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 April 1, 2001 Commission file number: 1-5761
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LaBarge, Inc.
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(Exact Name of Registrant as specified in its charter)
DELAWARE 73-0574586
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9900A Clayton Road, St. Louis, Missouri 63124
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(Address) (Zip Code)
(314) 997-0800
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(Registrant's telephone number, including Area Code)
N/A
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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 April 1, 2001. 14,931,616 shares of common stock.
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LABARGE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(dollars in thousands except per share data)
THREE MONTHS ENDED NINE MONTHS ENDED
------------------------ ------------------------
APRIL 1, April 2, APRIL 1, April 2,
2001 2000 2001 2000
-------- -------- -------- --------
NET SALES $ 32,428 $ 22,139 $ 83,636 $ 53,822
-------- -------- -------- --------
COSTS AND EXPENSES:
Cost of sales 25,153 16,923 65,273 42,785
Selling and administrative expense 5,010 3,920 13,250 11,240
(Gain) due to impairment of assets -- -- -- (2,300)
Interest expense 433 550 1,528 1,485
Loss from NotiCom -- 462 -- 1,614
Other income, net (221) (54) (826) (235)
-------- -------- -------- --------
Income earnings (loss) from continuing operations
before income taxes 2,053 338 4,411 (767)
Income tax expense (benefit) 838 209 1,835 (234)
-------- -------- -------- --------
Net earnings (loss) from continuing operations 1,215 129 2,576 (533)
-------- -------- -------- --------
DISCONTINUED OPERATIONS:
Gain (loss) from operations, net of tax benefit -- 204 -- 194
-------- -------- -------- --------
NET EARNINGS (LOSS) $ 1,215 $ 333 $ 2,576 $ (339)
======== ======== ======== ========
BASIC EARNINGS (LOSS) PER SHARE:
Net income (loss) from continuing operations $ .08 $ .01 $ .17 $ (.03)
Net income (loss) from discontinued operations -- .01 -- .01
-------- -------- -------- --------
BASIC NET EARNINGS (LOSS) .08 .02 .17 (.02)
-------- -------- -------- --------
AVERAGE COMMON SHARES OUTSTANDING 14,928 14,810 14,899 14,748
======== ======== ======== ========
DILUTED EARNINGS (LOSS) PER SHARE:
Net income (loss) from continuing operations $ .08 $ .01 $ .17 $ (.03)
Net income (loss) from discontinued operations -- .01 -- .01
-------- -------- -------- --------
DILUTED NET EARNINGS (LOSS) $ .08 $ .02 $ .17 $ (.02)
-------- -------- -------- --------
AVERAGE DILUTED COMMON SHARES OUTSTANDING 14,928 14,814 14,899 14,748
======== ======== ======== ========
See accompanying notes to consolidated financial statements.
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LABARGE, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(dollars in thousands)
APRIL 1, July 2,
2001 2000
-------- --------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 1,701 $ 734
Accounts and notes receivable, net 15,196 17,813
Inventories 25,124 22,232
Prepaid expenses 893 864
Deferred tax assets, net 1,412 1,205
-------- --------
TOTAL CURRENT ASSETS $ 44,326 $ 42,848
-------- --------
PROPERTY, PLANT AND EQUIPMENT, NET 12,776 12,683
DEFERRED TAX ASSETS, NET 1,941 2,526
INTANGIBLE ASSETS, NET 4,794 5,516
OTHER ASSETS, NET 4,789 5,160
-------- --------
$ 68,626 $ 68,733
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings $ 3,500 $ 9,730
Current maturities of long-term debt 1,779 1,823
Trade accounts payable 9,840 8,228
Accrued employee compensation 5,361 5,075
Other accrued liabilities 5,434 2,763
-------- --------
TOTAL CURRENT LIABILITIES $ 25,914 $ 27,619
-------- --------
OTHER LONG-TERM LIABILITIES 623 316
LONG-TERM DEBT 7,946 9,284
SUBORDINATED DEBT 5,741 5,741
-------- --------
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value. Authorized 40,000,000 shares; issued 15,773,253
shares at April 1, 2001 and 15,773,253 at July 2, 2000,
including shares in treasury 158 158
Additional paid-in capital 13,609 13,722
Retained earnings 17,554 14,978
Accumulated other comprehensive loss (100) --
Less cost of common stock in treasury, 841,637 shares at
April 1, 2001 and 921,199 shares at July 2, 2000 (2,819) (3,085)
-------- --------
TOTAL STOCKHOLDERS' EQUITY 28,502 25,773
-------- --------
$ 68,626 $ 68,733
======== ========
See accompanying notes to consolidated financial statements.
