UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended: June 30, 2011
Or
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Numbers 1-1000
Sparton Corporation
(Exact name of registrant as specified in its charter)
Ohio | 38-1054690 | |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
425 N. Martingale Road, Suite 2050
Schaumburg, Illinois 60173
(Address of principal executive offices)
Registrants telephone number, including area code: (847) 762-5800
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
Name of each exchange on which registered | |
Common Stock, par value $1.25 per share | New York Stock Exchange |
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No x
Indicate by check mark 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 by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or such shorter period that the registrant was required to submit and post such files). Yes ¨ No ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of large accelerated filer, accelerated filer, and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer ¨ | Accelerated filer x | Non-accelerated filer ¨ | Smaller reporting company ¨ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No x
The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold (based on the closing price on the New York Stock Exchange) as of December 31, 2010 (the last business day of the registrants most recently completed second fiscal quarter) was approximately $77,981,000. For purposes of this computation, affiliates of the registrant include the registrants executive officers and directors and their respective affiliates as of December 31, 2010.
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ¨ No ¨
As of August 31, 2011, there were 10,236,484 shares of common stock, $1.25 par value per share, outstanding.
Documents Incorporated by Reference
Part III incorporates information by reference to the registrants definitive proxy statement for its 2011 Annual Meeting of Shareholders to be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year.
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FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains statements about future events and expectations that are forward-looking statements. We may also make forward-looking statements in our other reports filed with the SEC, in materials delivered to our shareholders and in press releases. These statements relate to future events or our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as may, will, should, expects, intends, plans, anticipates, believes, estimates, predicts, potential, or the negative use of these terms or other comparable terminology that convey the uncertainty of future events or outcomes. Although we believe these forward-looking statements are reasonable, they are based on a number of assumptions concerning future conditions, any or all of which may ultimately prove to be inaccurate. These forward-looking statements are based on managements views and assumptions at the time originally made, and we undertake no obligation to update these statements whether as a result of new information or future events. There can be no assurance that our expectations, projections or views will materialize, and you should not place undue reliance on these forward-looking statements. Any statement in this report that is not a statement of historical fact may be deemed to be a forward-looking statement and subject to the safe harbor created by the Private Securities Litigation Reform Act of 1995.
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ITEM 1. | BUSINESS |
General
Sparton Corporation and subsidiaries (the Company or Sparton) has been in continuous existence since 1900. It was last reorganized in 1919 as an Ohio corporation. The Company is a provider of complex and sophisticated electromechanical devices with capabilities that include concept development, industrial design, design and manufacturing engineering, production, distribution, and field service. The Company operates through three reportable business segments; Medical Device (Medical), Complex Systems (CS), formerly called Electronic Manufacturing Services (EMS), and Defense & Security Systems (DSS), which serves Defense, Security Systems, Navigation and Exploration markets. The electromechanical device end markets that Sparton, as a whole, serves are in Medical, Military & Aerospace and Industrial & Instrumentation. Effective beginning in fiscal 2010, the Company reports its operating results under these three reportable business segments. Prior to fiscal 2010, all of our operating units were aggregated into one line of business, EMS. Fiscal 2009 information presented herein reflects this change to segment reporting. Financial information by segment is presented in Note 15, Business Segments, of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K. All of the Companys facilities are registered to ISO standards, including 9001 or 13485, with most having additional certifications. The Companys products and services include products for Original Equipment Manufacturers (OEM) and Emerging Technology (ET) customers that are microprocessor-based systems that include transducers, printed circuit boards and assemblies, sensors, and electromechanical components, as well as development and design engineering services relating to these product sales. Sparton also develops and manufactures sonobuoys, anti-submarine warfare (ASW) devices used by the United States Navy and other free-world countries. Many of the physical and technical attributes in the production of sonobuoys are similar to those required in the production of the Companys other electrical and electromechanical products and assemblies.
The Companys website address is www.sparton.com. Information contained on our website is not part of this Annual Report on Form 10-K. Our website provides public access to, among other items, the Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Quarterly Earnings Releases, News Releases, Governance Guidelines, and the Code of Ethics, as well as various Board of Director committee charters. Upon request, the Company provides, free of charge, copies of its periodic and current reports (e.g., Forms 10-K, 10-Q and 8-K) and amendments to such reports that are filed with the Securities and Exchange Commission (SEC), as well as the Board of Director committee charters. Reports are available as soon as reasonably practicable after such reports are filed with or furnished to the SEC, either at the Companys website, through a link to the SECs website or upon request through the Companys Shareholders Relations Department.
Medical Segment
Medical Device operations, with locations in Ohio and Colorado, are comprised of contract development, design, production and distribution of complex and sophisticated medical related electromechanical devices for customers with specialized needs, specifically in the design and manufacturing process, to assure product reliability and safety in accordance with Food and Drug Administration (FDA) guidelines and approvals. This group specializes in systems and procedures targeted to the requirements of medical OEM and ET customers primarily in the In Vitro Diagnostic and Therapeutic Device segments of the Medical Device market space.
Our Medical segments objective is to be the preferred contract design and manufacturer of medical devices/instruments for market leading OEMs as well as emerging technologies. The market is driven by providing the total solution concept, at a competitive price to the customer. Our market advantage is our experience and knowledge of the market, breadth of services that we offer, and the referral relationships which have developed
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over the past 20 years. The major corporations on the customer side want to focus their time and energy supporting their major profit areas of consumables and new innovation through research and development. In addition, many companies are outsourcing certain engineering activities finding it costly and inefficient to have full time engineers available for new product development which cycles with new projects every three to five years. This is the niche that has proven to be successful to Sparton Medical.
The contract manufacturing of highly complex medical instrumentation is a fairly young industry with no dominate player in the market. In the past, large Printed Circuit Board contract manufacturers have sold their box build capabilities and have been very successful. The industry has continued to grow with more companies developing Printed Circuit Board Assembly (PCBA) capabilities and others entering the market via mergers and acquisitions of smaller companies. This has led to stronger competition with larger companies that have the financial resources to offer the services that the customers are requiring. Customers will assume that quality will be 100% and will drive their decisions based on pricing and services offered that best fit their total solutions needs.
The understanding of the medical market needs is critical for our success. We are well positioned with our engineering development, reliability engineering, manufacturing/testing, and service support services to meet our current organic growth plans. Additional growth may be gained through an acquisition strategy employed to expand our market reach and footprint into other geographic areas of the U.S.
On August 6, 2010, the Company completed the acquisition of certain assets related to the contract manufacturing business of Delphi Medical Systems, LLC (Delphi Medical or Delphi) in an approximate $8.4 million all-cash transaction. The acquired business, which is reported in the Companys Medical segment, provides a new and diversified customer base and provides Sparton with a geographic presence in the western United States. Delphi Medical primarily manufactures OEM medical devices including blood separation equipment, spinal surgery products and 3-D eye mapping devices. It also provides engineering and manufacturing support to a market-leading environmental sensor company whose markets include meteorology, weather critical operations and controlled environment applications.
On March 4, 2011, the Company completed the acquisition of certain assets and assumption of certain liabilities of Byers Peak, Incorporated (Byers Peak) in an approximate $4.1 million all-cash transaction. The acquired business, which is reported in the Companys Medical segment, provides further expansion into the therapeutic device market, diversifies Spartons customer base, and further expands the Companys geographic reach into the western United States. Additionally, the acquisition increases Spartons offerings with the inclusion of field service and refurbishment capabilities. Byers Peak primarily manufactures medical devices for OEM and emerging technology companies in the Therapeutic device market, including devices for surgical navigation, RF energy generation, arterial disease, and kidney dialysis. It also has a field service and installation group that primarily provides water filtration and disinfection systems for the medical industry as well as device refurbishment programs. Additionally, Byers Peak provides electromechanical device manufacturing support for a limited number of customers outside of the medical industry.
Medical sales to Siemens Diagnostics accounted for 18%, 21% and 17% of consolidated revenue for the fiscal years ended June 30, 2011, 2010 and 2009, respectively. Fenwal Blood Technologies, which became a customer with the Delphi acquisition, contributed 12% of consolidated revenue during the year ended June 30, 2011. The loss of either Siemens Diagnostics or Fenwal Blood Technologies as a customer could have a material adverse financial effect on the Company. See Item 1A. Risk Factors, We are dependent on a few large customers; the loss of such customers or reduction in their demand could substantially harm our business and operating results for a further discussion regarding these customers. While the overall relationships with the Siemens Diagnostics and Fenwal Blood Technologies are important to Sparton, the contracts with these companies are such as ordinarily accompany the kind of business conducted by Sparton and the Company does not believe that it is substantially dependent on any individual contract or agreement with these customers. The contractual arrangements entered into with Siemens Diagnostics and Fenwal Blood Technologies are represented
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by master agreements which include certain master terms and conditions of Spartons relationship with these customers. These agreements do not commit the customers to any specific volume of purchases. Moreover, these terms can be amended in appropriate circumstances. Thus, until these customers submit a purchase order to Sparton, there is no guarantee of any revenue to Sparton. Rather than depending on these contracts for revenue, the Company accepts purchase orders from these customers which determine volume and delivery requirements. Medical backlog was approximately $42.3 million and $14.0 million at June 30, 2011 and 2010, respectively. A majority of the June 30, 2011 Medical backlog is currently expected to be realized within the next 12 months.
As a medical device manufacturer, Sparton Medical Systems operates in a heavily regulated environment. Despite efforts to harmonize domestic and international regulations, inconsistencies still exist. Quality Management System requirements are generally compatible but device approval, licensing and environmental requirements vary widely and change frequently. RoHS (Restriction of Hazardous Substances) and REACH (Registration, Evaluation and Authorization of Chemicals) directives are among the more recent regulatory challenges. Similar environmental regulations are expected from other countries and the United States. Non-compliance risks range from variance notifications to production/shipping prevention depending upon the agency and form of non-compliance.
Complex Systems Segment
Spartons Complex Systems Business Unit, with locations in Florida and Vietnam, provides multiple industries with complex electronics systems offering end-to-end development and manufacturing solutions focused on high expectations of quality and delivery performance through a global footprint. As a vertically integrated business unit, we assist in providing our customers with seamless development of circuit card assemblies for integration into electro-mechanical solutions. Complex Systems has a diverse and highly skilled group of engineers that focus on maximizing efficiency and cost containment at the various steps in the design, engineering, and manufacturing process. These electronic specialists act as an intelligent source and ideal partner for development firms and OEMs. This business unit is a trusted source and supplier for low to medium volume/high complexity commercial and military aerospace applications, medical devices, telecommunications, energy, and industrial controls. Current portfolio of product line applications include: flight controls, cock pit displays, fuel system controls, secure communications, early warning detection, diagnostics systems, security systems, detection systems, lighting, satellite communications, audio, nuclear detection, inventory control, and defense.
Complex Systems provides to its customers support services that include engineering services, design, material management, obsolescence analysis and management, documentation development, and process improvement. Our engineering services, led by our rapid prototype and pilot build process, offer our customers a high quality product that can quickly be placed into their channels of distribution. Once a product has been proven viable, we offer domestic and low cost country manufacturing and distribution solutions.
The segment strives to exceed customers expectations of low cost with high delivery and quality performance. As these attributes are demanded by CS customers that produce the aforementioned products, Complex Systems strives to exceed those expectations through utilization of contemporary management tools to ascertain the effectiveness of all business operating systems. This has allowed Complex Systems to gain competitive traction in the market place.
Competitors in our market segments are much larger in size and typically operate in a medium to higher volume sector. These competitors, however, typically do not provide low-volume, high-mix legacy services that Sparton can provide, as this remains our niche in the market. Other EMS providers of comparable size to Spartons Complex Systems Business Unit are forecasted to modestly grow by leading industry experts. OEMs in our market segments are continually driving costs out of their respective businesses through outsourcing strategies, allowing opportunity for Sparton to capture additional value add opportunities.
Sparton Complex Systems continues to engage in ongoing strategic initiatives to expand market awareness of Sparton capabilities. As we continue to execute to our growth strategy, we anticipated adding additional resources in
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Marketing Services, Business Development, and Program Administration services. We further intend to expand our web presence and continue direct participation in trade shows and networking forums. We are also engaged with local and regional economic development authorities. We continue to gain traction in this area as partnerships have developed with higher educational institutions research and development programs and county and regional economic leadership teams. Our Vietnam location continues to be engaged with the local government authority assisting North American Companies seeking to conduct business in Vietnam. These additional efforts will allow focused marketing for each of our identified markets optimizing our ability to selectively target new customers.
Complex Systems backlog was approximately $29.5 million and $29.1 million at June 30, 2011 and 2010, respectively. A majority of the June 30, 2011 Complex Systems backlog is currently expected to be realized within the next 12 months.
The majority of Spartons Complex Systems customers are in regulated industries where strict adherence to regulations is required such as Federal Drug Administration (FDA), International Tariff and Arms Regulations (ITAR), Federal Aviation Administration (FAA). These requirements are highly technical in nature and require strict adherence and documentation related to operational processes and documentation. Spartons quality system provides us the ability to service such markets, differentiating Sparton from some potential competitors which lack such systems.
DSS Segment
DSS operations, located in Florida, are comprised of design, development and production of products for a number of technologically significant programs aimed at fulfilling defense and commercial needs. Specializing in the development and production of complex electromechanical equipment, DSS designs and manufactures sonobuoys, anti-submarine warfare (ASW) devices used by the U.S. Navy and foreign governments. This business unit also performs an engineering development function for the United States military and prime defense contractors on advanced technologies targeted as future defense products as well as replacement of current systems. The sonobuoy product line is built to the customers demanding specifications. These products are ITAR restricted, which limits opportunities for competition.
DSS is partner to a 50/50 joint venture agreement (JV) with UnderSea Sensor Systems, Inc. (USSI), the only other major producer of sonobuoys to the free world. USSIs parent company is Ultra Electronics Holdings PLC, based in the United Kingdom. The joint venture arrangement operates under the name ERAPSCO and allows Sparton and USSI to consolidate their own unique and complementary backgrounds to jointly develop and produce U.S. derivative sonobuoy designs for the U.S. Navy as well as foreign countries. In concept, and in practice, ERAPSCO serves as a pass-through entity with no funds or assets. While the joint venture agreement provides the opportunity to maximize efficiencies in the design and development of the related sonobuoys, both venture companies function independently as subcontractors; therefore, there is no separate entity to be accounted for or consolidated. The Board of Directors of ERAPSCO has the responsibility for the overall management and operation of the JV. The six (6) member board consists of equal representation (full time employees) from both JV partners for three (3) year terms. Manpower for ERAPSCO, specifically a general manager role, contract administrator role and financial manager role, is similarly assigned by the JV partners for rotating three year terms and the costs of these assigned individuals are borne by the party assigning the personnel. In response to a customer request for proposal (RFP) that ERAPSCO will bid on, the Board of Directors of ERAPSCO determines both the composition of a response to the RFP and the composite bid to be submitted to the customer. The Board of Directors strives to divide the aggregate contract awards at a 50/50 share ratio. Each joint venture partner bears the costs it incurs associated with the preparation and submission of proposals. Each JV partner submits to ERAPSCO a proposal for the estimated cost of performing that portion of the RFP applicable to it. Upon award of a contract to the JV, separate subcontracts are generated between ERAPSCO and each of the JV partners defining the responsibilities and compensation for each JV partner. These subcontracts contain terms and conditions consistent with the prime contract. Each JV partner is responsible for
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the successful performance of its bid to the JV for its respective scope of work and each JV partner is responsible for profit or losses sustained in the execution of the subcontract against its respective bid. Under ERAPSCO, individual contract risk exposures are reduced, while the likelihood of achieving U.S. Navy and other ASW objectives is enhanced. ERAPSCO has been in existence for approximately twenty years and historically, the agreed upon products included under the joint venture agreement were generally developmental or sonobuoys with low volume demand. Four years ago, the Companys ERAPSCO arrangement was expanded to include additional products for U.S. customers and substantially all U.S. derivative sonobuoy products for customers outside of the United States. Beginning with the U.S. Government 2011 fiscal year contracts, all U.S. sonobuoy products are now bid and executed through ERAPSCO, completing the joint venture expansion which now includes sales of all U.S. derivative sonobuoys worldwide.
While the ERAPSCO agreement provides certain benefits to Sparton as described above, the Company does not believe that it is substantially dependent upon this agreement to conduct its business. If in the future, Sparton determines that this commercial arrangement is no longer beneficial, the Company has the ability to terminate the joint venture in relation to future business awards and return to independent bidding for U.S. Navy and foreign government ASW awards.
New internally funded products are under development for sale as commercial products to the navigation and underwater acoustic systems market. Markets for these products include autonomous underwater and ground vehicles, as well as unattended aerial vehicles as our product offerings grow. The principal example of such products is a family of precision electronic compasses for applications such as navigation and mineral or petroleum exploration. Competition among companies that build these products is intense and dynamic. As such, development of our commercial products requires the identification of sustainable competitive advantages (SCA) prior to investment to ensure there is a viable market for our products. Each new product must advance the technology available to the market enough to overcome the inherent inertia preventing potential customers from switching from competitors products. Likewise, existing products are evaluated periodically to ensure their SCA is still maintained and if not, either redesign or end-of-life occurs. The expansion of our commercial product lines leverages the intrinsic engineering talent at DSS and capitalizes on the sonobuoy product volumes to provide technological as well as economies of scale advantages.
Sonobuoy and related engineering services, including sales to the U.S. Navy, accounted for approximately 33%, 36% and 19% of consolidated revenue for the fiscal years ended June 30, 2011, 2010 and 2009, respectively. Sales to the U.S Navy, including subcontract sales through ERAPSCO, accounted for 30%, 28% and 14% of consolidated revenue for the fiscal years ended June 30, 2011, 2010 and 2009, respectively. The U.S. Navy issues multiple contracts annually for its sonobuoy and engineering requirements. The loss of U.S. Navy sonobuoy sales would have a material adverse financial effect on the Company. While the overall relationship with the U.S. Navy is important to Sparton, the contracts with the U.S. Navy, including subcontracts through ERAPSCO, are such as ordinarily accompany the kind of business conducted by Sparton and the Company does not believe that it is substantially dependent on any individual contract or agreement with this customer other than the Subcontract effective June 20, 2011 between Sparton Electronics, Florida, Inc. and ERAPSCO that is filed as an exhibit to this Annual Report on Form 10-K (the Subcontract). Pursuant to the Subcontract, DSS will supply sonobuoys to the U.S. Navy through ERAPSCO for a total contract value of approximately $32.2 million to Sparton Electronics.
DSS backlog was approximately $65.5 million and $69.6 million at June 30, 2011 and 2010, respectively. A majority of the June 30, 2011 DSS backlog is currently expected to be realized within the next 12 to 16 months.
United States Government contracts allow Sparton to submit advance billings, which are then applied against inventories purchased and manufacturing costs incurred by the Company throughout its performance under these contracts. Inventories were reduced by advance billings to the U.S. government for costs incurred related to long-term contracts, thereby establishing inventory to which the U.S. government then has title, of approximately $9.0 million and $7.4 million, respectively, at June 30, 2011 and 2010. At June 30, 2011 and
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2010, current liabilities include advance billings of $13.0 million and $21.6 million, respectively, on government contracts. As these billings are in excess of cost, there is no inventory to which the government would claim title and, therefore, no offset to inventory has been made.
DSSs business is affected by numerous laws and regulations relating to the award, administration and performance of U.S. Government contracts. The U.S. Government generally has the ability to terminate DSS contracts, in whole or in part, without prior notice, for convenience or for default based on performance. If any of these U.S. Government contracts were terminated for convenience, Sparton would generally be protected by provisions covering reimbursement for costs incurred on the contracts and profit on those costs, but not the anticipated profit that would have been earned had the contract been completed.
Other
Non-sonobuoy related manufacturing and services are sold primarily through a direct sales force. In addition, our divisional and executive management teams are an integral part of our sales and marketing teams.
While overall sales can fluctuate during the year in each of our segments, such fluctuations do not reflect a seasonal pattern or tendency.
Materials for our operations are generally available from a variety of worldwide sources, except for selected components. Access to competitively priced materials is critical to success in our businesses. In certain markets, the volume purchasing power of our larger competitors creates a cost advantage for them. The Company has encountered availability and extended lead time issues on some electronic components due to strong market demand, and this condition resulted in higher prices and late deliveries. However, the Company does not expect to encounter significant long-term problems in obtaining sufficient raw materials. The risk of material obsolescence in our businesses is less significant than that which exists in many other markets since raw materials and component parts are generally purchased only upon receipt of a customers order. However, excess material resulting from order lead-time is a risk factor due to potential order cancellation or design changes by customers.
During fiscal 2011, the Company incurred internally funded research and development expenses of $1.1 million for the internal development of technologies for use in navigation, oil and gas exploration and port security. These efforts relate to our DSS segment. During fiscal 2010 and 2009, the Company incurred no expenditures for research and development (R&D) not funded by customers. Customer funded R&D costs, which are usually part of a larger production agreement, totaled approximately $9.1 million, $10.0 million and $4.4 million for the years ended June 30, 2011, 2010 and 2009, respectively, all of which relates to our DSS segment.
Sparton earns revenues from United States based customers as well as foreign country based customers. Additionally, the Company has a manufacturing facility in Vietnam. Financial information regarding the Companys geographic sales concentration and locations of long-lived assets is presented in Note 16, Business, Geographic and Sales Concentration, of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K.
At June 30, 2011, Sparton employed 1,013 people, including 140 contractors. None of the Companys employees are represented by a labor union. The Company considers employee relations to be good.
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Executive Officers of the Registrant
Information with respect to executive officers of the Registrant is set forth below. The positions have been held for the periods noted.
Cary B. Wood |
Chief Executive Officer since November 2008 and President since April 2009. Previously Mr. Wood held the position of Chief Operating Officer for Citation Corporation in Novi, MI since August 2004. (Age 44) | |
Gregory A. Slome |
Senior Vice President and Chief Financial Officer since April 2009. Previously, Mr. Slome was an independent financial contractor since November 2007. Prior to that date, Mr. Slome was Director of Treasury and International Finance, U.S. Robotics Corporation since July 2000. (Age 48) | |
Gordon B. Madlock |
Senior Vice President, Operations since January 2009. Previously, Mr. Madlock held the position of Senior Vice President of Operations for Citation Corporation in Novi, MI since September 1999. (Age 53) | |
Michael W. Osborne |
Senior Vice President, Corporate and Business Development since January 2009. Previously, Mr. Osborne held the position of Vice President, Operations at The Niven Marketing Group in Carol Stream, IL since January 2006. Prior to that date, Mr. Osborne held the position of Vice President, Operations & Engineering at Gardner Bender in Milwaukee, WI since March 2004. (Age 40) | |
Steven M. Korwin |
Senior Vice President, Quality, Engineering and Information Systems since September 2010 and Senior Vice President, Quality and Engineering since September 2009. Previously, Mr. Korwin held the position of Group Vice President, Electronic Manufacturing Services since December 2008. Prior to that date, Mr. Korwin held the position of Vice President of Quality and Engineering for Citation Corporation in Novi, MI since October 2005. (Age 48) | |
Lawrence R. Brand |
Vice President, Human Resources since May 2011. Previously, Mr. Brand held the position of Director, Corporate Human Resources since February 2010. Prior to that date, Mr. Brand held the position of Senior Manager, Human Resources for Fellowes, Inc. in Itasca, IL since November 2004. (Age 44) | |
Jake Rost |
Vice President/General Manager, Medical Business Unit since March 2011. Prior to that date, Mr. Rost held the position of Vice President, Business Development for Byers Peak since January 2007. (Age 42) | |
Duane K. Stierhoff |
Vice President/General Manager, Medical Device Operations since June 2006. Prior to that date, Mr. Stierhoff held the position of Vice President Operations at Astro Instrumentation, LLC in Strongsville, OH. (Age 56) | |
James M. Lackemacher |
Vice President/General Manager, Defense and Security Systems Business Unit since April 2005. Previously Mr. Lackemacher held the position of Director of Government Engineering since September 2003. (Age 49) | |
Robert L. Grimm II |
Vice President/General Manager, Complex Systems Business Unit since July 2010. Previously Mr. Grimm held the position of General Manager, Electronic Manufacturing Services since January 2009. Prior to that date, Mr. Grimm held the position of General Manager for Citation Corporation in Novi, Michigan. (Age 45) |
There are no family relationships among the persons named above. All officers are elected annually and serve at the discretion of the Board of Directors.
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ITEM 1A. | RISK FACTORS |
We operate in a changing economic, political and technological environment that presents numerous risks, many of which are driven by factors that we cannot control or predict. The following discussion, as well as our Critical Accounting Policies and Estimates and Managements Discussion and Analysis in Item 7, highlight some of these risks. The terms Sparton, the Company, we, us, and our refer to Sparton Corporation and subsidiaries.
The industry is extremely competitive and we depend on continued outsourcing by OEMs.
The Complex Systems and Medical industries in general are highly fragmented and intensely competitive. Our contract manufacturing services are available from many sources, and we compete with numerous domestic and foreign firms. Within Spartons target market, the high-mix, low- to medium-volume sector of the Complex Systems and Medical industries, there are substantially fewer competitors, but competition remains strong. Some competitors have substantially greater manufacturing, R&D, marketing or financial resources and, in some cases, have more geographically diversified international operations. Sparton expects competition to intensify further as more companies enter our target markets and our customers consolidate. In the future, increased competition from large electronic component manufacturers that are selling, or may begin to sell, electronics manufacturing services may occur. Future growth will depend on new outsourcing opportunities, and could be limited by OEMs performing such functions internally or delaying their decision to outsource.
DSS is partner to a 50/50 joint venture agreement with USSI, the only other major producer of sonobuoys to the free world. If USSI were to terminate this joint venture, DSS would be required to return to independent bidding for U.S. Navy and other foreign country sonobuoy business. If this was to happen, it is possible that the Companys future results could be negatively impacted. Starting with the 2014 U.S. Government fiscal year, the U.S. Navy will open up its sonobuoy contract bidding process potentially allowing additional competitors to vie for this business. While the Company believes that there are significant barriers to entry into the sonobuoy market, if a new competitor was able to successfully develop the necessary technical capabilities and gain entry into the market space, the Companys future results could be negatively impacted.
In some cases, Sparton may not be able to offer prices as low as some competitors for a host of reasons. For example, those competitors may have lower cost structures for their services, they may be willing to accept business at lower margins in order to utilize more of their excess capacity, or they may be willing to take on business at low or even zero gross margins to gain entry into the Companys markets. Upon the occurrence of any of these events, our net sales would likely decline. Periodically, we may be operating at a cost disadvantage compared to some competitors with greater direct buying power. As a result, competitors may have a competitive advantage and obtain business from our customers.
Principal competitive factors in our targeted markets are believed to be quality, reliability, the ability to meet delivery schedules, customer service, technological sophistication, geographic location and price. During periods of recession in the Complex Systems and Medical industries, our competitive advantages in the areas of adaptive manufacturing and responsive customer service may be of reduced importance due to increased price sensitivity. We also expect our competitors to continue to improve the performance of their current products or services, to reduce their current products or service sales prices and to introduce new products or services that may offer greater performance and improved pricing. Any of these could cause a decline in sales, loss of market acceptance of our products or services, profit margin compression, or loss of market share.
Our operating results are subject to general economic conditions and may vary significantly from period to period due to a number of factors.
We are subject to inflation, interest rate changes, availability of capital markets, consumer spending rates, the effects of governmental plans to manage economic conditions and other national and global economic occurrences beyond our control. Such factors, economic weakness, and constrained customer spending have resulted in the past, and may result in the future, in decreased revenue, gross margin, earnings or growth rates.
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We can experience significant fluctuations in our annual and quarterly results of operations. In addition to general economic conditions, other factors that contribute to these fluctuations are our effectiveness in managing the manufacturing processes and costs in order to decrease manufacturing expenses, as well as the level of capacity utilization of our manufacturing facilities and associated fixed costs. The timing of our sonobuoy sales to the U.S. Navy is dependent upon access to the test range and successful passage of product tests performed by the U.S. Navy. Additionally, we rely on our customers demands, which can and do change dramatically, sometimes with little notice. Such factors also could affect our results of operations in the future.
Start-up costs and inefficiencies related to new or transferred programs can adversely affect our operating results and may not be recoverable.
Start-up costs, the management of labor and equipment resources in connection with new programs and new customer relationships and the need to estimate the extent and timing of required resources can adversely affect our profit margins and operating results. These factors are particularly evident with the introduction of new products and programs. The effects of these start-up costs and inefficiencies can also occur when new facilities are opened or programs are transferred from one facility to another.
If new programs or customer relationships are terminated or delayed, our operating results may be harmed, particularly in the near term. We may not be able to recoup our start-up costs or quickly replace these anticipated new program revenues.
We depend on limited or single source suppliers for some critical components; the inability to obtain components as required, with favorable purchase terms, could harm our business.
A significant portion of our costs are related to electronic components purchased to produce our products. In some cases our customers dictate that we purchase particular components from a single or limited number of suppliers. Supply shortages for a particular component can delay production, and thus delay shipments to customers and the associated revenue of all products using that component. This could cause the Company to experience a reduction in sales, increased inventory levels and costs, and could adversely affect relationships with existing and prospective customers. In the past, we have secured sufficient allocations of constrained components so that revenue was not materially impacted. If we are unable to procure necessary components under favorable purchase terms, including at favorable prices and with the order lead times needed for the efficient and profitable operation of our factories, our results of operations could suffer. The Company believes that alternative suppliers are available to provide the components, including unique components, necessary to manufacture our customers products.
We are dependent on a few large customers; the loss of such customers or reduction in their demand could substantially harm our business and operating results.
For the fiscal year ended June 30, 2011, our six largest customers, including the U.S. Navy, accounted for approximately 75% of total net sales. The U.S. Navy, a DSS customer through the Companys ERAPSCO agreement, represented 30% of our total net sales in the same period. Siemens Diagnostics and Fenwal Blood Technologies, both Medical customers, contributed 18% and 12%, respectively, of total net sales in fiscal 2011. We expect to continue to depend upon a relatively small number of customers, but we cannot ensure that present or future large customers will not terminate, significantly change, reduce, or delay their manufacturing arrangements with us. Because our major customers represent such a large part of our business, the loss of any of our major customers or reduced sales to these customers could negatively impact our business.
During the fourth quarter of fiscal 2011, Siemens notified the Company that it intends to dual source two of its larger programs with the Company beginning in fiscal 2012. Annual sales related to these programs aggregated approximately $27.8 million in fiscal 2011. While the Company cannot estimate the ultimate impact that this dual sourcing will have on its future annual sales, unless overall sales related to these programs increase,
12
this dual sourcing is expected to have an adverse impact on fiscal 2012 sales from the Companys Ohio facility. Related in part to this event and in conjunction with the Companys annual goodwill impairment analysis, the Company recorded impairments of $13.2 million and $3.7 million against its goodwill and customer relationships intangible asset, respectively, related to its Ohio reporting unit. See Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations Critical Accounting Policies and Estimates Goodwill and Intangible Assets for a further description of these impairments.
Additionally, the U.S. Navy generally has the ability to terminate DSS contracts, in whole or in part, without prior notice, for convenience or for default based on performance. If any of these U.S. Navy contracts were to be terminated for convenience, Sparton would generally be protected by provisions covering reimbursement for costs incurred on the contracts and profit on those costs, but not the anticipated profit that would have been earned had the contract been completed.
We rely on the continued growth and financial stability of our customers, including our major customers. Adverse changes in the end markets they serve can reduce demand from our customers in those markets and/or make customers in these end markets more price sensitive. Furthermore, mergers or restructurings among our customers or our customers customers could increase concentration or reduce total demand as the combined entities rationalize their business and consolidate their suppliers. Future developments, particularly in those end markets which account for more significant portions of our revenues, could harm our business and our results of operations.
Sparton also generates large accounts receivable in connection with electronic contract manufacturing. If one or more of our customers experiences financial difficulty and is unable to pay for the services provided, our operating results and financial condition could be adversely affected. If our customers seek bankruptcy protection, they could act to terminate all or a portion of their business with us, originate new business with our competitors and terminate or assign our long-term supply agreements. Any loss of revenue from our major customers, including the non-payment or late payment of our invoices, could materially adversely affect our business, results of operations and financial condition.
Congressional budgetary constraints or reallocations can reduce our government sales.
Our U.S. Government contracts have many inherent risks that could adversely impact our financial results. Future governmental sales could be affected by a change in defense spending by the U.S. Government, or by changes in spending allocation that could result in one or more of our programs being reduced, delayed or terminated, which could adversely affect our financial results. The Companys U.S. governmental sales are funded by the federal budget. Changes in negotiations for program funding levels or unforeseen world events can interrupt the funding for a program or contract. The timing of sonobuoy sales to the U.S. Navy is dependent upon access to their test facilities and successful passage of their product tests. Reduced governmental budgets have made access to the test range less predictable and less frequent than in the past, which has impacted the consistency or predictability of our reported revenues.
Customer cancellations, reductions, or delays could adversely affect our operating results.
We generally do not obtain long-term purchase commitments from our customers. Customers may cancel orders, delay the delivery of orders or release orders for fewer products than we previously anticipated for a variety of reasons, including decreases in demand for their products and services. Such changes by a significant customer, by a group of customers, or by a single customer whose production is material to an individual facility could seriously harm results of operations in that period. In addition, since much of our costs and operating expenses are relatively fixed, a reduction in customer demand would adversely affect our margins and operating income. Although we are always seeking new opportunities, we cannot be assured that we will be able to replace deferred, reduced or cancelled orders.
13
Our inability to forecast the level of customer orders with much certainty makes it difficult to schedule production and maximize utilization of manufacturing capacity. Additionally, we are often required to place materials orders from vendors, some of which are non-cancelable, based on an expected level of customer volume. At June 30, 2011, non-cancelable purchase orders with vendors totaled approximately $29.6 million. If actual demand is higher than anticipated, we may be required to increase staffing and other expenses in order to meet such demand of our customers. Alternatively, anticipated orders from our customers may be delayed or fail to materialize, thereby adversely affecting our results of operations. Such customer order fluctuations and deferrals have had a material adverse effect on us in the past, and we may experience similar effects in the future.
Such order changes could cause a delay in the repayment to us for inventory expenditures we incurred in preparation for the customers orders or, in certain circumstances, require us to return the inventory to our suppliers, resell the inventory to another customer or continue to hold the inventory. In some cases, excess material resulting from longer order lead time is a risk due to the potential of order cancellation or design changes by customers. Additionally, dramatic changes in circumstances for a customer could also negatively impact the carrying value of our inventory for that customer.
The Company and its customers may be unable to keep current with technological changes.
Our customers participate in markets that have rapidly changing technology, evolving industry standards, frequent new product introductions, and relatively short product life cycles. The introduction of products embodying new technologies or the emergence of new industry standards can render existing products obsolete or unmarketable. Our success depends upon our customers ability to enhance existing products and to develop and introduce new products, on a timely and cost-effective basis, that keep pace with technological developments and emerging industry standards, and address increasingly sophisticated customer requirements. There is no assurance that our customers will do so, and any failure to do so could substantially harm our customers and us.
Additionally, our future success will depend upon our ability to maintain and enhance our own technological capabilities, develop and market manufacturing services which meet changing customer needs, and successfully anticipate or respond to technological changes in manufacturing processes on a cost-effective and timely basis. If we are unable to do so, business, financial condition and operating results could be materially adversely affected.
Our growth strategies could be ineffective due to the risks of further acquisitions.
Our growth strategy has included acquiring complementary businesses. We could fail to identify, finance or complete suitable acquisitions on acceptable terms and prices. Acquisition efforts could increase a number of risks, including diversion of managements attention, difficulties in integrating systems and operations, potential loss of key employees and customers of the acquired companies and exposure to unanticipated liabilities. Our discovery of, or failure to discover, material issues during due diligence investigations of acquisition targets, either before closing with regard to potential risks of the acquired operations, or after closing with regard to the timely discovery of breaches of representations or warranties, could materially harm our business.
Our current use of advance billings within Government contracts may not continue.
Our current contracts with the U.S. Navy include provisions for certain billing and collection of funds from the Government in advance of related inventory purchases and incurrence of manufacturing expenses. These contractual provisions are an integral part of our capital and liquidity profile. While we have other sources of liquidity including, but not limited to, our operations, existing cash balances and our revolving line-of-credit, and we believe we have sufficient liquidity for our anticipated needs over the next 12 months, no assurances regarding liquidity can be made. The discontinuance of advance billing provisions from future U.S. Navy contracts would require us to fund the working capital requirements related to these contracts from other sources and otherwise could materially adversely impact our business, results of operations and financial condition.
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Fluctuations in foreign currency exchange rates could increase operating costs.
A portion of the Companys operations and some customers are in foreign locations. As a result, transactions may occur in currencies other than the U.S. dollar. Currency exchange rates fluctuate on a daily basis as a result of a number of factors and cannot be easily predicted. Volatility in the U.S. dollar could seriously harm our business, operating results and financial condition. The primary impact of currency exchange fluctuations is on the adjustments related to the translation of the Companys Vietnamese financial statements into U.S. dollars, which are included in current earnings, as well as impacting the cash, receivables, payables, property and equipment of our operating entities. The Company currently does not use financial instruments to hedge foreign currency fluctuation and unexpected expenses could occur from future fluctuations in exchange rates.
Failure to attract and retain key personnel and skilled associates could hurt operations.
Our success depends to a large extent upon the continued services of key management personnel. While we have employment contracts in place with several of our executive officers, we nevertheless cannot be assured that we will retain our key employees, and the loss of service of any of these officers or key management personnel could have a material adverse effect on our business growth and operating results.
Our future success will require an ability to attract and retain qualified employees. Competition for such key personnel is intense, and we cannot be assured that we will be successful in attracting and retaining such personnel. Changes in the cost of providing pension and other employee benefits, including changes in health care costs, investment returns on plan assets, and discount rates used to calculate pension and related liabilities, could lead to increased costs in any of our operations.
We are involved in legal proceedings and unfavorable decisions could materially affect us.
Our business activities expose us to risks of litigation with respect to our customers, suppliers, creditors, shareholders, product liability, or environmental-related matters. We may incur significant expense to defend or otherwise address current or future claims. Any litigation, even a claim without merit, could result in substantial costs and diversion of resources, and could have a material adverse effect on our business and results of operations.
Adverse regulatory developments could harm our business.
Our business operates in heavily regulated environments. We must manage the risk of changes in or adverse actions under applicable law or in our regulatory authorizations, licenses and permits, governmental security clearances, government procurement regulations or other legal rights in order to operate our business, manage our work force, or import and export goods and services as needed. We also face the risk of other adverse regulatory actions, compliance costs, or governmental sanctions.
The efficiency of our operations could be adversely affected by disruptions to our Information Technology (IT) Services, including implementation of our new enterprise resource planning (ERP) system.
We rely in part on various IT systems to manage our operations and to provide analytical information to management. These systems are vulnerable to, among other things, damage and interruption from power loss or natural disasters, computer system and network failures, loss of telecommunication services, physical and electronic loss of data, security breaches and computer viruses. Any inefficiencies or production down-times resulting from such disruptions could have a negative impact on our ability to meet customers orders, resulting in a delay or decrease to our revenue and a reduction to our operating margins. Further, we are in the process of implementing a new ERP system. While we believe we are effectively managing the implementation, there are risks involved in the rollout of an enterprise wide project. Any disruption to our financial or other systems as a result of the ERP rollout could have a material adverse impact on our business.
15
Business disruptions could seriously harm our business and results of operations.
Increased international political instability, evidenced by threats and occurrence of terrorist attacks, conflicts in the Middle East and Asia, and strained international relations arising from these conflicts, may hinder our ability to do business. The political environment in communist countries can contribute to the threat of instability. While we have not been adversely affected as yet due to this exposure, one of our facilities is based in Vietnam, which is a communist country. These events may continue to have an adverse impact on the U.S. and world economies, particularly customer confidence and spending, which in turn could affect our revenue and results of operations. The impact of these events on the volatility of the U.S. and world financial markets could increase the volatility of our securities and may limit the capital resources available to us, our customers and our suppliers.
Our operations could be subject to natural disasters and other business disruptions, including earthquakes, power shortages, telecommunications failures, water shortages, tsunamis, floods, hurricanes, fires, and other natural or manmade disasters, which could seriously harm our financial condition and increase our expenses. In the past, hurricanes have adversely impacted the performance of two of our production facilities located in Florida.
We have a production facility outside Ho Chi Minh City, Vietnam, which is in an area previously affected by avian flu. To the best of our knowledge, concerns about the spread of various types of flu have not affected our employees or operations. However, our production could be severely impacted by an epidemic spread of these or other forms of flu. These factors could also affect our suppliers and customers, and results of operations.
Changes in the securities laws and regulations have increased, and are likely to continue to increase our costs.
The Sarbanes-Oxley Act and more recently the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act) required or will require changes in some of our corporate governance, securities disclosure and compliance practices. In response to the requirements of the Sarbanes-Oxley Act, the SEC and the New York Stock Exchange (NYSE) promulgated new rules on a variety of subjects. Similar rules are expected to be promulgated in relation to the Dodd-Frank Act. Compliance with these new rules has increased and may increase further our legal, financial and accounting costs. We expect some level of increased costs related to these new regulations to continue indefinitely. While preparation and consulting costs are anticipated to decline, continuous review and audit costs related to these regulations may increase. However, absent significant changes in related rules (which we cannot assure), we anticipate these costs may decline somewhat in future years as we become more efficient in our compliance processes. We also expect these developments to make it more difficult and more expensive to obtain director and officer liability insurance, and we may be forced to accept reduced coverage or incur substantially higher costs to obtain coverage. Likewise, these developments may make it more difficult for us to attract and retain qualified members of our Board of Directors or qualified management personnel.
If we are unable to maintain effective internal control over our financial reporting, investors could lose confidence in the reliability of our financial statements, which could result in a reduction in the value of our common stock.
As required by Section 404 of the Sarbanes-Oxley Act, the SEC adopted rules requiring public companies to include a report of management on the companys internal control over financial reporting in their annual reports on Form 10-K. The report must contain an assessment by management of the effectiveness of our internal control over financial reporting. In addition, the independent registered public accounting firm auditing a companys financial statements must attest to and report on the effectiveness of the companys internal control over financial reporting, if the Companys public equity float remains above certain thresholds.
16
We are continuing our comprehensive efforts to comply with Section 404 of the Sarbanes-Oxley Act. If we are unable to maintain effective internal control over financial reporting, this could lead to a failure to meet our reporting obligations to the SEC which, in turn, could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our financial statements.
We are subject to a variety of environmental laws, which expose us to potential liability.
Our operations are regulated under a number of federal, state, provincial, local and foreign environmental laws and regulations, which govern, among other things, the discharge of hazardous materials into the air and water, as well as the handling, storage and disposal of such materials. These laws and regulations include the Clean Air Act, the Clean Water Act, the Resource, Conservation and Recovery Act and the Comprehensive Environmental Response, Compensation and Liability Act, as well as analogous state and foreign laws. Compliance with these environmental laws is a significant consideration for us because we use various hazardous materials in our manufacturing processes. We may be liable under environmental laws for the cost of cleaning up properties we own or operate if they are or become contaminated by the release of hazardous materials, regardless of whether we caused the release, even if we fully comply with applicable environmental laws. In the event of contamination or violation of environmental laws, we could be held liable for damages including fines, penalties and the costs of remedial actions and could also be subject to revocation of our discharge permits. Any such penalties or revocations could require us to cease or limit production at one or more of our facilities, thereby harming our business. In addition, such regulations could restrict our ability to expand our facilities or could require us to acquire costly equipment, or to incur other significant expenses to comply with environmental regulations, including expenses associated with the recall of any non-compliant product.
Sparton has been involved with ongoing environmental remediation since the early 1980s related to one of its former manufacturing facilities, located in Albuquerque, New Mexico. At June 30, 2011, Sparton had accrued approximately $4.2 million as its estimate of the remaining minimum future undiscounted financial liability with respect to this matter. 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. Factors which cause uncertainties for the Company include, but are not limited to, the effectiveness of the current work plans in achieving targeted results and proposals of regulatory agencies for desired methods and outcomes. It is possible that cash flows and results of operations could be materially affected by the impact of changes associated with the ultimate resolution of this contingency. At June 30, 2011, the Company estimates that it is reasonably possible, but not probable, that future environmental remediation costs associated with the Companys past operations at the Coors Road property, in excess of amounts already recorded and net of DOE reimbursement, could be up to $1.9 million before income taxes over the next approximately twenty years. See Item 3 Legal Proceedings of this Annual Report on Form 10-K.
Operations outside of the United States may be affected by legal and regulatory risks, and government reviews, inquiries or investigations could harm the Companys business.
The Companys operations in Vietnam and the business it conducts outside the United States are subject to risks relating to compliance with legal and regulatory requirements in the United States as well as in local jurisdictions. Additionally, there is a risk of potentially higher incidence of fraud or corruption in certain foreign jurisdictions and greater difficulty in maintaining effective internal controls. From time to time, the Company may conduct internal investigations and compliance reviews to ensure that the Company is in compliance with applicable laws and regulations. Additionally, the Company could be subject to inquiries or investigations by government and other regulatory bodies. Any determination that the Companys operations or activities are not in compliance with United States laws, including the Foreign Corrupt Practices Act, or various international laws and regulations could expose the Company to significant fines, penalties or other sanctions that may harm the business and reputation of the Company.
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Certain shareholders have significant control and shares eligible for public sale could adversely affect the share price.
As of June 30, 2011, the directors, executive officers and 5% shareholders beneficially owned or controlled an aggregate of approximately 38% of our common stock. Accordingly, certain persons have significant influence over the election of our Board of Directors, the approval or disapproval of any other matters requiring shareholder approval, and the affairs and policies of Sparton. Such voting power could also have the effect of deterring or preventing a change in control of the Company that might otherwise be beneficial to other shareholders. Conversely, such voting power could have the effect of deterring or preventing a change in control of the Company that might otherwise be detrimental to other shareholders. In addition, substantially all of the outstanding shares of common stock are freely tradable without restriction or further registration. Sales of substantial amounts of common stock by shareholders, or even the potential for such sales, may cause the market price to decline and could impair the ability to raise capital through the sale of equity securities.
In the future, we may need additional funding, which could be raised through issuances of equity securities. We also have the right to issue shares upon such terms and conditions and at such prices as our Board of Directors may establish. Such offerings would dilute the ownership interest of existing shareholders and could cause a dilution of the net tangible book value of such shares.
At June 30, 2011, there were options outstanding for the purchase of 220,341 shares of common stock of the Company, all of which options were vested and exercisable. Holders of our common stock could suffer dilution if outstanding common stock options are exercised in excess of the number of shares repurchased by Sparton.
Market volatility may have an adverse impact on our pension costs associated with our defined benefit plan.
The recent volatility and uncertainty in the global financial market has resulted in the Company making significant cash contributions to our pension plan in recent years. For a further discussion of the Sparton Corporation Pension Plan, see Pension Obligations in the Critical Accounting Policies and Estimates section in Part II, Item 7 of this report and Note 9, Employee Retirement Benefits Plans, of the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K. Notwithstanding the actions recently taken to reduce the costs of the plan, if the global financial market continues to be unstable or declines further, we may be required to make further contributions to the pension plan in future periods. These contributions, if made, would negatively impact our liquidity, cash flows, and financial position.
The tightened credit market, both nationally and globally, may adversely affect the availability of funds to us for working capital, liquidity requirements, and other purposes, which may adversely affect our cash flows and financial condition.
We anticipate that our revolving line-of-credit facility will be a component of our available working capital during fiscal 2012. For a summary of our banking arrangements, see Note 7, Debt, of the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K. If the turmoil in the credit market continues or intensifies, we may have difficulty maintaining a line-of-credit on similar or more favorable terms, which could adversely affect our liquidity, cash flows, and results of operations. There are no assurances we will always have access to a line-of-credit or that the line-of-credit would always be sufficient for all purposes. Additionally, if vendors of electronic components restricted or reduced credit extended to us for purchase of raw materials as a result of general market conditions, the vendors credit status, or our financial position, it could adversely affect liquidity, cash flows, and results of operations.
Our stock price may be volatile, and the stock is thinly traded, which may cause investors to lose most or part of their investment in our common stock.
The stock market may experience volatility that is often unrelated to the operating performance of any particular company or companies. If market-sector or industry-based fluctuations occur, our stock price could decline regardless of our actual operating performance, and investors could lose a substantial part of their investments.
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Moreover, if an active public market for our common stock is not sustained in the future, it may be difficult to resell such stock. Generally, our stock is thinly traded. When trading volumes are low, a relatively small buy or sell order can result in a relatively large change in the trading price of our common stock and investors may not be able to sell their securities at a favorable price. In addition, should the vested and exercisable stock options be exercised and the resulting common shares simultaneously sold (to fund the cost of the exercise and the related taxes associated with the stock sale), our stock price could be significantly adversely impacted.
ITEM 1B. | UNRESOLVED STAFF COMMENTS |
None.
ITEM 2. | PROPERTIES |
The following is a listing of Spartons principal properties as of June 30, 2011. Except as described below, Sparton owns all of these properties. These facilities provide a total of approximately 513,000 square feet of manufacturing and administrative space. There are manufacturing and office facilities at each location. Reflective of the current economic environment, Spartons manufacturing facilities are underutilized. Underutilized percentages vary by plant; however, ample space exists to accommodate expected growth. Sparton believes these facilities are suitable for its operations.
Segment/Location |
Square Feet | Ownership | ||||||
Medical Segment: |
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Strongsville, Ohio |
60,000 | Owned | ||||||
Frederick, Colorado |
65,000 | Leased | ||||||
Complex Systems Segment: |
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Brooksville, Florida |
136,000 | Owned | ||||||
Thuan An District, Binh Duong Province, Vietnam (Outside of Ho Chi Minh City) |
55,000 | Owned | ||||||
DSS Segment: |
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De Leon Springs, Florida |
197,000 | Owned | ||||||
Corporate Office: |
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Schaumburg, Illinois |
8,000 | Leased |
The Companys Frederick, Colorado facility has approximately 6 years remaining on its initial lease term. The lease provides the Company the option to extend the term up to an additional five years.
While the Company owns the building and other assets in Vietnam, the land is occupied under a long-term lease covering approximately 40 years. This lease is prepaid, with the cost amortized over the term of the lease, and carried in other long-term assets on our balance sheet.
The Company is additionally leasing approximately 30,000 square feet of manufacturing and administrative space in connection with its acquisition of Byers Peak, Incorporated (Byers Peak) in March 2011. This lease has an initial term of six months with options to extend the lease up to an additional eighteen months and is needed to facilitate the transition of the Byers Peak business to the Frederick, Colorado facility. The Company expects to have this transition completed by the end of the Companys fiscal 2012 second quarter and be able to terminate the lease at that time.
As of June 30, 2011, substantially all of our assets, including real estate, are pledged as collateral to secure any potential borrowings under our revolving line of credit (see Note 7, Debt, of the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K).
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ITEM 3. | LEGAL PROCEEDINGS |
Environmental Remediation
Sparton has been involved with ongoing environmental remediation since the early 1980s related to one of its former manufacturing facilities, located in Albuquerque, New Mexico (Coors Road). Although the Company entered into a long-term lease of the Coors Road property that was accounted for as a sale of property during fiscal 2010 (see Note 2, Summary of Significant Accounting Policies, Net, of the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K), it remains responsible for the remediation obligations related to its past operation of this facility. At June 30, 2011, Sparton had accrued approximately $4.2 million as its estimate of the remaining minimum future undiscounted financial liability with respect to this matter, of which approximately $0.4 million is classified as a current liability and included on the balance sheet in other accrued expenses. The Companys minimum cost estimate is based upon existing technology and excludes certain legal costs, which are expensed as incurred. The Companys estimate includes equipment and operating and maintenance costs for onsite and offsite pump and treat containment systems, as well as continued onsite and offsite monitoring. It also includes periodic reporting requirements.
On October 15, 2009, approximately $3.1 million of cash was utilized to establish a trust, the Sparton Corporation Financial Assurance Trust, for remediation activity. The funds were held in Spartons name and were invested with Sparton receiving the benefit of the investment return. As of June 30, 2010, approximately $3.2 million was held in this trust and reflected as restricted cash on the consolidated balance sheet. These funds were available for use against the expected remediation liability. The trust was established to meet the United States Environmental Protection Agencys (EPA) financial assurance requirements for the fiscal year ended June 30, 2010, with trust funds to be drawn upon only should Sparton not continue to meet its financial remediation requirements. The trust was to remain in place until the Company could again satisfy the EPA financial assurance requirements through compliance with financial ratios, as was previously attained on an annual basis until fiscal year 2009. Based on the Companys financial results for fiscal year 2010, the Company was again in compliance with the financial ratios and dissolved the trust during October 2010.
In fiscal 2003, Sparton reached an agreement with the United States Department of Energy (DOE) and others to recover certain remediation costs. Under the settlement terms, Sparton received cash and obtained some degree of risk protection as the DOE agreed to reimburse Sparton for 37.5% of certain future environmental expenses in excess of $8.4 million incurred from the date of settlement, if any, of which approximately $3.6 million has been expended as of June 30, 2011 toward the $8.4 million threshold. 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. Factors which cause uncertainties for the Company include, but are not limited to, the effectiveness of the current work plans in achieving targeted results and proposals of regulatory agencies for desired methods and outcomes. It is possible that cash flows and results of operations could be materially affected by the impact of changes associated with the ultimate resolution of this contingency. At June 30, 2011, the Company estimates that it is reasonably possible, but not probable, that future environmental remediation costs associated with the Companys past operations at the Coors Road property, in excess of amounts already recorded and net of DOE reimbursement, could be up to $1.9 million before income taxes over the next approximately twenty years.
The Company and its subsidiaries are also involved in certain existing compliance issues with the 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 clean-up costs at any specific site. The Companys past experience, however, has indicated that when it has contributed relatively small amounts of materials or waste to a specific site relative to other PRPs, its ultimate share of any clean-up 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 as a PRP.
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Customer Relationships
The Company had an action before the U.S. Court of Federal Claims to recover damages arising out of an alleged infringement by the U.S. Navy of certain patents held by Sparton and used in the production of sonobuoys. Pursuant to an agreement between the Company and counsel conducting the litigation, a significant portion of the claim will be retained by the Companys counsel in contingent fees if the litigation is successfully concluded. A trial of the matter was conducted by the court in April 2008, with a decision against Sparton filed in August 2009 and published in September 2009. In October 2009, an appeal of this unfavorable decision was filed with the Federal Circuit Court of Appeals. Based on this decision, management believes that the Companys ability to obtain any recovery with respect to the claim is remote.
Litigation
On August 9, 2009, Sparton and certain subsidiaries were named as defendants in a wrongful death suit, alleging that a defective transmission shifter assembly in a 1996 Chrysler automobile caused a July 2007 death. The suit also named Chrysler LLC, Dura Automotive Systems, Inc., and Chandler Motors Company as defendants. The suit was filed in Pontotoc County Circuit Court in Mississippi. Sparton has not manufactured automotive shifter assemblies for Chrysler since December 1996, when it sold its KPI Group subsidiary to Dura Automotive Systems, Inc. The plaintiff sought damages for economic loss, pain and suffering, and loss of companionship, as well as punitive damages. After Sparton filed a motion for summary judgment, and after plaintiff took the deposition of a Chrysler representative who testified that Sparton had nothing to do with the design of any shifters KPI may have manufactured, plaintiff consented to the entry of judgment for Sparton on all claims. An order dismissing all claims against Sparton with prejudice was submitted to the Court and was entered on August 10, 2011, thereby closing this litigation against Sparton.
