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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, 1995 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.)
P.O. Box 14499, St. Louis, Missouri 63178
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(Address) (Zip Code)
(314) 231-5960
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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 .
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Indicate the number of shares outstanding of each of the Issuer's classes of
common stock as of November 2, 1995. 15,296,059 of common shares.
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LaBARGE, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
(dollars in thousands except per share data)
THREE MONTHS ENDED
OCTOBER 1, October 2,
1995 1994
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NET SALES $ 13,361 $ 17,111
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COSTS AND EXPENSES:
Cost of sales 11,322 14,339
Selling and administrative expenses 1,673 2,069
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12,995 16,408
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EARNINGS FROM OPERATIONS 366 703
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Interest expense 319 548
Other income, net 46 33
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EARNINGS BEFORE INCOME TAXES 93 188
Income tax expense (benefit) 6 11
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NET EARNINGS $ 87 $ 177
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Net earnings per common share $.01 $.01
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Average common shares outstanding 15,246 15,209
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See accompanying notes to financial statements.
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LaBARGE, INC.
BALANCE SHEET
(Unaudited)
(dollars in thousands except per share data)
OCTOBER 1, July 2,
1995 1995
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ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 316 $ 143
Accounts and notes receivable, net 8,016 9,017
Inventories 14,602 14,133
Prepaid expenses 332 293
Deferred tax assets, net 758 758
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TOTAL CURRENT ASSETS 24,274 24,344
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MARKETABLE SECURITIES, AT COST 250 -
PROPERTY, PLANT AND EQUIPMENT, NET 2,947 2,676
DEFERRED TAX ASSETS, NET 2,492 2,492
OTHER ASSETS, NET 2,164 2,096
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$ 31,877 $ 31,608
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings $ 5,500 $ 2,500
Current maturities of long-term debt 1,510 1,670
Trade accounts payable 5,504 5,013
Accrued liabilities 2,180 2,392
Current liabilities from discontinued operations - 269
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TOTAL CURRENT LIABILITIES 14,694 11,844
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LONG-TERM OBLIGATIONS:
Long-term debt 3,777 6,467
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3,777 6,467
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STOCKHOLDERS' EQUITY:
Common stock, $.01 par value. Authorized 20,000,000 shares;
issued 15,296,059 shares at October 1, 1995
and 15,227,316 shares at July 2, 1995 153 152
Additional paid-in capital 12,624 12,554
Retained earnings 629 600
Less stock in treasury; -0- shares at October 1, 1995 and
5,391 shares at July 2, 1995 - (9)
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TOTAL STOCKHOLDERS' EQUITY 13,406 13,297
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$ 31,877 $ 31,608
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See accompanying notes to financial statements.
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LaBARGE, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
(dollars in thousands)
THREE MONTHS ENDED
OCTOBER 1, October 2,
1995 1994
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 87 $ 177
Adjustments to reconcile net cash provided
by operating activities:
Depreciation and amortization 210 272
Accretion of discount on long-term assets
from business divestitures (7) (8)
Accretion of discount on note from discontinued operations 6 11
Changes in assets and liabilities:
Accounts and notes receivable, net 751 1,411
Inventories (469) (622)
Prepaid expenses (39) (12)
Trade accounts payable 491 (1,010)
Accrued liabilities (212) (203)
Current liabilities from discontinued operations (275) (125)
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Net cash provided (used) by operating activities 543 (109)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment (443) (237)
Additions to other assets of continuing operations (99) (62)
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Net cash (used) by investing activities (542) (299)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of long-term debt (350) (446)
Exercise of stock warrants and options 14 60
Purchase of common stock to treasury 8 -
Net change in short-term borrowings 500 900
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Net cash provided by financing activities 172 514
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NET INCREASE IN CASH AND CASH EQUIVALENTS 173 106
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 143 140
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 316 $ 246
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See accompanying notes to financial statements.
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LaBARGE, INC.
FORM 10-Q
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. FINANCIAL STATEMENTS - BASIS OF PREPARATION
The balance sheet at October 1, 1995 and the related statements of operations
for the three months ended October 1, 1995 and October 2, 1994 have been
prepared by LaBarge, Inc. (the "Company") without audit. In the opinion of
management, adjustments 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 information and footnote disclosures normally included in financial
statements prepared in conformity with generally accepted accounting principles
have been condensed or omitted. These 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,
1995.