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LABARGE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(dollars in thousands)
NINE MONTHS ENDED
-------------------------
APRIL 1, April 2,
2001 2000
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss) $ 2,576 $ (339)
Adjustments to reconcile net cash provided by operating activities:
(Gain) due to impairment of assets -- (100)
Net (earnings) from discontinued operations -- (194)
Loss from NotiCom and amortization of technology -- 1,068
Depreciation and amortization 2,160 2,657
Deferred taxes 378 (132)
Other 2 (230)
Changes in assets and liabilities:
Accounts and notes receivable, net 2,617 (2,878)
Inventories (2,891) (5,565)
Prepaid expenses (29) (80)
Trade accounts payable 1,612 4,111
Other accrued liabilities 3,149 (425)
------- -------
NET CASH PROVIDED BY CONTINUING OPERATIONS 9,574 (2,107)
NET CASH PROVIDED BY DISCONTINUED OPERATIONS -- 33
------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES 9,574 (2,074)
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment (1,446) (976)
Decrease (increase) in other assets 283 (460)
Investment in other companies -- (948)
Cash used by investing activities - discontinued operations -- (54)
------- -------
NET CASH USED BY INVESTING ACTIVITIES (1,163) (2,438)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of long-term debt (1,367) (3,942)
Sale (purchase) of common stock 153 51
Net change in short-term borrowings (6,230) 8,450
Net change in short-term debt of discontinued operations -- 100
------- -------
NET CASH USED BY FINANCING ACTIVITIES (7,444) 4,659
------- -------
NET INCREASE IN CASH AND CASH EQUIVALENTS 967 147
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 734 462
------- -------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 1,701 $ 609
======= =======
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 PRESENTATION
The consolidated balance sheets at April 1, 2001 and July 2, 2000, the related
consolidated statements of operations for the three and nine months ended April
1, 2001 and April 2, 2000 and the consolidated statements of cash flows for the
nine months ended April 1, 2001 and April 2, 2000, 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 prior year amounts have been
reclassified to conform with the current year's presentation.
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 July 2, 2000.
2. ACCOUNTS AND NOTES RECEIVABLE
Accounts and notes receivable consist of the following:
(dollars in thousands)
APRIL 1, July 2,
2001 2000
---------- ----------
Billed shipments, net of progress payments $14,854 $17,128
Less allowance for doubtful accounts 256 172
------- -------
Trade receivables, net 14,598 16,956
Other current receivables 598 857
------- -------
$15,196 $17,813
======= =======
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.
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3. INVENTORIES
Inventories consist of the following:
(dollars in thousands)
APRIL 1, July 2,
2001 2000
----------- -----------
Raw materials $12,168 $12,348
Work in progress 14,300 10,210
------- -------
26,468 22,558
Less progress payments 1,344 326
------- -------
$25,124 $22,232
======= =======
In accordance with contractual agreements, the U.S. Government has a security
interest in inventories identified with related contracts for which progress
payments have been received.
4. INTANGIBLE ASSETS, NET
Intangible assets, net, is summarized as follows:
(dollars in thousands)
APRIL 1, July 2,
2001 2000
-------- -------
Software $1,453 $1,366
Patents 80 91
Goodwill 6,695 6,685
------ ------
8,228 8,142
Less amortization 3,434 2,626
------ ------
$4,794 $5,516
====== ======
Amortization expense was approximately $220,000 for the quarter ended April 1,
2001 and $282,000 for the quarter ended April 2, 2000.
5. OTHER ASSETS
Other assets is summarized as follows:
(dollars in thousands)
APRIL 1, July 2,
2001 2000
-------- -------
Cash value of life insurance $3,828 $3,618
Deposits, licenses, and other 861 1,429
Investments in businesses 136 136
------ ------
$4,825 $5,183
Less amortization 36 23
------ ------
$4,789 $5,160
====== ======
Investments in businesses primarily refers to the Company's securities in
Norwood Abbey, Ltd.
