SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10Q
QUARTERLY REPORT UNDER SECTION 13 or 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended December 30, 2001
Commission file number: 1-5761
LABARGE, INC.
(Exact Name of Registrant as specified in its charter)
DELAWARE
73-0574586
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
9900A Clayton Road, St. Louis, Missouri
63124
(Address)
(Zip Code)
(314) 997-0800
(Registrant's telephone number, including Area Code)
N/A
(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. YesX. No.
Indicate the number of shares outstanding of each of the Issuer's
classes of common stock
as of December 30, 2001. 14,971,398 shares of common stock.
LABARGE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(dollars in thousands except per share data)
Three Months Ended
Six Months Ended
December 30,
December 31,
December 30,
December 31,
2001
2000
2001
2000
Net sales
$ 31,495
$ 26,923
$ 63,603
$ 51,207
Costs and expenses:
Cost of sales
24,825
21,383
50,713
40,120
Selling and administrative expense
4,476
4,052
8,831
8,240
Interest expense
336
557
652
1,095
Other income, net
(102)
(327)
(197)
(606)
Income before income taxes
1,960
1,258
3,604
2,358
Income tax expense
760
532
1,369
997
Net earnings
$ 1,200
$ 726
$ 2,235
$ 1,361
Basic net earnings per share
$ .08
$ .05
$ .15
$ .09
Average common shares outstanding
14,961
14,899
14,971
14,884
Diluted net earnings per share
$ .08
$ .05
$ .15
$ .09
Average diluted common shares outstanding
15,364
14,899
15,254
14,884
See accompanying notes to consolidated financial statements.
LABARGE, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(dollars in thousands)
December 30,
July 1,
2001
2001
ASSETS
Current assets:
Cash and cash equivalents
$ 2,322
$ 666
Accounts and notes receivable, net
11,888
16,946
Inventories
22,666
23,212
Prepaid expenses
700
727
Deferred tax assets, net
923
1,087
Total current assets
$ 38,499
$ 42,638
Property, plant and equipment, net
13,231
13,113
Deferred tax assets, net
1,039
1,908
Intangible assets, net
4,927
4,693
Other assets, net
5,339
5,186
$ 63,035
$ 67,538
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings
$ 2,650
$ 2,500
Current maturities of long-term debt
1,758
1,779
Trade accounts payable
7,734
9,605
Accrued employee compensation
5,342
5,965
Other accrued liabilities
886
3,899
Total current liabilities
$ 18,370
$ 23,748
Other long-term liabilities
1,616
953
Long-term debt
5,621
7,500
Subordinated debt
5,621
5,621
Stockholders' equity:
Common stock, $.01 par value. Authorized 40,000,000 shares; issued 15,773,253 shares at
December 30, 2001 and 15,773,253 at July 1, 2001, including shares in treasury
158
158
Additional paid-in capital
13,520
13,569
Retained earnings
21,041
18,806
Accumulated other comprehensive loss
(164)
(97)
Less cost of common stock in treasury, shares at 825,519 at
December 30, 2001 and 812,176 shares at July 1, 2001
(2,748)
(2,720)
Total stockholders' equity
31,807
29,716
$ 63,035
$ 67,538
See accompanying notes to consolidated financial statements.
LABARGE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(dollars in thousands)
Six Months Ended
December 30,
December 31,
2001
2000
Cash flows from operating activities:
Net earnings
$ 2,235
$ 1,361
Adjustments to reconcile net cash provided by
operating activities:
Depreciation and amortization
1,108
1,523
Deferred taxes
1,033
378
Other
23
3
Changes in assets and liabilities, net of acquisitions:
Accounts and notes receivable, net
5,057
3,802
Inventories
546
(2,790)
Prepaid expenses
27
52
Trade accounts payable
(1,871)
1,840
Accrued liabilities and other
(3,039)
2,657
Net cash provided by operating activities
5,119
8,826
Cash flows from investing activities:
Additions to property, plant and equipment
(481)
(851)
Additions to other assets
(1,154)
(464)
Net cash used by investing activities
(1,635)
(1,315)
Cash flows from financing activities:
Repayments of long-term debt
(1,900)
(905)
(Purchase) sale of common stock
(78)
106
Net change in short-term borrowings
150
(4,543)
Net cash used by financing activities
(1,828)
(5,342)
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
1,656
666
2,169
734
Cash and cash equivalents at end of period
$ 2,322
$ 2,903
See accompanying notes to consolidated financial statements.
