1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE PERIOD ENDED DECEMBER 31, 2000.
OR
[ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE TRANSITION PERIOD From __________ to __________
Commission File number 1-1000
SPARTON CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Ohio 38-1054690
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2400 East Ganson Street
Jackson, Michigan 49202
----------------------------------------
(Address of principal executive offices)
(Zip Code)
(517)787-8600
----------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by checkmark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date.
Common Stock, $1.25 Par Value - 7,648,090 shares as of January 31, 2001.
2
INDEX
SPARTON CORPORATION AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets - December 31 and June 30, 2000. 3
Condensed Consolidated Statements of Operations - Three-Month and Six-Month
Periods ended December 31, 2000 and 1999. 4
Condensed Consolidated Statements of Cash Flows - Six-Month Periods ended
December 31, 2000 and 1999. 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 11
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 13
Attachment
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3
SPARTON CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets (Unaudited)
December 31 and June 30, 2000
December 31 June 30
----------- -------
Assets
Current assets:
Cash and cash equivalents $ 12,141,186 $ 5,052,405
Investment securities 1,215,769 4,643,704
Income taxes recoverable 623,665 483,598
Accounts receivable 20,217,651 20,677,281
Inventories and costs on contracts in progress, less progress payments
of $11,103,000 at December 31 ($3,309,000 at June 30) 48,104,622 51,189,623
Prepaid expenses 3,411,734 4,295,496
------------- -------------
Total current assets 85,714,627 86,342,107
Deferred income taxes 304,800 304,800
Other assets 10,509,411 10,922,299
Property, plant and equipment - net 10,938,509 11,407,030
------------- -------------
Total assets $ 107,467,347 $ 108,976,236
============= =============
Liabilities and Shareowners' Equity
Current liabilities:
Accounts payable $ 13,077,980 $ 14,251,023
Salaries and wages 2,084,492 3,145,222
Accrued liabilities 5,142,678 4,167,288
------------- -------------
Total current liabilities 20,305,150 21,563,533
Environmental remediation 8,335,553 8,335,553
Shareowners' equity:
Common stock - 7,828,090 shares outstanding at December 31 and
June 30 after deducting 106,622 shares in treasury 9,785,113 9,785,113
Capital in excess of par value 494,427 494,427
Accumulated other comprehensive loss (23) (108,014)
Retained earnings 68,547,127 68,905,624
------------- -------------
Total shareowners' equity 78,826,644 79,077,150
------------- -------------
Total liabilities and shareowners' equity $ 107,467,347 $ 108,976,236
============= =============
SEE ACCOMPANYING NOTES
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SPARTON CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Operations (Unaudited)
For the Three-Month and Six-Month Periods ended December 31, 2000 and 1999
Three-Month Periods Six-Month Periods
---------------------------- ----------------------------
2000 1999 2000 1999
----------- ------------ ------------ ------------
Net sales $ 46,556,366 $ 36,737,575 $ 89,238,678 $ 71,211,532
Costs and expenses 45,495,135 48,860,868 89,828,979 83,883,133
------------ ------------ ------------ ------------
1,061,231 (12,123,293) (590,301) (12,671,601)
Other income (expenses):
Interest and investment income 149,436 166,291 228,252 419,356
Other - net (19,117) 11,364 (206,448) 427,775
------------ ------------ ------------ ------------
Income (loss) before income taxes 1,191,550 (11,945,638) (568,497) (11,824,470)
Provision (credit) for income taxes 441,000 (4,420,000) (210,000) (4,375,000)
------------ ------------ ------------ ------------
Net income (loss) $ 750,550 $ (7,525,638) $ (358,497) $ 7,449,470)
============ ============ ============ ============
Basic and diluted earnings (loss) per share $.09 $(.96) $ (.05) $ (.95)
==== ===== ====== ======
Dividends $-0- $ -0- $ -0- $ -0-
==== ===== ====== ======
SEE ACCOMPANYING NOTES
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SPARTON CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Unaudited)
For the Six-Month Periods ended December 31, 2000 and 1999
2000 1999
------------- -------------
Cash flows (used) provided by operating activities:
Loss from continuing operations $ (358,497) $ (7,449,470)
Add noncash items affecting operations:
Depreciation 1,003,567 1,076,530
Environmental charge -- 10,000,000
Deferred income taxes -- (3,431,000)
Add (deduct) changes in operating assets and liabilities:
Inventories 3,085,001 (6,436,933)
Other accrued liabilites 906,413 1,498,963
Accounts receivable 459,630 (5,744,347)
Income taxes (140,067) (339,757)
Accounts payable (1,173,043) (138,935)
------------ ------------
Net cash (used) provided by operating activities 3,783,004 (10,964,949)
Cash flows (used) provided by investing activities:
Sales of investment securities-net 3,427,935 11,243,984
Noncurrent other assets 412,888 444,480
Purchases of property, plant and equipment-net (535,046) (1,230,107)
------------ ------------
3,305,777 10,458,357
------------ ------------
Increase (decrease) in cash and cash equivalents 7,088,781 (506,592)
Cash and cash equivalents at beginning of period 5,052,405 4,165,758
------------ ------------
Cash and cash equivalents at end of period $ 12,141,186 $ 3,659,166
============ ============
Supplemental disclosures of cash flow information:
Cash paid (refunded) during the period
Income taxes paid $ 75,000 $ 65,000
============ ============
Income taxes refunded $ -0- $ (673,000)
============ ============
SEE ACCOMPANYING NOTES
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SPARTON CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. The accompanying condensed consolidated balance sheet at December 31, 2000,
and the related condensed consolidated statements of operations for the
three-month and six-month periods ended December 31, 2000 and 1999 and cash
flows for the six-month periods ended December 31, 2000 and 1999 are unaudited,
but include all adjustments (consisting only of normal recurring accruals) which
the Company considers necessary for a fair presentation of such financial
statements. The results of operations for the period ended December 31, 2000,
are not necessarily indicative of the results that may be expected for the full
fiscal year.
