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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended October 1, 2000 Commission file number: 1-5761
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LaBarge, Inc.
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(Exact Name of Registrant as specified in its charter)
DELAWARE 73-0574586
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9900A Clayton Road, St. Louis, Missouri 63124
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(Address) (Zip Code)
(314) 997-0800
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(Registrant's telephone number, including Area Code)
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(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes |X|. No |_|.
Indicate the number of shares outstanding of each of the Issuer's classes of
common stock as of October 1, 2000. 14,876,710 shares of common stock.
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LABARGE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(dollars in thousands except per share data)
THREE MONTHS ENDED
------------------------------------------
OCTOBER 1, October 3,
2000 1999
- --------------------------------------------------------------------------- -------------------- ---------------------
NET SALES $ 24,284 $ 14,131
- --------------------------------------------------------------------------- -------------------- ---------------------
COSTS AND EXPENSES:
Cost of sales 18,737 11,670
Selling and administrative expense 4,188 3,686
Interest expense 537 446
Loss from NotiCom -- 520
Other income, net (277) (71)
- --------------------------------------------------------------------------- -------------------- ---------------------
Income (loss) from continuing operations before income taxes 1,099 (2,120)
Income tax expense (benefit) 465 (780)
- --------------------------------------------------------------------------- -------------------- ---------------------
Net income (loss) from continuing operations 634 (1,340)
- --------------------------------------------------------------------------- -------------------- ---------------------
DISCONTINUED OPERATIONS:
Loss from operations, net of tax benefit of $45 -- (58)
- --------------------------------------------------------------------------- -------------------- ---------------------
NET EARNINGS (LOSS) $ 634 $ (1,398)
=========================================================================== ==================== =====================
BASIC EARNINGS (LOSS) PER SHARE:
Net income (loss) from continuing operations $ .04 $ (.09)
Net income (loss) from discontinued operations -- --
- --------------------------------------------------------------------------- -------------------- ---------------------
BASIC NET EARNINGS (LOSS) $ .04 $ (.09)
- --------------------------------------------------------------------------- -------------------- ---------------------
AVERAGE COMMON SHARES OUTSTANDING 14,868 14,744
=========================================================================== ==================== =====================
DILUTED EARNINGS (LOSS) PER SHARE:
Net (loss) income from continuing operations $ .04 $ (.09)
Net income (loss) from discontinued operations -- --
- --------------------------------------------------------------------------- -------------------- ---------------------
DILUTED NET EARNINGS (LOSS) $ .04 $ (.09)
- --------------------------------------------------------------------------- -------------------- ---------------------
AVERAGE DILUTED COMMON SHARES OUTSTANDING 14,868 14,744
=========================================================================== ==================== =====================
See accompanying notes to consolidated financial statements.
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LABARGE, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(dollars in thousands)
OCTOBER 1, July 2,
2000 2000
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ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 599 $ 734
Accounts and notes receivable, net 15,196 17,813
Inventories 25,303 22,232
Prepaid expenses 929 864
Deferred tax assets, net 1,205 1,205
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TOTAL CURRENT ASSETS $ 43,232 $ 42,848
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PROPERTY, PLANT AND EQUIPMENT, NET 12,752 12,683
DEFERRED TAX ASSETS, NET 2,526 2,526
INTANGIBLE ASSETS, NET 5,208 5,516
OTHER ASSETS, NET 5,544 5,160
- --------------------------------------------------------------------------------- ------------------- --------------------
$ 69,262 $ 68,733
================================================================================= =================== ====================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings $ 10,150 $ 9,730
Current maturities of long-term debt 1,793 1,823
Trade accounts payable 8,683 8,228
Accrued employee compensation 4,416 5,075
Other accrued liabilities 2,445 2,763
- --------------------------------------------------------------------------------- ------------------- --------------------
TOTAL CURRENT LIABILITIES $ 27,487 $ 27,619
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OTHER LONG-TERM LIABILITIES 343 316
LONG-TERM DEBT 9,233 9,284
SUBORDINATED DEBT 5,741 5,741
- --------------------------------------------------------------------------------- ------------------- --------------------
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value. Authorized 40,000,000 shares; issued 15,773,253
shares at October 1, 2000 and 15,773,253 at July 2, 2000,
including shares in treasury 158 158
Additional paid-in capital 13,722 13,722
Retained earnings 15,612 14,978
Less cost of common stock in treasury, 896,543 shares at
October 1, 2000 and 921,199 shares at July 2, 2000 (3,034) (3,085)
- --------------------------------------------------------------------------------- ------------------- --------------------
TOTAL STOCKHOLDERS' EQUITY 26,458 25,773
- --------------------------------------------------------------------------------- ------------------- --------------------
$ 69,262 $ 68,733
================================================================================= =================== ====================
See accompanying notes to consolidated financial statements.
