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Sparton Corp. Reports Operating Results (10-Q)

February 12, 2010 | About:
10qk

10qk

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Sparton Corp. (SPA) filed Quarterly Report for the period ended 2009-12-31.

Sparton Corp. has a market cap of $63.2 million; its shares were traded at around $6.35 with and P/S ratio of 0.3.
This is the annual revenues and earnings per share of SPA over the last 10 years. For detailed 10-year financial data and charts, go to 10-Year Financials of SPA.


Highlight of Business Operations:

Medical sales increased approximately $2.1 million in the three months ended December 31, 2009 as compared with the same quarter last year. This increase in sales was primarily due to $1.5 million of incremental revenue from one customer that increased production related to one of its product lines. A second customer contributed $0.8 million of sales above the same period in the prior year, as they acquired product and resumed production from a developer that was in bankruptcy. Medical sales are dependent on a small number of key strategic customers. Siemens Diagnostics contributed 20% and 19% of consolidated company net sales during the three months ended December 31, 2009 and 2008, respectively. Medical backlog was approximately $12.0 million at December 31, 2009. Commercial orders, in general, may be rescheduled or cancelled without significant penalty, and, as a result, may not be a meaningful measure of future sales. A majority of the December 31, 2009 Medical backlog is expected to be realized in the next 12-15 months.

EMS sales for the three months ended December 31, 2009 decreased approximately $20.2 million as compared with the same quarter last year. This decrease primarily reflects decreased sales to four customers, whose combined decrease totaled approximately $16.6 million from the prior year quarter. Sparton disengaged with two of these customers as of June 30, 2009. Sparton completed its disengagement with a third customer, Honeywell, during the three months ended December 31, 2009. Honeywell contributed 1% and 19% of consolidated company net sales during the three months ended December 31, 2009 and 2008, respectively. The decrease in sales to the fourth customer reflects the quarter over quarter loss of certain programs with this customer. Offsetting these decreases, sales to another customer, Goodrich, increased by approximately $0.9 million. Goodrich contributed 13% and 10% of consolidated company net sales during the three months ended December 31, 2009 and 2008, respectively. EMS sales include intercompany sales resulting primarily from the production of circuit boards that are then utilized in DSS product sales. These intercompany sales are eliminated in consolidation. EMS backlog was approximately $30.5 million at December 31, 2009. Commercial orders, in general, may be rescheduled or cancelled without significant penalty, and, as a result, may not be a meaningful measure of future sales. A majority of the December 31, 2009 EMS backlog is currently expected to be realized in the next 12-15 months.

DSS sales for the three months ended December 31, 2009 were significantly above the second quarter of last year, showing an increase of $11.2 million, reflecting increased sonobuoy sales to foreign governments and higher U.S. Navy product volume due in part to successful sonobuoy lot acceptance testing in the current fiscal year. Increased engineering sales revenue also contributed to the increase. Total sales to the U.S. Navy in the three months ended December 31, 2009 and 2008 was approximately $12.1 million and $7.3 million, or 26% and 13%, respectively, of consolidated company net sales for those periods. Sonobuoy sales to foreign governments were $6.4 million and $0.1 million in the three months ended December 31, 2009 and 2008, respectively. We do not expect foreign government sales to continue at this elevated level during the remainder of fiscal 2010. DSS backlog was approximately $52.2 million at December 31, 2009. A majority of the December 31, 2009 DSS backlog is currently expected to be realized within the next 12-15 months.

Restructuring and impairment charges were $1.0 million and $31,000 for the three months ended December 31, 2009 and 2008, respectively, of which $0.4 million and $31,000 were included in the EMS operating results for those periods. For a further discussion of the restructuring activity see Note 11 to the Condensed Consolidated Financial Statements.

Other income (expense) for the three months ended December 31, 2009 was $0.2 million, versus $0 in the second quarter of fiscal 2009. Translation adjustments, not related to costs of goods sold, along with gains and losses from foreign currency transactions, in the aggregate, amounted to losses of $28,000 and $1.1 million for the three months ended December 31, 2009 and 2008, respectively. The Canadian dollar experienced significant volatility against the U.S. dollar during the three months ended December 31, 2008. With the closure of the Canadian facility, however, it is anticipated that the impact in fiscal 2010 and future periods will not be significant.

Due to the factors described above, the Company reported net income of $3.2 million ($0.33 per share, basic and diluted) for the three months ended December 31, 2009, compared to a net loss of $2.8 million ($(0.28) per share, basic and diluted) for the corresponding period last year.

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