2. Long-term contracts relate principally to government defense contracts. These
contracts are accounted for based on completed units and their estimated average
contract cost per unit. Development contracts are accounted for based on
percentage of completion. Costs and fees billed under cost-reimbursement-type
contracts are recorded as sales. A provision for the entire amount of a loss on
a contract is charged to operations as soon as the loss is determinable.
Inventories are valued at the lower of cost (first-in, first-out basis) or
market and include costs related to long-term contracts. Inventories, other than
contract costs, are principally raw materials and supplies. The following are
the major classifications of inventory:
December 31, 2000 June 30, 2000
----------------- -------------
Raw materials $37,435,000 $42,419,000
Work in process and finished goods 10,670,000 8,771,000
----------- -----------
Total $48,105,000 $51,190,000
=========== ===========
3. Basic earnings per share were computed using the weighted average number of
shares outstanding. For the three-month and six-month periods, average shares
outstanding were 7,828,090 for all periods presented. Differences in the
weighted average number of shares outstanding for purposes of computing diluted
earnings per share were due to the inclusion of the dilutive effect of
outstanding employee incentive stock options granted of 149,000 shares, at
prices ranging from $3.750 to $4.250. These differences in the weighted average
number of shares outstanding for the calculation of basic and diluted earnings
per share were not material and resulted in no differences between basic and
diluted earnings per share. Options to purchase 32,000 shares at $6.625 and
116,500 shares at $8.375 for the three months and six months ended December 31,
2000 and 1999, respectively, were not included in the computation of diluted
earnings per share because their exercise price was greater than the average
market price of the common shares and therefore the effect would be
anti-dilutive.
4. Comprehensive income includes net income, as well as unrealized gains and
losses which are excluded from net income; and reflected as a direct charge or
credit to stockholders' equity. A summary of comprehensive income for the
three-month and six-month periods ending December 31, 2000 and 1999 was as
follows:
Three Months Ended Six Months Ended
------------------------ ------------------------
2000 1999 2000 1999
---- ---- ---- ----
Net income (loss) $751,000 $(7,526,000) $(358,000) $(7,449,000)
Other Comprehensive Income:
Unrealized gains (losses) on investment securities 2,000 (20,000) 108,000 (42,000)
-------- ----------- --------- -----------
Comprehensive income (loss) $753,000 $(7,546,000) $(250,000) $(7,491,000)
======== =========== ========= ===========
5. Cash and cash equivalents consist of demand deposits and highly liquid
investments with an original maturity date of less than three months. A large
majority of the investment portfolio has an original maturity date of less than
two years and a daily market exists for all the investment securities. The
Company believes that the impact of fluctuations in interest rates on its
investment portfolio should not have a material impact on financial position or
results of operations. It is the Company's intention to use these investment
securities to provide working capital and to otherwise fund the expansion of its
business.
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7
At December 31, 2000, the Company had net unrealized losses of $36. At that
date, the net after-tax effect of these losses was $23 and was included in
equity. For the six months ended December 31, 2000 and 1999, the Company had
sales of investment securities totaling $3,428,000 and $11,244,000,
respectively. There were no purchases of investment securities in either period.
6. One of Sparton's facilities, located in Albuquerque, New Mexico, has been the
subject of ongoing investigations conducted with the Environmental Protection
Agency (EPA) under the Resource Conservation and Recovery Act (RCRA). The
investigation began in the early 1980's and involved a review of on-site and
off-site environmental impacts.
At December 31, 2000, Sparton has an accrual of $9,000,000 as its estimate of
the future undiscounted minimum financial liability with respect to this matter.
