Sparton (SPA) 8-K Fiscal 2012 Fourth Quarter and Full Year Financial Results

Fiscal 2012 Year-End

Financial Results

Conference Call

Exhibit 99.2

September 6, 2012

2

Safe Harbor Statement

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 operating income, adjusted net income and adjusted income per share – basic and

diluted and adjusted earnings before interest, taxes, depreciation and amortization (”adjusted

EBIDTA”)  are non-GAAP financial measures that exclude or add the effect of certain gains and

charges, including, for fiscal 2011, imputing taxes at a 36% effective rate. Sparton believes that

the presentation of non-GAAP financial information provides useful supplemental information to

management and investors regarding financial and business trends relating to the Company’s

financial results. More detailed information, including period over period segment comparisons,

non-GAAP reconciliation tables and the reasons management believes non-GAAP measures

provide useful information to investors, is included in the Fiscal 2012 Fourth Quarter and Full

Year Financial Results press release and Form 10-Q dated September 5, 2012.

3

•

4

th

Quarter Highlights

•

Fiscal 2012 Fourth Quarter Results

•

Quarterly Adjusted EPS

•

Fiscal 2012 Year-End Results

•

Segmented Operating Results

•

Liquidity & Capital Resources

•

Growth Investments Summary

•

Outlook

•

Q & A

Today’s Agenda

Today’s Agenda

4

•

Adjusted net income of $4.0 million, or $0.40 per share, versus adjusted

net

income

of

$2.9

million,

or

$0.28

per

share

in

the

prior

year

quarter

•

Adjusted operating margin of 9.9% compared to 7.3% last year

•

Awarded 12 new business programs with 5 new customers

•

Quarter end sales backlog of approximately $148.4 million, up 8%

•

Adjusted

EBITDA

of

$6.8

million

versus

$5.1

million

in

the

prior

year

quarter, an increase of 32%.

•

Subsequent Event: July 2012 amendment and extension of the

Company’s revolving credit facility

4

th

Quarter Highlights

5

Consolidated Financial Results

Consolidated Financial Results

Fiscal 2012 Fourth Quarter

Fiscal 2012 Fourth Quarter

(Adjusted)

2012

2011

2012

2011

Net Sales

$    61,326

$    60,902

$    61,326

$   60,902

$       424

Gross Profit

12,261

10,393

12,261

10,393

1,868

20.0%

17.1%

20.0%

17.1%

Selling and Administrative Expense

5,777

5,176

5,777

5,176

(601)

9.4%

8.5%

9.4%

8.5%

Internal R&D Expense

330

546

330

546

216

Amortization of intangible assets

105

198

105

198

93

Restructuring/impairment charges

(9)

(2)

-

-

Impairment of intangible asset

-

3,663

-

-

Impairment of goodwill

-

13,153

-

-

Other operating expense, net

(9)

2

(9)

2

11

Operating Income (Loss)

6,067

(12,343)

6,058

4,471

1,587

9.9%

-20.3%

9.9%

7.3%

Income Before Provision For (Benefit From) Income Tax

6,084

(12,346)

6,075

4,468

1,607

Provision For (Benefit From) Income Taxes

2,032

(11,619)

2,032

1,608

(424)

Net Income

$      4,052

$        (727)

$      4,043

$     2,860

$    1,183

6.6%

-1.2%

6.6%

4.7%

Income per Share, Basic and Diluted

$        0.40

$       (0.07)

$        0.40

$       0.28

$      0.12

($ in 000’s, except per share)

(adjusted removes certain gains and charges, including, for fiscal 2011 imputing taxes at 36% effective rate)

YoY

Variance

(Reported)

(Adjusted)

Quarter ended June 30,

Quarter ended June 30,

6

Quarterly Adjusted EPS

Quarterly Adjusted EPS

Diluted

Diluted

$0.64

$0.91

$-

$0.10

$0.20

$0.30

$0.40

$0.50

$0.60

$0.70

$0.80

$0.90

$1.00

Q1

Q2

Q3

Q4

YTD

FY11 YTD

FY12 YTD

FY11

FY12

7

Consolidated Financial Results

Consolidated Financial Results

Fiscal 2012

Fiscal 2012

(Adjusted)

