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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 September 27, 1998 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 September 27, 1998. 15,386,979 common stock.
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LABARGE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(dollars in thousands except per share data)
Three Months Ended
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September 27, September 28,
1998 1997
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NET SALES $ 24,667 $ 21,492
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COSTS AND EXPENSES:
Cost of sales 19,289 16,805
Selling and administrative expense 3,411 2,981
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22,700 19,786
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EARNINGS FROM OPERATIONS 1,967 1,706
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Interest expense 309 130
Equity in loss of joint ventures 28 94
Minority interest income 147
Other (income) expense, net (152) (24)
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EARNINGS BEFORE INCOME TAXES 1,635 1,506
INCOME TAX EXPENSE 603 556
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NET EARNINGS $ 1,032 $ 950
======================================================================================
BASIC NET EARNINGS PER COMMON SHARE $ .07 $ .06
AVERAGE COMMON SHARES OUTSTANDING 15,455 15,658
======================================================================================
DILUTED NET EARNINGS PER COMMON SHARE $ .07 $ .06
AVERAGE COMMON SHARES OUTSTANDING 15,530 15,794
======================================================================================
See accompanying notes to consolidated financial statements.
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LABARGE, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(dollars in thousands)
SEPTEMBER 27, JUNE 28,
1998 1998
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ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 3,040 $ 540
Accounts and notes receivable, net 16,184 18,332
Inventories 19,048 18,968
Prepaid expenses 832 772
Deferred tax assets, net 1,587 2,087
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TOTAL CURRENT ASSETS 40,691 40,699
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PROPERTY, PLANT AND EQUIPMENT, NET 11,549 11,254
OTHER ASSETS, NET 10,656 7,039
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$ 62,896 $ 58,992
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings $ 750 $ 5,020
Current maturities of long-term debt 1,793 1,102
Trade accounts payable 6,787 6,034
Accrued employee compensation 4,407 4,710
Other accrued liabilities 2,216 2,321
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TOTAL CURRENT LIABILITIES 15,953 19,187
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LONG-TERM DEBT 16,788 10,163
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STOCKHOLDERS' EQUITY:
Common stock, $.01 par value. Authorized
40,000,000 shares; issued 15,658,280 shares
at September 27, 1998 and at June 28, 1998, including shares
in treasury 156 156
Additional paid-in capital 13,468 13,468
Retained earnings 17,515 16,683
Less cost of common stock in treasury, 271,301 shares at September 27, 1998
and 163,000 shares
at June 28, 1998 (984) (665)
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TOTAL STOCKHOLDERS' EQUITY 30,155 29,642
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$ 62,896 $ 58,992
=========================================================================================================
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
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SEPTEMBER 27, SEPTEMBER 28,
1998 1997
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 1,032 $ 950
Adjustments to reconcile net cash provided (used) by operating
activities:
Undistributed loss (earnings) in equity of joint venture 28 94
Minority interest in consolidated subsidiary 147 --
Depreciation and amortization 430 269
Deferred taxes 500 457
Changes in assets and liabilities, net of acquisition of majority
business interest:
Accounts and notes receivable, net 2,149 (795)
Inventories (80) (2,075)
Prepaid expenses (60) (724)
Trade accounts payable 753 1,093
Accrued liabilities (554) (843)
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NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 4,345 (1,574)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment (697) (453)
Additions to other assets (173) (1,035)
Payments for investments in other companies (1,801) --
Payments for interest in technology (1,700) --
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NET CASH USED BY INVESTING ACTIVITIES (4,371) (1,488)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Additions to long-term debt 7,336 --
Change in short-term borrowings (4,270) 2,030
Repayments of long-term debt (20) (264)
Sale (purchase) of common stock from (for) treasury (520) --
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NET CASH PROVIDED BY FINANCING ACTIVITIES 2,526 1,766
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NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 2,500 (1,296)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 540 1,467
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 3,040 $ 171
=============================================================================================================
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
The consolidated balance sheets at September 27, 1998 and June 28, 1998, the
related consolidated statements of operations for the three months ended
September 27, 1998 and September 28, 1997 and the consolidated statements of
cash flows for the three months ended September 27, 1998 and September 28, 1997
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. The Company
adopted SFAS No. 130, "Reporting Comprehensive Income" during the first quarter
of fiscal 1999. The adoption of SFAS No. 130 had no impact on the Company's
consolidated financial statements.
