Plants Produce Positives

For the last 30-odd years, LaBarge Inc. of St. Louis, a contract electronics manufacturer, has operated plants in two small Northwest Arkansas towns. The company’s clients include some of the biggest names in the defense and aerospace industries, including Raytheon, Lockheed Martin, Sikorsky, General Dynamics, Northrop Grumman and Boeing.

While LaBarge has weathered the recession better than many other manufacturers, it did lay off 90 employees at its Berryville facility when one of its largest clients went bankrupt in late 2008. The company has since hired back many of those workers as it won new contracts.

The company’s Arkansas plants in Berryville and Huntsville employ about 375 people, with a combined 2010 payroll of $11.3 million. They also provide an alternative type of factory employment to Tyson Foods Inc. and Butterball poultry plants, the largest employers in those towns.

Both LaBarge facilities primarily handle defense contracts, including making electronic parts for such well-known projects as Sikorsky’s UH 60 Black Hawk helicopter and M1 Abrams tank, and General Dynamics’ BGM-109 Tomahawk cruise missile.

“When you’re building something that’s being launched into space, or if you’re building cables that go into a military helicopter or a jet of some kind, people take a lot of pride in knowing that lives are dependent on the type of product and the type of quality that they do on a day-to-day basis,” said Chuck Baughman, general manager of the Berryville plant and one at Joplin, Mo. “That means a lot to people.”

The company has been a positive presence in Berryville, said Bob Ballinger, president of the Berryville Chamber of Commerce.

“We do have other great employers like Tyson Foods, for instance,” Ballinger said. “But what LaBarge brings is a little bit of diversity in jobs and creates a situation where we have an employer that brings people from all over the place to come to the community, which has a lasting, resounding impact.”

Russ Meyer, general manager of the Huntsville LaBarge plant, said the company’s employees are extremely dedicated.

“They’re very hard workers. We invest a significant amount of training in them, and their efforts are phenomenal,” he said.

The average length of service at the Huntsville plant is a little more than 13 years, and 64 percent of the employees have been there 10 years or longer, Meyer said.

CEO and president Craig LaBarge also mentioned the company’s low turnover and lengthy employment durations.

“Every month I send out letters to employees who have reached a certain milestone in terms of employment, starting at five years, and then every five years thereafter,” LaBarge said. “I’m constantly astounded at the number of employees across the company who have been with us for 20, 25, 30 years, and I take a great deal of pleasure in sending out those letters.”

 

Arkansas Work Force

In 1953, Pierre L. LaBarge Jr. founded LaBarge Pipe & Steel. It became a publicly traded company in December 1968 through a merger with Dorsett Electronics Inc. of Tulsa. LaBarge’s son, Craig, became president and CEO in 1991.

The company also has facilities in Missouri, Oklahoma, Pennsylvania, Texas and Wisconsin. But the two Arkansas plants are in much smaller cities than the company’s other locations, such as Tulsa, St. Louis, Houston and Pittsburgh.

When the Huntsville plant opened in 1978, it produced electronic fuse timers for Army munitions, similar to products from the Tulsa plant.

Berryville’s plant opened four years later, turning out much of what the Joplin plant did at the time, cables for the M1 Abrams tank.

“We knew that Arkansas had a great reputation as a great place to do business,” Craig LaBarge said.

The company worked in conjunction with the Arkansas Department of Economic Development, which helped identify potential locations, he said.

“We looked at a number of areas and towns in the Northwest Arkansas area and then selected Berryville and Huntsville,” LaBarge said, citing the towns’ adequate work forces.

LaBarge Inc. has 1,570 employees in six states. About 42 percent of the company’s business is in the defense sector, 23 percent is for industrial clients, 20 percent for the energy industry, 11 percent medical and 4 percent for other types of clients.

The Arkansas plants are much more heavily weighted toward defense contracts, which make up about 90 percent of the work at each facility. During a recession, that can be helpful, as the defense industry typically isn’t exposed to such wild economic swings as other sectors, LaBarge said.

Among current jobs, the Berryville plant is working on a $1.6 million contract from Kaman Aerospace Corp. to provide cockpit wiring harnesses for the MH-60S Seahawk helicopter; a $5 million contract for wiring harnesses for Sikorsky; and a $4.9 million contract for the Atlas V launch vehicle, which is used to put satellites in orbit.

The Huntsville plant is working on a $3.5 million contract from General Dynamics to build assemblies for the Aegis Weapon System, a missile system used by the U.S. Navy. The plant is also working on an $18.9 million Sikorsky contract making electronic assemblies for the Black Hawk helicopter.

 

Stock Performance

While the recession hasn’t affected LaBarge to the extent it has many other firms, its stock has seen some big swings during the last several years. In July 2005, it hit a high of $20.80, but by March 2009, it was down to $5.33. As of mid-February, it was trading in the $16 range. The company does not pay a dividend.

“I think our performance and our growth have resulted in the stock being more attractive to more institutional investors,” LaBarge said. “We’re getting big enough so that we can attract some attention, and our performance, frankly, really stands out.”

For fiscal 2010, which ended June 27, LaBarge had net earnings of $14.8 million on sales of $289.3 million. That’s up sharply from fiscal 2009, when the company earned $10.3 million on sales of $273.4 million. In 2000, LaBarge earned $1.6 million on sales of $78.3 million.

“I think we’re considered still a small-cap company and in many cases some people still think of us as kind of a micro-cap company, so we have to appeal to a unique audience of investors that are comfortable with small companies,” LaBarge said. “And it’s a smaller group of potential investors that like that, so we suffer there.

“We tend not to have the kind of the trading volume that the bigger companies do, of course, and that tends to make the stock more volatile in terms of its trading price. We can fluctuate a lot from week to week.

“I do think in the end, though, that performance really matters, and the fact that we’ve been able to consistently keep growing the business and growing earnings does, over time, get people’s attention.”

On Feb. 10, the Securities & Exchange Commission sent LaBarge a Wells Notice, which is a letter informing a person or company the SEC is planning to bring an enforcement action.

The notice told the company the SEC would likely file a civil enforcement action against the company in connection with financial reporting processes from 2006 and 2007.

The SEC stated, however, the notice only indicated a potential action, that there would likely not be any allegations of fraud and that the SEC did not expect that LaBarge would have to restate its earnings.

According to a LaBarge statement, the company believes the charges are without merit, though it is cooperating fully with the SEC.

“Although we believe we have substantial defenses to these allegations, we believe it is in the best interests of our shareholders to discuss with the SEC a possible resolution,” LaBarge stated.