SCHAUMBURG, Ill.--(BUSINESS WIRE)--Sparton Corporation (NYSE: SPA) today announced results for the fourth quarter of fiscal 2015 ended June 30, 2015. The Company reported fourth quarter sales of $126.4 million, or an increase of 35% from $93.5 million for the fourth quarter of fiscal 2014. Operating income for the fourth quarter of fiscal 2015 was $8.8 million, which included $2.8 million for the L-3 settlement and associated legal costs to that matter incurred in that quarter. This compares to operating income of $5.0 million in the fourth quarter of fiscal 2014, which included recognition of $4.2 million of environmental remediation expense. Net income for the fourth quarter of fiscal 2015 was $5.1 million or $0.52 per basic share, and $0.51 per diluted share compared to net income of $3.0 million, or $0.29 per share, basic and diluted, in the same quarter a year ago.
Consolidated Results for the Quarters and Years Ended June 30, 2015 and 2014 (in thousands, except per share amounts):
| For the Three Months Ended | For the Years Ended | |||||||||||||||||||||
| June 30, | June 30, | June 30, | June 30, | |||||||||||||||||||
| 2015 | 2014 | % Chg | 2015 | 2014 | % Chg | |||||||||||||||||
| Net sales | $ | 126,393 | $ | 93,500 | 35.2 | % | $ | 382,125 | $ | 336,501 | 13.6 | % | ||||||||||
| Base business | 104,534 | 93,500 | 11.8 | % | 297,963 | 310,574 | (4.1 | )% | ||||||||||||||
| Acquisitions | 21,859 | — | 84,162 | 25,927 | 224.6 | % | ||||||||||||||||
| Gross profit | 28,055 | 20,908 | 34.2 | % | 74,671 | 64,815 | 15.2 | % | ||||||||||||||
| Adjusted gross profit | 28,099 | 20,989 | 33.9 | % | 74,970 | 65,152 | 15.1 | % | ||||||||||||||
| Selling and administrative expenses | 13,588 | 10,559 | 28.7 | % | 46,876 | 35,698 | 31.3 | % | ||||||||||||||
| Legal settlement | 2,500 | — | 2,500 | — | ||||||||||||||||||
| Environmental remediation | — | 4,238 | — | 4,238 | ||||||||||||||||||
| Operating income | 8,809 | 4,984 | 76.7 | % | 17,252 | 20,251 | (14.8 | )% | ||||||||||||||
| Adjusted operating income | 11,605 | 9,303 | 24.7 | % | 21,760 | 25,014 | (13.0 | )% | ||||||||||||||
| Net income | 5,098 | 2,971 | 71.6 | % | 10,989 | 12,987 | (15.4 | )% | ||||||||||||||
| Adjusted net income | 6,473 | 5,698 | 13.6 | % | 13,066 | 16,013 | (18.4 | )% | ||||||||||||||
| Income per share - basic | 0.52 | 0.29 | 1.10 | 1.28 | ||||||||||||||||||
| Adjusted income per share - basic | 0.65 | 0.56 | 1.30 | 1.58 | ||||||||||||||||||
| Income per share - diluted | 0.51 | 0.29 | 1.10 | 1.28 | ||||||||||||||||||
| Adjusted income per share - diluted | 0.65 | 0.56 | 1.30 | 1.58 | ||||||||||||||||||
| Adjusted EBITDA | 15,360 | 11,920 | 28.9 | % | 34,305 | 34,979 | (1.9 | )% | ||||||||||||||
Cary Wood, President & CEO, commented, “Given the headwinds we faced going into fiscal 2015, we are very pleased with the final results for the year. We finished the year at an adjusted earnings per share of $1.30, revenue increased 14%, gross margins improved for the sixth straight year and adjusted EBITDA was $34.3 million, approximately the same as compared to the same prior year period. Consolidated legacy revenues decreased 4% or $12.6 million for the year, primarily due to the MDS segment’s 15% reduction in revenues led by the Fenwal rebalancing activities of $19 million as well as fluctuations in customer demand due to program cancellations, governmental funding and customer design related delays, partially offset by the ECP segment’s growth of 20% or $19.0 million led by increased production requirements of the new U.S. Navy sonobuoy contract. The seven acquisitions completed in the year added approximately $84.2 million of revenue, representing 22% of fiscal 2015’s revenue. Our gross margin improvements continue to be realized through the deployment of the Sparton Business System, a collection of benchmarked best practices that are implemented through employee led lean events. Adjusted EBITDA for the year came in at 9.0% of sales, 100 basis points below our objective, due to SG&A expenses, primarily from the increased M&A activity of completing seven transactions as compared to three in the prior year, fourth quarter integration activities related to the Hunter acquisition and other key investments in preparation of executing our 2020 Vision. In the fourth quarter, with the Fenwal rebalancing behind us, we realized 12% growth in our base business over the prior year’s quarter, with ECP and MDS growing at 27% and 2% respectively, indicating the positive health of our legacy business as we enter fiscal 2016. The results have continued to reflect the successful execution and completion of our 2010 Strategic Growth Plan, in particular our new business development process and our approach to adding complementary acquisitions; however, in fiscal 2015, the impact from the loss of certain Fenwal programs, coupled with multiple customer initiated production delays, were greater than the increased new business we launched throughout the course of the year.”
Fourth Quarter Financial Highlights
- Quarterly revenue grew 35% to $126 million as compared to the same quarter of the prior year.
-
170 new program or product wins were awarded with a first time order
value of $12.0 million (excludes domestic sonobuoy awards).
- 70 in MDS with a first time order value of $9.1 million
- 100 in ECP with a first time order value of $2.9 million
- Quarter end sales backlog of approximately $313 million, representing a 113% increase over the prior year quarter.
- Completed the acquisition of Hunter Technology Corporation in April 2015.
- Settled the L-3 dispute for $2.5 million.
- Amended revolving credit facility, increasing committed facility size from $200 million to $275 million and resetting the facility's accordion feature to $100 million.
Additional Fiscal 2015 Highlights
- Annual revenue growth of 14% to $382 million as compared to prior year.
-
421 new business programs awarded with potential sales of $58.6
million (excludes domestic sonobuoy awards)
- 122 wins in MDS with $30.2 million in potential annualized sales
- 299 wins in ECP with $28.4 million in first time sales
- Completed seven acquisitions comprising of Hunter Technology, Stealth.com, KEP, Real-Time, Argotec, IED and eMT
- Annual adjusted EBITDA of $34 million.
Hunter Technology Corporation
On April 14, 2015, the Company completed the acquisition of Hunter Technology Corporation ("Hunter"), an $80.5 million (unaudited) annual revenue business, with operations located in Milpitas, CA (San Jose) and Lawrenceville, GA (Atlanta), in a $55.0 million all-cash transaction. Hunter, which is part of the Company's MDS segment, was founded in 1968 and was one of the first electronic contract manufacturing providers specializing in military and aerospace applications. Today, Hunter is one of the few suppliers in the Silicon Valley region providing engineering design, new product introduction (NPI) and full-rate production manufacturing solutions working with major defense and aerospace companies, test and measurement suppliers, secure networking solution providers, medical device manufacturers and a wide variety of industrial customers.
Segment Results
During the first quarter of fiscal 2015, the Company changed its reportable segments to align with the way it internally reports and manages the business. The prior reportable segments of Medical and Complex Systems have been combined and are referred to as Manufacturing & Design Services or "MDS". The prior DSS reportable segment and subsequently acquired businesses providing rugged electronics are now referred to as Engineered Components & Products or "ECP".