Other
In addition to the foregoing, from time to time, the Company is involved in various legal proceedings relating to claims arising in the ordinary course of business. The Company is not currently a party to any other such legal proceedings, the adverse outcome to which, individually or in the aggregate, is expected to have a material adverse effect on our business, financial condition or results of operations.
ITEM 4. | [REMOVED AND RESERVED] |
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ITEM 5. | MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES |
Market Information. Our common stock is traded on the New York Stock Exchange (NYSE) under the symbol SPA.
The table below sets forth the high and low closing prices of our common stock as reported by the NYSE for each quarter during the last two years:
Quarter | ||||||||||||||||
1st | 2nd | 3rd | 4th | |||||||||||||
Year Ended June 30, 2011 |
||||||||||||||||
High |
$ | 6.09 | $ | 8.37 | $ | 9.00 | $ | 10.22 | ||||||||
Low |
$ | 4.78 | $ | 6.08 | $ | 7.63 | $ | 7.68 | ||||||||
Year Ended June 30, 2010 |
||||||||||||||||
High |
$ | 4.40 | $ | 6.47 | $ | 6.74 | $ | 6.00 | ||||||||
Low |
$ | 2.60 | $ | 4.00 | $ | 5.60 | $ | 4.95 |
Holders. As of August 31, 2011, there were 448 record holders of our common stock. The number of record holders does not include beneficial owners whose shares are held in the names of banks, brokers, nominees or other fiduciaries.
Dividends. We have not paid dividends on our common stock during either fiscal 2011 or fiscal 2010. Other than in fiscal 2006, the Company has not declared or paid cash dividends on our common stock for many years. In addition, our credit facility prohibits us from declaring or paying any dividends on our capital stock without obtaining prior approval from our credit facility provider.
Securities Authorized for Issuance Under Equity Compensation Plans. See our disclosure below in Part III, Item 12. Security Ownership of Certain Beneficial Owners and Management Related Stockholder Matters.
Unregistered Sales of Equity Securities and Use of Proceeds. None.
Performance Graph. The performance graph below compares the cumulative total shareholder return on our common stock for the past five years against the cumulative total return of a broad market index (Russell 2000 Index) and a peer group index, which is composed of Aerovironment, Inc., Analogic Corporation, API Technologies Corp., Astronics Corporation, Benchmark Electronics, Inc., CTS Corporation, Ducommun Incorporated, HEI, Inc., IEC Electronics Corp., ION Geophysical Corporation, Plexus Corp., Raven Industries, Inc., SigmaTron International, Inc., SMTC Corporation, Sypris Solutions, Inc. and Ultra Electronics Holdings. Previously, the Company used the S&P 500 Composite Index as its broad market index comparative and the Electronics Component of the NASDAQ as its more specific industry index comparative. The Company changed its comparative broad market index because it believes that the Russell 2000 Index is a more meaningful proxy for the overall marketplace than the S&P 500 Composite Index. The comparative peer group was selected based on a review of publicly available information about these companies and the Companys determination that they are engaged in electronics manufacturing businesses similar to that of the Company or its reportable operating segments. The Company also believes that this peer group is a more meaningful comparative than the industry index used in the previous year.
The graph assumes that $100.00 was invested in our common stock and in each index on June 30, 2006. The total return for the common stock and the indices used assumes the reinvestment of dividends, if any. The comparisons in the graph below are based upon historical data and are not indicative of, nor intended to forecast, future performance of our common stock.
22
Comparison of Cumulative Total Return
Among Sparton Corporation,
Russell 2000 Index, Peer Group Index,
S&P 500 Index and NASDAQ Electronics Component Index
06/30/06 | 06/30/07 | 06/30/08 | 6/30/09 | 06/30/10 | 6/30/11 | |||||||||||||||||||
Sparton Corporation |
100.00 | 88.94 | 51.88 | 35.82 | 62.14 | 126.25 | ||||||||||||||||||
Russell 2000 Index |
100.00 | 116.43 | 98.78 | 73.17 | 88.89 | 122.15 | ||||||||||||||||||
Peer Group |
100.00 | 106.78 | 101.55 | 69.97 | 86.36 | 118.67 | ||||||||||||||||||
S&P 500 Index |
100.00 | 120.59 | 104.77 | 77.30 | 88.46 | 115.61 | ||||||||||||||||||
NASDAQ Electronics Component Index |
100.00 | 116.80 | 106.44 | 77.55 | 93.33 | 116.37 |
23
ITEM 6. | SELECTED FINANCIAL DATA |
The following table sets forth a summary of selected financial data for the last five fiscal years. This selected financial data should be read in conjunction with Managements Discussion and Analysis of Financial Condition and Results of Operations and our Audited Consolidated Financial Statements and, in each case, any related notes thereto included elsewhere in this report. ($ in thousands, except share data)
2011 (a) | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||
Operating Results: |
||||||||||||||||||||
Net sales |
$ | 203,352 | $ | 173,977 | $ | 221,871 | $ | 229,806 | $ | 200,086 | ||||||||||
Cost of goods sold |
170,184 | 147,394 | 205,985 | 218,216 | 194,145 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Gross profit |
33,168 | 26,583 | 15,886 | 11,590 | 5,941 | |||||||||||||||
Selling and administrative expenses |
20,842 | 18,205 | 18,851 | 19,106 | 17,948 | |||||||||||||||
Internal research and development expenses |
1,110 | | | | | |||||||||||||||
Restructuring/impairment charges |
75 | 4,076 | 7,008 | 181 | | |||||||||||||||
Gain on acquisition |
(2,550 | ) | | | | | ||||||||||||||
Gain on sale of property, plant and equipment |
(139 | ) | (3,119 | ) | (10 | ) | (977 | ) | (89 | ) | ||||||||||
Impairment of intangible asset |
3,663 | | | | | |||||||||||||||
Impairment of goodwill |
13,153 | | | | | |||||||||||||||
Other operating expenses |
843 | 1,699 | 1,294 | 483 | 278 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Operating income (loss) |
(3,829 | ) | 5,722 | (11,257 | ) | (7,203 | ) | (12,196 | ) | |||||||||||
Other expense, net |
(114 | ) | (198 | ) | (2,709 | ) | (734 | ) | (180 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Income (loss) before income taxes |
(3,943 | ) | 5,524 | (13,966 | ) | (7,937 | ) | (12,376 | ) | |||||||||||
Provision for (benefit from) income taxes |
(11,404 | ) | (1,916 | ) | 1,787 | 5,201 | (4,607 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net income (loss) |
$ | 7,461 | $ | 7,440 | $ | (15,753 | ) | $ | (13,138 | ) | $ | (7,769 | ) | |||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Weighted-Average Common Shares Outstanding: |
||||||||||||||||||||
Common stock basic |
10,217,494 | 9,972,409 | 9,811,635 | 9,811,507 | 9,817,972 | |||||||||||||||
Common stock diluted |
10,255,368 | 9,972,409 | 9,811,635 | 9,811,507 | 9,817,972 | |||||||||||||||
Per Share of Common Stock Income (Loss): |
||||||||||||||||||||
Common stock basic |
$ | 0.73 | $ | 0.75 | $ | (1.61 | ) | $ | (1.34 | ) | $ | (0.79 | ) | |||||||
Common stock diluted |
$ | 0.73 | $ | 0.75 | $ | (1.61 | ) | $ | (1.34 | ) | $ | (0.79 | ) | |||||||
Shareholders equity Per Share |
$ | 7.33 | $ | 6.30 | $ | 5.52 | $ | 7.22 | $ | 8.81 | ||||||||||
Cash Dividends Per Share |
$ | | $ | | $ | | $ | | $ | | ||||||||||
Other Financial Data: |
||||||||||||||||||||
Total assets |
$ | 122,609 | $ | 119,861 | $ | 155,002 | $ | 142,726 | $ | 137,008 | ||||||||||
Working capital |
$ | 51,323 | $ | 37,730 | $ | 32,898 | $ | 41,581 | $ | 52,989 | ||||||||||
Working capital ratio |
2.22:1 | 1.82:1 | 1.38:1 | 1.74:1 | 2.62:1 | |||||||||||||||
Debt |
$ | 1,796 | $ | 1,917 | $ | 22,959 | $ | 25,588 | $ | 17,011 | ||||||||||
Shareholders equity |
$ | 75,047 | $ | 64,269 | $ | 54,895 | $ | 70,860 | $ | 86,480 |
(a) | The operating results of the Medical businesses acquired from Delphi Medical Systems, LLC and Byers Peak, Incorporated have been included in the Companys consolidated financial results since the date of acquisitions on August 6, 2010 and March 4, 2011, respectively. |
24
ITEM 7. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
The following is an analysis of the Companys results of operations, liquidity and capital resources and should be read in conjunction with the Consolidated Financial Statements and notes related thereto included in this Annual Report on Form 10-K. To the extent that the following Managements Discussion and Analysis contains statements which are not of a historical nature, such statements are forward-looking statements which involve risks and uncertainties. These risks include, but are not limited to the risks and uncertainties discussed in Item 1A Risk Factors in this Annual Report on Form 10-K. The following discussion and analysis should be read in conjunction with the Forward Looking Statements and Item 1A Risk Factors each included in this Annual Report on Form 10-K.
Business Overview
General
Sparton is a provider of complex and sophisticated electromechanical devices with capabilities that include concept development, industrial design, design and manufacturing engineering, production, distribution, and field service. In fiscal 2009, management initiated a full evaluation of our operations, including operating structure. This evaluation resulted in changes in fiscal 2010 to our analysis of how the components of Spartons business contribute to consolidated operating results and the overall level of desegregation of reported financial data, including the nature and number of operating segments, disclosure of segment information and the consistency of such information with internal management reports. The Company operates through three reportable business segments; Medical Device (Medical), Complex Systems (CS), formerly called Electronic Manufacturing Services (EMS), and Defense & Security Systems (DSS), which serves Defense, Security Systems, Navigation and Exploration markets. The electromechanical device end markets that Sparton, as a whole, serves are in Medical, Military & Aerospace and Industrial & Instrumentation. Effective for fiscal 2010, we report our operating results under these three reportable business segments. Prior to fiscal 2010, all of our operating units were aggregated into one line of business, EMS. The prior period presented herein reflects this change to segment reporting.
All of the Companys facilities are registered to ISO standards, including 9001 or 13485, with most having additional certifications. The Companys products and services include products for Original Equipment Manufacturers (OEM) and Emerging Technology (ET) customers that are microprocessor-based systems that include transducers, printed circuit boards and assemblies, sensors, and electromechanical components, as well as development and design engineering services relating to these product sales. Sparton also develops and manufactures sonobuoys, anti-submarine warfare (ASW) devices used by the United States Navy and other free-world countries. Many of the physical and technical attributes in the production of sonobuoys are similar to those required in the production of the Companys other electrical and electromechanical products and assemblies.
The Company uses an internal management reporting system, which provides important financial data to evaluate performance and allocate the Companys resources on a market segment basis. Net sales for segments are attributed to the segment in which the product is manufactured or service is performed. A segments performance is evaluated based upon its operating income (loss). A segments operating income (loss) includes its gross profit on sales less its selling and administrative expenses, but excludes some corporate and other unallocated items such as, interest expense, interest income, other income (expense) and income tax expense (benefit). Corporate and other unallocated costs primarily represent corporate administrative expenses related to those administrative, financial and human resource activities which are not allocated to operations and excluded from segment profit. These costs are not allocated to the segments, as management excludes such costs when assessing the performance of the segments. Inter-segment transactions are generally accounted for at amounts that approximate arms length transactions. The accounting policies for each of the segments are the same as for the Company taken as a whole.
25
Medical Segment
Medical operations are comprised of contract development, design, production and distribution of complex and sophisticated medical related electromechanical devices for customers with specialized needs, specifically in the design and manufacturing process, to assure product reliability and safety in accordance with Food and Drug Administration (FDA) guidelines and approvals. This group specializes in systems and procedures targeted to the requirements of medical OEM and ET customers primarily in the In Vitro Diagnostic and Therapeutic Device segments of the Medical Device market space.
Complex Systems Segment
Complex Systems operations provides multiple industries with complex electronics systems offering end-to-end development and manufacturing solutions focused on high expectations of quality and delivery performance through a global footprint. As a vertically integrated business unit, this segment assists in providing its customers with seamless development of circuit card assemblies for integration into electro-mechanical solutions. By focusing on maximizing efficiency and cost containment at the various steps in the design, engineering, and manufacturing process, Complex Systems acts as an intelligent source and ideal partner for development firms and OEMs. This business unit is a supplier for low to medium volume/high complexity commercial and military aerospace applications, medical devices, telecommunications, energy, and industrial controls. Its current portfolio of product line applications include: flight controls, cock pit displays, fuel system controls, secure communications, early warning detection, diagnostics systems, security systems, detection systems, lighting, satellite communications, audio, nuclear detection, inventory control, and defense.
DSS Segment
DSS operations are comprised of design, development and production of products for a number of technologically significant programs aimed at fulfilling defense and commercial needs. Specializing in the development and production of complex electromechanical equipment, Sparton designs and manufactures sonobuoys, ASW devices used by the U.S. Navy and foreign governments. This business unit also performs an engineering development function for the United States military and prime defense contractors on advanced technologies targeted as future defense products as well as replacement of current systems. The sonobuoy product line is built to the customers demanding specifications. These products are restricted by International Tariff and Arms Regulations (ITAR), which limits opportunities for competition. Additionally, this business unit internally develops and markets commercial products based on its navigation and underwater acoustic knowledge and the intrinsic skill sets of its technical staff.
Risks and Uncertainties
Sparton, as a high-mix, low to medium volume supplier, provides rapid product turnaround for customers. High-mix describes customers needing multiple product types with generally low to medium volume manufacturing runs. As a contract manufacturer with customers in a variety of markets, the Company has substantially less visibility of end user demand and, therefore, forecasting sales can be problematic. Customers may cancel their orders, change production quantities and/or reschedule production for a number of reasons. Depressed economic conditions may result in customers delaying delivery of product, or the placement of purchase orders for lower volumes than previously anticipated. Unplanned cancellations, reductions, or delays by customers may negatively impact the Companys results of operations. As many of the Companys costs and operating expenses are relatively fixed within given ranges of production, a reduction in customer demand can disproportionately affect the Companys gross margins and operating income. The majority of the Companys sales have historically come from a limited number of customers. Significant reductions in sales to, or a loss of, one of these customers could materially impact our operating results if the Company were not able to replace those sales with new business.
26
Other risks and uncertainties that may affect our operations, performance, growth forecasts and business results include, but are not limited to, timing and fluctuations in U.S. and/or world economies, sharp volatility of world financial markets over a short period of time, competition in the overall contract manufacturing business, availability of production labor and management services under terms acceptable to the Company, Congressional budget outlays for sonobuoy development and production, Congressional legislation, uncertainties associated with the outcome of litigation, changes in the interpretation of environmental laws and the uncertainties of environmental remediation and customer labor and work strikes. Further risk factors are the availability and cost of materials, as well as non-cancelable purchase orders we have committed to in relation to customer forecasts that can be subject to change. A number of events can impact these risks and uncertainties, including potential escalating utility and other related costs due to natural disasters, as well as political uncertainties such as the unrest in Africa and the Middle East. The February 2011 earthquake, tsunami and resultant nuclear disaster in Japan had the potential to cause availability and pricing issues relating to certain materials used within the Companys products. The Company currently does not believe that the effects of these events will have a material impact on its business. Additional trends, risks and uncertainties that have arisen recently include dependence on key personnel, the impact on the Companys pension plan and risks surrounding the Companys recent acquisitions as well as uncertainties surrounding the global economy and U.S. healthcare legislation and the effects of those uncertainties on OEM behavior, including heighted inventory management, product development cycles and outsourcing strategies. Finally, the Sarbanes-Oxley Act of 2002, and more recently the Dodd-Frank Act have required or will require changes in, and formalization of, some of the Companys corporate governance and compliance practices. The SEC and the New York Stock Exchange have also passed or will pass related rules and regulations requiring additional compliance activities. Compliance with these rules has increased administrative costs and may increase these costs further in the future. A further discussion of the Companys risk factors has been included in Part I, Item 1(a), Risk Factors, of this Annual Report on Form 10-K. 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.
Acquisition of Delphi Medical
On August 6, 2010, the Company completed the acquisition of certain assets related to the contract manufacturing business of Delphi Medical Systems, LLC (Delphi Medical or Delphi). The purchase price was approximately $8.6 million, including additional consideration paid during the three months ended December 31, 2010 related to determination of the final inventory value. Total cash consideration paid of approximately $8.4 million, including a $2.0 million escrowed holdback, was net of approximately $0.2 million for the assumption of retained employee accruals and was financed entirely through the use of Company cash. The purchase agreement provides for the recovery from Delphi Medical of an amount up to $2.0 million, deposited in escrow at closing, for certain excess and obsolete inventory remaining on-hand at the end of the 18 month period from closing. These escrowed funds are additionally available for payment of potential seller indemnification obligations in relation to the agreement.
The acquired business, also now referred to as Sparton Medical Systems (SMS) Colorado, which is reported in the Companys Medical segment, has added revenue from a new and diversified customer base and provides Sparton with a geographic presence in the western United States. Delphi Medical primarily manufactures OEM medical devices including blood separation equipment, spinal surgery products and 3-D eye mapping devices. It also provides engineering and manufacturing support to a market-leading environmental sensor company whose markets include meteorology, weather critical operations and controlled environment applications.
27
The following table summarizes, on a pro forma basis, the results of operations of the acquired contract manufacturing business of Delphi Medical as though the acquisition had occurred as of July 1, 2009. The pro forma amounts presented are not necessarily indicative of either the actual consolidated results had the acquisition occurred as of July 1, 2009 or of future consolidated operating results (in thousands):
For the Years Ended June 30, | ||||||||||||||||
2011 | 2010 | |||||||||||||||
Pre Acquisition |
Post Acquisition |
SMS Colorado Pro Forma |
SMS Colorado Pro Forma |
|||||||||||||
Sales |
$ | 3,451 | $ | 39,004 | $ | 42,455 | $ | 30,733 | ||||||||
Gross profit |
$ | 85 | $ | 5,856 | $ | 5,941 | $ | 123 | ||||||||
Gain on acquisition |
$ | | $ | (2,550 | ) | $ | (2,550 | ) | $ | | ||||||
Operating income (loss) |
$ | (85 | ) | $ | 5,741 | $ | 5,656 | $ | (1,612 | ) | ||||||
Income (loss) before provision for (benefit from) income taxes |
$ | (77 | ) | $ | 6,019 | $ | 5,942 | $ | (973 | ) | ||||||
Net income (loss) |
$ | (77 | ) | $ | 6,019 | $ | 5,942 | $ | (973 | ) |
Sparton did not identify any material intangible assets in this acquisition. Sparton has determined that the fair value of the assets acquired and liabilities assumed related to this acquisition exceed the total purchase consideration and as a result the Company recorded a gain on acquisition of $2.4 million in the three months ended September 30, 2010. The gain was subsequently increased by $0.2 million based on adjustments to the opening inventory valuation. Sparton believes it was able to purchase this contract manufacturing business from Delphi Medical significantly below its fair value due to Delphis desire to liquidate this asset in a timely manner and focus on its core business.
The Company incurred legal, professional and other costs related to this acquisition aggregating approximately $0.2 million. These costs were recognized as non-segment selling and administrative expenses of approximately $0.1 million and $0.1 million in the years ended June 30, 2011 and 2010, respectively. These expenses are not reflected in the above table.
On August 6, 2010 and concurrent with the acquisition of Delphi Medical, the Company entered into leases for two facilities housing the operations of this contract manufacturing business. During the year ended June 30, 2011, the Company initiated and completed the consolidation of the operations into one facility, and terminated the lease for the building which the Company exited.
Acquisition of Byers Peak
On March 4, 2011, the Company completed the acquisition of certain assets and assumption of certain liabilities of Byers Peak, Incorporated (Byers Peak) in an approximate $4.1 million all-cash transaction, after certain working capital adjustments. The transaction was financed through the use of Company cash and included an approximate $0.4 million holdback which is available to fund potential seller indemnification obligations in relation to the agreement.
The acquired business, also now referred to as BP Colorado, which is reported in the Companys Medical segment, provides further expansion into the therapeutic device market, diversifies Spartons customer base, and further expands the Companys geographic reach into the western United States. Additionally, the acquisition increases Spartons offerings with the inclusion of field service and refurbishment capabilities. Byers Peak primarily manufactures medical devices for OEM and emerging technology companies in the Therapeutic device market, including devices for surgical navigation, RF energy generation, non-invasive pain relief, arterial disease, and kidney dialysis. It also has a field service and installation group that primarily provides water filtration and disinfection systems for the medical industry as well as device refurbishment programs. Additionally, Byers Peak provides electromechanical device manufacturing support for a limited number of customers outside of the medical industry.
28
The following table summarizes, on a pro forma basis, the results of operations of the acquired contract manufacturing business of Byers Peak as though the acquisition had occurred as of July 1, 2009. The pro forma amounts presented are not necessarily indicative of either the actual consolidated results had the acquisition occurred as of July 1, 2009 or of future consolidated operating results (in thousands):
For the Years Ended June 30, | ||||||||||||||||
2011 | 2010 | |||||||||||||||
Pre Acquisition |
Post Acquisition |
BP Colorado Pro Forma |
BP Colorado Pro Forma |
|||||||||||||
Sales |
$ | 6,613 | $ | 3,316 | $ | 9,929 | $ | 8,313 | ||||||||
Gross profit |
$ | 790 | $ | 226 | $ | 1,016 | $ | 1,241 | ||||||||
Operating income (loss) |
$ | (103 | ) | $ | (63 | ) | $ | (166 | ) | $ | 162 | |||||
Income (loss) before provision for (benefit from) income taxes |
$ | (103 | ) | $ | (63 | ) | $ | (166 | ) | $ | 162 | |||||
Net income (loss) |
$ | (103 | ) | $ | (63 | ) | $ | (166 | ) | $ | 162 |
Total purchase consideration was allocated to the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values at the acquisition date. The Byers Peak acquisition resulted in approximately $1.5 million of goodwill, which is expected to be deductible for tax purposes and which was assigned entirely to the Companys Medical segment. The Company believes goodwill primarily relates to the complementary strategic fit, resulting synergies and the acquired workforce that this business brings to existing operations. The acquired identifiable intangible assets, aggregating approximately $1.5 million, include customer relationships of $1.3 million and non-compete agreements of approximately $0.2 million. The fair values of acquired identifiable intangible assets were determined to be Level 3 under the fair value hierarchy and were estimated based on future cash flows and customer attrition rates, discounted using an estimated weighted average cost of capital. The customer relationships are being amortized using an accelerated methodology over ten years. The non-compete agreements are being amortized on a straight-line basis over two years as the ratable decline in value over time is most consistent with the contractual nature of these assets.
The Company incurred legal, professional and other costs related to this acquisition aggregating approximately $0.1 million. These costs were recognized as non-segment selling and administrative expenses in the year ended June 30, 2011. These expenses are not reflected in the above table.
On March 4, 2011 and concurrent with the acquisition of Byers Peak, the Company entered into a six month sublease for the facility housing the operations of this contract manufacturing business. The Company may, at its option, extend the term of this sublease for an additional eighteen month period. In conjunction with the Byers Peak acquisition, the Company has begun to consolidate the Byers Peak operations into the Companys Frederick, Colorado facility. These restructuring activities are expected to be materially complete by the end of the Companys fiscal 2012 second quarter.
29
Consolidated Results of Operations
Summary
The major elements affecting net income (loss) for the year ended June 30, 2011 as compared to the year ended June 30, 2010 were as follows (in millions):
Net income fiscal 2010 |
$ | 7.4 | ||||||
Increased gross profit from acquired Medical businesses |
$ | 6.1 | ||||||
Decreased gross profit on Strongsville Medical programs |
(1.8 | ) | ||||||
Increased gross profit on Complex Systems programs |
2.7 | |||||||
Decreased gross profit on DSS programs |
(0.4 | ) | ||||||
Increased selling and administrative expenses |
(2.6 | ) | ||||||
Increased internal research and development expenses |
(1.1 | ) | ||||||
Decreased restructuring/impairment charges |
4.0 | |||||||
Gain on acquisition |
2.6 | |||||||
Lower gain on sale of property, plant and equipment |
(3.0 | ) | ||||||
Impairment of intangible asset |
(3.7 | ) | ||||||
Impairment of goodwill |
(13.2 | ) | ||||||
Decreased carrying costs for closed facilities |
0.9 | |||||||
Increased income tax benefit |
9.5 | |||||||
Other, net |
0.1 | |||||||
|
|
|||||||
Net change |
0.1 | |||||||
|
|
|||||||
Net income fiscal 2011 |
$ | 7.5 | ||||||
|
|
Fiscal 2011 was impacted by:
| Incremental gross profit on Medical programs acquired from Delphi Medical and Byers Peak. |
| Decreased year-to-date gross profit on Medical programs from the Strongsville, Ohio facility due to decreased volume and related capacity utilization, unfavorable product mix and customer pricing adjustments, partially offset by various cost reduction initiatives. |
| Increased gross profit on Complex Systems programs due mainly to improved performance, favorable product mix, completion in fiscal 2010 of plant closures and consolidations and an aggressive continuous improvement program, partially offset by a decrease in sales volume. |
| Decreased gross profit on DSS programs due to decreases in sonobuoy sales to foreign governments and in engineering sales revenue, partially offset by higher U.S. Navy sonobuoy production in the current year and increased digital compass sales. |
| Increased selling and administrative expenses for the year reflecting additional expenses related to the Companys Colorado facilities and increased business development expenses, partially offset by reduced information technology expenses. In addition, selling and administrative expenses were further impacted by charges from an unfavorable arbitration award related to a dispute with a disengaged customer, partially offset by reduced selling and administrative expenses resulting from the completion of the consolidation of Complex Systems facilities during fiscal 2010. |
| Internal research and development expenses of approximately $1.1 million in the year ended June 30, 2011 compared to none in fiscal 2010. |
| Restructuring/impairment charges of $0.1 million in the year ended June 30, 2011 compared to $4.1 million in fiscal 2010. |
| A small gain on sale of property, plant and equipment in fiscal 2011 compared to the $3.1 million fiscal 2010 gain on sale of the Companys Bluewater Road property in Albuquerque, New Mexico. |
30
| Fiscal 2011 impairment of intangible asset related to customer relationships acquired in conjunction with the Companys purchase of Astro Instrumentation, LLC (Astro) in May 2006. |
| Fiscal 2011 impairment of goodwill relating to the Companys purchase of Astro. |
| Reduced closed facility carrying costs due to sales of properties. |
| Fiscal 2011 reinstatement of deferred tax assets compared to fiscal 2010 income tax benefit related to a change in income tax carryback regulations. |
Presented below are more detailed comparative data and discussions regarding our consolidated and reportable segment results of operations for the year ended June 30, 2011 compared to the year ended June 30, 2010 and the year ended June 30, 2010 compared to the year ended June 30, 2009.
For the Year ended June 30, 2011 compared to the Year ended June 30, 2010
The following table presents consolidated statement of operations data as a percentage of net sales for the years ended June 30, 2011 and 2010 (dollars in thousands):
2011 | 2010 | |||||||||||||||
Total | % of Sales | Total | % of Sales | |||||||||||||
Net sales |
$ | 203,352 | 100.0 | % | $ | 173,977 | 100.0 | % | ||||||||
Cost of goods sold |
170,184 | 83.7 | 147,394 | 84.7 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Gross profit |
33,168 | 16.3 | 26,583 | 15.3 | ||||||||||||
Selling and administrative expenses |
20,842 | 10.3 | 18,205 | 10.5 | ||||||||||||
Internal research and development expenses |
1,110 | 0.5 | | | ||||||||||||
Restructuring/impairment charges |
75 | 0.0 | 4,076 | 2.3 | ||||||||||||
Gain on acquisition |
(2,550 | ) | (1.2 | ) | | | ||||||||||
Gain on sale of property, plant and equipment, net |
(139 | ) | (0.1 | ) | (3,119 | ) | (1.8 | ) | ||||||||
Impairment of intangible asset |
3,663 | 1.8 | | | ||||||||||||
Impairment of goodwill |
13,153 | 6.5 | | | ||||||||||||
Other operating expense, net |
843 | 0.4 | 1,699 | 1.0 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Operating income (loss) |
(3,829 | ) | (1.9 | ) | 5,722 | 3.3 | ||||||||||
Total other expense, net |
(114 | ) | (0.0 | ) | (198 | ) | (0.1 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Income (loss) before benefit from income taxes |
(3,943 | ) | (1.9 | ) | 5,524 | 3.2 | ||||||||||
Benefit from income taxes |
(11,404 | ) | (5.6 | ) | (1,916 | ) | (1.1 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Net income |
$ | 7,461 | 3.7 | % | $ | 7,440 | 4.3 | % | ||||||||
|
|
|
|
|
|
|
|
The following table presents net sales by reportable segment for the years ended June 30, 2011 and 2010 (in thousands):
2011 | 2010 | |||||||||||||||||||
Total | % of Total | Total | % of Total | % Change | ||||||||||||||||
SEGMENT |
||||||||||||||||||||
Medical |
$ | 98,028 | 48 | % | $ | 64,424 | 37 | % | 52 | % | ||||||||||
Complex Systems |
49,835 | 25 | 57,423 | 33 | (13 | ) | ||||||||||||||
DSS |
69,720 | 34 | 63,853 | 37 | 9 | |||||||||||||||
Eliminations |
(14,231 | ) | (7 | ) | (11,723 | ) | (7 | ) | 21 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Totals |
$ | 203,352 | 100 | % | $ | 173,977 | 100 | % | 17 | |||||||||||
|
|
|
|
|
|
|
|
31
The following table presents gross profit and gross profit as a percent of net sales by reportable segment for the years ended June 30, 2011 and 2010 (in thousands):
2011 | 2010 | |||||||||||||||
Total | GP% | Total | GP% | |||||||||||||
SEGMENT |
||||||||||||||||
Medical |
$ | 12,938 | 13 | % | $ | 8,603 | 13 | % | ||||||||
Complex Systems |
4,835 | 10 | 2,133 | 4 | ||||||||||||
DSS |
15,395 | 22 | 15,847 | 25 | ||||||||||||
|
|
|
|
|||||||||||||
Totals |
$ | 33,168 | 16 | $ | 26,583 | 15 | ||||||||||
|
|
|
|
The following table presents operating income (loss) and operating income (loss) as a percent of net sales for the years ended June 30, 2011 and 2010 (in thousands):
2011 | 2010 | |||||||||||||||
Total | % of Sales | Total | % of Sales | |||||||||||||
SEGMENT |
||||||||||||||||
Medical |
$ | (8,011 | ) | (8 | )% | $ | 4,600 | 7 | % | |||||||
Complex Systems |
1,586 | 3 | (2,150 | ) | (4 | ) | ||||||||||
DSS |
10,869 | 16 | 13,150 | 21 | ||||||||||||
Corporate and other unallocated |
(8,273 | ) | | (9,878 | ) | | ||||||||||
|
|
|
|
|||||||||||||
Totals |
$ | (3,829 | ) | (2 | ) | $ | 5,722 | 3 | ||||||||
|
|
|
|
Medical
Medical sales in the year ended June 30, 2011 included $42.3 million of additional sales from the acquisitions of certain assets related to the contract manufacturing businesses of Delphi Medical and Byers Peak. Excluding these fiscal year 2011 incremental sales, legacy Medical sales decreased approximately $8.7 million in the year ended June 30, 2011 as compared with the prior year. This decrease in comparable sales was primarily due to decreased sales to two customers. Sales to one customer decreased by $4.8 million, reflecting the suspension of production during fiscal 2011 to make product enhancement modifications. The product enhancement modifications were made, however, the Company cannot predict at what level sales for this product will continue. Sales to another customer decreased by $3.8 million, reflecting this customers disengagement during fiscal 2011. Several other customers in the aggregate accounted for the remaining sales variance. Medical sales are dependent on a small number of key strategic customers. Siemens Diagnostics contributed 18% and 21% of consolidated company net sales during the years ended June 30, 2011 and 2010, respectively. Fenwal Blood Technologies, which became a customer with the Delphi acquisition, contributed 12% of consolidated company net sales during the year ended June 30, 2011. During the fourth quarter of fiscal 2011, Siemens notified the Company that it intends to dual source two of its larger programs with the Company beginning in fiscal 2012. Annual sales related to these programs aggregated approximately $27.8 million in fiscal 2011. While the Company cannot estimate the ultimate impact that this dual sourcing will have on its future annual sales, unless overall sales related to these programs increase, this dual sourcing is expected to have an adverse impact on fiscal 2012 sales from the Companys Ohio facility. Medical backlog was approximately $42.3 million at June 30, 2011 compared to approximately $14.0 million at June 30, 2010, reflecting added backlog from the Companys fiscal 2011 business acquisitions. Commercial orders, in general, may be rescheduled or cancelled without significant penalty, and, as a result, may not be a meaningful measure of future sales. A majority of the June 30, 2011 Medical backlog is currently expected to be realized in the next 12 months.
Gross profit varies from period to period and can be affected by a number of factors, including product mix, production efficiencies, capacity utilization, and costs associated with new program introduction. The gross profit
32
percentage on Medical sales remained consistent at 13% for each of the years ended June 30, 2011 and 2010, respectively. These comparable margins on Medical sales reflect decreased capacity utilization at the Companys Strongsville, Ohio facility, certain unfavorable product mix between the two periods and the loss of certain favorable materials pricing benefits in the prior year to customer pricing adjustments. These downward pressures on gross margin were offset by greater operating efficiencies resulting from the Companys continued implementation of Lean Enterprise and its cost management efforts. Gross profit percentage on sales from the businesses acquired during fiscal 2011 was 14% for the period since acquisition.
Selling and administrative expenses relating to the Medical segment were $6.0 million and $3.5 million for the years ended June 30, 2011 and 2010, respectively. Reflected in the year ended June 30, 2011 are increased direct and allocated expenses related to the Companys recent acquisitions of $2.7 million. Decreased selling and administrative expenses from the Ohio facility reflect lower bad debt expense and a decrease in allocated corporate selling and administrative expenses to the Ohio facility in the current fiscal year, partially offset by increased business development efforts in the current fiscal year and $0.4 million in charges related to an unfavorable arbitration award related to a dispute with a disengaged customer.
Restructuring/impairment charges relating to the Medical segment were $0.1 million for the year ended June 30, 2011 and related to the workforce reduction and facility consolidations at the Companys Colorado facilities. No restructuring/impairment charges relating to the Medical segment were recognized in the prior year period. For a further discussion of the restructuring activity see Note 14, Restructuring Activities, of the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K.
On August 6, 2010, the Company completed the acquisition of certain assets related to the contract manufacturing business of Delphi Medical. The Company determined that the fair value of the assets acquired and liabilities assumed related to this acquisition exceeded the total purchase consideration and as a result the Company recorded a gain on acquisition of $2.6 million during the year ended June 30, 2011. For a further discussion of this acquisition, see Note 3, Acquisitions, of the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K.
In conjunction with its annual test of goodwill, the Company recorded a non-cash impairment charge of approximately $13.2 million during the fourth quarter of fiscal 2011 related to its Ohio reporting unit. The impairment reflects various downward trends in volume within the Companys Ohio reporting unit, which was acquired in fiscal 2006, including the impact of a customer disengagement and Siemens fiscal 2011 fourth quarter notification of its intent to dual source certain programs with us as part of an overall dual sourcing strategy for certain of its critical programs. As a result of these downward trends in volume, the Company also recorded a non-cash impairment charge of approximately $3.7 million during the fourth quarter of fiscal 2011 related to its customer relationships intangible asset acquired with its Ohio Medical business in fiscal 2006. No impairments of goodwill or identifiable intangible assets occurred during fiscal 2010. See below in Critical Accounting Policies and Estimates Goodwill and Intangible Assets for a complete discussion regarding these impairment charges and the contributing reasons.
Complex Systems
CS sales for the year ended June 30, 2011 decreased approximately $7.6 million as compared with last year. This decrease primarily reflects decreased sales to three customers, whose combined decrease totaled approximately $12.3 million from the prior year period. Sparton completed its disengagement with one of these customers, Honeywell, during the three months ended December 31, 2009. The decreases in sales to the remaining two customers reflect the year over year loss of certain programs with these customers and production delays due to customer engineering design changes. Partially offsetting these decreases, sales to another customer increased by approximately $1.1 million. CS sales include intercompany sales resulting primarily from the production of circuit boards that are then utilized in DSS product sales. Intercompany sales increased approximately $2.5 million in fiscal 2011 as compared to the prior year. These intercompany sales are eliminated
33
in consolidation. Several other customers in the aggregate accounted for the remaining sales variance. One customer, Goodrich, contributed 9% and 13% of consolidated Company net sales during the years ended June 30, 2011 and 2010, respectively. CS backlog was approximately $29.5 million at June 30, 2011. Commercial orders, in general, may be rescheduled or cancelled without significant penalty, and, as a result, may not be a meaningful measure of future sales. A majority of the June 30, 2011 CS backlog is currently expected to be realized in the next 12 months.
The gross profit percentage on CS sales increased to 10% for the year ended June 30, 2011 compared to 4% for the year ended June 30, 2010. The year over year comparison reflects favorable product mix due to increased DSS product sales, improved performance, completion of the consolidation of CS operations in fiscal 2010 and an aggressive continuous improvement program, partially offset by the overall decrease in sales volume.
Selling and administrative expenses relating to the CS segment were $3.3 million for each of the years ended June 30, 2011 and 2010 as decreased expenses related to the consolidation of CS facilities during fiscal 2010 and decreased allocated corporate selling and administrative expenses were offset by increased business development and safety efforts in the current fiscal year.
Restructuring/impairment charges relating to the CS segment were $1.0 million for the year ended June 30, 2010. No restructuring/impairment charges relating to the CS segment were recognized in the current year period. For a further discussion of the restructuring activity see Note 14, Restructuring Activities, of the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K.
DSS
DSS sales for the year ended June 30, 2011 increased by $5.9 million from the prior fiscal year, reflecting higher U.S. Navy sonobuoy production in the current year period and increased digital compass sales. Partially offsetting these increases were decreases in sonobuoy sales to foreign governments and in engineering sales revenue. Total sales to the U.S. Navy, including those through ERAPSCO, in the year ended June 30, 2011 and 2010 were approximately $61.7 million and $48.3 million, or 30% and 28%, respectively, of consolidated Company net sales for those year. Sonobuoy sales to foreign governments were $4.9 million and $13.9 million in the years ended June 30, 2011 and 2010, respectively. DSS backlog was approximately $65.5 million at June 30, 2011. A majority of the June 30, 2011 DSS backlog is currently expected to be realized within the next 12 to 16 months.
The gross profit percentage on DSS sales for the year ended June 30, 2011 was 22% compared to 25% for the year ended June 30, 2010. Gross profit percentage was adversely affected in the current year period by decreased sales to foreign governments as compared to the prior year period, partially offset by favorable product mix on increased U.S. Navy sonobuoy sales.
Selling and administrative expenses relating to the DSS segment were $3.4 million and $2.7 million for the years ended June 30, 2011 and 2010, respectively, reflecting increased direct selling and administrative expenses due to increased business development efforts in the current fiscal period.
Internal research and development expenses reflect costs incurred for the internal development of technologies for use in navigation, oil and gas exploration and port security. These costs include salaries and related expenses, contract labor and consulting costs, materials and the cost of certain research and development specific equipment. The Company incurred $1.1 million of internally funded research and development expenses in the year ended June 30, 2011. No internally funded research and development expense was recognized in fiscal 2010.
34
Corporate and Other Unallocated
Total corporate selling and administrative expenses were $14.5 million and $14.7 million for the years ended June 30, 2011 and 2010, respectively, reflecting decreased information technology expenses, partially offset by increased business development expenses and fiscal 2011 legal, professional and travel expenses relating to acquisitions. Of these costs, $6.4 million and $6.0 million, respectively, were allocated to segment operations in these periods. Allocations of corporate selling and administrative expenses are based on the nature of the service provided and can fluctuate from period to period.
Other operating expenses were $0.3 million and $1.2 million for the years ended June 30, 2011 and 2010, respectively. These expenses primarily represent ongoing costs related to closed facilities and facilities held for sale. The Company sold its last remaining idled facility in February 2011.
Non-segment related restructuring/impairment charges were $3.1 million for the year ended June 30, 2010 and were related to relocation of the Companys corporate office. No non-segment restructuring/impairment charges were recognized in the current year. For a further discussion of the restructuring activity see Note 14, Restructuring Activities, of the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K.
Gain on sales of property, plant and equipment for the years ended June 30, 2011 and 2010 were $0.1 million and $3.1 million, respectively. The fiscal 2011 gain primarily reflects the gain on sale of the Companys Bluewater Road property in Albuquerque, New Mexico. See Note 5, Property, Plant and Equipment, net, of the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K for a further discussion of this sale. The fiscal 2010 gain reflects the gain on sale of our Coors Road property.
Interest expense consists of interest and fees on our outstanding debt and revolving credit facility (see Note 7, Debt, of the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K), including amortization of financing costs. Interest expense was $0.7 million for the year ended June 30, 2011 compared to $0.8 million for the year ended June 30, 2010. The decrease primarily reflects the repayment of the Companys line-of-credit and bank term debt with available cash on August 14, 2009.
The Company is responsible for income taxes within each jurisdiction in which it operates. The Company recorded an income tax benefit of approximately $11.4 million for the year ended June 30, 2011 compared to an income tax benefit of approximately $1.9 million for the year ended June 30, 2010. The fiscal 2011 income tax benefit reflects the June 30, 2011 reinstatement of approximately $11.7 million of deferred tax assets as the Company now believes it is more likely than not that it will be able to utilize these tax benefits in future periods. The fiscal 2010 benefit reflects the release of $2.3 million of deferred tax asset valuation allowance in relation to tax regulation changes related to carryback provisions. See Note 8, Income Taxes, of the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K.
Due to the factors described above, the Company reported net income of $7.5 million ($0.73 per share, basic and diluted) for the year ended June 30, 2011, compared to net income of $7.4 million ($0.75 per share, basic and diluted) for the prior fiscal year.
35
For the Year ended June 30, 2010 compared to the Year ended June 30, 2009
The following table presents consolidated statement of operations data as a percentage of net sales for the years ended June 30, 2010 and 2009 (dollars in thousands):
2010 | 2009 | |||||||||||||||
Total | % of Sales | Total | % of Sales | |||||||||||||
Net sales |
$ | 173,977 | 100.0 | % | $ | 221,871 | 100.0 | % | ||||||||
Cost of goods sold |
147,394 | 84.7 | 205,985 | 92.8 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Gross profit |
26,583 | 15.3 | 15,886 | 7.2 | ||||||||||||
Selling and administrative expenses |
18,205 | 10.5 | 18,851 | 8.5 | ||||||||||||
Restructuring/impairment charges |
4,076 | 2.3 | 7,008 | 3.2 | ||||||||||||
Gain on sale of property, plant and equipment, net |
(3,119 | ) | (1.8 | ) | (10 | ) | | |||||||||
Other operating expense, net |
1,699 | 1.0 | 1,294 | 0.6 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Operating income |
5,722 | 3.3 | (11,257 | ) | (5.1 | ) | ||||||||||
Total other expense, net |
(198 | ) | (0.1 | ) | (2,709 | ) | (1.2 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Income before provision for (benefit from) income taxes |
5,524 | 3.2 | (13,966 | ) | (6.3 | ) | ||||||||||
Provision for (benefit from) income taxes |
(1,916 | ) | (1.1 | ) | 1,787 | 0.8 | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net income (loss) |
$ | 7,440 | 4.3 | % | $ | (15,753 | ) | (7.1 | )% | |||||||
|
|
|
|
|
|
|
|
The following table presents net sales by reportable segment for the years ended June 30, 2010 and 2009 (in thousands):
2010 | 2009 | |||||||||||||||||||
Total | % of Total | Total | % of Total | % Change | ||||||||||||||||
SEGMENT |
||||||||||||||||||||
Medical |
$ | 64,424 | 37 | % | $ | 64,393 | 29 | % | 0 | % | ||||||||||
Complex Systems |
57,423 | 33 | 127,002 | 57 | (55 | ) | ||||||||||||||
DSS |
63,853 | 37 | 42,289 | 19 | 51 | |||||||||||||||
Eliminations |
(11,723 | ) | (7 | ) | (11,813 | ) | (5 | ) | (1 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Totals |
$ | 173,977 | 100 | % | $ | 221,871 | 100 | % | (22 | ) | ||||||||||
|
|
|
|
|
|
|
|
The following table presents gross profit and gross profit as a percent of net sales by reportable segment for the years ended June 30, 2010 and 2009 (in thousands):
2010 | 2009 | |||||||||||||||
Total | GP% | Total | GP% | |||||||||||||
SEGMENT |
||||||||||||||||
Medical |
$ | 8,603 | 13 | % | $ | 7,793 | 12 | % | ||||||||
Complex Systems |
2,133 | 4 | 1,448 | 1 | ||||||||||||
DSS |
15,847 | 25 | 6,645 | 16 | ||||||||||||
|
|
|
|
|||||||||||||
Totals |
$ | 26,583 | 15 | $ | 15,886 | 7 | ||||||||||
|
|
|
|
36
The following table presents operating income (loss) and operating income (loss) as a percent of net sales for the years ended June 30, 2010 and 2009 (in thousands):
2010 | 2009 | |||||||||||||||
Total | % of Sales | Total | % of Sales | |||||||||||||
SEGMENT |
||||||||||||||||
Medical |
$ | 4,600 | 7 | % | $ | 3,731 | 6 | % | ||||||||
Complex Systems |
(2,150 | ) | (4 | ) | (9,893 | ) | (8 | ) | ||||||||
DSS |
13,150 | 21 | 4,093 | 10 | ||||||||||||
Corporate and other unallocated |
(9,878 | ) | | (9,188 | ) | | ||||||||||
|
|
|
|
|||||||||||||
Totals |
$ | 5,722 | 3 | $ | (11,257 | ) | (5 | ) | ||||||||
|
|
|
|
Medical
Medical sales remained consistent in the year ended June 30, 2010 as compared with the prior year, reflecting increases and decreases in volume from various customers. The year over year results reflect increased sales volume to one customer of $3.6 million, as it increased sales on new products. In addition, another customer contributed $1.7 million of sales above the same period in the prior year, as it acquired product and resumed production from a developer that was in bankruptcy during fiscal 2009. Sales volume to a third customer contributed $2.6 million of the increase over the prior year as its product received FDA approval. Offsetting these year over year increases, sales to two customers decreased by $2.6 million and $2.7 million, respectively, reflecting customer disengagements in fiscal 2009 and fiscal 2010, respectively. Several other customers in the aggregate accounted for the remaining sales variance. Siemens Diagnostics contributed 21% and 17% of consolidated Company net sales during the years ended June 30, 2010 and 2009, respectively.
Gross profit varies from period to period and can be affected by a number of factors, including product mix, production efficiencies, capacity utilization, and costs associated with new program introduction. The gross profit percentage on Medical sales increased to 13% from 12% for the years ended June 30, 2010 and 2009, respectively. This improvement in margins on Medical sales was due in part to favorable product mix and increased manufacturing efficiencies resulting from continued implementation of Lean Enterprise. In addition, changes from the recent consolidation of manufacturing operations allowed for the realization of greater operating efficiencies.
Complex Systems
CS sales for the year ended June 30, 2010 decreased approximately $69.6 million as compared with the prior year. This decrease reflects decreased sales to four customers, whose combined decrease totaled approximately $62.0 million for the year. Sparton disengaged with two of these customers as of June 30, 2009. Sparton completed its disengagement with a third customer, Honeywell, during the three months ended December 31, 2009. Honeywell contributed 2% and 19% of consolidated Company net sales during the years ended June 30, 2010 and 2009, respectively. The decrease in sales to the fourth customer reflects the loss of certain programs with this customer. Partially offsetting these decreases, sales to another customer, Goodrich, increased by approximately $4.4 million. Goodrich contributed 13% and 8% of consolidated Company net sales during the years ended June 30, 2010 and 2009, respectively. Several other customers in the aggregate accounted for the remaining sales variance. CS sales include intercompany sales resulting primarily from the production of circuit boards that are then utilized in DSS product sales. These intercompany sales are eliminated in consolidation.
The gross profit percentage on CS sales increased to 4% from 1% for the years ended June 30, 2010 and 2009, respectively. The improvement in gross profit was mainly attributable to the reduced overhead costs, including lower pension costs, associated with the plant closings and the consolidation of CS operations, as well as to the termination of certain unprofitable customer contracts, partially offset by the overall decrease in sales volume. Margin was also favorably impacted by improved performance and price increases to certain customers.
37
DSS
DSS sales for the year ended June 30, 2010 were significantly above the prior fiscal year, showing an increase of $21.6 million, reflecting higher U.S. Navy product volume due to successful sonobuoy lot acceptance testing as well as an increase in the awarded annual Navy contracts in production and reflecting increased sonobuoy sales to foreign governments in the current fiscal year. Increased engineering sales revenue also contributed to the increase. Total sales to the U.S. Navy in the years ended June 30, 2010 and 2009 was approximately $48.3 million and $30.7 million, or 28% and 14%, respectively, of consolidated Company net sales for those periods. Sonobuoy sales to foreign governments were $13.9 million and $10.8 million in the years ended June 30, 2010 and 2009, respectively.
The gross profit percentage on DSS sales increased to 25% from 16% for the years ended June 30, 2010 and 2009, respectively. The improvement in gross margin reflects increased foreign sonobuoy sales which generated increased margins due to an improved pricing structure. Additionally, gross profit percentage was favorably affected by incurrence of minimal rework costs as a result of successful sonobuoy drop tests in the current year, reflecting improvement in production efficiency and the Companys continued implementation of Lean Enterprise. Margin was also positively impacted by a significant increase in overall sales volume from the prior year.
Corporate and Other Unallocated
Segmented operating income (loss) includes both direct segment selling and administrative expenses as well as an allocation of certain corporate selling and administrative expenses. On a consolidated basis, selling and administrative expenses for the year ended June 30, 2010 decreased by approximately $0.6 million, compared to the prior year, reflecting decreased costs resulting from facility closings and cost reduction activities, legal fees in fiscal 2009 related to Electropac litigation, partially offset by increased expenses related to the Companys short-term incentive plan and stock-based compensation. Total corporate selling and administrative expenses were $14.7 million and $14.9 million for the years ended June 30, 2010 and 2009, respectively. Of these costs, $6.1 million and $7.4 million, respectively, were allocated to segment operations in these periods. Allocations of corporate selling and administrative expenses are based on the nature of the service provided and can fluctuate from period to period.
Other operating expenses were $1.2 million and $0.8 million for the years ended June 30, 2010 and 2009, respectively. Expenses in both years primarily represent ongoing carrying costs for facilities held for sale, which are expected to decrease in future periods with the sale of the Jackson, Michigan and London, Ontario, Canada facilities in June 2010.
Restructuring/impairment charges were $4.1 million and $7.0 million for the years ended June 30, 2010 and 2009, respectively, of which $1.0 million and $6.0 million were included in the CS operating results for those periods. For a further discussion of the restructuring activity see Note 14, Restructuring Activities, of the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K.
Gain on sale of property plant and equipment for the year ended June 30, 2010 reflects the gain on sale of our Coors Road property. See Note 2, Summary of Significant Accounting Policies, of the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K for a further discussion of this sale.
Interest expense consists of interest and fees on our outstanding debt and revolving credit facility (see Note 7, Debt, of the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K), including amortization of deferred financing costs. Interest expense was $0.8 million for the year ended June 30, 2010 compared to $1.6 million for the year ended June 30, 2009. The decrease primarily reflects the repayment of the Companys line-of-credit and bank term debt with available cash on August 14, 2009.
38
The fiscal 2010 year reflects a gain on sale of investment of $0.2 million from the sale of part of the Companys interest in Cybernet Systems Corporation (Cybernet). See Note 2, Summary of Significant Accounting Policies, of the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K for a further discussion of this sale. Translation adjustments, not related to cost of goods sold, along with gains and losses from foreign currency transactions, in the aggregate, amounted to losses of $23 thousand and $1.5 million for the years ended June 30, 2010 and 2009, respectively. The Canadian dollar experienced significant volatility against the U.S. dollar during the year ended June 30, 2009. With the closure of the Canadian facility, however, the impact in fiscal 2010 has not been significant and it is anticipated that future periods will not be significant. Other income was $0.4 million for each of the years ended June 30, 2010 and 2009.
The Company is responsible for income taxes within each jurisdiction in which it operates. The Company recorded an income tax benefit of approximately $1.9 million for the year ended June 30, 2010, compared to expense of $1.8 million for the prior year. The fiscal 2010 benefit reflects the release of $2.3 million of deferred tax asset valuation allowance in relation to recent tax regulation changes related to carryback provisions. See Note 8, Income Taxes, of the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K for a further discussion of income taxes.
Due to the factors described above, the Company reported net income of $7.4 million ($0.75 per share, basic and diluted) for the year ended June 30, 2010, compared to a net loss of $15.8 million ($(1.61) per share, basic and diluted) for fiscal 2009.
Liquidity and Capital Resources
Certain of the Companys DSS contracts allow for billings to occur when certain milestones under the applicable program are reached, independent of the amount shipped by Sparton as of such date. These advance billings reduce the amount of cash that would otherwise be required during the performance of these contracts. As of June 30, 2011 and June 30, 2010, $13.0 million and $21.6 million, respectively, of billings in excess of costs were received. The Company currently expects to meet its liquidity needs through a combination of sources including, but not limited to, operations, existing cash balances, its revolving line-of-credit, anticipated continuation of advance billings on certain DSS contracts and improvement in inventory management. With the above sources providing the expected cash flows, the Company currently believes that it will have sufficient liquidity for our anticipated needs over the next 12 months, but no assurances regarding liquidity can be made.
Operating activities provided $2.5 million, $19.9 million and $38.3 million of net cash flows in fiscal 2011, 2010 and 2009, respectively. Excluding changes in working capital, operating activities provided $13.2 million and $10.2 million in fiscal 2011 and 2010, respectively, and used $6.8 million in fiscal 2009, reflecting the Companys relative operating performance during those years and for fiscal 2010 additionally reflecting income taxes recovered from net operating loss carrybacks. Working capital used $10.7 million in fiscal 2011 and provided $9.6 million and $45.1 million of net cash flows in fiscal 2010 and 2009, respectively. Fiscal 2011 working capital related cash flows primarily reflect funding of production related to U.S. Navy contracts during the year in excess of advance billings received, the initial working capital funding related the Companys newly acquired Frederick, Colorado facility as well as a funding of a pension contribution during the period. Fiscal 2010 working capital related cash flows reflect reduced working capital requirements related to lower sales volumes due to customer disengagements, the closing of facilities and the Companys continued inventory management efforts, offset by the funding of production related to U.S. Navy contracts during the year in excess of advance billings received as well as cash outlays relating to restructuring activities and a pension contribution made in the first quarter of fiscal 2010. Fiscal 2009 working capital related cash flows primarily reflect a decrease in inventories, primarily due to the Companys focus on reducing the level of inventory carried and certain customer disengagements, as well as cash receipts from U.S. Government interim billings in excess of production costs.