2. ACCOUNTS AND NOTES RECEIVABLE
Accounts and notes receivable consist of the following:
(dollars in thousands)
OCTOBER 1, July 2,
1995 1995
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Billed shipments, net of progress payments $ 6,179 $ 6,668
Unbilled costs and accrued profits,
net of progress payments 748 901
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Trade receivables - gross 6,927 7,569
Less: Allowance for doubtful accounts (178) (168)
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Trade receivables - net 6,749 7,401
Current portion of notes receivable 837 1,168
Other current receivables 430 448
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$ 8,016 $ 9,017
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Unbilled amounts represent revenues recognized on contracts, less applicable
progress payments received, for which billings have not been presented to the
customers at the balance sheet dates. Unbilled amounts are usually billed
within the month following the closing date as units are delivered to the
customer.
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.
Notes receivable include a note from a prior divestiture of $237,000, and a note
from a former officer of the Company totaling $600,000.
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Other current receivables represent amounts due from employees for travel
advances and other miscellaneous sources.
3. INVENTORIES
Inventories consist of the following:
(dollars in thousands)
OCTOBER 1, July 2,
1995 1995
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Raw materials $ 9,233 $ 8,609
Work in process 6,067 6,181
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15,300 14,790
Less progress payments (698) (657)
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$ 14,602 $ 14,133
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In accordance with contractual agreements, the government has a security
interest in inventories related to contracts for which progress payments have
been received.
4. MARKETABLE SECURITIES
At October 1, 1995, the Company had $250,000 in common stock of Venisect, Inc.
which is valued at cost.
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5. 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,
1995 1995
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SHORT-TERM BORROWINGS:
Revolving credit agreement:
Balance at period-end $ 5,500 $ 2,500
Interest rate at period-end 10.25% 10.50%
Average amount of short-term borrowings
outstanding during period (rounded to
nearest thousand) $ 5,292 $ 2,472
Average interest rate for period 10.38% 9.70%
Maximum short-term borrowings
at any month-end $ 5,700 $ 5,000
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Total short-term borrowings $ 5,500 $ 2,500
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OCTOBER 1, July 2,
1995 1995
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LONG-TERM DEBT:
Sanwa Business Credit Corporation:
Revolving credit agreement $ - $ 2,500
Term loan 655 805
Chemical Bank term loan 893 1,071
12% Subordinated Notes 3,386 3,386
Industrial revenue bond due
semiannually through 1997, interest at 8% 180 180
Other 173 195
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5,287 8,137
Less current maturities 1,510 1,670
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Total long-term debt $ 3,777 $ 6,467
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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.
At October 1, 1995, the Company has reclassified $2,500,000 of revolving debt
from long-term to short-term due to the expiration of its loan agreement on
July 3, 1996. The Company intends to negotiate a new loan agreement before
this date and will again classify a portion thereof to long-term.
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6. EARNINGS PER COMMON SHARE
Earnings per common share is based on the weighted average number of shares
outstanding during the quarter. Also outstanding are the following common
stock options: 111,000 exercisable at $.66 to $1.125; 75,000 not exercisable
until August, 1996 at $1.3125 to $1.4438 per share; 20,000 not exercisable
until February, 1997 at $1.3833 per share and 20,000 not exercisable until
April, 1997 at $1.4205 per share. The options are not considered dilutive
common stock equivalents for the purposes of the earnings per share
calculation.
7. INCOME TAXES
The tax benefits from the Company's net operating loss carryforwards, which
will more likely than not be realized, have been recorded as an asset. As of
October 1, 1995, the net value of this benefit was $3,249,562 and is reported
as $758,00 in current assets and $2,492,000 in other assets.
The net operating loss carryforwards as of July 2, 1995, for Federal Income Tax
purposes, were $20,393,000, which are available to offset future Federal
taxable income through 2003. The Company also has investment tax credit
carryforwards for Federal income tax purposes of approximately $227,000 which
are available to reduce future Federal income taxes through 2001. In addition,
the Company has alternative minimum tax credit carryforwards of approximately
$245,000 which are available to reduce future regular Federal income taxes over
an indefinite period. These carryforwards are the result of losses generated
by discontinued operations prior to 1987.
8. CASH FLOWS
Total cash payments for interest for the three months ended October 1, 1995
were $327,000 compared to $550,000 for the three months ended October 2, 1994.
