<PAGE> 1
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 29, 1996 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 .
----- -----
Indicate the number of shares outstanding of each of the Issuer's classes of
common stock as of September 29, 1996. 15,621,545 shares of common stock.
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LABARGE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(dollars in thousands except per share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 29, October 1,
1996 1995
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<S> <C> <C>
NET SALES $ 21,923 $ 13,361
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COSTS AND EXPENSES:
Cost of sales 17,167 11,322
Selling and administrative expenses 2,859 1,673
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20,026 12,995
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EARNINGS FROM OPERATIONS 1,897 366
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Interest expense 288 319
Equity in loss of joint venture (133) -
Other income, net 20 46
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EARNINGS BEFORE INCOME TAXES 1,496 93
Income tax expense 96 6
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NET EARNINGS $ 1,400 $ 87
==========================================================================================================================
Net earnings per common share $ .09 $ .01
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Average common shares outstanding 15,605 15,246
==========================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
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LABARGE, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(dollars in thousands except per share data)
<TABLE>
<CAPTION>
SEPTEMBER 29, June 30,
1996 1996
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<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 435 $ 935
Accounts and notes receivable, net 13,103 13,455
Inventories 20,949 17,577
Prepaid expenses 267 286
Deferred tax assets, net 1,013 1,013
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TOTAL CURRENT ASSETS 35,767 33,266
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PROPERTY, PLANT AND EQUIPMENT, NET 3,206 3,194
DEFERRED TAX ASSETS, NET 2,237 2,237
INVESTMENT IN JOINT VENTURE 24 157
OTHER ASSETS, NET 2,678 2,696
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$ 43,912 $ 41,550
==========================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings $ 2,970 $ 400
Current maturities of long-term debt 619 633
Trade accounts payable 6,262 7,614
Accrued liabilities 4,464 4,729
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TOTAL CURRENT LIABILITIES 14,315 13,376
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LONG-TERM OBLIGATIONS:
Long-term debt 10,417 10,419
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STOCKHOLDERS' EQUITY:
Common stock, $.01 par value. Authorized 20,000,000 shares;
issued 15,621,545 shares at September 29, 1996
and 15,601,891 shares at June 30, 1996 156 156
Additional paid-in capital 13,553 13,527
Retained earnings 5,473 4,073
Less stock in treasury; 346 shares at September 29, 1996 and
187 shares at June 30, 1996 (2) (1)
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TOTAL STOCKHOLDERS' EQUITY 19,180 17,755
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$ 43,912 $ 41,550
==========================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
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LABARGE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(dollars in thousands)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 29, October 1,
1996 1995
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 1,400 $ 87
Adjustments to reconcile net cash provided (used)
by operating activities:
Undistributed loss in equity of joint venture 133 -
Depreciation and amortization 236 210
Other - 1
Changes in assets and liabilities:
Accounts and notes receivable, net 352 751
Inventories (3,372) (469)
Prepaid expenses 19 (39)
Trade accounts payable (1,351) 491
Accrued liabilities (265) (212)
Current liabilities from discontinued operations - (275)
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NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES (2,848) 543
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CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment (204) (443)
Additions to other assets (26) (99)
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NET CASH USED BY INVESTING ACTIVITIES (230) (542)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of long-term debt (17) (350)
Exercise of stock warrants and options 26 14
(Purchase) sale of common stock to/from treasury (1) 8
Net change in short-term borrowings 2,570 500
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NET CASH PROVIDED BY FINANCING ACTIVITIES 2,578 172
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NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (500) 173
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 935 143
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 435 $ 316
==========================================================================================================================
</TABLE>
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 balance sheet at September 29, 1996 and June 30, 1996, the related
statements of operations for the three ended September 29, 1996 and October 1,
1995 and the statement of cash flows for the three months ended September 29,
1996 and October 1, 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 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
Accounts and notes receivable consist of the following:
(dollars in thousands)
<TABLE>
<CAPTION>
SEPTEMBER 29, June 30,
1996 1996
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<S> <C> <C>
Billed shipments, net of progress payments $ 12,550 $ 12,860
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Less allowance for doubtful accounts 202 187
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Trade receivables - net 12,348 12,673
Current portion of notes receivable 600 600
Other current receivables 155 182
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$ 13,103 $ 13,455
===================================================================================================================
</TABLE>
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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<PAGE> 6
3. INVENTORIES
