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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 31, 1996 Commission file number: 1-5761
LaBarge, Inc.
(Exact name of registrant as specified in its charter)
DELAWARE 73-0574586
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P.O. Box 14499, St. Louis, Missouri 63178
(Address) (Zip Code)
(314) 231-5960
(Registrant's telephone number, including Area Code)
(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 April 30, 1996. 15,301,891 shares of common stock.
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LaBARGE, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands except per share data)
THREE MONTHS ENDED NINE MONTHS ENDED
MARCH 31, April 2, MARCH 31, April 2,
1996 1995 1996 1995
---------- ----------- --------- ----------
NET SALES $ 21,423 $ 14,770 $ 49,695 $ 48,087
---------- ----------- --------- ----------
COSTS AND EXPENSES:
Cost of sales 17,382 12,307 41,188 39,970
Selling and administrative expense 2,414 1,891 5,885 6,014
---------- ----------- ---------- ----------
19,796 14,198 47,073 45,984
EARNINGS FROM OPERATIONS 1,627 572 2,622 2,103
---------- ----------- ---------- ----------
Interest expense 351 334 996 1,392
Other income, net 27 37 211 247
---------- ----------- ---------- ----------
EARNINGS BEFORE INCOME TAXES 1,303 275 1,837 958
Income tax expense 85 16 118 57
---------- ----------- ---------- ----------
NET EARNINGS $ 1,218 $ 259 $ 1,719 $ 901
========== =========== ========== ==========
NET EARNINGS PER COMMON SHARE $.08 $.02 $.11 $.06
========== =========== ========== ==========
AVERAGE COMMON SHARES OUTSTANDING 15,302 15,227 15,281 15,220
========== =========== ========== ==========
See accompanying notes to financial statements.
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LABARGE, INC.
BALANCE SHEET
(Unaudited)
(dollars in thousands except per share data)
MARCH 31, July 2,
1996 1995
----------- -----------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 447 $ 143
Accounts and notes receivable, net 13,916 9,017
Inventories 17,105 14,133
Prepaid expenses 402 293
Deferred tax assets, net 758 758
--------- ---------
TOTAL CURRENT ASSETS 32,628 24,344
--------- ---------
MARKETABLE SECURITIES, AT COST 250 -
PROPERTY, PLANT AND EQUIPMENT, NET 3,086 2,676
DEFERRED TAX ASSETS, NET 2,492 2,492
OTHER ASSETS, NET 1,911 2,096
--------- ---------
$ 40,367 $ 31,608
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings $ 9,000 $ 2,500
Current maturities of long-term debt 778 1,670
Trade accounts payable 8,579 5,013
Accrued liabilities 3,455 2,392
Current liabilities from discontinued operations - 269
--------- ---------
TOTAL CURRENT LIABILITIES 21,812 11,844
--------- ---------
LONG-TERM OBLIGATIONS:
Long-term debt 3,521 6,467
--------- ---------
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value. Authorized 20,000,000 shares;
issued 15,301,891 shares at March 31, 1996
and 15,227,316 shares at July 2, 1995 153 152
Additional paid-in capital 12,630 12,554
Retained earnings 2,251 600
Less stock in treasury; 61 shares at March 31, 1996 and
5,391 shares at July 2, 1995 - (9)
--------- ---------
TOTAL STOCKHOLDERS' EQUITY 15,034 13,297
--------- ---------
$ 40,367 $ 31,608
========= =========
See accompanying notes to financial statements.