The Company's cost estimate is based upon existing technology and excludes legal
and related consulting costs. The Company's estimate includes equipment and
operating costs for on-site and off-site pump and treat containment systems, a
soil vapor extraction program and continued on-site and off-site monitoring.
This estimate is based on existing methodology. Legal and related consulting
costs are expensed as incurred.
Uncertainties associated with environmental remediation contingencies are
pervasive and often result in wide ranges of reasonably possible outcomes.
Estimates developed in the early stages of remediation can vary significantly.
Normally a finite estimate of cost does not become fixed and determinable at a
specific point in time. Rather, the costs associated with environmental
remediation become estimable over a continuum of events and activities that help
to frame and define a liability. It is possible that cash flows and results of
operations could be affected by the impact of the ultimate resolution of this
contingency.
7. Deferred tax assets and liabilities are determined based on differences
between financial reporting and the tax bases of assets and liabilities. Accrued
environmental contingencies are a significant component of the Company's
deferred tax assets.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is management's discussion and analysis of certain significant
events affecting the Company's earnings and financial condition during the
periods included in the accompanying financial statements. The Company's
operations are in one line of business, electronic manufacturing services (EMS).
This includes the design, development and/or manufacture of electronic parts and
assemblies for both government and commercial customers worldwide.
The Private Securities Litigation Reform Act of 1995 reflects Congress'
determination that the disclosures of forward-looking information is desirable
for investors and encourages such disclosure by providing a safe harbor for
forward-looking statements by corporate management. The following discussion
about the Company's results of operations and financial condition contains
forward-looking statements that involve risk and uncertainty. The Company notes
that a variety of factors could cause the actual results and experience to
differ materially from anticipated results or other expectations expressed in
the Company's forward-looking statements. The risks and uncertainties that may
affect the operations, performance, growth forecasts and results of the
Company's business include, but are not limited to, timing and fluctuations in
U.S. and/or world economies and in customer demand for products, competition in
the overall EMS business, the availability and cost of materials, production
labor and management services under terms acceptable to the Company,
Congressional budget outlays for sonobuoy development and production,
Congressional legislation, changes in the interpretation of environmental laws
and the uncertainties of environmental remediation. The Company has encountered
availability and extended lead time issues on some electronic components.
Shortages on some key electronic components have resulted in higher prices.
This shortage on some critical electronic components could impact the
electronics industry, and Sparton specifically, for some time. Availability of
components could adversely affect the Company's ability to meet customers'
production schedules. In addition, the ability to recover increasing material
costs from customers will be a factor in future operating results. Management
cautions readers not to place undue reliance on forward-looking statements,
which are subject to influence by the enumerated risk factors as well as
unanticipated future events.
RESULTS OF OPERATIONS
- ---------------------
Six-Month Periods
- -----------------
Sales for the six-month period totaled $89,239,000, and while lower than
expected, were above last year by $18,027,000 (25%). Overall commercial EMS
sales increased (43%), while governmental sales decreased (11%). This sales
improvement came in general from existing customers. Government sales include
shipments on several government contracts expected to ship last year. These
sonobuoy shipments increased reported sales but carried no gross margin, due to
incurred cost overruns in the prior year. While substantially above last year,
sales were still below plan due to technical and production delays on several
government EMS programs.
An operating loss of $590,000 was reported for the six months ended December 31,
2000, compared to an operating loss of $12,672,000 for the same period last
year. In December 2000, the Company finalized negotiations with a customer to
recover excess program startup costs previously incurred. The amount recovered,
$1.9 million, was recorded in the quarter ended December 31, 2000, as additional
revenue. Also, included in these results were charges against income of $677,000
in 2000 and $10,487,000 in 1999 related to the New Mexico environmental
remediation effort. The prior estimates of future minimum costs were revised as
of December 31, 1999, to reflect the remediation activities contained in the
Consent Decree executed and lodged with the Court in January 2000. The accrual
approximated $11,300,000 at December 31, 1999 and included $1,675,000 for fines,
penalties, and litigation reimbursement costs to various governmental entities.
The remainder of the $11,300,000 was intended to cover minimum anticipated
remediation costs for the next thirty years. The operations' results also
reflect adverse manufacturing variances of $3,862,000 ($1,291,000 in 1999). The
reason for these higher variances include: an increase in material acquisition
costs, increased lease costs due to the new equipment acquired, additional
depreciation due to remodeling in the past year, and smaller than expected
production at one facility due to program delays. Additionally, gross margin for
the six months ended December 31, 1999, reflects a charge of $1,158,000 due to
revisions in estimated completion costs on certain governmental contracts.
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Interest and Investment Income declined $191,000 to $228,000 in 2000 due to
lower average investments. Other Expense-Net was $206,000 in 2000 compared to
Other Income-Net of $428,000 for the corresponding six-month period last year.