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LaBARGE, INC.
FORM 10-Q
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATION AND
FINANCIAL CONDITION
LaBarge, Inc. engineers, manufactures, tests and sells sophisticated electronic
control systems and devices and complex interconnect assemblies under contract
with its customers. Markets for the Company's products are the defense
electronics, telecommunications, medical equipment, aerospace,
geophysical/energy and various other commercial/industrial markets. The
Company employs approximately 620 people.
On December 2, 1994, the Company completed the sale of the on-going business of
its operation in Flippin, Arkansas to Avnet, Inc. In the transaction, Avnet
purchased substantially all of the assets of the Flippin operation and the
related business for approximately $10,455,000 cash and assumed liabilities of
approximately $2,900,000. The proceeds from the sale were used to reduce debt.
The Company continues to operate its facilities in Huntsville and Berryville,
Arkansas; Tulsa, Oklahoma and Joplin, Missouri. The Company will continue,
through its remaining operations, to focus on design and manufacture of
high-tech electronic systems, devices and interconnect systems with special
emphasis on higher value-added products.
The Flippin facility manufactured cable assemblies for a variety of markets
including computer products and medical equipment. Revenues for the quarter
ended October 2, 1994 were approximately $4.7 million (27% of the Company
total).
The December, 1994 sale of the Flippin facility allowed the exchange and
redemption of 15% Subordinated Notes due in May, 1997. Both transactions were
part of a Company plan to strengthen its balance sheet. The Company believes
the stronger balance sheet will allow it much greater flexibility to invest in
growth opportunities at its other facilities.
Historically, due to the lead times required in the production of the Company's
defense and aerospace products, its backlog of firm, unshipped orders has
always been considered important. However, as the Company has decreased its
dependence on large defense contracts and increased the proportion of its sales
received from non-defense customers which have much shorter lead times and
demand just-in-time deliveries, the importance of backlog as a barometer of
future performance has decreased. The backlog at October 1, 1995 was
approximately $51.6 million compared to $52.1 million at July 2, 1995. The
backlog at October 1, 1995 for the products described below consisted of
approximately $30.1 million of orders for various defense products, the
majority of which contain cancellation and termination provisions, and $21.5
million of orders for commercial products. Approximately $3.2 million of the
total backlog is not scheduled to ship within the next 12 months pursuant to
the shipment schedules contained in those contracts.
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Substantially all of the Company's contracts with the United States Government
and subcontracts with prime contractors of the United States Government are
firm fixed-price contracts. Under firm fixed-price contracts, work is
performed and paid for at a fixed amount without adjustment for the actual
costs experienced in connection with the contracts. Therefore, unless the
customer actually or constructively alters or impedes the work performed, all
risk of loss due to cost overruns is borne by the Company.
The Company continues to pursue defense-related business. During the first
quarter, the Company received additional orders on the AEGIS program totaling
$5.2 million. AEGIS is the most advanced shipboard anti-aircraft and
anti-missile system in the world. All work on this contract is being performed
in Huntsville, Arkansas.
Sales to Lockheed Martin represented approximately 34% of total Company sales
for the three months ended October 1, 1995.
The Company also serves the telecommunications, medical equipment, commercial
aerospace, geophysical and other commercial/industrial markets. The Company
has aggressively expanded its commercial business over the past several years
and intends to continue to do so. Non-defense business represented
approximately 36% of total Company sales for the quarter. The Company
manufactures products as diverse as an audio tape player used by the vision
impaired and data collection equipment used in energy production. As in the
defense market, all production is completed on a contract basis.
The Company has developed a portable medical laser under a contract from
Venisect, Inc. The laser is used to perforate the skin to draw small amounts
of blood for testing. Phase II FDA clinical trials are continuing and it is
hoped approval for commercial use will be received this fiscal year. The
impact on the Company's sales cannot yet be determined.
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LaBARGE, INC.
FORM 10-Q
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
RESULTS OF OPERATIONS
THREE MONTHS ENDED OCTOBER 1, 1995
COMPARED TO THREE MONTHS ENDED OCTOBER 2, 1994
Net sales for the three months ended October 1, 1995 were $13,361,000 compared
to $17,111,000 for the three months ended October 2, 1994. Excluding Flippin's
volume from 1994, the continuing business showed a sales gain of approximately
7.4% year-to-year for the three-month period.
