisition of D3
Technologies.





Non-segment
Expenses





Interest Income (Expense),
net.  Net interest expense for the first quarter of 2009 was
$0.4 million compared to $0.5 million for the first quarter of 2008. The decline
was due to decreases in interest rates in the first quarter of 2009 compared to
the first quarter of 2008.





Income Tax
Expense.  During the first quarter of 2009, we recorded income
tax expense of $1.9 million compared to $2.5 million in the first quarter of
2008.  We applied an effective tax rate of 36.50% to income for the
first quarter of 2009 compared to 36.25% for the first quarter of 2008. Our 2009
effective tax rate was negatively impacted by a higher effective state income
tax rate.




Liquidity
and Capital Resources





During
the first quarter of 2009, we used $8.0 million of cash in operating activities,
compared to $4.0 million in the first quarter of 2008. An increase in accounts
receivable used $12.4 million of cash in the first quarter of 2009 as sales for
tooling and 767 wing modification kits of approximately $10 million were
predominately billed in March.  Accrued liabilities decreased by $2.1
million in the first quarter of 2009.  We used cash for payments for
various bonus plans, 401(k) and profit sharing contributions for 2008, and
customer rebate programs.  Decrease in accounts payable also used cash
of $1.6 million.





Net cash used in investing
activities was $11.0 million for the first quarter of 2009 compared to $1.5
million for the first quarter of 2008. In the first quarter of 2009, cash
was primarily used to acquire Intec, manufacturing equipment and computer
equipment and software. In the first quarter of 2008, we spent $1.5 million on
capital expenditures primarily for equipment in order to meet current and
expected customer demand.




Cash
provided by financing activities was $19.3 million for the first quarter of 2009
compared to $5.5 million for the first quarter of 2008. Funds provided in 2009
and 2008 represent net cash advances from our revolving credit
facility.




We
continue to assess the potential impact of recent trends in the global economic
environment on our liquidity and overall financial condition, particularly with
respect to the availability of, terms of and access to credit.  Our
inventory reduction plan announced earlier this year, as well as reduced capital
expenditures and collections of the unusually high accounts receivable at the
end of March, are expected to lead to our free cash flow goal for 2009 of more
than $20 million.  Our capital budget for 2009 anticipates capital
expenditures of approximately $5.0 million.  Despite a general
tightening in the credit markets, we expect to meet our ongoing working capital,
acquisition and capital expenditure needs presently and for the next twelve
months from a combination of our cash on hand, cash flow from operating
activities, including the impact of our planned inventory reduction initiatives,
and cash obtained by drawing down our credit facility.




17




Contractual
Obligations and Commitments





For
information concerning contractual obligations, see the caption “Contractual
Obligations and Commitments” in “Item 7. Management’s Discussion and Analysis of
Financial Condition and Results” in our Annual Report on Form 10-K for the year
ended December 31, 2008.





Item 3.  Quantitative and Qualitative
Disclosures About Market Risk.




We are
exposed to market risk primarily due to fluctuations in interest
rates.  Our outstanding credit facility carries a fluctuating interest
rate that varies based on changes in the prime lending rate of Wachovia Bank,
National Association. Accordingly, we are subject to potential fluctuations in
our debt service. Based on the amount of our outstanding debt as of March 31,
2009, a hypothetical 1% change in the interest rate of our outstanding credit
facility would result in a change in our annual interest expense of
approximately $0.4 million during the next 12-month period. However, we have the
ability to fix the interest rate under LIBOR for a period not to exceed one year
(see Note 5 to Condensed Consolidated Financial Statements).  While
not eliminating interest rate risk, this allows us to moderate the impact of
changes in the prime lending rate.




Item 4.  Controls and
Procedures.




Disclosure
Controls and Procedures




Our
management, under the supervision and with the participation of our Chief
Executive Officer and Chief Financial Officer, carried out an evaluation of the
effectiveness of the design and operation of the Company’s disclosure controls
and procedures (as defined by Rules 13a-15(e) and 15d-15(c) of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”)), as of March 31,
2009.  Based upon and as of the date of this evaluation, our Chief
Executive Officer and Chief Financial Officer have concluded that such
disclosure controls and procedures were effective to ensure that the information
required to be disclosed by the Company in the reports that it files or submits
under the Exchange Act (a) is recorded, processed, summarized and reported
within the time period specified in the Securities and Exchange Commission’s
rules and forms and (b) is accumulated and communicated to the Company’s
management, including its principal executive and principal financial officers,
as appropriate to allow timely decisions regarding required
disclosure.





Changes
in Internal Control Over Financial Reporting





No change
in our internal control over financial reporting occurred during the period
covered by this report that has materially affected, or is reasonable likely to
materially affect, our internal control over financial
reporting.


18


PART
II





OTHER INFORMATION





Item 1.  Legal Proceedings.





We are
not a party to any legal proceedings, other than routine claims and lawsuits
arising in the ordinary course of our business. We do not believe such claims
and lawsuits, individually or in the aggregate, will have a material adverse
effect on our business.





Item 1A.  Risk Factors.





There
have been no material changes to the risk factors as previously disclosed in
our Annual Report on Form 10-K for the fiscal year ended December 31, 2008
filed with the Securities and Exchange Commission on March 16,
2009.





Item 2.  Unregistered Sales of Equity
Securities and Use of Proceeds.





None.





Item 3.  Defaults Upon Senior
Securities.





None.





Item 4.  Submission of Matters to a Vote of
Security Holders.





None.





Item 5.  Other
Information.





None.





Item 6.  Exhibits.





See
Exhibit Index.


19








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, in the County of St. Charles and State of Missouri on the 8th
day of May, 2009.









LMI
      AEROSPACE, INC./s/
      Ronald S. SaksRonald
      S. Saks,
              President
      and Chief Executive Officer
              (Principal
      Executive Officer)/s/
      Lawrence E. DickinsonLawrence
      E. Dickinson
              Chief
      Financial Officer and Secretary
              (Principal
      Financial and Principal Accounting
              Officer)







20




EXHIBIT INDEX









Exhibit No.
              Description2.1
              Stock
      Purchase Agreement dated as of June 17, 2007 between John J. Bogan,
      Trustee of the John Bogan Separate Property Trust Dated October 5, 1999,
      William A. Huston, and LMI Aerospace, Inc. previously filed as Exhibit 2.1
      to the Registrant’s Form 8-K filed June 18, 2007 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 April 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 filed as
      Exhibit 3.3 to the Registrant’s Form 10-K for the fiscal year ended
      December 31, 2001 and filed April 1, 2002 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
              Amendment
      to Employment Agreement between D3 Technologies, Inc. and Ryan P. Bogan
      dated as of December 31, 2008.10.2
              Lease
      Agreement dated January 16, 2009 by and between Integrated Holdings, LLC,
      and Integrated Technologies, Inc. for the premises located at 1910 Merrill
      Creek Parkway, Everett, WA  98203.31.1
              Rule
      13a-14(a) Certification of Ronald S. Saks, President and Chief Executive
      Officer.31.2
              Rule
      13a-14(a) Certification of Lawrence E. Dickinson, Secretary and Chief
      Financial Officer.32
              Certification
      pursuant to 18 U.S.C Section 1350 as adopted pursuant to Section 906 of
      Sarbanes-Oxley Act of 2002.