<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 December 29, 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
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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 December 29, 1996. 15,621,495 common stock.
<PAGE> 2
LABARGE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(dollars in thousands except per share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 29, December 31, DECEMBER 29, December 31,
1996 1995 1996 1995
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET SALES $24,102 $14,910 $46,026 $28,271
- ---------------------------------------------------------------------------------------------
COSTS AND EXPENSES:
Cost of sales 19,086 12,483 36,254 23,806
Selling and administrative expenses 3,069 1,798 5,928 3,471
- ---------------------------------------------------------------------------------------------
22,155 14,281 42,182 27,277
- ---------------------------------------------------------------------------------------------
EARNINGS FROM OPERATIONS 1,947 629 3,844 994
- ---------------------------------------------------------------------------------------------
Interest expense 300 327 588 646
Equity in loss of joint venture (6) - (139) -
Other income, net 12 139 32 185
- ---------------------------------------------------------------------------------------------
EARNINGS BEFORE INCOME TAXES 1,653 441 3,149 533
INCOME TAX EXPENSE 106 27 202 33
- ---------------------------------------------------------------------------------------------
NET EARNINGS $1,547 $414 $2,947 $500
=============================================================================================
NET EARNINGS PER COMMON SHARE $.10 $.03 $.19 $.03
=============================================================================================
AVERAGE COMMON SHARES OUTSTANDING 15,622 15,296 15,613 15,271
=============================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
-2-
<PAGE> 3
LABARGE, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(dollars in thousands except per share data)
<TABLE>
<CAPTION>
DECEMBER 29, June 30,
1996 1996
- ---------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 2,550 $ 935
Accounts and notes receivable, net 12,324 13,455
Inventories 19,727 17,577
Prepaid expenses 282 286
Deferred tax assets, net 1,013 1,013
- ---------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 35,896 33,266
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PROPERTY, PLANT AND EQUIPMENT, NET 3,326 3,194
DEFERRED TAX ASSETS, NET 2,237 2,237
INVESTMENT IN JOINT VENTURE 18 157
OTHER ASSETS, NET 2,736 2,696
- ---------------------------------------------------------------------------------------
$44,213 $41,550
=======================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings $ 2,650 $ 400
Current maturities of long-term debt 619 633
Trade accounts payable 4,920 7,614
Accrued liabilities 5,032 4,729
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TOTAL CURRENT LIABILITIES 13,221 13,376
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Long-term debt 10,265 10,419
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STOCKHOLDERS' EQUITY:
Common stock, $.01 par value. Authorized 20,000,000 shares;
issued 15,621,495 shares at December 29, 1996
and 15,601,891 shares at June 30, 1996 156 156
Additional paid-in capital 13,553 13,527
Retained earnings 7,020 4,073
Less stock in treasury; 396 shares at December 29, 1996 and
187 shares at June 30, 1996 (2) (1)
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TOTAL STOCKHOLDERS' EQUITY 20,727 17,755
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$44,213 $41,550
=======================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
-3-
<PAGE> 4
LABARGE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(dollars in thousands)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 29, December 31,
1996 1995
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $2,947 $ 500
Adjustments to reconcile net cash provided (used) by operating activities:
Undistributed loss in equity of joint venture 139 -
Depreciation and amortization 484 443
Other - (8)
Changes in assets and liabilities:
Accounts and notes receivable, net 1,131 (332)
Inventories (2,150) (1,070)
Prepaid expenses 4 9
Trade accounts payable (2,694) 813
Accrued liabilities 303 (161)
Current liabilities of discontinued operations, net - (275)
- ---------------------------------------------------------------------------------------------------------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 164 (81)
- ---------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment (526) (540)
Additions to other assets (129) (156)
- ---------------------------------------------------------------------------------------------------------
NET CASH USED BY INVESTING ACTIVITIES (655) (696)
- ---------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of long-term debt (169) (769)
Exercise of stock warrants and options 26 10
Purchase of common stock to treasury (1) 9
Net change in short-term borrowings 2,250 1,600
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NET CASH PROVIDED BY FINANCING ACTIVITIES 2,106 850
- ---------------------------------------------------------------------------------------------------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 1,615 73
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 935 143
- ---------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $2,550 $ 216
=========================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
-4-
<PAGE> 5
LABARGE, INC.
FORM 10-Q
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. CONSOLIDATED FINANCIAL STATEMENTS - BASIS OF PREPARATION
The consolidated balance sheets at December 29, 1996 and June 30, 1996, the
related consolidated statements of operations for the three and six months
ended December 29, 1996 and December 31, 1995 and the consolidated statements
of cash flows for the six months ended December 29, 1996 and December 31, 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)
DECEMBER 29, June 30,
1996 1996
- --------------------------------------------------------------------------------
Billed shipments, net of progress payments $ 11,772 $ 12,860
Less allowance for doubtful accounts 160 187
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Trade receivables - net 11,612 12,673
Current portion of notes receivable 600 600
Other current receivables 112 182
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$ 12,324 $ 13,455
================================================================================
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.
