SPA
$18.99
Sparton
$.03
.16%
Earnings Details
Quarter December 2017
Tuesday, February 06, 2018 4:05:04 PM
Tweet Share Watch
Summary

Sparton (SPA) Recent Earnings

Sparton (SPA) reported Quarter December 2017 earnings of $0.45 per share on revenue of $97.8 million.. Revenue grew 0.4% on a year-over-year basis.

Sparton Corp is engaged in providing design, development, and manufacturing services for electromechanical devices and engineered products. The Company serves the Medical & Biotechnology, Military & Aerospace and Industrial & Commercial markets.

Results
Reported Earnings
$0.45
Earnings Whisper
-
Consensus Estimate
Reported Revenue
$97.8 Mil
Revenue Estimate
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Sparton Corporation Reports Fiscal 2018 Second Quarter Results

Sparton Corporation (SPA) today announced results for the second quarter of fiscal year 2018 ended December 31, 2017.

Second Quarter Financial Results and Highlights

Joseph J. Hartnett, Interim President & CEO, commented, "The operational improvements we have made over the past two years continues to drive our performance through some very challenging times. Thanks to the collective effort of the entire organization, we were able to achieve significant improvements over our first quarter’s results in many important areas including sales, margins, cash flows, new program wins and borrowings under our credit facility."

Joseph G. McCormack, Senior Vice President & CFO, commented, "During the second quarter of fiscal year 2018, the Company recorded additional income tax expense of $10.8 million as a result of the newly enacted Tax Cuts and Jobs Act of 2017 which was principally related to a write-down of the Company’s net deferred tax assets as a result of the reduction in the statutory income tax rate."

Consolidated:

? Net sales of $97.8 million

? Gross profit margin of 20.9%

? SG&A expenses of $14.1 million or 14.4% of sales; adjusted SG&A of $12.7 million, 13.0% of sales

? Loss per share of $(0.92), adjusted earnings per share of $0.45

? Adjusted EBITDA of $8.7 million, an 8.9% adjusted EBITDA margin

MDS Segment:

? Gross sales of $58.4 million

? Gross profit margin of 12.6%

? Operating loss of $0.2 million

? Adjusted EBITDA of $4.2 million, a 7.1% adjusted EBITDA margin

? New program wins in Q2 have expected revenue of $20.0 million when fully ramped up into production

? Trailing four quarter new program win revenue of $67.4 million, which continues to support our future organic growth

ECP Segment:

? Gross sales of $42.5 million

? Gross profit margin of 31.7%

? Operating income of $8.9 million

? Adjusted EBITDA of $10.5 million, a 24.6% adjusted EBITDA margin

SELECTED FINANCIAL DATA
For the Quarters Ended
For the First Two Quarters
Q2 FY18
Q1 FY18
Q2 FY17
2018
2017
(Dollars in thousands, except per share data)
Consolidated:
Net sales
$ 97,819
$
82,763
$
97,399
$ 180,582
$ 197,766
Gross profit
20,429
14,588
15,898
35,017
33,183
Selling and administrative expenses
14,074
15,205
12,953
29,279
26,336
Operating income
3,793
(3,112 )
221
681
1,553
Adjusted operating income (non-GAAP)
7,053
1,162
3,107
8,215
7,421
Earnings per share
(0.92 )
(0.29 )
(0.09 )
(1.21 )
(0.08 )
Adjusted Earnings per share (non-GAAP)
0.45
--
0.10
0.44
0.31
EBITDA (non-GAAP)
7,153
337
3,890
7,490
8,961
Adjusted EBITDA (non-GAAP)
8,741
2,899
5,553
11,640
11,696
Adjusted EBITDA margin (non-GAAP)
8.9 %
3.5 %
5.7 %
6.4 %
5.9 %
Free cash flow (non-GAAP)
$ 19,725
$ (23,684 )
$
10,008
$
(3,959 )
$
12,101
MDS Segment:
Gross sales
$ 58,353
$
55,308
$
67,382
$ 113,661
$ 132,384
Intercompany sales
(2,970 )
(2,937 )
(2,333 )
(5,907 )
(4,533 )
Net sales
55,383
52,371
65,049
107,754
127,851
Gross profit
6,960
5,993
8,357
12,953
15,651
Selling and administrative expenses
3,513
3,454
3,384
6,967
6,892
Allocation of corporate expenses
2,101
2,446
2,177
4,547
4,645
Operating Income (loss)
(208 )
(1,485 )
986
(1,693 )
472
Adjusted Segment EBITDA (non-GAAP)
$
4,159
$
3,250
5,875
$
7,409
$
10,566
ECP Segment:
Gross sales
$ 42,468
$
30,399
$
32,350
$
72,867
$
69,942
Intercompany sales
(32 )
(7 )
--
(39 )
(27 )
Net sales
42,436
30,392
32,350
72,828
69,915
Gross profit
13,469
8,595
7,541
22,064
17,532
Selling and administrative expenses
2,533
2,589
2,550
5,122
5,174
Allocation of corporate expenses
1,037
991
995
2,028
2,195
Operating Income
8,891
4,098
3,082
12,989
8,511
Adjusted Segment EBITDA (non-GAAP)
$ 10,458
$
5,678
4,646
16,136
$
11,874