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LABARGE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(dollars in thousands)
THREE MONTHS ENDED
----------------------------------------
OCTOBER 1, October 3,
2000 1999
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss) $ 634 $ (1,398)
Adjustments to reconcile net cash (used) provided by operating activities:
Net loss from discontinued operations -- 58
Loss from NotiCom and amortization of technology -- 520
Depreciation and amortization 784 766
Deferred taxes -- (573)
Other (3) 34
Changes in assets and liabilities:
Accounts and notes receivable, net 2,618 2,886
Inventories (3,071) (955)
Prepaid expenses (65) 32
Trade accounts payable 455 (165)
Accrued liabilities and other (965) (1,030)
- ---------------------------------------------------------------------------------------- ------------------- --------------------
NET CASH PROVIDED BY CONTINUING OPERATIONS 387 175
NET CASH PROVIDED BY DISCONTINUED OPERATIONS -- 334
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NET CASH PROVIDED BY OPERATING ACTIVITIES 387 509
- ---------------------------------------------------------------------------------------- ------------------- --------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment (556) (233)
Additions to other assets (371) (288)
Investment in other companies -- (405)
Cash used by investing activities - discontinued operations -- (274)
- ---------------------------------------------------------------------------------------- ------------------- --------------------
NET CASH USED BY INVESTING ACTIVITIES (927) (1,200)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Additions to long-term debt -- (7)
Repayments of long-term debt (66) (836)
Sale (purchase) of common stock 51 (104)
Net change in short-term borrowings, net of acquisitions 420 1,820
Net change in short-term debt of discontinued operations -- (150)
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NET CASH PROVIDED BY FINANCING ACTIVITIES 405 723
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NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (135) 32
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 734 462
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CASH AND CASH EQUIVALENTS AT END OF YEAR $ 599 $ 494
======================================================================================== =================== ====================
See accompanying notes to consolidated financial statements.
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LABARGE, INC.
FORM 10-Q
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. CONSOLIDATED FINANCIAL STATEMENTS - BASIS OF PRESENTATION
The consolidated balance sheets at October 1, 2000 and July 2, 2000, the
related consolidated statements of operations and cash flows for the three
months ended October 1, 2000 and October 3, 1999, have been prepared by
LaBarge, Inc. (the "Company") without audit. In the opinion of management,
adjustments, all of a normal and recurring nature, necessary to present fairly
the financial position and the results of operations and cash flows for the
aforementioned periods, have been made. Certain prior year amounts have been
reclassified to conform with the current year's presentation.
Certain information and footnote disclosures normally included in consolidated
financial statements prepared in conformity with generally accepted accounting
principles have been condensed or omitted. These consolidated financial
statements should be read in conjunction with the audited financial statements
and notes thereto included in the Company's Annual Report on Form 10-K for the
fiscal year ended July 2, 2000.
2. ACCOUNTS AND NOTES RECEIVABLE
Accounts and notes receivable consist of the following:
(dollars in thousands)
OCTOBER 1, July 2,
2000 2000
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Billed shipments, net of progress payments $ 14,704 $ 17,128
Less allowance for doubtful accounts 166 172
- ----------------------------------------------------------- ----------------------------- ---------------------------
Trade receivables, net 14,538 16,956
Other current receivables 658 857
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$ 15,196 $ 17,813
=========================================================== ============================= ===========================
Progress payments are payments from customers in accordance with contractual
terms for contract costs incurred to date. Such payments are credited to the
customer at the time of shipment.