39
Cash flows used in investing activities in fiscal 2011, 2010 and 2009 totaled $8.5 million, $3.6 million and $2.2 million, respectively. Fiscal 2011 reflects the acquisition of certain assets related to the contract manufacturing business of Delphi Medical. The consideration paid of $8.4 million is net of assumed employee accrual adjustments. Fiscal 2011 also reflects the approximate $4.1 million acquisition of certain assets and assumption of certain liabilities of Byers Peak. These two purchases were financed entirely through the use of Company cash. Fiscal years 2010 and 2009 each reflect the payment of contingent purchase consideration to the prior owners of Astro Instrumentation, LLC (Astro). Fiscal 2010 also reflects the utilization of $3.1 million to establish a trust, the Sparton Corporation Financial Assurance Trust, related to environmental remediation activities at one of Spartons former facilities. The funds were held in Spartons name and were invested with Sparton receiving the benefit of the investment return. Investment returns on the funds during the year ended June 30, 2010 totaled approximately $0.1 million. These funds were available for use to satisfy the expected remediation liability reflected in the June 30, 2010 balance sheet. Fiscal 2011 reflects the Companys dissolution of the trust during October 2010. For further discussion of this remediation activity, see Part I, Item 3. Legal Proceedings. Capital expenditures for the years ended June 30, 2011, 2010 and 2009 were approximately $3.2 million, $1.5 million and $1.2 million, respectively. Proceeds from the sale of property, plant and equipment for the years ended June 30, 2011, 2010 and 2009 were approximately $4.0 million, $3.1 million and $0.0 million, respectively. Fiscal 2011 proceeds from the sale of property, plant and equipment primarily represent the February 2011 sale of the Companys Bluewater Road property in Albuquerque, New Mexico. Fiscal 2010 proceeds from the sale of property, plant and equipment related to the closings and sales of its Jackson, Michigan and London, Ontario, Canada facilities and the long-term lease of its Coors Road property in Albuquerque, New Mexico. In addition, fiscal 2010 reflects proceeds from the sale of a portion of the Companys interest in Cybernet totaling approximately $0.5 million.
Cash flows provided by (used in) financing activities in fiscal 2011, 2010 and 2009 totaled $0.1 million, $(21.9 million) and $(2.7 million), respectively. The primary uses of cash from financing activities in fiscal 2011, 2010 and 2009 were the repayment of debt. Fiscal 2010 and 2009 also reflects the payment of financing fees related to the Companys new revolving credit facility. The primary source of cash from financing activities in fiscal 2009 was from increased borrowings on the Companys bank line-of-credit facility. In the year ended June 30, 2010, the Company paid off the existing balance on its line-of-credit facility totaling $15.5 million, and the $3.4 million remaining balance on its term loan, with National City Bank. Fiscal 2011 also reflects tax benefits in excess of recorded stock-based compensation.
As of June 30, 2011, the Companys bank line-of-credit facility totaled $20.0 million, subject to certain collateral restrictions, with no borrowings against the available funds. The Company did have certain letters of credit outstanding against this facility totaling $0.5 million at June 30, 2011. This bank debt is subject to certain customary covenants which the Company was in compliance with at June 30, 2011. The maturity date for this line-of-credit is August 14, 2012. The Company also has approximately $1.8 million of industrial revenue bonds outstanding at June 30, 2011. See Note 7, Debt, of the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K for a further discussion of the Companys debt.
During fiscal 2009, management initiated a full evaluation of the Companys operations and long-term business strategy. As a result, during the third quarter of fiscal 2009, management began to implement a formal turnaround plan focused on returning Sparton to profitability and the assurance of the Companys viability. These measures were designed to reduce operating costs, increase efficiencies, and improve our competitive position in response to excess capacity, the prevailing economy and the need to optimize manufacturing resources. These restructuring activities included, among other actions, plant consolidation and closures, workforce reductions, customer contract disengagements, and changes in employee pension and health care benefits. During fiscal 2011, the Company took certain cost reduction actions in relation to its acquisition of certain assets related to the contract manufacturing business of Delphi Medical. These actions included a workforce reduction at the Colorado location and the consolidation of the Colorado manufacturing facilities from two to one. All of these restructuring activities are substantially completed as of June 30, 2011. In conjunction with the Byers Peak acquisition, the Company intends to consolidate the Byers Peak operations into the Companys Frederick
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Colorado facility. These restructuring activities, which are expected to consist primarily of production moving costs, began in the Companys fiscal 2011 fourth quarter and are expected to be materially complete by the end of the Companys fiscal 2012 second quarter. The Company expects to incur less than $0.1 million of additional costs related to restructuring activities and has remaining restructuring related cash payments of approximately $0.2 million to be made during fiscal 2012.
On August 24, 2011, the Companys Board of Directors approved a repurchase by Spartan Corporation of up to $3,000,000 of shares of its common stock over the next 24 months in open market, block transactions and privately negotiated transactions.
Commitments and Contingencies
Please see Part I, Item 3. Legal Proceedings for a discussion regarding our commitments and contingencies.
Contractual Obligations
Future minimum contractual cash obligations for the next five years and in the aggregate at June 30, 2011, are as follows (dollars in thousands):
Payments Due By Period | ||||||||||||||||||||
Total | Less than 1 Year |
2-3 Years | 4-5 Years | More than 5 Years |
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Contractual obligations: |
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Debt |
$ | 1,899 | $ | 136 | $ | 286 | $ | 317 | $ | 1,160 | ||||||||||
Cash interest (1) |
638 | 99 | 178 | 148 | 213 | |||||||||||||||
Operating leases (2) |
5,052 | 1,732 | 1,594 | 1,108 | 618 | |||||||||||||||
Environmental liabilities |
4,222 | 459 | 567 | 534 | 2,662 | |||||||||||||||
Pension contributions |
347 | 306 | 41 | | | |||||||||||||||
Non-cancelable purchase orders |
29,564 | 29,564 | | | | |||||||||||||||
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|
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Total |
$ | 41,722 | $ | 32,296 | $ | 2,666 | $ | 2,107 | $ | 4,653 | ||||||||||
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(1) | Cash interest reflects interest payments on our Industrial Revenue Bonds discussed below. |
(2) | Does not include payments due under renewals to the original lease terms. |
Debt The Companys debt currently consists of Ohio State Economic Development Revenue Bonds, series 2002-4 (Industrial Revenue Bonds). These bonds have interest rates which vary, dependent on the maturity date of the bonds ranging from 5.00% to 5.45%. The bonds carry certain sinking fund requirements generally obligating the Company to deposit funds into a sinking fund. The sinking fund requires the Company to make monthly deposits of one twelfth of the annual obligation plus accrued interest. The Company also has an irrevocable letter of credit in the amount of approximately $0.3 million, which is renewable annually, to secure repayment of a portion of the bonds.
The Company also has a revolving line of credit which it currently has not drawn upon. See Note 7, Debt, of the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K of this report for a further discussion of this line of credit.
Operating leases See Note 10, Commitments and Contingencies, of the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K for further discussion of operating leases.
Environmental liabilities See Note 10, Commitments and Contingencies, of the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K of this report for a description of the accrual for environmental remediation. Of the $4.2 million total, $0.4 million is classified as a current liability and $3.8 million is classified as a long-term liability, both of which are included on the balance sheet as of June 30, 2011.
Pension liability See Note 9, Employee Retirement Benefit Plans, of the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K of this report for additional pension information.
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Non-cancelable purchase orders Binding orders the Company has placed with suppliers that are subject to quality and performance requirements.
Off-Balance Sheet Arrangements
The Company has standby letters of credit outstanding of approximately $0.5 million at June 30, 2011, principally to support the Industrial Revenue bonds assumed from Astro and an operating lease agreement. Approximately $0.3 million is a letter of credit related to the Industrial Revenue bonds discussed above. Other than these standby letters of credit and the operating lease commitments included above, we have no off-balance sheet arrangements that would have a current or future material effect on our financial condition, changes in financial condition, revenue, expense, results of operations, liquidity, capital expenditures or capital resources.
Inflation
We believe that inflation has not had a significant impact in the past and is not likely to have a significant impact in the foreseeable future on our results of operations.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preparation of our consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requires management to make estimates, judgments and assumptions that affect the amounts reported as assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. Estimates are regularly evaluated and are based on historical experience and on various other assumptions believed to be reasonable under the circumstances. Actual results could differ from those estimates. In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP and does not require managements judgment in application. There are also areas in which managements judgment in selecting among available alternatives would not produce a materially different result. The Company believes that of its significant accounting policies discussed in Note 2 to the Consolidated Financial Statements, which is included in Item 8, the following involve a higher degree of judgment and complexity. Senior management has reviewed these critical accounting policies and related disclosures with the audit committee of Spartons Board of Directors.
Environmental Contingencies
One of Spartons former manufacturing facilities, located in Albuquerque, New Mexico (Coors Road), has been the subject of ongoing investigations and remediation efforts conducted with the EPA under the Resource Conservation and Recovery Act (RCRA). As discussed in Note 10, Commitments and Contingencies, of the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K, Sparton has accrued its estimate of the minimum future non-discounted financial liability. The estimate was developed using existing technology and excludes legal and related consulting costs. The minimum cost estimate includes equipment, operating and monitoring costs for both onsite and offsite remediation. Sparton recognizes certain legal costs in the periods incurred and reviews its EPA accrual activity quarterly. 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. Factors which cause uncertainties for the Company include, but are not limited to, the effectiveness of the current work plans in achieving targeted results and proposals of regulatory agencies for desired methods and outcomes. It is possible that cash flows and results of operations could be materially affected by the impact of changes associated with the ultimate resolution of this contingency. At June 30, 2011, the Company estimates that it is reasonably possible, but not probable, that future environmental remediation
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costs associated with the Companys past operations at the Coors Road property, in excess of amounts already recorded and net of DOE reimbursement, could be up to $1.9 million before income taxes over the next approximately twenty years.
Government Contract Cost Estimates
Government production contracts are accounted for based on completed units accepted with respect to revenue recognition and their estimated average cost per unit regarding costs. Losses for the entire amount of the contract are recognized in the period when such losses are determinable. Significant judgment is exercised in determining estimated total contract costs including, but not limited to, cost experience to date, estimated length of time to contract completion, costs for materials, production labor and support services to be expended and known issues on remaining units to be completed. In addition, estimated total contract costs can be significantly affected by changing test routines and procedures, resulting design modifications and production rework from these changing test routines and procedures, and limited range access for testing these design modifications and rework solutions. Estimated costs developed in the early stages of contracts can change, sometimes significantly, as the contracts progress, and events and activities take place. Changes in estimates can also occur when new designs are initially placed into production. The Company formally reviews its costs incurred-to-date and estimated costs to complete on all significant contracts at least quarterly and revised estimated total contract costs are reflected in the financial statements. Advance billings in excess of inventoried costs are included in current liabilities. Depending upon the circumstances, it is possible that the Companys financial position, results of operations and cash flows could be materially affected by changes in estimated costs to complete on one or more significant government contracts.
Commercial Inventory Valuation
Valuation of commercial customer inventories requires a significant degree of judgment. These valuations are influenced by the Companys experience to date with both customers and other markets, prevailing market conditions for raw materials, contractual terms and customers ability to satisfy these obligations, environmental or technological materials obsolescence, changes in demand for customer products, and other factors resulting in acquiring materials in excess of customer product demand. Contracts with some commercial customers may be based upon estimated quantities of product manufactured for shipment over estimated time periods. Raw material inventories are purchased to fulfill these customer requirements. Within these arrangements, customer demand for products frequently changes, sometimes creating excess and obsolete inventories.
The Company regularly reviews raw material inventories by customer for both excess and obsolete quantities. Wherever possible, the Company attempts to recover its full cost of excess and obsolete inventories from customers or, in some cases, through other markets. When it is determined that the Companys carrying cost of such excess and obsolete inventories cannot be recovered in full, a charge is taken against income for the difference between the carrying cost and the estimated realizable amount. The Companys cost adjustments for excess and obsolete inventory is specific to individual parts. As a result, the adjustments create a new cost basis for those parts. The Company recorded inventory write-downs totaling approximately $0.2 million, $1.5 million and $3.0 million for the years ended June 30, 2011, 2010 and 2009, respectively. These charges are included in cost of goods sold for the periods presented. If inventory that has previously been impaired is subsequently sold, the amount of reduced cost basis is reflected as cost of goods sold. The Company experienced minimal subsequent sales of excess and obsolete inventory during the three years ended June 30, 2011 that resulted in higher gross margins due to previous write-downs. Such sales and the impact of those sales on gross margin were not material to the years presented. If assumptions the Company has used to value its inventory deteriorate in the future, additional write-downs may be required.
Allowance for Probable Losses on Receivables
The accounts receivable balance is recorded net of allowances for amounts not expected to be collected from customers. The allowance is estimated based on historical experience of write-offs, the level of past due
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amounts, information known about specific customers with respect to their ability to make payments, and future expectations of conditions that might impact the collectability of accounts. Accounts receivable are generally due under normal trade terms for the industry. Credit is granted, and credit evaluations are periodically performed, based on a customers financial condition and other factors. Although the Company does not generally require collateral, cash in advance or letters of credit may be required from customers in certain circumstances, including some foreign customers. When management determines that it is probable that an account will not be collected, it is charged against the allowance for probable losses. The Company reviews the adequacy of its allowance monthly. The allowance for doubtful accounts considered necessary was approximately $0.1 million and $0.5 million at June 30, 2011 and 2010, respectively. If the financial condition of customers were to deteriorate, resulting in an impairment of their ability to make payment, additional allowances may be required. Given the Companys significant balance of government receivables and letters of credit from foreign customers, collection risk is considered minimal. Historically, uncollectible accounts have generally been insignificant, have generally not exceeded managements expectations, and the allowance is deemed adequate.
Pension Obligations
The Company calculates the cost of providing pension benefits under the provisions of FASB Accounting Standards Codification (ASC) Topic 715, Compensation Retirement Benefits, (ASC Topic 715). The key assumptions required within the provisions of ASC Topic 715 are used in making these calculations. The most significant of these assumptions are the discount rate used to value the future obligations and the expected return on pension plan assets. The discount rate is consistent with market interest rates on high-quality, fixed income investments. The expected return on assets is based on long-term returns and assets held by the plan, which is influenced by historical averages. If actual interest rates and returns on plan assets materially differ from the assumptions, future adjustments to the financial statements would be required. While changes in these assumptions can have a significant effect on the pension benefit obligation and the unrecognized gain or loss accounts disclosed in the Notes to the Consolidated Financial Statements, the effect of changes in these assumptions is not expected to have the same relative effect on net periodic pension expense in the near term. While these assumptions may change in the future based on changes in long-term interest rates and market conditions, there are no known expected changes in these assumptions as of June 30, 2011. As indicated above, to the extent the assumptions differ from actual results, there would be a future impact on the financial statements. The extent to which this will result in future expense is not determinable at this time as it will depend upon a number of variables, including trends in interest rates and the actual return on plan assets. The annual actuarial valuation of the pension plan is completed at the end of each fiscal year. Based on these valuations, net periodic pension expense prior to curtailment and settlement expenses for fiscal 2011 was calculated to be $0.2 million compared to $0.5 million and $1.0 million for fiscal 2010 and fiscal 2009, respectively.
Effective April 1, 2009, participation and the accrual of benefits in the Companys pension plan were frozen, at which time all participants became fully vested. As a result of this freeze, an approximate $0.3 million curtailment charge was recognized during the year ended June 30, 2009, related to the acceleration of all remaining prior service costs previously being amortized over future periods. In addition, lump-sum benefit distributions during fiscal 2011, fiscal 2010 and fiscal 2009 exceeded plan service and interest costs, resulting in lump-sum settlement charges of approximately $0.1million, $0.8 million and $1.1 million also being recognized during the respective years. These settlement charges resulted from several business and economic factors that have affected the measurement of the plans projected benefit obligation in recent years, including the recent management actions described above, changes in the plans benefit formula, the timing of participants retirement, changes in assumed interest rates, variation in investment returns, and the amounts of lump-sum distributions paid. The components of net periodic pension expense are detailed in Note 9, Employee Retirement Benefit Plans, of the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K.
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Business Combinations
The Company accounts for business combinations under the acquisition method of accounting in accordance with ASC Topic 805, Business Combinations. Accordingly, the Company recognizes amounts for identifiable assets acquired and liabilities assumed equal to their estimated acquisition date fair values. Transaction and integration costs associated with business combinations are expensed as incurred. Any excess of the acquisition price over the estimated fair value of net assets acquired is recorded as goodwill while any excess of the estimated fair value of net assets acquired over the acquisition price is recorded in current earnings as a gain.
The Company makes various assumptions in estimating the fair values of assets acquired and liabilities assumed. As fair value is a market-based measurement, it is determined based on the assumptions that market participants would use. The most significant assumptions typically relate to the estimated fair values of inventory and intangible assets, including customer lists and non-compete agreements. Management arrives at estimates of fair value based upon assumptions it believes to be reasonable. These estimates are based on historical experience and information obtained from the management of the acquired business and is inherently uncertain. Critical estimates in valuing certain intangible assets include but are not limited to: future expected discounted cash flows from customer relationships and contracts assuming similar product platforms and completed projects; the acquired companys market position, as well as assumptions about the period of time the acquired customer relationships will continue to generate revenue streams; and attrition and discount rates. Unanticipated events and circumstances may occur which may affect the accuracy or validity of such assumptions, estimates or actual results, particularly with respect to amortization periods assigned to identifiable intangible assets.
Valuation of Property, Plant and Equipment
The Company records an impairment charge on our investment in property, plant and equipment that we hold and use in our operations if and when management determines that the related carrying values may not be recoverable. If one or more impairment indicators are deemed to exist, Sparton will measure any impairment of these assets based on current independent appraisals or a projected discounted cash flow analysis using a discount rate determined by management to be commensurate with the risk inherent in our business model. Our estimates of cash flows require significant judgment based on our historical and anticipated operating results and are subject to many factors.
During the years ended June 30, 2010 and 2009, the Company recognized impairment charges of approximately $1.4 million and $2.1 million, respectively, related to the restructuring related activities, primarily related to the closures of the Companys Jackson, Michigan, London, Ontario, Canada and Albuquerque, New Mexico facilities.
Goodwill and Intangible Assets
The Company tests for possible goodwill impairment annually or more often should events or changes in circumstances indicate the carry value of the goodwill may not be recoverable. The test is conducted at the reporting unit level. Sparton has three reportable business segments (Medical, Complex Systems, and DSS). Complex Systems and DSS each consist of a single reporting unit. Medical, within which all of the Companys goodwill resides, consists of two reporting units: (i) the Companys Ohio business purchased from Astro during fiscal 2006 and holding the goodwill related to the Astro purchase; and (ii) the Companys Colorado businesses acquired from Delphi and Byers Peak during fiscal 2011 and holding the goodwill related to the Byers Peak acquisition. For fiscal 2011, goodwill impairment testing was conducted on these two Medical segment reporting units. The impairment analysis is a two step process. The first step is to identify a potential impairment by comparing the fair value of a reporting unit with its carrying value. If the fair value of the reporting unit exceeds the carrying value of the net assets assigned to the reporting unit, goodwill is considered not impaired and the Company is not required to perform further testing. If the carrying value of the net assets assigned to the reporting unit exceeds the fair value of the reporting unit, then management will perform the second step of the
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impairment test in order to determine the implied fair value of the goodwill of the reporting unit. If the carrying value of a reporting units goodwill exceeds its implied fair value, then the Company would record an impairment loss equal to the difference.
Sparton determines the fair value of its reporting units, with the assistance of an independent valuation firm, based upon a combination of the income approach (discounted cash flow method) and market approach (market comparable model) methodologies. In concluding on the fair value estimates of its reporting units, the income approach is given a 75% weighting and the market approach is given a 25% weighting based on the quality and suitability of information available in performing the income approach, relative to the market approach.
The income approach methodology utilized in estimating the fair value of the Companys reporting units for purposes of the goodwill impairment testing requires various judgmental assumptions about revenues, operating margins, growth rates, working capital requirements and appropriate discount rate. In determining those judgmental assumptions, Sparton considers a variety of data, including, for each reporting unit, its annual budget for the upcoming year, its longer-term business plan, anticipated future cash flows, market data, and historical cash flow growth rates. The key assumptions used to estimate the fair value of the Companys reporting units under the discounted cash flow method are: (i) projected revenue growth over a five-year period; (ii) projected operating margins over a five-year period; (iii) projected terminal growth rate; and (iv) a weighted-average cost of capital.
Under the market approach, the value of each of the Companys reporting units is estimated by comparing it to publicly-traded firms in similar lines of business and geographic markets. The market approach takes into account, among other things, the market value of total invested capital to earnings before interest, taxes, depreciation and amortization (EBITDA) multiples of comparable companies. The selected multiples are then applied to the reporting units projected EBITDA to arrive at an indicated range of value.
The Companys fiscal 2011 annual test of goodwill related to its Colorado reporting unit did not indicate that the related goodwill was impaired. The Company determined that the fair value of the reporting unit substantially exceeded its carrying value, having exceeded its carrying value by approximately 126%.
The Companys fiscal 2010 annual test of goodwill related to its Ohio reporting unit did not indicate that the related goodwill was impaired. The Company determined at that time that the fair value of the reporting unit substantially exceeded its carrying value, having exceeded its carrying value by approximately 30%. The Companys fiscal 2011 annual test of goodwill related to its Ohio reporting unit did indicate that the related goodwill was impaired. The Company determined that the carrying value of the reporting unit exceeded its fair value, requiring Sparton to compare the carrying value of this goodwill to its implied fair value, which resulted in a non-cash impairment charge of approximately $13.2 million being recorded during the fourth quarter of fiscal 2011 to record this asset at its fair value of $6.0 million.
The drop in fair value between fiscal 2010 and fiscal 2011 reflects various downward trends in volume within the Companys Ohio reporting unit, which was acquired in fiscal 2006, including the impact of a customer disengagement and Siemens fiscal 2011 fourth quarter notification of its intent to dual source certain programs with us as part of an overall dual sourcing strategy for certain of its critical programs. The Companys assumptions used to estimate the fair value of the Medical segments Ohio reporting unit in fiscal 2011 reflect the Companys current outlook for this reporting unit and reflect the effects of the events and uncertainties mentioned above, including but not limited to, lower expected revenues and lower expected operating margins than reflected in the Companys fiscal 2010 goodwill impairment analysis. Determining the fair value of any reporting unit and intangible asset is judgmental in nature and involves the use of significant estimates and assumptions. The Company bases its fair value estimates on assumptions believed to be reasonable, but which are unpredictable and inherently uncertain. Actual future results may differ from those estimates. Circumstances that may lead to future impairment of goodwill include, but are not limited to, unforeseen decreases in future performance or industry demand, as well as further loss of a significant customer or program in excess of future incremental new business wins. The next annual goodwill impairment reviews are expected to be performed during the fourth quarter of fiscal 2012.
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The Companys intangible assets other than goodwill represent the values assigned to customer relationships acquired in conjunction with the Companys purchases of Astro and Byers Peak and values assigned to non-compete agreements acquired in conjunction with the Companys purchase of Byers Peak. All of the Companys intangible assets are included within the Medical segment. The impairment test for these intangible assets is conducted when impairment indicators are present. The Company continually evaluates whether events or circumstances have occurred that would indicate the remaining estimated useful lives of its intangible assets warrant revision or that the remaining balance of such assets may not be recoverable. The Company uses an estimate of the related undiscounted cash flows over the remaining life of the asset in measuring whether the asset is recoverable. If the carrying amount of an asset exceeds its estimated undiscounted future cash flows, an impairment charge would be recognized for the amount that the carrying amount of the asset exceeds the fair value of the asset.
As noted above, during the fourth quarter of fiscal 2011, the Company was notified by Siemens that it intends to dual source two of its larger programs with the Company beginning in fiscal 2012. Siemens was acquired as a customer in conjunction with the Companys purchase of Astro and as such Sparton considered Siemens dual sourcing of these two programs to be an impairment indicator requiring impairment review of the related intangible asset. This impairment review, which was conducted during the fourth quarter of fiscal 2011, concluded that the carrying value of this intangible asset was not fully recoverable and consequently a non-cash impairment charge of approximately $3.7 million was recorded during the fourth quarter of fiscal 2011 to record this asset at its fair value of $0.7 million. The other business events and uncertainties described above in relation to the Medical segments Ohio reporting unit were also contributing factors to the Astro customer relationship impairment charge. As part of the impairment review, the estimated remaining useful life of this asset was evaluated with the Company determining that no change was warranted.
During fiscal 2011 and in previous years, the customer relationships acquired in conjunction with the Companys purchase of Astro have been amortizing on a straight-line basis over 15 years. The straight-line method has been used to amortize these identified intangible assets because the Company believed that the expected undiscounted cash flows were reasonably consistent with a ratable decline in value over time. Beginning in fiscal 2012, the remaining customer relationships acquired in conjunction with the Companys purchase of Astro will be amortized using an accelerated methodology on its remaining life as the Company now believes that this more reasonably reflects the expected future undiscounted cash flows of the asset. The customer relationships acquired in conjunction with the Companys purchase of Byers Peak are also being amortized using an accelerated methodology over ten years. The Companys non-compete agreements are being amortized on a straight-line basis over two years as the ratable decline in value over time is most consistent with the contractual nature of these assets.
Income Taxes
As part of the process of preparing our consolidated financial statements we are required to estimate our taxes in each of the jurisdictions in which we operate. This process involves management estimating the actual current tax expense together with assessing temporary differences resulting from differing treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included within the consolidated balance sheets. We must then assess the likelihood that the deferred tax assets will be recovered from future taxable income and to the extent recovery is not likely, we must establish a valuation allowance. Future taxable income depends on the ability to generate income in excess of allowable deductions. To the extent we establish a valuation allowance or change this allowance in a period, an expense/benefit is recorded within the tax provision in the consolidated statement of operations.
In 2010 and 2009, the Company recorded valuation allowances against substantially all of its net deferred tax assets as management believed that the realization of the deferred tax assets related to the net operating loss carryovers and the other net temporary timing differences while possible, was not more likely than not. In 2011, the Company restored a large portion of the deferred tax assets as the Company now believes that the realization
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of the remaining net operating loss carryovers and the other net temporary timing differences is more likely than not, based on achieved levels of profitability over the past two fiscal years combined with the expectation of future profitability. In making these decisions to both record a valuation allowance and restore the net deferred tax assets, the Company considered all available positive and negative evidence, including future reversals of taxable temporary differences, projected future taxable income, tax planning strategies, and recent financial results.
Significant management judgment is required in determining our provision for income taxes, our deferred tax assets and liabilities and any valuation allowance recorded against net deferred tax assets. In the event that actual results differ from these estimates or we adjust these estimates in future periods, we may need to change the valuation allowance that could materially impact our financial condition and results of operations.
In addition, significant judgment and estimates would be required in determining how to account for uncertain tax positions the Company might take in the next twelve months. The Company believes its income tax filing positions and deductions will be sustained on audit and does not anticipate any adjustments that will result in a material adverse effect on the Companys financial condition, results of operations or cash flow. Pursuant to FASB ASC Topic 740, no liability has been recorded for uncertain tax positions.
Stock-Based Compensation
ASC Topic 718, Share-Based Payment, requires significant judgment and the use of estimates in the assumptions for the model used to value the share-based payment awards, including stock price volatility, and expected option terms. In addition, expected forfeiture rates for the share-based awards must be estimated. Because of our small number of option grants during our history, we are limited in our historical experience to use as a basis for these assumptions. While we believe that the assumptions and judgments used in our estimates are reasonable, actual results may differ from these estimates under different assumptions or conditions.
New Accounting Pronouncements
In July 2010, the FASB issued Accounting Standards Update (ASU) No. 2010-20, Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses, (ASU 2010-20). This update enhances the disclosure requirements about the credit quality and related allowance for credit losses of financing receivables. ASU 2010-20 was effective for Sparton in the second quarter of fiscal 2011. The adoption of this disclosure guidance did not have a significant impact on the Companys consolidated financial statements.
In December 2010, the FASB issued ASU No. 2010-29, Business Combinations (Topic 805): Disclosure of Supplementary Pro Forma Information for Business Combinations, which specifies that when a public company completes a business combination(s), the company should disclose revenue and earnings of the combined entity as though the business combination(s) occurred as of the beginning of the comparable prior annual reporting period. This standard also expands the supplemental pro forma disclosures under Topic 805 to include a description of the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included in the pro forma revenue and earnings. The requirements in this standard are effective for business combinations that occur on or after the beginning of the first annual reporting period beginning on or after December 15, 2010. The Company will apply the provisions of ASU 2010-29 on a prospective basis. The adoption of this guidance is not expected to have a significant impact on the Companys consolidated financial statements.
In May 2011, the FASB issued ASU No. 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs, which is intended to improve comparability of fair value measurements presented and disclosed in financial statements prepared in accordance with U.S. generally accepted accounting principles and International Financial Reporting Standards. This standard clarifies the application of existing fair value measurement requirements including
48
(1) the application of the highest and best use valuation premise, (2) the methodology to measure the fair value of an instrument classified in a reporting entitys shareholders equity, (3) disclosure requirements for quantitative information on Level 3 fair value measurements and (4) guidance on measuring the fair value of financial instruments managed within a portfolio. In addition, the standard requires additional disclosures of the sensitivity of fair value to changes in unobservable inputs for Level 3 securities. This standard is effective for interim and annual reporting periods ending on or after December 15, 2011. The adoption of this guidance is not expected to have a significant impact on the Companys consolidated financial statements.
In June 2011, the FASB issued ASU No. 2011-05, Presentation of Comprehensive Income, which requires that comprehensive income be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The standard also requires entities to disclose on the face of the financial statements reclassification adjustments for items that are reclassified from other comprehensive income to net earnings. This standard no longer allows companies to present components of other comprehensive income only in the statement of equity. This standard is effective for interim and annual reporting periods ending on or after December 15, 2011. The adoption of this guidance is not expected to have a significant impact on the Companys consolidated financial statements other than the prescribed change in presentation.
ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
The Company manufactures its products in the United States and Vietnam. We ceased manufacturing in Canada during the fourth quarter of fiscal 2009. Sales are to the U.S. as well as other foreign markets. The Company is potentially subject to foreign currency exchange rate risk relating to intercompany activity and balances and to receipts from customers and payments to suppliers in foreign currencies. Also, adjustments related to the translation of the Companys Vietnamese financial statements into U.S. dollars are included in current earnings. As a result, the Companys financial results could be affected by factors such as changes in foreign currency exchange rates or economic conditions in the domestic and foreign markets in which the Company operates. However, minimal third party receivables and payables are denominated in foreign currency and the related market risk exposure is considered to be immaterial. Historically, foreign currency gains and losses related to intercompany activity and balances have not been significant. However, due to the greater volatility of the Canadian dollar, the impact of transaction and translation losses increased in fiscal 2009. With the closure of the Canadian facility, however, the impact in fiscal 2011 and fiscal 2010 has not been significant and it is anticipated that future periods will not be significant.
The Companys revolving credit line, if drawn upon, is subject to future interest rate fluctuations which could potentially have a negative impact on cash flows of the Company. The Company is not party to any currency exchange or interest rate protection agreements as of June 30, 2011.
ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA |
Our financial statements required by this item are submitted as a separate section of this Annual Report on Form 10-K. See Index to Consolidated Financial Statements, commencing on page F-1 hereof.
ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE |
None.
49
ITEM 9A. | CONTROLS AND PROCEDURES |
Evaluation of Disclosure Controls and Procedures
Each of our Chief Executive Officer and Chief Financial Officer has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934) as of the end of the period covered by this Annual Report. Based on such evaluation, such officers have concluded that, as of the end of the period covered by this Annual Report, our disclosure controls and procedures are effective.
There have been no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities and Exchange Act of 1934) during the quarter ended June 30, 2011 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
50
Management Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control system was designed to provide reasonable assurance to our management and board of directors regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
Any internal control system, no matter how well designed, has inherent limitations and may not prevent or detect misstatements. Accordingly, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
We acquired Byers Peak, Incorporated (Byers Peak) on March 4, 2011. Because of the late date of the acquisition within the Companys fiscal year, management was unable to perform the necessary level of documentation and testing to provide a formal report assessing the effectiveness of Byers Peaks internal control over financial reporting. Therefore, management has excluded from the evaluation of internal control over financial reporting the internal controls of Byers Peak as permitted by Securities and Exchange Commission Staff interpretive guidance for newly acquired businesses.
Our management conducted an assessment of the effectiveness of our internal control over financial reporting as of June 30, 2011. This assessment was based on the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission, or COSO, in Internal Control Integrated Framework. Based on this assessment, management believes that, as of June 30, 2011, our internal control over financial reporting was effective.
BDO USA, LLP, our independent registered public accounting firm, issued an attestation report on the effectiveness of our internal control over financial reporting. Their report appears below.
/S/ CARY B. WOOD |
/S/ GREGORY A. SLOME | |||
Cary B. Wood President and Chief Executive Officer September 7, 2011 |
Gregory A. Slome Senior Vice President and Chief Financial Officer September 7, 2011 |
51
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of
Sparton Corporation
Schaumburg, Illinois
We have audited Sparton Corporations internal control over financial reporting as of June 30, 2011, based on criteria established in Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Sparton Corporations management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Item 9A, Management Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Companys internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A companys internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A companys internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the companys assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
As indicated in the accompanying Item 9A, Management Report on Internal Control over Financial Reporting, managements assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of Byers Peak, Incorporated (Byers Peak), which was acquired on March 4, 2011, and which is included in the consolidated balance sheet of Sparton Corporation as of June 30, 2011, and the related consolidated statements of operations, cash flows and shareholders equity for the year then ended. Byers Peak constituted 1.6% and 0.8% of net sales and net income, respectively, for the year then ended. Management did not assess the effectiveness of internal control over financial reporting of Byers Peak because of the timing of the acquisition which was completed on March 4, 2011. Our audit of internal control over financial reporting of Sparton Corporation also did not include an evaluation of the internal control over financial reporting of Byers Peak.
In our opinion, Sparton Corporation maintained, in all material respects, effective internal control over financial reporting as of June 30, 2011, based on the COSO criteria.
52
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Sparton Corporation as of June 30, 2011 and 2010, and the related consolidated statements of operations, cash flows and shareholders equity for each of the three years in the period ended June 30, 2011, and our report dated September 7, 2011 expressed an unqualified opinion thereon.
/s/ BDO USA, LLP
Grand Rapids, Michigan
September 7, 2011
ITEM 9B. | OTHER INFORMATION |
None.
53
ITEM 10. | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE |
Directors and Executive Officers of the Registrant Information with respect to directors is included in the Companys Proxy Statement for the 2011 Annual Meeting of Shareholders under Election of Directors and is incorporated herein by reference. Information concerning executive officers is set forth in Part I, Item 1 of this Annual Report on Form 10-K.
Audit Committee Financial Expert Information with respect to the audit committee financial expert is included in the Companys Proxy Statement for the 2011 Annual Meeting of Shareholders under the heading Corporate Governance and Board Matters Board Leadership Structure and Board and Committee Information and is incorporated herein by reference.
Identification and Composition of the Audit Committee Information with respect to the identification and composition of the audit committee is included in the Companys Proxy Statement for the 2011 Annual Meeting of Shareholders under the heading Corporate Governance and Board Matters Board Leadership Structure and Board and Committee Information and is incorporated herein by reference.
Compliance with Section 16(a) of the Exchange Act Information with respect to the compliance with Section 16(a) of the Exchange Act is included in the Companys Proxy Statement under the heading Section 16(a) Beneficial Ownership Reporting Compliance and is incorporated herein by reference.
Code of Business Conduct and Ethics Information with respect to the Companys Corporate Governance Guidelines and the Code of Business Conduct and Ethics (which applies to all officers and employees of the Company) is available at the Companys website www.sparton.com under the heading Investor Relations. This information is also available free of charge upon request from the Companys Shareholder Relations department at the corporate address. The Companys Code of Ethics as currently in effect (together with any amendments that may be adopted from time to time) is posted on the website. To the extent any waiver is granted with respect to the Code of Ethics that requires disclosure under applicable SEC rules, such waiver will also be posted on the website.
ITEM 11. | EXECUTIVE COMPENSATION |
The information required by Item 11 is included in the Companys Proxy Statement for the 2011 Annual Meeting of Shareholders under the heading Executive Officer and Director Compensation and is incorporated herein by reference.
ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS |
Information on ownership of the Companys common stock by management and certain other beneficial owners is included under Principal Shareholders and Security Ownership of Management in our Proxy Statement relating to our 2011 Annual Meeting of Shareholders and is incorporated herein by reference.
Information with respect to the Companys equity compensation plans is included in the Companys Proxy Statement for the 2011 Annual Meeting of Shareholders under Executive Officer and Director Compensation and is incorporated herein by reference.
54
ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE |
The information required by Item 13 is included in the Companys Proxy Statement for the 2011 Annual Meeting of Shareholders under Certain Relationships and Related Person Transactions and is incorporated herein by reference.
ITEM 14. | PRINCIPAL ACCOUNTING FEES AND SERVICES |
The information required by Item 14 is included in the Companys Proxy Statement under Advisory Vote on Appointment of Independent Registered Public Accountants and is incorporated herein by reference.
55
ITEM 15. | EXHIBITS, FINANCIAL STATEMENT SCHEDULES |
(a) | The following documents are filed as part of this Annual Report on Form 10-K: |
1. | Financial Statements |
See the Index to Consolidated Financial Statements on page F-1.
2. | Financial Statement Schedules. |
See the Index to Consolidated Financial Statements on page F-1
3. | See the Exhibit Index following the financial statements. |
(b) | See the Exhibit Index following the financial statements. |
(c) | Financial Statement Schedules. See (a) 2 above. |
56
Pursuant to the requirements of Section 13 or 15(d) 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 | ||
By: |
/S/ CARY B. WOOD | |
Cary B. Wood President and Chief Executive Officer | ||
Date: September 7, 2011 |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Name |
Title |
Date | ||
/S/ DAVID P. MOLFENTER David P. Molfenter |
Director, Chairman of the Board of Directors |
September 7, 2011 | ||
/S/ CARY B. WOOD Cary B. Wood |
Director, President and |
September 7, 2011 | ||
/S/ JAMES D. FAST James D. Fast |
Director |
September 7, 2011 | ||
/S/ JOSEPH J. HARTNETT Joseph J. Hartnett |
Director |
September 7, 2011 | ||
/S/ WILLIAM I. NOECKER William I. Noecker |
Director |
September 7, 2011 | ||
/S/ DOUGLAS R. SCHRANK Douglas R. Schrank |
Director |
September 7, 2011 | ||
/S/ W. PETER SLUSSER W. Peter Slusser |
Director |
September 7, 2011 | ||
/S/ JAMES R. SWARTWOUT James R. Swartwout |
Director |
September 7, 2011 | ||
/S/ GREGORY A. SLOME Gregory A. Slome |
Senior Vice President and |
September 7, 2011 |
57
SPARTON CORPORATION AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of
Sparton Corporation
Schaumburg, Illinois
We have audited the accompanying consolidated balance sheets of Sparton Corporation and subsidiaries as of June 30, 2011 and 2010, and the related consolidated statements of operations, cash flows and shareholders equity for each of the three years in the period ended June 30, 2011. In connection with our audits of the financial statements, we have also audited the financial statement schedule listed in the accompanying index. These financial statements and schedule are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and schedule. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Sparton Corporation and subsidiaries as of June 30, 2011 and 2010, and the results of its operations and its cash flows for each of the three years in the period ended June 30, 2011, in conformity with accounting principles generally accepted in the United States of America.
Also, in our opinion, the financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Sparton Corporations internal control over financial reporting as of June 30, 2011, based on criteria established in Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated September 7, 2011 expressed an unqualified opinion thereon.
/s/ BDO USA, LLP
Grand Rapids, Michigan
September 7, 2011
F-2
SPARTON CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
June 30, 2011 |
June 30, 2010 |
|||||||
Assets | ||||||||
Current Assets: |
||||||||
Cash and cash equivalents |
$ | 24,550 | $ | 30,589 | ||||
Restricted cash |
| 3,162 | ||||||
Accounts receivable, net of allowance for doubtful accounts of $65 and $532, respectively |
23,896 | 17,967 | ||||||
Inventories and cost of contracts in progress, net |
38,752 | 26,514 | ||||||
Income taxes receivable |
305 | 296 | ||||||
Deferred income taxes |
4,417 | 57 | ||||||
Property held for sale |
| 3,900 | ||||||
Prepaid expenses and other current assets |
1,491 | 1,449 | ||||||
|
|
|
|
|||||
Total current assets |
93,411 | 83,934 | ||||||
Property, plant and equipment, net |
11,395 | 8,924 | ||||||
Goodwill |
7,472 | 19,141 | ||||||
Other intangible assets, net |
2,053 | 4,803 | ||||||
Deferred income taxes non-current |
5,740 | | ||||||
Other non-current assets |
2,538 | 3,059 | ||||||
|
|
|
|
|||||
Total assets |
$ | 122,609 | $ | 119,861 | ||||
|
|
|
|
|||||
Liabilities and Shareholders Equity | ||||||||
Current Liabilities: |
||||||||
Current portion of long-term debt |
$ | 126 | $ | 121 | ||||
Accounts payable |
16,608 | 13,045 | ||||||
Accrued salaries and wages |
5,626 | 5,737 | ||||||
Accrued health benefits |
980 | 989 | ||||||
Current portion of pension liability |
306 | 1,139 | ||||||
Restructuring accrual |
118 | 233 | ||||||
Advance billings on customer contracts |
13,021 | 21,595 | ||||||
Other accrued expenses |
5,303 | 3,345 | ||||||
|
|
|
|
|||||
Total current liabilities |
42,088 | 46,204 | ||||||
Deferred income taxes non-current |
| 1,579 | ||||||
Pension liability non-current portion |
41 | 1,980 | ||||||
Long-term debt non-current portion |
1,670 | 1,796 | ||||||
Environmental remediation non-current portion |
3,763 | 4,033 | ||||||
|
|
|
|
|||||
Total liabilities |
47,562 | 55,592 | ||||||
|
|
|
|
|||||
Commitments and contingencies |
||||||||
Shareholders Equity: |
||||||||
Preferred stock, no par value; 200,000 shares authorized; none outstanding |
| | ||||||
Common stock, $1.25 par value; 15,000,000 shares authorized, 10,236,484 and 10,200,534 shares outstanding, respectively |
12,796 | 12,751 | ||||||
Capital in excess of par value |
20,635 | 19,864 | ||||||
Retained earnings |
42,487 | 35,026 | ||||||
Accumulated other comprehensive loss |
(871 | ) | (3,372 | ) | ||||
|
|
|
|
|||||
Total shareholders equity |
75,047 | 64,269 | ||||||
|
|
|
|
|||||
Total liabilities and shareholders equity |
$ | 122,609 | $ | 119,861 | ||||
|
|
|
|
See Notes to consolidated financial statements.
F-3
SPARTON CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except share data)
For the Year Ended June 30, | ||||||||||||
2011 | 2010 | 2009 | ||||||||||
Net sales |
$ | 203,352 | $ | 173,977 | $ | 221,871 | ||||||
Cost of goods sold |
170,184 | 147,394 | 205,985 | |||||||||
|
|
|
|
|
|
|||||||
Gross profit |
33,168 | 26,583 | 15,886 | |||||||||
|
|
|
|
|
|
|||||||
Operating expense: |
||||||||||||
Selling and administrative expenses |
20,842 | 18,205 | 18,851 | |||||||||
Internal research and development expenses |
1,110 | | | |||||||||
Amortization of intangible assets |
545 | 467 | 492 | |||||||||
Restructuring/impairment charges |
75 | 4,076 | 7,008 | |||||||||
Gain on acquisition |
(2,550 | ) | | | ||||||||
Gain on sale of property, plant and equipment, net |
(139 | ) | (3,119 | ) | (10 | ) | ||||||
Impairment of intangible asset |
3,663 | | | |||||||||
Impairment of goodwill |
13,153 | | | |||||||||
Other operating expenses |
298 | 1,232 | 802 | |||||||||
|
|
|
|
|
|
|||||||
Total operating expense |
36,997 | 20,861 | 27,143 | |||||||||
|
|
|
|
|
|
|||||||
Operating income (loss) |
(3,829 | ) | 5,722 | (11,257 | ) | |||||||
Other income (expense): |
||||||||||||
Interest expense |
(706 | ) | (844 | ) | (1,568 | ) | ||||||
Interest income |
151 | 85 | 28 | |||||||||
Gain on sale of investment |
| 201 | | |||||||||
Canadian translation adjustment |
5 | (23 | ) | (1,483 | ) | |||||||
Other, net |
436 | 383 | 314 | |||||||||
|
|
|
|
|
|
|||||||
Total other expense, net |
(114 | ) | (198 | ) | (2,709 | ) | ||||||
|
|
|
|
|
|
|||||||
Income (loss) before provision for (benefit from) income taxes |
(3,943 | ) | 5,524 | (13,966 | ) | |||||||
Provision for (benefit from) income taxes |
(11,404 | ) | (1,916 | ) | 1,787 | |||||||
|
|
|
|
|
|
|||||||
Net income (loss) |
$ | 7,461 | $ | 7,440 | $ | (15,753 | ) | |||||
|
|
|
|
|
|
|||||||
Income (loss) per share of common stock: |
||||||||||||
Basic |
$ | 0.73 | $ | 0.75 | $ | (1.61 | ) | |||||
|
|
|
|
|
|
|||||||
Diluted |
$ | 0.73 | $ | 0.75 | $ | (1.61 | ) | |||||
|
|
|
|
|
|
|||||||
Weighted average shares of common stock outstanding: |
||||||||||||
Basic |
10,217,494 | 9,972,409 | 9,811,635 | |||||||||
|
|
|
|
|
|
|||||||
Diluted |
10,255,368 | 9,972,409 | 9,811,635 | |||||||||
|
|
|
|
|
|
See Notes to consolidated financial statements.
F-4
SPARTON CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
For the Year Ended June 30, | ||||||||||||
2011 | 2010 | 2009 | ||||||||||
Cash Flows from Operating Activities: |
||||||||||||
Net income (loss) |
$ | 7,461 | $ | 7,440 | $ | (15,753 | ) | |||||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: |
||||||||||||
Depreciation and amortization |
1,611 | 1,463 | 1,886 | |||||||||
Deferred income tax expense (benefit) |
(11,276 | ) | 418 | 1,883 | ||||||||
Pension expense |
372 | 1,331 | 2,451 | |||||||||
Stock-based compensation expense |
646 | 505 | 196 | |||||||||
Non-cash restructuring/impairment charges |
| 2,129 | 2,112 | |||||||||
Gain on acquisition |
(2,550 | ) | | | ||||||||
Gain on sale of property, plant and equipment, net |
(139 | ) | (3,119 | ) | (10 | ) | ||||||
Gain on sale of investment |
| (201 | ) | | ||||||||
Impairment of intangible asset |
3,663 | | | |||||||||
Impairment of goodwill |
13,153 | | | |||||||||
Excess tax benefit from stock-based compensation |
(145 | ) | | | ||||||||
Other |
348 | 275 | 429 | |||||||||
Changes in operating assets and liabilities, net of business acquisitions: |
||||||||||||
Accounts receivable |
(4,595 | ) | 20,196 | (7,944 | ) | |||||||
Income taxes receivable |
(9 | ) | (296 | ) | | |||||||
Inventories and cost of contracts in progress |
77 | 11,921 | 24,838 | |||||||||
Prepaid expenses and other assets |
140 | 689 | 804 | |||||||||
Advance billings on customer contracts |
(8,574 | ) | (3,508 | ) | 25,102 | |||||||
Accounts payable and accrued expenses |
2,273 | (19,387 | ) | 2,316 | ||||||||
|
|
|
|
|
|
|||||||
Net cash provided by operating activities |
2,456 | 19,856 | 38,310 | |||||||||
|
|
|
|
|
|
|||||||
Cash Flows from Investing Activities: |
||||||||||||
Purchase of certain assets of Delphi Medical |
(8,419 | ) | | | ||||||||
Purchase of certain assets of Byers Peak |
(4,140 | ) | | | ||||||||
Additional goodwill from Astro acquisition |
| (2,476 | ) | (1,057 | ) | |||||||
Change in restricted cash |
3,162 | (3,162 | ) | | ||||||||
Purchases of property, plant and equipment |
(3,177 | ) | (1,535 | ) | (1,227 | ) | ||||||
Proceeds from sale of property, plant and equipment |
4,039 | 3,057 | 48 | |||||||||
Proceeds from sale of investment |
| 525 | | |||||||||
Other |
| | 4 | |||||||||
|
|
|
|
|
|
|||||||
Net cash used in investing activities |
(8,535 | ) | (3,591 | ) | (2,232 | ) | ||||||
|
|
|
|
|
|
|||||||
Cash Flows from Financing Activities: |
||||||||||||
Net short-term bank borrowings (repayments) |
| (15,500 | ) | 2,000 | ||||||||
Repayments of long-term debt |
(130 | ) | (5,551 | ) | (4,630 | ) | ||||||
Payment of debt financing costs |
| (886 | ) | (115 | ) | |||||||
Proceeds from the exercise of stock options |
25 | | | |||||||||
Excess tax benefit from stock-based compensation |
145 | | | |||||||||
|
|
|
|
|
|
|||||||
Net cash provided by (used in) financing activities |
40 | (21,937 | ) | (2,745 | ) | |||||||
|
|
|
|
|
|
|||||||
Net increase (decrease) in cash and cash equivalents |
(6,039 | ) | (5,672 | ) | 33,333 | |||||||
Cash and cash equivalents at beginning of year |
30,589 | 36,261 | 2,928 | |||||||||
|
|
|
|
|
|
|||||||
Cash and cash equivalents at end of year |
$ | 24,550 | $ | 30,589 | $ | 36,261 | ||||||
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|
|
|
|||||||
Supplemental disclosure of cash flow information: |
||||||||||||
Cash paid for interest |
$ | 365 | $ | 535 | $ | 1,494 | ||||||
|
|
|
|
|
|
|||||||
Cash paid (received) for income taxes |
$ | (94 | ) | $ | (2,039 | ) | $ | 243 | ||||
|
|
|
|
|
|
|||||||
Supplemental disclosure of non-cash investing activities: |
||||||||||||
Accrued expenses incurred for the acquisition of Astro |
$ | | $ | | $ | 1,029 | ||||||
|
|
|
|
|
|
See Notes to consolidated financial statements.
F-5
SPARTON CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
(Dollars in thousands, except share data)
Common Stock | Capital In Excess of Par Value |
Retained Earnings |
Accumulated Other Comprehensive Loss |
Total Shareholders Equity |
||||||||||||||||||||
Shares | Amount | |||||||||||||||||||||||
Balance at June 30, 2008 |
9,811,507 | $ | 12,264 | $ | 19,650 | $ | 43,593 | $ | (4,647 | ) | $ | 70,860 | ||||||||||||
Issuance of stock |
140,000 | 175 | (175 | ) | | | | |||||||||||||||||
Stock-based compensation expense |
| | 196 | | | 196 | ||||||||||||||||||
Effect of changing the pension plan measurement date, net of tax |
| | | (254 | ) | (144 | ) | (398 | ) | |||||||||||||||
Comprehensive loss, net of tax: |
||||||||||||||||||||||||
Net loss |
| | | (15,753 | ) | | (15,753 | ) | ||||||||||||||||
Change in unrecognized pension costs |
| | | | (10 | ) | (10 | ) | ||||||||||||||||
|
|
|||||||||||||||||||||||
Comprehensive loss |
(15,763 | ) | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Balance at June 30, 2009 |
9,951,507 | 12,439 | 19,671 | 27,586 | (4,801 | ) | 54,895 | |||||||||||||||||
Issuance of stock |
249,027 | 312 | (312 | ) | | | | |||||||||||||||||
Stock-based compensation expense |
| | 505 | | | 505 | ||||||||||||||||||
Comprehensive income, net of tax: |
||||||||||||||||||||||||
Net income |
| | | 7,440 | | 7,440 | ||||||||||||||||||
Change in unrecognized pension costs |
| | | | 1,429 | 1,429 | ||||||||||||||||||
|
|
|||||||||||||||||||||||
Comprehensive income |
8,869 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Balance at June 30, 2010 |
10,200,534 | 12,751 | 19,864 | 35,026 | (3,372 | ) | 64,269 | |||||||||||||||||
Issuance of stock |
30,950 | 39 | (39 | ) | | | | |||||||||||||||||
Exercise of stock options |
5,000 | 6 | 19 | | | 25 | ||||||||||||||||||
Stock-based compensation expense |
| | 646 | | | 646 | ||||||||||||||||||
Excess tax benefit of stock-based compensation |
| | 145 | | | 145 | ||||||||||||||||||
Comprehensive income, net of tax: |
||||||||||||||||||||||||
Net income |
| | | 7,461 | | 7,461 | ||||||||||||||||||
Change in unrecognized pension costs |
| | | | 2,501 | 2,501 | ||||||||||||||||||
|
|
|||||||||||||||||||||||
Comprehensive income |
9,962 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Balance at June 30, 2011 |
10,236,484 | $ | 12,796 | $ | 20,635 | $ | 42,487 | $ | (871 | ) | $ | 75,047 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to consolidated financial statements.
F-6
SPARTON CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Business
Sparton Corporation and subsidiaries (the Company or Sparton) has been in continuous existence since 1900. It was last reorganized in 1919 as an Ohio corporation. The Company is a provider of complex and sophisticated electromechanical devices with capabilities that include concept development, industrial design, design and manufacturing engineering, production, distribution, and field service. The Company operates through three reportable business segments; Medical Device (Medical), Complex Systems (CS), formerly called Electronic Manufacturing Services (EMS), and Defense & Security Systems (DSS), which serves Defense, Security Systems, and Navigation and Exploration markets. The electromechanical device end markets that Sparton, as a whole, serves are in Medical, Military & Aerospace and Industrial & Instrumentation. Effective beginning in fiscal 2010, the Company reports its operating results under these three reportable business segments. Prior to fiscal 2010, all of our operating units were aggregated into one line of business, EMS. Fiscal 2009 information presented herein reflects this change to segment reporting. Financial information by segment is presented in Note 15. All of the Companys facilities are registered to ISO standards, including 9001 or 13485, with most having additional certifications. The Companys products and services include products for Original Equipment Manufacturers (OEM) and Emerging Technology (ET) customers that are microprocessor-based systems that include transducers, printed circuit boards and assemblies, sensors, and electromechanical components, as well as development and design engineering services relating to these product sales. Sparton also develops and manufactures sonobuoys, anti-submarine warfare (ASW) devices, used by the United States Navy and other free-world countries. Many of the physical and technical attributes in the production of sonobuoys are similar to those required in the production of the Companys other electrical and electromechanical products and assemblies.
(2) Summary of Significant Accounting Policies
Basis of presentation and principles of consolidation The consolidated financial statements include the accounts of Sparton Corporation and subsidiaries and have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). All significant intercompany accounts and transactions have been eliminated in consolidation. Certain reclassifications of prior year amounts have been made to conform to the current year presentation. Subsequent events have been evaluated through the date these financial statements were issued.
