Sparton (SPA) 8-K Fiscal 2014 Year-End Financial Results

Fiscal 2014 Year-End Financial Results

September 10, 2014

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.

2

•

4   Quarter Highlights

•

Fiscal 2014 Highlights

•

4   Quarter and Year-End Operating Results

•

Liquidity & Capital Resources

•

Acquisition Update

•

Fiscal 2014 Summary

•

Fiscal 2015 Outlook

•

Q & A

Today’s Agenda

3

th

th

•

Quarterly revenue grew 15% to $93 million.

•

Quarterly adjusted EBITDA of $11.5 million or an increase of 23%.

•

26 new business programs were awarded with potential annualized

revenue of $13.3 million.

•

Completed the integration of Aubrey Group.

•

Redeemed $1.6 million of the remaining outstanding Industrial Revenue

Bonds with the State of Ohio.

4   Quarter Highlights

4

th

•

Annual revenue growth of 27% to $336 million.

•

Annual adjusted EBITDA of $33.3 million or an increase of 52% from the

prior year.

•

Organic growth, net of acquisition impacts, was 5%.

•

89 new business programs were awarded with potential annualized sales

of $38.8 million.

•

Completed

the

acquisitions

of

Aydin

Displays,

Beckwood

Services,

and

Aubrey Group.

Fiscal 2014 Highlights

5

Consolidated Financial Results

Fiscal 2014

6

(Adjusted)

2014

2013

2014

2013

Net Sales

$ 336,139

$ 264,627

$ 336,139

$ 264,627

$    71,512

Gross Profit

64,453

64,790

46,001

18,789

19.2%

19.3%

17.4%

Selling and Administrative Expense

35,698

35,698

26,451

(9,247)

10.6%

10.6%

10.0%

Internal R&D Expense

1,169

1,169

1,300

131

Amortization of intangible assets

3,287

3,287

1,575

(1,712)

EPA related -

net environmental remediation

4,238

-

-

-

Restructuring/impairment charges

188

-

-

-

Other operating expense, net

(16)

(16)

13

29

Operating Income

19,889

24,652

16,662

7,990

5.9%

45,435

17.2%

26,451

10.0%

1,300

1,575

-

55

13

16,041

6.1%

7.3%

6.3%

Income Before Provision For Income Tax

19,602

16,172

24,365

16,793

7,572

Provision For Income Taxes

6,615

2,702

8,352

4,976

(3,376)

Net Income

$    12,987

$    13,470

$    16,013

$    11,817

$      4,196

3.9%

5.1%

4.8%

4.5%

Income per Share (Basic)

$        1.28

$        1.32

$        1.58

$        1.16

$        0.42

Income per Share (Diluted)

$        1.28

$        1.32

$        1.58

$        1.16

$        0.42

($ in 000’s, except per share)

(adjusted removes certain gains and charges)

(Reported)

(Adjusted)

Year ended June 30,

Year ended June 30,

Total YoY

Variance

Consolidated Financial Results

Adjusted EBITDA

7

2014

2013

2014

2013

Variance

Net Income

$      2,971

$      5,636

$    12,987

$    13,470

$      (483)

Interest expense

291

128

838

518

320

Interest income

(7)

(3)

(9)

(102)

93

Provision for income taxes

1,758

1,871

6,615

2,702

3,913

Depreciation and amortization

2,213

1,725

8,123

4,761

3,362

Restructuring/impairment charges

-

55

188

55

133

EPA related -

net environmental remediation

4,238

-

4,238

-

4,238

Capitalized profit in inventory from acquisition

81

-

337

566

(229)

Adjusted EBITDA

$    11,545

$      9,412

$    33,317

$    21,970

$  11,347

12.4%

11.6%

9.9%

8.3%

3 months ended June 30,

Year ended June 30,

Operating Results

Revenue & Gross Profit

8

SEGMENT

2014

% of Total

2013

% Change

2014

% of Total

2013

% Change

Medical

$  39,109

42%

$  44,871

-13%

$162,648

48%

$146,873

11%

Complex Systems

22,986

24%

17,761

29%

83,119

25%

60,649

37%

DSS

36,310

39%

23,580

54%

109,134

33%

75,430

45%

Inter-company

(4,958)