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3. INVENTORIES
Inventories consist of the following:
(dollars in thousands)
OCTOBER 1, July 2,
2000 2000
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Raw materials $ 13,404 $ 12,348
Work in progress 12,378 10,210
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25,782 22,558
Less progress payments 479 326
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$ 25,303 $ 22,232
============================================================= ============================ ==========================
In accordance with contractual agreements, the U.S. Government has a security
interest in inventories identified with related contracts for which progress
payments have been received.
4. INTANGIBLE ASSETS, NET
Intangible assets, net, is summarized as follows:
(dollars in thousands)
OCTOBER 1, July 2,
2000 2000
- --------------------------------------------------------------- -------------------------- --------------------------
Software $ 1,380 $ 1,366
Patents 60 91
Goodwill 6,685 6,685
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8,125 8,142
Less amortization 2,917 2,626
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$ 5,208 $ 5,516
=============================================================== ========================== ==========================
Amortization expense was approximately $291,000 for the quarter ended October 1,
2000 and $303,000 for the quarter ended October 3, 1999.
5. OTHER ASSETS
Other assets is summarized as following:
(dollars in thousands)
OCTOBER 1, July 2,
2000 2000
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Cash value of life insurance $ 3,742 $ 3,618
Deposits, licenses, and other 1,693 1,429
Investments in businesses 136 136
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$ 5,571 $ 5,183
Less amortization 27 23
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$ 5,544 $ 5,160
============================================================= ============================ ==========================
Investments in businesses primarily refers to the Company's securities in
Norwood Abbey, Ltd.
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6. SHORT AND LONG-TERM OBLIGATIONS
Short-term borrowings, long-term debt and the current maturities of long-term
debt consist of the following:
(dollars in thousands)
OCTOBER 1, July 2,
2000 2000
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Short-term borrowings:
Revolving credit agreement:
Balance at period-end $ 10,150 $ 9,730
Interest rate at period-end 8.88% 9.45%
Average amount of short-term borrowings outstanding
during period $ 9,216 $ 4,612
Average interest rate for period 9.37% 9.03%
Maximum short-term borrowings at any month-end $ 10,150 $ 10,590
====================================================================== ======================= ======================
Senior long-term debt:
Senior lender:
Term loan $ 3,908 3,908
Mortgage loan 5,970 5,992
Other 1,148 1,207
- ---------------------------------------------------------------------- ----------------------- ----------------------
Total senior long-term debt 11,026 11,107
Less current maturities 1,793 1,823
- ---------------------------------------------------------------------- ----------------------- ----------------------
Long-term debt, less current maturities $ 9,233 $ 9,284
====================================================================== ======================= ======================
Subordinated debt $ 5,741 $ 5,741
====================================================================== ======================= ======================
The average interest rate was computed by dividing the sum of daily interest
costs by the sum of the daily borrowings for the respective periods.
SENIOR LENDER:
The Company has a senior, secured loan agreement with a bank. The following is a
summary of the agreement:
- - A term loan, with a current balance of $3.9 million, requiring repayments
of $393,000 of principal quarterly. Under this schedule, the term loan will
be repaid in December 2002.
- - A revolving credit facility up to $15.0 million based on a borrowing base
formula equal to the sum of 85% of eligible receivables, 50% of eligible
finished goods inventories, 30% of other eligible inventories, 50% of the
net book value of equipment and 75% of the net book value of real property
less the current term loan balance and outstanding letters of credit. As of
October 1, 2000, the maximum allowable was $15.0 million. The revolver
borrowing at quarter-end was $10.2 million, and letters of credit
outstanding totaled $1.5 million. Unused revolving credit available at
October 1, 2000 was $3.3 million. On October 24, 2000, the maturity date of
the revolving credit facility was extended to February 2002 and the
commitment amount increased to $18.0 million.
- - Covenants and performance criteria which involve Earnings Before Interest,
Taxes, Depreciation and Amortization ("EBITDA") in relation to debt, EBITDA
in relation to fixed charges, and maximum capital expenditures. The Company
is in compliance with its borrowing agreement covenants for the quarter
ended October 1, 2000.
