EXHIBIT 99.1
[LOGO OF SPARTON CORPORATION] NEWS RELEASE
FOR IMMEDIATE RELEASE
Sparton Corporation Releases Fiscal 2004 Third Quarter Results
JACKSON, Mich.--(BUSINESS WIRE) -- May 14, 2004--Electronic Design and
Manufacturing Service (EMS) provider, Sparton Corporation (NYSE:SPA) announced
the financial results for the third quarter and nine months ended March 31,
2004.
Sales for the three-month period ended March 31, 2004, totaled $43,566,000, an
increase of $2,725,000 (7%) from the same quarter last year. Government sales of
$14,061,000 increased $4,223,000 (43%) from prior year, principally due to the
successful passage of a number of sonobuoy drop tests during March. Industrial
market sales of $11,169,000 showed a significant decline, down 26% from the same
period last year. Industrial sales have been adversely impacted by the reduced
sales to customers providing detection equipment for U.S. airports.
Medical/scientific instrumentation sales were consistent with third quarter
sales in fiscal 2003, while aerospace sales of $13,885,000 increased 22% from
prior year, an increase mainly attributable to increased orders from existing
customers.
Sales for the nine-month period ended March 31, 2004, totaled $113,231,000, off
$7,658,000 (6%), compared to the same period last year. All markets, with the
exception of aerospace, evidenced a decline from prior year. Government sales
were $30,746,000 for the nine months ended March 31, 2004, down slightly from
prior year's sales of $32,715,000, a decline of 6%. Government sales declined
from last year in part due to the overall decline in sonobuoy sales to the U.S.
Navy and delayed foreign sonobuoy sales. Industrial sales of $29,089,000 showed
a decline of 29%. Industrial sales have declined sharply due to reduced sales
for homeland security. Prior year's sales benefited from strong demand from
customers with homeland security products, principally driven by the demand for
detection equipment in U.S. and Canadian airports. Contrary to other markets,
aerospace sales increased $7,155,000 (22%) to $39,899,000, primarily as a result
of increased sales to existing customers.
An operating profit of $133,000 was reported for the three months ended March
31, 2004, compared to $801,000 for the three months ended March 31, 2003. Gross
margin for the three months ended March 31, 2004, was 8%, up from 4% for the
previous three months ended December 31, 2003. The improved margin reflects the
conclusion of the start-up phase of several programs, as well as the completion
of one sonobuoy contract that had experienced technical problems. The 8% gross
margin for the three months ended March 31, 2004 was down from 10% in fiscal
2003. The decrease was partially due to a less favorable product mix, as well as
several programs in start-up mode which contributed minimal or negative margins.
In addition, the provision for pension costs was adjusted by $481,000 to reflect
the revised annual estimate of such costs. An operating loss of $5,358,000 was
reported for the nine months ended March 31, 2004, versus an operating profit of
$8,826,000 for the same period last year. Included in prior year's operating
income was a $5,500,000 recovery ($3,630,000 net of tax) of certain
environmental remediation costs. It reflects Sparton's settlement with the DOE
and others regarding the reimbursement of costs incurred at the Company's
Sparton Technology Coors
Road property. The Company is focused on continuing to improve margins through
cost reductions and/or recoupment of unplanned expenses from several customers.
The Company reported net income of $156,000 ($0.02 per share, basic and diluted)
and a loss of $3,541,000 ($(0.42) per share, basic and diluted) for the three
months and nine months ended March 31, 2004, versus $671,000 ($0.08 per share,
basic and diluted) and $6,427,000 ($0.77 per share basic, $0.76 per share
diluted) for the corresponding periods last year. At March 31, 2004, the Company
had $87,772,000 in shareowners' equity ($10.52 per share), $70,356,000 in
working capital, and a 4.84:1.00 working capital ratio.
SPARTON CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Operations (Unaudited)
For the Three-Month and Nine-Month Periods ended March 31, 2004 and 2003
Three-Month Periods Nine-Month Periods
------------------------------ ------------------------------
2004 2003 2004 2003
------------- ------------- ------------- -------------
Net sales $ 43,566,394 $ 40,841,367 $ 113,230,967 $ 120,888,569
Costs of goods sold 39,985,009 36,701,515 107,775,123 107,219,388
------------- ------------- ------------- -------------
3,581,385 4,139,852 5,455,844 13,669,181
Selling & administrative (income) expenses:
Selling & administrative expenses 3,345,108 3,332,782 10,574,176 10,066,411
EPA related -
Net environmental remediation 103,012 6,242 239,959 (5,223,320)
------------- ------------- ------------- -------------
3,448,120 3,339,024 10,814,135 4,843,091
------------- ------------- ------------- -------------
Operating income (loss) 133,265 800,828 (5,358,291) 8,826,090
Other income (expense):
Interest and investment income 157,079 188,192 510,325 489,849
Equity income (loss) in investment 4,000 29,000 16,000 (28,000)
Other - net (65,331) (60,490) (374,756) (107,141)
------------- ------------- ------------- -------------
95,748 156,702 151,569 354,708
------------- ------------- ------------- -------------
Income (loss) before income taxes 229,013 957,530 (5,206,722) 9,180,798
Provision (credit) for income taxes 73,000 287,000 (1,666,000) 2,754,000
------------- ------------- ------------- -------------
Net income (loss) $ 156,013 $ 670,530 $ (3,540,722) $ 6,426,798
============= ============= ============= =============
Earnings (loss) per share: [1]
Basic $ 0.02 $ 0.08 $ (0.42) $ 0.77
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Diluted $ 0.02 $ 0.08 $ (0.42) $ 0.76
============= ============= ============= =============
See accompanying notes.
[1] All share and per share information have been adjusted to reflect the impact
of the 5% stock dividends declared in January and October 2003.
Notes:
1. Financial information was taken from the Company's internal records and is
unaudited.
2. Basic weighted average shares outstanding for the three-month and
nine-month periods, were 8,345,787 and 8,344,863 in 2004, and 8,340,651
and 8,339,249 in 2003, respectively. Differences in basic and diluted
earnings (loss) per share were due to the inclusion of employee
incentive stock options.
3. Included in prior year's operating income was a $5,500,000 recovery
($3,630,000 net of tax) of certain environmental remediation costs.
This recovery reflects Sparton's settlement with the DOE and others
regarding the reimbursement of costs incurred at the Company's Sparton
Technology Coors Road property.
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SPARTON CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheet as of March 31, 2004 (Unaudited)
Current assets $ 88,696,240 Current liabilities $ 18,340,177
Other non-current assets 11,455,275 Environmental remediation 6,601,832
Property, plant & equipment-net 12,562,695 Shareowners' equity 87,772,201
------------ ------------
Total assets $112,714,210 Total liabilities & shareowners' equity $112,714,210
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This press release contains forward-looking statements within the scope of the
Securities Act Exchange of 1933 and the Securities Exchange Act of 1934. The
words "expects," "anticipates," "believes," "intends," "plans," and similar
expressions, and the negatives of such expressions, are intended to identify
forward-looking statements. Although the Company believes that these
statements are based upon reasonable assumptions, such statements involve risks,
uncertainties, and assumptions, including but not limited to industry and
economic conditions, customer actions, and other factors discussed in the
Company's form 10-Q for the quarter ended March 31, 2004, and it's other filings
with the Securities and Exchange Commission. Should one or more of these risks
or uncertainties materialize, or should underlying assumptions prove incorrect,
actual outcomes may vary materially from those indicated.