Manufacturing & Design Services (“MDS”) (in thousands)
| For the Three Months Ended June 30, | |||||||||||||||||||||
| % of | % of | ||||||||||||||||||||
| 2015 | Sales | 2014 | Sales | $ Chg | % Chg | ||||||||||||||||
| Sales: | |||||||||||||||||||||
| Base business | $ | 58,425 | 68.9 | % | $ | 57,232 | 92.1 | % | $ | 1,193 | 2.1 | % | |||||||||
| Acquisitions | 19,732 | 23.3 | % | — | — | 19,732 | — | ||||||||||||||
| Intercompany | 6,592 | 7.8 | % | 4,916 | 7.9 | % | 1,676 | 34.1 | % | ||||||||||||
| Total Sales | 84,749 | 100.0 | % | 62,148 | 100.0 | % | 22,601 | 36.4 | % | ||||||||||||
| Gross profit | 13,094 | 15.5 | % | 9,038 | 14.5 | % | 4,056 | 44.9 | % | ||||||||||||
| Selling and administrative expenses | 6,130 | 7.3 | % | 4,259 | 6.8 | % | 1,871 | 43.9 | % | ||||||||||||
| Amortization of intangible assets | 1,801 | 2.1 | % | 982 | 1.6 | % | 819 | 83.4 | % | ||||||||||||
| Legal settlement | 2,500 | 3.0 | % | — | — | 2,500 | — | ||||||||||||||
| Operating income | $ | 2,663 | 3.1 | % | $ | 3,797 | 6.1 | % | $ | (1,134 | ) | (29.9 | )% | ||||||||
MDS base business sales reflect sales from MDS facilities that were owned for both the three months ended June 30, 2015 and 2014. MDS acquisition sales relate to the acquisitions of Hunter, RTEmd and eMT in fiscal 2015. Base business sales were up slightly from the comparative prior year period.
The increase in gross margin percentage on MDS sales was positively affected in the current year by increased volume as compared to the prior year. The selling and administrative expense increase is primarily comprised of incremental direct and allocated expenses related to the Hunter, RTEmd and eMT operations.
The increase in amortization of intangible assets relates to the amortization of customer relationships and non-compete agreements acquired as part of the fiscal 2015 Hunter transaction, customer relationships acquired as part of the fiscal 2015 RTE transaction and customer relationships, non-compete agreements and trade names acquired as part of the fiscal 2015 eMT transaction.
| For the Years Ended June 30, | |||||||||||||||||||||
| % of | % of | ||||||||||||||||||||
| 2015 | Sales | 2014 | Sales | $ Chg | % Chg | ||||||||||||||||
| Sales: | |||||||||||||||||||||
| Base business | $ | 184,159 | 69.8 | % | $ | 215,787 | 87.7 | % | $ | (31,628 | ) | (14.7 | )% | ||||||||
| Acquisitions | 62,025 | 23.5 | % | 11,673 | 4.7 | % | 50,352 | 431.4 | % | ||||||||||||
| Intercompany | 17,756 | 6.7 | % | 18,669 | 7.6 | % | (913 | ) | (4.9 | )% | |||||||||||
| Total Sales | 263,940 | 100.0 | % | 246,129 | 100.0 | % | 17,811 | 7.2 | % | ||||||||||||
| Gross profit | 36,461 | 13.8 | % | 34,782 | 14.1 | % | 1,679 | 4.8 | % | ||||||||||||
| Selling and administrative expenses | 18,615 | 7.1 | % | 14,449 | 5.9 | % | 4,166 | 28.8 | % | ||||||||||||
| Amortization of intangible assets | 5,811 | 2.2 | % | 3,116 | 1.2 | % | 2,695 | 86.5 | % | ||||||||||||
| Legal settlement | 2,500 | 0.9 | % | — | — | 2,500 | — | ||||||||||||||
| Restructuring charges | — | — | 188 | 0.1 | % | (188 | ) | — | |||||||||||||
| Operating income | $ | 9,535 | 3.6 | % | $ | 17,029 | 6.9 | % | $ | (7,494 | ) | (44.0 | )% | ||||||||
MDS base business sales reflect sales from MDS facilities that were owned for both the entire years ended June 30, 2015 and 2014. MDS acquisition sales relate to the acquisitions of Hunter, RTEmd and eMT in fiscal 2015 and the acquisitions of Aubrey and Beckwood in fiscal 2014. The comparative decrease in base business sales reflects a rebalancing of Fenwal program engagements with the Company that began in the Company's fiscal 2014 third quarter. Fenwal contributed 14% and 20% of MDS segment net sales and 10% and 14% of consolidated company net sales during the fiscal years ended June 30, 2015 and 2014, respectively. The lost Fenwal programs negatively affected comparative sales $19.0 million in fiscal 2015, but were partially offset by a $6.8 million increase in sales in retained Fenwal programs. The remaining segment sales decrease reflects fluctuations in customer demand due to program cancellations, governmental funding and customer design related delays. MDS backlog was approximately $170.1 million at June 30, 2015 compared to $114.7 million at June 30, 2014. Commercial orders, in general, may be rescheduled or canceled without significant penalty, and, as a result, may not be a meaningful measure of future sales. A majority of the June 30, 2015 MDS backlog is currently expected to be realized in the next 12 months.
The decrease in gross margin percentage on MDS sales primarily reflects the effect of fixed overhead costs on lower base business sales. The selling and administrative expense increase is primarily comprised of incremental direct and allocated expenses related to the Hunter, RTEmd, eMT, Aubrey and Beckwood operations.
The increase in amortization of intangible assets relates to the amortization of customer relationships and non-compete agreements acquired as part of the fiscal 2015 Hunter transaction, customer relationships acquired as part of the fiscal 2015 RTE transaction, customer relationships, non-compete agreements and trade names acquired as part of the fiscal 2015 eMT transaction, non-compete agreements acquired as part of the fiscal 2014 Aubrey transaction and customer relationships and non-compete agreements acquired as part of the fiscal 2014 Beckwood transaction.
Engineered Components & Products (“ECP”) (in thousands)
| For the Three Months Ended June 30, | |||||||||||||||||||||
| % of | % of | ||||||||||||||||||||
| 2015 | Sales | 2014 | Sales | $ Chg | % Chg | ||||||||||||||||
| Sales: | |||||||||||||||||||||
| Base business | $ | 46,109 | 95.5 | % | $ | 36,268 | 99.9 | % | $ | 9,841 | 27.1 | % | |||||||||
| Acquisitions | 2,127 | 4.4 | % | — | — | 2,127 | — | ||||||||||||||
| Intercompany | 69 | 0.1 | % | 42 | 0.1 | % | 27 | 64.3 | % | ||||||||||||
| Total Sales | 48,305 | 100.0 | % | 36,310 | 100.0 | % | 11,995 | 33.0 | % | ||||||||||||
| Gross profit | 14,961 | 31.0 | % | 11,870 | 32.7 | % | 3,091 | 26.0 | % | ||||||||||||
| Selling and administrative expenses | 3,307 | 6.9 | % | 2,766 | 7.6 | % | 541 | 19.6 | % | ||||||||||||
| Internal research and development expenses | 787 | 1.6 | % | 165 | 0.4 | % | 622 | — | |||||||||||||
| Amortization of intangible assets | 581 | 1.2 | % | (18 | ) | — | 599 | — | |||||||||||||
| Operating income | $ | 10,286 | 21.3 | % | $ | 8,957 | 24.7 | % | $ | 1,329 | 14.8 | % | |||||||||
ECP base business sales reflect sales from ECP facilities that were owned for both the three months ended June 30, 2015 and 2014 as well as sales in fiscal 2015 relating to KEP, Argotec and IED, as sales relating to these tuck-in acquisitions were not considered material for separate presentation. ECP acquisition sales relate to the acquisition of Stealth in fiscal 2015. The increase in ECP base business sales reflects increased sonobuoy sales to the U.S. Navy as well as increased U.S. Navy engineering sales, partially offset by decreased sonobuoy sales to foreign governments.