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- - Interest on the loans at prime or a stated rate over LIBOR based on certain
ratios. As of the quarter-end, the average rate was approximately 9.37%.
- - A $6.2 million mortgage loan to finance the Company's fiscal 1998 purchase
of its headquarters building in St. Louis, Missouri. The loan has a 25-year
amortization, a 7.5% interest rate and is due in January 2008. The balance
at quarter-end was $6.0 million.
OTHER LONG-TERM DEBT:
Industrial Revenue Bonds:
In July 1998, the Company acquired tax-exempt Industrial Revenue Bond
financing in the amount of $1.3 million. The debt is payable over 10 years
with an interest rate of 5.28%. This funding was used to expand the
Berryville, Arkansas, facility. The outstanding balance at October 2000 was
$1.1 million.
Subordinated Convertible Notes:
On March 2, 1999, the Company, through its subsidiary LaBarge-OCS, Inc.,
purchased the remaining 90% of OCS for $5.6 million by (1) exchanging its
Subordinated Convertible Notes ("Notes") due June 2003 in the principal
amount of $4.3 million for the outstanding shares of OCS, and (2)
exchanging 310,000 shares of LaBarge-OCS, Inc. common stock for outstanding
options to purchase OCS common shares. The Notes bear interest at 7.5% per
annum payable quarterly beginning June 29, 1999, and noteholders are
entitled to participation payments if LaBarge-OCS, Inc. achieves certain
levels of earnings before taxes. The Notes are convertible by the holders
into LaBarge, Inc. Common Stock at $8.00 per share at any time after the
first anniversary of the Notes up to their maturity date. The 310,000
shares of LaBarge-OCS, Inc. common stock were exchanged for $1.3 million of
Notes in June 2000.
To mitigate the exposure to changes in interest rates, the Company entered
into an interest rate swap agreement with a bank in August 1998. This
agreement swaps a portion of the Company's exposure to three-month LIBOR
rates with a fixed rate of 5.95%. The notional amount of the agreement,
$7.9 million at October 1, 2000, amortizes quarterly to match the quarterly
payment under the existing bank term loan. This agreement expires in
September 2005.
OTHER LONG-TERM LIABILITIES:
Other long-term liabilities are deferred revenues associated with the
proprietary ScadaNET Network(TM) and represents prepaid communication
services.
7. DISCONTINUED OPERATIONS
On June 30, 2000, LaBarge Clayco Wireless was sold to Evolution Holdings, Inc.
of Phoenix, Arizona. For its 90% interest in this joint venture, the Company
received $4.6 million in cash and a three-year convertible note with an
estimated fair value of $115,000. In fiscal 2000 fourth quarter, the Company
recognized a one-time gain on the sale of $2.8 million, net of taxes.
LaBarge Clayco Wireless has been accounted for as a discontinued operation.
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8. INCOME TAXES
The Company has alternative minimum and investment tax credit carryforwards of
approximately $422,000 that are available to reduce future regular federal
income taxes.
9. CASH FLOWS
Total cash payments for interest for the three months ended October 1, 2000 were
$570,000, compared with $548,000 for the three months ended October 3, 1999.
Cash payments for federal and state income taxes were $850,000 for the three
months ended October 1, 2000, and a cash refund of $754,000, for the quarter
ended October 3, 1999.
