Sparton Corporation reports fiscal year end 2009 results

Sparton Corporation (NYSE: SPA) today announced results for the fiscal year ended June 30, 2009.

Mr. Cary Wood, president and CEO, stated that “Fiscal 2009 proved to be another challenging year for Sparton Corporation – challenging from a financial, operational and strategic perspective. While the net loss for the year is disappointing, we are encouraged by the progress we have made in the second half of the year. Of the total net loss for the year, $9.6 million is attributable to the second half. Included in the second half net loss was $7.0 million of restructuring and impairment charges and a $1.6 million tax provision related to reserves established against deferred tax assets. The Company experienced a positive shift in performance in the second half of the year, demonstrated by our improved gross margin, and even more pronounced when excluding the impact of the restructuring, impairment and tax charges.”

Fiscal Year 2009 fourth quarter results include the following:

• Aerospace sales increased $2.6 million or 14% in the fourth quarter of fiscal 2009 to $21.2 million compared to $18.6 million a year ago. The increase was primarily due to price increases and increased volume to certain customers.
• Medical/Scientific Instrumentation sales increased $2.5 million or 17% in the fourth quarter of fiscal 2009 to $17.8 million compared to $15.3 million a year ago. The increase was primarily due to increased volume from existing customers.
• Government sales increased $7.6 million or 68% in the fourth quarter of fiscal 2009 to $18.7 million compared to $11.1 million a year ago. The increase was primarily due to increased foreign sonobuoy orders and increased orders from the U.S. Navy.
• Industrial/Other sales decreased $11.8 million or 92% in the fourth quarter of fiscal 2009 to $1.1 million compared to $12.9 million a year ago. This decrease was primarily related to the completion of disengagements with several industrial customers in fiscal 2009.
• Gross profit as a percent of sales increased to 7.6% in the fourth quarter of fiscal 2009 from 3.3% in the fourth quarter of fiscal 2008. Gross profit was favorably impacted by improved margins on several customers resulting from price increases, improved performance, and reductions in force that took place in February and April 2009. Additionally, successful sonobuoy drop tests allowed for significantly improved margins associated with government sales due to labor efficiencies and minimal rework costs.
• Restructuring and impairment charges totaling $6.0 million were recorded in the fourth quarter of fiscal 2009 related to various turnaround actions, including a reduction in force and the closing of the Company’s London, Ontario and Jackson, Michigan facilities.
• A provision for income taxes of $1.4 million was included in the fourth quarter of fiscal 2009 compared to $7.1 million in the fourth quarter of fiscal 2008. The provision primarily relates to the establishment of reserves against deferred tax assets.

Fiscal Year 2009 results include the following:

• Aerospace sales improved significantly above the prior year, increasing $22.0 million or 34% to $86.6 million in fiscal 2009. This improvement was primarily due to increased demand from four existing customers.
• Medical/Scientific Instrumentation sales decreased $5.5 million or 8% from the prior year to $67.7 million, primarily due to delayed new customer program starts and decreased volume from existing customers.
• Government sales decreased $6.2 million or 13% from the prior year to $42.3 million, primarily due to lower U.S. Navy and foreign awards received in fiscal 2008 for completion in fiscal 2009.
• Industrial/Other sales decreased $18.3 million or 42% from the prior year to $25.3 million. This decrease was primarily related to four customers with whom the Company disengaged in fiscal 2009.
• Gross profit as a percent of sales increased to 7.1% in fiscal 2009 from 5.2% in fiscal 2008. Gross profit was favorably impacted by improved margins on several customers resulting from price increases, improved performance, and reductions in force, as well as the absence of a $2.4 million charge to cost of sales in fiscal 2008 related to the write-off of certain deferred assets. Additionally, successful sonobuoy drop tests allowed for significantly improved margins associated with government sales due to labor efficiencies and minimal rework costs. Negatively impacting gross profit was an increase in pension expense over the prior year of $1.5 million related primarily to curtailment and lump-sum settlement adjustments.
• Restructuring and impairment charges totaling $7.0 million were recorded in fiscal 2009, primarily in the fourth quarter, related to various turnaround actions, including two reductions in force and the closing of the Company’s London, Ontario and Jackson, Michigan facilities.
• Canadian translation losses included in other income (expense) totaled $1.5 million in fiscal 2009 compared to a gain of $0.3 million in fiscal 2008.
• A provision for income taxes of $1.8 million was included in fiscal 2009 compared to $5.2 million in fiscal 2008. The provision primarily relates to the establishment of reserves against deferred tax assets.