Liquidity and Capital Resources

As of December 31, 2017, the Company had $42 million available under its $125 million credit facility.

Non-GAAP Financial Measures

In addition to reporting financial results in accordance with U.S. generally accepted accounting principles ("GAAP"), Sparton Corporation has provided certain 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 effects 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 total operating 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, 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.

When we calculate adjusted earnings per share, adjusted EBITDA and other adjustments to the statements of income, we exclude certain expenses and income 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. We believe EBITDA and adjusted EBITDA are 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, EBITDA or adjusted EBITDA to be 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 other companies. Accordingly, the measurement has limitations depending on its use.

About Sparton Corporation

Sparton Corporation (SPA), now in its 118th 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 thirteen manufacturing locations and engineering design centers worldwide. Sparton’s Web site may be accessed at www.sparton.com.

Safe Harbor and Fair Disclosure Statement

Safe Harbor statement under the Private Securities Litigation Reform Act of 1995: To the extent any statements made in this release contain information that is not historical, these statements are essentially forward-looking and are subject to risks and uncertainties, including the difficulty of predicting future results, the regulatory environment, fluctuations in operating results and other risks detailed from time to time in Sparton’s filings with the Securities and Exchange Commission (SEC). The matters discussed in this press release may also involve risks and uncertainties concerning Sparton’s services described in Sparton’s filings with the SEC. In particular, see the risk factors described in Sparton’s most recent Form 10-K and Form 10-Q. Sparton assumes no obligation to update the forward-looking information contained in this press release.