-5%

(4,788)

4%

(18,762)

-6%

(18,325)

2%

Totals

$  93,447

100%

$  81,424

15%

$336,139

100%

$264,627

27%

SEGMENT

2014

GP % 

2013

GP % 

2014

GP % 

2013

GP % 

Medical

$     6,056

15.5%

$     7,410

16.5%

$  25,190

15.5%

$  21,853

14.9%

Complex Systems

2,930

12.7%

1,974

11.1%

9,297

11.2%

6,388

10.5%

DSS

11,951

32.9%

5,831

24.7%

30,303

27.8%

17,760

23.5%

Totals

$  20,937

22.4%

$  15,215

18.7%

$  64,790

19.3%

$  46,001

17.4%

($ in 000’s)

3 months ended June 30,

3 months ended June 30,

Year ended June 30,

Year ended June 30,

REVENUE

ADJUSTED GROSS PROFIT

Liquidity & Capital Resources

9

($ in '000)

Jun-13

Sep-13

Dec-13

Mar-14

Jun-14

Cash and equivalents

6,085

2,719

1,009

7,502

8,028

LOC Availability

55,000

36,000

40,000

30,000

59,000

Total

61,085

38,719

41,009

37,502

67,028

($ in '000)

Jun-13

Sep-13

Dec-13

Mar-14

Jun-14

Credit Revolver

10,000

28,500

25,000

35,000

41,000

IRB (Ohio)

1,539

1,506

1,472

1,437

-

Total

11,539

30,006

26,472

36,437

41,000

($ in '000)

Jun-13

Sep-13

Dec-13

Mar-14

Jun-14

Net Inventory

46,334

55,658

52,393

51,466

53,372

Cash Availability

Debt

Inventory

•

eMT

–

Closed transaction on July 9, 2014

–

Located in Irvine, CA

–

Contract services business of manufacturing electromechanical controls and electronic

assemblies

–

Over 20 years of experience and expertise in highly reliable industrial excimer laser products,

laser eye surgery sub-assemblies, target simulators for space and aviation systems, power

modules for computerized tomography (CT) products, test systems for commercial aerospace

OEMs, and toll road antennas and control boxes.

–

$25 million of revenue

–

Financials reported within Complex Systems segment

–

Minimal integration activities required

–

Accretive to earnings within 12 months

Acquisition Update

10

Fiscal 2014 Results:

27% revenue growth, including 5% organic growth in the legacy business

52% adjusted EBITDA growth

36% adjusted earnings per share growth

Supported by market research & go-to-

market programs

Fiscal 2014 Summary

11

New Programs

New Customers

Potential Annualized Revenue

17.7

$

23.8

$

39.4

$

38.8

$

Aubrey Group

GEDC-6

Fiscal 2012

AHRS-8

Temperature compensated attitude heading reference system

Fiscal 2014

Aydin

Various new ruggedized displays

IMU-10

Harsh environment inertial sensing system

26

40

71

89

11

PHOD-1

Aydin Displays

Beckwood Services

Fiscal 2013

Onyx EMS

Creonix

Internal Research & Development

Fiscal 2011

Gyro-enhanced digital compass

Hydrophone

Fiscal 2015

eMT

Fiscal 2014

FY11

FY12

FY13

FY14

20

12

26

Acquisitions

New Business Awards

Fiscal 2011

Delphi Medical

Byers Peak

–

DSS:

25%-30%

(5%

upward

revision)

–

Medical:

13%-16%

(No

changes,

even

with

the

in-sourcing

of

a

Fenwal program)

–

Complex

Systems:

9%-12%

(To

be

revisited

after

Q1

for

potential

upward

revision)

Fiscal 2015 Outlook

12

“We continue to focus on achieving a $500 million revenue run-rate at a 10% EBITDA margin by

the end of the year, but we will just not do a deal in order to reach the revenue goal if it’s not in

the best interest of Sparton or its shareholders.”

•

Continue to execute on the same priorities as in prior years

–

Further execution of our growth strategy

–

Continued focus on sustained profitability

–

More complementary and compatible acquisitions

•

Gross margin target guidance

•

Integration of eMT

•

Deploy the 2020 Vision (phase II of Sparton’s Strategic Growth Plan)

Q & A

13