Use of estimates Management of the Company has made a number of estimates, judgments and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent liabilities at the dates of the consolidated balance sheets and revenue and expense during the reporting periods to prepare these consolidated financial statements in conformity with GAAP. Actual results could differ from those estimates.
Cash and cash equivalents Cash and cash equivalents include cash on hand, demand deposits and money market funds with original maturities of three months or less. Cash equivalents are stated at cost which approximates fair value.
Accounts receivable, credit practices, and allowances for doubtful accounts Accounts receivable are customer obligations generally due under normal trade terms for the industry. Credit terms are granted and periodically revised based on evaluations of the customers financial condition. The Company performs ongoing credit evaluations of its customers and although the Company does not generally require collateral, letters of credit or cash advances may be required from customers in order to support accounts receivable in certain circumstances.
F-7
The Company maintains an allowance for doubtful accounts on receivables for estimated losses resulting from the inability of its customers to make required payments. The allowance is estimated primarily based on information known about specific customers with respect to their ability to make payments, and future expectations of conditions that might impact the collectability of accounts. When management determines that it is probable that an account will not be collected, all or a portion of the amount is charged against the allowance for doubtful accounts.
Inventories and costs of contracts in progress Inventories are valued at the lower of cost (first-in, first-out basis) or market and include costs related to long-term contracts as disclosed below. Inventories, other than contract costs, are principally raw materials and supplies.
United States Government contracts allow Sparton to submit advance billings, which are then applied against inventories purchased and manufacturing costs incurred by the Company throughout its performance under these contracts. Inventories were reduced by advance billings to the U.S. government for costs incurred related to long-term contracts, thereby establishing inventory to which the U.S. government then has title, of approximately $9.0 million and $7.4 million, respectively, at June 30, 2011 and 2010. At June 30, 2011 and 2010, current liabilities include advance billings of $13.0 million and $21.6 million, respectively, on government contracts. As these billings are in excess of cost, there is no inventory to which the government would claim title and, therefore, no offset to inventory has been made.
Customer orders are based upon forecasted quantities of product manufactured for shipment over defined periods. Raw material inventories are purchased to fulfill these customer requirements. Within these arrangements, customer demands for products frequently change, sometimes creating excess and obsolete inventories. The Company regularly reviews raw material inventories by customer for both excess and obsolete quantities. Wherever possible, the Company attempts to recover its full cost of excess and obsolete inventories from customers or, in some cases, through other markets. When it is determined that the Companys carrying cost of such excess and obsolete inventories cannot be recovered in full, a charge is taken against income for the difference between the carrying cost and the estimated realizable amount. The Companys cost adjustments for excess and obsolete inventory is specific to individual parts. As a result, the adjustments create a new cost basis for those parts. The Company recorded inventory write-downs totaling approximately $0.2 million, $1.5 million and $3.0 million for the years ended June 30, 2011, 2010 and 2009, respectively. These charges are included in cost of goods sold for the periods presented. If inventory that has previously been impaired is subsequently sold, the amount of reduced cost basis is reflected as cost of goods sold. The Company experienced minimal subsequent sales of excess and obsolete inventory during the three years ended June 30, 2011 that resulted in higher gross margins due to previous write-downs. Such sales and the impact of those sales on gross margin were not material to the years presented.
Property, plant and equipment, net Property, plant and equipment are stated at cost less accumulated depreciation. Major improvements and upgrades are capitalized while ordinary repair and maintenance costs are expensed as incurred. Depreciation is provided over estimated useful lives on both straight-line and accelerated methods. Estimated useful lives generally range from 5 to 50 years for buildings and improvements, 3 to 16 years for machinery and equipment and 3 to 5 years for test equipment.
Other assets Other non-current assets consist of the following at June 30, 2011 and 2010 (in thousands):
June 30, 2011 |
June 30, 2010 |
|||||||
Deferred financing fees, net |
$ | 367 | $ | 706 | ||||
Cost method investment in Cybernet Systems Corporation |
1,623 | 1,623 | ||||||
Coors Road long-term lease receivable |
242 | 468 | ||||||
Other |
306 | 262 | ||||||
|
|
|
|
|||||
Total other non-current assets |
$ | 2,538 | $ | 3,059 | ||||
|
|
|
|
F-8
Costs incurred in connection with the Companys revolving line-of-credit of approximately $1.0 million were deferred and are amortized to interest expense over the three year term of the facility. Approximately $0.3 million of amortization of these loan costs was recognized and reported as interest expense for each of the years ended June 30, 2011 and 2010.
In June 1999, the Company purchased a 14% interest in Cybernet Systems Corporation (Cybernet), a developer of hardware, software, next-generation network computing, and robotics products. Through January 2010, the investment was accounted for under the equity method, which required the Company to record its share of Cybernets income or loss in Spartons statements of operations with a corresponding increase or decrease in the investment account on Spartons balance sheets. In February 2010, the Company sold approximately $0.3 million, or approximately 17%, of its interest in Cybernet, resulting in a remaining interest of less than 12%. The Company received approximately $0.5 million for this interest resulting in an approximate gain of $0.2 million during the year ended June 30, 2010. In conjunction with the sale, Sparton reassessed the accounting treatment of its remaining investment in Cybernet and concluded that, due to the change in ownership percentage and the evolution of the relationship between Sparton and Cybernet as a result of the then recent change in Sparton management, it no longer is able to exercise significant influence over Cybernet. Accordingly, beginning February 2010, the Company accounts for its investment in Cybernet under the cost method.
During fiscal 2010, the Company entered into a long-term lease agreement in relation to its Coors Road property in Albuquerque, New Mexico. The 50-year lease agreement provides for one upfront payment of approximately $2.5 million and an additional approximate $0.8 million paid over three years in a series of equal annual payments. Ownership will transfer at the end of the lease term, or earlier at the option of the lessee, but in no event sooner than the completion of the installment payments and only if the tenant is not in default under the lease. The transaction was accounted for as a sale of real estate with full profit recognition and resulted in a gain on sale of property of approximately $3.1 million recognized in the year ended June 30, 2010. On April 1, 2011, the Company received the first of the annual payments of approximately $0.3 million. The $0.6 million of remaining future payments due have been discounted for the imputation of interest, resulting in a discounted receivable of approximately $0.5 million. Approximately $0.3 million of this discounted receivable is due within the next 12 months and therefore is included in prepaid expenses and other current assets on the balance sheets at June 30, 2011 and 2010.
Goodwill and intangible assets The Company tests for possible goodwill impairment annually or more often should events or changes in circumstances indicate the carry value of the goodwill may not be recoverable. The test is conducted at the reporting unit level. Sparton has three reportable business segments (Medical, Complex Systems, and DSS). Complex Systems and DSS each consist of a single reporting unit. Medical, within which all of the Companys goodwill resides, consists of two reporting units: (i) the Companys Ohio business purchased from Astro Instrumentation, LLC (Astro) during fiscal 2006 and holding the goodwill related to the Astro purchase; and (ii) the Companys Colorado businesses acquired from Delphi Medical Systems, LLC (Delphi Medical or Delphi) and Byers Peak, Incorporated (Byers Peak) during fiscal 2011and holding the goodwill related to the Byers Peak acquisition. For fiscal 2011, goodwill impairment testing was conducted on these two Medical segment reporting units. The impairment analysis is a two step process. First, the Company determines the fair value of the reporting unit and compares it to its carrying value. The fair value of reporting units is determined based on a weighting of both projected discounted future results and comparative market multiples. The projected discounted future results (discounted cash flow approach) is based on assumptions that are consistent with the Companys estimates of future growth and the strategic plan used to manage the underlying business. Factors requiring significant judgment include assumptions related to future revenue growth rates, operating margins, terminal growth rates and discount factors, amongst other considerations. Second, if the carrying value of a reporting unit exceeds its estimated fair value, an impairment loss is recognized for any excess of the carrying value of the reporting units goodwill over the implied fair value of that goodwill. The implied fair value of goodwill is determined by allocating the fair value of the reporting unit in a manner similar to a purchase price allocation. The residual fair value after this allocation is the implied fair value of the reporting unit goodwill. The Companys fair value estimates related to its goodwill impairment analyses are based on
F-9
Level 3 inputs within the fair value hierarchy as described below in this note under Fair value measurements. Determining the fair value of any reporting unit and intangible asset is judgmental in nature and involves the use of significant estimates and assumptions. The Company bases its fair value estimates on assumptions believed to be reasonable, but which are unpredictable and inherently uncertain. Actual future results may differ from those estimates. Circumstances that may lead to future impairment of goodwill include, but are not limited to, unforeseen decreases in future performance or industry demand, as well as further loss of a significant customer or program in excess of future incremental new business wins. The next annual goodwill impairment reviews are expected to be performed during the fourth quarter of fiscal 2012.
The Companys fiscal 2011 annual test of goodwill related to its Colorado reporting unit did not indicate that the related goodwill was impaired. While the Companys fiscal 2010 annual test of goodwill related to its Ohio reporting unit did not indicate that the related goodwill was impaired, its fiscal 2011 annual test of goodwill related to its Ohio reporting unit did indicate that the related goodwill was impaired. The Company determined that the carrying value of the reporting unit exceeded its fair value, requiring Sparton to compare the carrying value of this goodwill to its implied fair value, which resulted in a non-cash impairment charge of approximately $13.2 million being recorded during the fourth quarter of fiscal 2011 to record this asset at its fair value of $6.0 million.
This impairment reflects various downward trends in volume within the Companys Ohio reporting unit, which was acquired in fiscal 2006, including the impact of a customer disengagement and Siemens fiscal 2011 fourth quarter notification of its intent to dual source certain programs with us as part of an overall dual sourcing strategy for certain of its critical programs. The Companys assumptions used to estimate the fair value of the Medical segments Ohio reporting unit in fiscal 2011 reflect the Companys current outlook for this reporting unit and reflect the effects of the events and uncertainties mentioned above, including but not limited to, lower expected revenues and lower expected operating margins than reflected in the Companys fiscal 2010 goodwill impairment analysis.
The Companys intangible assets other than goodwill represent the values assigned to customer relationships acquired in conjunction with the Companys purchases of Astro and Byers Peak and values assigned to non-compete agreements acquired in conjunction with the Companys purchase of Byers Peak. All of the Companys intangible assets are included within the Medical segment. The impairment test for these intangible assets is conducted when impairment indicators are present. The Company continually evaluates whether events or circumstances have occurred that would indicate the remaining estimated useful lives of its intangible assets warrant revision or that the remaining balance of such assets may not be recoverable. The Company uses an estimate of the related undiscounted cash flows over the remaining life of the asset in measuring whether the asset is recoverable. If the carrying amount of an asset exceeds its estimated undiscounted future cash flows, an impairment charge would be recognized for the amount that the carrying amount of the asset exceeds the fair value of the asset. The Companys fair value estimates related to its intangible assets impairment analyses are based on Level 3 inputs within the fair value hierarchy as described below in this note under Fair value measurements.
As noted above, during the fourth quarter of fiscal 2011, the Company was notified by Siemens that it intends to dual source two of its larger programs with the Company beginning in fiscal 2012. Siemens was acquired as a customer in conjunction with the Companys purchase of Astro and as such Sparton considered Siemens dual sourcing of these two programs to be an impairment indicator requiring impairment review of the related intangible asset. This impairment review, which was conducted during the fourth quarter of fiscal 2011, concluded that the carrying value of this intangible asset was not fully recoverable and consequently a non-cash impairment charge of approximately $3.7 million was recorded during the fourth quarter of fiscal 2011 to record this asset at its fair value of $0.7 million. The other business events and uncertainties described above in relation to the Medical segments Ohio reporting unit were also contributing factors to the Astro customer relationship impairment charge. As part of the impairment review, the estimated remaining useful life of this asset was evaluated with the Company determining that no change was warranted.
F-10
During fiscal 2011 and in previous years, the customer relationships acquired in conjunction with the Companys purchase of Astro have been amortizing on a straight-line basis over 15 years. The straight-line method has been used to amortize these identified intangible assets because the Company believed that the expected undiscounted cash flows were reasonably consistent with a ratable decline in value over time. Beginning in fiscal 2012, the remaining customer relationships acquired in conjunction with the Companys purchase of Astro will be amortized using an accelerated methodology on its remaining life as the Company now believes that this more reasonably reflects the expected future undiscounted cash flows of the asset. The customer relationships acquired in conjunction with the Companys purchase of Byers Peak Incorporated are also being amortized using an accelerated methodology over ten years. The Companys non-compete agreements are being amortized on a straight-line basis over two years as the ratable decline in value over time is most consistent with the contractual nature of these assets.
Impairment of long-lived assets The Company reviews other long-lived assets that are not held for sale for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell and are reviewed at least quarterly. Impairment is determined by comparing the carrying value of the assets to their estimated future undiscounted cash flows. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset group exceeds the fair value of the asset group. During the years ended June 30, 2010 and 2009, the Company recognized impairment charges of approximately $1.4 million and $2.1 million, respectively, related to restructuring activities, primarily the closures of the Companys Albuquerque, New Mexico, Jackson, Michigan and London, Ontario, Canada facilities (see Notes 5 and 14).
Stock-based compensation The Company measures the cost of employee and director services received in exchange for an award of equity-based securities using the fair value of the award on the date of the grant. The Company recognizes that cost on a straight-line basis over the period that the award recipient is required to provide service to the Company in exchange for the award and, for certain awards, subject to the probability that related performance targets will be met (see Note 11).
Earnings (loss) per share Basic earnings (loss) per share is based on the weighted average number of common shares and participating securities outstanding during the period. Diluted earnings per share include the dilutive effect of additional potential common shares issuable under our stock-based compensation plans and are determined using the treasury stock method. Unvested restricted stock awards, which contain non-forfeitable rights to dividends whether paid or unpaid, are included in the number of shares outstanding for both basic and diluted earnings per share calculations. In the event of a net loss, unvested restricted stock awards are excluded from the calculation of both basic and diluted loss per share (see Note 12).
Income taxes The Company is required to estimate its taxes in each of the jurisdictions of operation which involves management estimating the actual current tax expense together with assessing temporary differences resulting from differing treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities. Deferred income taxes are based on enacted income tax rates in effect on the dates temporary differences between the tax and accounting bases of assets and liabilities are expected to reverse and tax credit carryforwards are utilized. The Company must then assess the likelihood that the deferred tax assets will be recovered from future taxable income and to the extent realization is not more likely than not, the Company must establish a valuation allowance. Future taxable income depends on the ability to generate income in excess of allowable deductions. To the extent the Company establishes a valuation allowance or increases this allowance in a period, an expense is recorded within the tax provision in the consolidated statements of operations. Significant management judgment is required in determining the Companys provision for income taxes, its deferred tax assets and liabilities and any valuation allowance recorded against net deferred tax assets.
ERAPSCO Agreement The Company is partner to a 50/50 joint venture agreement (JV) with UnderSea Sensor Systems, Inc. (USSI), the only other major producer of sonobuoys to the free world. USSIs parent company is Ultra Electronics Holdings PLC, based in the United Kingdom. The joint venture arrangement
F-11
operates under the name ERAPSCO and allows Sparton and USSI to consolidate their own unique and complementary backgrounds to jointly develop and produce U.S. derivative sonobuoy designs for the U.S. Navy as well as foreign countries. In concept, and in practice, ERAPSCO serves as a pass-through entity with no funds or assets. While the joint venture agreement provides the opportunity to maximize efficiencies in the design and development of the related sonobuoys, both venture companies function independently as subcontractors; therefore, there is no separate entity to be accounted for or consolidated. The Board of Directors of ERAPSCO has the responsibility for the overall management and operation of the JV. The six (6) member board consists of equal representation (full time employees) from both JV partners for three (3) year terms. Manpower for ERAPSCO, specifically a general manager role, contract administrator role and financial manager role, is similarly assigned by the JV partners for rotating three year terms and the costs of these assigned individuals are borne by the party assigning the personnel. In response to a customer request for proposal (RFP) that ERAPSCO will bid on, the Board of Directors of ERAPSCO determines both the composition of a response to the RFP and the composite bid to be submitted to the customer. The Board of Directors strives to divide the aggregate contract awards at a 50/50 share ratio. Each joint venture partner bears the costs it incurs associated with the preparation and submission of proposals. Each JV partner submits to ERAPSCO a proposal for the estimated cost of performing that portion of the RFP applicable to it. Upon award of a contract to the JV, separate subcontracts are generated between ERAPSCO and each of the JV partners defining the responsibilities and compensation for each JV partner. These subcontracts contain terms and conditions consistent with the prime contract. Each JV partner is responsible for the successful performance of its bid to the JV for its respective scope of work and each JV partner is responsible for profit or losses sustained in the execution of the subcontract against its respective bid. Under ERAPSCO, individual contract risk exposures are reduced, while the likelihood of achieving U.S. Navy and other ASW objectives is enhanced. ERAPSCO has been in existence for approximately twenty years and historically, the agreed upon products included under the joint venture agreement were generally developmental or sonobuoys with low volume demand. Four years ago, the Companys ERAPSCO arrangement was expanded to include additional products for U.S. customers and substantially all U.S. derivative sonobuoy products for customers outside of the United States. Beginning with the U.S. Government 2011 fiscal year contracts, all U.S. sonobuoy products are now bid and executed through ERAPSCO, completing the joint venture expansion which now includes sales of all U.S. derivative sonobuoys worldwide.
Revenue recognition The Companys net sales are comprised primarily of product sales, with supplementary revenues earned from engineering and design services. Standard contract terms are FOB shipping point. Revenue from product sales is generally recognized upon shipment of the goods; service revenue is recognized as the service is performed or under the percentage of completion method, depending on the nature of the arrangement. Costs and fees billed under cost-reimbursement-type contracts are recorded as sales. Long-term contracts relate principally to government defense contracts and related ERAPSCO subcontracts for sonobuoy production. These government defense contracts and related subcontracts are accounted for based on completed units accepted and their estimated average contract cost per unit. At June 30, 2011 and 2010, current liabilities include billings in excess of costs of $13.0 million and $21.6 million, respectively, on government contracts. Sales related to these billings are recognized based upon completed units accepted and are not recognized at the time of billings. A provision for the entire amount of a loss on a contract is charged to operations as soon as the loss is identified and the amount is reasonably determinable. Shipping and handling costs are included in cost of goods sold.
Advertising Costs The Company expenses advertising costs as they are incurred. For the years ended June 30, 2011, 2010 and 2009, advertising expense was approximately $0.4 million, $0.3 million and $0.1 million, respectively.
Research and development expenditures Internal research and development expenses reflect costs incurred for the internal development of technologies for use in navigation, oil and gas exploration and port security. These costs include salaries and related expenses, contract labor and consulting costs, materials and the cost of certain research and development specific equipment. The Company incurred $1.1 million of internally
F-12
funded research and development expenses during the year ended June 30, 2011. No internally funded research and development expense was incurred during either of the years ended June 30, 2010 or 2009. Customer funded research and development costs, which are usually part of a larger production agreement, totaled approximately $9.1 million, $10.0 million and $4.4 million for the years ended June 30, 2011, 2010 and 2009, respectively.
Fair value measurements Fair value estimates and assumptions and methods used to estimate the fair value of the Companys assets and liabilities are made in accordance with the requirements of the Financial Accounting Standards Board (the FASB), Accounting Standards Codification (ASC) Topic 820, Fair Value Measurements and Disclosures (ASC 820).
ASC 820 clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, ASC 820 establishes a three-tier value hierarchy, which prioritizes the inputs used in measuring fair value as follows: Level 1 are observable inputs such as quoted prices in active markets; Level 2 are inputs other than the quoted prices in active markets that are observable either directly or indirectly; and Level 3 are unobservable inputs in which there is little or no market data, which require the Company to develop its own assumptions. This hierarchy requires the Company to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value. As of June 30, 2011, the Company has no assets or liabilities which it measures and carries on its balance sheet at fair value on a recurring basis.
The Companys long-term debt instruments, consisting of industrial revenue bonds at June 30, 2011, are carried at historical cost. As of June 30, 2011 and 2010, the fair value of the industrial revenue bonds was approximately $2.2 million and $2.3 million, respectively compared to carrying values of approximately $1.8 million and $1.9 million, respectively. These fair values were derived from discounted cash flow analyses based on the terms of the contracts and observable market data, including adjustment for nonperformance risk. The Company has determined that it is not practicable to estimate the fair value of its cost method investment in Cybernet. Factors in this determination include the investment being a private company, the portfolio of patents owned by Cybernet which are difficult to value and the materiality of the investment in Cybernet to the Company. There have been no identified events or changes in circumstances that the Company views may have a significant adverse effect on the fair value of this investment. See Goodwill and intangible assets above in this note for a discussion of the Companys non-recurring fair value measurement of goodwill and intangible assets. The fair value of accounts receivable and accounts payable approximated their carrying values at both June 30, 2011 and 2010.
Market risk exposure The Company manufactures its products in the United States and Vietnam. It ceased manufacturing in Canada during the fourth quarter of fiscal 2009. Sales of the Companys products are in the U.S. and foreign markets. The Company is subject to foreign currency exchange rate risk relating to intercompany activity and balances and to receipts from customers and payments to suppliers in foreign currencies. Also, adjustments related to the translation of the Companys Vietnamese financial statements into U.S. dollars are included in current earnings. As a result, the Companys financial results could be affected by factors such as changes in foreign currency exchange rates or economic conditions in the domestic and foreign markets in which the Company operates. However, minimal third party receivables and payables are denominated in foreign currency and the related market risk exposure is considered to be immaterial. Historically, foreign currency gains and losses have not been significant. However, due to the greater volatility of the Canadian dollar, the impact of transaction and translation losses significantly increased in fiscal 2009. With the closure of the Canadian facility, however, the impact in fiscal 2011 and 2010 has not been significant and it is anticipated that future periods will not be significant.
For purposes of translating the financial statements of the Companys Vietnamese and former Canadian operations, the U.S. dollar is considered the functional currency. Related translation adjustments, along with gains and losses from foreign currency transactions, are included in other income (expense), net and, in the aggregate, amounted to approximately $0.0 million, $(0.0 million) and $(1.4 million) for the fiscal years ended June 30, 2011, 2010 and 2009, respectively.
F-13
The Company currently does not have financial instruments that are subject to interest rate risk. Historically, the Company has not experienced material gains or losses due to such interest rate changes. If used, the Companys revolving line-of-credit facility would subject the Company to interest rate risk, which would adversely impact results of operations should the interest rate significantly increase. For a further discussion on Spartons debt, see Note 7.
New accounting standards In July 2010, the FASB issued Accounting Standards Update (ASU) No. 2010-20, Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses, (ASU 2010-20). This update enhances the disclosure requirements about the credit quality and related allowance for credit losses of financing receivables. ASU 2010-20 was effective for Sparton in the second quarter of fiscal 2011. The adoption of this disclosure guidance did not have a significant impact on the Companys consolidated financial statements.
In December 2010, the FASB issued ASU No. 2010-29, Business Combinations (Topic 805): Disclosure of Supplementary Pro Forma Information for Business Combinations, which specifies that when a public company completes a business combination(s), the company should disclose revenue and earnings of the combined entity as though the business combination(s) occurred as of the beginning of the comparable prior annual reporting period. This standard also expands the supplemental pro forma disclosures under Topic 805 to include a description of the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included in the pro forma revenue and earnings. The requirements in this standard are effective for business combinations that occur on or after the beginning of the first annual reporting period beginning on or after December 15, 2010. The Company will apply the provisions of ASU 2010-29 on a prospective basis. The adoption of this guidance is not expected to have a significant impact on the Companys consolidated financial statements.
In May 2011, the FASB issued ASU No. 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs, which is intended to improve comparability of fair value measurements presented and disclosed in financial statements prepared in accordance with U.S. generally accepted accounting principles and International Financial Reporting Standards. This standard clarifies the application of existing fair value measurement requirements including (1) the application of the highest and best use valuation premise, (2) the methodology to measure the fair value of an instrument classified in a reporting entitys shareholders equity, (3) disclosure requirements for quantitative information on Level 3 fair value measurements and (4) guidance on measuring the fair value of financial instruments managed within a portfolio. In addition, the standard requires additional disclosures of the sensitivity of fair value to changes in unobservable inputs for Level 3 securities. This standard is effective for interim and annual reporting periods ending on or after December 15, 2011. The adoption of this guidance is not expected to have a significant impact on the Companys consolidated financial statements.
In June 2011, the FASB issued ASU No. 2011-05, Presentation of Comprehensive Income, which requires that comprehensive income be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The standard also requires entities to disclose on the face of the financial statements reclassification adjustments for items that are reclassified from other comprehensive income to net earnings. This standard no longer allows companies to present components of other comprehensive income only in the statement of equity. This standard is effective for interim and annual reporting periods beginning after December 15, 2011. The adoption of this guidance is not expected to have a significant impact on the Companys consolidated financial statements other than the prescribed change in presentation.
(3) Acquisitions
Delphi Medicals Contract Manufacturing Business On August 6, 2010, the Company completed the acquisition of certain assets related to the contract manufacturing business of Delphi Medical Systems, LLC (Delphi Medical or Delphi). The purchase price was approximately $8.6 million, including additional
F-14
consideration paid during the three months ended December 31, 2010 related to determination of the final inventory value. Total cash consideration paid of approximately $8.4 million, including a $2.0 million escrowed holdback, was net of approximately $0.2 million for the assumption of retained employee accruals and was financed entirely through the use of Company cash. The purchase agreement provides for the recovery from Delphi Medical of an amount up to $2.0 million, deposited in escrow at closing, for certain excess and obsolete inventory remaining on-hand at the end of the 18 month period from closing. These escrowed funds are additionally available for payment of potential seller indemnification obligations in relation to the agreement.
The acquired business, which is reported in the Companys Medical segment, has added revenue from a new and diversified customer base and provides Sparton with a geographic presence in the western United States. Delphi Medical primarily manufactures OEM medical devices including blood separation equipment, spinal surgery products and 3-D eye mapping devices. It also provides engineering and manufacturing support to a market-leading environmental sensor company whose markets include meteorology, weather critical operations and controlled environment applications.
The following table represents the allocation of the total consideration to assets acquired and liabilities assumed from Delphi Medical based on Spartons estimate of their respective fair values (in thousands):
Total purchase consideration |
$ | 8,419 | ||
Assets acquired and liabilities assumed: |
||||
Inventory |
10,806 | |||
Equipment |
360 | |||
Employee accruals assumed |
(197 | ) | ||
|
|
|||
Total assets acquired and liabilities assumed |
10,969 | |||
|
|
|||
Gain on acquisition |
$ | 2,550 | ||
|
|
Sparton did not identify any material intangible assets in this acquisition. Sparton has determined that the fair value of the assets acquired and liabilities assumed related to this acquisition exceed the total purchase consideration and as a result the Company recorded a gain on acquisition of $2.4 million in the three months ended September 30, 2010. The gain was subsequently increased by $0.2 million based on adjustments to the opening inventory valuation. Sparton believes it was able to purchase this contract manufacturing business from Delphi Medical significantly below its fair value due to Delphis desire to liquidate this asset in a timely manner and focus on its core business.
Included in the Companys Consolidated Statements of Operations for the year ended June 30, 2011 are net sales of approximately $39.0 million and income before provision for income taxes of approximately $6.0 million (including the $2.6 million gain on acquisition) resulting from the acquisition of Delphi Medical since August 6, 2010.
The Company incurred legal, professional and other costs related to this acquisition aggregating approximately $0.2 million. These costs were recognized as non-segment selling and administrative expenses of approximately $0.1 million and $0.1 million in the years ended June 30, 2011 and 2010, respectively.
On August 6, 2010 and concurrent with the acquisition of Delphi Medical, the Company entered into leases for two facilities housing the operations of this contract manufacturing business. During the year ended June 30, 2011, the Company initiated and completed the consolidation of the operations into one facility, and terminated the lease for the building which the Company exited.
Byers Peak On March 4, 2011, the Company completed the acquisition of certain assets and assumption of certain liabilities of Byers Peak, Incorporated (Byers Peak) in an approximate $4.1 million all-cash
F-15
transaction, after certain working capital adjustments. The transaction was financed through the use of Company cash and included an approximate $0.4 million holdback which is available to fund potential seller indemnification obligations in relation to the agreement.
The acquired business, which is reported in the Companys Medical segment, provides further expansion into the therapeutic device market, diversifies Spartons customer base, and further expands the Companys geographic reach into the western United States. Additionally, the acquisition increases Spartons offerings with the inclusion of field service and refurbishment capabilities. Byers Peak primarily manufactures medical devices for OEM and emerging technology companies in the Therapeutic device market, including devices for surgical navigation, RF energy generation, non-invasive pain relief, arterial disease, and kidney dialysis. It also has a field service and installation group that primarily provides water filtration and disinfection systems for the medical industry as well as device refurbishment programs. Additionally, Byers Peak provides electromechanical device manufacturing support for a limited number of customers outside of the medical industry.
The following table represents the allocation of the total consideration to assets acquired and liabilities assumed from Byers Peak based on Spartons estimate of their respective fair values (in thousands):
Total purchase consideration |
$ | 4,140 | ||
|
|
|||
Assets acquired and liabilities assumed: |
||||
Accounts receivable, net |
$ | 1,334 | ||
Inventory |
1,509 | |||
Intangible assets customer relationships |
1,300 | |||
Intangible assets non-compete agreements |
158 | |||
Goodwill |
1,484 | |||
Accounts payable |
(629 | ) | ||
Customer deposits |
(973 | ) | ||
Other current liabilities |
(43 | ) | ||
|
|
|||
Total assets acquired and liabilities assumed |
$ | 4,140 | ||
|
|
Total purchase consideration was allocated to the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values at the acquisition date. The Byers Peak acquisition resulted in approximately $1.5 million of goodwill, which is expected to be deductible for tax purposes and which was assigned entirely to the Companys Medical segment. The Company believes goodwill primarily relates to the complementary strategic fit, resulting synergies and the acquired workforce that this business brings to existing operations. The fair values of acquired identifiable intangible assets were determined to be Level 3 under the fair value hierarchy and were estimated based on future cash flows and customer attrition rates, discounted using an estimated weighted average cost of capital. The customer relationships are being amortized using an accelerated methodology over ten years. The non-compete agreements are being amortized on a straight-line basis over two years as the ratable decline in value over time is most consistent with the contractual nature of these assets.
Included in the Companys Consolidated Statements of Operations for the year ended June 30, 2011 are net sales of approximately $3.3 million and loss before provision for income taxes of approximately $0.1 million resulting from the acquisition of Byers Peak since March 4, 2011.
The Company incurred legal, professional and other costs related to this acquisition aggregating approximately $0.1 million. These costs were recognized as non-segment selling and administrative expenses during the year ended June 30, 2011.
On March 4, 2011 and concurrent with the acquisition of Byers Peak, the Company entered into a six month sublease for the facility housing the operations of this contract manufacturing business. The Company may, at its
F-16
option, extend the term of this sublease for an additional eighteen month period. In conjunction with the Byers Peak acquisition, the Company has begun to consolidate the Byers Peak operations into the Companys Frederick, Colorado facility. These restructuring activities are expected to be materially complete by the end of the Companys fiscal 2012 second quarter.
Pro Forma Results The following table summarizes, on a pro forma basis, the combined results of operations of the Company and the acquired contract manufacturing businesses of Delphi Medical and Byers Peak as though the acquisitions had occurred as of July 1, 2009. The pro forma amounts presented are not necessarily indicative of either the actual consolidated results had the acquisition occurred as of July 1, 2009 or of future consolidated operating results (in thousands, except per share amounts):
For the Years Ended | ||||||||
June 30, 2011 | June 30, 2010 | |||||||
Net sales |
$ | 213,416 | $ | 213,023 | ||||
Income (loss) before benefit from income taxes |
$ | (4,123 | ) | $ | 4,713 | |||
Net income |
$ | 7,281 | $ | 6,629 | ||||
Net income per share basic |
$ | 0.71 | $ | 0.66 | ||||
Net income per share diluted |
$ | 0.71 | $ | 0.66 |
(4) Inventories and Cost of Contracts in Progress, net
The following are the major classifications of inventory, net of interim billings, at June 30, 2011 and 2010 (in thousands):
June 30, 2011 |
June 30, 2010 |
|||||||
Raw materials |
$ | 35,695 | $ | 23,524 | ||||
Work in process |
7,819 | 3,611 | ||||||
Finished goods |
4,239 | 6,790 | ||||||
|
|
|
|
|||||
Total inventory and cost of contracts in progress, gross |
47,753 | 33,925 | ||||||
Inventory to which the U.S. government has title due to interim billings |
(9,001 | ) | (7,411 | ) | ||||
|
|
|
|
|||||
Total inventory and cost of contracts in progress, net |
$ | 38,752 | $ | 26,514 | ||||
|
|
|
|
(5) Property, Plant and Equipment, net
Property, plant and equipment, net consists of the following at June 30, 2011 and 2010 (in thousands):
June 30, 2011 |
June 30, 2010 |
|||||||
Land and land improvements |
$ | 1,235 | $ | 1,235 | ||||
Buildings and building improvements |
15,604 | 14,514 | ||||||
Machinery and equipment |
14,250 | 12,342 | ||||||
Construction in progress |
1,114 | 574 | ||||||
|
|
|
|
|||||
Total property, plant and equipment |
32,203 | 28,665 | ||||||
Less accumulated depreciation |
(20,808 | ) | (19,741 | ) | ||||
|
|
|
|
|||||
Total property, plant and equipment, net |
$ | 11,395 | $ | 8,924 | ||||
|
|
|
|
At June 30, 2010, the Company had for sale its Bluewater Road property in Albuquerque, New Mexico and classified this property as Property held for sale. During February 2011, the Company sold its Bluewater Road property for approximately $4.2 million, resulting in a gain on sale of property, after commissions and closing
F-17
costs, of approximately $0.1 million. During the fiscal years ended June 30, 2010 and 2009, based on third party appraisals, the Company recognized impairment charges of approximately $1.1 million and $0.8 million, respectively, related to this property to reduce the carrying value in accordance with ASC Topic 360, Property, Plant and Equipment. The non-segment impairment charges are included in Restructuring/impairment charges on the consolidated statements of operations and the reduction in carrying value recorded this property at estimated fair value less costs to sell in anticipation of its future sale.
Included in construction in progress at June 30, 2011 is approximately $0.5 million related to the expected implementation of a new enterprise resource planning system to be put into service in fiscal 2012.
(6) Goodwill and Other Intangible Assets
Changes in the carrying value of goodwill and ending composition of goodwill are as follows (in thousands):
June 30, 2011 |
June 30, 2010 |
|||||||
Goodwill, beginning of period |
$ | 19,141 | $ | 17,694 | ||||
Additions to goodwill during the period |
1,484 | 1,447 | ||||||
Impairment losses during the period |
(13,153 | ) | | |||||
|
|
|
|
|||||
Goodwill, end of period |
$ | 7,472 | $ | 19,141 | ||||
|
|
|
|
June 30, 2011 |
June 30, 2010 |
|||||||
Acquired Goodwill |
$ | 20,625 | $ | 19,141 | ||||
Accumulated impairment |
(13,153 | ) | | |||||
|
|
|
|
|||||
Goodwill |
$ | 7,472 | $ | 19,141 | ||||
|
|
|
|
Sparton did not incur any significant costs to renew or alter the term of any of its intangible assets during the year ended June 30, 2011. The weighted average amortization period, gross carrying amount, accumulated amortization and net carrying value of intangible assets at June 30, 2011 and 2010 are as follows (in thousands):
June 30, 2011 | ||||||||||||||||||||
Amortization Period in Months |
Gross Carrying Amount |
Accumulated Amortization |
Accumulated Impairments |
Net Carrying Value |
||||||||||||||||
Amortized intangible assets: |
||||||||||||||||||||
Non-compete agreements |
24 | $ | 158 | $ | (26 | ) | $ | | $ | 132 | ||||||||||
Customer relationships |
120-180 | 7,900 | (2,316 | ) | (3,663 | ) | 1,921 | |||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
$ | 8,058 | $ | (2,342 | ) | $ | (3,663 | ) | $ | 2,053 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
June 30, 2010 | ||||||||||||||||||||
Amortized intangible assets: |
||||||||||||||||||||
Customer relationships |
180 | $ | 6,600 | $ | | $ | (1,797 | ) | $ | 4,803 |
F-18
Amortization expense for each of the years ended June 30, 2011, 2010 and 2009 was approximately $0.5 million. Aggregate amortization expense relative to existing intangible assets for the periods shown is currently estimated to be as follows (in thousands):
Fiscal Year Ending June 30, |
||||
2012 |
$ | 435 | ||
2013 |
372 | |||
2014 |
283 | |||
2015 |
247 | |||
2016 |
210 | |||
Thereafter |
506 | |||
|
|
|||
Total |
$ | 2,053 | ||
|
|
(7) Debt
Short-term debt maturities and revolving line of credit Short-term debt at June 30, 2011 and 2010 reflects the current portion of the Companys industrial revenue bonds of approximately $0.1 million.
The Company has $20 million of maximum borrowing availability, subject to certain collateral restrictions, under a revolving line-of-credit facility (the Facility) provided in August 2009 by National City Business Credit, Inc. (now PNC Bank, National Association) to support working capital needs and other general corporate purposes. The line-of-credit facility is secured by substantially all of the assets of the Company. Outstanding borrowings bear interest at a variable rate defined as the Banks minimum base rate plus a specified margin, each component of which is determined separately for domestic and Eurodollar rate loans. The Facility was amended in March 2011 to reduce the interest rates on domestic and Eurodollar rate based loans, which at June 30, 2011 would have ranged from 3.19% to 5.25% per annum. Prior to the Facility amendment, the Company was subject to higher rates, with a minimum rate of 7% per annum. As a condition of the Facility, the Company is subject to certain customary covenants, which it was in compliance with at June 30, 2011. The Company had no borrowings drawn against the Facility during the years ended June 30, 2011 and 2010, however it did have certain letters of credit outstanding totaling $0.5 million. The maturity date for the line-of-credit is August 14, 2012. The Companys prior line of credit was retired on August 14, 2009.
Long-term debt Long-term debt consists of the following at June 30, 2011 and 2010 (in thousands):
June 30, 2011 |
June 30, 2010 |
|||||||
Industrial revenue bonds, face value |
$ | 1,899 | $ | 2,029 | ||||
Less unamortized purchase discount |
(103 | ) | (112 | ) | ||||
|
|
|
|
|||||
Industrial revenue bonds, carrying value |
1,796 | 1,917 | ||||||
Less: current portion |
(126 | ) | (121 | ) | ||||
|
|
|
|
|||||
Long-term debt, net of current portion |
$ | 1,670 | $ | 1,796 | ||||
|
|
|
|
Industrial Revenue Bonds
In connection with its acquisition of Astro in May 2006, the Company assumed repayment of principal and interest on bonds originally issued to Astro by the State of Ohio. These bonds are Ohio State Economic Development Revenue Bonds, series 2002-4. Astro originally entered into the loan agreement with the State of Ohio for the issuance of these bonds to finance the construction of the Companys Ohio operating facility. The principal amount, including premium, was issued in 2002 and totaled approximately $2.9 million. These bonds have interest rates which vary, dependent on the maturity date of the bonds ranging from 5.00% to 5.45%. Due to an increase in interest rates since the original issuance of the bonds, a discount amounting to approximately $0.2 million on the date of assumption by Sparton was recorded.
F-19
The bonds carry certain sinking fund requirements generally obligating the Company to make monthly deposits of one twelfth of the annual obligation plus accrued interest. The purchase discount is being amortized ratably over the remaining term of the bonds. Amortization expense for the years ended June 30, 2011, 2010 and 2009 was approximately $9,000, $10,000 and $9,000, respectively. The Company also has an irrevocable letter of credit in the amount of approximately $0.3 million, which is renewable annually, to secure repayment of a portion of the bonds.
Scheduled principal maturities on these bonds for each of the five years succeeding June 30, 2011 and thereafter are summarized as follows ($ in thousands):
Year ending June 30, |
Face Amount |
Amortization of Purchase Discount |
Carrying Value |
Stated Interest Rate |
||||||||||||
2012 |
$ | 136 | $ | 10 | $ | 126 | 5.00 | % | ||||||||
2013 |
140 | 9 | 131 | 5.00 | ||||||||||||
2014 |
146 | 10 | 136 | 5.00 | ||||||||||||
2015 |
156 | 9 | 147 | 5.00 | ||||||||||||
2016 |
161 | 10 | 151 | 5.45 | ||||||||||||
2017 2022 |
1,160 | 55 | 1,105 | 5.45 | ||||||||||||
|
|
|
|
|
|
|||||||||||
$ | 1,899 | $ | 103 | $ | 1,796 | |||||||||||
|
|
|
|
|
|
Notes Payable Former Owners of Astro
Two notes payable with initial principal of $3.75 million each, totaling $7.5 million, were payable to the sellers of Astro, which is now operated under the Medical segment. These notes were repaid over four years, in aggregate semi-annual payments of principal and interest in the combined amount of approximately $1.1 million on June 1 and December 1 of each year. Payments commenced on December 1, 2006. These notes each bore interest at 5.5% per annum. The notes were proportionately secured by the stock of Astro. On June 1, 2010, the Company made the final payments in satisfaction of these notes.
Bank Term Loan
The bank term loan, provided by National City Bank with an original principal of $10.0 million, was being repaid over five years, with quarterly principal payments of $0.5 million which commenced September 1, 2006. This loan bore interest at the variable rate of LIBOR plus 500 basis points, with interest calculated and paid quarterly along with the principal payment. The debt was secured by substantially all assets of the Company. On August 14, 2009, the Company paid off this term loan with a cash payment in connection with the Facility.
(8) Income Taxes
Income (loss) before income taxes by country consists of the following amounts (in thousands):
For the Year Ended June 30, | ||||||||||||
2011 | 2010 | 2009 | ||||||||||
United States |
$ | (5,072 | ) | $ | 6,039 | $ | (9,930 | ) | ||||
Canada |
10 | (922 | ) | (3,921 | ) | |||||||
Vietnam |
1,119 | 407 | (115 | ) | ||||||||
|
|
|
|
|
|
|||||||
$ | (3,943 | ) | $ | 5,524 | $ | (13,966 | ) | |||||
|
|
|
|
|
|
F-20
The provision (credit) for income taxes consists of the following components (in thousands):
For the Year Ended June 30, | ||||||||||||
2011 | 2010 | 2009 | ||||||||||
Current: |
||||||||||||
United States |
$ | | $ | (2,334 | ) | $ | | |||||
Canada |
(128 | ) | | (96 | ) | |||||||
State and local |
| | | |||||||||
|
|
|
|
|
|
|||||||
(128 | ) | (2,334 | ) | (96 | ) | |||||||
Deferred: |
||||||||||||
United States |
(10,762 | ) | 418 | 1,035 | ||||||||
Canada |
| | 848 | |||||||||
State and local |
(514 | ) | | | ||||||||
|
|
|
|
|
|
|||||||
(11,276 | ) | 418 | 1,883 | |||||||||
|
|
|
|
|
|
|||||||
$ | (11,404 | ) | $ | (1,916 | ) | $ | 1,787 | |||||
|
|
|
|
|
|
The consolidated effective income tax (credit) rate differs from the statutory U.S. federal tax rate for the following reasons and by the following percentages:
For the Year Ended June 30, | ||||||||||||
2011 | 2010 | 2009 | ||||||||||
Statutory U.S. federal income tax (credit) rate |
(34.0 | )% | 34.0 | % | (34.0 | )% | ||||||
Significant increases (reductions) resulting from: |
||||||||||||
Changes in valuation allowance |
(242.0 | ) | (69.2 | ) | 45.7 | |||||||
Canadian tax benefits |
(3.2 | ) | | | ||||||||
Foreign (income) loss with no tax (expense) benefit |
(9.6 | ) | (2.5 | ) | 0.3 | |||||||
State and local income taxes, net of federal benefit |
(1.3 | ) | | | ||||||||
Other |
0.9 | 3.0 | 0.8 | |||||||||
|
|
|
|
|
|
|||||||
Effective income tax (credit) rate |
(289.2 | )% | (34.7 | )% | 12.8 | % | ||||||
|
|
|
|
|
|
F-21
Significant components of deferred income tax assets and liabilities at June 30, 2011 and 2010, are as follows (in thousands):
June 30, 2011 |
June 30, 2010 |
|||||||
Deferred tax assets: |
||||||||
U.S. net operating loss carryovers |
$ | 2,257 | $ | 5,364 | ||||
Impairment of intangible asset |
1,246 | | ||||||
Impairment of goodwill |
4,472 | | ||||||
Environmental remediation |
1,435 | 1,543 | ||||||
Inventories |
1,513 | 921 | ||||||
Employment and compensation accruals |
672 | 708 | ||||||
State tax carryovers |
328 | 559 | ||||||
Canadian tax benefits |
2,062 | 2,193 | ||||||
Equity investment |
299 | 299 | ||||||
Pension liability |
449 | 1,183 | ||||||
Restructuring accruals |
30 | 71 | ||||||
Property, plant and equipment impairment |
| 649 | ||||||
Other |
592 | 388 | ||||||
|
|
|
|
|||||
Gross deferred tax assets |
15,355 | 13,878 | ||||||
Less valuation allowance |
(2,373 | ) | (13,091 | ) | ||||
|
|
|
|
|||||
Total deferred tax assets |
12,982 | 787 | ||||||
Deferred tax liabilities: |
||||||||
Property, plant and equipment |
(509 | ) | (569 | ) | ||||
Pension costs |
(331 | ) | (122 | ) | ||||
Goodwill and other intangibles |
(1,928 | ) | (1,483 | ) | ||||
Other |
(57 | ) | (135 | ) | ||||
|
|
|
|
|||||
Gross deferred tax liabilities |
(2,825 | ) | (2,309 | ) | ||||
|
|
|
|
|||||
Net deferred tax assets (liabilities) |
$ | 10,157 | $ | (1,522 | ) | |||
|
|
|
|
Net deferred income tax liabilities are included in the balance sheets at June 30, 2011 and 2010, as follows (in thousands):
June 30, 2011 |
June 30, 2010 |
|||||||
U.S. net deferred income tax assets, current |
$ | 4,417 | $ | 57 | ||||
U.S. net deferred income tax assets (liabilities), non-current |
5,740 | (1,579 | ) | |||||
|
|
|
|
|||||
$ | 10,157 | $ | (1,522 | ) | ||||
|
|
|
|
In 2010 and 2009, the Company recorded valuation allowances against substantially all of its net deferred tax assets as management believed that the realization of the deferred tax assets related to the net operating loss carryovers and the other net temporary timing differences while possible, was not more likely than not. In 2011, the Company restored a large portion of the deferred tax assets as the Company now believed that the realization of the remaining net operating loss carryovers and the other net temporary timing differences is more likely than not. In making these decisions to both record a valuation allowance and restore the net deferred tax assets, the Company considered all available positive and negative evidence, including future reversals of taxable temporary differences, projected future taxable income, tax planning strategies, and recent financial results. For U.S. income tax purposes, approximately $6.6 million of net operating loss carryovers are available to offset future Federal taxable income as of June 30, 2011, of which $4.7 million and $1.9 million expire in 2029 and 2028,
F-22
respectively. For state income tax purposes, the Company also has approximately $4.9 million of net operating loss carryovers, of which $1.7 million expire in 2029, $3.1 million expire in 2028 and $0.1 million expire in 2027. For financial reporting purposes, valuation allowances related to state income tax carryovers and stock options in the amounts of $0.1 million and $0.2 million, respectively, have been established as of June 30, 2011 and are included within the total valuation amount. The excess tax benefit of $0.2 million related to stock options reporting will be credited to capital in excess of par value in the year that the net operating loss carryovers are fully utilized.
As a result of new tax legislation enacted in November 2009, the Company elected to carry back a portion of its fiscal 2008 accumulated net operating loss to fiscal 2003, with this carryback generating a federal income tax refund of $1.7 million. In addition, the Internal Revenue Service issued an industry directive providing guidance for extending the carryback period to ten years for losses related to environmental remediation. The Company elected to carryback its remediation losses from fiscal years 2006 through 2009, generating a federal income tax refund of $0.6 million. As of June 30, 2010, the Company has received $2.0 million of the $2.3 million in refund claims. In conjunction with these carryback tax filings, the Company released $2.3 million of its deferred tax asset valuation allowance in 2010.
In prior years, a valuation allowance was established for the deferred tax asset related to the Canadian operations. As of June 30, 2011 and 2010, the deferred tax assets totaled $2.1 million and $2.2 million, respectively. Due to the decision to cease Canadian operations, a full valuation allowance was recorded and has not been released. The Company elected to carry back a portion of its fiscal 2009 Canadian net operating loss to fiscal 2008, with this carryback generating a Canadian income tax refund of $0.1 million. In conjunction with this carryback filing, the Company released $0.1 million of its Canadian deferred tax asset valuation allowance.
The Companys operations in Vietnam are subject to a four-year tax holiday from the time the entity begins to generate taxable income, with the possible extension to an eight-year tax holiday. Without the extension of the holiday to eight years, the Vietnamese facilitys taxable income will be subject to a tax rate of 12.5% (or 50% of the normal income state rate) for fiscal years 2012 to 2015. From 2016 forward, the tax rate will be at the full 25%. The Companys Vietnamese operations resulted in taxable income in 2011 and 2010, and no taxable income in 2009. Due to the Vietnam tax holiday associated with this facility, no tax expense was recorded for fiscal 2011 or 2010, and no benefit is available to be recognized for 2009.
The deferred tax asset valuation allowance in fiscal 2011, 2010 and 2009 includes (decreases) increases of $(1.1 million), $(0.5 million), and $0.2 million, respectively, which amounts were allocated directly to shareholders equity against deferred taxes related to unrecognized pension costs as (recoveries)/charges to the components of accumulated other comprehensive loss.
Based on its evaluation, the Company has concluded that there are no significant uncertain tax positions requiring recognition in the Companys financial statements. The Companys evaluation was performed for the fiscal years 2007 through 2011, the years which remain subject to examination by major tax jurisdictions as of June 30, 2011. The Company does not expect the total amount of unrecognized tax benefits to increase in the next twelve months. It is possible that the Company may from time to time be assessed interest or penalties by major tax jurisdictions, although any such assessments historically have been minimal and immaterial to our financial results. Any assessment for interest and/or penalties would be classified in the financial statements as selling and administrative expenses. The Company does not have any amounts accrued for interest and penalties at June 30, 2011, and is not aware of any claims for such amounts by federal, state or foreign taxing authorities.
F-23
(9) Employee Retirement Benefit Plans
Defined Benefit Pension Plan
As of June 30, 2011, approximately 400 employees and retirees of the Company are covered by a defined benefit pension plan. Effective April 1, 2009, participation and the accrual of benefits in this pension plan were frozen, at which time all participants became fully vested. As a result of this freeze, an approximate $0.3 million curtailment charge was recognized during the year ended June 30, 2009, related to the acceleration of all remaining prior service costs previously being amortized over future periods. In addition, lump-sum benefit distributions during fiscal years 2011, 2010 and 2009 exceeded plan service and interest costs, resulting in lump-sum settlement charges of approximately $0.1 million, $0.8 million and $1.1 million also being recognized during the respective years.
The components of net periodic pension expense for the years ended June 30, 2011, 2010 and 2009 were as follows (in thousands):
For the Year Ended June 30, | ||||||||||||
2011 | 2010 | 2009 | ||||||||||
Service cost |
$ | | $ | | $ | 350 | ||||||
Interest cost |
447 | 575 | 651 | |||||||||
Expected return on plan assets |
(438 | ) | (403 | ) | (474 | ) | ||||||
Amortization of prior service cost |
| | 69 | |||||||||
Amortization of unrecognized net actuarial loss |
235 | 374 | 389 | |||||||||
|
|
|
|
|
|
|||||||
Net periodic benefit cost |
244 | 546 | 985 | |||||||||
Curtailment charge |
| | 333 | |||||||||
Pro rata recognition of lump-sum settlements |
128 | 785 | 1,133 | |||||||||
|
|
|
|
|
|
|||||||
Total periodic pension expense |
$ | 372 | $ | 1,331 | $ | 2,451 | ||||||
|
|
|
|
|
|
The weighted average assumptions used to determine benefit obligations and net periodic benefit cost for fiscal 2011, 2010 and 2009 were as follows:
Benefit Obligation | Benefit Cost | |||||||||||||||||||||||
2011 | 2010 | 2009 | 2011 | 2010 | 2009 | |||||||||||||||||||
Discount rate (1) |
5.50 | % | 5.50 | % | 6.40 | % | 5.50 | % | 6.40 | % | 6.75 | % | ||||||||||||
Rate of compensation increase (2) |
0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | 4.00 | % | ||||||||||||
Expected long-term rate on plan assets (3) |
7.50 | % | 7.50 | % | 7.50 | % | 7.50 | % | 7.50 | % | 7.50 | % |
(1) | In fiscal 2009, a discount rate of 6.50% was used through February 28, 2009, the date the plan was frozen; a discount rate of 6.75% was used the remainder of fiscal 2009. The Company determines its assumption for the discount rate on an index of high-quality corporate bond yields and matching-funding yield curve analysis. |
(2) | As of June 30, 2009, the rate of compensation increase for calculation of the benefit obligation was 0.0% due the freezing of the plan as of April 1, 2009. |
(3) | The expected long-term rate of return for plan assets is based on analysis of historical data and future expectations relevant to the investments and consistency with the assumed rate of inflation implicit in the market. |
Prior to July 1, 2008, March 31 was used as the measurement date for the defined benefit plan. In accordance with the measurement date requirements of ASC 715-20, Compensation Retirement Benefits Defined Benefit Plans, beginning with fiscal 2009, a June 30 measurement date was elected for our defined benefit pension plan using a 15 month net periodic benefit cost based on the March 31, 2008 actuarial valuation (alternative transition method). Accordingly, one-fifth of the net periodic benefit cost for such 15-month
F-24
period, net of tax, was allocated as a direct adjustment to retained earnings in the amount of approximately $0.3 million in accordance with the transition provisions of the standard to reflect the change in measurement dates. In addition, to the extent the net periodic benefit cost included amortization of unrecognized actuarial losses and prior service cost, which were previously recognized as a component of accumulated other comprehensive loss at June 30, 2008, at that date there was also a direct charge to accumulated other comprehensive loss, net of tax, of approximately $0.1 million.