Gross profit percentage on ECP sales was negatively affected in the current quarter by unfavorable product mix. The selling and administrative expense increase is primarily comprised of incremental direct and allocated expenses related to the Stealth operations as well as increased costs in anticipation of future growth.
The increase in amortization of intangible assets relates to the amortization of customer relationships, non-compete agreements and trade names acquired as part of the fiscal 2015 Stealth transaction, customer relationships and trade names acquired as part of the fiscal 2015 KEP transaction and customer relationships and non-compete agreements acquired as part of the fiscal 2015 IED transaction.
Internal research and development expenses reflect costs incurred for the internal development of technologies for use in navigation, oil and gas exploration and flat panel display technology. These costs include salaries and related expenses, contract labor and consulting costs, materials and the cost of certain research and development specific equipment.
| For the Years Ended June 30, | |||||||||||||||||||||
| % of | % of | ||||||||||||||||||||
| 2015 | Sales | 2014 | Sales | $ Chg | % Chg | ||||||||||||||||
| Sales: | |||||||||||||||||||||
| Base business | $ | 113,804 | 83.5 | % | $ | 94,787 | 86.8 | % | $ | 19,017 | 20.1 | % | |||||||||
| Acquisitions | 22,137 | 16.2 | % | 14,254 | 13.1 | % | 7,883 | 55.3 | % | ||||||||||||
| Intercompany | 374 | 0.3 | % | 93 | 0.1 | % | 281 | 302.2 | % | ||||||||||||
| Total Sales | 136,315 | 100.0 | % | 109,134 | 100.0 | % | 27,181 | 24.9 | % | ||||||||||||
| Gross profit | 38,210 | 28.0 | % | 30,033 | 27.5 | % | 8,177 | 27.2 | % | ||||||||||||
| Selling and administrative expenses | 10,895 | 7.9 | % | 8,750 | 7.9 | % | 2,145 | 24.5 | % | ||||||||||||
| Internal research and development expenses | 1,502 | 1.1 | % | 1,169 | 1.1 | % | 333 | 28.5 | % | ||||||||||||
| Amortization of intangible assets | 780 | 0.6 | % | 171 | 0.2 | % | 609 | 356.1 | % | ||||||||||||
| Operating income | $ | 25,033 | 18.4 | % | $ | 19,943 | 18.3 | % | $ | 5,090 | 25.5 | % | |||||||||
ECP base business sales reflect sales from ECP facilities that were owned for both the entire years ended June 30, 2015 and 2014 as well as sales in fiscal 2015 relating to KEP, Argotec and IED as sales relating to these tuck-in acquisitions were not considered material for separate presentation. ECP acquisition sales relate to the acquisition of Stealth in fiscal 2015, as well as Aydin in fiscal 2014. The increase in ECP base business sales reflects increased sonobuoy sales to the U.S. Navy as well as increased U.S. Navy engineering sales, partially offset by decreased sonobuoy sales to foreign governments. Total sonobuoy sales to the U.S. Navy for the full years ended June 30, 2015 and 2014 were approximately $81.4 million and $53.0 million, respectively, which represented 60% and 49% of ECP segment sales and 21% and 16% of consolidated Company net sales for those periods. Sonobuoy sales to foreign governments were $15.3 million and $29.7 million for the full years ended June 30, 2015 and 2014, respectively. Government related engineering sales were $13.5 million and $10.1 million for the full years ended June 30, 2015 and 2014, respectively. ECP backlog was approximately $143.3 million at June 30, 2015 compared to $32.4 million at June 30, 2014. A majority of the June 30, 2015 ECP backlog is currently expected to be realized in the next 18 months.
Gross profit percentage on ECP sales was positively affected in the current year by increased volume as compared to the prior year. The selling and administrative expense increase is primarily comprised of incremental direct and allocated expenses related to the Stealth and Aydin operations.
The increase in amortization of intangible assets relates to the amortization of customer relationships, non-compete agreements and trade names acquired as part of the fiscal 2015 Stealth transaction, customer relationships and trade names acquired as part of the fiscal 2015 KEP transaction and customer relationships and non-compete agreements acquired as part of the fiscal 2015 IED transaction.
Internal research and development expenses reflect costs incurred for the internal development of technologies for use in navigation, oil and gas exploration and flat panel display technology. These costs include salaries and related expenses, contract labor and consulting costs, materials and the cost of certain research and development specific equipment.
L-3 Litigation & Revised Fiscal 2015 Quarterly Adjusted Earnings Per Share Results
On September 24, 2013, L-3 Communications Corporation, doing business as L-3 Linkabit, filed a complaint in the United States District Court for the Middle District of Florida, Orlando Division, against Sparton Corporation and Sparton Electronics. On August 24, 2015, Sparton and L-3 signed a mutual accord resolving the dispute. The agreement requires Sparton to pay L-3 $2.5 million on or before October 1, 2015 in consideration for dismissal of the litigation and is recorded in other accrued expenses on the Consolidated Balance Sheet. Neither party admitted to any mistakes, damage or fault.
Legal expenses related to this matter in fiscal 2015 totaled $977,000 and are reflected in the fiscal 2015 adjusted earnings per share result of $1.30. $252,000 was expended in the fourth quarter, which are eliminated in the fourth quarter adjusted earnings per share result of $0.65. The remaining $725,000 of legal expense incurred in the first three quarters had not been previously removed from earnings; therefore, the adjusted earnings per share quarterly results are revised as follows:
| Q1 | Q2 | Q3 | |||||||
| Original Adjusted EPS | $0.09 | $0.17 | $0.33 | ||||||
| Revised Adjusted EPS | $0.10 | $0.19 | $0.36 | ||||||
Liquidity and Capital Resources
As of June 30, 2015, the Company had $154.5 million borrowed and approximately $119.8 million available under its credit facility and had available cash and cash equivalents of $14.9 million. As of that date, the Company had received performance based payments under U.S. Navy contracts in excess of the funding of production to date under those contracts of $1.8 million and were recorded in the Consolidated Balance Sheets as other accrued expenses.
Sparton entered into a Second Amendment dated as of April 13, 2015 (“Amendment”) to its Amended and Restated Credit and Guaranty Agreement and Security Agreement (“Credit Agreement”) with BMO Harris Bank N.A., Bank of America, N.A., U.S. Bank National Association, SunTrust Bank, Fifth Third Bank, Associated Bank, N.A., Keybank National Association and Wintrust Bank. BMO Harris Bank acted as the lead agent for the lenders in a syndication arranged by BMO Capital Markets.