2012

2011

2012

2011

Net Sales

$ 223,577

$ 203,352

$ 223,577

$   203,352

$  20,225

Gross Profit

38,502

33,168

38,396

33,168

5,228

17.2%

16.3%

17.2%

16.3%

Selling and Administrative Expense

22,232

20,842

22,232

20,842

(1,390)

9.9%

10.2%

9.9%

10.2%

Internal R&D Expense

1,293

1,110

1,293

1,110

(183)

Amortization of intangible assets

435

545

435

545

110

Restructuring/impairment charges

(68)

75

-

-

Gain on acquisition

-

(2,550)

-

-

Gain on sale of property

-

(139)

-

-

Impairment of intangible asset

-

3,663

-

-

Impairment of goodwill

-

13,153

-

-

Other operating expense, net

65

298

65

298

233

Operating Income (Loss)

14,545

(3,829)

14,371

10,373

3,998

6.5%

-1.9%

6.4%

5.1%

Income Before Provision For (Benefit From) Income Tax

14,586

(3,943)

14,285

10,259

4,026

Provision For (Benefit From) Income Taxes

5,078

(11,404)

4,973

3,693

(1,280)

Net Income

$      9,508

$      7,461

$      9,312

$      6,566

$    2,746

4.3%

3.7%

4.2%

3.2%

Income per Share (Diluted)

$        0.93

$        0.73

$        0.91

$        0.64

$      0.27

($ in 000’s, except per share)

(adjusted removes certain gains and charges, including, for fiscal 2011 imputing taxes at 36% effective rate)

YoY

Variance

(Reported)

(Adjusted)

Fiscal

Fiscal

8

Sales & Gross Margin Results

Sales & Gross Margin Results

Medical

Medical

SEGMENT

2012

% of Total

2011

% Change

2012

% of Total

2011

% Change

Medical

$    28,361

46%

$    27,956

1%

$ 110,894

50%

$    98,028

13%

Complex Systems

15,688

26%

14,704

7%

53,609

24%

49,835

8%

DSS

20,976

34%

22,594

-7%

74,102

33%

69,720

6%

Eliminations

(3,699)

-6%

(4,352)

-15%

(15,028)

-7%

(14,231)

6%

Totals

$    61,326

100%

$    60,902

1%

$ 223,577

100%

$ 203,352

10%

SEGMENT

2012

GP % 

2011

GP % 

2012

GP % 

2011

GP % 

Medical

(a)

$       4,152

15%

$       3,727

13%

$    15,136

14%

$    12,938

13%

Complex Systems

2,435

16%

1,815

12%

5,762

11%

4,835

10%

DSS

5,674

27%

4,851

21%

17,498

24%

15,395

22%

Totals

$    12,261

20%

$    10,393

17%

$    38,396

17%

$    33,168

16%

($ in 000’s)

3 Months Ended June 30,

3 Months Ended June 30,

Fiscal

Fiscal

SALES

ADJUSTED GROSS MARGIN

(a) Fiscal 2012 Medical gross margins are adjusted to remove the effect of an acquisition related inventory contingency settlement.

9

Sales & Gross Margin Results

Sales & Gross Margin Results

Complex Systems

Complex Systems

SEGMENT

2012

% of Total

2011

% Change

2012

% of Total

2011

% Change

Medical

$    28,361

46%

$    27,956

1%

$ 110,894

50%

$    98,028

13%

Complex Systems

15,688

26%

14,704

7%

53,609

24%

49,835

8%

DSS

20,976

34%

22,594

-7%

74,102

33%

69,720

6%

Eliminations

(3,699)

-6%

(4,352)

-15%

(15,028)

-7%

(14,231)

6%

Totals

$    61,326

100%

$    60,902

1%

$ 223,577

100%

$ 203,352

10%

SEGMENT

2012

GP % 

2011

GP % 

2012

GP % 

2011

GP % 

Medical

(a)

$       4,152

15%

$       3,727

13%

$    15,136

14%

$    12,938

13%

Complex Systems

2,435

16%

1,815

12%

5,762

11%

4,835

10%

DSS

5,674

27%

4,851

21%

17,498

24%

15,395

22%

Totals

$    12,261

20%

$    10,393

17%

$    38,396

17%

$    33,168

16%

($ in 000’s)

3 Months Ended June 30,

3 Months Ended June 30,

Fiscal

Fiscal

SALES

ADJUSTED GROSS MARGIN

(a) Fiscal 2012 Medical gross margins are adjusted to remove the effect of an acquisition related inventory contingency settlement.

