SPARTON CORP - FORM 8-K - EX-99.2

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8-K - FORM 8-K - SPARTON CORP	d623578d8k.htm
EX-99.1 - EX-99.1 - SPARTON CORP	d623578dex991.htm

First Quarter Financial

Results Conference Call

November 6, 2013

Exhibit 99.2

Safe Harbor Statement

Certain statements herein constitute forward-looking statements within the meaning of the Securities Act of 1933,

as amended and the Securities Exchange Act of 1934, as amended. When used herein, words such as “believe,”

“expect,” “anticipate,” “project,” “plan,” “estimate,” “will” or “intend” and similar words or expressions as they relate

to the Company or its management constitute forward-looking statements. These forward-looking statements

reflect our current views with respect to future events and are based on currently available financial, economic and

competitive data and our current business plans. The Company is under no obligation to, and expressly disclaims

any obligation to, update or alter its forward-looking statements whether as a result of such changes, new

information, subsequent events or otherwise. Actual results could vary materially depending on risks and

uncertainties that may affect our operations, markets, prices and other factors. Important factors that could cause

actual results to differ materially from those forward-looking statements include those contained under the heading

of risk factors and in the management’s discussion and analysis contained from time-to-time in the Company’s

filings with the Securities and Exchange Commission.

Adjusted EBITDA and related reconciliation presented here represents earnings before interest, taxes,

depreciation and amortization as adjusted for restructuring/impairment charges, gross profit effects of capitalized

profit in inventory from acquisition and acquisition contingency settlement, and gain on sale of investment. The

Company believes Adjusted EBITDA is commonly used by financial analysts and others in the industries in which

the Company operates and, thus, provides useful information to investors. The Company does not intend, nor

should the reader consider, Adjusted EBITDA an alternative to net income, net cash provided by operating

activities or any other items calculated in accordance with GAAP. The Company's definition of Adjusted EBITDA

may not be comparable with Adjusted EBITDA as defined by other companies. Accordingly, the measurement has

limitations depending on its use.

•

1 Quarter Highlights

•

1 Quarter Segmented Operating Results

•

Liquidity & Capital Resources

•

Revenue Recognition

•

Fiscal 2014 Outlook

•

Q & A

Today’s Agenda

•

Sales in each of our business segments increased not only from

acquisitions, but also on an organic basis

•

Awarded 28 new business programs during the first quarter of fiscal

2014 with potential annualized sales of $8.2 million as well as a foreign

sonobuoy award of $5.0 million

•

Completed the acquisition of certain assets of Aydin Displays, LLC.

•

Quarter end sales backlog of approximately $205.7 million, up 32% from

a year ago

–

Excluding the newly acquired businesses, backlog was approximately $166.4 million

representing a 7% increase over the prior year quarter.

Quarter

Highlights

Consolidated

Financial

Results

Fiscal 2014

1 Quarter

(Adjusted)

2013

2012

2013

2012

Net Sales

$ 74,198

$ 50,801

$ 74,198

$ 50,801

$ 23,397

Gross Profit

12,194

8,000

12,194

8,000

4,194

16.4%

15.7%

16.4%

15.7%

Selling and Administrative Expense

7,645

5,472

7,645

5,472

(2,173)

10.3%

10.8%

10.3%

10.8%

Internal R&D Expense

389

305

389

305

(84)

Amortization of intangible assets

598

102

598

102

(496)

Restructuring/impairment charges

188

Other operating expense, net

(3)

(10)

(3)

(10)

(7)

Operating Income

3,377

2,131

3,565

2,131

1,434

4.6%

4.2%

4.8%

4.2%

Income Before Provision For Income Tax

3,393

2,188

3,581

2,188

1,393

Provision For Income Taxes

1,107

731

1,169

731

(438)

Net Income

$ 2,286

$ 1,457

$ 2,412

$ 1,457

$ 955

3.1%

2.9%

3.3%

2.9%

Income per Share (Basic)

$ 0.23

$ 0.14

$ 0.24

$ 0.14

$ 0.10

Income per Share (Diluted)

$ 0.23

$ 0.14

$ 0.24

$ 0.14

$ 0.10

($ in 000’s, except per share)