At June 30, 2011 and 2010, as a result of the fiscal 2009 plan curtailment, the accumulated benefit obligation is equal to the projected benefit obligation. The following tables summarize the changes in benefit obligations, plan assets and funded status of the plan at June 30, 2011 and 2010 (in thousands):
June 30, 2011 |
June 30, 2010 |
|||||||
Change in prepaid (accrued) benefit cost: |
||||||||
Prepaid (accrued) benefit cost at beginning of fiscal year |
$ | 360 | $ | (266 | ) | |||
Net periodic benefit cost for fiscal year |
(244 | ) | (546 | ) | ||||
Pro rata recognition of lump-sum settlements |
(128 | ) | (785 | ) | ||||
Employer contributions to plan |
984 | 1,957 | ||||||
|
|
|
|
|||||
Prepaid benefit cost at end of fiscal year |
$ | 972 | $ | 360 | ||||
|
|
|
|
|||||
Change in projected benefit obligation: |
||||||||
Projected benefit obligation at beginning of fiscal year |
$ | 9,008 | $ | 10,194 | ||||
Service cost |
| | ||||||
Interest cost |
447 | 575 | ||||||
Actuarial experience and changes in assumptions |
(155 | ) | 525 | |||||
Benefits paid |
(1,084 | ) | (2,286 | ) | ||||
|
|
|
|
|||||
Projected benefit obligation at end of fiscal year |
$ | 8,216 | $ | 9,008 | ||||
|
|
|
|
|||||
Change in plan assets: |
||||||||
Fair value of plan assets at beginning of fiscal year |
$ | 5,889 | $ | 5,036 | ||||
Employer contributions |
984 | 1,957 | ||||||
Actual return on plan assets |
2,080 | 1,182 | ||||||
Benefits paid |
(1,084 | ) | (2,286 | ) | ||||
|
|
|
|
|||||
Fair value of plan assets at end of fiscal year |
$ | 7,869 | $ | 5,889 | ||||
|
|
|
|
|||||
Amounts recognized in the Consolidated Balance Sheets: |
||||||||
Current portion of pension liability |
$ | (306 | ) | $ | (1,139 | ) | ||
Pension liability non-current portion |
(41 | ) | (1,980 | ) | ||||
|
|
|
|
|||||
Funded status total balance sheet liability |
$ | (347 | ) | $ | (3,119 | ) | ||
|
|
|
|
The Companys policy is to fund the plan based upon legal requirements and tax regulations. For fiscal 2012, based upon current actuarial calculations and assumptions, a cash contribution of approximately $0.3 million, reflective of required funding and discretionary funding is anticipated to ensure funding levels are in excess of 80%. These anticipated contributions are reflected as the current portion of the pension liability as of June 30, 2011. During the years ended June 30, 2011 and 2010, approximately $1.0 million and $2.0 million, respectively, was contributed to the pension plan, reflective of required funding and discretionary funding to ensure funding levels are in excess of 80%.
F-25
Pension related amounts recognized in other comprehensive income (loss), excluding tax effects, for the years ended June 30, 2011, 2010 and 2009 are as follows (in thousands):
For the Year Ended June 30, |
||||||||||||
2011 | 2010 | 2009 | ||||||||||
Amortization of prior service cost |
$ | | $ | | $ | 69 | ||||||
Amortization of unrecognized net actuarial loss |
235 | 374 | 389 | |||||||||
Curtailment charge |
| | 333 | |||||||||
Pro rata recognition of lump-sum settlements |
128 | 785 | 1,133 | |||||||||
Net actuarial gain (loss) |
1,797 | 254 | (1,810 | ) | ||||||||
|
|
|
|
|
|
|||||||
Total recognized in other comprehensive income (loss) |
$ | 2,160 | $ | 1,413 | $ | 114 | ||||||
|
|
|
|
|
|
The amounts in accumulated other comprehensive loss on the consolidated balance sheets, excluding tax effects, that have not yet been recognized as components of net periodic benefit cost at June 30, 2011 and 2010 are as follows (in thousands):
June 30, 2011 |
June 30, 2010 |
|||||||
Accumulated other comprehensive loss: |
||||||||
Net actuarial loss |
$ | 1,319 | $ | 3,479 | ||||
Net prior service cost |
| | ||||||
|
|
|
|
|||||
Total |
$ | 1,319 | $ | 3,479 | ||||
|
|
|
|
The estimated amount that will be amortized from accumulated other comprehensive loss, pre-tax, into net periodic pension cost in fiscal 2012 is expected to total approximately $0.4 million, consisting of amortization of unrecognized actuarial loss as well as lump sum settlement charges.
Expected benefit payments for the defined benefit pension plan for the next ten fiscal years are as follows (in thousands):
Fiscal Year Ended June 30, |
||||
2012 |
$ | 860 | ||
2013 |
877 | |||
2014 |
811 | |||
2015 |
772 | |||
2016 |
714 | |||
2017 2021 |
2,733 | |||
|
|
|||
Total |
$ | 6,767 | ||
|
|
The Companys investment policy related to pension plan assets is based on a review of the actuarial and funding characteristics of the plan. Capital market risk and return opportunities are also considered. The investment policys primary objective is to achieve a long-term rate of return consistent with the actuarially determined requirements of the plan, as well as maintaining an asset level sufficient to meet the plans benefit obligations. A target allocation range between asset categories has been established to enable flexibility in investment, allowing for a better alignment between the long-term nature of pension plan liabilities, invested assets, and current and anticipated market returns on those assets.
F-26
Below is a summary of pension plan asset allocations as of June 30, 2011 and 2010, by asset category:
Weighted Average
Allocation For the Year Ended June 30, |
||||||||||||
Target | 2011 | 2010 | ||||||||||
Equity securities |
40-70 | % | 61 | % | 64 | % | ||||||
Fixed income (debt) securities |
30-60 | % | 26 | % | 31 | % | ||||||
Cash and cash equivalents |
0-10 | % | 13 | % | 5 | % | ||||||
|
|
|
|
|||||||||
100 | % | 100 | % | |||||||||
|
|
|
|
The fair value of all the defined benefit pension plan assets is based on quoted prices in active markets for identical assets which are considered Level 1 inputs within the fair value hierarchy described in Note 2. The total estimated fair value of plan assets by asset class at June 30, 2011 and 2010 were as follows (in thousands):
June 30, 2011 |
June 30, 2010 |
|||||||
Asset Class: |
||||||||
Equity securities: |
||||||||
Directly held corporate stock Sparton (a) |
$ | 1,873 | $ | 1,254 | ||||
Directly held corporate stock Large Cap |
1,512 | 1,243 | ||||||
Registered investment companies Mid-Cap Value |
205 | 189 | ||||||
Registered investment companies Mid-Cap Growth |
221 | 192 | ||||||
Registered investment companies Small-Cap |
309 | 253 | ||||||
Registered investment companies International |
719 | 610 | ||||||
Fixed income (debt) securities: |
||||||||
Registered investment companies Intermediate Bond |
2,018 | 1,840 | ||||||
Cash and cash equivalents |
1,012 | 308 | ||||||
|
|
|
|
|||||
Total assets measured at fair value |
$ | 7,869 | $ | 5,889 | ||||
|
|
|
|
(a) | Shares of Sparton stock held by the defined benefit pension plan at June 30, 2011 and 2010 were 183,259 and 249,259, respectively. |
Defined Contribution Plans
Substantially all of the Companys U.S. employees are eligible to participate in the Companys 401(k) defined contribution plan. The plan allows employees to contribute up to 100% of their eligible compensation up to a maximum amount allowed by law and provides that the Company may, at its discretion, make matching contributions, profit sharing contributions or qualified non-elective contributions. Prior to April 1, 2009, the plan provided for Company matching of 50% of participants basic contributions on up to 6% of their eligible compensation. Effective April 1, 2009, the Company suspended its matching contribution in the Sparton Corporation 401(k) plan. Matching contributions were reinstated effective February 1, 2010, with the Company again matching 50% of participants basic contributions on up to 6% of their eligible compensation.
At the election of the participant, both employee and employer contributions may be invested in any of the available investment options under the plan, which election options include Sparton common stock. An employees total investment in Sparton common stock is subject to a 20% limitation of the total value of the participants account. As of June 30, 2011, approximately 162,000 shares of Sparton common stock were held in the 401(k) plan. Amounts expensed related to the Companys matching contributions and administrative expenses for the plan were approximately $0.5 million, $0.2 million and $0.6 million for the years ended June 30, 2011, 2010 and 2009, respectively. As of June 30, 2011, plan assets totaled approximately $22.7 million.
F-27
(10) Commitments and Contingencies
Operating Leases The Company is obligated under operating lease agreements for a portion of its production machinery and data processing equipment. Such leases, some of which are non-cancelable and in many cases include purchase or renewal options, expire at various dates and typically provide for monthly payments over a fixed term in equal, non- escalating amounts. Generally, the Company is responsible for maintenance, insurance and taxes relating to these leased assets. The Company is additionally obligated under operating lease agreements for its corporate headquarters in Schaumburg, Illinois and its manufacturing plant in Frederick, Colorado. Each of these leases provide for escalating minimum monthly base rental payments, require the Company to provide for maintenance, insurance and property taxes in addition to minimum monthly base rental and include renewal options. At June 30, 2011, the future minimum annual lease payments under these agreements are as follows (in thousands):
June 30, |
||||
2012 |
$ | 1,732 | ||
2013 |
982 | |||
2014 |
612 | |||
2015 |
610 | |||
2016 |
498 | |||
Thereafter |
618 | |||
|
|
|||
Total |
$ | 5,052 | ||
|
|
Rent expense was approximately $2.7 million, $3.6 million and $5.6 million, respectively, for the years ended June 30, 2011, 2010 and 2009. Included in rent expense for the years ended June 30, 2011 and 2010 was approximately $0.2 million and $0.1 million, respectively, of contingent rent expense primarily relating to the Companys corporate headquarters in Schaumburg, Illinois and, in the case of fiscal 2011, its Frederick, Colorado facility.
Environmental Remediation Sparton has been involved with ongoing environmental remediation since the early 1980s related to one of its former manufacturing facilities, located in Albuquerque, New Mexico (Coors Road). Although the Company entered into a long-term lease of the Coors Road property that was accounted for as a sale of property during fiscal 2010, it remains responsible for the remediation obligations related to its past operation of this facility. At June 30, 2011, Sparton had accrued approximately $4.2 million as its estimate of the remaining minimum future undiscounted financial liability with respect to this matter, of which approximately $0.4 million is classified as a current liability and included on the balance sheet in other accrued expenses. The Companys minimum cost estimate is based upon existing technology and excludes certain legal costs, which are expensed as incurred. The Companys estimate includes equipment and operating and maintenance costs for onsite and offsite pump and treat containment systems, as well as continued onsite and offsite monitoring. It also includes periodic reporting requirements.
On October 15, 2009, approximately $3.1 million of cash was utilized to establish a trust, the Sparton Corporation Financial Assurance Trust, for remediation activity. The funds were held in Spartons name and were invested with Sparton receiving the benefit of the investment return. As of June 30, 2010, approximately $3.2 million was held in this trust and reflected as restricted cash on the consolidated balance sheet. These funds were available for use against the expected remediation liability. The trust was established to meet the United States Environmental Protection Agencys (EPA) financial assurance requirements for the fiscal year ended June 30, 2010, with trust funds to be drawn upon only should Sparton not continue to meet its financial remediation requirements. The trust was to remain in place until the Company could again satisfy the EPA financial assurance requirements through compliance with financial ratios, as was previously attained on an annual basis until fiscal year 2009. Based on the Companys financial results for fiscal year 2010, the Company was again in compliance with the financial ratios and dissolved the trust during October 2010.
F-28
In fiscal 2003, Sparton reached an agreement with the United States Department of Energy (DOE) and others to recover certain remediation costs. Under the settlement terms, Sparton received cash and obtained some degree of risk protection as the DOE agreed to reimburse Sparton for 37.5% of certain future environmental expenses in excess of $8.4 million incurred from the date of settlement, if any, of which approximately $3.6 million has been expended as of June 30, 2011 toward the $8.4 million threshold. 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. Factors which cause uncertainties for the Company include, but are not limited to, the effectiveness of the current work plans in achieving targeted results and proposals of regulatory agencies for desired methods and outcomes. It is possible that cash flows and results of operations could be materially affected by the impact of changes associated with the ultimate resolution of this contingency. At June 30, 2011, the Company estimates that it is reasonably possible, but not probable, that future environmental remediation costs associated with the Companys past operations at the Coors Road property, in excess of amounts already recorded and net of DOE reimbursement, could be up to $1.9 million before income taxes over the next approximately twenty years.
The Company and its subsidiaries are also involved in certain existing compliance issues with the 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 clean-up costs at any specific site. The Companys past experience, however, has indicated that when it has contributed relatively small amounts of materials or waste to a specific site relative to other PRPs, its ultimate share of any clean-up 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 as a PRP.
Customer Relationships The Company had an action before the U.S. Court of Federal Claims to recover damages arising out of an alleged infringement by the U.S. Navy of certain patents held by Sparton and used in the production of sonobuoys. Pursuant to an agreement between the Company and counsel conducting the litigation, a significant portion of the claim will be retained by the Companys counsel in contingent fees if the litigation is successfully concluded. A trial of the matter was conducted by the court in April 2008, with a decision against Sparton filed in August 2009 and published in September 2009. In October 2009, an appeal of this unfavorable decision was filed with the Federal Circuit Court of Appeals. Based on this decision, management believes that the Companys ability to obtain any recovery with respect to the claim is remote.
Litigation On August 9, 2009, Sparton and certain subsidiaries were named as defendants in a wrongful death suit, alleging that a defective transmission shifter assembly in a 1996 Chrysler automobile caused a July 2007 death. The suit also named Chrysler LLC, Dura Automotive Systems, Inc., and Chandler Motors Company as defendants. The suit was filed in Pontotoc County Circuit Court in Mississippi. Sparton has not manufactured automotive shifter assemblies for Chrysler since December 1996, when it sold its KPI Group subsidiary to Dura Automotive Systems, Inc. The plaintiff sought damages for economic loss, pain and suffering, and loss of companionship, as well as punitive damages. After Sparton filed a motion for summary judgment, and after plaintiff took the deposition of a Chrysler representative who testified that Sparton had nothing to do with the design of any shifters KPI may have manufactured, plaintiff consented to the entry of judgment for Sparton on all claims. An order dismissing all claims against Sparton with prejudice was submitted to the Court and was entered on August 10, 2011, thereby closing this litigation against Sparton.
Other In addition to the foregoing, from time to time, the Company is involved in various legal proceedings relating to claims arising in the ordinary course of business. The Company is not currently a party to any other such legal proceedings, the adverse outcome to which, individually or in the aggregate, is expected to have a material adverse effect on our business, financial condition or results of operations.
F-29
(11) Stock-Based Compensation
The Company has two long-term incentive plans. The Sparton Corporation Stock Incentive Plan, as amended and restated (the 2001 Plan) was approved by the Companys shareholders on October 24, 2001. The Sparton Corporation 2010 Long-Term Incentive Plan (the 2010 Plan) was approved by the Companys shareholders on October 28, 2009.
2001 Plan. Under the 2001 Plan, the Company may grant to employees and non-employee directors incentive or non-qualified stock options, stock appreciation rights, restricted stock and other stock-based awards. All of the stock options issued to date under the 2001 Plan have either three, five or ten-year lives with either immediate vesting or vesting on an annual basis over four years beginning one year after grant date. Restricted stock awards granted to date to employees under the 2001 Plan vest annually over periods ranging from approximately 2.5 to 3.5 years. Unrestricted stock awards granted to date under the 2001 Plan represent annual stock grants to directors as a component of their overall compensation. The 2001 Plans termination date with respect to the granting of new awards is October 24, 2011. The total number of shares that may be granted under the 2001 Plan is 970,161 shares of the Companys common stock, of which amount, 70,700 shares remain available for awards as of June 30, 2011.
2010 Plan. Under the 2010 Plan, the Company may grant to employees, officers and directors of the Company or its subsidiaries incentive and non-qualified stock options, stock appreciation rights, restricted stock or restricted stock units, performance awards and other stock-based awards, including grants of shares. Restricted stock awards granted to date to employees under the 2010 Plan vest annually over four years, subject to achievement of certain financial performance metrics in addition to the service requirements. The 2010 Plan has a term of ten years. The total number of shares that may be awarded under the 2010 Plan is 1,000,000 shares of common stock, of which amount, 777,973 shares remain available for awards as of June 30, 2011.
The Company did not grant any stock options during the years ended June 30, 2011 or 2009. During the year ended June 30, 2010, the Company awarded an aggregate of 111,250 stock options to certain members of management at an exercise price of $5.00. The stock options were immediately exercisable. The closing price of the Companys stock on the date of grant was $4.59. The fair value of each grant is estimated at the grant date using the Black-Scholes option pricing method. The table below outlines the assumptions used for the options granted during the year ended June 30, 2010:
Weighted Average | ||||
Risk free interest rate |
1.25 | % | ||
Volatility |
78.10 | % | ||
Dividend yield |
0.00 | % | ||
Expected life in years |
3.00 | |||
Fair value price |
$ | 2.25 |
The risk-free interest rate was determined using the then implied yield currently available for zero-coupon U.S. government issues with a remaining term equal to the expected life of the stock options. The expected volatility assumption used in the Black-Scholes option pricing models was based on the historical volatility of the Companys common stock. The Company does not currently intend to pay cash dividends and thus has assumed a 0% dividend yield. The Company estimates the expected life for stock options based on expected future exercise patterns.
F-30
The following table shows stock-based compensation expense by type of share-based award for the years ended June 30, 2011, 2010 and 2009 included in the consolidated statements of operations (in thousands):
For the Year ended June 30, 2011 |
For the Year ended June 30, 2010 |
For the Year ended June 30, 2009 |
||||||||||
Fair value expense of stock option awards |
$ | | $ | 276 | $ | 32 | ||||||
Restricted stock |
646 | 229 | 164 | |||||||||
|
|
|
|
|
|
|||||||
Total stock-based compensation |
$ | 646 | $ | 505 | $ | 196 | ||||||
|
|
|
|
|
|
The following table shows the total remaining unrecognized compensation cost related to restricted stock grants and the fair value expense of stock option awards, as well as the weighted average remaining required service period over which such costs will be recognized as of June 30, 2011:
Total Remaining Unrecognized Compensation Cost (in thousands) |
Weighted Average Remaining Required Service Period (in years) |
|||||||
Fair value expense of stock option awards |
$ | 0 | 0.00 | |||||
Restricted stock |
640 | 2.11 | ||||||
|
|
|
|
|||||
$ | 640 | 2.11 | ||||||
|
|
|
|
The following is a summary of activity for the year-ended June 30, 2011 related to the Companys stock options granted under its long-term incentive plans:
Number of Options |
Weighted- Average Exercise Price |
|||||||
Options outstanding as of June 30, 2010 |
269,796 | $ | 6.89 | |||||
Granted |
| | ||||||
Exercised |
(5,000 | ) | 5.00 | |||||
Forfeited |
(44,455 | ) | 7.60 | |||||
Expired |
| | ||||||
|
|
|
|
|||||
Options outstanding as of June 30, 2011 |
220,341 | $ | 6.79 | |||||
|
|
|
|
|||||
Exercisable June 30, 2011 |
220,341 | $ | 6.79 | |||||
|
|
|
|
The following is a summary of options outstanding and exercisable at June 30, 2011:
Options Outstanding | Options Exercisable | |||||||||||||||||||||||||||||||
Range of Exercise |
Number Outstanding |
Weighted Average Remaining Contractual Life (in years) |
Weighted Average Exercise Price |
Aggregate Intrinsic Value (in thousands) |
Number Exercisable |
Weighted Average Remaining Contractual Life (in years) |
Weighted Average Exercise Price |
Aggregate Intrinsic Value (in thousands) |
||||||||||||||||||||||||
$5.00-$6.52 |
115,840 | 1.47 | $ | 5.19 | 115,840 | 1.47 | $ | 5.19 | ||||||||||||||||||||||||
$8.48-$8.57 |
104,501 | 4.04 | 8.56 | 104,501 | 4.04 | 8.56 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
220,341 | 2.68 | $ | 6.79 | $ | 756 | 220,341 | 2.68 | $ | 6.79 | $ | 756 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
F-31
All stock options outstanding at June 30, 2011 are vested. In general, the Companys policy is to issue new shares upon exercise of stock options. The intrinsic value of options exercised during the year ended June 30, 2011 was $17,600. No options were exercised during the years ended June 30, 2010 or 2009.
The following is a summary of activity for the year-ended June 30, 2011 related to shares granted under the Companys long-term incentive plans:
Shares | Weighted Average Grant Date Fair Value |
|||||||
Restricted shares at June 30, 2010 |
262,095 | $ | 4.55 | |||||
Granted |
30,950 | 7.92 | ||||||
Vested |
(49,218 | ) | 3.97 | |||||
Forfeited |
| | ||||||
|
|
|
|
|||||
Restricted shares at June 30, 2011 |
243,827 | $ | 5.09 | |||||
|
|
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The total fair value of restricted stock vested in the years ended June 30, 2011, 2010 and 2009 was $0.4 million, $0.4 million and $0.1 million, respectively.
(12) Earnings (Loss) Per Share Data
Earnings per share calculations, including weighted average number of shares of common stock outstanding used in calculating basic and diluted income (loss) per share, for the years ended June 30, 2011, 2010 and 2009 are as follows:
For the Year Ended June 30, | ||||||||||||
2011 | 2010 | 2009 | ||||||||||
Net income (loss) (in thousands) |
$ | 7,461 | $ | 7,440 | $ | (15,753 | ) | |||||
Weighted average shares outstanding Basic |
10,217,494 | 9,972,409 | 9,811,635 | |||||||||
Net effect of dilutive stock options |
37,874 | | | |||||||||
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Weighted average shares outstanding Diluted |
10,255,368 | 9,972,409 | 9,811,635 | |||||||||
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Net income (loss) per share: |
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Basic |
$ | 0.73 | $ | 0.75 | $ | (1.61 | ) | |||||
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Diluted |
$ | 0.73 | $ | 0.75 | $ | (1.61 | ) | |||||
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For the years ended June 30, 2011 and 2010, 243,827 and 262,095, respectively, unvested restricted shares were included in determining both basic and diluted earnings per share. For the year ended June 30, 2009, 93,334 unvested restricted shares were excluded in determining both basic and diluted earnings per share. Potential shares of common stock issuable upon exercise of stock options excluded from diluted income (loss) per share computations because their inclusion would be anti-dilutive were 104,501, 269,796 and 184,127 for the years ended June 30, 2011, 2010 and 2009, respectively. For the year ended June 30, 2009, basic and diluted loss per share are the same because the inclusion of the incremental potential shares of common stock from any assumed exercise of stock options is anti-dilutive due to the net loss reported for that year.
F-32
(13) Comprehensive Income (Loss)
Comprehensive loss, which includes all changes in the Companys equity during the period except transactions with shareholders, consisted of the following for the years ended June 30, 2011, 2010 and 2009 (in thousands):
For the Year Ended June 30, | ||||||||||||
2011 | 2010 | 2009 | ||||||||||
Net income (loss) |
$ | 7,461 | $ | 7,440 | $ | (15,753 | ) | |||||
Other comprehensive income (loss), net of tax |
||||||||||||
Pension experience gain (loss), net of tax (a) |
2,080 | 257 | (1,482 | ) | ||||||||
Other change in unrecognized pension costs, net of tax (b) |
421 | 1,172 | 1,472 | |||||||||
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2,501 | 1,429 | (10 | ) | |||||||||
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Comprehensive income (loss) |
$ | 9,962 | $ | 8,869 | $ | (15,763 | ) | |||||
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(a) | Pension experience gains (losses) during fiscal 2011, 2010 and 2009 are net of tax expense (benefit) of $0.6 million, $0.1 million and $(0.8 million), respectively, offset by the effect of allocations of $(0.9 million), $(0.1 million) and $0.0 million, respectively, related to (decreases) increases in the deferred tax valuation allowance, as described further in Note 8. |
(b) | Other change in unrecognized pension costs during fiscal 2011, 2010 and 2009 are net of tax expense of $0.1 million, $0.4 million and $0.8 million, respectively, offset by the effect of allocations of $(0.2 million), $(0.4 million) and $0.2 million, respectively, related to (decreases) increases in the deferred tax valuation allowance, as described further in Note 8. |
(14) Restructuring Activities
2009 Restructuring Plan
During fiscal 2009, management initiated a full evaluation of the Companys operations and long-term business strategy. As a result, in the third quarter of fiscal 2009, management began to implement a formal turnaround plan focused on returning Sparton to profitability and the assurance of the Companys viability (the 2009 Restructuring Plan). These measures were designed to reduce operating costs, increase efficiencies, and improve Spartons competitive position in response to excess capacity, the prevailing economy and the need to optimize manufacturing resources. These restructuring activities included, among other actions, plant consolidations, closures and sales, workforce reductions, customer contract disengagements, changes in employee pension and health care benefits and relocation of the Companys corporate office. Restructuring/impairment charges of approximately $11.1 million have been incurred as of June 30, 2011 related to these activities of which approximately $0.0 million, $7.0 million and $0.1 million were related to the Medical, CS and DSS segments, respectively. The Company does not expect to recognize any additional costs related to these activities. Expected remaining cash expenditures related to the 2009 Restructuring Plan of approximately $0.1 million primarily represent future lease payments and are expected to be paid out by the end of fiscal year 2012.
Delphi Medical Contract Manufacturing Business Acquisition Related Restructuring
During the first quarter of fiscal 2011, the Company took certain cost reduction actions in relation to its acquisition of certain assets related to the contract manufacturing business of Delphi Medical (the 2011 Colorado Restructuring Plan). These actions included a workforce reduction at the Colorado location and the consolidation of the Colorado manufacturing facilities from two to one. Restructuring/impairment charges recognized within the Medical segment of approximately $0.1 million have been incurred as of June 30, 2011 related to these acquisition related restructuring activities. The Company does not expect to recognize any additional costs related to these activities. All cash expenditures related to the 2011 Colorado Restructuring Plan have been made as of June 30, 2011.
F-33
Byers Peak Acquisition Related Restructuring
In conjunction with the Byers Peak acquisition, the Company intends to consolidate the Byers Peak operations into the Companys Frederick, Colorado facility. These restructuring activities, which are expected to consist primarily of production moving costs began in the Companys fourth quarter and are expected to be materially complete by the end of the Companys fiscal 2012 second quarter. Restructuring/impairment charges recognized within the Medical segment of less than $0.1 million have been incurred as of June 30, 2011 related to these acquisition related restructuring activities. The Company expects to incur less than $0.1 million additional costs and has remaining restructuring related cash payments of approximately $0.1 million to be paid out during the first and second quarters of fiscal 2012.
Summary of Restructuring Charges
The table below summarizes the nature and amount of all restructuring actions for the years ended June 30, 2011, 2010 and 2009 (in thousands):
Workforce Reduction (principally severance and retention bonuses) |
Facility Closing |
Lease Termination |
Production Transfer |
Total | ||||||||||||||||
Accrual balance at June 30, 2008 |
$ | | $ | | $ | | $ | | $ | | ||||||||||
Restructuring charges |
2,318 | 24 | 2,202 | 352 | 4,896 | |||||||||||||||
Less: cash payments |
(1,943 | ) | (24 | ) | (212 | ) | (352 | ) | (2,531 | ) | ||||||||||
Restructuring reversals |
| | | | | |||||||||||||||
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Accrual balance at June 30, 2009 |
375 | | 1,990 | | 2,365 | |||||||||||||||
Restructuring charges |
350 | 1,188 | 409 | | 1,947 | |||||||||||||||
Less: cash payments |
(718 | ) | (1,175 | ) | (2,186 | ) | | (4,079 | ) | |||||||||||
Restructuring reversals |
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Accrual balance at June 30, 2010 |
7 | 13 | 213 | | 233 | |||||||||||||||
Restructuring charges |
62 | 13 | | | 75 | |||||||||||||||
Less: cash payments |
(69 | ) | (26 | ) | (95 | ) | | (190 | ) | |||||||||||
Restructuring reversals |
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Accrual balance at June 30, 2011 |
$ | | $ | | $ | 118 | $ | | $ | 118 | ||||||||||
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During the years ended June 30, 2010 and 2009, approximately $1.4 million and $2.1 million, respectively, of impairment related to property, plant and equipment was recorded. Additionally, during the fiscal year 2010, the Company sold its Jackson, Michigan and London, Ontario, Canada properties for an aggregate loss of approximately $0.8 million. The impairments and loss on sales in these periods related to facility closings and are reflected in restructuring/impairment charges within those respective periods.
Given the significance of, and the timing of the execution of such activities, accounting for the expected cost of these actions can involve periodic reassessments of estimates made at the time the original decisions were made. We continually evaluate the adequacy of the remaining liabilities under our restructuring initiatives. Although we believe that these estimates accurately reflect the costs of our restructuring plans, actual results may differ, thereby requiring us to periodically record additional provisions or reverse a portion of such provisions.
(15) Business Segments
Reportable segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or group, in assessing performance and allocating resources.
F-34
The Company uses an internal management reporting system, which provides important financial data to evaluate performance and allocate the Companys resources on a segment basis. Net sales are attributed to the segment in which the product is manufactured or service is performed. A segments performance is evaluated based upon its operating income (loss). A segments operating income (loss) includes its gross profit on sales less its selling and administrative expenses, including allocations of certain corporate operating expenses, but excludes some corporate and other unallocated items such as, interest expense, interest income, other income (expense) and income tax expense (benefit). Allocations of certain corporate operating expenses are allocated based on the nature of the service provided. Corporate and other unallocated costs primarily represent corporate administrative expenses related to those administrative, financial and human resource activities which are not allocated to operations and excluded from segment profit. These costs are not allocated to the segments, as management excludes such costs when assessing the performance of the segments. Inter-segment transactions are generally accounted for at amounts that approximate arms length transactions. Identifiable assets by segments are those assets that are used in each segments operations. The accounting policies for each of the segments are the same as for the Company taken as a whole.
In fiscal 2009, management initiated a full evaluation of our operations, including operating structure. This evaluation resulted in changes in fiscal 2010 to our analysis of how the components of Spartons business contribute to consolidated operating results and the overall level of desegregation of reported financial data, including the nature and number of operating segments, disclosure of segment information and the consistency of such information with internal management reports. The Company operates through three reportable business segments; Medical Device (Medical), Complex Systems (CS), formerly called Electronic Manufacturing Services (EMS), and Defense & Security Systems (DSS), which serves Defense, Security Systems, Navigation and Exploration markets. The electromechanical device end markets that Sparton, as a whole, serves are in Medical, Military & Aerospace and Industrial & Instrumentation. Effective for fiscal 2010, Sparton reports its operating results under these three reportable business segments. Prior to fiscal 2010, all of the Companys operating units were aggregated into one line of business, EMS. The fiscal 2009 prior period presented herein reflects this change to segment reporting.
Medical Device (Medical) operations are comprised of contract development, design, production and distribution of complex and sophisticated medical related electromechanical devices for customers with specialized needs, specifically in the design and manufacturing process, to assure product reliability and safety in accordance with Food and Drug Administration (FDA) guidelines and approvals. This group specializes in systems and procedures targeted to the requirements of medical OEM and ET customers primarily in the In Vitro Diagnostic and Therapeutic Device segments of the Medical Device market space.
Complex Systems (CS) operations provides multiple industries with complex electronics systems offering end-to-end development and manufacturing solutions focused on high expectations of quality and delivery performance through a global footprint. As a vertically integrated business unit, this segment assists in providing its customers with seamless development of circuit card assemblies for integration into electro-mechanical solutions. By focusing on maximizing efficiency and cost containment at the various steps in the design, engineering, and manufacturing process, Complex Systems acts as an intelligent source and ideal partner for development firms and OEMs. This business unit is a supplier for low to medium volume/high complexity commercial and military aerospace applications, medical devices, telecommunications, energy, and industrial controls. Its current portfolio of product line applications include: flight controls, cock pit displays, fuel system controls, secure communications, early warning detection, diagnostics systems, security systems, detection systems, lighting, satellite communications, audio, nuclear detection, inventory control, and defense.
Defense & Security Systems (DSS) operations are comprised of design, development and production of products for a number of technologically significant programs aimed at fulfilling defense and commercial needs. Specializing in the development and production of complex electromechanical equipment, Sparton designs and
F-35
manufactures sonobuoys, ASW devices used by the U.S. Navy and foreign governments. This business unit also performs an engineering development function for the United States military and prime defense contractors on advanced technologies targeted as future defense products as well as replacement of current systems. The sonobuoy product line is built to the customers demanding specifications. These products are restricted by International Tariff and Arms Regulations (ITAR), which limits opportunities for competition. Additionally, this business unit internally develops and markets commercial products based on its navigation and underwater acoustic knowledge and the intrinsic skill sets of its technical staff.
Operating results and certain other financial information about the Companys three reportable segments for the years ended June 30, 2011, 2010 and 2009 and as of June 30, 2011 and June 30, 2010 were as follows (in thousands):
For the Year Ended June 30, 2011 | ||||||||||||||||||||||||
Medical | CS | DSS | Corporate and Other Unallocated |
Eliminations | Total | |||||||||||||||||||
Sales (a) |
$ | 98,028 | $ | 49,835 | $ | 69,720 | $ | | $ | (14,231 | ) | $ | 203,352 | |||||||||||
Gross profit |
$ | 12,938 | $ | 4,835 | $ | 15,395 | $ | | $ | | $ | 33,168 | ||||||||||||
Operating income (loss) |
$ | (8,011 | ) | $ | 1,586 | $ | 10,869 | $ | (8,273 | ) | $ | | $ | (3,829 | ) | |||||||||
Selling and administrative expenses |
$ | 6,031 | $ | 3,289 | $ | 3,416 | $ | 8,106 | $ | | $ | 20,842 | ||||||||||||
Internal research and development expenses |
$ | | $ | | $ | 1,110 | $ | | $ | | $ | 1,110 | ||||||||||||
Restructuring/impairment charges |
$ | 107 | $ | (22 | ) | $ | | $ | (10 | ) | $ | | $ | 75 | ||||||||||
Gain on acquisition |
$ | (2,550 | ) | $ | | $ | | $ | | $ | | $ | (2,550 | ) | ||||||||||
Gain on sale of property, plant and equipment |
$ | | $ | (18 | ) | $ | | $ | (121 | ) | $ | | $ | (139 | ) | |||||||||
Impairment of intangible asset |
$ | 3,663 | $ | | $ | | $ | | $ | | $ | 3,663 | ||||||||||||
Impairment of goodwill |
$ | 13,153 | $ | | $ | | $ | | $ | | $ | 13,153 | ||||||||||||
Depreciation/amortization |
$ | 793 | $ | 498 | $ | 249 | $ | 71 | $ | | $ | 1,611 | ||||||||||||
Capital expenditures |
$ | 45 | $ | 1,189 | $ | 1,385 | $ | 558 | $ | | $ | 3,177 | ||||||||||||
For the Year Ended June 30, 2010 | ||||||||||||||||||||||||
Medical | CS | DSS | Corporate and Other Unallocated |
Eliminations | Total | |||||||||||||||||||
Sales (a) |
$ | 64,424 | $ | 57,423 | $ | 63,853 | $ | | $ | (11,723 | ) | $ | 173,977 | |||||||||||
Gross profit |
$ | 8,603 | $ | 2,133 | $ | 15,847 | $ | | $ | | $ | 26,583 | ||||||||||||
Operating income (loss) |
$ | 4,600 | $ | (2,150 | ) | $ | 13,150 | $ | (9,878 | ) | $ | | $ | 5,722 | ||||||||||
Selling and administrative expenses |
$ | 3,536 | $ | 3,292 | $ | 2,697 | $ | 8,680 | $ | | $ | 18,205 | ||||||||||||
Restructuring/impairment charges |
$ | | $ | 993 | $ | | $ | 3,083 | $ | | $ | 4,076 | ||||||||||||
Gain on sale of property, plant and equipment |
$ | | $ | (32 | ) | $ | | $ | (3,087 | ) | $ | | $ | (3,119 | ) | |||||||||
Depreciation/amortization |
$ | 635 | $ | 620 | $ | 157 | $ | 51 | $ | | $ | 1,463 | ||||||||||||
Capital expenditures |
$ | 143 | $ | 917 | $ | 332 | $ | 143 | $ | | $ | 1,535 |
F-36
For the Year Ended June 30, 2009 | ||||||||||||||||||||||||
Medical | CS | DSS | Corporate and Other Unallocated |
Eliminations | Total | |||||||||||||||||||
Sales (a) |
$ | 64,393 | $ | 127,002 | $ | 42,289 | $ | | $ | (11,813 | ) | $ | 221,871 | |||||||||||
Gross profit |
$ | 7,793 | $ | 1,448 | $ | 6,645 | $ | | $ | | $ | 15,886 | ||||||||||||
Operating income (loss) |
$ | 3,731 | $ | (9,893 | ) | $ | 4,093 | $ | (9,188 | ) | $ | | $ | (11,257 | ) | |||||||||
Selling and administrative expenses |
$ | 3,570 | $ | 5,315 | $ | 2,481 | $ | 7,485 | $ | | $ | 18,851 | ||||||||||||
Restructuring/impairment charges |
$ | | $ | 6,017 | $ | 71 | $ | 920 | $ | | $ | 7,008 | ||||||||||||
Gain on sale of property, plant and equipment |
$ | | $ | (10 | ) | $ | | $ | | $ | | $ | (10 | ) | ||||||||||
Depreciation/amortization |
$ | 649 | $ | 1,024 | $ | 210 | $ | 3 | $ | | $ | 1,886 | ||||||||||||
Capital expenditures |
$ | | $ | 1,102 | $ | 120 | $ | 5 | $ | | $ | 1,227 | ||||||||||||
As of June 30, 2011 | ||||||||||||||||||||||||
Medical | CS | DSS | Corporate and Other Unallocated |
Eliminations | Total | |||||||||||||||||||
Total assets |
$ | 51,251 | $ | 24,642 | $ | 7,872 | $ | 38,844 | $ | | $ | 122,609 | ||||||||||||
As of June 30, 2010 | ||||||||||||||||||||||||
Medical | CS | DSS | Corporate and Other Unallocated |
Eliminations | Total | |||||||||||||||||||
Total assets |
$ | 46,695 | $ | 25,219 | $ | 5,980 | $ | 41,967 | $ | | $ | 119,861 |
(a) | CS sales include intercompany sales resulting primarily from the production of circuit boards that are then utilized in DSS product sales. These intercompany sales are eliminated in consolidation. |
(16) Business, Geographic and Sales Concentration
Sales to individual customers in excess of 10% of total net sales for the years ended June 30, 2011, 2010 and 2009 were as follows:
For the Year Ended June 30, | ||||||||||||
2011 | 2010 | 2009 | ||||||||||
U.S. Navy (a) |
30 | % | 28 | % | 14 | % | ||||||
Siemens Diagnostic (b) |
18 | % | 21 | % | 17 | % | ||||||
Fenwal Blood Technologies (c) |
12 | % | * | * | ||||||||
Goodrich (d) |
* | 13 | % | * | ||||||||
Honeywell (e) |
* | * | 19 | % |
(*) | Denotes sales were below 10% of total. |
(a) | Sales to the United States Navy, including those made through the Companys ERAPSCO agreement, are included in the results of the Companys DSS segment. |
(b) | Sales to Siemens Diagnostics are included in the results of the Companys Medical segment. See Note 2 for more information regarding Siemens Diagnostics. |
(c) | Sales to Fenwal Blood Technologies are included in the results of the Companys Medical segment. |
(d) | Sales to Goodrich are included in the results of the Companys CS segment. |
(e) | Sales to Honeywell are included in the results of the Companys CS segment. In March 2009, the Company terminated its sales agreement with Honeywell, an aerospace customer with several facilities to which it supplied product. Disengagement procedures and the winding down of contracts were completed in the second quarter of fiscal 2010. |
F-37
Net sales were made to customers located in the following countries (in thousands):
For the Year Ended June 30, | ||||||||||||
2011 | 2010 | 2009 | ||||||||||
United States |
$ | 172,646 | $ | 137,377 | $ | 167,782 | ||||||
Ireland |
23,078 | 21,258 | 21,102 | |||||||||
Canada |
91 | 72 | 15,525 | |||||||||
Other foreign countries (a) |
7,537 | 15,270 | 17,462 | |||||||||
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Consolidated total |
$ | 203,352 | $ | 173,977 | $ | 221,871 | ||||||
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(a) | No other single country accounted for 10% or more of export sales in the fiscal years ended June 30, 2011, 2010, or 2009. |
ASW devices and related engineering contract services to the U.S. government and foreign countries contributed approximately $66.5 million (33%), $62.6 million (36%) and $41.6 million (19%), respectively, to total net sales for the fiscal years ended June 30, 2011, 2010 and 2009.
The Companys investment in property, plant and equipment, which are located in the United States and Vietnam, are summarized, net of accumulated depreciation, as follows (in thousands):
As of June 30, 2011 |
As of June 30, 2010 |
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United States (a) |
$ | 8,775 | $ | 6,572 | ||||
Vietnam |
2,620 | 2,352 | ||||||
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Consolidated total |
$ | 11,395 | $ | 8,924 | ||||
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(a) | Property, plant and equipment located in the United States excludes assets held-for-sale in New Mexico of approximately $3.9 million at June 30, 2010 as further described in Note 5. |
(17) Quarterly Results of Operations (Unaudited) (In thousands, except per share data):
Quarter | ||||||||||||||||
1st (a) | 2nd | 3rd | 4th | |||||||||||||
Year Ended June 30, 2011 |
||||||||||||||||
Net sales |
$ | 45,767 | $ | 46,331 | $ | 50,352 | $ | 60,902 | ||||||||
Gross profit |
7,026 | 7,547 | 8,202 | 10,393 | ||||||||||||
Net income (loss) |
4,230 | 1,435 | 2,523 | (727 | ) | |||||||||||
Basic and diluted net income (loss) per share |
0.41 | 0.14 | 0.25 | (0.07 | ) | |||||||||||
Year Ended June 30, 2010 |
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Net sales |
$ | 48,104 | $ | 47,223 | $ | 38,637 | $ | 40,013 | ||||||||
Gross profit |
7,420 | 8,141 | 5,515 | 5,507 | ||||||||||||
Net income |
1,405 | 3,248 | 689 | 2,098 | ||||||||||||
Basic and diluted net income per share |
0.14 | 0.33 | 0.07 | 0.21 |
(a) | Fiscal 2011 first quarter net income and earnings per share amounts have been adjusted to reflect the finalization of the gain on acquisition of certain assets of the contract manufacturing business of Delphi Medical. See Note 3. |
(18) Subsequent Event:
On August 24, 2011 the Companys Board of Directors approved a repurchase by Sparton Corporation of up to $3,000,000 of shares of its common stock over the next 24 months in open market, block transactions and privately negotiated transactions.
F-38
SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS
(In thousands)
Years Ended June 30,
Balance at Beginning of Period |
Additions Charged to Costs and Expenses |
Addition Charged to Other Accounts |
Write-Offs/ Dispositions |
Balance at End of Period |
||||||||||||||||
2011 |
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Allowance for losses on accounts receivable |
$ | 532 | $ | 224 | $ | | $ | (691 | ) | $ | 65 | |||||||||
2010 |
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Allowance for losses on accounts receivable |
$ | 534 | $ | 133 | $ | | $ | (135 | ) | $ | 532 | |||||||||
2009 |
||||||||||||||||||||
Allowance for losses on accounts receivable |
$ | 258 | $ | 444 | $ | | $ | (168 | ) | $ | 534 |
F-39
INDEX TO EXHIBITS
Exhibit |
Description | |
3.1 | Second Amended Articles of Incorporation of the Registrant, incorporated herein by reference from the Registrants Proxy Statement on Form DEF 14A filed with the SEC on September 21, 2010. | |
3.2 | Amended and Restated Code of Regulations of the Registrant, incorporated herein by reference from the Registrants Proxy Statement on Form DEF 14A filed with the SEC on September 21, 2010. | |
10.1 | Amended and Restated Revolving Credit and Security Agreement dated August 14, 2009 among the Company, its subsidiaries and National City Business Credit, Inc., incorporated by reference from Exhibit 10.1 to the Registrants Current Report on Form 8-K filed with the SEC on August 18, 2009. | |
10.2 | Post-closing Agreement dated August 14, 2009 among the Company, its subsidiaries and National City Business Credit, Inc., incorporated by reference from Exhibit 10.2 to the Registrants Current Report on Form 8-K filed with the SEC on August 18, 2009. | |
10.3 | Long-Term Incentive Plan, incorporated by reference from Exhibit 10.1 to the Registrants Current Report on Form 8-K filed with the SEC on September 11, 2009. | |
10.4 | Lease Extension and Amendment Agreement dated May 1, 2010 between Sparton Technology, Inc. and 9621 Coors, L.L.C., guaranteed by Albuquerque Motor Company, Inc., incorporated by reference from Exhibit 10.1 to the Registrants Current Report on Form 8-K filed with the SEC on May 6, 2010. | |
10.5 | Option Agreement dated May 1, 2010 by and between Sparton Technology, Inc. and 9621 Coors, L.L.C., guaranteed by Albuquerque Motor Company, Inc., incorporated by reference from Exhibit 10.2 to the Registrants Current Report on Form 8-K filed with the SEC on May 6, 2010. | |
10.6 | Asset Purchase Agreement dated July 9, 2010 between Delphi Medical Systems, LLC and Sparton Medical Systems Colorado, LLC, incorporated by reference from Exhibit 10.1 to the Registrants Current Report on Form 8-K filed with the SEC on July 12, 2010. | |
10.7 | Asset Purchase Agreement dated December 8, 2010 between Coven Holdings LLC and Sparton Technology, Inc., incorporated by reference from Exhibit 10.1 to the Registrants Current Report on Form 8-K filed with the SEC on December 14, 2010. | |
10.8 | Employment Agreement dated November 6, 2008, by and between the Company and Cary B. Wood, incorporated by reference from Exhibit 10.2 to the Registrants Current Report on Form 8-K filed with the SEC on November 13, 2008. | |
10.9 | Employment Agreement dated March 30, 2009 by and between the Company and Greg Slome, incorporated by reference from Exhibit 10.1 to the Registrants Current Report on Form 8-K filed with the SEC on March 31, 2009. | |
10.10 | Executive Employment Agreement, effective as of January 5, 2009, by and between the Company and Gordon Madlock, incorporated by reference from Exhibit 10.2 to the Registrants Current Report on Form 8-K filed with the SEC on January 29, 2009. | |
10.11* | Amendment No. 2 to Amended and Restated Revolving Credit and Security Agreement dated March 3, 2011 among the Company, its subsidiaries and PNC Bank, National Association. | |
10.12*1 | Award/contract with an effective date of April 8, 2011 issued by the Naval Warfare Center to ERAPSCO. | |
10.13*1 | Amendment of Solicitation/Modification of Contract with an effective date of May 5, 2011 issued by the Naval Warfare Center to ERAPSCO. | |
10.14*1 | Amendment of Solicitation/Modification of Contract with an effective date of June 20, 2011 issued by the Naval Warfare Center to ERAPSCO. |
Exhibit |
Description | |
10.15*1 | Amendment of Solicitation/Modification of Contract with an effective date of July 25, 2011 issued by the Naval Warfare Center to ERAPSCO. | |
10.16*1 | Amendment of Solicitation/Modification of Contract with an effective date of August 18, 2011 issued by the Naval Warfare Center to ERAPSCO. | |
10.17*1 | Subcontract with an effective date of April 8, 2011 between Sparton Electronics Florida, Inc. and ERAPSCO. | |
10.18*1 | Subcontract Modification with an effective date of June 20, 2011 between Sparton Electronics Florida, Inc. and ERAPSCO. | |
10.19* | Employment Agreement dated December 8, 2008 by and between the Company and Steven M. Korwin. | |
10.20* | Employment Agreement dated January 5, 2009 by and between the Company and Michael W. Osborne. | |
10.21* | Amendment to the Sparton Corporation 2010 Long-Term Incentive Plan dated June 24, 2010. | |
10.22 | Employment Agreement dated August 24, 2011, by and between the Company and Cary B. Wood, incorporated by reference from Exhibit 10.1 to the Registrants Current Report on Form 8-K filed with the SEC on August 29, 2011. | |
21.1* | Subsidiaries of Sparton Corporation | |
23.1* | Consent of BDO USA, LLP | |
31.1* | Chief Executive Officer certification under Section 302 of the Sarbanes-Oxley Act of 2002. | |
31.2* | Chief Financial Officer certification under Section 302 of the Sarbanes-Oxley Act of 2002. | |
32.1* | Chief Executive Officer and Chief Financial Officer certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
* | Filed herewith. |
| Indicates management contract or compensatory arrangement. |
1 | Confidential treatment has been requested with respect to the redacted portions of this exhibit. |
Exhibit 10.11
AMENDMENT NO. 2 TO AMENDED AND RESTATED
REVOLVING CREDIT AND SECURITY AGREEMENT
THIS AMENDMENT NO. 2 (this Amendment) is entered into as of March 3, 2011, by and among SPARTON CORPORATION, a corporation organized under the laws of the State of Ohio (Sparton), SPARTON ELECTRONICS FLORIDA, INC., a corporation organized under the laws of the State of Florida (Sparton Florida), SPARTRONICS, INC., a corporation organized under the laws of the State of Michigan (Spartronics), SPARTON MEDICAL SYSTEMS, INC., a corporation organized under the laws of the State of Michigan (Sparton Medical), SPARTRONICS VIETNAM CO., LTD, a corporation organized under the laws of Vietnam (Spartronics Vietnam), SPARTON TECHNOLOGY, INC., a corporation organized under the laws of New Mexico (Sparton Technology), SPARTON OF CANADA, LIMITED, a Canadian corporation (Sparton Canada), SPARTON MEDICAL SYSTEMS COLORADO, LLC, a limited liability company organized under the laws of the State of Colorado (Sparton Medical Colorado) (Sparton, Sparton Florida, Spartronics, Sparton Medical, Sparton Vietnam, Sparton Technology, Sparton Canada, and Sparton Medical Colorado are each a Borrower, and collectively the Borrowers), PNC BANK, NATIONAL ASSOCIATION (PNC), the various financial institutions named therein or which hereafter become a party thereto, (together with PNC, collectively, Lenders) and PNC, as agent for the Lenders (in such capacity, Agent).
BACKGROUND
WHEREAS, Borrowers, Agent, and Lenders are parties to an Amended and Restated Revolving Credit and Security Agreement dated as of August 14, 2009, as amended by Amendment No. 1 to Revolving Credit and Security Agreement dated as of August 6, 2010 (as amended, restated, supplemented or otherwise modified from time to time, the Loan Agreement) pursuant to which Agent and Lenders provide Borrowers with certain financial accommodations.
WHEREAS, Borrowers have requested that Agent and Lenders amend certain provisions of the Loan Agreement as hereafter provided, and Agent and Lenders are willing to do so on the terms and conditions hereafter set forth.
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:
1. Definitions. All capitalized terms not otherwise defined herein shall have the meanings given to them in the Loan Agreement.
2. Amendments to Loan Agreement.
(a) The definition of Applicable Margin in Section 1.2 of the Loan Agreement is amended and restated in its entirety to read as follows:
Applicable Margin for Revolving Advances shall mean the
applicable percentage specified below:
APPLICABLE MARGIN FOR DOMESTIC RATE LOANS |
APPLICABLE MARGIN FOR EURODOLLAR RATE LOANS |
|||||
2.00 | % | 3.00 | % |
(b) The definition of Eurodollar Rate in Section 1.2 of the Loan Agreement is amended and restated in its entirety to read as follows:
Eurodollar Rate shall mean for any Eurodollar Rate Loan for the then current Interest Period relating thereto the interest rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) determined by Agent by dividing (i) the rate which appears on the Bloomberg Page BBAM1 (or on such other substitute Bloomberg page that displays rates at which US dollar deposits are offered by leading banks in the London interbank deposit market), or the rate which is quoted by another source selected by Agent which has been approved by the British Bankers Association as an authorized information vendor for the purpose of displaying rates at which US dollar deposits are offered by leading banks in the London interbank deposit market (an Alternative Source), at approximately 11:00 a.m., London time two (2) Business Days prior to the first day of such Interest Period (or if there shall at any time, for any reason, no longer exist a Bloomberg Page BBAM1 (or any substitute page) or any Alternate Source, a comparable replacement rate determined by the Agent at such time (which determination shall be conclusive absent manifest error)) for an amount comparable to such Eurodollar Rate Loan and having a borrowing date and a maturity comparable to such Interest Period by (ii) a number equal to 1.00 minus the Reserve Percentage.
The Eurodollar Rate shall be adjusted with respect to any Eurodollar Rate Loan that is outstanding on the effective date of any change in the Reserve Percentage as of such effective date. The Agent shall give prompt notice to the Borrowing Agent of the Eurodollar Rate as determined or adjusted in accordance herewith, which determination shall be conclusive absent manifest error.
3. Conditions Precedent to Effectiveness of this Amendment. This Amendment is not effective until each of the following conditions precedent (the Amendment Conditions Precedent) have been satisfied to Agents satisfaction:
(a) Agent has received a fully executed copy of this Amendment.
(b) All loan documents, including notes, security agreements, guarantees, subordination agreements, landlord waivers, financial statements, legal opinions, evidence of insurance, and other documents, are satisfactory in form and substance to Agent and its legal counsel.
4. Representations and Warranties. Each Borrower represents, warrants, and agrees
that:
(a) The execution, delivery, and performance of this Amendment are within its corporate, limited liability company, or limited partnership powers, have been duly authorized, and do not violate any statute, law, regulation, or its articles of incorporation, articles of organization, by-laws, or other organizational documents, or any material agreement or undertaking to which it is a party or by which it is bound.
(b) This Amendment is a legal, valid, and binding obligation of each Borrower, enforceable against each in accordance with its terms.
(c) After giving effect to the amendments in this Amendment, the representations and warranties contained in the Loan Agreement and the Other Documents are true on and as of the date of this Amendment with the same force and effect as if made on and as of the date of this Amendment.
(d) No Default or Event of Default exists on the date of this Amendment.
(e) All Obligations are due and owing without setoff, counterclaim, or defense.
5. Effect on the Agreement.
(a) References in the Loan Agreement and the Other Documents to the Loan Agreement are treated as references to the Loan Agreement as amended by this Amendment. Without limiting the definition of Other Documents, this Amendment and all other agreements and documents executed in connection with it are Other Documents.
(b) Except as specifically amended herein, the Loan Agreement, and all other documents, instruments and agreements executed and/or delivered in connection therewith, shall remain in full force and effect, and are hereby ratified, reaffirmed, confirmed and approved.
(c) If there is an express conflict between the terms of this Amendment and the terms of the Loan Agreement or the Other Documents, the terms of this Amendment control.
(d) The execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy of Agent or Lenders, nor constitute a waiver of any provision of the Loan Agreement, or any other documents, instruments or agreements executed and/or delivered under or in connection therewith.
6. Governing Law. This Amendment shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns and shall be governed by and construed in accordance with the laws of the State of Michigan, without regard to any conflicts of laws principles thereto that would call for the application of the laws of another jurisdiction.
7. Headings. Section headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose.
8. Counterparts; Facsimile. This Amendment may be executed by the parties hereto in one or more counterparts, each of which shall be deemed an original and all of which when taken together shall constitute one and the same agreement. Any signature delivered by a party by facsimile transmission or electronic transmission in PDF format shall be deemed to be an original signature hereto.
[Signature pages follow]
IN WITNESS WHEREOF, this Amendment has been duly executed as of the day and year first written above.