The Amendment augments the Company’s Credit Agreement by increasing the revolving line of credit facility by $75 million, to $275 million and adding a $50 million multi-currency sublimit to support the Company’s future acquisitions, working capital needs and other general corporate purposes. The Company has the right to request an increase of the facility in an amount of up to $100 million. It is secured by substantially all assets of the Company and its subsidiaries and expires on September 11, 2019.
Outlook
Cary Wood concluded, “As we move into fiscal 2016, I am optimistic that we will achieve our customary annual organic growth target of 3%-5% with the Fenwal rebalancing activities behind us. Not only is the focus on the top line with revenue performance, but more importantly, the flow through of that revenue as EBITDA and, ultimately, earnings per share. With the addition of Hunter Technology in the fourth quarter and the full-year effect of all acquisition’s made in fiscal 2015, our pro-forma revenue would be approximately $462 million, bringing us very close at accomplishing our targeted run-rate of $500 million of revenue by the end of fiscal 2015. We will continue to meet our growth expectations by focusing on new business development, internal product research and development and compatible and complementary acquisitions. We are experiencing positive momentum from our new business development process with additional new business wins, increased inclusion of our inertial navigation sensors and rugged electronic products in key OEM projects and increased Medical and Defense engineering program wins that may lead to potential long-term manufacturing opportunities. With fourteen acquisitions completed in the last five years, seven alone in the past year, we will be taking a short pause to allow for integration activities and other business synergies to be fully realized in the near term. Executing the 2020 Vision remains a priority, in particular, the grouping and management of product platforms for our existing product lines as well as the identification and development of new product platforms that will support the overall business objectives previously communicated at our Investor Day in October 2014. We had a strong fourth quarter to finish fiscal 2015 and expect to carry that momentum into next fiscal with a focus on increasing top line sales organically, supported by a solid new business funnel, and expanding margins, through continued cost reduction and synergy initiatives, for what we expect to be a successful fiscal 2016 on all fronts.”
Conference Call
Sparton will host a conference call with investors and analysts on September 9, 2015 at 10:00 a.m. CDT/11:00 a.m. EDT to discuss its fiscal year 2015 fourth quarter financial results, provide a general business update, and respond to investor questions. To participate, callers should dial (800) 272-9104. Participants should dial in at least 15 minutes prior to the start of the call. A Web presentation link is also available for the conference call: http://tinyurl.com/om2k7pd
Investors and financial analysts are invited to ask questions after the presentation is made. The presentation and a replay of the call will be available on Sparton’s Web site: http://www.sparton.com in the “Investor Relations” section for up to two years after the conference call.
Non-GAAP Financial Measures
In addition to reporting financial results in accordance with U.S. generally accepted accounting principles (“GAAP”), Sparton Corporation has provided non-GAAP financial measures as additional information for its operating results. These measures have not been prepared in accordance with GAAP and may be different from measures used by other companies. Whenever we use non-GAAP financial measures, we designate these measures, which exclude the effect of certain expenses and income, as “adjusted” and provide a reconciliation of non-GAAP financial measures to the most closely applicable GAAP financial measure. The non-GAAP financial measures eliminate or add certain items of expense and income from cost of goods sold, total operating expense, other income (expense) and income taxes. Management believes that this presentation is helpful to investors in evaluating the current operational and financial performance of our business and facilitates comparisons to historical results of operations. Management discloses this information along with a reconciliation of the comparable GAAP amounts to provide access to the detail and nature of adjustments made to GAAP financial results. While some of these excluded items have been periodically reported in our statements of operations, including significant restructuring and impairment charges as well as certain gains on sales of assets, their occurrence in future periods depends on future business and economic factors, among other evaluation criteria, and the occurrence of such events and factors may frequently be beyond the control of management.
We exclude restructuring/impairment charges, gross profit effects of capitalized profit in inventory from acquisitions, acquisition contingency settlement, changes in the liability for future estimated costs for environmental remediation and litigation settlements and related legal costs in matters considered not integral to the Company's operations nor recurring, the related tax effect of these items, as well as unusual discrete tax benefits or expense because we believe that they are not related directly to the underlying performance of our fundamental business operations. We exclude these measures when reviewing financial results and for business planning. Although these events are reflected in our GAAP financial statements, these transactions may limit the comparability of our fundamental operations with prior and future periods.
Adjusted EBITDA represents earnings before interest expense and income, taxes, depreciation and amortization as adjusted for restructuring/impairment charges, gross profit effects of capitalized profit in inventory from acquisitions and acquisition contingency settlement, legal settlement and charges for changes in the liability for future estimated costs for environmental remediation and stock based compensation expense. 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 operating income, 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.
About Sparton Corporation
Sparton Corporation (NYSE:SPA), now in its 116th year, is a provider of complex and sophisticated electromechanical devices with capabilities that include concept development, industrial design, design and manufacturing engineering, production, distribution, field service and refurbishment. The primary markets served are Medical & Biotechnology, Military & Aerospace and Industrial & Commercial. Headquartered in Schaumburg, IL, Sparton currently has fifteen manufacturing locations and engineering design centers worldwide. Sparton's Web site may be accessed at www.sparton.com.
Safe Harbor and Fair Disclosure Statement
Certain statements described in this press release are forward-looking statements within the scope of the Securities Act of 1933, as amended (the “Securities Act”), and the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements may be identified by the words “believe,” “expect,” “anticipate,” “project,” “plan,” “estimate,” “will” or “intend” and similar words or expressions. These forward-looking statements reflect Sparton’s current views with respect to future events and are based on currently available financial, economic and competitive data and its current business plans. Actual results could vary materially depending on risks and uncertainties that may affect Sparton’s operations, markets, prices and other factors. Important factors that could cause actual results to differ materially from those forward-looking statements include, but are not limited to, Sparton’s financial performance and the implementations and results of its ongoing strategic initiatives. For a more detailed discussion of these and other risk factors, see Part I, Item 1A, Risk Factors and Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, in Sparton’s Form 10-K for the year ended June 30, 2015, and its other filings with the Securities and Exchange Commission. Sparton undertakes no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law.