Gross profit for the three months ended October 1, 1995 was $2,039,000, 15.3%
of sales, compared to $2,772,000, 16.2% of sales, for the three months ended
October 2, 1994. Due to lower planned sales volume caused by the sale of the
Flippin business and fixed costs involved in pursuing new business
opportunities, margins are down approximately 1.1% of sales year-to-year.
Selling and administrative expenses were $1,673,000, 12.5% of sales, for the
three months ended October 1, 1995, compared to $2,069,000, 12.1% of sales, for
the three months ended October 2, 1994.
Earnings from operations for the three months ended October 1, 1995 were
$365,000, 2.7% of sales, compared to $703,000, 4.1% of sales, for the three
months ended October 2, 1994.
Interest expense for the three months ended October 1, 1995 was $319,000,
compared to $548,000 for the three months ended October 2, 1994. Lower debt
levels continue to keep interest costs down.
Other income was $46,000 and $33,000 for the three months ended October 1, 1995
and October 2, 1994, respectively. This is primarily accretion of a discount
on a note receivable.
The Company continues to have significant tax loss carryforwards which, in
accordance with SFAS 109, results in $3.25 million of deferred tax assets, net
of the related valuation allowance as of July 2, 1995. Income tax expense for
the three months ended October 1, 1995 and October 2, 1994 was $5,500 and
$11,300, respectively.
Net earnings for the three months ended October 1, 1995 were $87,000 compared
to $177,000 for the three months ended October 2, 1994.
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Earnings per common share were $.01 for the three months ended October 1, 1995
compared to $.01 for the three months ended October 2, 1994.
FINANCIAL CONDITION & LIQUIDITY
Over the last year, the Company has taken important steps to improve its
financial condition.
On December 2, 1994, the Company completed the sale of its operations in
Flippin, Arkansas to Avnet, Inc. In the transaction, Avnet purchased the net
assets of the Flippin operation and the related business for $10,455,000 and
assumed liabilities of $2,900,000. The proceeds of the sale were used to
reduce debt. As of October 1, 1995, $9,955,000 of the purchase price has been
received and used to reduce debt.
At October 1, 1995, the Company had borrowings as follows: a term loan with an
initial balance of $3,500,000 payable over four years at an interest rate of
prime plus 1.5% and a revolving credit facility of up to $14,500,000 which
expires July 3, 1996, at prime plus 1.5% interest, both through Sanwa Business
Credit. As of October 1, 1995, $655,000 was outstanding on the term loan and
$5,500,000 was outstanding on the revolver. In addition, the Company now has
$3,386,000 of 12% Subordinated Notes due May 15, 1998, $894,000 in notes due
Chemical Bank at prime plus .5%, plus other debt totaling $352,000. Equity at
October 1, 1995 was $13,406,000 or $.88 per common share.
Primary sources of the cash generated in the first quarter 1996 are: net
income of $87,000 adjusted for non-cash depreciation and amortization of
$210,000, reduction of accounts receivable of $1,001,000 and an increase in
payables of $491,000. Cash has been used to increase inventories by $469,000,
and reduce accrued liabilities and other current liabilities by $487,000. This
cash was used to purchase additional equipment.
During the three months ended October 1, 1995, the Company increased borrowings
by $172,000.
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PART II
Exhibits Page
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3.1(f) Amendment to Certificate of Incorporation dated October 26, 1995, as filed with
the State of Delaware on October 27, 1995. 15
3.1(g) Certificate Eliminating Certificate of Designation of Class A and Class B Cumulative
Exchangeable Preferred Stock dated October 26, 1995, as filed with the State of Delaware
on October 27, 1995. 18
3.1(h) Certificate Eliminating Certificate of Designation of Class C Cumulative Convertible
Preferred Stock dated October 26, 1995, as filed with the State of Delaware on
October 27, 1995. 21
3.1(i) Restated Certificate of Incorporation dated October 26, 1995, as filed with the State of
Delaware on October 31, 1995. 24
3.2(a) The By-Laws of LaBarge, Inc., as amended through October 26, 1995. 30
27 Article 5 Financial Data Schedule. 41
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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.
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(Registrant)
Date 11/14/95
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William J. Maender
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William J. Maender
Vice President - Finance,
Treasurer and Secretary
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