10. EARNINGS PER COMMON SHARE
Basic and diluted earnings (loss) per share are computed as follows:
THREE MONTHS ENDED
-------------------------------------
OCTOBER 1, October 3,
2000 1999
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NUMERATOR:
Net earnings (loss) from continuing operations $ 634 $ (1,340)
Net (loss) from discontinued operations -- (58)
- ------------------------------------------------------------------------ --------------------- ---------------
Net earnings (loss) $ 634 $ (1,398)
- ------------------------------------------------------------------------ --------------------- ---------------
DENOMINATOR:
Denominator for basic net earnings (loss) per share 14,868 14,744
- ------------------------------------------------------------------------ --------------------- ---------------
POTENTIAL COMMON SHARES:
Denominator for diluted net earnings (loss) per share -
adjusted weighted-average shares and assumed conversions 14,868 14,744
- ------------------------------------------------------------------------ --------------------- ---------------
BASIC EARNINGS (LOSS) PER SHARE:
Net earnings (loss) from continuing operations $ .04 $ (.09)
Earnings from discontinued operations -- --
- ------------------------------------------------------------------------ --------------------- ---------------
BASIC NET EARNINGS (LOSS) $ .04 $ (.09)
======================================================================== ===================== ===============
DILUTED EARNINGS (LOSS) PER SHARE:
Net earnings (loss) from continuing operations $ .04 $ (.09)
Earnings from discontinued operations -- --
- ------------------------------------------------------------------------ --------------------- ---------------
DILUTED NET EARNINGS (LOSS) PER SHARE: $ .04 $ (.09)
======================================================================== ===================== ===============
The effect of conversion of the Subordinated Convertible Notes into common stock
is not considered in the calculations of diluted net earnings per common share
because it would have an anti-dilutive effect on earnings per share.
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11. BUSINESS SEGMENT INFORMATION
Business segments:
(dollars in thousands)
NET SALES TO CUSTOMERS:
THREE MONTHS ENDED
---------------------------------------------
OCTOBER 1, October 3,
2000 1999
--------------------- -----------------------
Manufacturing Services Group $ 23,995 $ 14,049
Network Technologies Group 289 82
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$ 24,284 $ 14,131
===================================================== ===================== =======================
EARNINGS (LOSS):
THREE MONTHS ENDED
----------------------------------------------
OCTOBER 1, October 3,
2000 1999
----------------------- ----------------------
Pretax earnings (loss) from continuing operations:
Manufacturing Services Group $ 2,308 $ (842)
Network Technologies Group (598) (486)
NotiCom -- (520)
Corporate and other items (74) 174
Interest expense (537) (446)
----------------------------------------------------- ----------------------- ----------------------
NET EARNINGS (LOSS) FROM
CONTINUING OPERATIONS BEFORE TAX $ 1,099 $ (2,120)
INCOME TAX EXPENSE (BENEFIT) 465 (780)
----------------------------------------------------- ----------------------- ----------------------
NET EARNINGS (LOSS) FROM
CONTINUING OPERATIONS 634 (1,340)
----------------------------------------------------- ----------------------- ----------------------
Discontinued operations:
Income (loss) from operations, net of taxes $ -- $ (58)
----------------------------------------------------- ----------------------- ----------------------
$ 634 $ (1,398)
===================================================== ======================= ======================
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DEPRECIATION & INVESTMENTS &
AMORTIZATION EXPENSE CAPITAL EXPENDITURES
THREE MONTHS ENDED THREE MONTHS ENDED
--------------- ------------------- ------------------- ------------------
OCTOBER 1, October 3, OCTOBER 1, October 3,
2000 1999 2000 1999
--------------- ------------------- ------------------- ------------------
Manufacturing Services Group $ 408 $ 394 $ 668 $ 227
Network Technologies Group 234 269 36 84
Investment in NotiCom -- -- -- 405
Corporate and other items 142 103 223 210
- ------------------------------------- --------------- ------------------- ------------------- ------------------
$ 784 $ 766 $ 927 $ 926
===================================== =============== =================== =================== ==================
TOTAL ASSETS
------------------------------------------------
OCTOBER 1, July 2,
2000 2000
------------------------ -----------------------
Manufacturing Services Group $ 46,492 $ 45,283
Network Technologies Group 5,490 5,878
Corporate and other items 17,280 17,572
============================================ ======================== =======================
GEOGRAPHIC INFORMATION:
The Company has no sales offices or facilities outside of the United States.
Sales for export did not exceed 10% of total sales for the three months ended
October 1, 2000.
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LABARGE, INC.
FORM 10-Q
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
FORWARD-LOOKING STATEMENTS
Statements contained in this Report which are not historical facts are
forward-looking statements within the meaning of the federal securities laws.
Forward-looking statements involve risks and uncertainties. Future events and
the Company's actual results could differ materially from those contemplated by
those forward-looking statements. Important factors which could cause the
Company's actual results to differ materially from those projected in, or
inferred by, forward-looking statements are (but are not necessarily limited to)
the following: the impact of increasing competition or deterioration of economic
conditions in the Company's markets; cutbacks in defense spending by the U.S.