In liquidating investments during the first quarter of fiscal 2001, the Company
incurred a loss of $147,000. Included within 1999 Other Income-Net was a gain of
$443,000 from the sale of equipment and other assets at the Canadian operating
unit. The Company reported a net loss of $358,000 ($.05 per share) for the six
months ended December 31, 2000, compared to a net loss of $7,449,000 ($(.95) per
share) for the corresponding period last year.
Three-Month Periods
- -------------------
Sales for the three-month period ended December 31, 2000, totaled $46,556,000,
an increase of $9,819,000 (27%) from the similar quarter last year. Commercial
EMS sales increased $10,470,000, while government sales decreased $651,000.
Sales increased $7,097,000 at Sparton Electronics. The increase in commercial
EMS sales generally reflects increased demand from our existing customer base.
Sales to two existing customers increased by $2 million and $2.5 million,
respectively, over the same quarter last year. Government EMS sales were lower
than expected due to delays in the qualification of two major sonobuoy programs.
Revenues at Sparton Technology and Sparton of Canada were also above the
corresponding period last year.
An operating profit of $1,061,000 was reported for the three months ended
December 31, 2000, compared to an operating loss of $12,123,000 for the same
period last year. In December 2000, the Company finalized negotiations with a
customer to recover excess program startup costs previously incurred. The amount
recovered, $1.9 million, was recorded in the quarter ended December 31, 2000, as
additional revenue. Charges against income include $476,000 in 2000 and
$10,385,000 in 1999, related to the New Mexico environmental remediation effort,
discussed previously. Also reflected were adverse manufacturing variances of
$2,297,000 ($432,000 in 1999) for reasons previously discussed.
Interest and Investment Income declined $17,000 to $149,000 in 2000 due to lower
average investments. Other Expense-Net was $19,000 in 2000 compared to Other
Income-Net of $11,000 for the corresponding three-month period last year.
The Company reported a net profit of $751,000 ($.09 per share) for the three
months ended December 31, 2000, compared to net loss of $7,526,000 ($(.96) per
share) for the corresponding period last year.
FINANCIAL POSITION
- ------------------
For the six-month period ended December 31, 2000, Cash and Cash Equivalents
increased $7,089,000 to $12,141,000. Operating activities provided $3,783,000 in
net cash flows. The principal source of cash flow from operating activities was
a reduction in inventories. Cash flows provided by investing activities totaled
$3,306,000, principally from the sale of investments. No cash was used or
provided by financing activities.
At December 31, 2000, and June 30, 2000, the aggregate government EMS backlog
was approximately $53 million and $64 million, respectively. A majority of the
2000 backlog is expected to be realized in the next 12-15 months. Commercial EMS
sales are not included in the backlog. The Company does not believe the amount
of commercial sales covered by purchase orders received is a meaningful measure
of future sales, as such orders may be rescheduled or cancelled without
significant penalty.
At December 31, 2000, the Company had $78,827,000 in recorded shareowners'
equity ($10.07 per share), $65,409,000 in working capital, and a 4.22:1.00
working capital ratio. No dividends were declared in either period presented.
OTHER
- -----
One of Sparton's facilities, located in Albuquerque, New Mexico, has been the
subject of ongoing investigations conducted with the Environmental Protection
Agency (EPA) under the Resource Conservation and Recovery Act (RCRA). The
investigation began in the early 1980's and involved a review of on-site and
off-site environmental impacts.
At December 31, 2000, Sparton has an accrual of $9,000,000 as its estimate of
the future undiscounted minimum financial liability with respect to this matter.
The Company's cost estimate is based upon existing technology and excludes legal
and related consulting costs. The Company's estimate includes equipment and
operating costs for on-site and off-site
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pump and treat containment systems, a soil vapor extraction program and
continued on-site and off-site monitoring. This estimate is based on existing
methodology. Legal and related consulting costs are expensed as incurred.
Uncertainties associated with environmental remediation contingencies are
pervasive and often result in wide ranges of reasonably possible outcomes.
Estimates developed in the early stages of remediation can vary significantly.
Normally a finite estimate of cost does not become fixed and determinable at a
specific point in time. Rather, the costs associated with environmental
remediation become estimable over a continuum of events and activities that help
to frame and define a liability. It is possible that cash flows and results of
operations could be affected by the impact of the ultimate resolution of this
contingency.
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OTHER INFORMATION
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Various litigation is pending against the Company, in many cases involving
ordinary and routine claims incidental to the business of the Company and in
others presenting allegations that are non-routine. The Company and its
subsidiaries are also involved in certain compliance issues with the United
States Environmental Protection Agency (EPA) and various state agencies,
including being named as a potentially responsible party at several sites.
Potentially responsible parties (PRPs) can be held jointly and severally liable
for the cleanup costs at any specific site. The Company's past experience,
however, has indicated that when it has contributed only relatively small
amounts of materials or waste to a specific site relative to other PRPs, its
ultimate share of any cleanup costs has been minor. Based upon available
information, the Company believes it has contributed only small amounts to those
sites in which it is currently viewed a potentially responsible party.