| SPARTON CORPORATION AND SUBSIDIARIES | ||||||||
| CONSOLIDATED BALANCE SHEETS | ||||||||
| (Dollars in thousands, except share amounts) | ||||||||
| June 30, | June 30, | |||||||
| 2015 | 2014 | |||||||
| Assets | ||||||||
| Current Assets: | ||||||||
| Cash and cash equivalents | $ | 14,914 | $ | 8,028 | ||||
| Accounts receivable, net of allowance for doubtful accounts of $173 and $126, respectively | 70,974 | 48,697 | ||||||
| Inventories and cost of contracts in progress, net | 79,503 | 53,372 | ||||||
| Deferred income taxes, net | 4,714 | 3,813 | ||||||
| Prepaid expenses and other current assets | 5,488 | 2,654 | ||||||
| Total current assets | 175,593 | 116,564 | ||||||
| Property, plant and equipment, net | 32,608 | 28,523 | ||||||
| Goodwill | 74,175 | 28,189 | ||||||
| Other intangible assets, net | 45,825 | 20,041 | ||||||
| Deferred income taxes, net — non-current | 2,199 | 1,192 | ||||||
| Pension asset | — | 44 | ||||||
| Other non-current assets | 7,151 | 4,427 | ||||||
| Total assets | $ | 337,551 | $ | 198,980 | ||||
| Liabilities and Shareholders’ Equity | ||||||||
| Current Liabilities: | ||||||||
| Current portion of long-term debt | $ | — | $ | 900 | ||||
| Accounts payable | 29,948 | 16,543 | ||||||
| Accrued salaries and wages | 9,089 | 7,854 | ||||||
| Accrued health benefits | 1,510 | 1,538 | ||||||
| Performance based payments on customer contracts | 1,756 | 3,196 | ||||||
| Other accrued expenses | 16,328 | 11,090 | ||||||
| Total current liabilities | 58,631 | 41,121 | ||||||
| Pension liability — non-current portion | 424 | — | ||||||
| Long-term debt — non-current portion | 154,500 | 40,100 | ||||||
| Environmental remediation — non-current portion | 7,117 | 7,644 | ||||||
| Total liabilities | 220,672 | 88,865 | ||||||
| Commitments and contingencies | ||||||||
| Shareholders’ Equity: | ||||||||
| Preferred stock, no par value; 200,000 shares authorized; none issued | — | — | ||||||
| Common stock, $1.25 par value; 15,000,000 shares authorized, 9,886,618 and | ||||||||
| 10,129,031 shares issued and outstanding, respectively | 12,358 | 12,661 | ||||||
| Capital in excess of par value | 16,045 | 19,478 | ||||||
| Retained earnings | 89,933 | 78,944 | ||||||
| Accumulated other comprehensive loss | (1,457 | ) | (968 | ) | ||||
| Total shareholders’ equity | 116,879 | 110,115 | ||||||
| Total liabilities and shareholders’ equity | $ | 337,551 | $ | 198,980 | ||||
| SPARTON CORPORATION AND SUBSIDIARIES | ||||||||||||||||
| CONSOLIDATED STATEMENTS OF INCOME | ||||||||||||||||
| (Dollars in thousands, except share data) | ||||||||||||||||
| For the Three Months Ended | For the Years Ended | |||||||||||||||
| June 30, | June 30, | June 30, | June 30, | |||||||||||||
| 2015 | 2014 | 2015 | 2014 | |||||||||||||
| Net sales | $ | 126,393 | $ | 93,500 | $ | 382,125 | $ | 336,501 | ||||||||
| Cost of goods sold | 98,338 | 72,592 | 307,454 | 271,686 | ||||||||||||
| Gross profit | 28,055 | 20,908 | 74,671 | 64,815 | ||||||||||||
| Operating expense: | ||||||||||||||||
| Selling and administrative expenses | 13,588 | 10,559 | 46,876 | 35,698 | ||||||||||||
| Internal research and development expenses | 787 | 165 | 1,502 | 1,169 | ||||||||||||
| Amortization of intangible assets | 2,382 | 964 | 6,591 | 3,287 | ||||||||||||
| Legal settlement | 2,500 | — | 2,500 | — | ||||||||||||
| Environmental remediation | — | 4,238 | — | 4,238 | ||||||||||||
| Restructuring charges | — | — | — | 188 | ||||||||||||
| Other operating income, net | (11 | ) | (2 | ) | (50 | ) | (16 | ) | ||||||||
| Total operating expense, net | 19,246 | 15,924 | 57,419 | 44,564 | ||||||||||||
| Operating income | 8,809 | 4,984 | 17,252 | 20,251 | ||||||||||||
| Other income (expense): | ||||||||||||||||
| Interest expense | (895 | ) | (291 | ) | (2,456 | ) | (838 | ) | ||||||||
| Interest income | 1 | 7 | 3 | 9 | ||||||||||||
| Other, net | 29 | 29 | 156 | 180 | ||||||||||||
| Total other expense, net | (865 | ) | (255 | ) | (2,297 | ) | (649 | ) | ||||||||
| Income before income taxes | 7,944 | 4,729 | 14,955 | 19,602 | ||||||||||||
| Income taxes | 2,846 | 1,758 | 3,966 | 6,615 | ||||||||||||
| Net income | $ | 5,098 | $ | 2,971 | $ | 10,989 | $ | 12,987 | ||||||||
| Income per share of common stock: | ||||||||||||||||
| Basic | $ | 0.52 | $ | 0.29 | $ | 1.10 | $ | 1.28 | ||||||||
| Diluted | $ | 0.51 | $ | 0.29 | $ | 1.10 | $ | 1.28 | ||||||||
| Weighted average shares of common stock outstanding: | ||||||||||||||||
| Basic | 9,792,873 | 10,127,638 | 9,874,441 | 10,109,915 | ||||||||||||
| Diluted | 9,794,603 | 10,150,641 | 9,885,961 | 10,141,395 | ||||||||||||
| SPARTON CORPORATION AND SUBSIDIARIES | ||||||||
| CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
| (Dollars in thousands) | ||||||||
| For the years ended June 30, | ||||||||
| 2015 | 2014 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net income | $ | 10,989 | $ | 12,987 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation | 4,645 | 4,700 | ||||||
| Amortization of intangible assets | 6,591 | 3,423 | ||||||
| Deferred income taxes, net | (873 | ) | (976 | ) | ||||
| Stock-based compensation expense | 1,885 | 1,662 | ||||||
| Legal settlement | 2,500 | — | ||||||
| Environmental remediation | — | 4,238 | ||||||
| Gross profit effect of capitalized profit in inventory from acquisitions | 299 | 337 | ||||||
| Excess tax benefit from stock-based compensation | (1,044 | ) | (522 | ) | ||||
| Other, net | 739 | 247 | ||||||
| Changes in operating assets and liabilities, net of business acquisitions: | ||||||||
| Accounts receivable | (7,040 | ) | 4,886 | |||||
| Inventories and cost of contracts in progress, net | 501 | 1,484 | ||||||
| Prepaid expenses and other assets | (1,889 | ) | 419 | |||||
| Performance based payments on customer contracts | (1,440 | ) | (17,706 | ) | ||||
| Accounts payable and accrued expenses | (11,326 | ) | (2,728 | ) | ||||
| Net cash provided by operating activities | 4,537 | 12,451 | ||||||
| Cash Flows from Investing Activities: | ||||||||
| Acquisition of businesses, net of cash acquired and post-closing adjustments | (97,319 | ) | (35,560 | ) | ||||