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 28, 1998.
2. ACCOUNTS AND NOTES RECEIVABLE
Accounts and notes receivable consist of the following:
(dollars in thousands)
SEPTEMBER 28, June 28,
1998 1998
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Billed shipments, net of progress payments $15,324 $17,556
Less allowance for doubtful accounts 150 150
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Trade receivables - net 15,174 17,406
Notes receivables 918 903
Other current receivables 92 23
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$16,184 $18,332
====================================================================================
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.
Effective June 2, 1998, LaBarge, Inc. and TransMedica International, Inc.
("TRANSMEDICA") reached revised agreements concerning our exclusive
manufacturing agreement and negotiated payments of then open accounts
receivables. The Company agreed to accept an interest-bearing note secured by
all of the assets of TRANSMEDICA, for the $900,000 then owed for prior work and
to extend future credit up to an additional $1.1 million under the same note for
future work performed. The value of this note at the balance sheet dates is
shown above.
Other current receivables are amounts due from employees for travel advances and
other miscellaneous sources.
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3. INVENTORIES
Inventories consist of the following:
(dollars in thousands)
SEPTEMBER 27, June 28,
1998 1998
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Raw materials $11,286 $10,353
Work in progress 9,361 9,070
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20,647 19,423
Less progress payments 1,599 455
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$19,048 $18,968
========================================================================================
In accordance with contractual agreements, the government has a security
interest in inventories related to contracts for which progress payments have
been received.
4. OTHER ASSETS
Other assets is summarized as follows:
(dollars in thousands)
SEPTEMBER 27, June 28,
1998 1998
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Cash value of life insurance $ 2,415 $ 2,229
Deposits, licenses, and other 1,859 1,879
Investments in businesses 4,523 2,750
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8,797 6,858
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Software 1,055 1,047
Goodwill 412 412
Investment in technology 1,700 --
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3,167 1,459
Less amortization 1,308 1,278
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$10,656 $7,039
=========================================================================================
In the first quarter of fiscal 1999, LaBarge and Global Research Systems, Inc.
of Rome, Georgia ("Global") formed NotiCom L.L.C. ("NotiCom"), a Georgia limited
liability company, to develop and market electronic systems providing advance
notice of the impending arrival of passenger motor vehicles. The first product
to be marketed by NotiCom will be BusCall(TM). BusCall notifies parents by
phone when their children's school bus is approaching their bus stop. It will be
marketed to telephone companies which can offer BusCall as a value-added
service, such as call waiting and call forwarding. LaBarge is the exclusive
manufacturer of all products sold by NotiCom in the United States and Canada and
will recognize revenues as it sells products to NotiCom. Each of LaBarge and
Global has a 50% interest in NotiCom, except that after an aggregate of $1.0
million has been distributed by NotiCom, Global will be entitled to 75% of
subsequent distributions until it has received preferred distributions
aggregating $1.3 million. LaBarge has invested $1.8 million in NotiCom and has
committed to contribute $500,000 of development services. In addition, LaBarge
has paid Global $1.7 million for a 50% interest in the intellectual property and
has licensed the technology to NotiCom. The Company has committed to pay Global
up to an aggregate of $23.3 million of additional purchase
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price for its 50% interest in the technology if NotiCom meets or exceeds
cumulative earnings before income tax ("EBT") targets for the period from July
1, 1998 through December 1, 1999 and through each six-month period thereafter
through December 31, 2001. In order to generate the maximum purchase price,
NotiCom must generate $211.8 million of EBT between July 1, 1998 and December
31, 2001. Because NotiCom is a start-up venture, it is too early to predict if
or to what extent NotiCom may contribute to the Company's revenues or earnings;
therefore, the Company has not recorded the contingent purchase price. The
investment is accounted for using the equity method. For the three months ended
September 27, 1998, LaBarge's share of the losses from the joint venture were
$28,000.