Inventories consist of the following:
(dollars in thousands)
<TABLE>
<CAPTION>
SEPTEMBER 29, June 30,
1996 1996
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<S> <C> <C>
Raw materials $ 14,264 $ 14,042
Work in process 6,948 4,779
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21,212 18,821
Less progress payments 263 1,244
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$ 20,949 $ 17,577
===================================================================================================================
</TABLE>
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
Short-term borrowings, long-term debt and the current maturities of long-term
debt consist of the following: (dollars in thousands)
<TABLE>
<CAPTION>
SEPTEMBER 30, June 30,
1996 1996
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<S> <C> <C>
SHORT-TERM BORROWINGS:
Revolving credit agreement:
Balance at period-end $ 2,970 $ 400
Interest rate at period-end 8.00% 8.25%
Average amount of short-term borrowings
outstanding during period $ 1,631 $ 5,823
Average interest rate for period 8.00% 10.07%
Maximum short-term borrowings
at any month-end $ 2,970 $ 9,800
===================================================================================================================
Total short-term borrowings $ 2,970 $ 400
===================================================================================================================
</TABLE>
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<PAGE> 7
<TABLE>
<CAPTION>
SEPTEMBER 30, June 30,
1996 1996
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<S> <C> <C>
LONG-TERM DEBT:
Senior lender:
Revolving credit agreement $ 4,500 $ 4,500
Term loan 3,000 3,000
12% Subordinated Notes 3,386 3,386
Industrial revenue bond due
semiannually through 2001, interest at 5% 122 134
Other 28 32
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11,036 11,052
Less current maturities 619 633
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Total long-term debt, less current maturities $ 10,417 $ 10,419
===================================================================================================================
</TABLE>
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.
5. 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: 155,000 shares currently exercisable at $.66 to $1.44; 181,775
shares with exercise prices ranging from $1.31 to $7.24 which are not
exercisable at this time. The earliest exercise date of the non-exercisable
options is February 8, 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 quarter ended September 29, 1996,
options to purchase 20,000 shares were exercised at a price of $1.31 per share.
6. 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
September 29, 1996, the net value of this benefit was $3.25 million and is
reported as $1.013 million in current assets and $2.237 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 $.2 million
which are available to reduce future Federal income taxes through 2001. In
addition, the Company has alternative minimum tax credit carryforwards of
approximately $.3 million which are available to reduce future regular Federal
income taxes over an indefinite period.
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<PAGE> 8
7. CASH FLOWS
Total cash payments for interest for the three months ended September 29, 1996
were $186 thousand compared to $327 thousand for the three months ended October
1, 1995.
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LABARGE, INC.
FORM 10-Q
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATION 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. engineers, manufactures, tests and sells sophisticated electronic
control systems and devices and complex interconnect assemblies for a variety
of markets. Primary markets for the Company's products include
telecommunications, geophysical, medical, aerospace and defense industries.
The Company employs approximately 750 people.
On May 7, 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 engineering, project management, construction,
equipment installation and testing services for the rapidly growing wireless
telecommunications industry. LaBarge Clayco Wireless complements LaBarge's
efforts in the design, production and sale of 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.
On May 15, 1996, the Company, through its wholly-owned subsidiary LaBarge/STC,
Inc., purchased assets for approximately $2.7 million and assumed $.4 million
of liabilities of SOREP Technology Corporation (SOREP) in Houston, Texas.
LaBarge/STC, Inc. is engaged in the 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. In its most recent fiscal year prior to being
acquired by LaBarge, Inc., SOREP's sales were approximately $6 million and
operating profits were approximately 15%.
The results of this subsidiary is included in the consolidated results of the
Company for the quarter ended September 29, 1996.
The Company's backlog of firm, unshipped orders at September 29, 1996 was
approximately $63.8 million compared to $51.6 million at October 1, 1995. The
backlog
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<PAGE> 10
at September 29, 1996 for the products described below consisted of
approximately $36.1 million of orders for various defense products, the
majority of which contain cancellation and termination provisions, and
approximately $27.7 million of orders for commercial products. Approximately
$8.1 million of the total backlog is not scheduled to ship within the next 12
months pursuant to the shipment schedules contained in those contracts.
For the three months ended September 29, 1996, sales by market were as follows:
Approximately 40% defense; 24% geophysical; 23% telecommunications; 7%
commercial aerospace; and, the remainder other customers. Significant
customers during the quarter were: Lockheed Martin which accounted for 23% of
sales, Schlumberger, which accounted for 19% of sales and Northern Telecom,
which accounted for 19% of 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.
Venisect is currently attempting to secure U.S. Food and Drug Administration
clearance to market the device for the purpose of perforating the skin to
collect capillary blood for clinical testing. While there can be no assurance,
both LaBarge and Venisect remain confident that clearance will be received.
Upon FDA clearance the Company will manufacture the Laser Lancet(TM) for
distribution by Venisect.
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<PAGE> 11
LABARGE, INC.
