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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 28, 1997 Commission file number: 1-5761
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LaBarge, Inc.
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(Exact name of registrant as specified in its charter)
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<S><C>
DELAWARE 73-0574586
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P.O. Box 14499, St. Louis, Missouri 63178
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(Address) (Zip Code)
(314) 997-0800
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(Registrant's telephone number, including Area Code)
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(Former name, former address and former fiscal year, if changed since last report.)
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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 28, 1997. 15,658,230 common stock.
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LABARGE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(dollars in thousands except per share data)
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<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 28, September 29,
1997 1996
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<S> <C> <C>
NET SALES $ 21,492 $ 21,923
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COSTS AND EXPENSES:
Cost of sales 16,805 17,167
Selling and administrative expenses 2,981 2,859
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19,786 20,026
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EARNINGS FROM OPERATIONS 1,706 1,897
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Interest expense 130 288
Equity in joint venture (94) (133)
Other income, net 24 20
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EARNINGS BEFORE INCOME TAXES 1,506 1,496
Income tax expense 556 96
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NET EARNINGS $ 950 $ 1,400
========================================================================================
NET EARNINGS PER COMMON SHARE $ .06 $ .09
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Average common shares outstanding 15,658 15,605
========================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
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LABARGE, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(dollars in thousands)
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<CAPTION>
SEPTEMBER 28, June 29,
1997 1997
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<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 171 $ 1,467
Accounts receivable, net 14,179 13,384
Inventories 16,339 14,264
Prepaid expenses 1,459 735
Deferred tax assets, net 3,966 4,426
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TOTAL CURRENT ASSETS 36,114 34,276
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PROPERTY, PLANT AND EQUIPMENT, NET 4,325 4,090
INVESTMENT IN JOINT VENTURE 68 161
OTHER ASSETS, NET 5,917 4,932
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$ 46,424 $ 43,459
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings $ 2,030 $ -
Current maturities of long-term debt 1,032 1,032
Trade accounts payable 6,625 5,532
Accrued liabilities 5,408 6,251
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TOTAL CURRENT LIABILITIES 15,095 12,815
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Long-term debt 4,836 5,101
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STOCKHOLDERS' EQUITY:
Common stock, $.01 par value. Authorized 20,000,000 shares;
issued 15,658,230 shares at September 28, 1997
and 15,658,230 shares at June 29, 1997 156 156
Additional paid-in capital 13,468 13,468
Retained earnings 12,869 11,919
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TOTAL STOCKHOLDERS' EQUITY 26,493 25,543
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$ 46,424 $ 43,459
===========================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
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LABARGE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(dollars in thousands)
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<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 28, September 29,
1997 1996
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 950 $ 1,400
Adjustments to reconcile net cash used
by operating activities:
Loss in equity of joint venture 94 133
Depreciation and amortization 269 236
Changes in assets and liabilities:
Accounts receivable, net (795) 352
Inventories (2,075) (3,372)
Prepaid expenses (724) 19
Trade accounts payable 1,093 (1,351)
Accrued liabilities (843) (265)
Deferred taxes 457 -
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NET CASH USED BY OPERATING ACTIVITIES (1,574) (2,848)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment (453) (204)
Additions to other assets (1,035) (26)
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NET CASH USED BY INVESTING ACTIVITIES (1,488) (230)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of long-term debt (264) (17)
Exercise of stock warrants and options - 26
Purchase of common stock to treasury - (1)
Net change in short-term borrowings 2,030 2,570
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NET CASH PROVIDED BY FINANCING ACTIVITIES 1,766 2,578
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NET DECREASE IN CASH AND CASH EQUIVALENTS (1,296) (500)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,467 935
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 171 $ 435
=============================================================================================
</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 consolidated balance sheets at September 28, 1997 and June 29, 1997, the
related consolidated statements of operations for the three months ended
September 28, 1997 and September 29, 1996 and the consolidated statements of
cash flows for the three months ended September 28, 1997 and September 29, 1996
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.
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 29, 1997.
2. ACCOUNTS RECEIVABLE
Accounts receivable consist of the following:
(dollars in thousands)
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<CAPTION>
SEPTEMBER 28, June 29,
1997 1997
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<S> <C> <C>
Billed shipments, net of progress payments $ 13,515 $ 13,421
Unbilled costs and accrued profits, net of progress payments 743 -
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Trade receivables - gross 14,258 13,421
Less allowance for doubtful accounts 149 148
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Trade receivables - net 14,109 13,273
Other current receivables 70 111
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$ 14,179 $ 13,384
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</TABLE>
Unbilled amounts represent revenues recognized on contracts less progress
payments received for which billings have not been presented to the customers
at the balance sheet date. Unbilled amounts were billed in the month following
the closing date.
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.
Other current receivables are amounts due from employees for travel advances
and other miscellaneous sources.
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<PAGE> 6
3. OTHER ASSETS, NET
During the quarter, the Company invested an additional $2.0 million in
TRANSMEDICA INTERNATIONAL, INC. ("TRANSMEDICA"), formerly Venisect, Inc.