PNC BANK, NATIONAL ASSOCIATION, | ||
as Agent and Lender | ||
By: | /s/ Roger F. Reeder | |
Roger F. Reeder, Vice President |
ACKNOWLEDGED AND AGREED: | ||
SPARTON CORPORATION | ||
By: | /s/ Gregory A. Slome | |
Gregory A. Slome, Senior Vice President and Chief Financial Officer | ||
SPARTON ELECTRONICS FLORIDA, INC. | ||
By: | /s/ Gregory A. Slome | |
Gregory A. Slome, Treasurer and Secretary | ||
SPARTRONICS, INC. | ||
By: | /s/ Gregory A. Slome | |
Gregory A. Slome, Treasurer and Secretary | ||
SPARTON MEDICAL SYSTEMS, INC. | ||
By: | /s/ Gregory A. Slome | |
Gregory A. Slome, Treasurer and Secretary | ||
SPARTRONICS VIETNAM CO., LTD. | ||
By: | /s/ Cary B. Wood | |
Cary B. Wood, General Director |
[Signature Page to Amendment No. 2 to Amended and
Restated Revolving Credit and Security Agreement]
SPARTON TECHNOLOGY, INC. | ||
By: | /s/ Gregory A. Slome | |
Gregory A. Slome, Treasurer and Secretary |
SPARTON OF CANADA, LIMITED | ||
By: | /s/ Cary B. Wood | |
Cary B. Wood, President |
SPARTON MEDICAL SYSTEMS COLORADO, LLC, as Borrower | ||
By: | /s/ Gregory A. Slome | |
Gregory A. Slome, President |
[Signature Page to Amendment No. 2 to Amended and
Restated Revolving Credit and Security Agreement]
Exhibit 10.12
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
AWARD/CONTRACT |
1. THIS CONTRACT IS A RATED ORDER |
RATING | PAGE OF PAGES | |||||||||||
1 | 79 | |||||||||||||
2. CONTRACT (Proc. Inst. Ident.) NO. N00421-11-C-0030 |
3. EFFECTIVE DATE 08 Apr 2011 |
4. REQUISITION/PURCHASE REQUEST/PROJECT NO. SEE SCHEDULE | ||||||||||||
5. ISSUED BY | CODE | N00421 | 6. ADMINISTERED BY (If other than Item 5) | CODE | S2305A | |||||||||
NAVAL AIR WARFARE CENTER AD (PAX) CODE 2.5.1.9 - BLDG 441 21983 BUNDY RD PATUXENT RIVER MD 20670 |
DCMA COMBAT VEHICLES DETROIT 6501 EAST ELEVEN MILE, BLDG 231 ATTN: DCMAG-MD WARREN MI 48397-5000 |
7. NAME AND ADDRESS OF CONTRACTOR (No., street, city, county, state and zip code) ERAPSCO DAVID JOST 4578 EAST PARK 30 DR COLUMBIA CITY IN 46725-8869 |
8. DELIVERY ¨ FOB ORIGIN x OTHER (See below) | |||||||||||||
9. DISCOUNT FOR PROMPT PAYMENT | ||||||||||||||
10. SUBMIT INVOICES (4 copies unless otherwise specified) TO THE ADDRESS SHOWN IN: |
ITEM | |||||||||||||
CODE 0CCL9 | FACILITY CODE | |||||||||||||
11. SHIP TO/MARK FOR | CODE | 12. PAYMENT WILL BE MADE BY | CODE | HQ0337 | ||||||||||
See Schedule | DFAS COLUMBUS CENTER DFAS-CO/NORTH ENTITLEMENT OPERATIONS PO BOX 182266 COLUMBUS OH 43218-2266
| |||||||||||||
13.AUTHORITY FOR USING OTHER THAN FULL AND OPEN COMPETITION: ¨ 10 U.S.C. 2304(c)( ) ¨ 41 U.S.C. 253(c)( ) |
14. ACCOUNTING AND APPROPRIATION DATA See Schedule | |||||||||||||
15A. ITEM NO. | 15B. SUPPLIES/ SERVICES | 15C. QUANTITY | 15D. UNIT | 15E. UNIT PRICE | 15F. AMOUNT | |||||||||
SEE SCHEDULE
|
||||||||||||||
15G. TOTAL AMOUNT OF CONTRACT | $55,481,634.64 | |||||||||||||
16. TABLE OF CONTENTS |
(X) | SEC. | DESCRIPTION | PAGE(S) | (X) | SEC. | DESCRIPTION | PAGE(S) | |||||||
PART I - THE SCHEDULE | PART II - CONTRACT CLAUSES | |||||||||||||
X | A | A SOLICITATION/ CONTRACT FORM | 1 | X | I | CONTRACT CLAUSES | 47 - 77 | |||||||
X | B | SUPPLIES OR SERVICES AND PRICES/ COSTS | 2 -15 | PART III - LIST OF DOCUMENTS, EXHIBITS AND OTHER ATTACHMENTS | ||||||||||
X | C | DESCRIPTION/ SPECS./ WORK STATEMENT | 16 -19 | X | J | LIST OF ATTACHMENTS | 78 - 79 | |||||||
X | D | PACKAGING AND MARKING | 20 -26 | PART IV - REPRESENTATIONS AND INSTRUCTIONS | ||||||||||
X | E | INSPECTION AND ACCEPTANCE | 27 -32 | K | REPRESENTATIONS, CERTIFICATIONS AND OTHER STATEMENTS OF OFFERORS | |||||||||
X | F | DELIVERIES OR PERFORMANCE | 33 - 40 | |||||||||||
X | G | CONTRACT ADMINISTRATION DATA | 41 - 44 | L | INSTRS., CONDS., AND NOTICES TO OFFERORS | |||||||||
X | H | SPECIAL CONTRACT REQUIREMENTS | 45 - 46 | M | EVALUATION FACTORS FOR AWARD | |||||||||
CONTRACTING OFFICER WILL COMPLETE ITEM 17 OR 18 AS APPLICABLE | ||||||||||||||
17. x CONTRACTORS NEGOTIATED AGREEMENT Contractor is required
to sign this document and return copies to issuing office.) Contractor agrees to furnish and deliver all items or perform all the services set forth or otherwise identified above and on any continuation sheets for the consideration stated
herein. The rights and obligations of the parties to this contract shall be subject to and governed by the following documents: (a) this award contract, (b) the solicitation, if any, and (c) such provisions, representations, certifications, and
specifications, as are attached or incorporated by reference herein. (Attachments are listed herein.) |
18. ¨ AWARD
(Contractor is not required to sign this document.) Your offer on Solicitation Number N00421-10-R-1007-0001 including the additions or changes made by you which additions or changes are set forth in full above, is hereby accepted as to the items listed above and on any continuation sheets. This award consummates the contract which consists of the following documents: (a) the Government's solicitation and your offer, and (b) this award/contract. No further contractual document is necessary. | |||||||||||||
19A. NAME AND TITLE OF SIGNER (Type or print)
Douglas Randol |
20A. NAME OF CONTRACTING OFFICER JESSICA T. FLYNN / CONTRACTING OFFICER TEL: 301 757-2521 EMAIL: jessica.t.flynn@navy.mil | |||||||||||||
19B. NAME OF CONTRACTOR | 19C. DATE SIGNED | 20B. UNITED STATES OF AMERICA | 20C. DATE SIGNED | |||||||||||
BY /s/ Douglas Randol | 8-April 2011 | BY
![]() |
08-Apr-2011 | |||||||||||
(Signature of person authorized to sign) | (Signature of Contracting Officer) |
AUTHORIZED FOR LOCAL REPRODUCTION
Previous edition is usable |
STANDARD FORM 26 (REV. 4/2008)
Prescribed by GSA FAR (48 CFR) 53.214(a) |
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
N00421-11-C-0030
Page 2 of 82
Section B - Supplies or Services and Prices
ITEM NO | SUPPLIES/SERVICES | QUANTITY | UNIT | UNIT PRICE | AMOUNT | |||||||||||||
0001 |
[ | ] | Each | $ | [ | ] | $ | [ | ] | |||||||||
AN/SSQ-36B Sonobuoy FFP with Launcher Container LAU-126/A (including Reliability Inspection Test Samples). (Mar 2011 - Sept 2011) NALC: 8W78 NSN: 6655-01-475-9479 FOB: Origin PURCHASE REQUEST NUMBER: 1300197770 |
|
|||||||||||||||||
|
|
|||||||||||||||||
NET AMT | $ | [ | ] | |||||||||||||||
ACRN AB CIN: 130019777000001 |
|
$ | [ | ] | ||||||||||||||
ITEM NO | SUPPLIES/SERVICES | QUANTITY | UNIT | UNIT PRICE | AMOUNT | |||||||||||||
0002 |
[ | ] | Each | $ | [ | ] | $ | [ | ] | |||||||||
OPTION |
AN/SSQ-36B Sonobuoy (Surge) FFP with Launcher Container LAU-126/A (including Reliability Inspection Test Samples). (Opt exercise - Sept 2011) NALC: 8W78 NSN: 6655-01-475-9479 Final quantity to be determined at time of option exercise based on funding availability and Government requirements. FOB: Origin |
|
||||||||||||||||
|
|
|||||||||||||||||
NET AMT | $ | [ | ] |
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
N00421-11-C-0030
Page 3 of 82
ITEM NO | SUPPLIES/SERVICES | QUANTITY | UNIT | UNIT PRICE | AMOUNT | |||||||||||||
0003 |
[ | ] | Each | $ | [ | ] | $ | [ | ] | |||||||||
OPTION |
AN/SSQ-36B Sonobuoy (Opt 1) FFP with Launcher Container LAU-126/A (including Reliability Inspection Test Samples). (Oct 2011 - Sept 2012) NALC: 8W78 NSN: 6655-01-475-9479 Final quantity to be determined at time of option exercise based on funding availability and Government requirements. FOB: Origin |
|
||||||||||||||||
|
|
|||||||||||||||||
NET AMT | $ | [ | ] | |||||||||||||||
ITEM NO | SUPPLIES/SERVICES | QUANTITY | UNIT | UNIT PRICE | AMOUNT | |||||||||||||
0004 |
[ | ] | Each | $ | [ | ] | $ | [ | ] | |||||||||
OPTION |
AN/SSQ-36B Sonobuoy (Surge Opt 1) FFP with Launcher Container LAU-126/A (including Reliability Inspection Test Samples). (Opt exercise - Sept 2012) NALC: 8W78 NSN: 6655-01-475-9479 Final quantity to be determined at time of option exercise based on funding availability and Government requirements. FOB: Origin |
|
||||||||||||||||
|
|
|||||||||||||||||
NET AMT | $ | [ | ] |
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
N00421-11-C-0030
Page 4 of 82
ITEM NO | SUPPLIES/SERVICES | QUANTITY | UNIT | UNIT PRICE | AMOUNT | |||||||||||||
0005 |
Each | $ | [ | ] | ||||||||||||||
AN/SSQ-53F Sonobuoy FFP with Launcher container LAU-126/A (including Reliability Inspection Test Samples). (Mar 2011 - Sept 2011) NALC: 8W88 NSN: 5845-01-475-9870
FOB: Origin |
|
|||||||||||||||||
|
|
|||||||||||||||||
NET AMT | $ | [ | ] | |||||||||||||||
ITEM NO | SUPPLIES/SERVICES | QUANTITY | UNIT | UNIT PRICE | AMOUNT | |||||||||||||
0005AA |
[ | ] | Each | $ | [ | ] | $ | [ | ] | |||||||||
AN/SSQ-53F Sonobuoy FFP with Launcher container LAU-126/A (including Reliability Inspection Test Samples). (Mar 2011 - Sept 2011) NALC: 8W88 NSN: 5845-01-475-9870
FOB: Destination PURCHASE REQUEST NUMBER: 1300197770 |
|
|||||||||||||||||
|
|
|||||||||||||||||
NET AMT | $ | [ | ] | |||||||||||||||
ACRN AC CIN: 130019777000002 |
|
$ | [ | ] |
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
N00421-11-C-0030
Page 5 of 82
ITEM NO | SUPPLIES/SERVICES | QUANTITY | UNIT | UNIT PRICE | AMOUNT | |||||||||||||
0005AB |
[ | ] | Each | $ | [ | ] | $ | [ | ] | |||||||||
AN/SSQ-53F Sonobuoy FFP with Launcher container LAU-126/A (including Reliability Inspection Test Samples). (Mar 2011 - Sept 2011) NALC: 8W88 NSN: 5845-01-475-9870
FOB: Destination PURCHASE REQUEST NUMBER: 1300197767 |
|
|||||||||||||||||
|
|
|||||||||||||||||
NET AMT | $ | [ | ] | |||||||||||||||
ACRN AD CIN: 130019776700001 |
|
$ | [ | ] | ||||||||||||||
ITEM NO | SUPPLIES/SERVICES | QUANTITY | UNIT | UNIT PRICE | AMOUNT | |||||||||||||
0005AC |
[ | ] | Each | $ | [ | ] | $ | [ | ] | |||||||||
AN/SSQ-53F Sonobuoy FFP with Launcher container LAU-126/A (including Reliability Inspection Test Samples). (Mar 2011 - Sept 2011) NALC: 8W88 NSN: 5845-01-475-9870
FOB: Destination PURCHASE REQUEST NUMBER: 1300197769 |
|
|||||||||||||||||
|
|
|||||||||||||||||
NET AMT | $ | [ | ] | |||||||||||||||
ACRN AE CIN: 130019776900001 |
|
$ | [ | ] |
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
N00421-11-C-0030
Page 6 of 82
ITEM NO | SUPPLIES/SERVICES | QUANTITY | UNIT | UNIT PRICE | AMOUNT | |||||||||||||
0006 |
[ | ] | Each | $ | [ | ] | $ | [ | ] | |||||||||
OPTION |
AN/SSQ-53F Sonobuoy (Surge) FFP with Launcher container LAU-126/A (including Reliability Inspection Test Samples). (Opt exercise - Sept 2011) NALC: 8W88 NSN: 5845-01-475-9870 Final quantity to be determined at time of option exercise based on funding availability and Government requirements. FOB: Origin |
|
||||||||||||||||
|
|
|||||||||||||||||
NET AMT | $ | [ | ] | |||||||||||||||
ITEM NO | SUPPLIES/SERVICES | QUANTITY | UNIT | UNIT PRICE | AMOUNT | |||||||||||||
0007 |
[ | ] | Each | $ | [ | ] | $ | [ | ] | |||||||||
OPTION |
AN/SSQ-53F Sonobuoy (Opt 1) FFP with Launcher container LAU-126/A (including Reliability Inspection Test Samples). (Oct 2011 - Sept 2012) NALC: 8W88 NSN: 5845-01-475-9870 Final quantity to be determined at time of option exercise based on funding availability and Government requirements.
FOB: Origin |
|
||||||||||||||||
|
|
|||||||||||||||||
NET AMT | $ | [ | ] |
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
N00421-11-C-0030
Page 7 of 82
ITEM NO | SUPPLIES/SERVICES | QUANTITY | UNIT | UNIT PRICE | AMOUNT | |||||||||||||
0008 |
[ | ] | Each | $ | [ | ] | $ | [ | ] | |||||||||
OPTION |
AN/SSQ-53F Sonobuoy (Surge Opt 1) FFP with Launcher container LAU-126/A (including Reliability Inspection Test Samples). (Ordering Period Oct 2011 - Sept 2012) NALC: 8W88 NSN: 5845-01-475-9870 Final quantity to be determined at time of option exercise based on funding availability and Government requirements. FOB: Origin |
|
||||||||||||||||
|
|
|||||||||||||||||
NET AMT | $ | [ | ] | |||||||||||||||
ITEM NO | SUPPLIES/SERVICES | QUANTITY | UNIT | UNIT PRICE | AMOUNT | |||||||||||||
0009 |
[ | ] | Each | $ | [ | ] | $ | [ | ] | |||||||||
AN/SSQ-62E Sonobuoy FFP with LiS02 Battery; including Launcher Container LAU-126/A (w/ Reliability Inspection Test Samples). (Mar 2011 - Sept 2011) NALC: 8W86 NSN: 5845-01-581-3976 (Sparton) NSN:5845-01-456-1317 (USSI)
FOB: Origin PURCHASE REQUEST NUMBER: 1300197770 |
|
|||||||||||||||||
|
|
|||||||||||||||||
NET AMT | $ | [ | ] | |||||||||||||||
ACRN AA CIN: 130019777000003 |
|
$ | [ | ] |
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
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ITEM NO | SUPPLIES/SERVICES | QUANTITY | UNIT | UNIT PRICE | AMOUNT | |||||||||||||
0010 |
[ | ] | Each | $ | [ | ] | $ | [ | ] | |||||||||
OPTION |
AN/SSQ-62E Sonobuoy (Surge) FFP with LiS02 Battery; including Launcher Container LAU-126/A (w/ Reliability Inspection Test Samples). (Opt exercise - Sept 2011) NALC: 8W86 NSN: 5845-01-581-3976 (Sparton) NSN:5845-01-456-1317 (USSI) Final quantity to be determined at time of option exercise based on funding availability and Government requirements. FOB: Origin |
|
||||||||||||||||
|
|
|||||||||||||||||
NET AMT | $ | [ | ] | |||||||||||||||
ITEM NO | SUPPLIES/SERVICES | QUANTITY | UNIT | UNIT PRICE | AMOUNT | |||||||||||||
0011 |
[ | ] | Each | $ | [ | ] | $ | [ | ] | |||||||||
OPTION |
AN/SSQ-62E Sonobuoy (Opt 1) FFP with LiS02 Battery; including Launcher Container LAU-126/A (w/ Reliability Inspection Test Samples). (Oct 2011 - Sept 2012) NALC: 8W86 NSN: 5845-01-581-3976 (Sparton) NSN:5845-01-456-1317 (USSI) Final quantity to be determined at time of option exercise based on funding availability and Government requirements.
FOB: Origin |
|
||||||||||||||||
|
|
|||||||||||||||||
NET AMT | $ | [ | ] |
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
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ITEM NO | SUPPLIES/SERVICES | QUANTITY | UNIT | UNIT PRICE | AMOUNT | |||||||||||||
0012 |
[ | ] | Each | $ | [ | ] | $ | [ | ] | |||||||||
OPTION |
AN/SSQ-62E Sonobuoy (Surge Opt 1) FFP with LiS02 Battery; including Launcher Container LAU-126/A (w/ Reliability Inspection Test Samples). (Opt exercise - Sept 2012) NALC: 8W86 NSN: 5845-01-581-3976 (Sparton) NSN:5845-01-456-1317 (USSI) Final quantity to be determined at time of option exercise based on funding availability and Government requirements.
FOB: Origin |
|
||||||||||||||||
|
|
|||||||||||||||||
NET AMT | $ | [ | ] | |||||||||||||||
ITEM NO | SUPPLIES/SERVICES | QUANTITY | UNIT | UNIT PRICE | AMOUNT | |||||||||||||
0013 |
$ | 0.00 | ||||||||||||||||
Reserved FFP FOB: Origin |
|
|||||||||||||||||
|
|
|||||||||||||||||
NET AMT | $ | 0.00 |
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
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ITEM NO | SUPPLIES/SERVICES | QUANTITY | UNIT | UNIT PRICE | AMOUNT | |||||||
0014 |
$ | 0.00 | ||||||||||
Reserved FFP FOB: Origin |
||||||||||||
|
|
|||||||||||
NET AMT | $ | 0.00 | ||||||||||
ITEM NO | SUPPLIES/SERVICES | QUANTITY | UNIT | UNIT PRICE | AMOUNT | |||||||
0015 |
$ | 0.00 | ||||||||||
Reserved FFP FOB: Origin |
||||||||||||
|
|
|||||||||||
NET AMT | $ | 0.00 | ||||||||||
ITEM NO | SUPPLIES/SERVICES | QUANTITY | UNIT | UNIT PRICE | AMOUNT | |||||||
0016 |
$ | 0.00 | ||||||||||
Reserved FFP FOB: Origin |
||||||||||||
|
|
|||||||||||
NET AMT | $ | 0.00 |
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
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ITEM NO | SUPPLIES/SERVICES | QUANTITY | UNIT | UNIT PRICE | AMOUNT | |||||||
0017 |
$ | 0.00 | ||||||||||
Reserved FFP FOB: Origin |
||||||||||||
|
|
|||||||||||
NET AMT | $ | 0.00 | ||||||||||
ITEM NO | SUPPLIES/SERVICES | QUANTITY | UNIT | UNIT PRICE | AMOUNT | |||||||
0018 |
$ | 0.00 | ||||||||||
Reserved FFP FOB: Origin |
||||||||||||
|
|
|||||||||||
NET AMT | $ | 0.00 |
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
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ITEM NO | SUPPLIES/SERVICES | QUANTITY | UNIT | UNIT PRICE | AMOUNT | |||||||
0019 |
$ | 0.00 | ||||||||||
Reserved FFP FOB: Origin |
||||||||||||
|
|
|||||||||||
NET AMT | $ | 0.00 | ||||||||||
ITEM NO | SUPPLIES/SERVICES | QUANTITY | UNIT | UNIT PRICE | AMOUNT | |||||||
0020 |
$ | 0.00 | ||||||||||
Reserved FFP
FOB: Origin |
||||||||||||
|
|
|||||||||||
NET AMT | $ | 0.00 |
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
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ITEM NO | SUPPLIES/SERVICES | QUANTITY | UNIT | UNIT PRICE | AMOUNT | |||||||
0021 |
$ | 0.00 | ||||||||||
Reserved FFP FOB: Origin |
||||||||||||
|
|
|||||||||||
NET AMT | $ | 0.00 | ||||||||||
ITEM NO | SUPPLIES/SERVICES | QUANTITY | UNIT | UNIT PRICE | AMOUNT | |||||||
0022 |
$ | 0.00 | ||||||||||
Reserved FFP
FOB: Origin |
||||||||||||
|
|
|||||||||||
NET AMT | $ | 0.00 |
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
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ITEM NO | SUPPLIES/SERVICES | QUANTITY | UNIT | UNIT PRICE | AMOUNT | |||||||||
0023 |
$ | 0.00 | ||||||||||||
Reserved FFP FOB: Origin |
|
|||||||||||||
|
|
|||||||||||||
NET AMT | $ | 0.00 | ||||||||||||
ITEM NO | SUPPLIES/SERVICES | QUANTITY | UNIT | UNIT PRICE | AMOUNT | |||||||||
0024 |
$ | 0.00 | ||||||||||||
Reserved FFP FOB: Origin |
|
|||||||||||||
|
|
|||||||||||||
NET AMT | $ | 0.00 | ||||||||||||
ITEM NO | SUPPLIES/SERVICES | QUANTITY | UNIT | UNIT PRICE | AMOUNT | |||||||||
0025 |
$ | 0.00 | ||||||||||||
Reserved FFP FOB: Origin |
|
|||||||||||||
|
|
|||||||||||||
NET AMT | $ | 0.00 |
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
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ITEM NO | SUPPLIES/SERVICES | QUANTITY | UNIT | UNIT PRICE | AMOUNT | |||||||||
0026 |
Lot | NSP | ||||||||||||
CDRLS FFP for CLINs 0001 - 0025 FOB: Destination |
||||||||||||||
|
|
|||||||||||||
NET AMT | $ | 0.00 |
CLAUSES INCORPORATED BY FULL TEXT
5252.204-9501 NATIONAL STOCK NUMBERS (NAVAIR)(MAR 2007)
(a) This clause applies to supplies that are stock numbered under Federal Catalog System procedures.
(b) Unless otherwise authorized by the Contracting Officer, in writing, the Contractor shall not deliver any supplies until the supplies have been marked with a National Stock Number. All available National Stock Numbers will be furnished by the Government. If National Stock Numbers are not furnished by the Government in time to meet the delivery schedule for the supplies, the Contractor may present the supplies that are scheduled for delivery to the Contracting Officer for acceptance. The Contracting Officer may accept such supplies without National Stock Numbers and the Government will pay the Contractor, provided that title to the supplies is vested in the Government.
(c) The term Federal Stock Number (FSN), which may be referred to in the specifications of this contract or elsewhere in this contract, shall mean National Stock Number (NSN), and the term Federal Item Identification Number, wherever it appears, shall mean National Item Identification Number.
(As used in the foregoing clause, the term Contracting Officer shall mean the Administrative Contracting Officer (ACO) with respect to provisioned items and other supplies ordered by the ACO.)
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
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Section C - Descriptions and Specifications
DESCRIPTIONS AND SPECS
C.1 AN/SSQ Production Scope and Specifications (CLINs 0001- 0012)
The contractor shall deliver qualified AN/SSQ-36B, 53F, and 62E sonobuoys in accordance with the requirements set forth in the Production Sonobuoy Specification (PSS) (Attachment 1-9) as referenced in Section J.
C.1.1 ADDITIONAL SPECIFICATION FOR CLIN 0013
The Government hereby incorporates and makes a part of this solicitation the GPS Sonobuoy Requirement for Analog VHF Uplink as referenced in Section J with the same force and effect as if it had been set out in full text.
The following exceptions apply to the PSS for the Sparton AN/SSQ-62E configuration (SSQ-62E lots 50-100):
PSS Paragraph 3.3.3.9.3 Multiplexing, c. Phase Pilot:
Deviate to allow an additional 2 dB to the maximum test limit used during production lot testing at shallow depths (50 ft. and 90 ft.).
PSS paragraph 3.5.1.7 Phase tracking (Table XXXIV).
Deviate to allow three of the four sonar channels exceed the measurement requirements for O/D Phase tracking by up to 10 degrees over the current limits at frequencies at or above 200 Hz from the center frequency of the sonar channel.
C.1.2 ADDITIONAL SPECIFICATION FOR CLINS 0023 through 0025 - The 53F attenuated sonobuoy shall reproduce transient signals as well as sinusoidal signals. The reproduced signal shall contain no artifacts other than simple harmonic and inter modulation products of acoustic signals. Change PSS Table XXX Acoustic Sensitivity 53F Cal. Omni RMS Sound Pressure Level (SPL) above 1 µPa from 116 ± 2 dB to:
CLIN 0023 - For 20 dB attenuation 136 ± 2 dB
CLIN 0024 - For 40 dB attenuation 156 ± 2 dB
CLIN 0025 - For 60 dB attenuation 176 ± 2.5 dB
Change PSS Figure 11E by adding:
CLIN 0023 - 21 dB to all the SPL numbers
CLIN 0024 - 41 dB to all the SPL numbers
CLIN 0025 - 62 dB to all the SPL numbers
C.1.3 Other Applicable Documents (Applicable to CLINS 0001 through 0019, 0023 through 0025)
The following documents are mandatory to the extent referenced herein:
PMA-264 Documents |
Date |
Subject/Title | ||
PMA264-CMP REV-, CHG 0 |
July 2009 | AIR Antisubmarine Warfare (ASW) Configuration Management Plan |
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
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NAWCAD Test Procedures |
Date |
Subject/Title | ||
4.5.14-SOP-004 REV E, CHG 0 * |
01OCT08 | Standard Operating Procedure (SOP) for Laboratory & Ocean Testing of Sonobuoys, Sonobuoy Launcher Containers (SLCs) and Associated Packaging | ||
4.5.14-SOP-005 REV A, CHG 2 * |
01SEP09 | Open Ocean Test Defect Criteria | ||
NAC-SPD-21 * |
31 May 1989 | SKIP-LOT Sampling Plan for Production Sonobuoy Contracts Applicable Navy Hazard Classification Documents |
* | Note: The Government maintains the right to test sonobuoys and/or SLCs in any manner suitable to verify specification compliance, including, but not limited to, the stated test procedures. Therefore, the stated test procedures may be modified unilaterally by the Government as necessary to verify specification compliance. |
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
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Other Documents |
Subject/Title | |
NAVSEA Drawing 7375874 No Rev. |
Base, Bayonet | |
NAVAIR Drawing 1458AS202 Rev. C |
Container assembly, sonobuoy, unsealed, CNU/239E | |
NAVAIR DL 1458AS202 No Rev. |
Data List for Drawing 1458AS202 | |
NAVSEA DL 7375860 No Rev. |
Data List 36 and 48 Unit Pallet Assembly | |
NAVSEA Drawings 7375861 7375876 No Rev. |
36 and 48 Unit Pallet Assembly | |
NAVAIR Drawing 3065AS100 Rev. A |
A Size Store Launch Container | |
*(see Note) MIL-STD-464 dated 18MAR1997 |
Electromagnetic Environmental Effects | |
**(see Note) MIL-STD-464A dated 19DEC2002 |
Electromagnetic Environmental Effects Requirements for Systems | |
NAVSEA S9310-AQ-SAF-010 dated 14JUL03 |
Technical Manual for Batteries, Navy Lithium Safety Program Responsibilities and Procedures | |
ASTM D3953 |
Standard Specification for Strapping, Flat Steel and Seals |
Note:
* | Applicable for current production (as referenced in PSS Appendix F dated 01 October 2008) |
** | Applicable if certified HERO design is changed through Contractor Initiated ECP (as referenced in PSS Appendix F dated 01 October 2008) |
C.2 | CONTRACTOR-INITIATED CHANGES TO APPROVED SONOBUOYS CONFIGURATIONS |
(Applicable to all CLINS)
All contractor-initiated proposed changes to an approved sonobuoy configuration require Government approval In Accordance With (IAW) the Air Antisubmarine Warfare (ASW) Configuration Management Plan (Attachment 17) as referenced in Section J. Any costs associated with contractor initiated changes to sonobuoy configuration will not be reimbursed by the Government.
C.3 | CONTRACTOR-INITIATED ENGINEERING TESTS REQUIRING OCEAN TESTING |
(Applicable to CLINS 0001 through 0012, 0014 through 0019)
The Navy will provide engineering test support services to the contractor for tests requiring the use of specialized government test facilities to the contractor for conducting verification of corrective action for deficient sonobuoy reliability or performance or for verification of performance. These services will be made available throughout the period of performance of this contract. The contractor shall request such tests in writing via the contacting officer by submitting an engineering test plan IAW CDRL A002. The government reserves the right to disapprove test plans considered by the government to be unnecessary or outside the scope of this contract. All engineering test days requested are subject to test schedule/range availability and are at the contracting officers discretion. Any site other than San Clemente Island (SCI) is at the contracting officers discretion.
C.4 | Reserved |
C.5 | MEETINGS (Applicable to CLINs 0001, 0003, 0005, 0007, 0009, and 0011) |
One copy of each presentation shall be provided on a CD in MS Office format or Adobe presentation PDF format at the specified meeting/review. In the event the meeting/event is not held, the presentation shall be provided on the date the meeting/review is scheduled.
C.5.1 | Kick-off Meeting |
The contractor shall be responsible for scheduling and hosting a Kick-Off meeting. The contractor shall conduct the meeting in accordance with the PSS and Appendix D. Successful completion of the Kick-Off Meeting is contingent
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
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on resolution of all contractor action items from the meeting which shall be documented in list format with appropriate signatures signifying concurrence by both the technical point of contact and the Contracting Officer.
C.5.2 Production Readiness Review
The contractor shall schedule and conduct a Production Readiness Review in accordance with the PSS and Appendix D. Problems identified during the review shall be documented and corrected in accordance with the PSS and Appendix D.
C.6 | TEST FIXTURES (Applicable to all CLINs) |
The contractor shall supply any cabling, tools or special test fixtures necessary to perform any testing. The contractor shall update or replace this equipment, as needed, throughout the contract to replace worn cables or for electrical changes as a result of approved design modifications. The cost for all test fixtures shall be included in the unit price of all applicable CLINs.
Delivery of test fixtures shall be concurrent with test units. The items supplied shall become property of the Government.
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
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Section D - Packaging and Marking
PACKAGING REQUIREMENTS
D.1 | PACKAGING |
D.1.1 Packaging For Q-36B and Q-53F Units (CLINs 0001 0008, and 0023 - 0025)
The contractor shall package the deliverables for shipping in accordance with the following:
(a) 48 sonobuoys in Sonobuoy Launcher Container (SLCs) (per Section D.1.6) shall be packaged in the 48 Unit Bayonet Base Pallet in accordance with NAVSEA DL 7375860 and associated Drawings 7375861 through 7375876 with the following exception: All steel strapping shall be new (unused) material in accordance with ASTM D3953, Flat, Type 1, Finish B - Grade 1 (heavy coating). The size of the strapping used for securing the top cap to the pallet base shall be .75 inch wide and 0.031 inch thick. The size of the strapping used for securing the side panels and for the rails on the top cap and pallet base shall be ..75 inch wide and 0.020 inch thick. All seals used to join the ends of steel strapping shall be in accordance with ASTM D3953, class R or H, Finish B- Grade 1, Style I, II, III, or IV. The style of seal used shall be selected for compatibility with the tensioning and sealing tools being used.
(b) For partial pallets of less than 32 units on a 48 unit pallet the contractor may use CNU-239/E shipping containers, palletized in accordance with the PSS and Appendix G with the exception that all steel strapping shall be new (unused) material in accordance with ASTM D3953, Flat, Type 1, Finish B - Grade 1 (heavy coating). The size of the strapping used for securing the top cap to the pallet base shall be .75 inch wide and 0.031 inch thick. The size of the strapping used for securing the side panels and for the rails on the top cap and pallet base shall be .75 inch wide and 0.020 inch thick. All seals used to join the ends of steel strapping shall be in accordance with ASTM D3953, class R or H, Finish B - Grade 1, Style I, II, III, or IV. The style of seal used shall be selected for compatibility with the tensioning and sealing tools being used.
D.1.2 Packaging For Reliability Test Samples (CLINs 0001-0008 test samples)
The contractor shall package the test samples (sonobuoys in SLCs) in one of the following:
1. 36 or 48 bayonet base pallets in accordance with NAVSEA DL 7375860 and associated Drawings 7375861 through 7375876 with the following exception: All steel strapping shall be new (unused) material in accordance with ASTM D3953, Flat, Type 1, Finish B - Grade 1 (heavy coating). The size of the strapping used for securing the top cap to the pallet base shall be .75 inch wide and 0.031 inch thick. The size of the strapping used for securing the side panels and for the rails on the top cap and pallet base shall be .75 inch wide and 0.020 inch thick. All seals used to join the ends of steel strapping shall be in accordance with ASTM D3953, class R or H, Finish B - Grade 1, Style I, II, III, or IV. The style of seal used shall be selected for compatibility with the tensioning and sealing tools being used.
For AN/SSQ-53 test samples using the 36-unit pallet, the pallet deck may be 1/2 inch thick solid plywood (versus 3/4 inch) and the pallet cap may be 3/8 inch thick plywood (versus 3/4 inch)
2. CNU-239/E shipping containers and palletized in accordance with the PSS and Appendix G. All steel strapping shall be new (unused) material in accordance with ASTM D3953, Flat, Type 1, Finish B - Grade 1 (heavy coating). The size of the strapping used for securing the top cap to the pallet base shall be .75 inch wide and 0.031 inch thick. The size of the strapping used for securing the sides and for the rails on the top cap and pallet base shall be .75 inch wide and 0.020 inch thick. All seals used to join the ends of steel strapping shall be in accordance with ASTM D3953, class R or H, Finish B - Grade 1, Style I, II, III, or IV. The style of seal used shall be selected for compatibility with the tensioning and sealing tools being used.
3. Packaging as approved by the local Government QAR. Any non-standard method of packaging involving more than one unit shall use steel strapping (new) material in accordance with ASTM D3953, Flat, Type 1, Finish B -
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
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Grade 1 (heavy coating). The size of the strapping shall be .75 inch wide and 0.020 inch thick. All seals used to join the ends of steel strapping shall be in accordance with ASTM D3953, class R or H, Finish B - Grade 1, Style I, II, III, or IV. The style of seal used shall be selected for compatibility with the tensioning and sealing tools being used.
D.1.3 Packaging For Q-62E Units (CLIN 0009 0012)
The contractor shall package the deliverables for shipping in accordance with the following:
(a) 36 AN/SSQ-62E sonobuoys in the LAU-126/A SLCs (per D.1.6) shall be packaged in bayonet base pallets in accordance with NAVSEA DL 7375860 and associated Drawings 7375861 through 7375876 with the following exception: All steel strapping shall be new (unused) material in accordance with ASTM D3953, Flat, Type 1, Finish B - Grade 1 (heavy coating). The size of the strapping used for securing the top cap to the pallet base shall be .75 inch wide and 0.031 inch thick. The size of the strapping used for securing the side panels and for the rails on the top cap and pallet base shall be .75 inch wide and 0.020 inch thick. All seals used to join the ends of steel strapping shall be in accordance with ASTM D3953, class R or H, Finish B - Grade 1, Style I, II, III, or IV. The style of seal used shall be selected for compatibility with the tensioning and sealing tools being used.
(b) The contractor shall stack pallets no higher than three. The sonobuoy manufacturer may procure the bayonet base part (NAVSEA 7375874) from either Tri-City Plastics, Midland, MI or Precision Plastics, Columbia City, IN. Both these contractors have access to the Government owned tooling for that part.
D.1.4 Packaging For Reliability Test Samples (CLIN 0009 -0012)
The contractor shall package the test samples (sonobuoys in SLCs) in one of the following:
(1) 36 unit bayonet base pallets in accordance with NAVSEA DL 7375860 and associated Drawings 7375861 through 7375876 with the following exception: All steel strapping shall be new (unused) material in accordance with ASTM D3953, Flat, Type 1, Finish B - Grade 1 (heavy coating). The size of the strapping used for securing the top cap to the pallet base shall be .75 inch wide and 0.031 inch thick. The size of the strapping used for securing the side panels and for the rails on the top cap and pallet base shall be .75 inch wide and 0.020 inch thick. All seals used to join the ends of steel strapping shall be in accordance with ASTM D3953, class R or H, Finish B - Grade 1, Style I, II, III, or IV. The style of seal used shall be selected for compatibility with the tensioning and sealing tools being used.
(2) CNU-239/E shipping containers and palletized in accordance with the PSS and Appendix G. All steel strapping shall be new (unused) material in accordance with ASTM D3953, Flat, Type 1, Finish B - Grade 1 (heavy coating). The size of the strapping used for securing the top cap to the pallet base shall be .75 inch wide and 0.031 inch thick. The size of the strapping used for securing the side panels and for the rails on the top cap and pallet base shall be .75 inch wide and 0.020 inch thick. All seals used to join the ends of steel strapping shall be in accordance with ASTM D3953, class R or H, Finish B- Grade 1, Style I, II, III, or IV. The style of seal used shall be selected for compatibility with the tensioning and sealing tools being used.
(3) Packaging as approved by the local Government QAR. QAR may authorize non-standard method of packaging involving more than one unit shall use steel strapping (new) material in accordance with ASTM D3953, Flat, Type 1, Finish B - Grade 1 (heavy coating). The size of the strapping used shall be .75 inch wide and 0.020 inch thick. All seals used to join the ends of steel strapping shall be in accordance with ASTM D3953, class R or H, Finish B - Grade 1, Style I, II, III, or IV. The style of seal used shall be selected for compatibility with the tensioning and sealing tools being used.
D.1.5 Reserved
D.1.6 Sonobuoy Launcher Container Requirements
The SLC shall be manufactured in accordance with the following:
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
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a. The PSS and Appendix A replaces MIL-L-81745B.
b. NAVAIR Drawing 3065AS100 with the following changes:
(1) Change MIL-L-81745B to the PSS and Appendix A.
(2) Delete reference to DOD STD 100
(3) Delete reference to MIL-STD 210. Actual temperature requirements are provided in the PSS and Appendix A.
D.1.7 Gray Overpack (if required)
The gray overpack (CNU-239/E) where specified shall be in accordance with NAVAIR DL 1458AS202 and DRAWING 1458AS202 and associated drawings, with the following changes:
(a) Delete all references to MIL-D-3464; replace with; that meet the physical inspection and environmental test requirements of NAWCAD, Crane ETP 4.5.14-SOP-004 .
(b) Delete all references to MIL-T-43036; replace with ASTM D5330 Type 4
(c) Delete all references to MIL-STD-105; replace with; The sample shall be inspected for piece part construction, assembly and marking.
(d) Delete all references to MIL-STD-480; replace with the PSS and Appendix D.
(e) Delete all references to SPD-15 and replace with PSS Appendix C.
D.1.8 Packaging For Data (CLIN 0026)
The contractor shall package the Data required by the CDRL DD Form 1423 in accordance with contractor standard procedures, to assure safe delivery at destination.
D.2 | MARKING |
D.2.1 Marking for AN/SSQ-53F (Applicable to CLINs 0005-0008, 0013, 0015, and 0017)
Each AN/SSQ-53F sonobuoy shall be serialized by contract year, manufacturer, lot number, and unit. The serial number shall be unique for each sonobuoy delivered under the contract.
D.2.1.1 Marking For Fleet Units And Reliability Test Samples (Applicable to CLINs 0001 through 0012)
The nomenclature for this sonobuoy shall be AN/SSQ-36B, 53F or 62E as applicable. The abbreviated nomenclature shall be Q-36B, 53F, or 62E as applicable. The contractor shall use this nomenclature as required below.
D.2.1.2 Sonobuoy, Sonobuoy Launcher Container, and CNU-239 (Gray Overpack)
The contractor shall mark the sonobuoy, Sonobuoy Launcher Container (SLC), and CNU-239 shipping container in accordance with the PSS and Appendix C.
D.2.1.3 Pallet Marking Instructions
The contractor shall mark the pallet in accordance with the PSS and Appendix C and NAVAIR 5252.247-9517
D.2.1.4 Additional Marking Instructions For AN/SSQ-53F Sonobuoys CLINs 0013 and 0023 through 0025.
The sonobuoy, SLC, and pallet shall be marked as directed by paragraphs D.2.1.1 and D.2.1.2 with the following exceptions:
The sonobuoy, SLC and pallet marking shall not contain the nomenclature, NSN, NALC or barcodes of a production sonobuoy. If the sonobuoy is a modified unit; the existing marking and barcodes shall be deleted or permanently covered.
For CLIN 0013 The nomenclature shall be Q-53F DIFAR GPS.
For CLIN 0023 The nomenclature shall be Q-53F 20dB ATTEN
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
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For CLIN 0024 The nomenclature shall be Q-53F 40dB ATTEN
For CLIN 0025 The nomenclature shall be Q-53F 60dB ATTEN
D.2.2 Marking for Data
The contractor shall mark Data in accordance with the Contract Data Requirements Lists (CDRLs).
CLAUSES INCORPORATED BY FULL TEXT
5252.223-9502 HAZARDOUS MATERIAL (NAVAIR)(APR 2009) -
(a) Packaging, Packing, Marking, Labeling and Certification of Hazardous materials for shipment by any mode or combination of transportation modes shall be prepared (properly classed, described, packaged, marked, labeled, transport vehicle placarded, etc.) for shipment in accordance with MIL-STD-129 and Title 49 Code of Federal Regulations (CFR), Part 100-199 as applicable. In the event of any contradictions between the documents, 49 CFR shall govern or the applicable modal transport regulation.
(b) In the event of a conflict between specific requirements in the contract or order and existing applicable modal transport regulations, the regulations shall take precedence. Under no circumstances shall the contractor knowingly use materials, markings or procedures that are not in accordance with laws and regulations applicable to the mode of transportation employed.
(c) To ascertain which Department of Defense, or local installation regulations, concerning hazardous materials may have impact on this contract, the contractor should contact: David Seevers, 22347 Cedar Point Road, Building 2185, Patuxent River, MD 20670-1161, Phone: (301) 342-2079.
CLAUSES INCORPORATED BY FULL TEXT
5252.247-9503 MARKING OF WARRANTED ITEMS (NAVAIR) (OCT 2005)
(a) Each item covered by a warranty shall be stamped or marked in accordance with MIL-STD-129, Marking for Shipment and Storage, and MIL-STD-130, Identification Marking of U.S. Military Property, current at the date of award. Where this is impracticable, written notice shall be attached to or furnished with the warranted item.
(b) Each item covered by a warranty shall have a written notice attached to or furnished with the warranted item, and marked with the following:
(1) National stock number or manufacturers part number.
(2) Serial number or other item identifier (if the warranty applies to uniquely identified items).
(3) Contract number.
(4) Indication that a warranty applies.
(5) Manufacturer or entity (if other than the contractor) providing the warranty.
(6) Date or time when the warranty expires.
(7) Indication of whether or not attempted on-site repair by Government personnel will void the warranty.
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
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CLAUSES INCORPORATED BY FULL TEXT
5252.247-9507 PACKAGING AND MARKING OF REPORTS (NAVAIR) (OCT 2005)
(a) All unclassified data shall be prepared for shipment in accordance with best commercial practice. Classified reports, data and documentation, if any, shall be prepared for shipment in accordance with the National Industry Security Program Operating Manual, DoD 5220.22-M.
(b) The contractor shall prominently display on the cover of each report the following information:
(1) Name and business address of contractor.
(2) Contract Number/Delivery/Task order number.
(3) Contract/Delivery/Task order dollar amount.
(4) Whether the contract was competitively or non-competitively awarded.
(5) Name of sponsoring individual.
(6) Name and address of requiring activity.
CLAUSES INCORPORATED BY FULL TEXT
5252.247-9508 PROHIBITED PACKING MATERIALS (NAVAIR) (JUN 1998)
The use of asbestos, excelsior, newspaper or shredded paper (all types including waxed paper, computer paper and similar hydroscopic or non-neutral material) is prohibited. In addition, loose fill polystyrene is prohibited for shipboard use.
CLAUSES INCORPORATED BY FULL TEXT
5252.247-9509 PRESERVATION, PACKAGING, PACKING AND MARKING (NAVAIR)(JUL 1998)
(a) Preservation, packaging and packing shall conform to prevailing industry standards for the type of commodity purchased under this contract.
(b) All packages will be clearly marked with applicable contract number/delivery order number, and will contain appropriate packing slip. All deliveries will be marked for and/or consigned as follows:
IAW PSS Appendix C
(c) In the event of any discrepancy in material shipped (overage, technical rejection, damage), the contractor shall, immediately upon request of the Contracting Officer, furnish disposition instructions. Normally, such disposition instruction shall be a properly completed Commercial Bill of Lading, which includes, but is not limited to, the mode of shipment, routing, special handling, and so forth.
(d) If the contractor is required to install equipment upon delivery, then the contractor shall inform the Government of the date of shipment from the contractors facilities and the anticipated date of arrival at the site. This report shall be made no later than the actual date that the shipment is made from the contractors facilities. The report may be made by facsimile or e-mail, to the point of contact listed in Section G. All transportation, rigging,
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
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drayage, packing, unpacking, and handling necessary to accomplish the installation shall be the responsibility of the contractor.
CLAUSES INCORPORATED BY FULL TEXT
5252.247- 9510 PRESERVATION, PACKAGING, PACKING AND MARKING FOR FOREIGN MILITARY SALES (FMS) REQUIREMENTS (NAVAIR)(OCT 2005)
(a) Unless specified elsewhere in the contract, packing and packaging shall comply with MIL-STD-129 and other applicable DoD regulations. Packing and packaging materials shall provide protection from abuse during handling and from environmental, magnetic, and electrical damage during handling and subsequent future storage, possibly under less than desirable conditions.
(b) Marking: All unit and exterior containers/packs shall as a minimum be marked as follows:
(1) FMS Case Number.
(2) Part Number (with CAGE Code).
(3) For - the organization/address the material is shipped to.
(4) The applicable MILSTRIP number (identified separately for each line item of the contract/delivery order)
(5) Project Code number.
(6) Project Directive Line Item (PDLI) Number.
(7) Requisition Serial Number (RSN).
(8) Quantity.
(9) From - the contractors address shipped from.
(10) Ship to - the shipping address provided in the contract.
(11) Transportation Priority
(12) Required Delivery Date
(c) The contractor shall affix labels to the outside of each external pack warning all handlers that fragile, delicate, etc., equipment is contained within and to warn against particular improper handling and storage procedures/conditions as may be applicable to the item(s) ordered.
CLAUSES INCORPORATED BY FULL TEXT
5252.247-9514 TECHNICAL DATA PACKING INSTRUCTIONS (NAVAIR) (SEP 1999)
Technical Data and Information shall be packed and packaged for domestic shipment in accordance with best commercial practices. The package or envelope should be clearly marked with any special markings specified in this contract (or delivery/task order), e.g., Contract Number, CLIN, Device No., and document title must be on the outside of the package. Classified reports, data and documentation, if applicable, shall be prepared for shipment in accordance with Defense Industrial Manual for Safeguarding Classified Information, DoD 5220.22M.
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
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CLAUSES INCORPORATED BY FULL TEXT
5252.247- 9517 PACKAGING REQUIREMENTS FOR SHIPMENTS CONTAINING NON-MANUFACTURED WOOD PACKING MATERIALS (NAVAIR) (FEB 2002)
All non-manufactured, wooden pallets, reels, or containers shipped or used for shipment under this contract shall be heat treated and marked in accordance with the American Lumber Standards Committee, Incorporated Non-Manufactured Wood Packing Policy and Non-Manufactured Wood Packing Enforcement Regulations, both dated 30 May 2001.
CLAUSES INCORPORATED BY FULL TEXT
5252.247-9520 PRESERVATION, PACKAGING, AND PACKING (NAVAIR)(OCT 2005)
(a) The contractor shall preserve, pack and package items procured for system stock, overseas destinations or ships at sea, in accordance with the MIL-STD-2073-1 Level A requirements delineated in the schedule or elsewhere in the contract or order. If specific requirements are not included in the contract or order, the contractor shall preserve and package in accordance with previously approved level A requirements, within the technical parameters contained in MIL-STD-2073-1. Preservation and packing materials shall be fire retardant/non-combustible as prescribed in the specific packaging requirements in the contract or order, and to the maximum extent practicable.
(b) If the packaging materials specified in the contract or order are not fire retardant, and fire retardant varieties are included in commodity specifications for these materials, the contractor shall use fire retardant varieties. Fire retardant packaging materials are not required for items not used aboard ship. The use of plastic packaging materials is prohibited unless prescribed in specific packaging requirements in the contract or order, or unless required to adequately protect the item from damage
(c) For items procured for installation/immediate use, the contractor shall preserve and package in accordance with the Level C requirements of MIL-STD-2073-1. Packing for shipment (i.e., shipping container) shall be in accordance with MIL-STD-2073-1, Level A, for overseas surface shipments that are not containerized and all deliveries to ships at sea; Level B for all remaining overseas shipments; Level C or domestic shipments of items consumed at first destination. Fire retardant materials are not required in packing (i.e., shipping container) operations. All units, intermediate and shipping containers, shall be marked in accordance with MIL-STD-129. The use of shredded paper, excelsior, polystyrene and other loose-fill materials as a cushion is prohibited in all packaging and packing operation
(d) In accordance with 29 CFR, the contractor shall ensure that the following caution label is placed on all unit, intermediate and shipping containers for all items containing asbestos in a form that can be inhaled:
CAUTION
CONTAINS ASBESTOS FIBERS
AVOID CREATING DUST
BREATHING ASBESTOS DUST MAY CAUSE SERIOUS BODILY HARM
(e) All items containing asbestos in a form that can be inhaled shall be packaged in sealed, impermeable bags or other impermeable containers, as required by 29 CFR.
NOTE TO SUPPLIERS: If the supplies to be furnished on this document require the asbestos caution label described above, the contractor shall notify the contract administrator indicated in the schedule prior to shipment.
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
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Section E - Inspection and Acceptance
ACCEPTANCE
E.1 | ACCEPTANCE |
E.1.1 Sample Plans
The Government will test and accept production sonobuoys and SLCs in lots, as defined below. Prior to Government sampling, the contractor shall completely assemble all units for each lot. The test sample will be subjected to Government acceptance tests in accordance with test procedures as outlined in Section C.1.3.
If requested by the contractor and deemed advantageous to the Government, the Contracting Officer may permit other lot sizes, sample sizes, and acceptance limits. The Government maintains the right to test sonobuoys and/or SLCs to the service conditions identified within the specifications and/or drawings. Sonobuoys and/or SLCs subjected to any test or service condition identified within the specifications and/or drawings meet the contractual reliability metrics after undergoing Reliability Inspection testing identified in paragraph E.1.3.
E.1.2 Lot Sizes and Accept/Reject Criteria (CLINs 0001- 0012 where applicable)
Production Lot sizes shall be as follows:
| For the Q-36B - All Lot sizes shall be 1,280 each, except the last two Lots to be delivered shall be between 608 and 1,904 each. All Lots to be delivered, except the last Lot, shall result in full pallets (i.e. 48 each per pallet) |
| For the Q-53F - All Lot sizes shall be 1,664 each, except the last two Lots to be delivered shall be between 800 and 1,664 each. All Lots to be delivered, except the last Lot, shall result in full pallets (i.e. 48 each per pallet) |
| For the Q-62E - All Lot sizes shall be 1,292 each, except the last two Lots to be delivered shall be between 644 and 1,868 each. All Lots to be delivered, except the last Lot, shall result in full pallets (i.e. 36 each per pallet) |
E.1.2.1 Q-36B Accept/Reject Criteria (CLINS 0001 0004)
Thirty-two (32) of the units from each Lot shall constitute the Lot sample. Acceptance of all lots will be based on the following limits for defective units from the 32-unit test sample:
For the sonobuoy and SLC separately, there shall be: no critical defects; and 5 or less major defects and 7 or less combined major and minor defects total for the 32-unit sample in accordance with 4.5.14-SOP-005 REV A, CHG2 dated 01 September 2009 (Attachment 12).
E.1.2.2 Q-53F/Q-62E Accept/Reject Criteria (CLINS 0005 0012)
Thirty-two (32) of the units from each Lot shall constitute the Lot sample. Acceptance of all lots will be based on the following limits for defective units from the 32-unit test sample:
For the sonobuoy and SLC separately, there shall be: no critical defects; and 3 or less major defects and 5 or less combined major and minor defects total for the 32-unit sample in accordance with 4.5.14-SOP-005 REV A, CHG2 dated 01 September 2009 (Attachment 12).
NOTE: THE GOVERNMENT WILL ESTABLISH LOT SIZES AWARDED BASED ON THE ABOVE GUIDELINES AT TIME OF CONTRACT AWARD.
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
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E.1.3 Lot sizes for CLINs 0013 0019, and 0023-0025 will be determined at time of option exercise.
E.1.3.1 Reliability Inspection including Air Drop Test
The Government may conduct reliability inspection as an open ocean environment air drop. The Government will conduct inspection testing using 4.5.14-SOP-004 and 4.5.14-SOP-005. No more than two test sites will be used to perform reliability inspection on a lot sample. The total number of defective units observed at the test site(s) will be used to determine lot acceptability. 4.5.14-SOP-004 and 4.5.14-SOP-005 are used for defect criteria and classification. The contractor may delay mating the sonobuoys to SLCs on the balance of the production lot, until it receives final acceptance from the Contracting Officer.
The Government may conduct testing at an alternate site such as a Naval Laboratory or Government test range. The Contracting Officer will provide the contractor with 3 calendar days advance notice when an alternate site is being used.
E.1.3.2 Lot Sample Submission
The lot sample shall be submitted for reliability inspection with a DD Form 1222 (Request for and Results of Tests). The Government has forty-five (45) days, from the date a lot sample is submitted, to notify the local Government QAR of the test results. Date of submission is the date the DD Form 1222 is signed by the local Government QAR. If test results are not provided within this period, the lot and the lot sample will be accepted. The forty-five (45) day limit does not apply should the Government be unable to test due to Acts of God or Acts of War.
At the Contracting Officers discretion, the 45-day time limit will be changed to 60 days if the contractor does not provide the information required by the RDD of CDRL A00B.
E.1.4 Interruption of Reliability Inspection
After submittal of the lot sample, the contractor may request an interruption of the reliability inspection process through one of the following actions. The contractor shall notify the local Government Quality Assurance Representative (QAR) when they request termination or withdrawal.