LABARGE, INC.
FORM 10-Q
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. CONSOLIDATED FINANCIAL STATEMENTS - BASIS OF PRESENTATION
The consolidated balance sheets at December 30, 2001 and July 1, 2001,
the related consolidated
statements of operations for the three and six months ended
December 30, 2001 and
December 31, 2000 and the consolidated statements of cash
flows for the six months ended
December 30, 2001 and
December 31, 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 1, 2001.
2. GROSS AND NET SALES
Gross and net sales consist of the following:
(dollars in thousands)
Three Months Ended
Six Months Ended
December 30,
December 31,
December 30,
December 31,
2001
2000
2001
2000
Gross sales
$ 31,923
$ 27,004
$ 65,041
$ 51,871
Less sales discounts and
milestone liquidations
428
81
1,438
664
Net sales
$ 31,495
$ 26,923
$ 63,603
$ 51,207
The Company accepts sales discounts from a few customers in the normal
course of business.
3. ACCOUNTS AND NOTES RECEIVABLE
Accounts and notes receivable consist of the following:
(dollars in thousands)
December 30,
July 1,
2001
2001
Billed shipments, net of progress payments
$ 12,016
$ 16,703
Less allowance for doubtful accounts
257
289
Trade receivables, net
11,759
16,414
Other current receivables
129
532
$ 11,888
$ 16,946
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.
At December 30, 2001 and July 1, 2001, other current receivables
include $0 and
$346,000 of customer
payments to be received as a settlement under a prior claim for material.
For the six months ending December 30, 2001 and twelve months ending at
July 1, 2001, expense
for doubtful accounts charged to income before income
taxes was $26,000 and $324,000.
4. INVENTORIES
Inventories consist of the following:
(dollars in thousands)
December 30,
July 1,
2001
2001
Raw materials
$ 12,460
$ 11,554
Work in progress
11,964
13,028
Less reserve for obsolescence
874
755
23,550
23,827
Less progress payments
884
615
$ 22,666
$ 23,212
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.
For the six months ending December 30, 2001 and the twelve months ending
July 1, 2001, expense for inventory reserves charged to income before income
taxes was $312,000
and $1.1 million.
5. INTANGIBLE ASSETS, NET
Intangible assets, net, is summarized as follows:
(dollars in thousands)
December 30,
July 1,
2001
2001
Software
$ 1,900
$ 1,598
Patents
110
91
Goodwill
6,694
6,694
$ 8,704
$ 8,383
Less amortization
3,777
3,690
$ 4,927
$ 4,693
In July 2001, the Financial Accounting Standards Board ("FASB")
issued Statement
No. 142, "Goodwill and Other Intangible Assets." Statement 142
requires that goodwill
and intangible assets with indefinite useful lives no longer be
amortized, but instead
ested for impairment at least annually in accordance with the
provisions of Statement
142. Statement 142 also requires that intangible assets with
definite useful lives be
amortized over their respective estimated useful lives to their
estimated residual values,
and reviewed for impairment in accordance with SFAS No. 121,
"Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of."
The Company adopted the provisions of Statement 142 in the
first quarter,
ended September 30, 2001.
Goodwill amortization expense was $0 for the three and six months
ended December 30, 2001.
Goodwill amortization expense was $226,000 for the second quarter and
$453,000 for the six months, ended
December 31, 2000.
6. OTHER ASSETS
Other assets is summarized as follows:
(dollars in thousands)
December 30,
July 1,
2001
2001
Cash value of life insurance
$ 4,372
$ 4,220
Deposits, licenses, and other
878
871
Investments in businesses
136
136
$ 5,386
$ 5,227
Less amortization
47
41
$ 5,339
$ 5,186
Investments in businesses primarily refers to securities of Norwood Abbey, Ltd.,
held by the Company.
7. 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 30,
July 1,
2001
2000
Short-term borrowings:
Revolving credit agreement:
Balance at period-end
$ 2,650
$ 2,500
Interest rate at period-end
2.67%
4.78%
Average amount of short-term borrowings outstanding during period
$ 2,538
$ 7,275
Average interest rate for period
4.32%
8.30%
Maximum short-term borrowings at any month-end
$ 3,282
$ 13,302
Senior long-term debt:
Senior lender:
Term loan
$ 1,551
$ 2,336
Mortgage loan
4,841
5,895
Other
987
1,048
Total senior long-term debt
7,379
9,279
Less current maturities
1,758
1,779
Long-term debt, less current maturities
$ 5,621
$ 7,500
Subordinated debt
$ 5,621
$ 5,621
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:
* A term loan, with a current balance of $1.6 million, requiring
repayments of $393,000 of principal
quarterly.