In the second quarter of fiscal 1998, the Company increased its ownership of
LaBarge Clayco Wireless L.L.C. to 51%. Beginning with the second quarter fiscal
1998, LaBarge, Inc. began consolidating 100% of the results of this unit into
its financial statements and deducting the minority interest share before
arriving at pretax profits. The investment was previously recorded using the
equity method.
During fiscal 1998, the Company made a $500,000 investment equating to an
ownership position of approximately 10% in Open Cellular Systems, Inc. of St.
Louis. Open Cellular Systems uses shared access communication networks to
provide wireless communication solutions to the general industrial and utility
markets. The capabilities of Open Cellular complement LaBarge's and management
believes this alliance may provide future opportunities for the Company. The
Company accounts for this investment at cost.
During fiscal 1998, the Company invested an additional $2.0 million in
TRANSMEDICA. Payment for this investment included an exchange of approximately
$1.2 million of current accounts receivable and $800,000 cash. With this
investment, the Company has an investment in TRANSMEDICA of $2.3 million which
is carried on a cost basis and owns approximately 9.5% of its common stock. Also
during this period, LaBarge finalized revised agreements with TRANSMEDICA
concerning our exclusive manufacturing agreement and negotiated payment terms
for open receivables and for future payments for Laser Lancet(R) units.
5. SUBSEQUENT EVENT
On October 16, 1998, LaBarge filed a Petition for Specific Performance and
Declaratory Judgment in the Circuit Court for St. Louis County, Missouri,
seeking resolution of a dispute regarding LaBarge's rights to develop and
manufacture new laser products and determination of the number of Laser Lancet
devices TRANSMEDICA is presently obligated to purchase from LaBarge. The result
of this suit and its effect on LaBarge's valuation of its investment in, or
future sales to, TRANSMEDICA cannot yet be determined.
In October 1998, the Company purchased from Clayco Construction Company an
additional 39% of LaBarge Clayco Wireless L.L.C. for $300,000 to increase its
ownership to 90%. The Company continues to consolidate 100% of the results of
this unit into its financial statements and deducts the minority interest share
before arriving at pretax profits. The investment was previously reported on the
equity method.
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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)
September 27, June 28,
1998 1998
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Short-term borrowings:
Revolving credit agreements:
Balance at period end $ 750 $ 5,020
Interest rate at period end 8.75% 6.80%
Average amount of short-term borrowings outstanding during period $ 4,699 $ 4,751
Average interest rate for period 6.68% 6.94%
Maximum short-term borrowings at any month end $ 5,640 $ 9,250
==================================================================================================
Long-term debt:
Senior lender:
Revolving credit agreement -- 2,000
Term loan 11,000 3,000
Mortgage loan 6,145 6,164
Other 1,436 101
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18,581 11,265
Less current maturities 1,793 1,102
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Total long-term debt, less current maturities $16,788 $10,163
==================================================================================================
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 amended its lending agreement with NationsBank, N.A. on September
25, 1998. The amended agreement provides a seven-year, unsecured lending
agreement including an $11.0 million term loan payable in quarterly installments
of $393,000 which will begin December 31, 1998 and a $15.0 million working
capital revolver. The interest rate on both loans is variable based on the 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.
Through various performance criterion, this rate can be lowered to 150 basis
points below prime, or at the Company's option, 75 basis points over LIBOR. At
September 27, 1998, the Company was at the lowest rate possible under the
agreement, which currently ranges from 6.8% to 7.1%.