In February 1997, three lawsuits were filed against Sparton's wholly owned
subsidiary, Sparton Technology, Inc., in Federal District Court in Albuquerque,
one by the United States on behalf of the EPA, the second by the State of New
Mexico and the third by the City of Albuquerque and the County of Bernalillo.
All three actions alleged that the impacts to soil and groundwater associated
with Sparton Technology's Coors Road facility presented an imminent and
substantial threat to human health or the environment. On March 3, 2000, a
Consent Decree was entered, settling the lawsuits as well as a related
administrative enforcement action. The Consent Decree represents a judicially
enforceable settlement agreement under which Sparton Technology has paid
$1,000,000 to resolve claims for damages to natural resources, $475,000 to
resolve claims for civil penalties for alleged violations of state law and an
order entered in the related administrative enforcement action, and $200,000
for reimbursement of the litigation costs of certain plaintiffs. The Consent
Decree also contains work plans describing remedial activity Sparton Technology
agreed to undertake. In exchange for the monetary payment and an agreement to
implement the work plans, Sparton Technology received covenants not to sue that,
except in fairly extraordinary circumstances, prevent any further administrative
or judicial action by state and federal entities in connection with the impacts
to the environment associated with past activities at the Coors Road facility.
The work plans provide for the installation of an off-site containment well
(already completed and operating), enhancement to an on-site soil vapor
extraction system (in operation) and an on-site containment well. It is
anticipated that these remediation activities will operate for a period of time
during which Sparton Technology and the regulatory agencies will analyze their
effectiveness. The Company believes that it will take at least three to five
years before the effectiveness of the groundwater extraction wells can be
established. If ineffective, additional remedies may be imposed at a
significantly increased cost. There is no assurance that additional costs
greater than the amount accrued will not be incurred or that changes in
environmental laws or their interpretation will not require that additional
amounts be spent.
Upon entering into the Consent Decree, the Company reviewed its estimates of the
future costs expected to be incurred in connection with its remediation of the
environmental issues associated with its Coors Road Plant over the next 30
years. The Company increased its accrual for the cost of addressing
environmental impacts associated with its Coors Road Plant by $10,000,000,
pre-tax, in December 1999. At December 31, 2000, the remaining undiscounted
minimum accrual for EPA remediation approximates $9,000,000. This balance is
after payment of the $1,675,000 in costs and damages, described above, payable
to the various plaintiff parties, which amount was paid in March 2000. The
Company's estimate is based upon existing technology and current costs which
have not been discounted. The estimate includes equipment and operating and
maintenance costs for the on-site and off-site pump and treat containment
systems, a soil vapor extraction program and continued on-site and off-site
monitoring. It also includes the required periodic reporting requirements. This
estimate does not include legal and related consulting costs which are expensed
as incurred. The estimate does not reflect any offset or reduction for monies
recovered from various parties which the Company is currently pursuing as
described below.
In 1995 Sparton Corporation and Sparton Technology, Inc. filed a Complaint in
the Circuit Court of Cook County, Illinois, against Lumbermens Mutual Casualty
Company and American Manufacturers Mutual Insurance Company demanding
reimbursement of expenses incurred in connection with its remediation efforts at
the Coors Road facility based on various primary and excess comprehensive
general liability policies in effect between 1959 and 1975. In 1999 the
Complaint was amended to add various other excess insurers, including certain
London market insurers and Fireman's Fund Insurance Company. The case is
currently in the discovery stage, with discovery currently set to close on April
30, 2001.
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On February 11, 1998, Sparton Technology, Inc. commenced litigation in the
United States Court of Federal Claims alleging that the Department of Energy
(DOE), acting through its contractors, Sandia Corporation and Allied Signal,
Inc., is liable for reimbursement of Sparton's costs incurred in defending
against and complying with federal and state regulatory requirements. The DOE
prescribed certain mandatory performance requirements that were then imposed
upon Sparton Technology through its agreements with Sandia Corporation and
Allied Signal, Inc. On February 9, 1999, the Court of Federal Claims dismissed
Sparton Technology's complaint on the basis of a lack of jurisdiction concluding
that an agency relationship did not exist between Sandia Corporation and Allied
Signal, Inc. and the United States for purposes of reimbursing costs incurred
during litigation. Sparton Technology believed that the court erred in its
decision and filed its notice of appeal on April 9, 1999. On April 18, 2000, the
Federal Circuit Court reversed the lower court's decision and reinstated Sparton
Technology's claim for purposes of examining whether the Court of Federal Claims
does indeed have jurisdiction. Sparton Technology is now proceeding with
discovery on the jurisdiction related issues.