(a) Termination of Inspection/Test in Progress. The contractor may request termination of inspections already in process. The Contracting Officer or the authorized Government representative may then terminate the test if it is advantageous to the Government. If no defects are identified during the inspections prior to air launch or air launch tests have not begun, the sample under examination will be reported as withdrawn and processed as indicated below, otherwise, it will be rejected. The test report will detail the results of the inspections and tests performed. Section B of the DD Form 1222 will be completed, detailing the termination.
(b) Withdrawal of a Production Lot Sample Prior to Initiation of the Test Process
(1) Lot Sample Returned to Contractor. The contractor may request withdrawal of the lot sample and its return to the contractor at the contractors expense. The Contracting Officer will authorize the withdrawal and return of the lot sample to the contractor via a DD Form 1149 on a commercial bill of lading. Section B of the DD Form 1222 will be completed, detailing the withdrawal. The lot shall then be resubmitted.
(2) Lot Sample Held at Test Site. The contractor may request withdrawal of the lot sample and its storage at the receiving warehouse. The Contracting Officer will authorize the withdrawal and storage of the lot. Section B of the DD Form 1222 will be completed, detailing the withdrawal and noting the date of the withdrawal request. Subsequently, the contractor may request release of the lot sample or withdrawal (returned to contractor). The Contracting Officer will authorize either request. The time a lot is stored (from Contracting Officer withdrawal until Contracting Officer authorization for release of the lot sample) shall not count against the forty-five (45) day time limit to pull test samples in accordance with E.1.3.2 above.
E.1.5 Recovered Lot Sample Units
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Recovered defective units from an accepted lot sample may be returned to the contractor for failure analysis, at the Governments expense, via an authorized DD Form 1149. The Government will pay shipping costs only; the contractor is responsible for all failure analysis costs. Recovered defective units, as classified IAW 4.5.14-SOP-004 and 4.5.14-SOP-005, from a rejected lot sample will be returned to the contractor for failure analysis, at the contractors expense, via an authorized DD Form 1149. If requested by the contractor, 2 or less recovered non-defective units from a lot sample may be returned to the contractor for a failure analysis comparison. The units will be returned, at the contractors expense, via an authorized DD Form 1149. The contractor shall not use material, parts or components from recovered lot samples in production units.
E.1.6 Lot Rework and Resubmission
A lot which is rejected as a result of reliability inspection shall be reworked and resubmitted within 60 days after notice of lot rejection. Resubmission of the performance maintenance unit is not required. The following conditions shall be met before the lots resubmission sample is selected for reliability inspection:
(a) Failure Analysis Failure analysis for each defective unit shall be performed by the contractor and the cause or most probable cause for each defect shall be identified.
(b) Screening Sample. The local Government QAR shall randomly select an 80-unit screening sample from the remainder of the lot, unless otherwise authorized by the Procuring Contracting Officer. The sample shall be inspected/tested for each defect cause or probable cause identified in failure analysis. The screening sample is not required if the contractor chooses to rework the lot for all defects.
(c) Rework Procedure. A rework procedure for each defect observed in both the reliability inspection and the screening sample shall be prepared. Rework procedures for all other defects found in the screening sample shall be determined in accordance with the contractors Material Review Board (MRB) procedures.
(d) Rework. The lot shall be reworked conforming to the rework procedure. Units with defects shall be reworked or replaced in accordance with the procedure. The contractor shall build up the lot back to the lot size specified in the contract (including the lot sample).
(e) Resubmission. The procedure for lot submission shall be followed. New lot samples shall be identified with increasing submission numbers.
(1) Rejected Lots. If a lot is rejected on the fourth submission, the requirements for a possible resubmission shall be as required by the Contracting Officer. If only the SLC lot is rejected and the reported defects are air launch related, then the lot sample shall be resubmitted with sonobuoys or non-operational replicas (same air descent control system and external configuration). If the reported SLC defects are not air launch related then the lot sample may be resubmitted without sonobuoys.
(2) Withdrawal of Lot Sample (returned to contractor). A new sample shall be drawn along with a new DD Form 1222. The lot sample shall retain its submission number with a W added on when it is resubmitted to designate that it was previously withdrawn.
(3) Withdrawal of Lot Sample (held at test site). The DD Form 1222 shall be modified to indicate the resubmission. The lot sample shall retain its submission number with a W added on when it is resubmitted to designate that it was previously withdrawn.
E.1.7 Waiver of Rework or Resubmission
The contractor may request the Contracting Officer to consider a waiver of a rejected Lot for rework or resubmission if:
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
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(a) the exact or probable cause for the defects are not found in the screening sample; or
(b) rework of the entire lot is not considered practical because of the nature of the defect(s) found in the screening sample and effective corrective action is identified for future lots; or
(c) the impact of the defects on fleet use is minimal; or
(d) the rework is minor in nature and does not require testing.
This waiver is solely at U.S. Government discretion.
If the Government subsequently grants a waiver, the contractor is not required to replace the lot sample.
E.1.8 Reclaimed Material
The contractor may use material, parts, or components reclaimed from rejected lots but not recovered lot test samples, in accordance with procedures approved by the local Government QAR.
E.1.9 Skip Lots
Skip lot procedures shall be in accordance with SPD-21.
INSPECTION AND ACCEPTANCE TERMS
Supplies/services will be inspected/accepted at:
CLIN | INSPECT AT | INSPECT BY | ACCEPT AT | ACCEPT BY | ||||
0001 | Origin | Government | Origin | Government | ||||
0002 | Origin | Government | Origin | Government | ||||
0003 | Origin | Government | Origin | Government | ||||
0004 | Origin | Government | Origin | Government | ||||
0005 | Origin | Government | Origin | Government | ||||
0005AA | N/A | N/A | N/A | Government | ||||
0005AB | N/A | N/A | N/A | Government | ||||
0005AC | N/A | N/A | N/A | Government | ||||
0006 | Origin | Government | Origin | Government | ||||
0007 | Origin | Government | Origin | Government | ||||
0008 | Origin | Government | Origin | Government | ||||
0009 | Origin | Government | Origin | Government | ||||
0010 | Origin | Government | Origin | Government | ||||
0011 | Origin | Government | Origin | Government | ||||
0012 | Origin | Government | Origin | Government | ||||
0013 | Origin | Government | Origin | Government | ||||
0014 | Origin | Government | Origin | Government | ||||
0015 | Origin | Government | Origin | Government | ||||
0016 | Origin | Government | Origin | Government | ||||
0017 | Origin | Government | Origin | Government | ||||
0018 | Origin | Government | Origin | Government | ||||
0019 | Origin | Government | Origin | Government | ||||
0020 | Origin | Government | Origin | Government |
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
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0021 | Origin | Government | Origin | Government | ||||
0022 | Origin | Government | Origin | Government | ||||
0023 | Origin | Government | Origin | Government | ||||
0024 | Origin | Government | Origin | Government | ||||
0025 | Origin | Government | Origin | Government | ||||
0026 | Origin | Government | Origin | Government |
CLAUSES INCORPORATED BY REFERENCE
52.246-2 | Inspection Of SuppliesFixed Price | AUG 1996 | ||||
52.246-15 | Certificate of Conformance | APR 1984 | ||||
52.246-16 | Responsibility For Supplies | APR 1984 | ||||
252.246-7000 | Material Inspection And Receiving Report | MAR 2008 |
CLAUSES INCORPORATED BY FULL TEXT
52.246-11 HIGHER-LEVEL CONTRACT QUALITY REQUIREMENT (FEB 1999)
The Contractor shall comply with the higher-level quality standard selected below. [If more than one standard is listed, the offeror shall indicate its selection by checking the appropriate block.]
Title |
Number | Date | Tailoring | |||||||||
PSS Appendix D Product Assurance Requirements for Sonobuoy procurements REVA, CHG1 |
n/a | 3 Mar 2011 | No |
CLAUSES INCORPORATED BY FULL TEXT
5252.246-9512 INSPECTION AND ACCEPTANCE (NAVAIR) (OCT 2005)
(a) Inspection and acceptance of the supplies or services to be furnished hereunder shall be performed by a representative of the cognizant Contract Administration Office at the contractors or subcontractors plant located at 5612 Johnson Lake Rd, DeLeon Springs, FL 32130 and 4578 East Park 30 Dr., Columbia City, IN 46275
(b) Acceptance of all Contract Line Items/Sub Line Items (CLINs/SLINs) shall be made by signature of the accepting authority on a DD 250 submitted through the WAWF system. Acceptance will only occur when the accepting authority is sure that inspections performed demonstrate compliance with contract requirements.
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
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CLAUSES INCORPORATED BY FULL TEXT
5252.246-9514 INSPECTION AND ACCEPTANCE OF TECHNICAL DATA AND INFORMATION (NAVAIR) (FEB 1995)
Inspection and acceptance of technical data and information will be performed by the Procuring Contracting Officer (PCO) or his duly authorized representative. Inspection of technical data and information will be performed by ensuring successful completion of the requirements set forth in the DD Form 1423, Contract Data Requirements List (CDRL) and incorporation/resolution of Government review comments on the data items. Acceptance will be evidenced by execution of an unconditional DD Form 250, Material Inspection and Receiving Report, as appropriate, and/or upon receipt of a second endorsement acceptance by the PCO on the attachment to this contract entitled Wide Area Workflow (WAWF) form referenced in Clause 5252.232-9513. The attached form will not be used for high cost data such as drawings, specifications, and technical manuals.
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
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Section F - Deliveries or Performance
DELIVERIES
F.1a PLACE OF DELIVERY (CLINs 0001-0012)
The contractor shall then deliver the CLIN 0001-0012 production sonobuoys in SLCs from each CLIN 0001-0012 accepted lot to the location listed below, or any other locations as may be required by the contracting office. The Contracting Officer will provide instructions as to the location the contractor is to ship the remaining units an accepted lot, in the Final Acceptance Test Report (FATR) issued by NAWCAD Crane. The shipping documents shall indicate a Required Delivery Date (RDD) no later than 14 days after shipment is picked up by the carrier for locations within continental United States (CONUS). For shipments to locations outside CONUS, the shipping documents shall indicate an RDD to the point of embarkation no later than 14 days after shipment is picked up by the carrier. The contractor shall pack and submit for final inspection and acceptance sonobuoys from a passed lot within fifteen (15) working days of receipt of the final acceptance test report from NAWCAD Crane. The procedure for an accepted Lot should be as follows:
1. | The Government will send the FATR with shipping instructions to the contractor. |
(Note: The procedure outlined below (2 through 4) shall also be followed if the Government uses an alternate method of notification to signify Lot acceptance (i.e. notification letter, e-mail, or an approved Waiver request).
2. | The contractor shall submit a Wide Are Work Flow (WAWF) form referenced in NAVAIR Clause 5252.232-9513 to DCMA (or authorized Government representative) for signature thus starting the process to ship the Lot via Government Bill of Lading (GBL). |
3. | CDRL A00A requires the contractor to e-mail or fax #2 barcode to NAWCAD, Crane within 5 calendar days after receipt of the FATR. |
4. | NAWCAD, Crane will provide DD form 1348-1A (Issue Release / Receipt Document) and the Navy Ammunition Transaction Report to the contractor. These two items shall be attached to the signed DD250 and shall accompany the Lot being shipped. |
CLINs 0001 - 0012
Material Mailing Address |
Mailing Address | |
(a) UIC: N00421 |
SAME | |
NAWCAD Crane |
||
14051 Westgate Ct. Suite A |
||
Crane IN 47522 |
||
ATTN: Chuck Kimble |
||
******************************************* |
||
UIC: W62G2T |
SAME | |
Commanding Officer |
||
Distribution Depot San Joaquin |
||
25600 South Chrisman Road |
||
Warehouse #28 |
||
Tracy, CA 95376-5000 |
||
ATTN: James Luke (209) 839-4070 |
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
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******************************************** |
||
UIC: N00189 |
SAME | |
Commanding Officer |
||
Transportation Office |
||
Defense Distribution Depot Norfolk |
||
1968 Gilbert Street Building X136 |
||
Norfolk, VA 23512-0001 |
||
ATTN: Leland White (757) 444-7799 |
||
******************************************** |
||
UIC: N68836 |
SAME | |
Commanding Officer |
||
Naval Air Station Jacksonville |
||
Yorktown Avenue, BLDG 111, Door 24 |
||
Jacksonville, FL 32212-5000 |
||
ATTN: Christopher Scott (904) 542-5261 |
||
******************************************** |
||
UIC: N61168 |
SAME | |
Commander |
||
NAVAIR Warfare Center Aircraft Division |
||
22347 Cedar Pt. Rd., BLDG 2185, Unit 6 |
||
Patuxent River, MD 20670-1161 |
||
ATTN: Pat Lusk/Tommy Farr (301) 342-0905/5737 |
(j) | Additional Common Addresses as provided by the Contracting Officer via email |
F.1b PLACE OF DELIVERY (CLINs 0013-0025)
To be determined at time of option exercise.
F.2 | RELIABILITY/INSPECTION TEST SAMPLES |
The contractor shall submit production lots for selection of a test sample to the cognizant Government inspector at the site of complete assembly.
F.2.1 Place of Delivery for Reliability Inspection Samples (CLINs 0001-0012)
The contractor shall ship the Reliability Inspection Samples to the following address:
SPAWAR Systems Center Pacific
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
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Attn: Scott Granzow, Code 56420
4297 Pacific Highway, Bldg 7
San Diego, CA 92110-5000
NOTE: If the Government chooses an alternate test site, the above shipping address may not apply. In such cases, the Contracting Officer will provide an alternate shipping address to the contractor.
F.2.2 Notice of Shipment to Cognizant Contract Administration Office (CLINs 0001-0025)
Whenever a shipment is made under this contract (regardless of whether the shipment is transported under a commercial or Government bill of lading)(GBL), the contractor shall notify the cognizant field contract administration office by the most expedient means. The notification shall include the following information: date of shipment; contract number; item number and quantity shipped; and name of carrier accepting shipment from the contractor. The contractor shall confirm all notifications made by telephone, in writing.
F.2.3 Distribution of Material Inspection and Receiving Report (DD 250) (CLINs 0001-0025)
The contractor is responsible for distribution of the DD Form 250 in accordance with Appendix F of DFARS Clause 252.246-7000.
F.3 | MATERIAL SAFETY DATA SHEETS (Applicable to CLINS 0001, 0003, 0005, 0007, 0009 and 0011) |
The contractor shall provide Material Safety Data Sheets, OSHA form 174 or equivalent form containing identical data items communicating to users the chemical, physical, and hazardous properties of their product. Material Safety Data Sheets are not required for all products used in the manufacture of the final product. Material Safety Data Sheets are required for any item contained in the final product which require special disposal or handling during operational use or de-mil operations. This form shall comply with the OSHA Hazard Communication Standard, Title 29 CFR 1910.1200. The contractor shall deliver the MSDS concurrent with the first deliverable. It is requested that the MSDS be submitted via electronic mail to the following address: Tim.Perry@navy.mil/Charles.kimble@navy.mil. An alternate method is to mail 1 copy of the MSDS to the following address:
NAWCAD 4.5.14
One Martin County Suite A
14051 Westgate Court
Crane, IN 47522
The Contracting Officer shall also be notified via e-mail that the MSDS has been submitted.
F.4 | DELIVERY INFORMATION (CLINs 0001-0025) |
Vendor to provide detailed delivery schedule that is in accordance with delivery schedule calculation below table at the conclusion of negotiations that will be included in contract.
CLIN No. |
Description |
Quantity |
Within Days | |||
0001 |
Q36B Sonobuoys (Production Units) | To Be Determined (TBD) | * | |||
0002 |
Q36B Sonobuoys (Production Units) (Surge) | To Be Determined (TBD) | * |
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
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0003 |
Q-36B Sonobuoys (Production Units) (Opt 1) | To Be Determined (TBD) | * | |||
0004 |
Q-36B Sonobuoys (Production Units) (Surge Opt 1) | To Be Determined (TBD) | * | |||
0005 |
Q-53F Sonobuoys (Production Units) | To Be Determined (TBD) | ** | |||
0006 |
Q-53F Sonobuoys (Production Units) | To Be Determined (TBD) | ** | |||
0007 |
Q-53F Sonobuoys (Production Units) | To Be Determined (TBD) | ** | |||
0008 |
Q-53F Sonobuoys (Production Units) | To Be Determined (TBD) | ** | |||
0009 |
Q-62E Sonobuoys (Production Units) | To Be Determined (TBD) | *** | |||
0010 |
Q-62E Sonobuoys (Production Units) | To Be Determined (TBD) | *** | |||
0011 |
Q-62E Sonobuoys (Production Units) | To Be Determined (TBD) | *** | |||
0012 |
Q-62E Sonobuoys (Production Units) | To Be Determined (TBD) | *** | |||
0026 |
Data Items | See DD Form 1423s. | See DD Form 1423s. | |||
Material Safety Data Sheets | 1 Lo. | Concurrent with First Submission of Lot 1 Test Samples of each sonobuoy type | ||||
Kick-Off Meeting | 1 Ea. | NLT 60 Days ADC | ||||
Production Readiness Review | 1 Ea. | NLT 45 days prior to submission of Lot 1 Test Samples of each sonobuoy type | ||||
0013 |
AN/SSQ-53F Sonobuoys (GPS units) | 1,200 | Delivery will be established at time of option exercise for these CLINs | |||
0014 |
Q-36B Sonobuoys (FMS Units) | 500 | Delivery will be established at time of option exercise for these CLINs | |||
0015 |
Q-53F Sonobuoys (FMS Units) | 5,000 | Delivery will be established at time of option exercise for these CLINs |
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
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0016 |
Q-36B Sonobuoys (FMS Units) | 1,000 | Delivery will be established at time of option exercise for these CLINs | |||
0017 |
Q-53F Sonobuoys (FMS Units) | 1,000 | Delivery will be established at time of option exercise for these CLINs | |||
0018 |
Q-62E Sonobuoys (FMS Units) | 1,000 | Delivery will be established at time of option exercise for these CLINs | |||
0019 |
Q-62E Sonobuoys (FMS Units) | 1,000 | Delivery will be established at time of option exercise for these CLINs | |||
0020 |
Reserved | N/A | N/A | |||
0021 |
Reserved | N/A | N/A | |||
0022 |
Reserved | N/A | N/A | |||
0023 |
AN/SSQ-53F Sonobuoys (Attenuation 20 dB units) | 288 | Delivery will be established at time of option exercise for these CLINs | |||
0024 |
AN/SSQ-53F Sonobuoys (Attenuation 40 dB units) | 288 | Delivery will be established at time of option exercise for these CLINs | |||
0025 |
AN/SSQ-53F Sonobuoys (Attenuation 60 dB units) | 288 | Delivery will be established at time of option exercise for these CLINs |
* |
* | Q-36B The Government will establish a delivery schedule at time of task order award based on the following: |
| The first Lot shall be delivered no later than 365 days after date of task order award. |
| The last Lot shall be delivered no later than 640 days after date of task order award. |
| The Required Delivery Date (RDD) for each lot is as shown below. |
1. Number (#) of lots shall be determined IAW paragraph E.1.2 = A
2. # of days between lot deliveries (rounded up to next whole number) = (640 365) / (A-1) = B
3. Lot # RDD days after date of task order award = 365 + [(Lot # -1)*B]
Note: The Lot shall be accepted via the acceptance test report no later than the RDD.
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
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** | Q-53F and Q-62E The Government will establish a delivery schedule at time of task order award based on the following: |
| The first Lot shall be delivered no later than 365 days after date of task order award. |
| The last Lot shall be delivered no later than 730 days after date of task order award. |
| The Required Delivery Date (RDD) for each lot is as shown below |
1. Number (#) of lots shall be determined IAW paragraph E.1.2 = A
2. # of days between lot deliveries (rounded up to next whole number) = (730 365) / (A 1) = B
3. Lot # RDD days after date of task order award = 365 + [(Lot # -1) * B]
Note: The Lot shall be accepted via the acceptance test report no later than the RDD.
*** | Q-53F and Q-62E The Government will establish a delivery schedule at time of task order award based on the following: |
| The first Lot shall be delivered no later than 365 days after date of task order award. |
| The last Lot shall be delivered no later than 730 days after date of task order award. |
| The Required Delivery Date (RDD) for each lot is as shown below |
1. Number (#) of lots shall be determined IAW paragraph E.1.2 = A
2. # of days between lot deliveries (rounded up to next whole number) = (730 365) / (A-1) = B
3. Lot # RDD days after date of task order award = 365 + [(Lot # 1)*B]
Note: The Lot shall be accepted via the acceptance test report no later than the RDD.
F.5 | OPTION EXERCISE DATES (CLINs 0002-0004, 0006-0008, 0010-0025) |
The following CLINs expire if not exercised by 30 Sep 2011: 0002, 0006 and 0010.
The following CLINs expire if not exercised by 30 June 2012: 003, 007 and 0011.
The following CLINs expire if not exercised by 30 Sep 2012: 004, 008 and 0012-0025.
DELIVERY INFORMATION
CLIN | DELIVERY DATE | QUANTITY | SHIP TO ADDRESS | UIC | ||||
0001 |
730 dys. ADC | 3,211 | N/A FOB: Origin |
|||||
0002 |
N/A | N/A | N/A | N/A | ||||
0003 |
N/A | N/A | N/A | N/A | ||||
0004 |
N/A | N/A | N/A | N/A | ||||
0005 |
730 dys. ADC | N/A FOB: Origin |
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
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0005AA |
730 dys. ADC | 48,928 | N/A FOB: Destination |
|||||
0005AB |
730 dys. ADC | 2,061 | N/A FOB: Destination |
|||||
0005AC |
730 dys. ADC | 744 | N/A FOB: Destination |
|||||
0006 |
N/A | N/A | N/A | N/A | ||||
0007 |
N/A | N/A | N/A | N/A | ||||
0008 |
N/A | N/A | N/A | N/A | ||||
0009 |
730 dys. ADC | 10,286 | N/A FOB: Origin |
|||||
0010 |
N/A | N/A | N/A | N/A | ||||
0011 |
N/A | N/A | N/A | N/A | ||||
0012 |
N/A | N/A | N/A | N/A | ||||
0013 |
N/A | N/A | N/A | N/A | ||||
0014 |
N/A | N/A | N/A | N/A | ||||
0015 |
N/A | N/A | N/A | N/A | ||||
0016 |
N/A | N/A | N/A | N/A | ||||
0017 |
N/A | N/A | N/A | N/A | ||||
0018 |
N/A | N/A | N/A | N/A | ||||
0019 |
N/A | N/A | N/A | N/A | ||||
0020 |
N/A | N/A | N/A | N/A | ||||
0021 |
N/A | N/A | N/A | N/A | ||||
0022 |
N/A | N/A | N/A | N/A | ||||
0023 |
N/A | N/A | N/A | N/A | ||||
0024 |
N/A | N/A | N/A | N/A | ||||
0025 |
N/A | N/A | N/A | N/A | ||||
0026 |
730 dys. ADC | N/A FOB: Destination |
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
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CLAUSES INCORPORATED BY REFERENCE
52.211-8 |
Time of Delivery | JUN 1997 | ||
52.211-17 |
Delivery of Excess Quantities | SEP 1989 | ||
52.242-15 |
Stop-Work Order | AUG 1989 | ||
52.242-17 |
Government Delay Of Work | APR 1984 | ||
52.247-29 |
F.O.B. Origin | FEB 2006 | ||
52.247-34 |
F.O.B. Destination | NOV 1991 | ||
52.247-55 |
F.O.B. Point For Delivery Of Government-Furnished Property | JUN 2003 | ||
52.247-59 |
F.O.B OriginCarload and Truckload Shipments | APR 1984 | ||
52.247-65 |
F.O.B. Origin, Prepaid FreightSmall Package Shipments | JAN 1991 |
CLAUSES INCORPORATED BY FULL TEXT
5252.245-9509 PLACE OF DELIVERY - GOVERNMENT FURNISHED MATERIAL (NAVAIR) (MAR 1999)
(a) The Government will furnish to the contractor for use in connection with this contract the following material at the time specified:
Material |
Quantity |
Date | ||
[ ] | [ ] troy ounces per Q-62E sonobuoy (Sparton) | No later than 60 days prior to the start of production | ||
[ ] | [ ] troy ounces per Q-62E sonobuoy (USSI) | No later than 60 days prior to the start of production | ||
[ ] | [ ] troy ounces per Q-36B sonobuoy (Sparton) | No later than 60 days prior to the start of production |
(b) The material will be delivered at the Governments expense to the location designated in the contractors proposal for performance. Delivery includes delivery either directly to the factory/warehouse street location, or to a designated private siding if delivery is by rail.
(c) Only the material listed above in the quantity shown will be furnished by the Government. All other material required for performance of this contractor shall be furnished by the contractor. Such Government-furnished material shall be delivered at or near contractors plant under Government bills of lading, free of expense to the contractor, on board the conveyance selected by the Government. When rail delivery is designated by the Government as a mode of transportation and drayage from a team track to the contractors plant is necessary, the contractor agrees to arrange for prompt unloading of cars, pick-up and delivery of material to his plant free of expense to the Government.
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
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5252.247-9505 TECHNICAL DATA AND INFORMATION (NAVAIR) (FEB 1995)
Technical Data and Information shall be delivered in accordance with the requirements of the Contract Data Requirements List, DD Form 1423, Exhibit A, attached hereto, and the following:
(a) The contractor shall concurrently deliver technical data and information per DD Form 1423, Blocks 12 and 13 (date of first/subsequent submission) to all activities listed in Block 14 of the DD Form 1423 (distribution and addresses) for each item. Complete addresses for the abbreviations in Block 14 are shown in paragraph (g) below. Additionally, the technical data shall be delivered to the following cognizant codes, who are listed in Block 6 of the DD Form 1423.
(1) PCO, Code AIR 2.5.1.9
21983 Bundy Road, Bldg. 441
Patuxent River MD 20670
(2) ACO, Code S2305A
(b) Partial delivery of data is not acceptable unless specifically authorized on the DD Form 1423, or unless approved in writing by the PCO.
(c) The Government review period provided on the DD Form 1423 for each item commences upon receipt of all required data by the technical activity designated in Block 6.
(d) A copy of all other correspondence addressed to the Contracting Officer relating to data item requirements (i.e., status of delivery) shall also be provided to the codes reflected above and the technical activity responsible for the data item per Block 6, if not one of the activities listed above.
(e) The PCO reserves the right to issue unilateral modifications to change the destination codes and addresses for all technical data and information at no additional cost to the Government.
(f) Unless otherwise specified in writing, rejected data items shall be resubmitted within thirty (30) days after receipt of notice of rejection.
(g) DD Form 1423, Block 14 Mailing Addresses: IAW CDRL Distribution List
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
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Section G - Contract Administration Data
PERFORMANCE BASED PAYMENT
1 | S | Q53F, 62E, 36B Kick Off Meeting S | NLT 60 Days after Task Order Award | Power Point Presentation | $ | [ | ] | [ | ]% | |||||||
2 | S | Q53F and 62E Kick Off Meeting U | NLT 60 Days after Task Order Award | Power Point Presentation | $ | [ | ] | |||||||||
3 | S | Q36B Long Lead Material Order S | NLT 180 Days after Task Order Award | PO Report review by PMA264 | $ | [ | ] | [ | ]% | |||||||
4 | S | Q53F Long Lead Material Order S | NLT 180 Days after Task Order Award | PO Report review by PMA264 | $ | [ | ] | |||||||||
5 | S | Q53F Long Lead Material Order U | NLT 180 Days after Task Order Award | PO Report review by PMA264 | $ | [ | ] | |||||||||
6 | S | Q62E Long Lead Material Order S | NLT 180 Days after Task Order Award | PO Report review by PMA264 | $ | [ | ] | |||||||||
7 | S | Q62E Long Lead Material Order U | NLT 180 Days after Task Order Award | PO Report review by PMA264 | $ | [ | ] | |||||||||
8 | S | Q36B Acceptance of Production Readiness Review S | NLT 45 Days prior to submission of Lot 1 test samples | Power Point Presentation | $ | [ | ] | [ | ]% | |||||||
9 | S | Q53F Acceptance of Production Readiness Review S | NLT 45 Days prior to submission of Lot 1 test samples | Power Point Presentation | $ | [ | ] | |||||||||
10 | S | Q53F Acceptance of Production Readiness Review U | NLT 45 Days prior to submission of Lot 1 test samples | Power Point Presentation | $ | [ | ] | |||||||||
11 | S | Q62E Acceptance of Production Readiness Review S | NLT 45 Days prior to submission of Lot 1 test samples | Power Point Presentation | $ | [ | ] | |||||||||
12 | S | Q62E Acceptance of Production Readiness Review U | NLT 45 Days prior to submission of Lot 1 test samples | Power Point Presentation | $ | [ | ] | |||||||||
13 | S | Q36B Start Lot 1 Production S | NLT 45 Days after PRR acceptance | Production Date Certified by DCMA QAR | $ | [ | ] | [ | ]% | |||||||
14 | S | Q53F Start Lot 1 Production S | NLT 45 Days after PRR acceptance | Production Date Certified by DCMA QAR | $ | [ | ] | |||||||||
15 | S | Q53F Start Lot 1 Production U | NLT 45 Days after PRR acceptance | Production Date Certified by DCMA QAR | $ | [ | ] | |||||||||
16 | S | Q62E Start Lot 1 Production S | NLT 45 Days after PRR acceptance | Production Date Certified by DCMA QAR | $ | [ | ] | |||||||||
17 | S | Q62E Start Lot 1 Production U | NLT 45 Days after PRR acceptance | Production Date Certified by DCMA QAR | $ | [ | ] | |||||||||
PBP Schedule is to be treated on a whole contract basis whereas recoupment can be taken from any ACRN. |
$ | [ | ] | [ | ]% | |||||||||||
Cumulative: | ||||||||||||||||
|
(Final [ ]% of Payment to be liquidated upon shipment) |
|
ACCOUNTING AND APPROPRIATION DATA
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
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AA: 1711810 U3QZ 310 00019 0 050120 2D 000000
COST CODE: A20000702503
AMOUNT: $15,624,948.30
CIN 130019777000003: $15,624,948.30
AB: 1711810 U3QZ 310 00019 0 050120 2D 000000
COST CODE: A00000702503
AMOUNT: $1,884,664.34
CIN 130019777000001: $1,884,664.34
AC: 1711810 U3QZ 310 00019 0 050120 2D 000000
COST CODE: A10000702503
AMOUNT: $35,913,152.00
CIN 130019777000002: $35,913,152.00
AD: 1701810 U3QZ 310 00019 0 050120 2D 000000
COST CODE: A00000702432
AMOUNT: $1,512,774.00
CIN 130019776700001: $1,512,774.00
AE: 1791810 U3QZ 310 00019 0 050120 2D 000000
COST CODE: A00000702436
AMOUNT: $546,096.00
CIN 130019776900001: $546,096.00
CLAUSES INCORPORATED BY REFERENCE
252.201-7000 | Contracting Officers Representative | DEC 1991 |
CLAUSES INCORPORATED BY FULL TEXT
5252.201-9501 DESIGNATION OF CONTRACTING OFFICERS REPRESENTATIVE (COR)(NAVAIR) (OCT 1994)
(a) The Contracting Officer has designated Tim Perry and Chuck R. Kimble, One Martin County, 14051 Westgate Court, Crane, IN 47522, Code 4.5.14.3, 812-863-7070 as the authorized Contracting Officers Representative (COR) for this contract.
(b) The duties of the COR are limited to the following: Please see attached COR Appt Letter.
5252.204-9503 EXPEDITING CONTRACT CLOSEOUT (NAVAIR) (JAN 2007)
(a) As part of the negotiated fixed price or total estimated amount of this contract, both the Government and the Contractor have agreed to waive any entitlement that otherwise might accrue to either party in any residual dollar amount of $1,000 or less at the time of final contract closeout. The term residual dollar amount shall include all money that would otherwise be owed to either party at the end of the contract, except that, amounts connected in any way with taxation, allegations of fraud and/or antitrust violations shall be excluded. For purposes of determining residual dollar amounts, offsets of money owed by one party against money that would otherwise be paid by that party might be considered to the extent permitted by law.
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
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(b) This agreement to waive entitlement to residual dollar amounts has been considered by both parties. It is agreed that the administrative costs for either party associated with collecting such small dollar amounts could exceed the amount to be recovered.
5252.232-9511 NOTICE OF REQUIREMENTS FOR PROMPT PAYMENT (NAVAIR) (MAR 2006)
The Government anticipates that this contract will be distributed to Defense Finance and Accounting Service (DFAS) by the DOD Electronic Document Access (EDA) system. DFAS is responsible for payment of contractor invoices.
(a) In accordance with FAR Clause 52.232-33 Payment By Electronic Funds TransferCentral Contractor Registration, the contractor is responsible for providing updated information to the Central Contractor Register (CCR) database. Additionally, the contractor is responsible for maintaining its active status in the CCR database.
(b) If the DUNS, CAGE code, TIN or address set forth in the contract do not match the information in the CCR, then DFAS will return invoices without payment. Therefore, it is imperative that the contractor ensure the DUNS, CAGE code, TIN and contractor address on the contract are accurate and in compliance with the CCR database. Additionally, any changes/updates made to the CCR database should be communicated to the Contracting Officer for the purpose of modifying the contract to reflect the new data.
5252.232-9513 INVOICING AND PAYMENT (WAWF) INSTRUCTIONS (MAR 2009)
(a) The following information is provided to assist the contractor in submitting invoices and receiving reports electronically through Wide Area Work Flow Receipt and Acceptance (WAWF) in accordance with DFARS 252.232-7003:
(1) Registration instructions, on-line training, user guides, quick reference guides, and other support documents and information can be found at the following website: WAWF Overview
(2) Vendors should contact the following POCs for additional support with registration or other WAWF issues, based on the administration of their contract:
(i) DCMA-administered contracts: Contact the ACO at the cognizant Defense Contract Management Agency (DCMA) office found in the contract.
(ii) Locally-administered contracts: Contact your local NAVAIR/NAWC Pay Office (Commercial Accounts) at [N/A contract will not be locally administered] or DFAS via the numbers listed at www.dfas.mil
(3) Information on the electronic forms the contractor shall utilize to comply with DFARS 252.232-7003 is available on the WAWF Functional Information and WAWF Training websites.
(4) Back up documentation (such as timesheets, etc.) can be included and attached to the invoice in WAWF. Attachments created in any Microsoft Office product are attachable to the invoice in WAWF. Total limit for the size of files per invoice is 5 megabytes.
(b) The following information, regarding invoice routing DODAACs, must be entered for completion of the invoice in WAWF:
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
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DoDAAC LOCATION TABLE | ||||||||||||
- Select Combo for Fixed Price Supplies and Services - Select Cost Voucher for all Cost or T&M or CLINs. - The 2-in-1 invoice is not authorized for use by NAVAIR - Questions? Call 1-866-618-5988 | ||||||||||||
DoDAAC Description |
Located in Block | |||||||||||
DD1155 (Destination Acceptance) |
DD1155 (Source/ Origin Acceptance) |
SF26 | SF33 | SF1449 | SF1449 (Destination Acceptance) | |||||||
Issuing Office DoDAAC |
6 | 6 | 5 | 7 | 7 | 9 | ||||||
Administrating Office DoDAAC |
7 | 7 | 6 | 24 | 26 | 16 | ||||||
Inspectors DoDAAC |
See Schedule |
See Schedule |
11 | See Schedule |
See Schedule |
See Schedule | ||||||
Service Acceptor DoDAAC |
14 | See Schedule |
11 | See Schedule |
See Schedule |
15 | ||||||
Pay Office DoDAAC |
15 | 16 | 12 | 25 | 27 | 18a |
(c) Cost Vouchers also require the cognizant DCAA DoDAAC, which can be found by entering the contractors zip code in the Audit Office Locator at http://www.dcaa.mil. Contractors approved by DCAA for direct billing will not process vouchers through DCAA, but may submit directly to DFAS. Final voucher submission will be approved by the ACO.
(d) For each invoice / cost voucher submitted for payment, the contractor shall also email the WAWF automated invoice notice directly to the following additional points of contact:
Name (or Clause w/Name) |
|
Phone |
Role | |||
See: 5252.201-9500 or 5252.201-9501 | Technical Point of Contact or Contracting Officers Representative | |||||
Chuck Kimble | Charles.kimble@navy.mil | 812-863-7075 | COR | |||
Dale Hoit | Dale.hoit@navy.mil | 812-860-7070 X202 | TPOC | |||
John Wambaugh | John.wambaugh@navy.mil | 812-863-7070 X216 | TPOC | |||
Tim Perry | Tim.perry@navy.mil | 812-863-7070 X209 | COR |
5252.232-9522 TRANSPORTATION ACCOUNT CODES (NAVAIR) (OCT 2005)
(a) The contractor is responsible for placing the Government assigned Transportation Account Code (TAC) on shipping documentation to enable payment of transportation bills by the U.S. Government under contracts with F.O.B. origin terms.
(b) The applicable TAC for this contract is as follows: The Government will provide the current TAC code prior to shipment of the first Lot.
(c) For shipments that will require use of military airlift, complete an Advance Transportation Control and Movement Document (ATCMD, DD Form 1384) and provide it to the cognizant Air Clearance Authority. Include the contract number and applicable TAC on the ATCMD. Also, ensure the ATCMD contains information for special requirements such as:
(1) shipments to be accompanied by couriers or monitors;
(2) shipments requiring special handling such as environmental control, hand-to-hand receipt, hazardous/dangerous cargo, short shelf life material, sensitive shipments and classified cargo;
(3) shipments requiring expediting action or those that must move on a specific flight.
(d) The cognizant DCMA office may be contacted for additional information or assistance on preparation of shipping documents or other transportation concerns.
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
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Section H - Special Contract Requirements
CLAUSES INCORPORATED BY REFERENCE
5252.243-9504 | AUTHORIZED CHANGES ONLY BY THE CONTRACTING OFFICER | JAN 1992 |
CLAUSES INCORPORATED BY FULL TEXT
5252.216-9512 PAPERLESS CONTRACTING (NAVAIR) (JUN 2009)
(a) Orders and requests for proposals are hereby authorized to be issued by facsimile or by electronic commerce (including e-mail and paperless methods of delivery). Nothing in this contract should be read to prohibit these types of orders. In the event of a conflict with any other provision of this contract, this clause shall govern.
(b) To the extent the terms written , mailed , or physically delivered appear in other provisions of this contract, these terms are hereby defined to explicitly include electronic commerce, email, or paperless delivery methods.
5252.223-9501 MATERIAL SAFETY DATA SHEET (MSDS) (NAVAIR) (APR 2009)
(a) The contractor shall forward an electronic copy of the Material Safety Data Sheet (MSDS) required under FAR Clause 52.223-3, Hazardous Material Identification and Material Safety Data, to Mar-navyhmirs@med.navy.mil and the Naval Inventory Control Point (NICP) at wraps.prime.fct@navy.mil .
(b) One copy of the MSDS shall be enclosed with the shipping documents. If the shipment is received without an attached copy of the MSDS, the Government has the right to refuse receipt.
5252.227-9507 NOTICE REGARDING THE DISSEMINATION OF EXPORT-CONTROLLED TECHNICAL DATA (NAVAIR) (OCT 2005)
(a) Export of information contained herein, which includes release to foreign nationals within the United States, without first obtaining approval or license from the Department of State for items controlled by the International Traffic in Arms Regulations (ITARS), or the Department of Commerce for items controlled by the Export Administration Regulations (EAR), may constitute a violation of law.
(b) For violation of export laws, the contractor, its employees, officials or agents are subject to:
(1) Imprisonment and/or imposition of criminal fines; and
(2) Suspension or debarment from future Government contracting actions.
(c) The Government shall not be liable for any unauthorized use or release of export-controlled information, technical data or specifications in this contract.
(d) The contractor shall include the provisions or paragraphs (a) through (c) above in any subcontracts awarded under this contract.
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
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5252.227-9511 DISCLOSURE, USE AND PROTECTION OF PROPRIETARY INFORMATION (NAVAIR) (FEB 2009)
(a) During the performance of this contract, the Government may use an independent services contractor (ISC), who is neither an agent nor employee of the Government. The ISC may be used to conduct reviews, evaluations, or independent verification and validations of technical documents submitted to the Government during performance.
(b) The use of an ISC is solely for the convenience of the Government. The ISC has no obligation to the prime contractor. The prime contractor is required to provide full cooperation, working facilities and access to the ISC for the purposes stated in paragraph (a) above.
(c) Since the ISC is neither an employee nor an agent of the Government, any findings, recommendations, analyses, or conclusions of such a contractor are not those of the Government.
(d) The prime contractor acknowledges that the Government has the right to use ISCs as stated in paragraph (a) above. It is possible that under such an arrangement the ISC may require access to or the use of information (other than restricted cost or pricing data), which is proprietary to the prime contractor.
(e) To protect any such proprietary information from disclosure or use, and to establish the respective rights and duties of both the ISC and prime contractor, the prime contractor agrees to enter into a direct agreement with any ISC as the Government requires. A properly executed copy (per FAR 9.505-4) of the agreement will be provided to the Procuring Contracting Officer.
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
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Section I - Contract Clauses
CLAUSES INCORPORATED BY REFERENCE
52.202-1 | Definitions | JUL 2004 | ||
52.203-3 | Gratuities | APR 1984 | ||
52.203-5 | Covenant Against Contingent Fees | APR 1984 | ||
52.203-6 | Restrictions On Subcontractor Sales To The Government | SEP 2006 | ||
52.203-7 | Anti-Kickback Procedures | JUL 1995 | ||
52.203-8 | Cancellation, Rescission, and Recovery of Funds for Illegal or Improper Activity | JAN 1997 | ||
52.203-10 | Price Or Fee Adjustment For Illegal Or Improper Activity | JAN 1997 | ||
52.203-12 | Limitation On Payments To Influence Certain Federal Transactions | SEP 2007 | ||
52.203-13 | Contractor Code of Business Ethics and Conduct | DEC 2008 | ||
52.204-2 | Security Requirements | AUG 1996 | ||
52.204-4 | Printed or Copied Double-Sided on Recycled Paper | AUG 2000 | ||
52.209-6 | Protecting the Governments Interest When Subcontracting With Contractors Debarred, Suspended, or Proposed for Debarment | SEP 2006 | ||
52.211-5 | Material Requirements | AUG 2000 | ||
52.211-15 | Defense Priority And Allocation Requirements | APR 2008 | ||
52.215-2 | Audit and RecordsNegotiation | MAR 2009 | ||
52.215-8 | Order of PrecedenceUniform Contract Format | OCT 1997 | ||
52.215-10 | Price Reduction for Defective Cost or Pricing Data | OCT 1997 | ||
52.215-11 | Price Reduction for Defective Cost or Pricing DataModifications | OCT 1997 | ||
52.215-12 | Subcontractor Cost or Pricing Data | OCT 1997 | ||
52.215-13 | Subcontractor Cost or Pricing DataModifications | OCT 1997 | ||
52.215-14 | Integrity of Unit Prices | OCT 1997 | ||
52.215-15 | Pension Adjustments and Asset Reversions | OCT 2004 | ||
52.215-18 | Reversion or Adjustment of Plans for Postretirement Benefits (PRB) Other than Pensions | JUL 2005 | ||
52.215-19 | Notification of Ownership Changes | OCT 1997 | ||
52.215-21 | Requirements for Cost or Pricing Data or Information Other Than Cost or Pricing DataModifications | OCT 1997 | ||
52.219-8 | Utilization of Small Business Concerns | MAY 2004 | ||
52.219-9 | Small Business Subcontracting Plan | APR 2008 | ||
52.219-9 (Dev) | Small Business Subcontracting Plan (Deviation) | APR 2008 | ||
52.219-16 | Liquidated Damages-Subcontracting Plan | JAN 1999 | ||
52.222-19 | Child Labor Cooperation with Authorities and Remedies | AUG 2009 | ||
52.222-20 | Walsh-Healey Public Contracts Act | DEC 1996 | ||
52.222-21 | Prohibition Of Segregated Facilities | FEB 1999 | ||
52.222-26 | Equal Opportunity | MAR 2007 | ||
52.222-35 | Equal Opportunity For Special Disabled Veterans, Veterans of the Vietnam Era, and Other Eligible Veterans | SEP 2006 | ||
52.222-36 | Affirmative Action For Workers With Disabilities | JUN 1998 | ||
52.222-37 | Employment Reports On Special Disabled Veterans, Veterans Of The Vietnam Era, and Other Eligible Veterans | SEP 2006 |
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
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52.222-39 | Notification of Employee Rights Concerning Payment of Union Dues or Fees | DEC 2004 | ||
52.222-50 | Combating Trafficking in Persons | FEB 2009 | ||
52.222-54 | Employment Eligibility Verification | JAN 2009 | ||
52.223-3 | Hazardous Material Identification And Material Safety Data | JAN 1997 | ||
52.223-6 | Drug-Free Workplace | MAY 2001 | ||
52.223-14 | Toxic Chemical Release Reporting | AUG 2003 | ||
52.225-13 | Restrictions on Certain Foreign Purchases | JUN 2008 | ||
52.226-1 | Utilization Of Indian Organizations And Indian-Owned Economic Enterprises | JUN 2000 | ||
52.227-1 | Authorization and Consent | DEC 2007 | ||
52.227-2 | Notice And Assistance Regarding Patent And Copyright Infringement | DEC 2007 | ||
52.229-3 | Federal, State And Local Taxes | APR 2003 | ||
52.230-2 | Cost Accounting Standards | OCT 2008 | ||
52.232-1 | Payments | APR 1984 | ||
52.232-8 | Discounts For Prompt Payment | FEB 2002 | ||
52.232-9 | Limitation On Withholding Of Payments | APR 1984 | ||
52.232-11 | Extras | APR 1984 | ||
52.232-23 Alt I | Assignment of Claims (Jan 1986) - Alternate I | APR 1984 | ||
52.232-25 | Prompt Payment | OCT 2008 | ||
52.232-33 | Payment by Electronic Funds TransferCentral Contractor Registration | OCT 2003 | ||
52.233-1 | Disputes | JUL 2002 | ||
52.233-3 | Protest After Award | AUG 1996 | ||
52.242-13 | Bankruptcy | JUL 1995 | ||
52.243-1 | ChangesFixed Price | AUG 1987 | ||
52.244-5 | Competition In Subcontracting | DEC 1996 | ||
52.244-6 | Subcontracts for Commercial Items | AUG 2009 | ||
52.245-9 | Use And Charges | JUN 2007 | ||
52.246-23 | Limitation Of Liability | FEB 1997 | ||
52.247-1 | Commercial Bill Of Lading Notations | FEB 2006 | ||
52.249-2 | Termination For Convenience Of The Government (Fixed-Price) | MAY 2004 | ||
52.249-8 | Default (Fixed-Price Supply & Service) | APR 1984 | ||
52.252-6 | Authorized Deviations In Clauses | APR 1984 | ||
52.253-1 | Computer Generated Forms | JAN 1991 | ||
252.201-7000 | Contracting Officers Representative | DEC 1991 | ||
252.203-7000 | Requirements Relating to Compensation of Former DoD Officials | JAN 2009 | ||
252.203-7001 | Prohibition On Persons Convicted of Fraud or Other Defense-Contract-Related Felonies | DEC 2008 | ||
252.203-7002 | Requirement to Inform Employees of Whistleblower Rights | JAN 2009 | ||
252.204-7003 | Control Of Government Personnel Work Product | APR 1992 | ||
252.204-7004 Alt A | Central Contractor Registration (52.204-7) Alternate A | SEP 2007 | ||
252.204-7005 | Oral Attestation of Security Responsibilities | NOV 2001 | ||
252.205-7000 | Provision Of Information To Cooperative Agreement Holders | DEC 1991 | ||
252.209-7004 | Subcontracting With Firms That Are Owned or Controlled By The Government of a Terrorist Country | DEC 2006 | ||
252.211-7003 | Item Identification and Valuation | AUG 2008 |
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
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252.211-7005 | Substitutions for Military or Federal Specifications and Standards | NOV 2005 | ||
252.211-7007 | Reporting of Government-Furnished Equipment in the DoD Item Unique Identification (IUID) Registry | NOV 2008 | ||
252.215-7000 | Pricing Adjustments | DEC 1991 | ||
252.215-7002 | Cost Estimating System Requirements | DEC 2006 | ||
252.215-7004 | Excessive Pass-Through Charges | MAY 2008 | ||
252.219-7003 | Small Business Subcontracting Plan (DOD Contracts) | APR 2007 | ||
252.219-7003 (Dev) | Small Business Subcontracting Plan (Dod Contracts) (Deviation) | APR 2007 | ||
252.219-7003 (Dev) Alt I | Small Business Subcontracting Plan (DoD Contracts) (Deviation) Alternate I | APR 2007 | ||
252.223-7001 | Hazard Warning Labels | DEC 1991 | ||
252.223-7004 | Drug Free Work Force | SEP 1988 | ||
252.225-7001 | Buy American Act And Balance Of Payments Program | JAN 2009 | ||
252.225-7002 | Qualifying Country Sources As Subcontractors | APR 2003 | ||
252.225-7004 | Report of Contract Performance Outside the United States and CanadaSubmission after Award | MAY 2007 | ||
252.225-7006 | Quarterly Reporting of Actual Contract Performance Outside the United States | MAY 2007 | ||
252.225-7012 | Preference For Certain Domestic Commodities | DEC 2008 | ||
252.225-7013 | Duty-Free Entry | OCT 2006 | ||
252.225-7016 | Restriction On Acquisition Of Ball and Roller Bearings | MAR 2006 | ||
252.226-7001 | Utilization of Indian Organizations and Indian-Owned Economic Enterprises, and Native Hawaiian Small Business Concerns | SEP 2004 | ||
252.227-7016 | Rights in Bid or Proposal Information | JUN 1995 | ||
252.227-7019 | Validation of Asserted RestrictionsComputer Software | JUN 1995 | ||
252.227-7025 | Limitations on the Use or Disclosure of Government-Furnished Information Marked with Restrictive Legends | JUN 1995 | ||
252.227-7026 | Deferred Delivery Of Technical Data Or Computer Software | APR 1988 | ||
252.227-7027 | Deferred Ordering Of Technical Data Or Computer Software | APR 1988 | ||
252.227-7030 | Technical DataWithholding of Payment (Editable Local) | MAR 2000 | ||
252.231-7000 | Supplemental Cost Principles | DEC 1991 | ||
252.232-7003 | Electronic Submission of Payment Requests and Receiving Reports | MAR 2008 | ||
252.232-7010 | Levies on Contract Payments | DEC 2006 | ||
252.239-7001 | Information Assurance Contractor Training and Certification | JAN 2008 | ||
252.243-7001 | Pricing Of Contract Modifications | DEC 1991 | ||
252.243-7002 | Requests for Equitable Adjustment | MAR 1998 | ||
252.244-7000 | Subcontracts for Commercial Items and Commercial Components (DoD Contracts) | AUG 2009 | ||
252.246-7001 Alt I | Warranty Of Data (Dec 1991) - Alternate I | DEC 1991 | ||
252.247-7023 | Transportation of Supplies by Sea | MAY 2002 | ||
252.247-7024 | Notification Of Transportation Of Supplies By Sea | MAR 2000 |
CLAUSES INCORPORATED BY FULL TEXT
52.217-9 OPTION TO EXTEND THE TERM OF THE CONTRACT (MAR 2000)
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
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(a) The Government may extend the term of this contract by written notice to the Contractor within 5 days; provided, that the Government gives the Contractor a preliminary written notice of its intent to extend at least 15 days before the contract expires. The preliminary notice does not commit the Government to an extension.
(b) If the Government exercises this option, the extended contract shall be considered to include this option clause.
(c) The total duration of this contract, including the exercise of any options under this clause, shall not exceed 60 months.
52.219-28 POST-AWARD SMALL BUSINESS PROGRAM REREPRESENTATION (APR 2009)
(a) Definitions. As used in this clause
Long-term contract means a contract of more than five years in duration, including options. However, the term does not include contracts that exceed five years in duration because the period of performance has been extended for a cumulative period not to exceed six months under the clause at 52.217-8, Option to Extend Services, or other appropriate authority.
Small business concern means a concern, including its affiliates, that is independently owned and operated, not dominant in the field of operation in which it is bidding on Government contracts, and qualified as a small business under the criteria in 13 CFR part 121 and the size standard in paragraph (c) of this clause. Such a concern is not dominant in its field of operation when it does not exercise a controlling or major influence on a national basis in a kind of business activity in which a number of business concerns are primarily engaged. In determining whether dominance exists, consideration shall be given to all appropriate factors, including volume of business, number of employees, financial resources, competitive status or position, ownership or control of materials, processes, patents, license agreements, facilities, sales territory, and nature of business activity.
(b) If the Contractor represented that it was a small business concern prior to award of this contract, the Contractor shall rerepresent its size status according to paragraph (e) of this clause or, if applicable, paragraph (g) of this clause, upon the occurrence of any of the following:
(1) Within 30 days after execution of a novation agreement or within 30 days after modification of the contract to include this clause, if the novation agreement was executed prior to inclusion of this clause in the contract.
(2) Within 30 days after a merger or acquisition that does not require a novation or within 30 days after modification of the contract to include this clause, if the merger or acquisition occurred prior to inclusion of this clause in the contract.
(3) For long-term contracts
(i) Within 60 to 120 days prior to the end of the fifth year of the contract; and
(ii) Within 60 to 120 days prior to the date specified in the contract for exercising any option thereafter.
(c) The Contractor shall rerepresent its size status in accordance with the size standard in effect at the time of this rerepresentation that corresponds to the North American Industry Classification System (NAICS) code assigned to this contract. The small business size standard corresponding to this NAICS code can be found at http://www.sba.gov/services/contractingopportunities/sizestandardstopics/ .
(d) The small business size standard for a Contractor providing a product which it does not manufacture itself, for a contract other than a construction or service contract, is 500 employees.
(e) Except as provided in paragraph (g) of this clause, the Contractor shall make the rerepresentation required by paragraph (b) of this clause by validating or updating all its representations in the Online Representations and Certifications Application and its data in the Central Contractor Registration, as necessary, to ensure that they reflect the Contractors current status. The Contractor shall notify the contracting office in writing within the timeframes specified in paragraph (b) of this clause that the data have been validated or updated, and provide the date of the validation or update.
(f) If the Contractor represented that it was other than a small business concern prior to award of this contract, the Contractor may, but is not required to, take the actions required by paragraphs (e) or (g) of this clause.
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
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(g) If the Contractor does not have representations and certifications in ORCA, or does not have a representation in ORCA for the NAICS code applicable to this contract, the Contractor is required to complete the following rerepresentation and submit it to the contracting office, along with the contract number and the date on which the rerepresentation was completed:
The Contractor represents that it [ ] is, [X ] is not a small business concern under NAICS Code 334511 assigned to contract number N00421-11-C-0030.
[Contractor to sign and date and insert authorized signers name and title].
Signature | Date |
Signers Printed Name | Signers Title |
52.223-11 OZONE-DEPLETING SUBSTANCES (MAY 2001)
(a) Definition. Ozone-depleting substance, as used in this clause, means any substance the Environmental Protection Agency designates in 40 CFR part 82 as
(1) Class I, including, but not limited to, chlorofluorocarbons, halons, carbon tetrachloride, and methyl chloroform; or
(2) Class II, including, but not limited to, hydrochlorofluorocarbons.