* 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 December 30, 2001,
the maximum allowable was
$14.9 million. The revolver borrowing at quarter-end was $2.7 million, and
letters of credit outstanding
totaled $2.0 million. Unused revolving credit available at December 30, 2001
was $10.2 million. This
credit facility matures in February 2002. It is the Company's intention to
renew or replace this credit facility.
* Covenants and performance criteria which involve Earnings Before
Interest, Taxes, Depreciation
and Amortization ("EBITDA") in relation to debt and, in addition, after
June 30, 2000, EBITDA in relation to
fixed charges. The Company is in compliance with its borrowing
agreement covenants for the quarter
ended December 2001.
* Interest on the loans at prime or a stated rate over LIBOR based on
certain ratios. For the
quarter, the average rate was approximately 4.32%.
* A $6.2 million mortgage loan to finance the Company's fiscal 1998
purchase of its
headquarters building in St. Louis, Missouri. The loan payment
schedule is based on a 25-year
amortization with a balloon final payment due in January 2008, and
a 7.5% interest rate. The balance
at quarter-end was $4.8 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
December 30, 2001 was $987,000.
Subordinated Convertible Notes:
In March 1999, the Company, through its subsidiary LaBarge-OCS, Inc.
issued its Subordinated
Convertible Notes ("Notes") due June 2003 in the aggregate principal amount
of $5.6 million for the
acquisition of OCS. The Notes bear interest at 7.5% per annum payable
quarterly, 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 S
tock at $8.00 per share at
any time up to their maturity date.
OTHER LONG-TERM LIABILITIES:
Other long-term liabilities include deferred revenues associated with the
proprietary
ScadaNET Network(tm) (representing prepaid communication services) in the
amount of $1.3 million
and customer advances in the amount of $160,000.
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 as amended on
November 6, 2001. This
agreement, designated as a cash flow 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 $3.5 million
and it expires in June 2003. In accordance with SFAS 133, as amended by
SFAS 138, the change in
fair value of the swap during the second quarter of fiscal 2002, amounting
to approximately $28,000,
was recorded to other comprehensive loss.
SUBSEQUENT EVENTS:
Effective February 1, 2002, the Company's revolving credit agreement was
renewed under
substantially the same terms and conditions. The new revolving credit
agreement amount is
$15.0 million and matures in May 2003.
Also, on February 1, 2002, the outstanding balance of the senior
secured term loan,
$1.6 million, was repaid in full.
8. CASH FLOWS
Total cash payments for interest for the three and six months ended
December 30, 2001
were $237,000 and $569,000 , compared with $456,000 and $1.0 million
for the three and six
months ended December 31, 2000. Cash payments for federal and state
income taxes were
$880,000 and $1.2 million for the three and six months ended
December 30, 2001, compared
with $845,00 and $1.7 million for the three and six months
ended December 31, 2000.
9. EARNINGS PER COMMON SHARE
Basic and diluted earnings per share are computed as follows and
includes adjustments to
prior period required by the adoption of FAS 142:
Three Months Ended
Six Months Ended
December 30,
2001
December 31,
2000
December 30,
2001
December 31,
2000
Numerator:
Reported net earnings
$ 1,200
$ 726
$ 2,235
$ 1,361
Add back: Goodwill amortization expense
-
226
-
453
Adjusted net earnings
$ 1,200
$ 952
$ 2,235
$ 1,814
Denominator:
Denominator for basic net earnings per share
14,961
14,899
14,971
14,884
Potential common shares:
Denominator for diluted net earnings per share - adjusted weighted-average shares and
assumed conversions
15,364
14,899
15,254
14,884
Basic net earnings per share:
Reported net earnings
$ .08
$ .05
$ .15
$ .09
Goodwill amortization expense
-
.01
-
.03
Adjusted net earnings per share
$ .08
$ 06
$ .15
$ .12
Diluted net earnings per share
Reported net earnings
$ .08
$ .05
$ .15
$ .09
Goodwill amortization expense
-
.01
-
.03
Adjusted net earnings per share
$ .08
$ .06
$ .15
$ .12
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.