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LABARGE, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
(dollars in thousands)
NINE MONTHS ENDED
MARCH 31, April 2,
1996 1995
--------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 1,719 $ 901
Adjustments to reconcile net cash provided
by operating activities:
Depreciation and amortization 697 760
Accretion of discount on long-term assets from business divestitures (21) (23)
Accretion of discount on note from discontinued operations 6 29
Gain on sale of Flippin facility - (154)
Changes in assets and liabilities:
Accounts and notes receivable, net (5,370) 2,268
Inventories (2,972) (1,197)
Prepaid expenses (108) (95)
Trade accounts payable 3,566 (1,941)
Accrued liabilities 1,064 (508)
Liabilities of discontinued operations (275) (125)
-------- --------
NET CASH USED BY OPERATING ACTIVITIES (1,694) (85)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment (985) (500)
Additions to other assets of continuing operations (317) (230)
Sale of operating facility in Flippin - 9,890
Collection of note receivable 621 -
-------- --------
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES (681) 9,160
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of long-term debt (3,839) (8,220)
Exercise of stock warrants and options 18 60
Net change in short-term borrowings 6,500 (800)
-------- --------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES 2,679 (8,960)
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 304 115
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 143 140
--------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 447 $ 255
========= ========
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 March 31, 1996 and July 2, 1995, the related statements of
operations for the three and nine months ended March 31, 1996 and April 2, 1995
and the statement of cash flows for the nine months ended March 31, 1996 and
April 2, 1995 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)
MARCH 31, JULY 2,
1996 1995
----------- ------------
Billed shipments, net of progress payments $ 12,502 $ 6,668
Unbilled costs and accrued profits,
net of progress payments 839 901
----------- -----------
Trade receivables - gross 13,341 7,569
Less: Allowance for doubtful accounts (143) (168)
----------- -----------
Trade receivables - net 13,198 7,401
Current portion of notes receivable 600 1,168
Other current receivables 118 448
----------- -----------
$ 13,916 $ 9,017
=========== ===========
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 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)
MARCH 31, July 2,
1996 1995
---------- ----------
Raw materials $ 13,508 $ 8,609
Work in process 4,364 6,181
---------- ----------
17,872 14,790
Less progress payments (767) (657)
---------- ----------
$ 17,105 $ 14,133
========== ==========
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 March 31, 1996, the Company had $250,000 in common stock of Venisect, Inc.
which is valued at cost. This represents approximately 4% of the Company.
Since Venisect is not publicly traded, there is no active market for the shares
at this time.
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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)
MARCH 31, July 2,
1996 1995
-------------- ------------
SHORT-TERM BORROWINGS:
Revolving credit agreement:
Balance at period-end $ 9,000 $ 2,500
Interest rate at period-end 9.75% 10.50%
Average amount of short-term borrowings
outstanding during period (rounded to
nearest thousand) $ 5,409 $ 2,472
Average interest rate for period 10.19% 9.70%
Maximum short-term borrowings
at any month-end $ 9,100 $ 5,000
============== ============
Total short-term borrowings $ 9,000 $ 2,500
============== ============
MARCH 31, July 2,
1996 1995
-------------- ------------
LONG-TERM DEBT:
Sanwa Business Credit Corporation:
Revolving credit agreement $ - $ 2,500
Term loan 205 805
Chemical Bank term loan 536 1,071
12% Subordinated Notes 3,386 3,386
Industrial revenue bond due
semiannually through 1997, interest at 8% - 180
Other 172 195
-------------- ------------
4,299 8,137
Less current maturities 778 1,670
-------------- ------------
Total long-term debt $ 3,521 $ 6,467
============== ============
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 December 31, 1995, the Company 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 and warrants: 100,000 shares currently exercisable at $.66 to
$1.2375; 165,000 shares with exercise prices ranging from $1.3125 to $4.378
which are not exercisable at this time; and 300,000 warrants at $3 per share
which expire June 1, 1996. The earliest exercise date of the non-exercisable
option is August 24, 1996. The options and warrants 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
March 31, 1996, the net value of this benefit was $3,250,000 and is reported as
$758,000 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 and nine months ended March 31,
1996 were $345,000 and $980,000 compared to $413,000 and $1,530,000 for the
three and nine months ended April 2, 1995.
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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
telecommunications, geophysical/energy, medical equipment, aerospace, defense
electronics and various other commercial/industrial markets. The Company
employs approximately 680 people.
On December 2, 1994, the Company completed the sale of the on-going business of
its operation in Flippin, Arkansas to Avnet, Inc. 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 nine and
three months ended April 2, 1995 were approximately $7.3 million (15% of the
Company's nine months sales). There were no revenues from the Flippin
operation recorded in the three months ended April 2, 1995.