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6. SHORT AND LONG-TERM OBLIGATIONS
Short-term borrowings, long-term debt and the current maturities of long-term
debt consist of the following:
(dollars in thousands)
APRIL 1, July 2,
2001 2000
----------- -----------
Short-term borrowings:
Revolving credit agreement:
Balance at period-end $ 3,500 $ 9,730
Interest rate at period-end 6.64% 9.45%
Average amount of short-term borrowings outstanding during period
$ 8,503 $ 4,612
Average interest rate for period 7.97% 9.03%
Maximum short-term borrowings at any month-end $13,302 $10,590
======= =======
Senior long-term debt:
Senior lender:
Term loan $ 2,729 3,908
Mortgage loan 5,919 5,992
Other 1,077 1,207
------- -------
Total senior long-term debt 9,725 11,107
Less current maturities 1,779 1,823
------- -------
Long-term debt, less current maturities $ 7,946 $ 9,284
======= =======
Subordinated debt $ 5,741 $ 5,741
======= =======
The average interest rate was computed by dividing the sum of daily interest
costs by the sum of the daily borrowings for the respective periods.
SENIOR LENDER:
The Company has a senior, secured loan agreement with a bank. The following is a
summary of the agreement:
o A term loan, with a current balance of $2.7 million, requiring repayments
of $393,000 of principal quarterly. Under this schedule, the term loan will
be repaid in December 2002.
o A revolving credit facility up to $18.0 million based on a borrowing base
formula equal to the sum of 85% of eligible receivables, 50% of eligible
finished goods inventories, 30% of other eligible inventories, 50% of the
net book value of equipment and 75% of the net book value of real property
less the current term loan balance and outstanding letters of credit. As of
April 1, 2001, the maximum allowable was $18.0 million. The revolver
borrowing at quarter-end was $3.5 million, and letters of credit
outstanding totaled $2.2 million. Unused revolving credit available at
April 1, 2001 was $12.3 million. The maturity date of the revolving credit
facility is February 2002.
o Covenants and performance criteria which involve Earnings Before Interest,
Taxes, Depreciation and Amortization ("EBITDA") in relation to debt, EBITDA
in relation to fixed charges, and maximum capital expenditures. The Company
is in compliance with its borrowing agreement covenants for the quarter
ended April 1, 2001.
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o Interest on the loans at prime or a stated rate over LIBOR based on certain
ratios. As of the quarter-end, the average rate was approximately 6.64%.
o A $6.2 million mortgage loan to finance the Company's fiscal 1998 purchase
of its headquarters building in St. Louis, Missouri. The loan has a 25-year
amortization, a 7.5% interest rate and is due in January 2008. The balance
at quarter-end was $5.9 million.
OTHER LONG-TERM DEBT:
Industrial Revenue Bonds:
In July 1998, the Company acquired tax-exempt Industrial Revenue Bond
financing in the amount of $1.3 million. The debt is payable over 10 years
with an interest rate of 5.28%. This funding was used to expand the
Berryville, Arkansas, facility. The outstanding balance at April 2001 was
$1.1 million.
Subordinated Convertible Notes:
On March 2, 1999, the Company, through its subsidiary LaBarge-OCS, Inc.,
purchased the remaining 90% of OCS for $5.6 million by (1) exchanging its
Subordinated Convertible Notes ("Notes") due June 2003 in the principal
amount of $4.3 million for the outstanding shares of OCS, and (2)
exchanging 310,000 shares of LaBarge-OCS, Inc. common stock for outstanding
options to purchase OCS common shares. The Notes bear interest at 7.5% per
annum payable quarterly beginning June 29, 1999, and noteholders are
entitled to participation payments if LaBarge-OCS, Inc. achieves certain
levels of earnings before taxes. The Notes are convertible by the holders
into LaBarge, Inc. Common Stock at $8.00 per share at any time after the
first anniversary of the Notes up to their maturity date. The 310,000
shares of LaBarge-OCS, Inc. common stock were exchanged for $1.3 million of
Notes in June 2000.
To mitigate the exposure to changes in interest rates, the Company entered
into an interest rate swap agreement with a bank on February 26, 2001. The
agreement, designated as a hedge, swaps a portion of the Company's exposure
to three-month LIBOR rates with a fixed rate of 5.95%. The notional amount
of the agreement is $4.0 million and expires in June 2003. In accordance
with FAS 133, the change in fair value of the swap, amounting to
approximately $100,000, was recorded to other comprehensive loss.