-5-
<PAGE> 6
3. INVENTORIES
-----------
Inventories consist of the following:
(dollars in thousands)
DECEMBER 29, June 30,
1996 1996
- --------------------------------------------------------------------------------
Raw materials $ 13,502 $ 14,042
Work in process 6,225 4,779
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19,727 18,821
Less progress payments - 1,244
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$ 19,727 $ 17,577
================================================================================
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)
DECEMBER 29, June 30,
1996 1996
- --------------------------------------------------------------------------------
SHORT-TERM BORROWINGS:
Revolving credit agreement:
Balance at period-end $ 2,650 $ 400
Interest rate at period-end 8.00% 8.25%
Average amount of short-term borrowings
outstanding during period $ 2,232 $ 5,823
Average interest rate for period 7.66% 10.07%
Maximum short-term borrowings
at any month-end $ 3,060 $ 9,800
================================================================================
Total short-term borrowings $ 2,650 $ 400
================================================================================
-6-
<PAGE> 7
4. SHORT AND LONG-TERM OBLIGATIONS (continued)
-------------------------------
DECEMBER 29, June 30,
1996 1996
- --------------------------------------------------------------------------------
LONG-TERM DEBT:
Senior lender:
Revolving credit agreement $ 4,500 $ 4,500
Term loan
12% Subordinated Notes 2,850 3,000
Industrial revenue bond due 3,386 3,386
semiannually through 2001, interest at 5% 122 134
Other 26 32
- --------------------------------------------------------------------------------
10,884 11,052
Less current maturities 619 633
- --------------------------------------------------------------------------------
Total long-term debt, less current maturities $10,265 $10,419
================================================================================
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 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 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 six months
ended December 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
December 29, 1996, the net value of this benefit was $3.25 million and is
reported as $1.01 million in current assets and $2.23 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-
<PAGE> 8
7. CASH FLOWS
Total cash payments for interest for the three and six months ended December
29, 1996 were $290,000 and $476,000 compared to $308,000 and $635,000 for the
three and six months ended December 31, 1995.
-8-
<PAGE> 9
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
systems and devices and complex interconnect assemblies. Primary markets for
the Company's products include telecommunications, geophysical, medical,
aerospace and defense. The Company employs approximately 770 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 the assets for approximately $2.7 million and assumed $400,000
of liabilities of SOREP Technology Corporation 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. The results of this subsidiary are included
in the consolidated results of the Company for the three and six months ended
December 29, 1996.
The Company's backlog of firm, unshipped orders at December 29, 1996 was
approximately $58.8 million compared to $64.0 million at December 31, 1995.
The backlog at December 29, 1996 consisted of approximately $39.8 million for
various defense products, and approximately $19.0 million for commercial
products. Approximately $8.8 million of the total backlog is not scheduled to
ship within the next break5break512 months pursuant to the shipment schedules
contained in those contracts.
For the six months ended December 29, 1996, approximately 45% of the Company's
sales
-9-
<PAGE> 10
were defense related while 55% were commercial. Commercial markets included
telecommunications (21%), geophysical (21%), aerospace (7%) and other (6%).
Significant customers for the six months were: Lockheed Martin, which accounted
for 24% of sales; Schlumberger, which accounted for 15% of sales; Northern
Telecom, which accounted for 17% 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 (FDA) clearance to market the device for the purpose of
perforating the skin to collect capillary blood for clinical testing. On
December 30, 1996, Venisect provided the FDA with the additional information the
FDA requested to complete its review of Venisect's request for clearance to
market the Laser Lancet(TM). 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.
-10-
<PAGE> 11
LABARGE, INC.
FORM 10-Q
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
RESULTS OF OPERATIONS
SIX MONTHS ENDED DECEMBER 29, 1996
COMPARED TO SIX MONTHS ENDED DECEMBER 31, 1995
Net sales for the six months ended December 29, 1996 were $46.0 million
compared to $28.3 million for the six months ended December 31, 1995, an
increase of approximately $17.7 million or 63%. The increase is mainly
attributable to growth in sales to the telecommunications and geophysical
markets including sales by LaBarge/STC, Inc.
Gross profit for the six months ended December 29, 1996 was $9.77 million,
21.2% of sales, compared to $4.47 million, 15.8% of sales, for the six months
ended December 31, 1995. The increase in gross margin is attributable to
higher sales volume relative to fixed costs and a more profitable product mix.
