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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 March 30, 1997 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) 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 .
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Indicate the number of shares outstanding of each of the Issuer's classes of
common stock as of March 30, 1997. 15,638,280 common stock.
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LABARGE, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
(dollars in thousands except per share data)
THREE MONTHS ENDED NINE MONTHS ENDED
MARCH 30, March 31, MARCH 30, March 31,
1997 1996 1997 1996
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NET SALES $ 25,230 $ 21,423 $ 71,256 $ 49,695
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COSTS AND EXPENSES:
Cost of sales 20,456 17,382 56,710 41,188
Selling and administrative expense 2,796 2,414 8,724 5,885
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23,252 19,796 65,434 47,073
EARNINGS FROM OPERATIONS 1,978 1,627 5,822 2,622
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Interest expense 226 350 814 996
Equity in loss of joint venture (6) - (145) -
Other income, net 28 26 60 211
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EARNINGS BEFORE INCOME TAXES 1,774 1,303 4,923 1,837
INCOME TAX EXPENSE 98 85 300 118
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NET EARNINGS $ 1,676 $ 1,218 $ 4,623 $ 1,719
====================================================================================================================================
NET EARNINGS PER COMMON SHARE $ .11 $ .08 $ .30 $ .11
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AVERAGE COMMON SHARES OUTSTANDING 15,628 15,302 15,618 15,281
====================================================================================================================================
See accompanying notes to consolidated financial statements.
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LABARGE, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(dollars in thousands except per share data)
MARCH 30, June 30,
1997 1996
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CURRENT ASSETS:
Cash and cash equivalents $ 1,110 $ 935
Accounts and notes receivable, net 13,802 13,455
Inventories 17,604 17,577
Prepaid expenses 332 286
Deferred tax assets, net 1,013 1,013
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TOTAL CURRENT ASSETS 33,861 33,266
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PROPERTY, PLANT AND EQUIPMENT, NET 3,979 3,194
DEFERRED TAX ASSETS, NET 2,237 2,237
INVESTMENT IN JOINT VENTURE 12 157
OTHER ASSETS, NET 3,020 2,696
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$ 43,109 $ 41,550
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings $ 500 $ 400
Current maturities of long-term debt 1,006 633
Trade accounts payable 5,578 7,614
Accrued liabilities 5,995 4,729
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TOTAL CURRENT LIABILITIES 13,079 13,376
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Long-term debt 7,628 10,419
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STOCKHOLDERS' EQUITY:
Common stock, $.01 par value. Authorized 20,000,000 shares;
issued 15,638,280 shares at March 30, 1997
and 15,601,891 shares at June 30, 1996 156 156
Additional paid-in capital 13,571 13,527
Retained earnings 8,675 4,073
Less stock in treasury; -0- shares at March 30, 1997 and
187 shares at June 30, 1996 - (1)
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TOTAL STOCKHOLDERS' EQUITY 22,402 17,755
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$ 43,109 $ 41,550
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See accompanying notes to consolidated financial statements.
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LABARGE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(dollars in thousands)
NINE MONTHS ENDED
MARCH 30, March 31,
1997 1996
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 4,623 $ 1,719
Adjustments to reconcile net cash provided (used)
by operating activities:
Undistributed loss in equity of joint venture 145 -
Depreciation and amortization 751 697
Other - (15)
Changes in assets and liabilities:
Accounts and notes receivable, net (347) (4,749)
Inventories (27) (2,972)
Prepaid expenses (46) (108)
Trade accounts payable (2,036) 3,566
Accrued liabilities 1,266 1,064
Current liabilities of discontinued operations, net - (275)
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NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 4,329 (1,073)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment (1,401) (985)
Additions to other assets (458) (317)
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NET CASH USED BY INVESTING ACTIVITIES (1,859) (681)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of long-term debt (2,418) (3,839)
Exercise of stock warrants and options 22 18
Sale of common stock from treasury 1 -
Net change in short-term borrowings 100 6,500
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NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES (2,295) 2,679
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NET INCREASE IN CASH AND CASH EQUIVALENTS 175 304
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 935 143
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,110 $ 447
====================================================================================================================================
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 PREPARATION
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The consolidated balance sheets at March 30, 1997 and June 30, 1996, the
related consolidated statements of operations for the three and nine months
ended March 30, 1997 and March 31, 1996 and the consolidated statements of cash
flows for the nine months ended March 30, 1997 and March 31, 1996 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 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 June 30, 1996.