In September 1998, the Company successfully completed a ten-year term Industrial
Revenue Bond financing in the amount of $1.4 million to finance an expansion of
its Berryville, Arkansas facility.
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7. INCOME TAXES
As of June 28, 1998, the Company had alternative minimum tax credit
carryforwards and investment tax credits of approximately $712,000 available to
reduce future regular federal income taxes.
8. CASH FLOWS
Total cash payments for interest for the three months ended September 27, 1998
were $351,000 compared with $93,000 for the three months ended September 28,
1997.
9. EARNINGS PER COMMON SHARE
Earnings per share are computed as follows:
SEPTEMBER 27, September 28,
1998 1997
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NUMERATOR:
Net earnings $ 1,032 $ 950
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DENOMINATOR:
Denominator for basic net earnings per share- weighted-average
shares 15,455 15,658
Effect of dilutive securities-employee stock options 75 136
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POTENTIAL COMMON SHARES:
Denominator for diluted net earnings per shares- adjusted
weighted-average shares and assumed conversions
15,530 15,794
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BASIC NET EARNINGS PER COMMON SHARE $ .07 $ .06
===================================================================================================
DILUTED NET EARNINGS PER COMMON SHARE $ .07 $ .06
===================================================================================================
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LABARGE, INC.
FORM 10-Q
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
Statements contained herein which are not historical facts are forward-looking
statements that involve risks and uncertainties. Future events and the Company's
actual results could differ materially from those contemplated by those
forward-looking statements. 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 Form 10-K for the
fiscal year ended June 28, 1998, which is on file with the Securities and
Exchange Commission and available to stockholders from the Company.
LaBarge, Inc. designs, engineers and manufactures sophisticated electronic
assemblies and complex interconnect systems on a custom basis for its customers.
As such, the Company relies heavily on establishing new and maintaining existing
relationships with its customers. The customers are primarily in the commercial
aerospace, defense, geophysical, medical and wireless telecommunications
markets. The Company employs approximately 850 people.
The Company's backlog of firm, unshipped orders at September 27, 1998 was
approximately $52.6 million compared to $64.9 million at September 28, 1997. The
backlog at September 27, 1998 consisted of approximately $31.5 million for
various defense customers and approximately $21.1 million for commercial
electronics customers, compared with $45.1 million for defense and $19.8 million
for commercial for the quarter ended September 28, 1997. Approximately $14.4
million of the total backlog is not scheduled to ship within the next 12 months
pursuant to the shipment schedules outlined by our customers.
For the three months ended September 27, 1998, approximately 50.0% of the
Company's sales were to customers in commercial markets, including
telecommunications (17.8%), geophysical (16.3%), aerospace (11.8%) and other
(4.1%). Two customers account for in excess of 10% each of total sales for the
three months: Schlumberger in the geophysical market at 12.6% of total sales;
and Lockheed Martin in the aerospace and defense markets at 28.6% of total
sales.
The Company has designed and developed the Laser Lancet(R), a small medical
laser, for TransMedica International, Inc., ("TRANSMEDICA") under a licensing
agreement from TRANSMEDICA. TRANSMEDICA retains responsibility for sales and
marketing of the Laser Lancet.
Early in fiscal 1998, the Company invested $2.0 million in the common stock of
TRANSMEDICA. Payment for this investment included an exchange for approximately
$1.2 million of accounts receivable and $800,000 cash. The Company has invested
a total of $2.3 million in TRANSMEDICA, which is carried at cost, and owns
approximately 9.5% of TRANSMEDICA's common stock.
Effective June 2, 1998, LaBarge and TRANSMEDICA reached revised agreements
concerning LaBarge's exclusive manufacturing rights, and negotiated payment
terms for open receivables and for future payments for Laser Lancet units.
