LaBarge reports increases in sales and earnings for Q4 and earnings
Aug 26, 2005
Net Sales up 39%, earnings up 58% and EPS increased to $.68 vs. $.44 for the year.
LaBarge, Inc. (AMEX: LB) reported that financial results for the fiscal 2005 fourth quarter and year ended July 3, 2005 rose significantly over prior-year levels.
For the fiscal 2005 fourth quarter, net sales rose 10 percent to $45,105,000, compared with $40,910,000 for the year-ago period. Fiscal 2005 fourth-quarter net earnings increased 14 percent to $2,839,000, or $.18 per diluted share, compared with $2,501,000, or $.16 per diluted share, in the fiscal 2004 fourth quarter.
For the 2005 fiscal year, net sales rose 39 percent to $182,294,000, compared with $131,510,000 for the year-ago period. Net earnings for the 2005 fiscal year grew 58 percent to $10,870,000, or $.68 per diluted share, compared with $6,869,000, or $.44 per diluted share, in fiscal 2004. Fiscal 2004 results include a net loss from discontinued operations of $102,000, or $.01 per share. LaBarge's Pittsburgh operation, which the Company acquired in February 2004, contributed net sales of $53,045,000 and earnings of approximately $.13 per diluted share in the 2005 fiscal year, versus $17,553,000 and earnings of approximately $.06 per diluted share in the prior fiscal year.
Gross margin in fiscal 2005 was 22.6 percent compared with 23.1 percent in the previous fiscal year. Typically, LaBarge's gross margins are in the 20 percent to 23 percent range, varying as a result of product mix. Selling and administrative expense declined as a percentage of sales to 12.6 percent in fiscal 2005, versus 14.3 percent in the prior year. In actual dollars, fiscal 2005 selling and administrative expense rose 22 percent from fiscal 2004 levels, in contrast to the 39 percent increase in sales volume. In fiscal 2005, interest expense was $1,747,000, versus $718,000 one year earlier. This increase was due to higher average borrowings as a result of the Pittsburgh acquisition and higher interest rates.
Total debt declined 26 percent to $27,916,000 at July 3, 2005, compared with $37,735,000 at June 27, 2004, illustrating the Company's strong cash flow. Further, reflecting the Company's sound asset management, both accounts receivable and inventories were up modestly compared with the Company's 39 percent increase in sales. Stockholders' equity was $53,830,000 at the end of fiscal 2005, up 26 percent from $42,584,000 at fiscal 2004 year-end.
Backlog of unshipped orders at July 3, 2005 was $164,926,000, up 5 percent from $156,949,000 at the end of fiscal 2004, and up 8 percent from $152,470,000 at the end of the fiscal 2005 third quarter.
Craig LaBarge, chief executive officer and president, commented, "LaBarge achieved outstanding year-over-year growth during fiscal 2005, which was primarily attributable to increased shipments to defense and natural resources customers, combined with a full-year's contribution of the Pittsburgh operation. Had LaBarge owned Pittsburgh for the full 2004 fiscal year, net sales for fiscal 2005 would have grown 17 percent and net earnings would have risen 35 percent on a pro forma basis." (Please refer to the attached "Supplemental Financial Information" for a reconciliation of the pro forma to the comparable reported results.)
Mr. LaBarge continued, "The largest contributor to both fiscal 2005 and 2004 revenues was shipments to defense customers, which accounted for 45 percent of fiscal 2005 sales and 48 percent of sales in fiscal 2004. In actual dollars, fiscal 2005 defense shipments were up nearly 30 percent over the prior year, providing cables and electronic assemblies for a variety of defense applications, including military aircraft, radar systems and shipboard programs.
"Revenues from the natural resources sector represented 19 percent of fiscal 2005 sales versus 14 percent in the year-ago period. Actual dollar sales to this sector increased nearly 90 percent in fiscal 2005 as shipments of electronic equipment to mining customers more than tripled from fiscal 2004 levels. Sales to customers in the oil-and-gas market also increased during fiscal 2005, growing 35 percent over the prior year.
"Shipments to industrial customers were 19 percent of full-year revenues in fiscal 2005, compared with 13 percent in the comparable period a year ago. This growth was primarily from the Pittsburgh operation which broadened our customer mix to include companies that do business in the glass packaging and specialized instrumentation industries, as well as other industrial markets.
"The remaining 17 percent of fiscal 2005 sales and 25 percent of fiscal 2004 sales were attributable to customers in a variety of other market sectors, including commercial aerospace and government systems."
Outlook and Commentary
Mr. LaBarge concluded, "Based on the strength of current backlog and the healthy array of new business opportunities in the pipeline, we expect to achieve double-digit growth in fiscal 2006 full-year sales and earnings. However, we anticipate first-quarter sales and earnings per share will be down slightly from the prior-year's levels due to several customer-requested delays in certain planned shipments. We are projecting fiscal 2006 first-quarter sales in the range of $41 million to $42 million and diluted earnings per share of $0.12 to $0.13, compared with sales of $43.6 million and diluted earnings per share of $0.15 in the fiscal 2005 first quarter. We expect this year's second-quarter sales and earnings to be substantially higher than projected first-quarter levels and up from the prior year's second-quarter results. Further, we anticipate the largest year-over-year percentage gains will come in the second half of fiscal 2006.
"Our earnings estimates factor in the expensing of stock options, which the Company will begin in the first quarter of fiscal 2006 in accordance with the Statement of Financial Accounting Standards No. 123(R), Share-Based Payment. We estimate that the impact to earnings will be approximately $0.01 per share for the first quarter of fiscal 2006."