| Purchase of securities available for sale | (986 | ) | — | |||||
| Purchases of property, plant and equipment | (5,802 | ) | (3,501 | ) | ||||
| Proceeds from sale of property, plant and equipment | — | 69 | ||||||
| Net cash used in investing activities | (104,107 | ) | (38,992 | ) | ||||
| Cash Flows from Financing Activities: | ||||||||
| Borrowings of long-term debt | 215,835 | 70,000 | ||||||
| Repayments of long-term debt | (102,335 | ) | (40,623 | ) | ||||
| Payment of debt financing costs | (1,423 | ) | — | |||||
| Repurchase of stock | (6,830 | ) | (1,559 | ) | ||||
| Proceeds from the exercise of stock options | 165 | 144 | ||||||
| Excess tax benefit from stock-based compensation | 1,044 | 522 | ||||||
| Net cash provided by financing activities | 106,456 | 28,484 | ||||||
| Net increase in cash and cash equivalents | 6,886 | 1,943 | ||||||
| Cash and cash equivalents at beginning of year | 8,028 | 6,085 | ||||||
| Cash and cash equivalents at end of year | $ | 14,914 | $ | 8,028 | ||||
| Supplemental disclosure of cash flow information: | ||||||||
| Cash paid for interest | $ | 1,747 | $ | 631 | ||||
| Cash paid for income taxes | $ | 7,190 | $ | 7,065 | ||||
| Supplemental disclosure of non-cash investing activities: | ||||||||
| Accounts payable recognized in relation to purchase consideration adjustment | $ | 603 | $ | 252 | ||||
| SPARTON CORPORATION AND SUBSIDIARIES | ||||||||||||||||||||||
| SELECT SEGMENT INFORMATION | ||||||||||||||||||||||
| (UNAUDITED) | ||||||||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||||
|
Net sales: |
||||||||||||||||||||||
| For the Three Months Ended June 30, | For the Years Ended June 30, | |||||||||||||||||||||
| SEGMENT | 2015 | 2014 | % Chg | 2015 | 2014 | % Chg | ||||||||||||||||
| Manufacturing & Design Services | $ | 84,749 | $ | 62,148 | 36.4 | % | $ | 263,940 | $ | 246,129 | 7.2 | % | ||||||||||
| Engineered Components & Products | 48,305 | 36,310 | 33.0 | % | 136,315 | 109,134 | 24.9 | % | ||||||||||||||
| Eliminations | (6,661 | ) | (4,958 | ) | 34.3 | % | (18,130 | ) | (18,762 | ) | (3.4 | )% | ||||||||||
| Totals | $ | 126,393 | $ | 93,500 | 35.2 | % | $ | 382,125 | $ | 336,501 | 13.6 | % | ||||||||||
|
Gross profit: |
||||||||||||||||||||||||||||
| For the Three Months Ended June 30, | For the Years Ended June 30, | |||||||||||||||||||||||||||
| SEGMENT | 2015 | GP % | 2014 | GP % | 2015 | GP % | 2014 | GP % | ||||||||||||||||||||
| Manufacturing & Design Services | $ | 13,094 | 15.5 | % | $ | 9,038 | 14.5 | % | $ | 36,461 | 13.8 | % | $ | 34,782 | 14.1 | % | ||||||||||||
| Engineered Components & Products | 14,961 | 31.0 | % | 11,870 | 32.7 | % | 38,210 | 28.0 | % | 30,033 | 27.5 | % | ||||||||||||||||
| Totals | $ | 28,055 | 22.2 | % | $ | 20,908 | 22.4 | % | $ | 74,671 | 19.5 | % | $ | 64,815 | 19.3 | % | ||||||||||||
|
Adjusted gross profit: |
||||||||||||||||||||||||||||
| For the Three Months Ended June 30, | For the Years Ended June 30, | |||||||||||||||||||||||||||
| SEGMENT | 2015 | GP % | 2014 | GP % | 2015 | GP % | 2014 | GP % | ||||||||||||||||||||
| Manufacturing & Design Services | $ | 13,138 | 15.5 | % | $ | 9,038 | 14.5 | % | $ | 36,760 | 13.9 | % | $ | 34,849 | 14.2 | % | ||||||||||||
| Engineered Components & Products | 14,961 | 31.0 | % | 11,951 | 32.9 | % | 38,210 | 28.0 | % | 30,303 | 27.8 | % | ||||||||||||||||
| Totals | $ | 28,099 | 22.2 | % | $ | 20,989 | 22.4 | % | $ | 74,970 | 19.6 | % | $ | 65,152 | 19.4 | % | ||||||||||||
|
Operating income: |
||||||||||||||||||||||||||||
| For the Three Months Ended June 30, | For the Years Ended June 30, | |||||||||||||||||||||||||||
| % of | % of | % of | % of | |||||||||||||||||||||||||
| SEGMENT | 2015 | Sales | 2014 | Sales | 2015 | Sales | 2014 | Sales | ||||||||||||||||||||
| Manufacturing & Design Services | $ | 2,663 | 3.1 | % | $ | 3,797 | 6.1 | % | $ | 9,535 | 3.6 | % | $ | 17,029 | 6.9 | % | ||||||||||||
| Engineered Components & Products | 10,286 | 21.3 | % | 8,957 | 24.7 | % | 25,033 | 18.4 | % | 19,943 | 18.3 | % | ||||||||||||||||
| Other Unallocated | (4,140 | ) | — | (7,770 | ) | — | (17,316 | ) | — | (16,721 | ) | — | ||||||||||||||||
| Totals | $ | 8,809 | 7.0 | % | $ | 4,984 | 5.3 | % | $ | 17,252 | 4.5 | % | $ | 20,251 | 6.0 | % | ||||||||||||
|
Adjusted operating income: |
||||||||||||||||||||||||||||
| For the Three Months Ended June 30, | For the Years Ended June 30, | |||||||||||||||||||||||||||
| % of | % of | % of | % of | |||||||||||||||||||||||||
| SEGMENT | 2015 | Sales | 2014 | Sales | 2015 | Sales | 2014 | Sales | ||||||||||||||||||||
| Manufacturing & Design Services | $ | 5,459 | 6.4 | % | $ | 3,797 | 6.1 | % | $ | 13,311 | 5.0 | % | $ | 17,284 | 7.0 | % | ||||||||||||
| Engineered Components & Products | 10,286 | 21.3 | % | 9,038 | 24.9 | % | 25,033 | 18.4 | % | 20,213 | 18.5 | % | ||||||||||||||||
| Other Unallocated | (4,140 | ) | — | (3,532 | ) | — | (16,584 | ) | — | (12,483 | ) | — | ||||||||||||||||
| Totals | $ | 11,605 | 9.2 | % | $ | 9,303 | 9.9 | % | $ | 21,760 | 5.7 | % | $ | 25,014 | 7.4 | % | ||||||||||||
| SPARTON CORPORATION AND SUBSIDIARIES | ||||||||||||||||||||||||
|
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES |
||||||||||||||||||||||||
| (UNAUDITED) | ||||||||||||||||||||||||
| (Dollars in thousands, except share data) | ||||||||||||||||||||||||
| For the Three Months Ended June 30, 2015 | For the Three Months Ended June 30, 2014 | |||||||||||||||||||||||
| Non-GAAP | Non-GAAP | |||||||||||||||||||||||
| GAAP | Adjustment | Adjusted | GAAP | Adjustment | Adjusted | |||||||||||||||||||
| Net sales | $ | 126,393 | $ | — | $ | 126,393 | $ | 93,500 | $ | — | $ | 93,500 | ||||||||||||
| Cost of goods sold | 98,338 | (44 | ) | (a) | 98,294 | 72,592 | (81 | ) | (a) | 72,511 | ||||||||||||||
| Gross profit | 28,055 | 44 | 28,099 | 20,908 | 81 | 20,989 | ||||||||||||||||||
| Operating Expense: | ||||||||||||||||||||||||
| Selling and administrative expenses | 13,588 | (252 | ) | (b) | 13,336 | 10,559 | — | 10,559 | ||||||||||||||||
| Internal research and development expenses | 787 | — | 787 | 165 | — | 165 | ||||||||||||||||||