2. ACCOUNTS AND NOTES RECEIVABLE
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Accounts and notes receivable consist of the following:
(dollars in thousands)
MARCH 30, June 30,
1997 1996
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Billed shipments, net of progress payments $ 13,280 $ 12,860
Less allowance for doubtful accounts 160 187
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Trade receivables - net 13,120 12,673
Current portion of notes receivable 600 600
Other current receivables 82 182
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$ 13,802 $ 13,455
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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 former officer of the Company totaling
$600,000.
Other current receivables represent amounts due from employees for travel
advances and other miscellaneous sources.
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3. INVENTORIES
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Inventories consist of the following:
(dollars in thousands)
MARCH 30, June 30,
1997 1996
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Raw materials $ 13,250 $ 14,042
Work in process 4,354 4,779
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17,604 18,821
Less progress payments - 1,244
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$ 17,604 $ 17,577
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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. SHORT AND LONG-TERM OBLIGATIONS
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Short-term borrowings, long-term debt and the current maturities of long-term
debt consist of the following: (dollars in thousands)
MARCH 30, June 30,
1997 1996
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SHORT-TERM BORROWINGS:
Revolving credit agreement:
Balance at period-end $ 500 $ 400
Interest rate at period-end 6.85% 8.25%
Average amount of short-term borrowings
outstanding during period $ 1,913 $ 5,823
Average interest rate for period 7.58% 10.07%
Maximum short-term borrowings
at any month-end $ 3,060 $ 9,800
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Total short-term borrowings $ 500 $ 400
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4. SHORT AND LONG-TERM OBLIGATIONS (continued)
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MARCH 30, June 30,
1997 1996
LONG-TERM DEBT:
Senior lender:
Revolving credit agreement $ 4,500 $ 4,500
Term loan 4,000 3,000
12% Subordinated Notes - 3,386
Industrial revenue bond due semiannually
through 2001, interest at 5% 110 134
Other 24 32
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8,634 11,052
Less current maturities 1,006 633
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Total long-term debt, less current maturities $ 7,628 $ 10,419
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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.
On February 28, 1997, the Company redeemed all $3.4 million of outstanding 12%
Subordinated Notes, which were due in May 1998.
On March 20, 1997, the Company entered into an amended credit agreement with
NationsBank (formerly Boatmen's National Bank), its senior lender. The revised
four-year unsecured lending agreement provides a $4.0 million term loan payable
in quarterly installments of $250,000 beginning June 30, 1997 and a $17.0
million working capital revolver. The interest rate on both loans is variable
based on a ratio of senior debt to earnings and is available as either a
premium over LIBOR or a discount from prime rate at the Company's option.
5. EARNINGS PER COMMON SHARE
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In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 128 (SFAS No. 128) "Earnings
Per Share" (EPS). SFAS No. 128 establishes standards for computing and
presenting earnings per share. It also requires dual presentation of basic and
diluted EPS on the face of the income statement for all entities with complex
capital structures and requires a reconciliation of the numerator and
denominator of the basic EPS computation to the numerator and denominator of
the diluted EPS computation. SFAS No. 128 is effective for financial
statements for both interim and annual periods ending after December 15, 1997,
and early application is not permitted. The Company believes the adoption of
this accounting standard will not have a material impact on earnings per share.
Earnings per common share is based on the weighted average number of shares
outstanding during the period, i.e., quarter or year to date. Also outstanding
are the following common stock options: 155,000 shares currently exercisable at
$.66 to $1.44 and 161,775 shares with exercise
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prices ranging from $1.42 to $7.24 which are not exercisable at this time.
The earliest exercise date of the non-exercisable options is April 11, 1997.
Due to the insignificant percentage of options outstanding to the total number
of common shares outstanding, the options are not considered dilutive common
stock equivalents for the purposes of the earnings per share calculation.
During the nine months ended March 30, 1997, options to purchase 40,000 shares
were exercised at prices ranging from $1.125 to $1.3125 per share.
6. INCOME TAXES
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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
March 30, 1997, the net value of this benefit was $3.2 million and is reported
as $1.0 million in current assets and $2.2 million in other assets.
The net operating loss carryforwards as of June 30, 1996, for Federal Income
Tax purposes, were $16.6 million, 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 $200,000 which
are available to reduce future Federal income taxes through 2001. In addition,
the Company has alternative minimum tax credit carryforwards of approximately
$300,000 which are available to reduce future regular Federal income taxes over
an indefinite period.