Selling and administrative expenses for the six months ended December 29, 1996
were $5.93 million, 12.9% of sales, compared to $3.47 million, 12.3% of sales,
for the six months ended December 31, 1995. The increased expenses are due to
added personnel and outside professional services to support the sales growth
and the acquisition of SOREP Technology Corporation in May 1996.
Earnings from operations were $3.84 million, 8.4% of sales, for the six months
ended December 29, 1996, compared to $994,000, 3.5% of sales, for the six
months ended December 31, 1995.
Interest expense for the six months ended December 29, 1996 was $588,000,
compared to $646,000 for the six months ended December 31, 1995.
Equity in loss of joint venture of $139,000 represents the Company's share of
the loss incurred by LaBarge Clayco Wireless L.L.C. for the six months.
The Company has significant tax loss carryforwards which offset most of its
income tax liability. Income tax expense for the six months ended December 29,
1996 and December 31, 1995, respectively, was $202,000 and $33,000.
Net earnings for the six months ended December 29, 1996 were $2.95 million, up
489% compared to $500,000 for the six months ended December 31, 1995.
Earnings per common share were $.19 for the six months ended December 29, 1996
and $.03 for the six months ended December 31, 1995.
-11-
<PAGE> 12
RESULTS OF OPERATIONS
THREE MONTHS ENDED DECEMBER 29, 1996
COMPARED TO THREE MONTHS ENDED DECEMBER 31, 1995
Net sales for the three months ended December 29, 1996 were $24.1 million
compared to $14.9 million for the three months ended December 31, 1995. This
is a 62% increase and is largely attributable to higher shipments in the
telecommunications and geophysical markets.
Gross profit for the three months ended December 29, 1996 was $5.02 million,
20.8% of sales, compared to $2.43 million, 16.3% of sales, for the three months
ended December 31, 1995. The higher volume of sales in relation to fixed costs
and an improved mix of product shipments are the primary reasons for the higher
margins.
Selling and administrative expenses were $3.07 million, 12.7% of sales, for the
three months ended December 29, 1996, compared to $1.8 million, 12.1% of sales,
for the three months ended December 31, 1995. Selling and administrative
expenses have increased due to additional personnel to support growth and the
acquisition of SOREP.
Earnings from operations for the three months ended December 29, 1996 were
$1.95 million, 8.1% of sales, compared to $629,000, 4.2% of sales, for the
three months ended December 31, 1995.
Interest expense for the three months ended December 29, 1996 was $300,000
compared to $327,000 for the three months ended December 31, 1995.
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 December 29, 1996 and December 31, 1995 was $106,000 and
$27,000, respectively.
Net earnings for the three months ended December 29, 1996 were $1.55 million,
compared to $414,000 for the three months ended December 31, 1995.
Earnings per common share were $.10 for the three months ended December 29,
1996, compared to $.03 for the three months ended December 31, 1995.
FINANCIAL CONDITION & LIQUIDITY
On June 25, 1996, the Company entered into a new lending agreement providing
for a $3.0 million term loan and a $17.0 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 principal of $150,000.
This loan agreement provides sufficient working capital to support planned
internal growth.
-12-
<PAGE> 13
For the six months ended December 29, 1996, the Company generated cash from its
operations totaling $164,000. Cash was generated through net earnings and
reduced accounts receivable. Cash was used to reduce accounts payable and
increase inventories.
During the six months ended December 29, 1996, the Company increased borrowings
by $2.1 million.
-13-
<PAGE> 14
PART II
Not Applicable
-14-
<PAGE> 15
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 February 12, 1997
--------------------
/s/William J. Maender
--------------------------
William J. Maender
Vice President - Finance,
Treasurer and Secretary
-15-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-29-1997
<PERIOD-END> DEC-29-1996
<CASH> 2,550
<SECURITIES> 0
<RECEIVABLES> 12,324
<ALLOWANCES> 160
<INVENTORY> 19,727
<CURRENT-ASSETS> 35,896
<PP&E> 3,326
<DEPRECIATION> (9,598)
<TOTAL-ASSETS> 44,213
<CURRENT-LIABILITIES> 13,221
<BONDS> 0
0
0
<COMMON> 156
<OTHER-SE> 20,571
<TOTAL-LIABILITY-AND-EQUITY> 44,213
<SALES> 46,026
<TOTAL-REVENUES> 46,026
<CGS> 36,254
<TOTAL-COSTS> 42,182
<OTHER-EXPENSES> 107
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 588
<INCOME-PRETAX> 3,149
<INCOME-TAX> 202
<INCOME-CONTINUING> 2,947
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,947
<EPS-PRIMARY> .19
<EPS-DILUTED> .19
</TABLE>