OTHER LONG-TERM LIABILITIES:
Other long-term liabilities include deferred revenues associated with the
proprietary ScadaNET Network" (representing prepaid communication
services).
7. DISCONTINUED OPERATIONS
On June 30, 2000, LaBarge Clayco Wireless was sold to Evolution Holdings, Inc.
of Phoenix, Arizona. For its 90% interest in this joint venture, the Company
received $4.6 million in cash and a three-year convertible note with an
estimated fair value of $115,000. In the fiscal 2000 fourth quarter, the Company
recognized a one-time gain on the sale of $2.8 million, net of taxes.
LaBarge Clayco Wireless has been accounted for as a discontinued operation.
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8. INCOME TAXES
The Company has alternative minimum and investment tax credit carryforwards of
approximately $422,000 that are available to reduce future federal income taxes.
9. CASH FLOWS
Total cash payments for interest for the three and nine months ended April 1,
2001 were $488,000 and $1.5 million, respectively, compared with $475,000 and
$1.6 million for the three and nine months ended April 2, 2000. Cash payments
for federal and state income taxes were $231,000 and $1.2 million, respectively,
for the three and nine months ended April 1, 2001, compared with a cash refund
for income taxes of $-0- and $754,000, for the three and nine months ended
April 2, 2000.
10. EARNINGS PER COMMON SHARE
Basic and diluted earnings (loss) per share are computed as follows:
THREE MONTHS ENDED NINE MONTHS ENDED
--------------------------- ---------------------------
APRIL 1, April 2, APRIL 1, April 2,
2001 2000 2001 2000
---------- ---------- ---------- ----------
NUMERATOR:
Net earnings (loss) from continuing operations $ 1,215 $ 129 $ 2,576 $ (533)
Net earnings (loss) from discontinued operations -- 204 -- 194
---------- ---------- ---------- ----------
Net earnings (loss) $ 1,215 $ 333 $ 2,576 $ (339)
---------- ---------- ---------- ----------
DENOMINATOR:
Denominator for basic net earnings
(loss) per share 14,928 14,810 14,899 14,748
---------- ---------- ---------- ----------
POTENTIAL COMMON SHARES:
Denominator for diluted net earnings
(loss) per share - adjusted weighted -
average shares and assumed conversions 14,928 14,814 14,899 14,748
---------- ---------- ---------- ----------
BASIC EARNINGS (LOSS) PER SHARE:
Net earnings (loss) from
continuing operations $ .08 $ .01 $ .17 $ (.03)
Earnings (loss) from discontinued operations -- .01 -- .01
---------- ---------- ---------- ----------
BASIC NET EARNINGS (LOSS) $ .08 $ .02 $ .17 $ (.02)
========== ========== ========== ==========
DILUTED EARNINGS (LOSS) PER SHARE:
Net earnings (loss) from
continuing operations $ .08 $ .01 $ .17 $ (.03)
Earnings (loss) from discontinued operations -- .01 -- .01
---------- ---------- ---------- ----------
DILUTED NET EARNINGS (LOSS) PER SHARE: $ .08 $ .02 $ .17 $ (.02)
========== ========== ========== ==========
The effect of conversion of the Subordinated Convertible Notes into common stock
is not considered in the calculations of diluted net earnings per common share
because it would have an anti-dilutive effect on earnings per share.
