 Fiscal 2012 Q4 Investor Presentation (NYSE: SPA) September 5, 2012 Exhibit 99.1 |
 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. 2 |
 3 Investment Considerations Investment Considerations Operational Phase of Turnaround Completed Established Growing Business Expanded Gross Margins Solid Balance Sheet Repositioned the Company for Growth 112 year old business with market leadership in defense and medical sectors; 10% sales increase in fiscal 2012; 35% year- over-year adjusted EBITDA increase in fiscal 2012 New management; significant cost removed from fiscals 2009-10; Adjusted fiscal 2012 EPS (diluted) was $0.91, fiscal 2011 EPS was $0.64 and fiscal 2010 EPS of $0.40 As of June 30, 2012, $47 million in cash and no bank debt (post- acquisitions); $20 million unused line of credit; Completed $3.0 million stock buyback program in FY2012 FY2011 26 new programs and 11 new customers Developed 2 new proprietary products (GEDC-6/PHOD-1) FY2012 40 new programs and 20 new customers Developed 1 new proprietary product (AHRS-8) Fiscal 2012: 17.2% Fiscal 2011: 16.3% Fiscal 2010: 15.3% Fiscal 2009: 7.2% |
 4 Mission Mission Sparton will continue to differentiate itself as a premier supplier of sophisticated electromechanical devices, sub-assemblies and related services for highly regulated environments in the Medical, Military & Aerospace, and Industrial markets by leveraging and expanding its capabilities and offerings within the electromechanical value stream. |
 5 Our Business Our Business • Sparton is in one single line of business called Electromechanical Devices. • Sparton is currently segmented into three financial reporting business units. Defense & Security: Design and Manufacturing (both as a contractor and OEM) Medical Device: Contract Design, Manufacturing, and Assembly Complex Systems: Commonly referred to within legacy Sparton as EMS, but currently consists of circuit card assembly and box build (contract manufacturing and assembly) outside of the medical and defense markets. In the future, may include electro- mechanical based B2B products as well as EMS services. • Sparton currently serves three electronics markets – Medical, Military & Aerospace, and Industrial & Instrumentation. |
 6 Strategically Located Strategically Located • Four domestic and one low cost country manufacturing facilities – De Leon Springs, FL (Orlando) – Strongsville, OH (Cleveland) – Frederick, CO (Denver) – Brooksville, FL (Tampa) – Ho Chi Minh City, Vietnam – Sparton owns 448,000 square feet of production facility capacity across the U.S. and Asia • 950 employees worldwide |
 7 • Lack of strategic direction • Poor financial condition • Bad delivery & quality performance • Limited business development personnel • No marketing programs • FY12 revenues of $224 million • Continue to grow medical segment • July 2012 amendment and extension of credit facility • Awarded 40 new business programs - 20 of which were new customers • Completed $3 million in share buyback • Continue to gain new business programs • Invest in developing proprietary products • Focus on targeted acquisitions Turnaround Summary Turnaround Summary Operating Challenges • Fragmented operating system • Overcapacity • Manufacturing inefficiencies - Unsupported lean programs - Inventory control & disposition • Customer contractual issues • Liquidity concerns Organic Growth Challenges (a) Includes restructuring and impairment charges of $0.71 per share and a non-cash provision for income taxes of $0.18 per share (b) Adjusted operating income, adjusted net income and adjusted income per share (diluted) are non-GAAP financial measures that exclude or add the effect of certain gains and charges, including imputing taxes at a 36% effective rate. Year End 2012 Status FY2013 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 EPS Finance & Operations Organic Growth Turnaround Period Plan FY2013 Implement FY2009 FY2010 FY2011 FY2012 Implement 0.64 b (1.61) a 0.40 b Sustain / Continuous Improvement Grow Plan FY2007 FY2008 (0.79) (1.34) 0.91 b |