The December, 1994 sale of the Flippin facility allowed the Company to exchange
and redeem its 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 has allowed much greater flexibility to
invest in growth opportunities at its other facilities.
The Company's backlog of firm, unshipped orders at March 31, 1996 was
approximately $58.5 million compared to $44 million at April 2, 1995. The
backlog at March 31, 1996 for the products described below consisted of
approximately $35.2 million of orders for various defense products, the
majority of which contain cancellation and termination provisions, and $23.5
million of orders for commercial products. Approximately $7.5 million of the
total backlog is not scheduled to ship within the next 12 months pursuant to
the shipment schedules contained in those contracts.
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
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work performed, all risk of loss due to cost overruns is borne by the Company.
Sales to Northern Telecom in the telecommunications market accounted for 30.8%
of total sales for the three months and 17.1% for the nine months ended March
31, 1996. Sales to Lockheed Martin, in the defense and aerospace markets,
represented approximately 28.1% of total Company sales for the three months and
30.5% for the nine months ended March 31, 1996.
The Company 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 57.1% of total Company sales for the quarter and 47.3% for the
nine months.
The Company has developed a portable medical laser (the Laser Lancet(TM)) under
a contract from Venisect, Inc. One application of the laser is to perforate
the skin to draw small amounts of blood for testing. Phase II FDA clinical
trials for this application have been completed and a Form 510(K), requesting
for marketing and manufacturing approval, was filed with the FDA in December.
The request is currently being evaluated by the FDA. The Company anticipates
approval to be received this fiscal year. The impact on the Company's sales
cannot yet be determined.
In late January 1996, the FDA approved the commencement of human clinical
trials for use of the Laser Lancet(TM) in transdermal drug delivery. Venisect
scientists have shown that the simple, painless alteration of the outermost
layer of skin with the Laser Lancet(TM) results in clinically significant
improvement in the ability to deliver a wide range of drugs transdermally.
On May 7, 1996, the Company announced the formation of LaBarge Clayco Wireless
LLC. The new company is a 50/50 joint venture of LaBarge Wireless, a wholly
owned subsidiary of LaBarge, Inc. and Clayco Construction Company of St. Louis.
LaBarge Clayco Wireless LLC will provide engineering, project management,
construction, equipment installation and testing services for the rapidly
growing wireless telecommunications industry, with special emphasis on the PCS
(Personal Communications Services) market. The impact on LaBarge's earnings
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
NINE MONTHS ENDED MARCH 31, 1996
COMPARED TO NINE MONTHS ENDED APRIL 2, 1995
In December 1994, the Company sold its Flippin, Arkansas operation and its
related business for approximately $10,455,000. Sales, related costs and
profits though November 1994 are included in operating results for the nine
months ended April 2, 1995 and may distort the comparative data presented.
Net sales for the nine months ended March 31, 1996 were $49,695,000 compared to
$48,087,000 for the nine months ended April 2, 1995. Sales from continuing
operations were up approximately $9.0 million or 21.8% year-to-year. Higher
sales in the telecommunications market contributed significantly to this
increase. The Flippin operation accounted for $7.3 million in sales for the
nine months ended April 2, 1995.
Gross profit for the nine months ended March 31, 1996 was $8,507,000, 17.1% of
sales, compared to $8,117,000, 16.9% of sales, for the nine months ended April
2, 1995. Gross margins are increasing.
Selling and administrative expenses for the nine months ended March 31, 1996
were $5,885,000, 11.8%of sales, compared to $6,014,000, 12.5% of sales, for
the nine months ended April 2, 1995. The Company continues to maintain strict
control over expenses as it strives for growth.
Earnings from operations were $2,622,000, 5.3% of sales, for the nine months
ended March 31, 1996, compared to $2,103,000, 4.4% of sales, for the nine
months ended April 2, 1995.