10. BUSINESS SEGMENT INFORMATION
Business segments:
(dollars in thousands)
NET SALES TO CUSTOMERS:
Three Months Ended
Six Months Ended
December 30,
2001
December 31,
2000
December 30,
2001
December 31,
2000
Manufacturing Services Group
$ 30,653
$ 26,565
$ 61,683
$ 50,560
Network Technologies Group
842
358
1,920
647
$ 31,495
$ 26,923
$ 63,603
$ 51,207
EARNINGS:
Three Months Ended
Six Months Ended
December 30,
December 31,
December 30,
December 31,
2001
2000
2001
2000
Pretax earnings:
Manufacturing Services Group
$ 2,419
$ 2,349
$ 4,345
$ 4,657
Network Technologies Group
(212)
(560)
(289)
(1,159)
Corporate and other items
89
26
200
(45)
Interest expense
(336)
(557)
(652)
(1,095)
Net earnings before income taxes
$ 1,960
$ 1,258
$ 3,604
$ 2,358
Income tax expense
760
532
1,369
997
Net earnings
1,200
$ 726
$ 2,235
$ 1,361
DEPRECIATION & AMORTIZATION EXPENSE:
Three Months Ended
Six Months Ended
December 30,
2001
December 31,
2000
December 30,
2001
December 31,
2000
Manufacturing Services Group
$ 419
$ 375
$ 824
$ 784
Network Technologies Group
24
229
44
463
Corporate and other items
122
135
240
276
$ 565
$ 739
$ 1,108
$ 1,523
INVESTMENTS & CAPITAL EXPENDITURES:
Three Months Ended
Six Months Ended
December 30,
2001
December 31,
2000
December 30,
2001
December 31,
2000
Manufacturing Services Group
$ 477
$ 356
$ 1,208
$ 1,024
Network Technologies Group
81
212
160
248
Corporate and other items
411
(180)
267
43
$ 969
$ 388
$ 1,635
$ 1,315
TOTAL ASSETS:
December 30,
2001
July 1,
2001
Manufacturing Services Group
$ 40,873
$ 46,150
Network Technologies Group
5,612
5,459
Corporate and other items
16,550
15,929
$ 63,035
$ 67,538
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 months and six
months ended December 30, 2001.
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:
* The Manufacturing Services Group is the Company's core electronics
manufacturing services
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. In the fiscal 2002 second quarter, the Company derived
approximately 97% of its total revenues
from this group.
The group markets its services to companies in technology-driven
industries 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, oil and gas,
and other commercial markets. The group's engineering and manufacturing
facilities are located in
Arkansas, Missouri, Oklahoma and Texas.
The backlog of unshipped orders in the Manufacturing Services Group
increased to $94.6 million
at December 30, 2001 compared with $89.5 million at December 31, 2000.
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 the application of those competencies to targeted
large customers in a
variety of industries.
* 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. Results of the group are included in
the consolidated results
of the Company since the date of the OCS acquisition, March 2, 1999.
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% of its total
revenues from this group for the three months and six months
ended December 30, 2001.
The backlog of unshipped orders in the Network Technologies
Group is $540,000 at
December 30, 2001, compared with $860,000 at December 31, 2000.
SIGNIFICANT EVENTS
Recent significant events include:
* In July 2001, the Financial Accounting Standards Board ("FASB")
issued Statement No. 142,
"Goodwill and Other Intangible Assets." Statement 142 requires that
goodwill and intangible assets
with indefinite useful lives no longer be amortized, but instead tested
for impairment at least annually
in accordance with the provisions of Statement 142. Statement 142
will also require that intangible
assets with definite useful lives be amortized over their respective
estimated useful lives to their estimated
residual values, and reviewed for impairment in accordance with
SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of."
The Company has adopted the provisions of Statement 142 with the
first fiscal quarter ended
September 30, 2001.
Goodwill amortization expense was $0 for the quarter ended
December 30, 2001 and $226,000
for the quarter ended December 31, 2000.