Payment for this investment included an exchange of approximately $1.2 million
of current accounts receivable and $800,000 cash. The amount of the
receivable, $1.2 million, was included in other assets, net as of June 29,
1997. With this investment the Company owns approximately 9.5% of
TRANSMEDICA's Common Stock.
4. INVENTORIES
Inventories consist of the following:
(dollars in thousands)
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<CAPTION>
SEPTEMBER 28, June 29,
1997 1997
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<S> <C> <C>
Raw materials $ 11,235 $ 10,546
Work in process 5,718 4,015
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16,953 14,561
Less progress payments 614 297
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$ 16,339 $ 14,264
=========================================================================
</TABLE>
In accordance with contractual agreements, the government has a security
interest in inventories related to contracts for which progress payments have
been received.
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)
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<CAPTION>
SEPTEMBER 28, June 29,
1997 1997
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<S> <C> <C>
SHORT-TERM BORROWINGS:
Revolving credit agreement:
Balance at period-end $ 2,030 $ -
Interest rate at period-end 6.83% 6.88%
Average amount of short-term borrowings
outstanding during period $ 1,243 $ 1,484
Average interest rate for period 7.12% 7.47%
Maximum short-term borrowings
at any month-end $ 2,090 $ 3,060
=======================================================================================
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5. SHORT AND LONG-TERM OBLIGATIONS (continued)
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<CAPTION>
SEPTEMBER 28, June 29,
1997 1997
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<S> <C> <C>
LONG-TERM DEBT:
Senior lender:
Revolving credit agreement $ 2,000 $ 2,000
Term loan 3,750 4,000
Industrial revenue bond due semiannually
through 2001, interest at 5% 97 110
Other 21 23
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5,868 6,133
Less current maturities 1,032 1,032
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Total long-term debt, less current maturities $ 4,836 $ 5,101
========================================================================================
</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.
6. EARNINGS PER COMMON SHARE
In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 128 (SFAS No. 128) "Earnings
Per Share" (EPS). SFAS No. 128 establishes standards for computing and
presenting earnings per share. It also requires dual presentation of basic and
diluted EPS on the face of the income statement for all entities with complex
capital structures and requires a reconciliation of the numerator and
denominator of the basic EPS computation to the numerator and denominator of
the diluted EPS computation. SFAS No. 128 is effective for financial
statements for both interim and annual periods ending after December 15, 1997,
and early application is not permitted. The Company believes the adoption of
this accounting standard will not have a material impact on earnings per share.
Earnings per common share is based on the weighted average number of shares
outstanding during the period (i.e., quarter or year to date). Also
outstanding are the following common stock options: 205,000 shares currently
exercisable at $.66 to $4.37 and 167,288 shares with exercise prices ranging
from $5.86 to $7.24 which are not exercisable at this time. 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.
7. INCOME TAXES
The Company is now reporting net earnings on a fully taxed basis. This is the
result of the revaluation at year end fiscal 1997 of the Company's deferred tax
assets, including its tax loss carryforwards. Thus, net earnings for the
quarter ending September 28, 1997 were $950,000 or
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<PAGE> 8
$.06 per share compared with $1,400,000 or $.09 per share for quarter ended
September 29, 1996. Comparably taxed first quarter 1997 net earnings would
have been $943,000 or $.06 per share.
At June 29, 1997, the Company had net operating loss carryforwards for federal
income tax purposes of $8.0 million which are available to offset future
federal taxable income through 2004. In addition, the Company has alternative
minimum tax credit carryforwards and investment tax credits of approximately
$584,000 which are available to reduce future regular federal income taxes.
8. CASH FLOWS
Total cash payments for interest for the three months ended September 28, 1997
were $93,000 compared to $186,000 for the three months ended September 29,
1996.
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LABARGE, INC.
FORM 10-Q
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
Statements contained in this Report which are not historical facts are forward
looking statements within the meaning of Section 27A of the Securities Act of
1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended, which are intended to be covered by the safe harbors created thereby.
For a summary of important factors which could cause the Company's actual
results to differ materially from those projected in, or inferred by, the
forward looking statements, see the Company's Annual Report on Form 10-K for
the fiscal year ended June 29, 1997, 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 telecommunication markets. The Company employs approximately 800
people.
The Company's backlog of firm, unshipped orders at September 28, 1997 was
approximately $64.9 million compared to $63.8 million at September 29, 1996.
The backlog at September 28, 1997 consisted of approximately $45.1 million for
various defense products, and approximately $19.8 million for commercial
products. Approximately $6.6 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 28, 1997, approximately 54.2% of the
Company's sales were defense related while 45.8% were commercial. Commercial
markets included aerospace (9.3%), geophysical (22.4%), telecommunications
(4.9%), and other (9.2%). Two customers each account for in excess of 10% of
total sales for the three months: one in the aerospace/defense market at 23%
of total sales; one in the geophysical market at 12% of total sales.
The Company has designed and developed the Laser Lancet(R), a small medical
laser, for TRANSMEDICA under a licensing agreement from TRANSMEDICA. On April
16, 1997, TRANSMEDICA received clearance from the U.S. Food and Drug
Administration (FDA) to market and manufacture the device for the purpose of
perforating the skin to collect capillary blood for clinical testing. Pursuant
to the terms of the licensing agreement, the Company has begun low-rate
production of the Laser Lancet(R) for distribution by TRANSMEDICA.