 8 Senior Management Team Senior Management Team Cary B. Wood, Chief Executive Officer • Appointed CEO November 2008 • Formerly Chief Operating Officer of Citation Corporation, a private company with foundry, machinery and assembly operations with 20+ years of experience at GM, United Technologies & Elkay Manufacturing • Developed a track record with performance turn-around and growth strategies in both private and public company settings • Appointed CFO in April 2009 • Formerly Director of Treasury and International Finance at U.S. Robotics Corporation with 15+ years of experience at Grant Thornton LLP Gordon Madlock, Senior Vice President – Operations • 30+ years experience improving manufacturing quality and productivity at companies including Citation Corporation, Lear Corp. and United Technologies Mike Osborne, Senior Vice President – Corporate Development • Responsible for driving corporate and business unit strategic planning and development, M&A activity, business development & customer retention, and investor relations Steve Korwin, Senior Vice President – Quality & Engineering • Extensive experience leading manufacturing operations and improving quality processes to increase profitability and sales Larry Brand, Vice President – Corporate HR • Considerable experience providing strategic leadership and tactical direction for the overall Human Resources function to senior management and company leadership teams Gregory Slome, Chief Financial Officer |
 9 Smaller Board Board size reduced from 11 to 7 (6 independent, 1 non-independent) Destaggered All directors require a majority vote threshold in order to be Board elected at each annual meeting Say-on-Pay Implemented “say-on-pay” vote on executive compensation Aligned Incentive Established Short Term Incentive Plan based on annual Plan performance objectives and Long Term Incentive Plan based on long term financial metrics in alignment with shareholder interests Updated Governing Updated the Articles of Incorporation, Code of Regulations, and Documents Committee Charters to reflect today’s business environment Improved Corporate Governance Improved Corporate Governance |
 10 Market Dynamics Market Dynamics Medical Military & Aerospace Computer Automotive Consumer Electronics Market ($1.3 trillion) Total 2010 EMS/ODM Outsourced Market: $276 billion 2010 – 2013 Compounded Annual Growth Rate: 7.6% Defense & Security Navigation & Exploration Medical = business segment market focus Highest growth sector No current customers Volume & commodity pricing resulting in low margins OEMs are experts at outsourcing High growth High volume production drives lower margins Outsourcing mostly in low cost country regions Complexity is general low Moderate growth High volume production drives lower margins Outsourcing mostly in low cost country regions OEMs are experts at outsourcing Moderate growth High volume production drives lower margins Outsourcing mostly in low cost country regions OEMs are experts at outsourcing Source: Technology Forecasters Inc, Dec. 2010 Market: $15B Growth: 9.3% Market: $6B Growth: 6.2% Market: $20B Growth: 6.6% Market: $10B Growth: 12.9% Market: $44B Growth: 7.8% Market: $84B Growth: 6.8% Market: $98B Growth: 3.1% Complex Systems Industrial & Instrumentation Moderate growth Blue chip customers Preferred supplier status New to outsourcing Contract design, mfg, and assembly roll-up opportunity Regulated market (ITAR, COMSEC) Moderate growth Blue chip customers Preferred supplier status Contract design, mfg, and assembly roll-up opportunity Regulated market (FDA) High growth Blue chip customers New to outsourcing Contract design, mfg, and assembly roll-up opportunity Communication |
 11 Vision Vision Sparton will become a $500 million enterprise by fiscal 2015 by attaining key market positions in our primary lines of business and through complementary and compatible acquisitions; and will consistently rank in the top half of our peer group in return on shareholder equity and return on net assets. |
 12 Shifting Revenue Mix To Shifting Revenue Mix To Higher Margin Businesses Higher Margin Businesses DSS Medical Complex Systems 7% - 10% FY2012 by Segment (Revenue of $224 million) FY2011 by Segment (Revenue of $203 million) Backlog FY2013 Target Gross Margin by Segment FY2012 by Market (Revenue of $224 million) 13% - 16% 20% - 25% 111.3 94.7 99.6 112.8 113.7 119.3 122.4 137.3 145.5 126.5 146.6 148.4 0 20 40 60 80 100 120 140 160 FY10Q1 FY10Q2 FY10Q3 FY10Q4 FY11Q1 FY11Q2 FY11Q3 FY11Q4 FY12Q1 FY12Q2 FY12Q3 FY12Q4 |
 13 • Develop, design, and manufacture security products, primarily anti-submarine warfare detection devices for the U.S. and other free- world governments, and commercially develops spin-off technology for existing and alternate markets (Navigation & Exploration) • One of the two largest sonobuoy producers – Consumable device lasting approximately 8 hours used to detect submerged submarines • FY2012 Sales: $74 million, consistently profitable business • Visible Business: $77 million in government funded backlog as of June 30, 2012 • Key Customers: Defense & Security Systems Defense & Security Systems Sonobuoys Navigation Sensors |