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11. BUSINESS SEGMENT INFORMATION
Business segments:
(dollars in thousands)
NET SALES TO CUSTOMERS:
THREE MONTHS ENDED NINE MONTHS ENDED
---------------------- ----------------------
APRIL 1, April 2, APRIL 1, April 2,
2001 2000 2001 2000
-------- -------- -------- --------
Manufacturing Services Group $31,530 $21,779 $82,091 $53,241
Network Technologies Group 898 360 1,545 581
------- ------- ------- -------
$32,428 $22,139 $83,636 $53,822
======= ======= ======= =======
EARNINGS (LOSS):
THREE MONTHS ENDED NINE MONTHS ENDED
----------------------- ------------------------
APRIL 1, April 2, APRIL 1, April 2,
2001 2000 2001 2000
-------- -------- -------- --------
Pretax earnings (loss) from continuing
operations:
Manufacturing Services Group $ 2,790 $ 1,900 $ 7,447 $ 1,606
Gain due to impairment of assets -- -- -- 2,300
------- ------- ------- -------
Total Manufacturing Services Group 2,790 1,900 7,447 3,906
Network Technologies Group (365) (490) (1,522) (1,567)
NotiCom -- (462) -- (1,614)
Corporate and other items 61 (60) 14 (7)
Interest expense (433) (550) (1,528) (1,485)
------- ------- ------- -------
NET EARNINGS (LOSS) FROM
CONTINUING OPERATIONS BEFORE TAX $ 2,053 $ 338 $ 4,411 $ (767)
INCOME TAX EXPENSE (BENEFIT) 838 209 1,835 (234)
------- ------- ------- -------
NET EARNINGS (LOSS) FROM
CONTINUING OPERATIONS 1,215 129 2,576 (533)
------- ------- ------- -------
Discontinued operations:
Income (loss) from operations,
net of taxes -- 204 -- 194
------- ------- ------- -------
Net earnings (loss) $ 1,215 $ 333 $ 2,576 $ (339)
======= ======= ======= =======
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DEPRECIATION & AMORTIZATION EXPENSE:
THREE MONTHS ENDED NINE MONTHS ENDED
--------------------- ---------------------
APRIL 1, April 2, APRIL 1, April 2,
2001 2000 2001 2000
-------- -------- -------- --------
Manufacturing Services Group $ 345 $ 327 $1,128 $1,044
Network Technologies Group 226 248 689 763
NotiCom -- 178 -- 547
Corporate and other items 66 102 343 303
------ ------ ------ ------
$ 637 $ 855 $2,160 $2,657
====== ====== ====== ======
INVESTMENTS & CAPITAL EXPENDITURES:
THREE MONTHS ENDED NINE MONTHS ENDED
----------------------- ----------------------
APRIL 1, April 2, APRIL 1, April 2,
2001 2000 2001 2000
-------- -------- -------- --------
Manufacturing Services Group $ (9) $ 175 $ 1,015 $ 686
Network Technologies Group (163) 27 85 127
Investment in NotiCom -- 58 -- 948
Corporate and other items 20 245 63 623
------- ------- ------- -------
$ (152) $ 505 $ 1,163 $ 2,384
======= ======= ======= =======
Investment and capital expenditures is a composite of transactions related to
fixed assets, intangible assets, investment in joint ventures and other assets.
TOTAL ASSETS:
APRIL 1, July 2,
2001 2000
-------- -------
Manufacturing Services Group $45,878 $45,283
Network Technologies Group 5,571 5,878
Corporate and other items 17,177 17,572
------- -------
$68,626 $68,733
======= =======
GEOGRAPHIC INFORMATION:
The Company has no sales offices or facilities outside of the United States.
Sales for export did not exceed 10% of total sales for the three or nine months
ended April 1, 2001.
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LABARGE, INC.
FORM 10-Q
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
FORWARD-LOOKING STATEMENTS
Statements contained in this Report which are not historical facts are
forward-looking statements within the meaning of the federal securities laws.
Forward-looking statements involve risks and uncertainties. Future events and
the Company's actual results could differ materially from those contemplated by
those forward-looking statements. Important factors which could cause the
Company's actual results to differ materially from those projected in, or
inferred by, forward-looking statements are (but are not necessarily limited to)
the following: the impact of increasing competition or deterioration of economic
conditions in the Company's markets; cutbacks in defense spending by the U.S.
Government; unexpected increases in the cost of raw materials, labor and other
resources necessary to operate the Company's business; the availability, amount,
type and cost of financing for the Company and any changes to that financing.
LaBarge, Inc. ("LaBarge" or the "Company") is a Delaware Corporation. The
Company is engaged in the following primary business activities:
o The MANUFACTURING SERVICES GROUP is the Company's core electronics
manufacturing business, which has been its principal business since 1985.
This group designs, engineers and produces sophisticated electronic systems
and devices and complex interconnect systems on a contract basis for its
customers. The Company derived approximately 97% and 98% of its total
revenues from this group for the three and nine months ended April 1, 2001,
respectively.
The group markets its services to companies desiring an engineering and
manufacturing partner capable of developing and providing high-reliability
electronic equipment, including products capable of performing in harsh
environmental conditions, such as high and low temperature, severe shock
and vibration. The group serves customers in a variety of markets with
significant revenues from customers in the government systems, defense,
aerospace, and oil and gas markets. The group's manufacturing facilities
are located in Arkansas, Missouri, Oklahoma and Texas.