Sparton Technology, Inc. filed a complaint on September 21, 1998, against Allied
Signal, Inc. in U.S. District Court in Kansas City seeking to recover costs
incurred to investigate and remediate impacts to the environment at its Coors
Road facility. In July 1999, the Court allowed Sparton Technology to amend its
complaint to add Sandia Corporation and the DOE as defendants. In March 2000,
the case was transferred to the United States District Court in Albuquerque, New
Mexico. Written discovery commenced, but was stayed on July 13, 2000, so that a
court-ordered mediation could be conducted. That did not result in settlement,
and on December 20, 2000, the Court entered a new discovery scheduling order
that ends fact discovery in December 2001 and expert witness discovery in July
2002. Dispositive motions are due at that time. Trial is not yet scheduled, but
normally takes place within six months of dispositive motions. Active discovery
is now taking place.
At this time, the Company is unable to predict the amount or timing of recovery,
if any, that may result from the pursuit of these before-mentioned three claims.
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OTHER INFORMATION
PART II.
Item 6. Exhibits and Reports on Form 10-K and 10-Q
(a) Exhibits
3 & 4 Instruments defining the rights of security holders have been
previously filed as follows:
Articles of Incorporation of the Registrant were filed on form
10-K for the year ended June 30, 1981, and an amendment thereto
was filed on Form 10-Q for the three-month period ended December
31, 1983, and are incorporated herein by reference.
The amended By-Laws of the Registrant are filed herewith and
attached.
Code of Regulation of the Registrant was filed on Form 10-K for
the year ended June 30, 1981, and an amendment thereto was filed
on Form 10-Q for the three-month period ended September 30, 1982,
and are incorporated herein by reference.
27 Submitted to the Securities and Exchange Commission for its
information.
(b) Reports on Form 8-K filed in the Second Quarter of Fiscal 2001: None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SPARTON CORPORATION
-------------------
Registrant
Date: February 9, 2001 /s/ David W. Hockenbrocht
---------------- ----------------------------------------
David W. Hockenbrocht, CEO and President
Date: February 9, 2001 /s/ Richard Langley
---------------- ----------------------------------------
Richard Langley, Chief Financial Officer
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ATTACHMENT
SPARTON CORPORATION
BY-LAWS
MEETING OF DIRECTORS
--------------------
ARTICLE I A regular meeting of the Board of Directors shall be held
immediately following the annual meeting of the shareholders at the place where
such shareholders' meeting is held, and regular meetings of the Board of
Directors shall also be held at such time and place, within or without the State
of Ohio, as may be fixed by the Board of Directors.
Special meetings of the Board of Directors may be called
at any time by the Chairman of the Board of Directors or by the President (on
notice to each director as hereinafter provided) to be held at such time and
place, within or without the State of Ohio, as shall be fixed by the officer
calling the meeting, and special meetings shall be called by the Chairman of the
Board of Directors or by the President (on notice to each director as
hereinafter provided) on the written request of a majority of the members of the
Executive Committee or of the Board of Directors, to be held at such time and
place, within or without the State of Ohio, as shall be designated in such
written request.
The Secretary of the Company shall give notice of the time
and place of each regular or special meeting of the Board or mailing or
telegraphing such notice to each director at least three (3) days, or
telephoning such notice at lease two (2) days before the time fixed for such
meeting, except the meeting following the annual shareholders' meeting, which
meeting shall require no notice.
A majority of the directors then holding office shall be
necessary to constitute a quorum for the transaction of business, provided,
however, that the directors present at any directors' meeting, though less than
such majority, may adjourn such meeting from time to time. No notice of any
adjourned meeting need be given other than by announcement at the meeting at
which such adjournment is taken.
Any action which may be authorized or taken at a meeting
of the directors may be authorized or taken without a meeting in a writing or
writings signed by all the directors, which writing or writings shall be filed
with or entered upon the records of the corporation.
EXECUTIVE COMMITTEE
-------------------
ARTICLE II An Executive Committee, to consist of not less than three
(3) nor more than five (5) directors, may be elected by the Board of Directors.
The Board of Directors may appoint one or more directors as alternate members of
the Executive Committee, who may take the place of any absent member or members
at any meeting of the Committee. The Board of Directors shall have the power to
remove from the Executive Committee at any time any member or members of said
Committee and to elect another director or directors as a member or members of
the Executive Committee in place of the person or persons so removed from the
said Committee. The Executive Committee may act by the affirmative vote of a
majority of its members at a meeting or may take any action without a meeting if
such action is authorized by a writing (which may be in two or more
counterparts) signed by all of its members. The Executive Committee shall have
and exercise all the powers of the Board of Directors in the intervals between
the meetings of the Board of Directors in the management of the business and
affairs of the Company, including the right to authorize the seal of the Company
to be affixed to all corporate papers which may require it, and generally shall
perform such other duties and exercise such other powers as may be specifically
directed or delegated to the Executive Committee by the Board from time to time.