Government; the outcome of litigation the Company is party to; unexpected
increases in the cost of raw materials, labor and other resources necessary to
operate the Company's business; the availability, amount, type and cost of
financing for the Company and any changes to that financing.
LaBarge, Inc. ("LaBarge" or the "Company") is a Delaware Corporation. The
Company is engaged in the following primary business activities:
- - The MANUFACTURING SERVICES GROUP is the Company's core manufacturing
business, which has been its principal business since 1985. This group
designs, engineers and produces sophisticated electronic systems and
devices and complex interconnect systems on a contract basis for its
customers. The Company derived approximately 99% of its total revenues from
this group for the three months ended October 1, 2000.
The group markets its services to companies desiring an engineering and
manufacturing partner capable of developing and providing high-reliability
electronic equipment, including products capable of performing in harsh
environmental conditions, such as high and low temperature, severe shock
and vibration. The group serves customers in a variety of markets with
significant revenues from customers in the defense, aerospace, and oil and
gas markets. The group's manufacturing facilities are located in Arkansas,
Missouri, Oklahoma and Texas.
The backlog of unshipped orders in the Manufacturing Services Group
increased to $65.7 million at October 1, 2000, compared to $62.7 million at
fiscal 2000 year-end. The growth in backlog is the result of an improved
and reorganized sales and marketing effort that concentrates on the
Company's core competencies and the application of those competencies to
targeted large customers in a variety of industries. Backlog growth was
from commercial customers.
- - The NETWORK TECHNOLOGIES GROUP was started in fiscal 1999 through the
acquisition of privately held Open Cellular Systems, Inc. ("OCS"). The
group designs and markets proprietary cellular and network communication
system products and Internet services that provide monitoring and control
of remote industrial equipment. This group is initially focusing its
marketing efforts on the railroad industry to monitor railroad-crossing
equipment, and on the oil and gas pipeline industry to monitor cathodic
protection devices. The Company derived 1% of its total revenues from this
group for the three months ended October 1, 2000.
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SIGNIFICANT EVENTS
Recent significant events include:
- - On June 30, 2000 LaBarge Clayco Wireless was sold to Evolution Holdings,
Inc. of Phoenix, Arizona. For its 90% interest in the joint venture, the
Company received $4.6 million in cash and a three-year convertible note
with an estimated fair value of $115,000. The Company recognized a one-time
gain on the sale of $2.8 million, net of taxes. LaBarge Clayco Wireless has
been accounted for as a discontinued operation.
- - During the latter part of fiscal 2000, it was determined that significant
additional investment would be required to continue development of NotiCom
L.L.C.'s BusCall(TM) product. During the fourth quarter, the Company
determined it will not provide such additional funding for NotiCom.
Consequently, NotiCom attempted to raise additional equity in the capital
markets. To date, these efforts have not been successful. Given these
events, during the fourth quarter of fiscal 2000, the Company wrote-down
its remaining investment in NotiCom and the related technology to zero. The
total loss to LaBarge, including its share of NotiCom's operations and the
write-down was $4.2 million in fiscal 2000.
RESULTS OF OPERATIONS -- QUARTER ENDED OCTOBER 1, 2000
NET SALES
(dollars in thousands)
QUARTER ENDED
----------------------------------------------
OCTOBER 1, October 3,
CHANGE 2000 1999
----------------------------- -------------------- ----------------------- ---------------------
Net Sales 71.8% $ 24,284 $ 14,131
============================= ==================== ======================= =====================
For the fiscal 2001 first quarter, ended October 1, 2000, net sales from
continuing operations were $24.3 million compared with $14.1 million for the
same period of fiscal 2000. Sales to our top 10 customers represented 71% of
total revenue in the first quarter of fiscal 2001 versus 64% for the same period
of fiscal 2000. Sales to our top three customers and the portion of total sales
they represented were as follows: Northrop Grumman, 23%; Schlumberger, 16%; and
Lockheed Martin, 8%.