RESULTS OF OPERATIONS - THREE MONTHS ENDED DECEMBER 30, 2001
Net Sales
(dollars in thousands)
Three Months Ended
Six Months Ended
December 30,
2001
December 31,
2000
December 30,
2001
December 31,
2000
Net Sales
$ 31,495
$ 26,923
$ 63,603
$ 51,207
For the fiscal 2002 second quarter, ended December 30, 2001, net
sales from continuing
operations were
$31.5 million compared with $26.9 million for the same period of
fiscal 2001. Sales to top
10 customers represented 79% of total revenue in the second quarter
of fiscal 2002 versus 71% for the
same period of fiscal 2001. The Company's top three customers and
the portion of total second-quarter
sales they represented were as follows: Northrop Grumman, 28%;
Schlumberger, 17%; and Lockheed
Martin, 13%.
The Manufacturing Services Group. Sales in the manufacturing
services segment of the
business were
$30.7 million, accounting for 97% of total sales for the quarter
ended December 30, 2001,
up $4.1 million, or 15%, over the same period of fiscal 2001.
The significant sales growth came from both government systems
and defense customers.
Sales to the defense industry grew 30%, primarily consisting of
components of land-based and ship-borne
radar systems. Sales of electro-mechanical assemblies for mail
sorting equipment used by the U.S. Postal
Service was the most significant contributor to the growth in government
systems, increasing 43% year over year.
Network Technologies Group. Sales of the Network Technologies
Group were 3% of total sales
for the quarter and six months ended December 30, 2001.
The Group generated second-quarter sales of $842,000 million
versus $358,000 for the second
quarter of fiscal 2001. Sales were primarily to the railroad industry
where the Company's ScadaNET
Network(tm) product is used primarily to monitor railroad crossing
equipment. The major contributor to
second-quarter sales growth was increased shipments to the
Union Pacific Railroad.
The Company also began shipping small numbers of units to
targeted customers in the pipeline
market where the ScadaNET Network(tm) is used to monitor the
performance of cathodic protection
devices on petroleum and natural gas pipelines.
Gross Profit
(dollars in thousands)
Three Months Ended
Six Months Ended
December 30,
2001
December 31,
2000
December 30,
2001
December 31,
2000
Gross profit
Gross margin
$ 6,670
21.2%
$ 5,540
20.6%
$ 12,890
20.3%
$ 11,087
21.7%
A breakdown of margins by group shows the following:
Manufacturing Services Group. This group's gross profit margin
was 20.3% for the quarter
ended December 30, 2001, compared with 20.2% for the quarter
ended December 31, 2000.
Network Technologies Group. This group's gross profit margin
was 54.0% for the quarter ended
December 30, 2001, compared with 49.3% for the quarter ended
December 31, 2000.
Selling and Administrative Expenses
(dollars in thousands)
Three Months Ended
Six Months Ended
December 30,
2001
December 31,
2000
December 30,
2001
December 31,
2000
Selling and administrative expenses
Percent of sales
$ 4,476
14.2%
$ 4,052
15.1%
$ 8,831
13.9%
$ 8,240
16.1%
Selling and administrative expenses rose for the three and
six months ended
December 30, 2001, compared with the prior year's periods, as a
result of increased sales.
However, selling and administrative expenses declined as
a percentage of sales reflecting the
accompanying higher sales levels.
Manufacturing Services Group. Selling and administrative
expenses for this group were $3.8 million
(12.3% of sales) for the quarter ended December 30, 2001
and $3.2 million (12.1% of sales) for the
same period of fiscal 2001.
Network Technologies Group. Selling and administrative
expenses for the quarter ended
December 30, 2001 for this group were $667,000 and included
no goodwill amortization. For
the same period of fiscal 2001, these expenses totaled $736,000,
including $217,000 in amortization
of goodwill. Selling and administrative expenses increased in the
fiscal 2002 period due to additional
selling and development activity, larger sales volume and greater
allocation of corporate expenses.
Interest Expense
(dollars in thousands)
Three Months Ended
Six Months Ended
December 30,
2001
December 31,
2000
December 30,
2001
December 31,
2000
Interest expense
$ 336
$ 557
$ 652
$ 1,095
Interest expense decreased for the quarter ended
December 30, 2001, primarily due to
lower debt levels and lower interest rates on short-term borrowings.
Average short-term borrowings
for the three- and six-month period ended December 30, 2001 were
$7.8 million lower than the same
periods of fiscal 2001. Average interest rates declined 450 basis
points for the six months ended
December 30, 2001.