The Executive Committee shall record full and complete the
minutes of all its proceedings and acts and shall submit the same to the Board
of Directors at the next succeeding meeting of the Board of Directors and
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shall submit the same at any other time to the Board of Directors or to any
member thereof upon its or his request.
Vacancies in the Executive Committee shall be filled by
the Board of Directors, provided that any such vacancy may be temporarily filled
by an alternate member until filled by the Board of Directors.
The Executive Committee shall meet upon call of the
Chairman of the Board of Directors or of the President or of a majority of the
Executive Committee, provided, however, that notice of the time and place of
such meeting shall be given by mailing or telegraphing such notice to each
member of the Committee at least three (3) days or telephoning such notice to
each member of the Committee at least two (2) days before the time fixed for
such meeting. It shall be the duty of the Secretary of the Executive Committee
to give such notice upon the request of the officer or members of the Executive
Committee calling the meeting.
The meetings of the Executive Committee shall be held at
such place, within or without the State of Ohio, as the Board of Directors or
the Executive Committee or the President may designate.
OFFICERS
--------
ARTICLE III The Board of Directors shall annually elect a President,
one or more Vice Presidents, a Secretary and a Treasurer, and may also annually
elect a Chairman of the Board, one or more Assistant Secretaries and one or more
Assistant Treasurers. The Board of Directors may further elect or appoint such
other officers or agents as the Board of Directors may from time to time deem
necessary who shall have such authority and perform such duties as may be
prescribed by the Board of Directors. Each officer shall hold office until the
next annual shareholders' meeting and until his successor is elected and
qualified unless sooner removed by the Board of Directors, which the Board of
Directors shall have power to do at any time, with or without cause, without
prejudice to the contract rights of such officer.
The President shall have power to suspend or remove any
officer of the Company, except the Chairman of the Board of Directors, subject
to the right of the Board of Directors or the Executive Committee to reinstate
such officer.
CHAIRMAN OF THE BOARD OF DIRECTORS
----------------------------------
ARTICLE IV The Chairman of the Board of Directors shall preside at all
meetings of the Board of Directors. He shall also have such other powers and
duties as the Board of Directors may from time to time authorize or impose.
A Chairman of the Board who has served the Corporation
with distinction, upon retirement from that office, may be especially honored by
the Board of Directors by appointing him or her to be Chairman Emeritus. The
Chairman Emeritus shall have no duties, responsibilities, rights or authorities
with respect to the management or operation of the Corporation by reason of his
or her appointment to that office. If the Chairman Emeritus is a member of the
Board, he or she shall have the duties, responsibilities, rights and authorities
as from time to time are vested in the other members of the Board. In addition,
the Board may, with the consent of the Chairman Emeritus, assign to the Chairman
Emeritus from time to time such consulting, advisory or other duties as the
Board may determine in its discretion, and may fix appropriate compensation
for the performance of such duties.
PRESIDENT
---------
ARTICLE V The President shall be the chief executive officer
specifically imposed upon him by statute and as from time to time may be imposed
upon him by the Board of Directors or by the Executive Committee. He shall have
the general management of the Company's business and affairs, subject, however,
at
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all times to the control of the Board of Directors and of the Executive
Committee and to the right of the Board of Directors or the Executive Committee
to delegate any specific power or duty, except such as may be by statute
conferred exclusively upon the President, to any other officer or officers of
the Company.
In the event of the absence of disability of the Chairman
of the Board of Directors or in the event no Chairman of the Board is elected,
the President shall preside at all meetings of the Board of Directors and the
Executive Committee of the Board of Directors.
VICE PRESIDENTS
---------------
ARTICLE VI The Vice Presidents of the Company shall perform such
duties as from time to time may be respectively imposed upon them by the Board
of Directors or by the Executive Committee or by the President, and in case of
the absence or disability of the President or of a vacancy in his office, the
Vice President who is then the senior in office shall be vested with all the
President's powers and be required to perform all the President's duties, unless
the Board of Directors shall otherwise provide.
The Board of Directors may specifically designate any Vice
President of the Company as Executive Vice President or Senior Vice President or
other designation or title and assign to him such powers and duties as the Board
of Directors may determine.
SECRETARY
---------
ARTICLE VII The Secretary shall be ex officio Secretary of the Board
of Directors and of the Executive Committee of the Board of Directors. He shall
attend all meetings of the Board of Directors and act as Secretary thereof, and
record all votes and proceedings in books to be kept for that purpose. In
addition to the minutes of the meetings of the Board of Directors, the Secretary
shall also keep the records of all other corporate proceedings.
The Secretary shall be the custodian of the corporate seal
of the Company and shall affix said corporate seal to all contracts, deeds and
other writings and documents executed by the Company under its corporate seal is
duly authorized.
The Secretary shall give notice of the meetings of
shareholders and of the Board of Directors and shall perform such other duties
as may be required by the Board of Directors, or by the Executive Committee or
by the President.