The backlog of unshipped orders in the Manufacturing Services Group
increased to $93.2 million at April 1, 2001, compared with $62.7 million at
fiscal 2000 year-end. The growth in backlog is the result of an improved
and reorganized sales and marketing effort that concentrates on the
Company's core competencies and their application to targeted large
customers in a variety of industries. Backlog growth during the quarter was
related to commercial customers, and includes major new customer
relationships in new markets with significant growth potential.
o The NETWORK TECHNOLOGIES GROUP was started in fiscal 1999 through the
acquisition of privately held Open Cellular Systems, Inc. ("OCS"). The
group designs and markets proprietary cellular and network communication
system products and Internet services that provide monitoring and control
of remote industrial equipment. This group is initially focusing its
marketing efforts on the railroad industry to monitor railroad-crossing
equipment, and on the oil and gas pipeline industry to monitor cathodic
protection devices. The Company derived 3% and 2% of its total revenues
from this group for the three and nine months ended April 1, 2001,
respectively.
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The backlog of unshipped orders in the Network Technologies Group was $1.4
million at April 1, 2001, compared with $382,000 at fiscal 2000 year-end.
Contracts with the railroad industry represented the majority of the growth
in the backlog.
SIGNIFICANT EVENTS
Recent significant events include:
o On June 30, 2000, LaBarge Clayco Wireless was sold to Evolution Holdings,
Inc. of Phoenix, Arizona. For its 90% interest in the joint venture, the
Company received $4.6 million in cash and a three-year convertible note
with an estimated fair value of $115,000. The Company recognized a one-time
gain on the sale of $2.8 million, net of taxes. LaBarge Clayco Wireless has
been accounted for as a discontinued operation.
o During the latter part of fiscal 2000, it was determined that significant
additional investment would be required to continue development of NotiCom
L.L.C.'s BusCall(TM) product. During the fourth quarter, the Company
determined it would not provide such additional funding for NotiCom.
Consequently, NotiCom attempted to raise additional equity in the capital
markets. To date, these efforts have not been successful. Given these
events, during the fourth quarter of fiscal 2000, the Company wrote-down
its remaining investment in NotiCom and the related technology to zero. The
total loss to LaBarge, including its share of NotiCom's operations and the
write-down was $4.2 million (before taxes) in fiscal 2000.
RESULTS OF OPERATIONS -- QUARTER ENDED APRIL 1, 2001
NET SALES
(dollars in thousands)
THREE MONTHS ENDED NINE MONTHS ENDED
---------------------- ----------------------
APRIL 1, April 2, APRIL 1, April 2,
2001 2000 2001 2000
-------- -------- -------- -------
Net Sales $32,428 $22,139 $83,636 $53,822
======= ======= ======= =======
For the fiscal 2001 third quarter, ended April 1, 2001, net sales from
continuing operations were $32.4 million compared with $22.1 million for the
same period of fiscal 2000. Sales to our top 10 customers represented 81% of
total revenue in the third quarter of fiscal 2001 versus 65% for the same period
of fiscal 2000. Sales to our top three customers and the portion of total
third-quarter sales they represented were as follows: Northrop Grumman, 33%;
Schlumberger, 18%; and Lockheed Martin, 9%.
The MANUFACTURING SERVICES GROUP. Sales in the manufacturing services segment of
the business were $31.5 million, accounting for 97% of total sales for the
quarter ended April 1, 2001, up $9.8 million (45%) over the same period of
fiscal 2000.
Comparing the third quarter of fiscal 2001 with the same period of fiscal 2000,
the significant sales growth came from commercial customers. Sales to commercial
customers grew 107% to $24.6 million. Sales of electro-mechanical assemblies for
mail handling equipment used by the U.S. Postal Service was the most significant
contributor to this growth. Sales to oil and gas and commercial aerospace
customers also increased during the period.
NETWORK TECHNOLOGIES GROUP. Sales by this segment of the Company were 3% of
total sales for the quarter ended April 1, 2001.