CONSOLIDATING FINANCIAL INFORMATION - Q2 FISCAL YEAR 2018
(Dollars in thousands, except per share data)
Corporate
MDS
ECP
Total
Net Sales
$ --
$
55,383
$
42,436
$
97,819
Cost of goods sold
--
48,423
28,967
77,390
Gross profit
--
6,960
13,469
$
20,429
Operating expenses:
Selling and administrative
8,028
3,513
2,533
14,074
Selling and administrative - Corp allocations
(3,138 )
2,101
1,037
--
Internal research and development
--
--
669
669
Amortization of intangible assets
--
1,554
339
1,893
Total operating expenses
4,890
7,168
4,578
16,636
Income (loss) from operations
(4,890 )
(208 )
8,891
3,793
Interest expense, net
(1,507 )
--
--
(1,507 )
Other income (expense)
(1 )
19
(5 )
13
Income taxes
(11,296 )
(37 )
--
(11,333 )
Net income (loss)
$
(17,694 )
$
(226 )
$
8,886
$
(9,034 )
Income per share of common stock:
Basic
$
(0.92 )
Diluted
(0.92 )
Weighted average shares of common stock outstanding:
Basic
9,834,723
Diluted
9,834,723
CONSOLIDATING FINANCIAL INFORMATION - Q2 FISCAL YEAR 2017
(Dollars in thousands, except per share data)
Corporate
MDS
ECP
Total
Net Sales
$ --
$
65,049
$
32,350
$
97,399
Cost of goods sold
--
56,692
24,809
81,501
Gross profit
--
8,357
7,541
$
15,898
Operating expenses:
Selling and administrative
7,019
3,384
2,550
12,953
Selling and administrative - Corp allocations
(3,172 )
2,177
995
--
Internal research and development
--
--
533
533
Amortization of intangible assets
--
1,810
381
2,191
Total operating expenses
3,847
7,371
4,459
15,677
Income (loss) from operations
(3,847 )
986
3,082
221
Interest expense, net
(1,071 )
4
--
(1,067 )
Other income (expense)
(7 )
12
(16 )
(11 )
Income taxes
(45 )
(5 )
--
(50 )
Net income (loss)
$
(4,970 )
$
997
$
3,066
$
(907 )
Income per share of common stock:
Basic
$
(0.09 )
Diluted
(0.09 )
Weighted average shares of common stock outstanding:
Basic
9,802,664
Diluted
9,802,664
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
For the First Two Quarters
2018
2017
($ in thousands)
Cash Flows from Operating Activities:
Operating activities, net of working capital changes
$ 5,891
$
8,158
Net changes in working capital
(6,765 )
6,513
Cash Flows from Operating Activities
(874 )
14,671
Cash Flows from Investing Activities:
Capital expenditures
(3,099 )
(2,570 )
Other investing activities
14
--
Cash Flows from Investing Activities
(3,085 )
(2,570 )
Cash Flows from Financing Activities:
Net change in credit facility
4,400
(11,500 )
Other financing activities
(325 )
(144 )
Cash Flows from Financing Activities
4,075
(11,644 )
Change in Cash and Cash Equivalents
116
457
Cash and Cash Equivalents - Beginning
988
132
Cash and Cash Equivalents - Ending
$ 1,104
$
589
CONDENSED CONSOLIDATED BALANCE SHEETS
December 31,
July 2,
2017
2017
($ in thousands)
Assets
Cash and cash equivalents
$
1,104
$
988
Accounts receivable, net
54,466
45,347
Inventories
62,767
60,248
Prepaid and other current assets
4,177
3,851
Property, plant and equipment, net
34,484
34,455
Goodwill
12,663
12,663
Other intangible assets, net
24,629
28,445
Other assets
19,948
31,146
Total assets
$ 214,238
$
217,143
Liabilities and Shareholders’ Equity
Accounts payable
$
38,210
$
27,672
Accrued expenses
20,807
26,580
Credit facility
78,900
74,500
Capital lease obligations, long term
32
167
Environmental
5,208
5,468
Pension
820
888
Shareholders’ Equity
70,261
81,868
Total Liabilities and Shareholders’ Equity
$ 214,238
$
217,143
RECONCILIATION OF NON-GAAP MEASURES
EBITDA Reconciliation (Non-GAAP) - Q2 Fiscal Year 2018
(Dollars in thousands)
Corporate
MDS
ECP
Total
Net income (loss)
$ (17,694 )
$
(226 )
$
8,886
$
(9,034 )
Interest expense, net
1,507
--
--
1,507
Income taxes
11,296
37
--
11,333
Amortization of intangible assets