7. CASH FLOWS
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Total cash payments for interest for the three and nine months ended March 30,
1997 were $133,000 and $609,000 compared to $345,000 and $980,000,
respectively, for the three and nine months ended March 31, 1996.
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LABARGE, INC.
FORM 10-Q
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
Statements contained in this Report which are not historical facts are forward
looking statements within the meaning of Section 27A of the Securities Act of
1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended, which are intended to be covered by the safe harbors created thereby.
For a summary of important factors which could cause the Company's actual
results to differ materially from those projected in, or inferred by, the
forward looking statements, see the Company's Annual Report on Form 10-K for
the fiscal year ended June 30, 1996, which is on file with the Securities and
Exchange Commission and available to stockholders from the Company.
LaBarge, Inc. designs, engineers, manufactures, tests and sells sophisticated
custom electronic products and systems and complex interconnect assemblies.
Primary markets the Company has chosen to pursue for its products include
telecommunications, geophysical, medical, aerospace and defense. The Company
employs approximately 800 people.
In May 1996, the Company, through its wholly-owned subsidiary LaBarge Wireless
Inc., entered into a fifty-fifty joint venture with Clayco Construction Company
of St. Louis, Missouri. The new company, LaBarge Clayco Wireless L.L.C.,
provides cell site engineering, project management, construction, equipment
installation and testing services to the rapidly growing wireless
telecommunications industry. LaBarge Clayco Wireless complements LaBarge's
capability in the design, manufacture and sale of electronic equipment for this
segment of the telecommunications market. LaBarge, Inc. accounts for its fifty
percent investment in LaBarge Clayco Wireless L.L.C. under the equity method of
accounting.
In May 1996, the Company, through its wholly-owned subsidiary LaBarge/STC,
Inc., purchased the assets of SOREP Technology Corporation in Houston, Texas
for approximately $2.7 million and assumed $400,000 of liabilities.
LaBarge/STC, Inc. is engaged in the engineering and manufacture of custom
hybrid circuits and high-temperature electronic assemblies used in oil and gas
exploration, drilling and production. The acquisition furthers the Company's
efforts to expand its geophysical business. The results of this subsidiary
are included in the consolidated results of the Company for the three and nine
months ended March 30, 1997 only.
The Company's backlog of firm, unshipped orders at March 30, 1997 was
approximately $62.3 million compared to $58.5 million at March 31, 1996. The
backlog at March 30, 1997 consisted of approximately $39.0 million for various
defense products, and approximately $23.1 million for commercial products.
Approximately $11.6 million of the
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total backlog is not scheduled to ship within the next 12 months pursuant to
the shipment schedules contained in those contracts.
For the nine months ended March 30, 1997, approximately 45% of the Company's
sales were defense related while 55% were commercial. Commercial markets
included telecommunications (19%), geophysical (22%), aerospace (7%) and other
(7%). Several customers account for a significant percentage of sales for the
nine months: One in the aerospace/defense market accounts for 24% of total
sales; one in the geophysical market accounts for 15% of total sales; and one
in the telecommunications market accounts for 14% of total sales.
The Company has designed and developed the Laser Lancet(TM), a small medical
laser, for Venisect, Inc. under a technology licensing agreement from Venisect.
On April 16, 1997, Venisect and the Company announced it had received clearance
from the U.S. Food and Drug Administration (FDA) to market the device for the
purpose of perforating the skin to collect capillary blood for clinical
testing. With FDA clearance the Company will begin to manufacture the Laser
Lancet(TM) for distribution by Venisect.
It is too early to project annual sales for the Laser Lancet(TM) or
predict how it will contribute to LaBarge's revenues and earnings.
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LABARGE, INC.
FORM 10-Q
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
RESULTS OF OPERATIONS
NINE MONTHS ENDED MARCH 30, 1997
COMPARED TO NINE MONTHS ENDED MARCH 31, 1996
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Net sales for the nine months ended March 30, 1997 were $71.3 million compared
to $49.7 million for the nine months ended March 31, 1996, an increase of $21.6
million or 43%. This increase is primarily attributable to sales growth in the
telecommunications and geophysical markets, including sales of LaBarge/STC,
Inc.
Gross profit for the nine months ended March 30, 1997 was $14.5 million, 20.4%
of sales, compared to $8.5 million, 17.1% of sales, for the nine months ended
March 31, 1996, an increase of $6 million or 70%. The increase in gross margin
is attributable to higher sales volume in relation to fixed costs and a more
profitable product mix.