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<PAGE> 10
During the quarter, the Company increased its investment in TRANSMEDICA by
investing $2.0 million by exchanging approximately $1.2 million of receivables
and payment of $800,000 cash. The Company now owns approximately 9.5% of
TRANSMEDICA's common stock.
It is too early to predict the extent to which the Laser Lancet(R) contribute
to LaBarge's revenues and earnings.
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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 28, 1997
COMPARED TO THREE MONTHS ENDED SEPTEMBER 29, 1996
Net sales for the three months ended September 28, 1997 were $21.5 million
compared to $21.9 million for the three months ended September 29, 1996, a
decrease of $400,000 or 1.8%.
Gross profit for the three months ended September 28, 1997 was $4.7 million,
21.8% of sales, compared to $4.8 million, 21.7% of sales, for the three months
ended September 29, 1996.
Selling and administrative expenses for the three months ended September 28,
1997 were $3.0 million or 13.9% of sales, compared to $2.9 million or 13.0% of
sales for the three months ended September 29, 1996. The increase in expense
is due to additional personnel hired to support the Company's anticipated
future growth.
Interest expense for the three months ended September 28, 1997 was $130,000
compared to $288,000 for the three months ended September 29, 1996. Lower debt
levels, redemption of 12% Subordinated Notes in February 1997 and reduced
interest rates under the current loan agreement continue to result in lower
interest costs.
Equity in loss of joint venture for the three months ended September 28, 1997
was $94,000 compared to loss of $133,000 for the three months ended September
29, 1996. These amounts represent the Company's share of losses incurred by
LaBarge Clayco Wireless L.L.C.
Income tax expense for the three months ending September 28, 1997 were $556,000
compared to $96,000 for the three months ended September 29, 1996, an increase
of $460,000. The process is due to the revaluation at June 29, 1997 of the
Company's deferred tax assets, including its loss carryforwards, which resulted
in the use a combined tax rate of 38% for the current quarter versus 6% in the
quarter ended Sept. 29, 1996.
The Company has significant net operating loss carryforwards which offset most
of its income tax liability. The loss carryforwards are part of the Company's
deferred tax assets included in the balance sheet. As of September 28, 1997
deferred tax assets were $4.0 million, compared to $4.4 million as of June 29,
1997
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<PAGE> 12
Earnings per common share were $.06 for the three months ended September 28,
1997, and $.09 for the three months ended September 29, 1996. If earnings per
share had been fully taxed at September 29, 1996, they would be $.06 per common
share.
FINANCIAL CONDITION & LIQUIDITY
Accounts receivable, at September 28, 1997 was $14.2 million compared to $13.4
million at June 29, 1997; an increase of $795,000.
Inventories at September 28, 1997 were $16.3 million and at June 29, 1997, they
were $14.3 million. This increase of $2.0 million is attributable to new job
start ups when inventories typically are received faster than initial shipments
are made to the customer. Due to this inventory increase, accounts payable
increased $1.1 million.
Prepaid expenses at September 28, 1997 was $1.5 million compared to $700,000 at
June 29, 1997. This increase is due to the Company prepaying certain expenses
to obtain a 15% discount. This prepayment will be expensed as services are
rendered.
Accounts payable increase $1.1 million during the quarter, due primarily to the
timing of the inventory increase.
For the three months ended September 28, 1997, the Company used cash totaling
$1.6 million to support its operations.
During the quarter the Company used cash of $453,000 to purchase property,
plant and equipment; and, used $1.0 million to purchase other assets, including
$800,000 to purchase the TRANSMEDICA common stock.
The Company used approximately $1.3 million of its available cash and borrowed
an additional net $1.8 million during the quarter to fund the above
expenditures.
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<PAGE> 13
PART II
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LABARGE, INC.
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(Registrant)
Date 11/5/97
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/s/ William J. Maender
-------------------------
William J. Maender
Vice President - Finance,
Treasurer and Secretary
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<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-29-1997
<PERIOD-END> SEP-28-1997
<CASH> 171
<SECURITIES> 0
<RECEIVABLES> 14,179
<ALLOWANCES> 149
<INVENTORY> 16,339
<CURRENT-ASSETS> 36,114
<PP&E> 4,325
<DEPRECIATION> 9,805
<TOTAL-ASSETS> 46,424
<CURRENT-LIABILITIES> 15,095
<BONDS> 0
0
0
<COMMON> 156
<OTHER-SE> 26,337
<TOTAL-LIABILITY-AND-EQUITY> 46,424
<SALES> 21,492
<TOTAL-REVENUES> 21,492
<CGS> 16,805
<TOTAL-COSTS> 19,786
<OTHER-EXPENSES> 70
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 130
<INCOME-PRETAX> 1,506
<INCOME-TAX> 556
<INCOME-CONTINUING> 950
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 950
<EPS-PRIMARY> .06
<EPS-DILUTED> .06
</TABLE>