The MANUFACTURING SERVICES GROUP. Sales in the manufacturing services segment of
the business were $24.0 million, accounting for 99% of total sales for the
quarter ended October 1, 2000; up $9.9 million (70.8%) over the same period of
fiscal 2000.
Comparing the first quarter of fiscal 2001 with the same period of fiscal 2000,
the significant sales growth came from commercial customers. Sales to commercial
customers almost doubled to $15.3 million. Sales of electro-mechanical
assemblies for mail handling equipment used by the U.S. Postal Service was the
most significant contribution to this growth. Sales to oil and gas customers
also increased during the period.
Sales to defense customers increased $2.3 million to $8.2 million from the first
quarter ended October 3, 1999.
NETWORK TECHNOLOGIES GROUP. Sales by this segment of the Company were 1% of
total sales for the quarter ended October 1, 2000.
The Network Technologies Group generated first quarter sales of $289,000 versus
$82,000 for the first quarter of fiscal 2000. Sales were primarily to the
railroad industry. During fiscal 2000, the group's proprietary ScadaNET
Network(TM) was selected by several rail organizations as the system of choice
for their remote monitoring programs. The system is being installed at nearly
1,300 active crossings in seven states by The Burlington Northern and Santa Fe
Railway Company, Montana Rail Link and I&M Rail Link. First
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quarter sales represented the continuation of this build-out program. The
ScadaNET Network has also been selected by Union Pacific Railroad as a standard
component of all its newly constructed and upgraded rail crossings.
GROSS PROFIT
(dollars in thousands)
QUARTER ENDED
----------------------------------------------------
OCTOBER 1, October 3,
Change 2000 1999
-------------------------- -------------------- -------------------------- -------------------------
Gross profit + 125.4 % $ 5,547 $ 2,461
Gross margin + 5.4 pts. 22.8% 17.4%
========================== ==================== ========================== =========================
A breakdown of margins by group shows the following:
MANUFACTURING SERVICES GROUP. This group's gross profit margin was 22.1% for the
quarter ended October 1, 2000, compared with 17.3% for the same period of fiscal
2000. In the current period, margin increases were obtained through better
product mix and increased production levels.
NETWORK TECHNOLOGIES GROUP. This group's gross profit margin was 50.1% for the
quarter ended October 1, 2000. Gross margins for the new Network Technologies
Group were not significant for the same period of fiscal 2000, as sales totaled
only $82,000.
During fiscal 2001, we anticipate that the Company's sales mix will evolve into
higher gross margins with increased sales from the Network Technologies Group.
SELLING AND ADMINISTRATIVE EXPENSES
(dollars in thousands)
QUARTER ENDED
----------------------------------
OCTOBER 1, October 3,
Change 2000 1999
---------------------------------------------- ------------------ ------------------ ---------------
Selling and administrative expenses + 13.6% $ 4,188 $ 3,686
Percent of sales - 8.9 pts. 17.2% 26.1%
============================================== ================== ================== ===============
Selling and administrative expenses rose for the quarter ended October 1, 2000,
reflecting much higher sales levels.
MANUFACTURING SERVICES GROUP. Selling and administrative expenses for this group
were $3.3 million (13.8% of sales) for the quarter ended October 1, 2000 and
$3.3 million (23.4% of sales) for the same period of fiscal 2000.
NETWORK TECHNOLOGIES GROUP. This group accounted for $743,000 of selling and
administrative expenses for the quarter ended October 1, 2000. This included
$219,000 in amortization of goodwill. For the same period of fiscal 2000, these
expenses totaled $494,000, including $240,000 of goodwill. Selling and
administrative expenses increased due primarily to additional sales volume.
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INTEREST EXPENSE
(dollars in thousands)
QUARTER ENDED
-----------------------------------------------
OCTOBER 1, October 3,
2000 1999
------------------------------------ ----------------------------- -----------------------
Interest expense $ 537 $ 446
==================================== ============================= =======================
Interest expense increased for the quarter ended October 1, 2000, due to
primarily higher average interest rates on additional short-term borrowings to
support increased levels of working capital.