| Amortization of intangible assets | 2,382 | — | 2,382 | 964 | — | 964 | ||||||||||||||||||
| Legal settlement | 2,500 | (2,500 | ) | (c) | — | — | — | — | ||||||||||||||||
| Environmental remediation | — | — | — | 4,238 | (4,238 | ) | (e) | — | ||||||||||||||||
| Other operating income, net | (11 | ) | — | (11 | ) | (2 | ) | — | (2 | ) | ||||||||||||||
| Total operating expense, net | 19,246 | (2,752 | ) | 16,494 | 15,924 | (4,238 | ) | 11,686 | ||||||||||||||||
| Operating income | 8,809 | 2,796 | 11,605 | 4,984 | 4,319 | 9,303 | ||||||||||||||||||
| Other income (expense): | ||||||||||||||||||||||||
| Interest expense | (895 | ) | — | (895 | ) | (291 | ) | — | (291 | ) | ||||||||||||||
| Interest income | 1 | — | 1 | 7 | — | 7 | ||||||||||||||||||
| Other, net | 29 | — | 29 | 29 | — | 29 | ||||||||||||||||||
| Total other expense, net | (865 | ) | — | (865 | ) | (255 | ) | — | (255 | ) | ||||||||||||||
| Income before income taxes | 7,944 | 2,796 | 10,740 | 4,729 | 4,319 | 9,048 | ||||||||||||||||||
| Income taxes | 2,846 | 1,421 | (d) | 4,267 | 1,758 | 1,592 | 3,350 | |||||||||||||||||
| Net income | $ | 5,098 | $ | 1,375 | $ | 6,473 | $ | 2,971 | $ | 2,727 | $ | 5,698 | ||||||||||||
| Income per share of common stock: | ||||||||||||||||||||||||
| Basic | $ | 0.52 | $ | 0.65 | $ | 0.29 | $ | 0.56 | ||||||||||||||||
| Diluted | $ | 0.51 | $ | 0.65 | $ | 0.29 | $ | 0.56 | ||||||||||||||||
| Weighted average shares of common stock outstanding: | ||||||||||||||||||||||||
| Basic | 9,792,873 | 9,792,873 | 10,127,638 | 10,127,638 | ||||||||||||||||||||
| Diluted | 9,794,603 | 9,794,603 | 10,150,641 | 10,150,641 | ||||||||||||||||||||
| (a) Gross profit effect of capitalized profit in inventory from acquisitions | ||||||||||||||||||||||||
| (b) Legal expenses related to a settlement | ||||||||||||||||||||||||
| (c) Recognition of settled litigation | ||||||||||||||||||||||||
| (d) Includes Canadian NOL as it relates to the purchase of Stealth. | ||||||||||||||||||||||||
| (e) Recognition of environmental remediation expense | ||||||||||||||||||||||||
| SPARTON CORPORATION AND SUBSIDIARIES | ||||||||||||||||||||||||
|
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES |
||||||||||||||||||||||||
| (UNAUDITED) | ||||||||||||||||||||||||
| (Dollars in thousands, except share data) | ||||||||||||||||||||||||
| For the Year Ended June 30, 2015 | For the Year Ended June 30, 2014 | |||||||||||||||||||||||
| Non-GAAP | Non-GAAP | |||||||||||||||||||||||
| GAAP | Adjustment | Adjusted | GAAP | Adjustment | Adjusted | |||||||||||||||||||
| Net sales | $ | 382,125 | $ | — | $ | 382,125 | $ | 336,501 | $ | — | $ | 336,501 | ||||||||||||
| Cost of goods sold | 307,454 | (299 | ) | (a) | 307,155 | 271,686 | (337 | ) | (a) | 271,349 | ||||||||||||||
| Gross profit | 74,671 | 299 | 74,970 | 64,815 | 337 | 65,152 | ||||||||||||||||||
| Operating Expense: | ||||||||||||||||||||||||
| Selling and administrative expenses | 46,876 | (1,709 | ) | (b) | 45,167 | 35,698 | — | 35,698 | ||||||||||||||||
| Internal research and development expenses | 1,502 | — | 1,502 | 1,169 | — | 1,169 | ||||||||||||||||||
| Amortization of intangible assets | 6,591 | — | 6,591 | 3,287 | — | 3,287 | ||||||||||||||||||
| Legal settlement | 2,500 | (2,500 | ) | (c) | — | — | — | — | ||||||||||||||||
| Environmental remediation | — | — | — | 4,238 | (4,238 | ) | (f) | — | ||||||||||||||||
| Restructuring charges | — | — | — | 188 | (188 | ) | — | |||||||||||||||||
| Other operating income, net | (50 | ) | — | (50 | ) | (16 | ) | — | (16 | ) | ||||||||||||||
| Total operating expense, net | 57,419 | (4,209 | ) | 53,210 | 44,564 | (4,426 | ) | 40,138 | ||||||||||||||||
| Operating income | 17,252 | 4,508 | 21,760 | 20,251 | 4,763 | 25,014 | ||||||||||||||||||
| Other income (expense): | ||||||||||||||||||||||||
| Interest expense | (2,456 | ) | 421 | (d) | (2,035 | ) | (838 | ) | — | (838 | ) | |||||||||||||
| Interest income | 3 | — | 3 | 9 | — | 9 | ||||||||||||||||||
| Other, net | 156 | — | 156 | 180 | — | 180 | ||||||||||||||||||
| Total other expense, net | (2,297 | ) | 421 | (1,876 | ) | (649 | ) | — | (649 | ) | ||||||||||||||
| Income before income taxes | 14,955 | 4,929 | 19,884 | 19,602 | 4,763 | 24,365 | ||||||||||||||||||
| Income taxes | 3,966 | 2,852 | (e) | 6,818 | 6,615 | 1,737 | 8,352 | |||||||||||||||||
| Net income | $ | 10,989 | $ | 2,077 | $ | 13,066 | $ | 12,987 | $ | 3,026 | $ | 16,013 | ||||||||||||
| Income per share of common stock: | ||||||||||||||||||||||||
| Basic | $ | 1.10 | $ | 1.30 | $ | 1.28 | $ | 1.58 | ||||||||||||||||
| Diluted | $ | 1.10 | $ | 1.30 | $ | 1.28 | $ | 1.58 | ||||||||||||||||
| Weighted average shares of common stock outstanding: | ||||||||||||||||||||||||
| Basic | 9,874,441 | 9,874,441 | 10,109,915 | 10,109,915 | ||||||||||||||||||||
| Diluted | 9,885,961 | 9,885,961 | 10,141,395 | 10,141,395 | ||||||||||||||||||||
| (a) Gross profit effect of capitalized profit in inventory from acquisitions | ||||||||||||||||||||||||
| (b) Includes adjustments to remove $430 success based acquisition finder's fee paid in relation to the acquisition of eMT, remove $150 success based finder's fee paid in relation to acquisition of IED, $152 of costs recognized in relation to the reorganization of the Company's finance function and $977 of legal expenses related to a settlement | ||||||||||||||||||||||||
| (c) Recognition of settled litigation | ||||||||||||||||||||||||
| (d) Accelerated recognition of unamortized debt financing costs from prior credit facility due to refinancing | ||||||||||||||||||||||||
| (e) Includes Canadian NOL as it relates to the purchase of Stealth. | ||||||||||||||||||||||||
| (f) Recognition of environmental remediation expense | ||||||||||||||||||||||||
| SPARTON CORPORATION AND SUBSIDIARIES | ||||||||||||||||
|
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES |
||||||||||||||||
| (UNAUDITED) | ||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||
| For the Three Months Ended | For the Years Ended | |||||||||||||||
| June 30, | June 30, | June 30, | June 30, | |||||||||||||