10

Sales & Gross Margin Results

Sales & Gross Margin Results

Defense & Security Systems

Defense & Security Systems

SEGMENT

2012

% of Total

2011

% Change

2012

% of Total

2011

% Change

Medical

$    28,361

46%

$    27,956

1%

$ 110,894

50%

$    98,028

13%

Complex Systems

15,688

26%

14,704

7%

53,609

24%

49,835

8%

DSS

20,976

34%

22,594

-7%

74,102

33%

69,720

6%

Eliminations

(3,699)

-6%

(4,352)

-15%

(15,028)

-7%

(14,231)

6%

Totals

$    61,326

100%

$    60,902

1%

$ 223,577

100%

$ 203,352

10%

SEGMENT

2012

GP % 

2011

GP % 

2012

GP % 

2011

GP % 

Medical

(a)

$       4,152

15%

$       3,727

13%

$    15,136

14%

$    12,938

13%

Complex Systems

2,435

16%

1,815

12%

5,762

11%

4,835

10%

DSS

5,674

27%

4,851

21%

17,498

24%

15,395

22%

Totals

$    12,261

20%

$    10,393

17%

$    38,396

17%

$    33,168

16%

($ in 000’s)

3 Months Ended June 30,

3 Months Ended June 30,

Fiscal

Fiscal

SALES

ADJUSTED GROSS MARGIN

(a) Fiscal 2012 Medical gross margins are adjusted to remove the effect of an acquisition related inventory contingency settlement.

11

Liquidity & Capital Resources

Liquidity & Capital Resources

25,588

22,959

1,917

1,796

1,669

0.36

0.42

0.03

0.02

0.02

0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

0.4

0.45

0

25,000

50,000

Jun-08

Jun-09

Jun-10

Jun-11

Jun-12

($ in '000)

Jun-11

Sep-11

Dec-11

Mar-12

Jun-12

Credit Revolver

-

-

-

-

-

IRB (Ohio)

1,796

1,766

1,735

1,702

1,669

Total

1,796

1,766

1,735

1,702

1,669

($ in '000)

Jun-11

Sep-11

Dec-11

Mar-12

Jun-12

Net Inventory

38,752

41,816

38,545

39,252

35,102

Debt

Inventory

($ in '000)

Jun-11

Sep-11

Dec-11

Mar-12

Jun-12

Cash and equivalents

24,550

26,984

30,610

26,682

46,950

LOC Availability

17,541

17,533

17,290

16,469

16,277

Total

42,091

44,517

47,900

43,151

63,227

Cash Availability

12

Growth Investments

Growth Investments

Fiscal 2012 Summary

Fiscal 2012 Summary

Focus:

Use growth investments to achieve sustainable year-over-year revenue and profit increases

and to further place protective barriers around Sparton.

Supported by market research &       

go-to-market programs

FY11

FY12

FY11

FY12

FY11

FY12

Q1

5

9

3

3

2.2

$  

6.0

$  

Q2

6

7

2

5

4.4

5.0

Q3

12

12

5

7

9.1

7.6

Q4

3

12

1

5

2.0

5.2

Total

26

40

11

20

17.7

$

23.8

$

Gyro-enhanced digital compass

Hydrophone

($ in millions)

GEDC-6

PHOD-1

AHRS-8

Internal Research & Development

Fiscal 2011

Fiscal 2012

Temperature compensated attitude

heading reference system

New Business Awards

Programs

New

Customers

Potential  Annual

Revenue

Acquisitions

Fiscal 2011

Fiscal 2012

Delphi Medical

Byers Peak

none

13

•

Implementation of the strategic growth plan

–

Continue

to

gain

traction

on

a

nationally

focused

direct

selling

effort

–

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

–

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

•

Focus on sustained profitability

–

Continue margin improvements in Complex Systems

–

Increase capacity utilization

–

Improve the working capital turnover rate

–

Continue additional improvements in operating performance through lean and quality efforts

•

Year-over-year increases in revenue and profitability with the second half

of fiscal

2013 being stronger than the first half as experienced in the previous two fiscal

years

Fiscal 2013 Outlook

Fiscal 2013 Outlook

14

Q & A