 Defense & Security Systems Defense & Security Systems Market Outlook Market Outlook • Government FY2009 production peak was realized primarily in Sparton’s FY2011 – Reduced U.S. Navy sonobuoy production volume in Sparton’s FY2012 will be partially offset by the pursuit of new developmental engineering funds from the DoD for Antisubmarine Warfare related applications ($37 million over 5 years of engineering funds already announced) • High Altitude Antisubmarine Warfare (HAASW) • Deep Water Active Distributed System (DWADS) • Comms at Speed & Depth (CSD) {on-hold} • Q125 Technology Improvements • Q-36 ECP Program – Continued military actions taken by North Korea and China should have an impact in the use of sonobuoys in that region – The leak of government sensitive information may also put foreign nations on guard and require more monitoring of their territorial waterways – U.S. Navy plans to buy 117 P-8A anti-submarine warfare, anti- surface warfare, intelligence, surveillance and reconnaissance aircraft to replace its existing P-3 fleet. Initial operational capability is scheduled for 2013. – The Indian navy signed a contract for eight P-8I aircraft in January 2009. Boeing will deliver the first P-8I within 48 months of contract signing and the remaining seven by 2015. • Foreign sales are still somewhat unpredictable although a sharp increase was seen in the 2 nd quarter of FY2010 & 1 st nine months of FY2012 The Boeing P-8 Posiden aircraft to become the new launch vehicle for sonobuoys • 14 |
 15 Medical Medical • Design and manufacture medical devices and instruments for the In Vitro Diagnostics and Therapeutics Device markets – Work with OEMs and biomedical companies to interface their core technology into a complex medical laboratory instrument or point of care device – Manufacturer of The NeuroStar® TMS Therapy System, the first and only Transcranial Magnetic Stimulation (TMS) device cleared by the FDA for the treatment of depression • FY2012 Sales: $111 million of consistently profitable business • Visible Business: $46 million of backlog as of June 30, 2012 • Recurring revenue due to highly regulated medical industry • Key customers: Analyzers Neurology Blood Separation |
 16 Complex Systems Complex Systems • Manufacturer of circuit card assemblies and electronic based box build products primarily for the military and commercial aerospace markets • New prototyping capabilities to shorten development and introduction lead times for customers • FY2012 External Sales: $39 million • Visible Business: $25 million of backlog as of June 30, 2012 • Consolidated business from old and inefficient sites to state-of-the-art and technologically advanced facilities in Florida and Vietnam for improved efficiencies and capacity utilization • Key Customers: Circuit Board Assembly Sub Assembly Complete System Box Build |
 17 Strategic Direction Strategic Direction Growth Planning by Segment Growth Planning by Segment Navigation & Exploration Pursue complementary and compatible acquisitions including B2B products and other services. Medical Defense & Security Complex Systems Pursue complementary and compatible acquisitions including B2B products and other services that do not directly compete with our customers. Develop new Navigation System and Acoustic Detection & Communication products for existing and new markets such as Defense, Port Security, Oil & Gas, and Advanced Security Systems. Continue to lead in Anti-Submarine Warfare (ASW) device production and related advanced developmental engineering projects for the U.S. government. Continue to make business enhancements to improve its return on sales by engaging new and existing customers on contract design and manufacturing. Improve market share within the In Vitro Diagnostics and Therapeutic Device markets through geographic expansion and new & increased vertical offerings. Executive Leadership Team Charter: Manage the business to increase shareholder value by achieving profitable organic growth, completing complementary and compatible acquisitions, and fixing or divesting underperforming lines of business. |
 18 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 Strategic M&A Internal Research & Development (IP) Targeted Business Development |
 19 Financial Highlights Financial Highlights |
 20 • 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 |
 21 Sustained Profitability Sustained Profitability (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 |
 22 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 $1.00 Q1 Q2 Q3 Q4 YTD FY11 YTD FY12 YTD FY11 FY12 |
 23 Liquidity & Capital Resources Liquidity & Capital Resources ($ 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 ($ 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 Cash Availability Debt Inventory 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 |
 24 • 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 |
 25 Sparton Corporation NYSE: SPA Cary Wood, President & CEO 425 N. Martingale Road Suite 2050 Schaumburg, IL 60173 |