The Network Technologies Group generated third quarter sales of $898,000 versus
$360,000 for the third quarter of fiscal 2000. Sales were primarily to the
railroad industry. During fiscal 2000, the group's proprietary
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ScadaNET Network(TM) was selected by several rail organizations as the system of
choice for their remote monitoring programs. The system is being installed at
nearly 2,600 active crossings by The Burlington Northern and Santa Fe Railway
Company, Union Pacific Railroad, Montana Rail Link and I&M Rail Link.
Second-quarter sales represented the continuation of this build-out program. The
ScadaNET Network is a standard component of all new and upgraded rail crossings
built by the Union Pacific Railroad and Burlington Northern and Santa Fe Railway
Company. In January 2001, the Company reached an agreement with Union Pacific
Railroad to provide equipment and remote monitoring services to retrofit 1,100
crossings in the state of Illinois.
GROSS PROFIT
(dollars in thousands)
THREE MONTHS ENDED NINE MONTHS ENDED
------------------------ ---------------------------
APRIL 1, April 2, APRIL 1, April 2,
2001 2000 2001 2000
-------- -------- --------- ----------
Gross profit $ 7,275 $ 5,216 $ 18,363 $ 11,037
Gross margin 22.4% 23.6% 22.0% 20.5%
======== ======== ========= =========
A breakdown of margins by group shows the following:
MANUFACTURING SERVICES GROUP. This group's gross profit margin was 21.5% for the
quarter (21.4% for the nine months) ended April 1, 2001, compared with 24.5% for
the quarter (21.5% for the nine months) ended April 2, 2000.
NETWORK TECHNOLOGIES GROUP. This group's gross profit margin was 54.4% for the
quarter (52.4% for the nine months) ended April 1, 2001. This represents gross
profit amounts of $488,000 and $810,000 for the three and nine months ended
April 1, 2001. In fiscal year 2000, gross profit was $188,000 and $400,000 for
the three and nine months ended April 2, 2000.
SELLING AND ADMINISTRATIVE EXPENSE
(dollars in thousands)
THREE MONTHS ENDED NINE MONTHS ENDED
-------------------------- -----------------------------
APRIL 1, April 2, APRIL 1, April 2,
2001 2000 2001 2000
---------- ----------- ------------ ------------
Selling and administrative
expense $ 5,010 $ 3,920 $ 13,250 $ 11,240
Percent of sales 15.5% 17.7% 15.8% 20.9%
======== ======== ========= =========
Selling and administrative expense rose for the three and nine months ended
April 1, 2001 as compared with prior periods, reflecting much higher sales
levels. However, selling and administrative expense declined as a percentage
reflecting increased sales without a proportionate increase in selling and
administrative expense. Growth in prior periods' selling and administrative
expense was in anticipation of higher levels of sales and bookings that were
realized in the third quarter and the expected sales levels for the remainder of
the fiscal year.
MANUFACTURING SERVICES GROUP. Selling and administrative expense for this group
was $4.1 million (13.0% of sales) for the quarter ended April 1, 2001 and $3.4
million (15.7% of sales) for the same period of fiscal 2000.
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NETWORK TECHNOLOGIES GROUP. This group accounted for $854,000 of selling and
administrative expense for the quarter ended April 1, 2001, including $215,000
in amortization of goodwill. For the same period of fiscal 2000, these expenses
totaled $679,000, including $240,000 of goodwill. Selling and administrative
expense increased in the fiscal 2001 periods due to additional selling and
development activity, larger sales volume and greater allocation of corporate
expenses.
INTEREST EXPENSE
(dollars in thousands)
THREE MONTHS ENDED NINE MONTHS ENDED
--------------------- ----------------------
APRIL 1, April 2, APRIL 1, April 2,
2001 2000 2001 2000
-------- -------- --------- --------
Interest expense $ 433 $ 550 $1,528 $1,485
====== ====== ====== ======
Interest expense decreased for the quarter ended April 1, 2001, primarily due to
lower short-term borrowings. Average short-term borrowings for the nine-month
period ended April 1, 2001 were slightly higher than the previous period.
LOSS FROM NOTICOM
(dollars in thousands)
THREE MONTHS ENDED NINE MONTHS ENDED
------------------------------ -------------------------------
APRIL 1, April 2, APRIL 1, April 2,
2001 2000 2001 2000
---------- ----------- ----------- ----------
Loss from NotiCom $ -- $ 462 $ -- $ 1,614
======= ======= ======= =======
The Company is no longer providing funding for NotiCom L.L.C. and, at the end of
fiscal year 2000, wrote-down its remaining investment to zero. No additional
expense is expected to be incurred from the Company's interest in NotiCom's
operations.