Selling and administrative expenses for the nine months ended March 30, 1997
were $8.7 million or 12.2% of sales, compared to $5.9 million or 11.8% of sales
for the nine months ended March 31, 1996. The increase in expense is due to
additional personnel hired to support growing customer application needs at the
higher sales volume and due to the acquisition of SOREP Technology Corporation
in May 1996.
Earnings from operations were $5.8 million or 8.2% of sales, for the nine
months ended March 30, 1997, compared to $2.6 million or 5.3% of sales, for the
nine months ended March 31, 1996.
Interest expense for the nine months ended March 30, 1997 was $814,000 compared
to $996,000 for the nine months ended March 31, 1996. Lower debt levels,
redemption of the 12% Subordinated Notes and reduced interest rates under the
new loan agreement continue to result in lower interest costs.
Equity in loss of joint venture of $145,000 represents the Company's share of
the loss incurred by LaBarge Clayco Wireless L.L.C. for the nine months ended
March 30, 1997.
The Company has significant net operating loss carryforwards which offset most
of its income tax liability. Income tax expense for the nine months ended
March 30, 1997 and March 31, 1996, respectively, was $300,000 and $118,000.
Net earnings for the nine months ended March 30, 1997 were $4.6 million
compared to $1.7 million for the nine months ended March 31, 1996, an increase
of $2.9 million or
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170%. Earnings per common share were $.30 for the nine months ended March 30,
1997 and $.11 for the nine months ended March 31, 1996.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 30, 1997
COMPARED TO THREE MONTHS ENDED MARCH 31, 1996
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Net sales for the three months ended March 30, 1997 were $25.2 million compared
to $21.4 million for the three months ended March 31, 1996. This is an 18%
increase and is largely attributable to higher shipments in the
telecommunications and geophysical markets over the prior year's quarter.
Over the last five quarters, a significant portion of the Company's
telecommunications market sales have been to one customer. Sales to that
customer declined in the third quarter and are now expected to decline further
over the next few quarters due to: slower PCS infrastructure build out and a
decision to redesign the product to better meet the needs of the market. It is
expected that sales to other telecommunications customers and other markets
should offset this decline.
Gross profit for the three months ended March 30, 1997 was $4.8 million or
18.9% of sales, compared to $4.0 million or 18.9% of sales, for the three
months ended March 31, 1996. The higher volume of sales in relation to fixed
costs is the primary reason for the increased profit dollars.
Selling and administrative expenses were $2.8 million or 11.1% of sales, for
the three months ended March 30, 1997, compared to $2.4 million or 11.3% of
sales, for the three months ended March 31, 1996. Selling and administrative
expenses have increased due to additional personnel to support growth and the
acquisition of SOREP Technology Corporation.
Earnings from operations for the three months ended March 30, 1997 were $2.0
million or 7.8% of sales, compared to $1.6 million or 7.6% of sales, for the
three months ended March 31, 1996.
Interest expense for the three months ended March 30, 1997 was $226,000
compared to $350,000 for the three months ended March 31, 1996.
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 June 30, 1996. Income tax expense for
the three months ended March 30, 1997 and March 31, 1996 was $98,000 and
$85,000, respectively.
Net earnings for the three months ended March 30, 1997 were $1.7 million,
compared to $1.2 million for the three months ended March 31, 1996, an increase
of $500,000 or 42%.
Earnings per common share were $.11 for the three months ended March 30, 1997,
compared to $.08 for the three months ended March 31, 1996.
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FINANCIAL CONDITION & LIQUIDITY
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On February 28, 1997, the Company redeemed all $3.4 million of 12% Subordinated
Notes, which were due in May 1998.
On March 20, 1997, the Company entered into a revised and amended four-year
unsecured lending agreement providing for a $4.0 million term loan and a $17.0
million revolving credit facility. The term loan requires quarterly payments
of principal of $250,000 beginning June 30, 1997. This loan agreement provides
sufficient working capital to support planned business growth.
For the nine months ended March 30, 1997, the Company generated cash from its
operations totaling $4.3 million. Cash was generated through net earnings and
was used to reduce accounts payable by $2.0 million and pay down debt by $2.3
million.
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PART II
Amendment to
Loan Agreement between
NationsBank (formerly Boatmen's)
and
LaBarge, Inc.,
LaBarge/STC, Inc. and
LaBarge Wireless, Inc.
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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 5/14/97
William J. Maender
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William J. Maender
Vice President - Finance,
Treasurer and Secretary
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