LOSS FROM NOTICOM
(dollars in thousands)
QUARTER ENDED
-----------------------------------------------
OCTOBER 1, October 3,
2000 1999
------------------------------------------ -------------------- --------------------------
Loss from NotiCom $ -- $ 520
========================================== ==================== ==========================
The Company is no longer providing funding for NotiCom L.L.C. and, at the end of
fiscal year 2000, wrote-down its remaining investment to zero. No additional
expense is expected to be incurred from the Company's interest in NotiCom's
operations.
PRETAX EARNINGS (LOSS) FROM CONTINUING OPERATIONS
(dollars in thousands)
QUARTER ENDED
------------------------------------------------
OCTOBER 1, October 3,
2000 1999
----------------------------------------- ----------------------- ------------------------
Pretax earnings (loss) $ 1,099 $ (2,120)
========================================= ======================= ========================
The change in earnings from continuing operations for the quarter ended October
1, 2000, compared with the same period of fiscal 2000, is attributable to
significantly higher sales ($9.9 million) and gross profit ($2.9 million) from
the Manufacturing Services Group and the absence of a charge associated with
NotiCom L.L.C., offset by $91,000 in higher interest expense. The Company sold
certain technology during the quarter ended October 1, 2000, for a total of
$575,000. Revenue recognized in connection with this sale in the quarter ended
October 1, 2000, was approximately $130,000 net of related expenses. The
remainder of the sale price will be recognized in the second and third quarters
of fiscal 2001, matching the Company's performance requirements remaining under
the terms of the sale agreement.
TAX EXPENSE (BENEFIT) FROM CONTINUING OPERATIONS
(dollars in thousands)
QUARTER ENDED
------------------------------------------------
OCTOBER 1, October 3,
2000 1999
----------------------------------------- ------------------------ -----------------------
Tax expense (benefit) from
continuing operations $ 465 $ (780)
========================================= ======================== =======================
Tax expense (benefit) is impacted by non-deductible goodwill expense incurred in
connection with the OCS acquisition that equaled $219,000 for the quarter ended
October 1, 2000, and $240,000 for the same period of fiscal 2000.
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DISCONTINUED OPERATIONS, NET OF TAX
(dollars in thousands)
QUARTER ENDED
---------------------------------------------
OCTOBER 1, October 3,
2000 1999
-------------------------------------------- --------------------- -----------------------
Income from discontinue operations $ -- $ (58)
============================================ ===================== =======================
Discontinued operations reflect the results of LaBarge Clayco Wireless, sold on
June 30, 2000.
FINANCIAL CONDITION AND LIQUIDITY
The following shows LaBarge's equity and total debt positions:
STOCKHOLDERS' EQUITY AND DEBT
(dollars in thousands)
QUARTER ENDED
---------------------------------------------------------
OCTOBER 1, July 2,
2000 2000
--------------------------------- ------------------------------ --------------------------
Stockholders' equity $ 26,458 $ 25,773
Debt $ 26,917 $ 26,578
================================= ============================== ==========================
The Company's continuing operations provided $387,000 of net cash for the
quarter ended October 1, 2000. Net higher levels of working capital and capital
expenditures were essentially financed by operations and a net $339,000 increase
in debt.
Currently, our total debt-to-equity ratio is 1.02 to 1 versus 1.03 to 1 at the
end of fiscal 2000.
Effective October 24, 2000, our revolving credit agreement (see Note 7 in "Notes
to Consolidated Financial Statements") maturity has been extended to February
2002, and the commitment amount increased to $18.0 million.
RISK FACTORS
The Company operates in a competitive marketplace and is exposed to risks
associated with economic conditions.
The Network Technologies Group, as a relatively new operation, has used cash
since its acquisition in March 1999. It is too early to predict the timing and
the extent of the potential wide-spread acceptance of this segment's products
and its contribution to future earnings and cash flow.
Overall, we believe our availability of funds going forward from cash generated
from operations and available credit with the bank should be sufficient to
support the planned operations and capital expenditures of our business for the
next two years.
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PART II
NOT APPLICABLE
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SIGNATURE
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.
LABARGE, INC.
--------------------------------
Date: November 7, 2000
/s/Donald H. Nonnenkamp
--------------------------------
Donald H. Nonnenkamp
Vice President
and Chief Financial Officer
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