Interest expense for the nine months ended March 31, 1996 was $996,000,
compared to $1,392,000 for the nine months ended April 2, 1995. Lower debt
levels in the first six months of fiscal 1996 resulted in the lower interest
costs.
Other income was $211,000 and $247,000 for the nine months ended March 31, 1996
and April 2, 1995, respectively. Included in other income for the nine months
ended March 31, 1996 is approximately $100,000 in interest and reserve
adjustments related to cash in conjunction with the Flippin sale. Included in
the other income for the period ended April 2, 1995, is $154,000 in gain from
the sale of the Flippin facility. The remainder of this income, in both
periods, represents accretion of a discount on a note receivable.
The Company has significant net operating loss carryforwards which offset most
of its
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income tax liability. Income tax expense for the nine months ended March 31,
1996 and April 2, 1995, respectively, was $118,000 and $57,000.
Net earnings for the nine months ended March 31, 1996 were $1,719,000, compared
to $901,000 for the nine months ended April 2, 1995.
Earnings per common share were $.11 for the nine months ended March 31, 1996
and $.06 for the nine months ended April 2, 1995.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1996
COMPARED TO THREE MONTHS ENDED APRIL 2, 1995
Net sales for the three months ended March 31, 1996 were $21,423,000 compared
to $14,770,000 for the three months ended April 2, 1995. This is a 45%
increase and is largely attributable to higher shipments in the wireless
telecommunications market. We expect to see continued significant volume due
to increasing demand caused by the rapidly growing PCS (Personal Communications
Services) wireless market.
Gross profit for the three months ended March 31, 1996 was $4,041,000, 18.9% of
sales, compared to $2,463,000, 16.7% of sales, for the three months ended April
2, 1995. The higher volume of sales in relation to fixed costs is the primary
reason for the higher margins.
Selling and administrative expenses were $2,414,000, 11.3% of sales, for the
three months ended March 31, 1996, compared to $1,891,000, 12.8% of sales, for
the three months ended April 2, 1995.
Earnings from operations for the three months ended March 31, 1996 were
$1,627,000, 7.6% of sales, compared to $572,000, 3.9% of sales, for the three
months ended April 2, 1995.
Interest expense for the three months ended March 31, 1996 was $351,000,
compared to $334,000 for the three months ended April 2, 1995. An increase in
borrowings to support the higher sales volume resulted in the increased
interest expense for the period.
Other income was $27,000 and $37,000 for the three months ended March 31, 1996
and April 2, 1995, respectively.
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 March 31, 1996 and April 2, 1995 was $85,000 and
$16,000, respectively.
Net earnings for the three months ended March 31, 1996 were $1,218,000 compared
to $259,000 for the three months ended April 2, 1995.
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Earnings per common share were $.08 for the three months ended March 31, 1996
compared to $.02 for the three months ended April 2, 1995.
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
assets of the Flippin operation and the related business for $10,455,000 cash
and assumed liabilities of $2,900,000. The proceeds of the sale were used to
reduce debt.
At March 31, 1996, the Company had borrowings as follows: a term loan with an
initial balance of $3,280,000 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 March 31, 1996, $205,000 was outstanding on the term loan and
$9,000,000 was outstanding on the revolver. In addition, the Company now has
$3,386,000 of 12% Subordinated Notes due May 15, 1998, $563,000 in notes due
Chemical Bank at prime plus .5%, plus other debt totaling $172,000. Equity at
March 31, 1996 was $15,034,000 or $.98 per common share.
The Company is confident that it will arrange an adequate line of credit prior
to the July 3rd expiration of its current loan agreement
For the nine months ended March 31, 1996, the Company used cash in its
operations, primarily due to higher accounts receivable and inventory. The
investment in inventory is necessary to support the higher volume planned for
the fourth quarter of fiscal 1996. Further, the Company invested $985,000 in
new equipment during the period .
During the nine months ended March 31, 1996, the Company increased borrowings
by $2,679,000.
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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.
---------------------------------
(Registrant)
Date May 13, 1996
/s/ William J. Maender
-------------------------------
William J. Maender
Vice President - Finance,
Treasurer and Secretary
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