With the agreement, LaBarge became the exclusive manufacturer for all of North
and South Americas and Europe. Secondly, the Company agreed to accept an
interest-bearing note, secured by all the assets of TRANSMEDICA, for the
$900,000 then owed for prior work, and for up to $1.1 million in funding for new
production of Laser Lancets. As part of the agreement, LaBarge received
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warrants to purchase an additional 4% of TRANSMEDICA's common stock for $25 per
share.
As a result of certain disputes that have arisen between the Company and
TRANSMEDICA, on October 16, 1998, LaBarge filed a Petition for Specific
Performance and Declaratory Judgment in the Circuit Court for St. Louis County,
Missouri, seeking resolution of LaBarge's rights to develop and manufacture new
laser products and determination of the number of Laser Lancet devices
TRANSMEDICA is presently obligated to purchase from LaBarge. It is too early to
determine what, if any, effect this suit will have on either the value of
LaBarge's investment in TRANSMEDICA (which is accounted for at cost), or on its
future revenues from TRANSMEDICA.
In the first quarter of fiscal 1999, LaBarge and Global Research Systems, Inc.
of Rome, Georgia ("Global") formed NotiCom L.L.C. ("NotiCom"), a Georgia limited
liability company, to develop and market electronic systems providing advance
notice of the impending arrival of passenger motor vehicles. The first product
to be marketed by NotiCom will be BusCall(TM). BusCall notifies parents by
phone when a their children's school bus is approaching their bus stop. It will
be marketed to telephone companies which can offer BusCall as a value-added
service, such as call waiting and call forwarding. LaBarge is the exclusive
manufacturer of all products sold by NotiCom in the United States and Canada and
will recognize revenues as it sells products to NotiCom. Each of LaBarge and
Global has a 50% interest in NotiCom, except that after an aggregate of $1.0
million has been distributed by NotiCom, Global will be entitled to 75% of
subsequent distributions until it has received preferred distributions
aggregating $1.3 million. LaBarge has invested $1.8 million in NotiCom and has
committed to contribute $500,000 of development services. In addition, LaBarge
has paid Global $1.7 million for a 50% interest in the intellectual property and
has licensed the technology to NotiCom. The Company has committed to pay Global
up to an aggregate of $23.3 million of additional purchase price for its 50%
interest in the technology if NotiCom meets or exceeds cumulative earnings
before income tax ("EBT") targets for the period from July 1, 1998 through
December 1, 1999 and through each six-month period thereafter through December
31, 2001. In order to generate the maximum purchase price, NotiCom must generate
$211.8 million of EBT between July 1, 1998 and December 31, 2001. Because
NotiCom is a start-up venture, it is too early to predict if or to what extent
NotiCom may contribute to the Company's revenues or earnings; therefore, the
Company has not recorded the contingent purchase price.
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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 SEPTEMBER 27, 1998
COMPARED TO THREE MONTHS ENDED SEPTEMBER 28, 1997
Net sales for the three months ended September 27, 1998 were $24.7 million
compared to $21.5 million for the three months ended September 28, 1997, an
increase of $3.2 million or 14.9%. This increase was due to inclusion of LaBarge
Clayco Wireless sales of $3.6 million for the three months ended September 27,
1998. LaBarge Clayco Wireless L.L.C. was not consolidated until the second
quarter of fiscal 1998.
Gross profit for the three months ended September 27, 1998 was $5.4 million,
21.8% of sales, compared to $4.7 million, 21.8% of sales, for the three months
ended September 28, 1997.
Selling and administrative expenses for the three months ended September 27,
1998 were $3.4 million or 13.8% of sales, compared to $3.0 million or 13.9% of
sales for the three months ended September 28, 1997.
Interest expense for the three months ended September 27, 1998 was $309,000
compared to $130,000 for the three months ended September 28, 1997. Interest
expense has increased due to an increase in debt incurred in connection with:
the purchase of the Company's headquarters in St. Louis, Missouri for $6.2
million in January 1998; the investment in NotiCom L.L.C. and technology related
thereto, totaling $3.5 million in July 1998; and, the financing of the expansion
of our Berryville, Arkansas facility for $1.4 million in September 1998.