FORM 10-Q
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 29, 1996
COMPARED TO THREE MONTHS ENDED OCTOBER 1, 1995
In May 1996, the Company, through its wholly-owned subsidiary LaBarge/STC,
Inc., purchased the assets for approximately $2.7 million and assumed $.4
million in liabilities of SOREP Technology Corporation in Houston, Texas. The
Company also, through its wholly-owned subsidiary LaBarge Wireless, Inc.,
entered into a fifty-fifty joint venture with Clayco Construction Company.
Sales, related costs, profits and losses in equity of the joint venture are
included in operating results for the three months ended September 29, 1996 and
distort the comparative data presented.
Net sales for the three months ended September 29, 1996 were $21.923 million
compared to $13.361 million for the three months ended October 1, 1995, and
increase of approximately $8.6 million or 64.0%. The increase is mainly due
to sales in the telecommunications market, which were minimal in the three
months ended October 1, 1995, and sales by LaBarge/STC, Inc., which was
acquired in May 1996.
Gross profit for the three months ended September 29, 1996 was $4.756 million,
21.7% of sales, compared to $2.039 million, 15.3% of sales, for the three
months ended October 1, 1995. The increase in gross margin is mainly due to
increased sales, improved product mix and lower than budgeted fixed costs for
the three months ended September 29, 1996.
Selling and administrative expenses for the three months ended September 29,
1996 were $2.859 million, 13.0% of sales, compared to $1.673 million, 12.5% of
sales, for the three months ended October 1, 1995. The increased dollar cost
of these expenses is due to added personnel and outside professional services
to support the sales growth.
Earnings from operations were $1.897 million, 8.7% of sales, for the three
months ended September 29, 1996, compared to $366 thousand, 2.7% of sales, for
the three months ended October 1, 1995.
Interest expense for the three months ended September 29, 1996 was $288
thousand, compared to $319 thousand for the three months ended October 1, 1995.
Equity in loss of joint venture of $133 thousand, represents LaBarge Wireless,
Inc.'s share of the loss incurred by LaBarge Clayco Wireless L.L.C. during the
quarter. The Company anticipates the performance of this operation to improve
as the year progresses.
The Company has significant net operating loss carryforwards which offset most
of its
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<PAGE> 12
income tax liability. Income tax expense for the three months ended September
29, 1996 and October 1, 1995, respectively, was $96 thousand and $6 thousand.
Net earnings for the three months ended September 29, 1996 were $1.4 million,
compared to $87 thousand for the three months ended October 1, 1995.
Earnings per common share were $.09 for the three months ended September 29,
1996 and $.01 for the three months ended October 1, 1995.
FINANCIAL CONDITION & LIQUIDITY
On June 25, 1996, the Company entered into a new lending agreement providing
for a $3 million term loan and a $17 million revolving credit facility based on
a borrowing base formula tied to accounts receivable and inventory. Both loans
are secured by the assets of the Company and mature in July 1999. The term
loan requires quarterly payments of $150 thousand beginning October 1, 1996.
This new agreement provides sufficient working capital to support planned
internal growth in the Company's existing markets and operations.
For the three months ended September 29, 1996, the Company used cash in its
operations totaling $2.8 million, primarily due to higher inventories and
reduction of accounts payable. The investment in inventory is necessary to
support the higher volume planned for the future quarters of fiscal 1997.
During the three months ended September 29, 1996, the Company increased
borrowings by $2.6 million.
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<PAGE> 13
PART II
Not Applicable
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<PAGE> 14
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 November 1, 1996
--------------------
/s/William J. Maender/s/
----------------------------
William J. Maender
Vice President - Finance,
Treasurer and Secretary
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-29-1997
<PERIOD-END> SEP-29-1996
<CASH> 435
<SECURITIES> 0
<RECEIVABLES> 13,103
<ALLOWANCES> 202
<INVENTORY> 20,949
<CURRENT-ASSETS> 35,767
<PP&E> 3,206
<DEPRECIATION> (9,401)
<TOTAL-ASSETS> 43,912
<CURRENT-LIABILITIES> 14,315
<BONDS> 0
0
0
<COMMON> 156
<OTHER-SE> 19,024
<TOTAL-LIABILITY-AND-EQUITY> 43,912
<SALES> 21,923
<TOTAL-REVENUES> 21,923
<CGS> 17,167
<TOTAL-COSTS> 20,026
<OTHER-EXPENSES> 113
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 288
<INCOME-PRETAX> 1,496
<INCOME-TAX> 96
<INCOME-CONTINUING> 1,400
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,400
<EPS-PRIMARY> .09
<EPS-DILUTED> .09
</TABLE>