| 2015 | 2014 | 2015 | 2014 | |||||||||||||
| Net income | $ | 5,098 | $ | 2,971 | $ | 10,989 | $ | 12,987 | ||||||||
| Interest expense | 895 | 291 | 2,456 | 838 | ||||||||||||
| Interest income | (1 | ) | (7 | ) | (3 | ) | (9 | ) | ||||||||
| Income taxes | 2,846 | 1,758 | 3,966 | 6,615 | ||||||||||||
| Depreciation and amortization | 3,559 | 2,213 | 11,236 | 8,123 | ||||||||||||
| Legal settlement and related expense | 2,752 | — | 3,477 | — | ||||||||||||
| Environmental remediation | — | 4,238 | — | 4,238 | ||||||||||||
| Restructuring charges | — | — | — | 188 | ||||||||||||
| Gross profit effect of capitalized profit in inventory from acquisitions | 44 | 81 | 299 | 337 | ||||||||||||
| Stock based compensation expense - Non-Directors | 167 | 375 | 1,590 | 1,397 | ||||||||||||
| Stock based compensation expense - Directors | — | — | 295 | 265 | ||||||||||||
| Adjusted EBITDA | $ | 15,360 | $ | 11,920 | $ | 34,305 | $ | 34,979 | ||||||||
| SPARTON CORPORATION AND SUBSIDIARIES | |||||||||||||||
|
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES |
|||||||||||||||
| (UNAUDITED) | |||||||||||||||
| (Dollars in thousands) | |||||||||||||||
| For the Three Months Ended June 30, 2015 | |||||||||||||||
| Manufacturing | Engineered | ||||||||||||||
| & Design | Components & | Other | |||||||||||||
| Services | Products | Unallocated | Total | ||||||||||||
| Gross profit | $ | 13,094 | $ | 14,961 | $ | — | $ | 28,055 | |||||||
| Gross profit effect of capitalized profit in inventory from acquisition | 44 | — | — | 44 | |||||||||||
| Adjusted gross profit | $ | 13,138 | $ | 14,961 | $ | — | $ | 28,099 | |||||||
| For the Three Months Ended June 30, 2014 | |||||||||||||||
| Manufacturing | Engineered | ||||||||||||||
| & Design | Components & | Other | |||||||||||||
| Services | Products | Unallocated | Total | ||||||||||||
| Gross profit | $ | 9,038 | $ | 11,870 | $ | — | $ | 20,908 | |||||||
| Gross profit effect of capitalized profit in inventory from acquisition | — | 81 | — | 81 | |||||||||||
| Adjusted gross profit | $ | 9,038 | $ | 11,951 | $ | — | $ | 20,989 | |||||||
| For the Year Ended June 30, 2015 | |||||||||||||||
| Manufacturing | Engineered | ||||||||||||||
| & Design | Components & | Other | |||||||||||||
| Services | Products | Unallocated | Total | ||||||||||||
| Gross profit | $ | 36,461 | $ | 38,210 | $ | — | $ | 74,671 | |||||||
| Gross profit effect of capitalized profit in inventory from acquisitions | 299 | — | — | 299 | |||||||||||
| Adjusted gross profit | $ | 36,760 | $ | 38,210 | $ | — | $ | 74,970 | |||||||
| For the Year Ended June 30, 2014 | |||||||||||||||
| Manufacturing | Engineered | ||||||||||||||
| & Design | Components & | Other | |||||||||||||
| Services | Products | Unallocated | Total | ||||||||||||
| Gross profit | $ | 34,782 | $ | 30,033 | $ | — | $ | 64,815 | |||||||
| Gross profit effect of capitalized profit in inventory from acquisitions | 67 | 270 | — | 337 | |||||||||||
| Adjusted gross profit | $ | 34,849 | $ | 30,303 | $ | — | $ | 65,152 | |||||||
| SPARTON CORPORATION AND SUBSIDIARIES | |||||||||||||||
|
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES |
|||||||||||||||
| (UNAUDITED) | |||||||||||||||
| (Dollars in thousands) | |||||||||||||||
| For the Three Months Ended June 30, 2015 | |||||||||||||||
| Manufacturing | Engineered | ||||||||||||||
| & Design | Components & | Other | |||||||||||||
| Services | Products | Unallocated | Total | ||||||||||||
| Operating income (loss) | $ | 2,663 | $ | 10,286 | $ | (4,140 | ) | $ | 8,809 | ||||||
| Gross profit effect of capitalized profit in inventory from acquisition | 44 | — | — | 44 | |||||||||||
| Legal settlement | 2,500 | — | — | 2,500 | |||||||||||
| Legal settlement expense | 252 | — | — | 252 | |||||||||||
| Adjusted operating income (loss) | $ | 5,459 | $ | 10,286 | $ | (4,140 | ) | $ | 11,605 | ||||||
| Depreciation/amortization | $ | 2,650 | $ | 706 | $ | 203 | $ | 3,559 | |||||||
| For the Three Months Ended June 30, 2014 | |||||||||||||||
| Manufacturing | Engineered | ||||||||||||||
| & Design | Components & | Other | |||||||||||||
| Services | Products | Unallocated | Total | ||||||||||||
| Operating income (loss) | $ | 3,797 | $ | 8,957 | $ | (7,770 | ) | $ | 4,984 | ||||||
| Gross profit effect of capitalized profit in inventory from acquisition | — | 81 | — | 81 | |||||||||||
| Environmental remediation | — | — | 4,238 | 4,238 | |||||||||||
| Adjusted operating income (loss) | $ | 3,797 | $ | 9,038 | $ | (3,532 | ) | $ | 9,303 | ||||||
| Depreciation/amortization | $ | 1,862 | $ | 244 | $ | 107 | $ | 2,213 | |||||||
| For the Year Ended June 30, 2015 | |||||||||||||||
| Manufacturing | Engineered | ||||||||||||||
| & Design | Components & | Other | |||||||||||||
| Services | Products | Unallocated | Total | ||||||||||||
| Operating income (loss) | $ | 9,535 | $ | 25,033 | $ | (17,316 | ) | $ | 17,252 | ||||||
| Gross profit effect of capitalized profit in inventory from acquisitions | 299 | — | — | 299 | |||||||||||
| Legal settlement | 2,500 | — | — | 2,500 | |||||||||||
| Legal settlement expense | 977 | — | — | 977 | |||||||||||
| Success based acquisition finder's fees and finance reorganization | — | — | 732 | 732 | |||||||||||
| Adjusted operating income (loss) | $ | 13,311 | $ | 25,033 | $ | (16,584 | ) | $ | 21,760 | ||||||
| Depreciation/amortization | $ | 8,875 | $ | 1,648 | $ | 713 | $ | 11,236 | |||||||
| For the Year Ended June 30, 2014 | |||||||||||||||
| Manufacturing | Engineered | ||||||||||||||
| & Design | Components & | Other | |||||||||||||
| Services | Products | Unallocated | Total | ||||||||||||
| Operating income (loss) | $ | 17,029 | $ | 19,943 | $ | (16,721 | ) | $ | 20,251 | ||||||
| Gross profit effect of capitalized profit in inventory from acquisitions | 67 | 270 | — | 337 | |||||||||||
| Environmental remediation | — | — | 4,238 | 4,238 | |||||||||||
| Restructuring charges | 188 | — | — | 188 | |||||||||||
| Adjusted operating income (loss) | $ | 17,284 | $ | 20,213 | $ | (12,483 | ) | $ | 25,014 | ||||||
| Depreciation/amortization | $ | 6,576 | $ | 1,149 | $ | 398 | $ | 8,123 | |||||||