(adjusted removes certain gains and charges)

(Reported)

(Adjusted)

Quarter ended Sept 30,

Total YoY

Variance

Consolidated Financial Results

Adjusted EBITDA

2013

2012

Net Income

$ 2,286

$ 1,457

$ 829

Interest expense

158

Interest income

(2)

(28)

Provision for income taxes

1,107

731

376

Depreciation and amortization

1,721

479

1,242

Restructuring/impairment charges

188

Adjusted EBITDA

$ 5,458

$ 2,720

$ 2,738

7.4%

5.4%

Quarter ended Sept 30,

YoY

Variance

Operating Results

Revenue & Gross Profit

SEGMENT

2013

% of Total

2012

% Change

Medical

$ 42,008

57%

$ 28,059

50%

Complex Systems

18,265

25%

12,347

48%

DSS

17,893

24%

14,987

19%

Inter-company

(3,968)

-5%

(4,592)

-14%

Totals

$ 74,198

100%

$ 50,801

46%

SEGMENT

2013

GP %

2012

GP %

Medical

$ 6,978

16.6%

$ 4,194

14.9%

Complex Systems

1,868

10.2%

1,096

8.9%

DSS

3,348

18.7%

2,710

18.1%

Totals

$ 12,194

16.4%

$ 8,000

15.7%

($ in 000’s)

3 months ended Sept 30,

REVENUE

GROSS PROFIT

Liquidity & Capital Resources

50,000

25,000

Jun-10

Jun-11

Jun-12

Jun-13

Sep-13

1,917

1,796

1,669

11,539

30,006

0.31

0.35

0.30

0.25

0.20

0.15

0.10

0.05

($ in '000)

Sep-12

Dec-12

Mar-13

Jun-13

Sep-13

Cash and equivalents

43,096

6,066

4,358

6,085

2,719

LOC Availability

16,012

51,000

52,000

55,000

36,000

Total

59,108

57,066

56,358

61,085

38,719

($ in '000)

Sep-12

Dec-12

Mar-13

Jun-13

Sep-13

Credit Revolver

14,000

13,000

10,000

28,500

IRB (Ohio)

1,637

1,604

1,572

1,539

1,506

Total

1,637

15,604

14,572

11,539

30,006

($ in '000)

Sep-12

Dec-12

Mar-13

Jun-13

Sep-13

Net Inventory

38,467

45,367

46,928

46,334

55,658

Cash Availability

Debt

Inventory

•

The new policy continues to recognize revenue under the percentage of

completion method

Revenue Recognition

Revenue was recognized for

each lot of sonobuoys

produced when that lot was

formally accepted by the

customer

Revenue is recognized

when production and

internal testing of each lot of

sonobuoys is completed

From Completed Units

Accepted Basis

To Units-of-Production

Basis

Revenue Recognition

FY13 Q1 Reconciliation Table

Consolidated Statement of Income Data:

Net Sales

49,020

1,781

50,801

Cost of goods sold

Gross profit

Income before provision for income taxes

Provision for income taxes

Net income

Income per share of common stock - Basic

Income per share of common stock - Diluted

Weighted average shares outstanding - Basic

Weighted average shares outstanding - Diluted

10,163,151

0.09

0.05

0.14

10,141,612

953

504

1,457

0.09

0.05

0.14

1,401

787

2,188

448

283

731

41,807

994

42,801

7,213

787

8,000

For the Three Months Ended September 30, 2012

As Originally Reported

Adjustment

As Restated

(Dollars in thousands, except share amounts)

Fiscal 2014 Outlook

Implementation of the strategic growth plan

Focus on sustained profitability

Complete the integration of Aydin Displays

–

Continue to grow organically

–

Maintain our level of investment in internal research & development to commercially

extend our product lines

–

Continue to enable our engineering workforce to develop new and innovative

proprietary solutions for our end markets

–

Continue to seek out complementary and compatible acquisitions

–

Further leverage Viet Nam as a low cost country alternative and in-region provider

–

Continue margin improvements across the entire company

–

Increase capacity utilization

–

Continue additional improvements in operating performance through lean and quality

efforts

•

Q & A

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