PRETAX EARNINGS (LOSS) FROM CONTINUING OPERATIONS
(dollars in thousands)
THREE MONTHS ENDED NINE MONTHS ENDED
--------------------- ---------------------
APRIL 1, April 2, APRIL 1, April 2,
2001 2000 2001 2000
-------- -------- -------- --------
Pretax earnings (loss) $2,053 $ 338 $4,411 $ (767)
====== ====== ====== ======
The increase in earnings from continuing operations for the quarter ended
April 1, 2001, compared with the same period of fiscal 2000, is primarily
attributable to significantly higher sales (an increase of $9.8 million) and
gross profit (an increase of $1.6 million) from the Manufacturing Services
Group, a $125,000 reduction in the pretax loss of the Network Technologies Group
and the absence of a charge associated with NotiCom L.L.C.
The Company sold certain technology during the quarter ended October 1, 2000,
for a total of $575,000. Revenue recognized in connection with this sale in the
quarter ended April 1, 2001, was approximately $119,000.
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TAX EXPENSE (BENEFIT) FROM CONTINUING OPERATIONS
(dollars in thousands)
THREE MONTHS ENDED NINE MONTHS ENDED
--------------------- ---------------------
APRIL 1, April 2, APRIL 1, April 2,
2001 2000 2001 2000
-------- -------- -------- --------
Tax expense (benefit) from
continuing operations $ 838 $ 209 $1,835 $ (234)
====== ====== ====== ======
Tax expense (benefit) was impacted by non-deductible goodwill expense of
$215,000 incurred in connection with the OCS acquisition in the quarter ended
April 1, 2001, and $240,000 for the same period of fiscal 2000.
DISCONTINUED OPERATIONS, NET OF TAX
(dollars in thousands)
THREE MONTHS ENDED NINE MONTHS ENDED
--------------------------- ---------------------------
APRIL 1, April 2, APRIL 1, April 2,
2001 2000 2001 2000
-------- -------- -------- --------
Income from discontinued operations $ -- $ 204 $ -- $ 194
===== ====== ===== =======
Discontinued operations reflect the results of LaBarge Clayco Wireless, sold on
June 30, 2000.
FINANCIAL CONDITION AND LIQUIDITY
The following table shows LaBarge's equity and total debt positions:
STOCKHOLDERS' EQUITY AND DEBT
(dollars in thousands)
APRIL 1, July 2,
2001 2000
------- -------
Stockholders' equity $28,502 $25,773
Debt $18,966 $26,578
======= =======
The Company's continuing operations provided $748,000 of net cash for the
quarter ended April 1, 2001. A reduction in cash balances, together with cash
from earnings, offset by an increase in net working capital assets, reduced
short-term and long-term borrowings during the quarter ended April 1, 2001.
Currently, our total debt-to-equity ratio is .67 to 1 versus 1.03 to 1 at the
end of fiscal 2000.
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RISK FACTORS
The Company operates in a competitive marketplace and is exposed to risks
associated with economic conditions.
The Network Technologies Group, as a relatively new operation, has used cash
since its acquisition in March 1999. It is too early to predict the timing and
the extent of the potential widespread acceptance of this segment's products and
its contribution to future earnings and cash flow.
Overall, we believe our availability of funds going forward from cash generated
from operations and available credit with the bank should be sufficient to
support the planned operations and capital expenditures of our business for the
next two years.
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PART II
ITEM 5. Other Information
At its regular quarterly meeting held on May 2, 2001, the Company's
Board of Directors voted to increase the size of the Board from eight
to nine members and to appoint Robert G. Clark as a Class C Director.
Mr. Clark is Chairman and Chief Executive Officer of Clayco
Construction Company, a national, commercial construction company
founded in 1984 and headquartered in St. Louis, Missouri.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Reports on Form 8-K: On March 26, 2001, a current report on Form
8-K was filed in accordance with Regulation FD to report certain
information the Registrant intended to present to certain
institutional investors.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LABARGE, INC.
--------------------------------
Date: May 11, 2001
/s/ Donald H. Nonnenkamp
-------------------------------
Donald H. Nonnenkamp
Vice President
and Chief Financial Officer
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