ASSISTANT SECRETARIES
---------------------
ARTICLE VIII The Assistant Secretaries of the Company shall perform
such duties as from time to time may be respectively imposed upon them by the
Board of Directors or by the Executive Committee or by the President, and in
case of the absence or disability of the Secretary or of a vacancy in his
office, the Assistant Secretary (or if there be more than one Assistant
Secretary, then the Assistant Secretary who is then the senior in office) shall
be vested with all the Secretary's powers and required to perform all the
Secretary's duties.
TREASURER
---------
ARTICLE IX The Treasurer shall be the chief financial officer of the
Company and shall have charge and custody of and be responsible for all funds
and securities of the Company, and shall deposit all such funds in the name and
to the credit of the Company in such depositaries as may be designated by the
Board of
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Directors or by the Executive Committee. He shall keep or cause to be kept full
and accurate accounts of receipts and disbursements in books belonging to the
Company. He shall have full authority to receive and receipt for all moneys due
the Company, and shall render to the President and to the Chairman of the Board
of Directors and to the Board of Directors and to the Executive Committee,
whenever any of them may require it, an account of all his transactions as
Treasurer, and shall perform such other duties as may be required by the Board
of Directors or by the Executive Committee or by the President.
ASSISTANT TREASURERS
--------------------
ARTICLE X The Assistant Treasurers of the Company shall perform such
duties as from time to time may be respectively imposed upon them by the Board
of Directors or by the Executive Committee or by the President, and in case of
the absence or disability of the Treasurer or of a vacancy in his office, the
Assistant Treasurer (or if there be more than one Assistant Treasurer, then
the Assistant Treasurer who is then the senior in office) shall be vested with
all the Treasurer's powers and required to perform all the Treasurer's duties.
GENERAL PROVISIONS
------------------
ARTICLE XI In case of the absence or disability of any officer of the
Company, or for any reason that may seem sufficient to the Board of Directors or
to the Executive Committee, the Board of Directors or the Executive Committee,
except as prohibited by law, may delegate his powers and duties to any other
officer or to any director.
RESIGNATIONS
------------
ARTICLE XII Any director or other elected officer may resign at any
time. The acceptance of his resignation shall not be required to make it valid.
FISCAL YEAR
-----------
ARTICLE XIII The fiscal year of the Company shall begin on the first
day of July and end on the thirtieth day of June in each year.
CHECKS, NOTES, ETC.
-------------------
ARTICLE XIV All checks, drafts and orders for the payment of money of
the Company shall be signed by the President or by any Vice President and the
Treasurer or Assistant Treasurer or by any two Vice Presidents or by the
Treasurer and the Assistant Treasurer except when otherwise specifically
provided by resolution of the Board of Directors or of the Executive Committee.
Either the President, any Vice President, the Treasurer or any Assistant
Treasurer is authorized to endorse for collection or deposit to the credit of
the Company any and all checks, drafts, bills of exchange, promissory notes,
orders, certificates of deposit and acceptances.
All notes of the Company for the payment of money shall be
signed by the Chairman of the Board of Directors or the President or any Vice
President and by the Secretary or the Treasurer, or any Assistant Secretary or
Assistant Treasurer, unless otherwise provided by the Board of Directors or by
the Executive Committee, provided, however, that one person shall not sign in
more than one capacity.
Contracts, deeds and other documents executed by the
Company may be signed in the name and on behalf of the Company by the President
or any Vice President and by the Secretary or any Assistant Secretary or
18
the Treasurer or any Assistant Treasurer unless the Board of Directors or the
Executive Committee shall otherwise determine, provided, however, that one
person shall not sign in more than one capacity unless the Board of Directors or
the Executive Committee shall so direct. The Board of Directors or the Executive
Committee may authorize any other officer or officers or agent or agents of the
Company to enter into any contract or to execute and deliver any contract or
other instrument in the name and on behalf of the Company.
SEAL
----
ARTICLE XV The common corporate seal of the corporation shall consist
of a round seal with the words "SPARTON CORPORATION, OHIO" in the margin thereof
and the word "SEAL" in the center thereof.
METHOD OF GIVING NOTICE
-----------------------
ARTICLE XVI Whenever the By-Laws require notice, it shall not be
construed to mean personal notice except where the statutes require personal
notice, but such notice may be given in writing by depositing the same in a post
office or letter box in a postpaid sealed wrapper, directed to the address as
the same appears on the books or records of the Company, or by a telegram
containing such notice directed to the address as the same appears on the books
or records of the Company, or by telephone, and such notice, if given by mail,
shall be deemed given when so mailed, and if given by telegraph, shall be deemed
given when the telegram is so sent.
ALTERATION OF BY-LAWS
---------------------
ARTICLE XVII The Board of Directors, by a vote of a majority of the
full Board of Directors, may, at any regular or special meeting, alter, amend or
repeal the By-Laws.