Equity in loss of joint venture for the three months ended September 27, 1998
was $28,000 compared to $94,000 for the three months ended September 28, 1997.
These amounts represent the Company's share of losses (gains) incurred by
NotiCom L.L.C. for the period ending September 27, 1998 and LaBarge Clayco
Wireless L.L.C. for the period ending September 28, 1997. In the second quarter
of fiscal 1998, the Company increased its ownership of LaBarge Clayco Wireless
L.L.C. to 51%. Beginning with the second quarter, LaBarge, Inc. began
consolidating 100% of the results of this unit into its financial statements and
deducting the minority interest before arriving at pretax profits. The minority
interest profit for the three months ended September 27, 1998 was $147,000.
Other income for the three months ended September 27, 1998, was $152,000
compared to $24,000 for the three months ended September 28, 1997. This increase
is the result of the purchase of our corporate headquarters in St. Louis,
Missouri and the revenues and expenses resulting from the leasing of space in
that building to third parties.
Income tax expense for the three months ended September 27, 1998 was $603,000
compared to $556,000 for the three months ended September 28, 1997, an increase
of $47,000. The effective tax rate for both quarters was 37%.
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Diluted earnings per common share were $.07 for the three months ended September
27, 1998, and $.06 for the three months ended September 28, 1997.
FINANCIAL CONDITION & LIQUIDITY
Cash and cash equivalents at September 27, 1998 were $3.0 million compared with
$540,000 at June 28, 1998.
Accounts receivable at September 27, 1998, were $16.2 million compared with
$18.3 million at June 28, 1998; a decrease of $2.1 million.
Inventories at September 27, 1998 and June 28, 1998 were $19.0 million and $19.0
million, respectively.
Also during the three months ended September 27, 1998, the Company purchased
$697,000 in property, plant and equipment. For the quarter ended September 28,
1997, $453,000 was purchased.
During the first three months of the current fiscal year, the Company invested
$3.5 million in NotiCom L.L.C., a joint venture between the Company and Global
Research Systems, Inc.
In September 1998, the Company amended its lending agreement with NationsBank,
N.A., extending the term of the agreement, converting its short-term debt of
$4.3 million to long-term and adding additional long-term debt of $1.8 million.
In addition, long-term debt of $1.4 million was added via an Industrial Revenue
Bond to expand the Berryville plant.
YEAR 2000
THE COMPANY'S STATE OF READINESS:
We are currently reviewing our exposure to Year 2000 computer-related risks. We
are reviewing all internal systems, as well as those of suppliers and customers,
to evaluate any potential impact on January 1, 2000 and beyond.
COST:
The total historical or anticipated cost for Year 2000 remediation activity are
not material. The cost of this effort thus far has been immaterial and has been
included in operating expenses.
RISKS AND CONTINGENCY PLANS:
To date, we believe that all internal systems will be compliant or at least have
no material adverse effect on our ability to operate on or after January 1,
2000. No major program revisions have been identified which would result in
significant cost in future periods. Third parties having a material relationship
with the Company may be a potential risk based on their individual Year 2000
preparedness which may not be within the Company's reasonable control. The
Company is in the process of identifying, reviewing, and logging the Year 2000
preparedness of critical third parties. Pending the results of that review, the
Company will then determine what course of action and contingencies will need to
be made.
We anticipate, but cannot be assured, that should a problem arise, we will be
able to take necessary steps to minimize the impact with minimal or no material
effect on the results of the Company or its customers.
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PART II
Item 6. Exhibits and Report on Form 8-K
a. Exhibit 10.10 Amended Loan Agreement between Page 17
NationsBank, N.A. and LaBarge, 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.
--------------------------------
Date November 9, 1998
----------------
/s/ William J. Maender
-------------------------------
William J. Maender
Vice President - Finance,
Treasurer and Secretary
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