--
1,554
339
1,893
Depreciation
565
693
196
1,454
Selling and administrative - Corp allocations
(3,138 )
2,101
1,037
--
EBITDA, excluding corporate allocation
(7,464 )
4,159
10,458
7,153
Adjustments for nonrecurring operating expenses:
221
--
--
221
Stock-based compensation
Costs related to potential sale of Company
1,367
--
--
1,367
Adjusted EBITDA, before corporate allocation
$
(5,876 )
$
4,159
$
10,458
$
8,741
Adjusted EBITDA, after corporate allocation
$
(2,738 )
$
2,058
$
9,421
$
8,741
Adjusted EBITDA margin
8.9
%
EBITDA Reconciliation (Non-GAAP) - Q2 Fiscal Year 2017
(Dollars in thousands)
Corporate
MDS
ECP
Total
Net income (loss)
$
(4,970 )
$
997
$
3,066
$
(907 )
Interest expense, net
1,071
(4 )
--
1,067
Income taxes
45
5
--
50
Amortization of intangible assets
--
1,810
381
2,191
Depreciation included in SG&A above
446
839
204
1,489
Selling and administrative - Corp allocations
(3,172 )
2,177
995
--
EBITDA, excluding corporate allocation
(6,580 )
5,824
4,646
3,890
Adjustments for nonrecurring operating expenses:
Stock-based compensation
968
--
--
968
Costs related to potential sale of company
644
51
--
695
Adjusted EBITDA, before corporate allocation
$
(4,968 )
$
5,875
$
4,646
$
5,553
Adjusted EBITDA, after corporate allocation
$
(1,796 )
$
3,698
$
3,651
$
5,553
Adjusted EBITDA margin
5.7
%
Adjusted EPS (Non-GAAP)
For the Quarters Ended
For the First Two Quarters
Q2 FY18
Q1 FY18
Q2 FY17
2018
2017
(Dollars in thousands, except per share data)
Earnings per share - diluted, as reported
$
(0.92 )
$
(0.29 )
$
(0.09 )
$
(1.21 )
$
(0.08 )
Nonrecurring items
0.12
0.16
0.05
0.27
0.10
Amortization of intangible assets
0.15
0.13
0.14
0.28
0.29
Deferred tax asset adjustment
1.10
--
--
1.10
--
Adjusted earnings per share
$
0.45
$ --
$
0.10
$
0.44
$
0.31
Adjustments, net of tax:
Costs related to potential sale of Company
$
1,149
$
1,528
$
452
$
2,677
$
883
Other nonrecurring adjustments
--
--
--
--
65
Total nonrecurring, net of tax
1,149
1,528
452
2,677
948
Amortization of intangible assets, net of tax
1,498
1,250
1,424
2,748
2,866
Adjustments for Tax Act
10,807
--
--
10,807
--
Total adjustments
$
13,454
$
2,778
$
1,876
$
16,232
$
3,814
Adjusted SG&A and Operating Income (Non-GAAP)
For the Quarters Ended
Q2 FY18
Q1 FY18
Q2 FY17
SG&A
Operating
SG&A
Operating
SG&A
Operating
Income
Income
Income
(Dollars in thousands)
As reported
$
14,074
$
3,793
$
15,205
$
(3,112 )
$
12,953
$
221
Percentage of sales
14.4 %
3.9 %
18.4 %
(3.8 )%
13.3 %
0.2 %
Adjustments:
Amortization of intangible assets
--
1,893
--
1,923
--
2,191
Costs related to potential sale of Company
1,367
1,367
2,351
2,351
695
695
Other nonrecurring adjustments
--
--
--
--
--
--
Total adjustments
1,367
3,260
2,351
4,274
695
2,886
As adjusted
$
12,707
$
7,053
$
12,854
$
1,162
$
12,258
$
3,107
Adjusted percentage of sales
13.0 %
7.2 %
15.5 %
1.4 %
12.6 %
3.2 %
For the First Two Quarters
2018
2017
SG&A
Operating
SG&A
Operating
Income
Income
(Dollars in thousands)
As reported
$
29,279
$
681
$
26,336
$
1,553
Percentage of sales
16.2 %
0.4 %
13.3 %
0.8 %
Adjustments:
Amortization of intangible assets
--
3,816
--
4,410
Costs related to potential sale of Company
3,718
3,718
1,358
1,358
Other nonrecurring adjustments
--
--
100
100
Total adjustments
3,718
7,534
1,458
5,868
As adjusted
$
25,561
$
8,215
$
24,878
$
7,421
Adjusted percentage of sales
14.2 %
4.5 %
12.6 %
3.8 %

http://cts.businesswire.com/ct/CT?id=bwnews&sty=20180206006389r1&sid=cmtx6&distro=nx&lang=en

View source version on businesswire.com: http://www.businesswire.com/news/home/20180206006389/en/

SOURCE: Sparton Corporation

Media:
Sparton Corporation
Joe McCormack, (847) 762-5800
ir@sparton.com