Pretax Earnings
(dollars in thousands)
Three Months Ended
Six Months Ended
December 30,
2001
December 31,
2000
December 30,
2001
December 31,
2000
Pretax earnings
$ 1,960
$ 1,258
$ 3,604
$ 2,358
The increase in pretax earnings for the quarter ended
December 30, 2001, compared with the
same period of fiscal 2001, is primarily attributable to significantly higher
gross profit ($1.1 million) on
higher sales
($4.6 million), a reduction in goodwill amortization expense of $226,000
and a $221,000
reduction in interest expense.
Tax Expense
(dollars in thousands)
Three Months Ended
Six Months Ended
December 30,
2001
December 31,
2000
December 30,
2001
December 31,
2000
Tax Expense
$ 760
$ 532
$ 1,369
$ 997
The tax rate for the quarter ended December 30, 2001, was lower
than the prior year's fiscal
second quarter due to the elimination of the non-deductible goodwill
amortization expense of $226,000.
FINANCIAL CONDITION AND LIQUIDITY
The following table shows LaBarge's equity and total debt positions:
Stockholders' Equity and Debt
(dollars in thousands)
December 30,
July 1,
2001
2001
Stockholders' equity
$ 31,807
$ 29,716
Debt
$ 15,650
$ 17,400
The Company's operations provided $3.0 million and
$5.1 million of net cash for the
three and six months ended December 30, 2001.
Currently, total debt-to-equity ratio for the Company
is .49 to 1 versus .59 to 1 at the
end of fiscal 2001.
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 during its
first two years of operation. 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, management believes our availability of funds going
forward from cash generated
from operations and available bank credit should be sufficient to
support the planned operations and
capital expenditures of the Company's business for the next two years.
New Accounting Standards
In July 2001, the Financial Accounting Standards Board ("FASB")
issued Statement No. 141,
"Business Combinations," and Statement No. 142, "Goodwill and
Other Intangible Assets." Statement
141 requires that the purchase method of accounting be used for all
business combinations initiated or
completed after June 30, 2001. Statement 141 also specifies criteria
that intangible assets acquired in a
purchase method business combination must meet to be recognized and
reported apart from goodwill.
Statement 142 requires that goodwill and intangible assets with indefinite
useful lives no longer be
amortized, but instead tested for impairment at least annually in
accordance with the provisions of
Statement 142. Statement 142 also requires that intangible assets
with definite useful lives be
amortized over their respective estimated useful lives to their estimated
residual values, and reviewed
for impairment in accordance with SFAS No. 121, "Accounting for the Impairment
of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of."
The Company has adopted the provisions of Statement 142 and has
reassessed the useful
lives and residual values of all recorded intangible assets. No change
in amortization periods was
made. The Company has received third party expert advice as to the
evaluation of goodwill and
intangible assets value. No impairment was required to be recorded.
Subsequent Events:
Effective February 1, 2002, the Company's revolving credit agreement
was renewed under
substantially the same terms and conditions. The new revolving credit
agreement amount is
$15.0 million and matures in May 2003.
Also, on February 1, 2002, the outstanding balance of the Company's
senior secured term
loan, $1.6 million, was repaid in full.
PART II
ITEM 4. Submission of Matter to a Vote of Security Holders
On November 14, 2001, at the Company's Annual Meeting of
Stockholders, stockholders
took the following actions:
a) Elected three Class C Directors for a term ending in 2004 and one
Class B Director for a
term ending in 2003.
Class C:
Votes FOR
Votes ABSTAINING
Robert H. Chapman
13,704,324
94,934
Richard P. Conerly
13,699,864
99,394
Pierre L. LaBarge, Jr.
13,665,225
134,033
Class B:
Robert G. Clark
13,706,463
92,795
b) Ratified the selection of KPMG LLP as independent accountants for
the fiscal year 2002,
with 13,729,677 FOR votes, 46,820 AGAINST votes, and 22,761
votes ABSTAINED.
ITEM 6. Exhibits and Reports on Form 8-K
Reports on Form 8-K: Current reports on From 8-K were filed on
the dates that follow in
accordance with Regulation FD to report certain information the
Registrant intended to present to
certain institutional investors:
i. October 8, 2001
ii. November 8, 2001
iii. December 13, 2001.
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: February 7, 2002
/s/ Donald H. Nonnenkamp
Donald H. Nonnenkamp
Vice President
and Chief Financial Officer