(b) The Contractor shall label products which contain or are manufactured with ozone-depleting substances in the manner and to the extent required by 42 U.S.C. 7671j (b), (c), and (d) and 40 CFR Part 82, Subpart E, as follows:
WARNING: Contains (or manufactured with, if applicable) * , a substance(s) which harm(s) public health and environment by destroying ozone in the upper atmosphere.
* | The Contractor shall insert the name of the substance(s). |
52.232-32 PERFORMANCE-BASED PAYMENTS (JAN 2008)
(a) Amount of payments and limitations on payments. Subject to such other limitations and conditions as are specified in this contract and this clause, the amount of payments and limitations on payments shall be specified in the contracts description of the basis for payment.
(b) Contractor request for performance-based payment. The Contractor may submit requests for payment of performance-based payments not more frequently than monthly, in a form and manner acceptable to the Contracting Officer. Unless otherwise authorized by the Contracting Officer, all performance-based payments in any period for which payment is being requested shall be included in a single request, appropriately itemized and totaled. The Contractors request shall contain the information and certification detailed in paragraphs (l) and (m) of this clause.
(c) Approval and payment of requests.
(1) The Contractor shall not be entitled to payment of a request for performance-based payment prior to successful accomplishment of the event or performance criterion for which payment is requested. The Contracting Officer shall determine whether the event or performance criterion for which payment is requested has been successfully accomplished in accordance with the terms of the contract. The Contracting Officer may, at any time, require the Contractor to substantiate the successful performance of any event or performance criterion which has been or is represented as being payable.
(2) A payment under this performance-based payment clause is a contract financing payment under the Prompt Payment clause of this contract and not subject to the interest penalty provisions of the Prompt Payment Act. The designated payment office will pay approved requests on the [30th] day after receipt of the request for performance-based payment by the designated payment office. However, the designated payment office is not required to provide
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
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payment if the Contracting Officer requires substantiation as provided in paragraph (c)(1) of this clause, or inquires into the status of an event or performance criterion, or into any of the conditions listed in paragraph (e) of this clause, or into the Contractor certification. The payment period will not begin until the Contracting Officer approves the request.
(3) The approval by the Contracting Officer of a request for performance-based payment does not constitute an acceptance by the Government and does not excuse the Contractor from performance of obligations under this contract.
(d) Liquidation of performance-based payments.
(1) Performance-based finance amounts paid prior to payment for delivery of an item shall be liquidated by deducting a percentage or a designated dollar amount from the delivery payment. If the performance-based finance payments are on a delivery item basis, the liquidation amount for each such line item shall be the percent of that delivery item price that was previously paid under performance-based finance payments or the designated dollar amount. If the performance-based finance payments are on a whole contract basis, liquidation shall be by either predesignated liquidation amounts or a liquidation percentage.
(2) If at any time the amount of payments under this contract exceeds any limitation in this contract, the Contractor shall repay to the Government the excess. Unless otherwise determined by the Contracting Officer, such excess shall be credited as a reduction in the unliquidated performance-based payment balance(s), after adjustment of invoice payments and balances for any retroactive price adjustments.
(e) Reduction or suspension of performance-based payments. The Contracting Officer may reduce or suspend performance-based payments, liquidate performance-based payments by deduction from any payment under the contract, or take a combination of these actions after finding upon substantial evidence any of the following conditions:
(1) The Contractor failed to comply with any material requirement of this contract (which includes paragraphs (h) and (i) of this clause).
(2) Performance of this contract is endangered by the Contractors
(i) Failure to make progress; or
(ii) Unsatisfactory financial condition.
(3) The Contractor is delinquent in payment of any subcontractor or supplier under this contract in the ordinary course of business.
(f) Title.
(1) Title to the property described in this paragraph (f) shall vest in the Government. Vestiture shall be immediately upon the date of the first performance-based payment under this contract, for property acquired or produced before that date. Otherwise, vestiture shall occur when the property is or should have been allocable or properly chargeable to this contract.
(2) Property, as used in this clause, includes all of the following described items acquired or produced by the Contractor that are or should be allocable or properly chargeable to this contract under sound and generally accepted accounting principles and practices:
(i) Parts, materials, inventories, and work in process;
(ii) Special tooling and special test equipment to which the Government is to acquire title under any other clause of this contract;
(iii) Nondurable (i.e., noncapital) tools, jigs, dies, fixtures, molds, patterns, taps, gauges, test equipment and other similar manufacturing aids, title to which would not be obtained as special tooling under subparagraph (f)(2)(ii) of this clause; and
(iv) Drawings and technical data, to the extent the Contractor or subcontractors are required to deliver them to the Government by other clauses of this contract.
(3) Although title to property is in the Government under this clause, other applicable clauses of this contract (e.g., the termination or special tooling clauses) shall determine the handling and disposition of the property.
(4) The Contractor may sell any scrap resulting from production under this contract, without requesting the Contracting Officers approval, provided that any significant reduction in the value of the property to which the Government has title under this clause is reported in writing to the Contracting Officer.
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
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(5) In order to acquire for its own use or dispose of property to which title is vested in the Government under this clause, the Contractor must obtain the Contracting Officers advance approval of the action and the terms. If approved, the basis for payment (the events or performance criteria) to which the property is related shall be deemed to be not in compliance with the terms of the contract and not payable (if the property is part of or needed for performance), and the Contractor shall refund the related performance-based payments in accordance with paragraph (d) of this clause.
(6) When the Contractor completes all of the obligations under this contract, including liquidation of all performance-based payments, title shall vest in the Contractor for all property (or the proceeds thereof) not
(i) Delivered to, and accepted by, the Government under this contract; or
(ii) Incorporated in supplies delivered to, and accepted by, the Government under this contract and to which title is vested in the Government under this clause.
(7) The terms of this contract concerning liability for Government-furnished property shall not apply to property to which the Government acquired title solely under this clause.
(g) Risk of loss. Before delivery to and acceptance by the Government, the Contractor shall bear the risk of loss for property, the title to which vests in the Government under this clause, except to the extent the Government expressly assumes the risk. If any property is damaged, lost, stolen, or destroyed, the basis of payment (the events or performance criteria) to which the property is related shall be deemed to be not in compliance with the terms of the contract and not payable (if the property is part of or needed for performance), and the Contractor shall refund the related performance-based payments in accordance with paragraph (d) of this clause.
(h) Records and controls. The Contractor shall maintain records and controls adequate for administration of this clause. The Contractor shall have no entitlement to performance-based payments during any time the Contractors records or controls are determined by the Contracting Officer to be inadequate for administration of this clause.
(i) Reports and Government access. The Contractor shall promptly furnish reports, certificates, financial statements, and other pertinent information requested by the Contracting Officer for the administration of this clause and to determine that an event or other criterion prompting a financing payment has been successfully accomplished. The Contractor shall give the Government reasonable opportunity to examine and verify the Contractors records and to examine and verify the Contractors performance of this contract for administration of this clause.
(j) Special terms regarding default. If this contract is terminated under the Default clause,
(1) the Contractor shall, on demand, repay to the Government the amount of unliquidated performance-based payments, and
(2) title shall vest in the Contractor, on full liquidation of all performance-based payments, for all property for which the Government elects not to require delivery under the Default clause of this contract. The Government shall be liable for no payment except as provided by the Default clause.
(k) Reservation of rights.
(1) No payment or vesting of title under this clause shall
(i) Excuse the Contractor from performance of obligations under this contract; or
(ii) Constitute a waiver of any of the rights or remedies of the parties under the contract.
(2) The Governments rights and remedies under this clause
(i) Shall not be exclusive, but rather shall be in addition to any other rights and remedies provided by law or this contract; and
(ii) Shall not be affected by delayed, partial, or omitted exercise of any right, remedy, power, or privilege, nor shall such exercise or any single exercise preclude or impair any further exercise under this clause or the exercise of any other right, power, or privilege of the Government.
(l) Content of Contractors request for performance-based payment. The Contractors request for performance-based payment shall contain the following:
(1) The name and address of the Contractor;
(2) The date of the request for performance-based payment;
(3) The contract number and/or other identifier of the contract or order under which the request is made;
(4) Such information and documentation as is required by the contracts description of the basis for payment; and
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
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(5) A certification by a Contractor official authorized to bind the Contractor, as specified in paragraph (m) of this clause.
(m) Content of Contractors certification. As required in paragraph (l)(5) of this clause, the Contractor shall make the following certification in each request for performance-based payment:
I certify to the best of my knowledge and belief that
(1) This request for performance-based payment is true and correct; this request (and attachments) has been prepared from the books and records of the Contractor, in accordance with the contract and the instructions of the Contracting Officer;
(2) (Except as reported in writing on N/A, all payments to subcontractors and suppliers under this contract have been paid, or will be paid, currently, when due in the ordinary course of business;
(3) There are no encumbrances (except as reported in writing on N/A against the property acquired or produced for, and allocated or properly chargeable to, the contract which would affect or impair the Governments title;
(4) There has been no materially adverse change in the financial condition of the Contractor since the submission by the Contractor to the Government of the most recent written information dated 7 Mar 2011; and
(5) After the making of this requested performance-based payment, the amount of all payments for each deliverable item for which performance-based payments have been requested will not exceed any limitation in the contract, and the amount of all payments under the contract will not exceed any limitation in the contract.
52.233-4 APPLICABLE LAW FOR BREACH OF CONTRACT CLAIM (OCT 2004)
United States law will apply to resolve any claim of breach of this contract.
52.245-1 GOVERNMENT PROPERTY (JUN 2007)
(a) Definitions. As used in this clause
Acquisition cost means the cost to acquire a tangible capital asset including the purchase price of the asset and costs necessary to prepare the asset for use. Costs necessary to prepare the asset for use include the cost of placing the asset in location and bringing the asset to a condition necessary for normal or expected use.
Cannibalize means to remove serviceable parts from one item of equipment in order to install them on another item of equipment.
Contractor-acquired property means property acquired, fabricated, or otherwise provided by the Contractor for performing a contract, and to which the Government has title.
Contractor inventory means
(1) Any property acquired by and in the possession of a Contractor or subcontractor under a contract for which title is vested in the Government and which exceeds the amounts needed to complete full performance under the entire contract;
(2) Any property that the Government is obligated or has the option to take over under any type of contract, e.g., as a result either of any changes in the specifications or plans thereunder or of the termination of the contract (or subcontract thereunder), before completion of the work, for the convenience or at the option of the Government; and
(3) Government-furnished property that exceeds the amounts needed to complete full performance under the entire contract.
Contractors managerial personnel means the Contractors directors, officers, managers, superintendents, or equivalent representatives who have supervision or direction of
(1) All or substantially all of the Contractors business;
(2) All or substantially all of the Contractors operation at any one plant or separate location; or
(3) A separate and complete major industrial operation.
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
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Demilitarization means rendering a product unusable for, and not restorable to, the purpose for which it was designed or is customarily used.
Discrepancies incident to shipment means any differences ( e.g. , count or condition) between the items documented to have been shipped and items actually received.
Equipment means a tangible asset that is functionally complete for its intended purpose, durable, nonexpendable, and needed for the performance of a contract. Equipment is not intended for sale, and does not ordinarily lose its identity or become a component part of another article when put into use.
Government-furnished property means property in the possession of, or directly acquired by, the Government and subsequently furnished to the Contractor for performance of a contract.
Government property means all property owned or leased by the Government. Government property includes both Government-furnished and Contractor-acquired property.
Material means property that may be consumed or expended during the performance of a contract, component parts of a higher assembly, or items that lose their individual identity through incorporation into an end-item. Material does not include equipment, special tooling and special test equipment.
Nonseverable means property that cannot be removed after construction or installation without substantial loss of value or damage to the installed property or to the premises where installed.
Plant equipment as used in this part, means personal property of a capital nature (including equipment, machine tools, test equipment, furniture, vehicles, and accessory and auxiliary items) for use in manufacturing supplies, in performing services, or for any administrative or general plant purpose. It does not include special tooling or special test equipment.
Precious metals means silver, gold, platinum, palladium, iridium, osmium, rhodium, and ruthenium.
Property means all tangible property, both real and personal.
Property Administrator means an authorized representative of the Contracting Officer appointed in accordance with agency procedures, responsible for administering the contract requirements and obligations relating to Government property in the possession of a Contractor.
Provide means to furnish, as in Government-furnished property, or to acquire, as in contractor-acquired property.
Real property means land and rights in land, ground improvements, utility distribution systems, and buildings and other structures. It does not include foundations and other work necessary for installing special tooling, special test equipment, or plant equipment.
Sensitive property means property potentially dangerous to the public safety or security if stolen, lost, or misplaced, or that shall be subject to exceptional physical security, protection, control, and accountability. Examples include weapons, ammunition, explosives, controlled substances, radioactive materials, hazardous materials or wastes, or precious metals.
Surplus property means excess personal property not required by any Federal agency as determined by the Administrator of the General Services Administration (GSA).
(b) Property management .
(1) The Contractor shall have a system to manage (control, use, preserve, protect, repair and maintain) Government property in its possession. The system shall be adequate to satisfy the requirements of this clause. In doing so, the Contractor shall initiate and maintain the processes, systems, procedures, records, and methodologies necessary for effective control of Government property, consistent with voluntary consensus standards and/or industry-leading practices and standards for Government property management except where inconsistent with law or regulation. During the period of performance, the Contractor shall disclose any significant changes to their property management system to the Property Administrator prior to implementation.
(2) The Contractors responsibility extends from the initial acquisition and receipt of property, through stewardship, custody, and use until formally relieved of responsibility by authorized means, including delivery, consumption, expending, disposition, or via a completed investigation, evaluation, and final determination for lost, damaged, destroyed, or stolen property. This requirement applies to all Government property under the Contractors accountability, stewardship, possession or control, including its vendors or subcontractors (see paragraph (f)(1)(v) of this clause).
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
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(3) The Contractor shall include the requirements of this clause in all subcontracts under which Government property is acquired or furnished for subcontract performance.
(c) Use of Government property . The Contractor shall use Government property, either furnished or acquired under this contract, only for performing this contract, unless otherwise provided for in this contract or approved by the Contracting Officer. The Contractor shall not modify, cannibalize, or make alterations to Government property unless this contract specifically identifies the modifications, alterations or improvements as work to be performed.
(d) Government-furnished property .
(1) The Government shall deliver to the Contractor the Government-furnished property described in this contract. The Government shall furnish related data and information needed for the intended use of the property. The warranties of suitability of use and timely delivery of Government-furnished property do not apply to property acquired or fabricated by the Contractor as contractor-acquired property and subsequently transferred to another contract with this Contractor.
(2) The delivery and/or performance dates specified in this contract are based upon the expectation that the Government-furnished property will be suitable for contract performance and will be delivered to the Contractor by the dates stated in the contract.
(i) If the property is not delivered to the Contractor by the dates stated in the contract, the Contracting Officer shall, upon the Contractors timely written request, consider an equitable adjustment to the contract.
(ii) In the event property is received by the Contractor, or for Government-furnished property after receipt and installation, in a condition not suitable for its intended use, the Contracting Officer shall, upon the Contractors timely written request, advise the Contractor on a course of action to remedy the problem. Such action may include repairing, replacing, modifying, returning, or otherwise disposing of the property at the Governments expense. Upon completion of the required action(s), the Contracting Officer shall consider an equitable adjustment to the contract (see also paragraph (f)(1)(ii)(A) of this clause).
(iii) The Government may, at its option, furnish property in an as-is condition. The Contractor will be given the opportunity to inspect such property prior to the property being provided. In such cases, the Government makes no warranty with respect to the serviceability and/or suitability of the property for contract performance. Any repairs, replacement, and/or refurbishment shall be at the Contractors expense.
(3)(i) The Contracting Officer may by written notice, at any time
(A) Increase or decrease the amount of Government-furnished property under this contract;
(B) Substitute other Government-furnished property for the property previously furnished, to be furnished, or to be acquired by the Contractor for the Government under this contract; or
(C) Withdraw authority to use property.
(ii) Upon completion of any action(s) under paragraph (d)(3)(i) of this clause, and the Contractors timely written request, the Contracting Officer shall consider an equitable adjustment to the contract.
(e) Title to Government property .
(1) The Government shall retain title to all Government-furnished property. Title to Government property shall not be affected by its incorporation into or attachment to any property not owned by the Government, nor shall Government property become a fixture or lose its identity as personal property by being attached to any real property.
(2) Fixed-price contracts.
(i) All Government-furnished property and all property acquired by the Contractor, title to which vests in the Government under this paragraph (collectively referred to as Government property), are subject to the provisions of this clause.
(ii) Title to each item of equipment, special test equipment and special tooling acquired by the Contractor for the Government under this contract shall pass to and vest in the Government when its use in performing this contract commences or when the Government has paid for it, whichever is earlier, whether or not title previously vested in the Government.
(iii) If this contract contains a provision directing the Contractor to purchase material for which the Government will reimburse the Contractor as a direct item of cost under this contract
(A) Title to material purchased from a vendor shall pass to and vest in the Government upon the vendors delivery of such material; and
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
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(B) Title to all other material shall pass to and vest in the Government upon
( 1 ) Issuance of the material for use in contract performance;
( 2 ) Commencement of processing of the material or its use in contract performance; or
( 3 ) Reimbursement of the cost of the material by the Government, whichever occurs first.
(3) Title under Cost-Reimbursement or Time-and-Material Contracts or Cost-Reimbursable contract line items under Fixed-Price contracts .
(i) Title to all property purchased by the Contractor for which the Contractor is entitled to be reimbursed as a direct item of cost under this contract shall pass to and vest in the Government upon the vendors delivery of such property.
(ii) Title to all other property, the cost of which is reimbursable to the Contractor, shall pass to and vest in the Government upon
(A) Issuance of the property for use in contract performance;
(B) Commencement of processing of the property for use in contract performance; or
(C) Reimbursement of the cost of the property by the Government, whichever occurs first.
(iii) All Government-furnished property and all property acquired by the Contractor, title to which vests in the Government under this paragraph (e)(3)(iii) (collectively referred to as Government property), are subject to the provisions of this clause.
(f) Contractor plans and systems.
(1) Contractors shall establish and implement property management plans, systems, and procedures at the contract, program, site or entity level to enable the following outcomes:
(i) Acquisition of Property. The Contractor shall document that all property was acquired consistent with its engineering, production planning, and material control operations.
(ii) Receipt of Government Property . The Contractor shall receive Government property (document the receipt), record the information necessary to meet the record requirements of paragraph (f)(1)(iii)(A)(1) through (5) of this clause, identify as Government owned in a manner appropriate to the type of property ( e.g. ., stamp, tag, mark, or other identification), and manage any discrepancies incident to shipment.
(A) Government-furnished property. The Contractor shall furnish a written statement to the Property Administrator containing all relevant facts, such as cause or condition and a recommended course(s) of action, if overages, shortages, or damages and/or other discrepancies are discovered upon receipt of Government-furnished property.
(B) Contractor-acquired property. The Contractor shall take all actions necessary to adjust for overages, shortages, damage and/or other discrepancies discovered upon receipt, in shipment of Contractor-acquired property from a vendor or supplier, so as to ensure the proper allocability and allowability of associated costs.
(iii) Records of Government property. The Contractor shall create and maintain records of all Government property accountable to the contract, including Government-furnished and Contractor-acquired property.
(A) Property records shall enable a complete, current, auditable record of all transactions and shall, unless otherwise approved by the Property Administrator, contain the following:
( 1 ) The name, part number and description, manufacturer, model number, and National Stock Number (if needed for additional item identification tracking and/or disposition).
( 2 ) Quantity received (or fabricated), issued, and balance-on-hand.
( 3 ) Unit acquisition cost.
( 4 ) Unique-item identifier or equivalent (if available and necessary for individual item tracking).
( 5 ) Unit of measure.
( 6 ) Accountable contract number or equivalent code designation.
( 7 ) Location.
( 8 ) Disposition.
( 9 ) Posting reference and date of transaction.
( 10 ) Date placed in service.
(B) Use of a Receipt and Issue System for Government Material . When approved by the Property Administrator, the Contractor may maintain, in lieu of formal property records, a file of appropriately cross-referenced documents evidencing receipt, issue, and use of material that is issued for immediate consumption.
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
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(iv) Physical inventory . The Contractor shall periodically perform, record, and disclose physical inventory results. A final physical inventory shall be performed upon contract completion or termination. The Property Administrator may waive this final inventory requirement, depending on the circumstances ( e.g. ., overall reliability of the Contractors system or the property is to be transferred to a follow-on contract).
(v) Subcontractor control .
(A) The Contractor shall award subcontracts that clearly identify assets to be provided and shall ensure appropriate flow down of contract terms and conditions ( e.g. , extent of liability for loss, damage, destruction or theft of Government property).
(B) The Contractor shall assure its subcontracts are properly administered and reviews are periodically performed to determine the adequacy of the subcontractors property management system.
(vi) Reports. The Contractor shall have a process to create and provide reports of discrepancies; loss, damage, destruction, or theft; physical inventory results; audits and self-assessments; corrective actions; and other property related reports as directed by the Contracting Officer.
(A) Loss, damage, destruction, or theft. Unless otherwise directed by the Property Administrator, the Contractor shall investigate and promptly furnish a written narrative of all incidents of loss, damage, destruction, or theft to the property administrator as soon as the facts become known or when requested by the Government.
(B) Such reports shall, at a minimum, contain the following information:
( 1 ) Date of incident (if known).
( 2 ) The name, commercial description, manufacturer, model number, and National Stock Number (if applicable).
( 3 ) Quantity.
( 4 ) Unique Item Identifier (if available).
( 5 ) Accountable Contract number.
( 6 ) A statement indicating current or future need.
( 7 ) Acquisition cost, or if applicable, estimated scrap proceeds, estimated repair or replacement costs.
( 8 ) All known interests in commingled property of which the Government property is a part.
( 9 ) Cause and corrective action taken or to be taken to prevent recurrence.
( 10 ) A statement that the Government will receive any reimbursement covering the loss, damage, destruction, or theft, in the event the Contractor was or will be reimbursed or compensated.
( 11 ) Copies of all supporting documentation.
( 12 ) Last known location.
( 13 ) A statement that the property did or did not contain sensitive or hazardous material, and if so, that the appropriate agencies were notified.
(vii) Relief of stewardship responsibility . Unless the contract provides otherwise, the Contractor shall be relieved of stewardship responsibility for Government property when such property is
(A) Consumed or expended, reasonably and properly, or otherwise accounted for, in the performance of the contract, including reasonable inventory adjustments of material as determined by the Property Administrator; or a Property Administrator granted relief of responsibility for loss, damage, destruction or theft of Government property;
(B) Delivered or shipped from the Contractors plant, under Government instructions, except when shipment is to a subcontractor or other location of the Contractor; or
(C) Disposed of in accordance with paragraphs (j) and (k) of this clause.
(viii) Utilizing Government property .
(A) The Contractor shall utilize, consume, move, and store Government Property only as authorized under this contract. The Contractor shall promptly disclose and report Government property in its possession that is excess to contract performance.
(B) Unless otherwise authorized in this contract or by the Property Administrator the Contractor shall not commingle Government property with property not owned by the Government.
(ix) Maintenance . The Contractor shall properly maintain Government property. The Contractors maintenance program shall enable the identification, disclosure, and performance of normal and routine preventative
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
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maintenance and repair. The Contractor shall disclose and report to the Property Administrator the need for replacement and/or capital rehabilitation.
(x) Property closeout . The Contractor shall promptly perform and report to the Property Administrator contract property closeout, to include reporting, investigating and securing closure of all loss, damage, destruction, or theft cases; physically inventorying all property upon termination or completion of this contract; and disposing of items at the time they are determined to be excess to contractual needs.
(2) The Contractor shall establish and maintain Government accounting source data, as may be required by this contract, particularly in the areas of recognition of acquisitions and dispositions of material and equipment.
(3) The Contractor shall establish and maintain procedures necessary to assess its property management system effectiveness, and shall perform periodic internal reviews and audits. Significant findings and/or results of such reviews and audits pertaining to Government property shall be made available to the Property Administrator.
(g) Systems analysis .
(1) The Government shall have access to the contractors premises and all Government property, at reasonable times, for the purposes of reviewing, inspecting and evaluating the Contractors property management plan, systems, procedures, records, and supporting documentation that pertains to Government property.
(2) Records of Government property shall be readily available to authorized Government personnel and shall be safeguarded from tampering or destruction.
(3) Should it be determined by the Government that the Contractors property management practices are inadequate or not acceptable for the effective management and/or control of Government property under this contract, and/or present an undue risk to the Government, the Contractor shall immediately take all necessary corrective actions as directed by the Property Administrator.
(4) The Contractor shall ensure Government access to subcontractor premises, and all Government property located at subcontractor premises, for the purposes of reviewing, inspecting and evaluating the subcontractors property management plan, systems, procedures, records, and supporting documentation that pertains to Government property.
(h) Contractor Liability for Government Property .
(1) Unless otherwise provided for in the contract, the Contractor shall not be liable for loss, damage, destruction, or theft to the Government property furnished or acquired under this contract, except when any one of the following applies
(i) The risk is covered by insurance or the Contractor is otherwise reimbursed (to the extent of such insurance or reimbursement). The allowability of insurance costs shall be determined in accordance with 31.205-19.
(ii) The loss, damage, destruction, or theft is the result of willful misconduct or lack of good faith on the part of the Contractors managerial personnel. Contractors managerial personnel, in this clause, means the Contractors directors, officers, managers, superintendents, or equivalent representatives who have supervision or direction of all or substantially all of the Contractors business; all or substantially all of the Contractors operation at any one plant or separate location; or a separate and complete major industrial operation.
(iii) The Contracting Officer has, in writing, revoked the Governments assumption of risk for loss, damage, destruction, or theft, due to a determination under paragraph (g) of this clause that the Contractors property management practices are inadequate, and/or present an undue risk to the Government, and the Contractor failed to take timely corrective action. If the Contractor can establish by clear and convincing evidence that the loss, damage, destruction, or theft of Government property occurred while the Contractor had adequate property management practices or the loss, damage, destruction, or theft of Government property did not result from the Contractors failure to maintain adequate property management practices, the Contractor shall not be held liable.
(2) The Contractor shall take all reasonable actions necessary to protect the Government property from further loss, damage, destruction, or theft. The Contractor shall separate the damaged and undamaged Government property, place all the affected Government property in the best possible order, and take such other action as the Property Administrator directs.
(3) The Contractor shall do nothing to prejudice the Governments rights to recover against third parties for any loss, damage, destruction, or theft of Government property.
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
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(4) Upon the request of the Contracting Officer, the Contractor shall, at the Governments expense, furnish to the Government all reasonable assistance and cooperation, including the prosecution of suit and the execution of instruments of assignment in favor of the Government in obtaining recovery.
(i) Equitable adjustment . Equitable adjustments under this clause shall be made in accordance with the procedures of the Changes clause. The right to an equitable adjustment shall be the Contractors exclusive remedy and the Government shall not be liable to suit for breach of contract for the following:
(1) Any delay in delivery of Government-furnished property.
(2) Delivery of Government-furnished property in a condition not suitable for its intended use.
(3) An increase, decrease, or substitution of Government-furnished property.
(4) Failure to repair or replace Government property for which the Government is responsible.
(j) Contractor inventory disposal . Except as otherwise provided for in this contract, the Contractor shall not dispose of Contractor inventory until authorized to do so by the Plant Clearance Officer.
(1) Scrap to which the Government has obtained title under paragraph (e) of this clause .
(i) Contractor with an approved scrap procedure .
(A) The Contractor may dispose of scrap resulting from production or testing under this contract without Government approval. However, if the scrap requires demilitarization or is sensitive property, the Contractor shall submit the scrap on an inventory disposal schedule.
(B) For scrap from other than production or testing the Contractor may prepare scrap lists in lieu of inventory disposal schedules (provided such lists are consistent with the approved scrap procedures), except that inventory disposal schedules shall be submitted for scrap aircraft or aircraft parts and scrap that
( 1 ) Requires demilitarization;
( 2 ) Is a classified item;
( 3 ) Is generated from classified items;
( 4 ) Contains hazardous materials or hazardous wastes;
( 5 ) Contains precious metals; or
( 6 ) Is dangerous to the public health, safety, or welfare.
(ii) Contractor without an approved scrap procedure . The Contractor shall submit an inventory disposal schedule for all scrap. The Contractor may not dispose of scrap resulting from production or testing under this contract without Government approval.
(2) Predisposal requirements .
(i) Once the Contractor determines that Contractor-acquired property is no longer needed for contract performance, the Contractor in the following order of priority
(A) May contact the Contracting Officer if use of the property in the performance of other Government contracts is practical;
(B) May purchase the property at the acquisition cost; or
(C) Shall make reasonable efforts to return unused property to the appropriate supplier at fair market value (less, if applicable, a reasonable restocking fee that is consistent with the suppliers customary practices).
(ii) The Contractor shall list, on Standard Form 1428, Inventory Disposal Schedule, property that was not used in the performance of other Government contracts under paragraph (j)(2)(i)(A) of this clause, property that was not purchased under paragraph (j)(2)(i)(B) of this clause, and property that could not be returned to a supplier under paragraph (j)(2)(i)(C) of this clause.
(3) Inventory disposal schedules .
(i) The Contractor shall use Standard Form 1428, Inventory Disposal Schedule, to identify
(A) Government-furnished property that is no longer required for performance of this contract, provided the terms of another Government contract do not require the Government to furnish that property for performance of this contract;
(B) Contractor-acquired property, to which the Government has obtained title under paragraph (e) of this clause, which is no longer required for performance of that contract; and
(C) Termination inventory.
(ii) The Contractor may annotate inventory disposal schedules to identify property the Contractor wishes to purchase from the Government.
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
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(iii) Unless the Plant Clearance Officer has agreed otherwise, or the contract requires electronic submission of inventory disposal schedules, the Contractor shall prepare separate inventory disposal schedules for
(A) Special test equipment with commercial components;
(B) Special test equipment without commercial components;
(C) Printing equipment;
(D) Information technology ( e.g. ., computers, computer components, peripheral equipment, and related equipment);
(E) Precious metals;
(F) Mononuclear hazardous materials or hazardous wastes; or
(G) Nuclear materials or nuclear wastes.
(iv) The Contractor shall describe the property in sufficient detail to permit an understanding of its intended use. Property with the same description, condition code, and reporting location may be grouped in a single line item.
(4) Submission requirements . The Contractor shall submit inventory disposal schedules to the Plant Clearance Officer no later than
(i) 30-days following the Contractors determination that a Government property item is no longer required for performance of this contract;
(ii) 60 days, or such longer period as may be approved by the Plant Clearance Officer, following completion of contract deliveries or performance; or
(iii) 120 days, or such longer period as may be approved by the Termination Contracting Officer following contract termination in whole or in part.
(5) Corrections. The Plant Clearance Officer may
(i) Reject a schedule for cause ( e.g. ., contains errors, determined to be inaccurate); and
(ii) Require the Contractor to correct an inventory disposal schedule.
(6) Postsubmission adjustments. The Contractor shall notify the Plant Clearance Officer at least 10 working days in advance of its intent to remove an item from an approved inventory disposal schedule. Upon approval of the Plant Clearance Officer, or upon expiration of the notice period, the Contractor may make the necessary adjustments to the inventory schedule.
(7) Storage.
(i) The Contractor shall store the property identified on an inventory disposal schedule pending receipt of disposal instructions. The Governments failure to furnish disposal instructions within 120 days following acceptance of an inventory disposal schedule may entitle the Contractor to an equitable adjustment for costs incurred to store such property on or after the 121st day.
(ii) The Contractor shall obtain the Plant Clearance Officers approval to remove Government property from the premises where the property is currently located prior to receipt of final disposition instructions. If approval is granted, any costs incurred by the Contractor to transport or store the property shall not increase the price or fee of any Government contract. The storage facility shall be appropriate for assuring the propertys physical safety and suitability for use. Approval does not relieve the Contractor of any liability for such property under this contract.
(8) Disposition instructions.
(i) If the Government does not furnish disposition instructions to the Contractor within 45 days following acceptance of a scrap list, the Contractor may dispose of the listed scrap in accordance with the Contractors approved scrap procedures.
(ii) The Contractor shall prepare for shipment, deliver f.o.b. origin, or dispose of Contractor inventory as directed by the Plant Clearance Officer. If not returned to the Government, the Contractor shall remove and destroy any markings identifying the property as U.S. Government-owned property prior to its disposal.
(iii) The Contracting Officer may require the Contractor to demilitarize the property prior to shipment or disposal. In such cases, the Contractor may be entitled to an equitable adjustment under paragraph (i) of this clause.
(9) Disposal proceeds. As directed by the Contracting Officer, the Contractor shall credit the net proceeds from the disposal of Contractor inventory to the contract, or to the Treasury of the United States as miscellaneous receipts.
(10) Subcontractor inventory disposal schedules . The Contractor shall require its Subcontractors to submit inventory disposal schedules to the Contractor in accordance with the requirements of paragraph (j)(4) of this clause.
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
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(k) Abandonment of Government property .
(1) The Government shall not abandon sensitive Government property or termination inventory without the Contractors written consent.
(2) The Government, upon notice to the Contractor, may abandon any nonsensitive Government property in place, at which time all obligations of the Government regarding such property shall cease.
(3) The Government has no obligation to restore or rehabilitate the Contractors premises under any circumstances; however, if Government-furnished property is withdrawn or is unsuitable for the intended use, or if other Government property is substituted, then the equitable adjustment under paragraph (i) of this clause may properly include restoration or rehabilitation costs.
(l) Communication . All communications under this clause shall be in writing.
(m) Contracts outside the United States . If this contract is to be performed outside of the United States and its outlying areas, the words Government and Government-furnished (wherever they appear in this clause) shall be construed as United States Government and United States Government-furnished, respectively.
52.246-19 WARRANTY OF SYSTEMS AND EQUIPMENT UNDER PERFORMANCE SPECIFICATIONS OR DESIGN CRITERIA (MAY 2001)
(a) Definitions. As used in this clause
Acceptance means the act of an authorized representative of the Government by which the Government assumes for itself, or as an agent of another, ownership of existing and identified supplies, or approves specific services rendered, as partial or complete performance of the contract.
Defect means any condition or characteristic in any supplies or services furnished by the Contractor under the contract that is not in compliance with the requirements of the contract.
Supplies means the end items furnished by the Contractor and related services required under this contract. Except when this contract includes the clause entitled Warranty of Data, supplies also mean data.
(b) Contractors obligations. (1) the Contractors warranties under this clause shall apply only to those defects discovered by either the Government or the Contractor within 3 years after date of Government acceptance.
(2) If the Contractor becomes aware at any time before acceptance by the Government (whether before or after tender to the Government) that a defect exists in any supplies or services, the Contractor shall (i) correct the defect or (ii) notify the Contracting Officer, in writing, of the defect, using the same procedures prescribed in paragraph (b)(3) of this clause.
(3) If the Contracting Officer determines that a defect exists in any of the supplies or services accepted by the government under this contract, the contracting officer shall notify the Contractor of the defect, in writing, within within 6 months after discovery of defect. Upon timely notification of the existence of a defect, or if the Contractor independently discovers a defect in accepted supplies or services, the Contractor shall submit to the Contracting Officer, in writing, within 3 months a recommendation for corrective actions, together with supporting information in sufficient detail for the contracting officer to determine what corrective action, if any, shall be undertaken.
(4)The Contractor shall comply with any timely written direction from the Contracting Officer to correct or partially correct a defect, at no increase in the contract price.
(5) The contractor shall also prepare and furnish to the Contracting Officer data and reports applicable to any correction required under this clause (including revision and updating of all other affected data called for under this contract) at no increase in the contract price.
(6) In the event of timely notice of a decision not to correct or only to partially correct, the contractor shall submit a technical and cost proposal within 1 month to amend the contract to permit acceptance of the affected supplies or services in accordance with the revised requirement, and an equitable reduction in the contract price shall be negotiated by the parties and be reflected in a supplemental agreement to this contract.
(7) Any supplies or parts thereof corrected or furnished in replacement and any services reperformed shall also be subject to the conditions of this clause to the same extent as supplies or services initially accepted. The warranty,
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
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with respect to these supplies, parts, or services, shall be equal in duration to that set forth in paragraph (b)(1) of this clause, and shall run from the date of delivery of the corrected or replaced supplies.
(8) The Contractor shall not be responsible under this clause for the correction of defects in Government-furnished property, except for defects in installation, unless the contractor performs, or is obligated to perform, any modifications or other work on such property. In that event, the Contractor shall be responsible for correction of defects that result from the modifications or other work.
(9) If correction or replacement is required, and transportation of supplies in connection with correction or replacement is necessary, transportation charges and responsibility for the supplies while in transit shall be borne by the Government.
(10) All implied warranties of merchantability and fitness for a particular purpose are excluded from any obligation under this contract.
(c) Remedies available to the Government. (1) The rights and remedies of the Government provided in this clause
(i) Shall not be affected in any way by any terms or conditions of this contract concerning the conclusiveness of inspection and acceptance; and
(ii) Are in addition to, and do not limit, any rights afforded to the Government by any other clause of this contract.
(2) Within 1 month after receipt of the Contractors recommendations for corrective action and adequate supporting information, the Contracting Officer, using sole discretion, shall give the Contractor written notice not to correct any defect, or to correct or partially correct any defect within a reasonable time at either the contractors production facility or the Navy inventory site.
(3) In no event shall the Government be responsible for any extension or delays in the scheduled deliveries or periods of performance under this contract as a result of the Contractors obligations to correct defects, nor shall there be any adjustment of the delivery schedule or period of performance as a result of the correction of defects unless provided by a supplemental agreement with adequate consideration.
(4) This clause shall not be construed as obligating the Government to increase the contract price.
(5) (i) The Contracting Officer shall give the Contractor a written notice specifying any failure or refusal of the Contractor to
(A) Present a detailed recommendation for corrective action as required by paragraph (b)(3) of this clause.
(B) Correct defects as directed under paragraph (b)(4) of this clause; or
(C) Prepare and furnish data and reports as required by paragraph (b)(5) of this clause.
(ii) The notice shall specify a period of time following receipt of the notice by the Contractor in which the Contractor must remedy the failure or refusal specified in the notice.
(6) If the Contractor does not comply with the Contracting Officers written notice in paragraph (c)(5)(i) of this clause, the Contracting Officer may by contract or otherwise
(i) Obtain detailed recommendations for corrective action and either
(A) Correct the supplies or services; or
(B) Replace the supplies or services, and if the Contractor fails to furnish timely disposition instructions, the Contracting Officer may dispose of the nonconforming supplies for the Contractors account in a reasonable manner, in which case the Government is entitled to reimbursement from the Contractor, or from the proceeds, for the reasonable expenses of care and disposition, as well as for excess costs incurred or to be incurred;
(ii) Obtain applicable data and reports; and
(iii) Charge the Contractor for the costs incurred by the Government.
52.248-1 VALUE ENGINEERING (FEB 2000)
(a) General. The Contractor is encouraged to develop, prepare, and submit value engineering change proposals (VECPs) voluntarily. The Contractor shall share in any net acquisition savings realized from accepted VECPs, in accordance with the incentive sharing rates in paragraph (f) below.
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
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(b) Definitions.
Acquisition savings, as used in this clause, means savings resulting from the application of a VECP to contracts awarded by the same contracting office or its successor for essentially the same unit. Acquisition savings include
(1) Instant contract savings, which are the net cost reductions on this, the instant contract, and which are equal to the instant unit cost reduction multiplied by the number of instant contract units affected by the VECP, less the Contractors allowable development and implementation costs;
(2) Concurrent contract savings, which are net reductions in the prices of other contracts that are definitized and ongoing at the time the VECP is accepted; and
(3) Future contract savings, which are the product of the future unit cost reduction multiplied by the number of future contract units in the sharing base. On an instant contract, future contract savings include savings on increases in quantities after VECP acceptance that are due to contract modifications, exercise of options, additional orders, and funding of subsequent year requirements on a multiyear contract.
Collateral savings, as used in this clause, means those measurable net reductions resulting from a VECP in the agencys overall projected collateral costs, exclusive of acquisition savings, whether or not the acquisition cost changes.
Contracting office includes any contracting office that the acquisition is transferred to, such as another branch of the agency or another agencys office that is performing a joint acquisition action.
Contractors development and implementation costs, as used in this clause, means those costs the Contractor incurs on a VECP specifically in developing, testing, preparing, and submitting the VECP, as well as those costs the Contractor incurs to make the contractual changes required by Government acceptance of a VECP.
Future unit cost reduction, as used in this clause, means the instant unit cost reduction adjusted as the Contracting Officer considers necessary for projected learning or changes in quantity during the sharing period. It is calculated at the time the VECP is accepted and applies either
(1) Throughout the sharing period, unless the Contracting Officer decides that recalculation is necessary because conditions are significantly different from those previously anticipated; or
(2) To the calculation of a lump-sum payment, which cannot later be revised.
Government costs, as used in this clause, means those agency costs that result directly from developing and implementing the VECP, such as any net increases in the cost of testing, operations, maintenance, and logistics support. The term does not include the normal administrative costs of processing the VECP or any increase in this contracts cost or price resulting from negative instant contract savings.
Instant contract, as used in this clause, means this contract, under which the VECP is submitted. It does not include increases in quantities after acceptance of the VECP that are due to contract modifications, exercise of options, or additional orders. If this is a multiyear contract, the term does not include quantities funded after VECP acceptance. If this contract is a fixed-price contract with prospective price redetermination, the term refers to the period for which firm prices have been established.
Instant unit cost reduction means the amount of the decrease in unit cost of performance (without deducting any Contractors development or implementation costs) resulting from using the VECP on this, the instant contract. If this is a service contract, the instant unit cost reduction is normally equal to the number of hours per line-item task saved by using the VECP on this contract, multiplied by the appropriate contract labor rate.
Negative instant contract savings means the increase in the cost or price of this contract when the acceptance of a VECP results in an excess of the Contractors allowable development and implementation costs over the product of the instant unit cost reduction multiplied by the number of instant contract units affected.
Net acquisition savings means total acquisition savings, including instant, concurrent, and future contract savings, less Government costs.
Sharing base, as used in this clause, means the number of affected end items on contracts of the contracting office accepting the VECP.
Sharing period, as used in this clause, means the period beginning with acceptance of the first unit incorporating the VECP and ending at a calendar date or event determined by the contracting officer for each VECP.
Unit, as used in this clause, means the item or task to which the Contracting Officer and the Contractor agree the VECP applies.
Value engineering change proposal (VECP) means a proposal that
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
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(1) Requires a change to this, the instant contract, to implement; and
(2) Results in reducing the overall projected cost to the agency without impairing essential functions or characteristics; provided, that it does not involve a change
(i) In deliverable end item quantities only;
(ii) In research and development (R&D) end items or R&D test quantities that is due solely to results of previous testing under this contract; or
(iii) To the contract type only.
(c) VECP preparation. As a minimum, the Contractor shall include in each VECP the information described in subparagraphs (c)(1) through (8) below. If the proposed change is affected by contractually required configuration management or similar procedures, the instructions in those procedures relating to format, identification, and priority assignment shall govern VECP preparation. The VECP shall include the following:
(1) A description of the difference between the existing contract requirement and the proposed requirement, the comparative advantages and disadvantages of each, a justification when an items function or characteristics are being altered, the effect of the change on the end items performance, and any pertinent objective test data.
(2) A list and analysis of the contract requirements that must be changed if the VECP is accepted, including any suggested specification revisions.
(3) Identification of the unit to which the VECP applies.
(4) A separate, detailed cost estimate for (i) the affected portions of the existing contract requirement and (ii) the VECP. The cost reduction associated with the VECP shall take into account the Contractors allowable development and implementation costs, including any amount attributable to subcontracts under the Subcontracts paragraph of this clause, below.
(5) A description and estimate of costs the Government may incur in implementing the VECP, such as test and evaluation and operating and support costs.
(6) A prediction of any effects the proposed change would have on collateral costs to the agency.
(7) A statement of the time by which a contract modification accepting the VECP must be issued in order to achieve the maximum cost reduction, noting any effect on the contract completion time or delivery schedule.
(8) Identification of any previous submissions of the VECP, including the dates submitted, the agencies and contract numbers involved, and previous Government actions, if known.
(d) Submission. The Contractor shall submit VECPs to the Contracting Officer, unless this contract states otherwise. If this contract is administered by other than the contracting office, the Contractor shall submit a copy of the VECP simultaneously to the Contracting Officer and to the Administrative Contracting Officer.
(e) Government action. (1) The Contracting Officer will notify the Contractor of the status of the VECP within 45 calendar days after the contracting office receives it. If additional time is required, the Contracting Officer shall notify the Contractor within the 45-day period and provide the reason for the delay and the expected date of the decision. The Government will process VECPs expeditiously; however, it shall not be liable for any delay in acting upon a VECP.
(2) If the VECP is not accepted, the Contracting Officer will notify the Contractor in writing, explaining the reasons for rejection. The Contractor may withdraw any VECP, in whole or in part, at any time before it is accepted by the Government. The Contracting Officer may require that the Contractor provide written notification before undertaking significant expenditures for VECP effort.
(3) Any VECP may be accepted, in whole or in part, by the Contracting Officers award of a modification to this contract citing this clause and made either before or within a reasonable time after contract performance is completed. Until such a contract modification applies a VECP to this contract, the Contractor shall perform in accordance with the existing contract. The decision to accept or reject all or part of any VECP is a unilateral decision made solely at the discretion of the Contracting Officer.
(f) Sharing rates. If a VECP is accepted, the Contractor shall share in net acquisition savings according to the percentages shown in the table below. The percentage paid the Contractor depends upon
(1) This contracts type (fixed-price, incentive, or cost-reimbursement);
(2) The sharing arrangement specified in paragraph (a) above (incentive, program requirement, or a combination as delineated in the Schedule); and
(3) The source of the savings (the instant contract, or concurrent and future contracts), as follows:
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
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CONTRACTORS SHARE OF NET ACQUISITION SAVINGS
(Figures in percent)
Incentive (Voluntary) | Program Requirement (Mandatory) | |||||||
Contract Type |
Instant Contract Rate |
Concurrent and Future Contract Rate |
Instant Contract Rate |
Concurrent and Future Contract Rate | ||||
Fixed-price (includes fixed-price-award-fee; excludes other fixed-price incentive contracts) |
(1)50 | (1)50 | 25 | 25 | ||||
Incentive (fixed-price or cost)(other than award fee) |
(2) | (1)50 | (2) | 25 | ||||
Cost-reimbursement ([includes cost-plus-award-fee; excludes other cost-type incentive Contracts]) |
(3)25 | (3)25 | 15 | 15 |
(1) | The Contracting Officer may increase the Contractors sharing rate to as high as 75 percent for each VECP. |
(2) | Same sharing arrangement as the contracts profit or fee adjustment formula. |
(3) | The Contracting Officer may increase the Contractors sharing rate to as high as 50 percent for each VECP. |
(g) Calculating net acquisition savings. (1) Acquisition savings are realized when (i) the cost or price is reduced on the instant contract, (ii) reductions are negotiated in concurrent contracts, (iii) future contracts are awarded, or (iv) agreement is reached on a lump-sum payment for future contract savings (see subparagraph (i)(4) below). Net acquisition savings are first realized, and the Contractor shall be paid a share, when Government costs and any negative instant contract savings have been fully offset against acquisition savings.
(2) Except in incentive contracts, Government costs and any price or cost increases resulting from negative instant contract savings shall be offset against acquisition savings each time such savings are realized until they are fully offset. Then, the Contractors share is calculated by multiplying net acquisition savings by the appropriate Contractors percentage sharing rate (see paragraph (f) of this clause). Additional Contractor shares of net acquisition savings shall be paid to the Contractor at the time realized.
(3) If this is an incentive contract, recovery of Government costs on the instant contract shall be deferred and offset against concurrent and future contract savings. The Contractor shall share through the contract incentive structure in savings on the instant contract items affected. Any negative instant contract savings shall be added to the target cost or to the target price and ceiling price, and the amount shall be offset against concurrent and future contract savings.
(4) If the Government does not receive and accept all items on which it paid the Contractors share, the Contractor shall reimburse the Government for the proportionate share of these payments.
(h) Contract adjustment. The modification accepting the VECP (or a subsequent modification issued as soon as possible after any negotiations are completed) shall
(1) Reduce the contract price or estimated cost by the amount of instant contract savings, unless this is an incentive contract;
(2) When the amount of instant contract savings is negative, increase the contract price, target price and ceiling price, target cost, or estimated cost by that amount;
(3) Specify the Contractors dollar share per unit on future contracts, or provide the lump-sum payment;
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
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(4) Specify the amount of any Government costs or negative instant contract savings to be offset in determining net acquisition savings realized from concurrent or future contract savings; and
(5) Provide the Contractors share of any net acquisition savings under the instant contract in accordance with the following:
(i) Fixed-price contractsadd to contract price.
(ii) Cost-reimbursement contractsadd to contract fee.
(i) Concurrent and future contract savings.
(1) Payments of the Contractors share of concurrent and future contract savings shall be made by a modification to the instant contract in accordance with subparagraph (h)(5) above. For incentive contracts, shares shall be added as a separate firm-fixed-price line item on the instant contract. The Contractor shall maintain records adequate to identify the first delivered unit for 3 years after final payment under this contract.
(2) The Contracting Officer shall calculate the Contractors share of concurrent contract savings by
(i) Subtracting from the reduction in price negotiated on the concurrent contract any Government costs or negative instant contract savings not yet offset; and
(ii) Multiplying the result by the Contractors sharing rate.
(3) The Contracting Officer shall calculate the Contractors share of future contract savings by
(i) Multiplying the future unit cost reduction by the number of future contract units scheduled for delivery during the sharing period;
(ii) Subtracting any Government costs or negative instant contract savings not yet offset; and
(iii) Multiplying the result by the Contractors sharing rate.
(4) When the Government wishes and the Contractor agrees, the Contractors share of future contract savings may be paid in a single lump sum rather than in a series of payments over time as future contracts are awarded. Under this alternate procedure, the future contract savings may be calculated when the VECP is accepted, on the basis of the Contracting Officers forecast of the number of units that will be delivered during the sharing period. The Contractors share shall be included in a modification to this contract (see subparagraph (h)(3) above) and shall not be subject to subsequent adjustment.
(5) Alternate no-cost settlement method. When, in accordance with subsection 48.104-4 of the Federal Acquisition Regulation, the Government and the Contractor mutually agree to use the no-cost settlement method, the following applies:
(i) The Contractor will keep all the savings on the instant contract and on its concurrent contracts only.
(ii) The Government will keep all the savings resulting from concurrent contracts placed on other sources, savings from all future contracts, and all collateral savings.
(j) Collateral savings. If a VECP is accepted, the Contracting Officer will increase the instant contract amount, as specified in paragraph (h)(5) of this clause, by a rate from 20 to 100 percent, as determined by the Contracting Officer, of any projected collateral savings determined to be realized in a typical year of use after subtracting any Government costs not previously offset. However, the Contractors share of collateral savings will not exceed the contracts firm-fixed-price, target price, target cost, or estimated cost, at the time the VECP is accepted, or $100,000, whichever is greater. The Contracting Officer will be the sole determiner of the amount of collateral savings.
(k) Relationship to other incentives. Only those benefits of an accepted VECP not rewardable under performance, design-to-cost (production unit cost, operating and support costs, reliability and maintainability), or similar incentives shall be rewarded under this clause. However, the targets of such incentives affected by the VECP shall not be adjusted because of VECP acceptance. If this contract specifies targets but provides no incentive to surpass them, the value engineering sharing shall apply only to the amount of achievement better than target.
(l) Subcontracts. The Contractor shall include an appropriate value engineering clause in any subcontract of $100,000 or more and may include one in subcontracts of lesser value. In calculating any adjustment in this contracts price for instant contract savings (or negative instant contract savings), the Contractors allowable development and implementation costs shall include any subcontractors allowable development and implementation costs, and any value engineering incentive payments to a subcontractor, clearly resulting from a VECP accepted by the Government under this contract. The Contractor may choose any arrangement for subcontractor value engineering incentive payments; provided, that the payments shall not reduce the Governments share of concurrent or future contract savings or collateral savings.
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
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(m) Data. The Contractor may restrict the Governments right to use any part of a VECP or the supporting data by marking the following legend on the affected parts:
These data, furnished under the Value Engineering clause of contract N00421-11-C-0030, shall not be disclosed outside the Government or duplicated, used, or disclosed, in whole or in part, for any purpose other than to evaluate a value engineering change proposal submitted under the clause. This restriction does not limit the Governments right to use information contained in these data if it has been obtained or is otherwise available from the Contractor or from another source without limitations.
If a VECP is accepted, the Contractor hereby grants the Government unlimited rights in the VECP and supporting data, except that, with respect to data qualifying and submitted as limited rights technical data, the Government shall have the rights specified in the contract modification implementing the VECP and shall appropriately mark the data. (The terms unlimited rights and limited rights are defined in Part 27 of the Federal Acquisition Regulation.)
52.252-2 CLAUSES INCORPORATED BY REFERENCE (FEB 1998)
This contract incorporates one or more clauses by reference, with the same force and effect as if they were given in full text. Upon request, the Contracting Officer will make their full text available. Also, the full text of a clause may be accessed electronically at this/these address(es): http://www.arnet.gov/far or http://farsite.hill.af.mil.
252.204-7006 BILLING INSTRUCTIONS (OCT 2005)
When submitting a request for payment, the Contractor shall
(a) Identify the contract line item(s) on the payment request that reasonably reflect contract work performance; and
(b) Separately identify a payment amount for each contract line item included in the payment request.
252.208-7000 INTENT TO FURNISH PRECIOUS METALS AS GOVERNMENT- FURNISHED MATERIAL (DEC 1991)
(a) The Government intends to furnish precious metals required in the manufacture of items to be delivered under the contract if the Contracting Officer determines it to be in the Governments best interest. The use of Government-furnished silver is mandatory when the quantity is one hundred troy ounces or more. The precious metal(s) will be furnished pursuant to the Government Furnished Property clause of this contract.
(b) The Offeror shall cite the type (silver, gold, platinum, palladium, iridium, rhodium, and ruthenium) and quantity in whole troy ounces of precious metals required in the performance of this contract (including precious metals required for any first article or production sample), and shall specify the national stock number (NSN) and nomenclature, if known, of the deliverable item requiring precious metals.
Deliverable Item
Precious Metal* Quantity(NSN and Nomenclature)
[ ] [ ] troy ounces per Q-62E sonobuoy | 9660-00-106-9432 (Sparton) | |
[ ] [ ] troy ounces per Q-62E sonobuoy | 9660-00-106-9432 (USSI) | |
[ ] [ ] troy ounces per Q-36B sonobuoy | 9660-00-106-9432 (Sparton) |
* | If platinum or palladium, specify whether sponge or granules are required. |
(c) Offerors shall submit two prices for each deliverable item which contains precious metalsone based on the Government furnishing precious metals, and one based on the Contractor furnishing precious metals. Award will be made on the basis which is in the best interest of the Government.
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
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(d) The Contractor agrees to insert this clause, including this paragraph (d), in solicitations for subcontracts and purchase orders issued in performance of this contract, unless the Contractor knows that the item being purchased contains no precious metals.
252.227-7013 RIGHTS IN TECHNICAL DATANONCOMMERCIAL ITEMS (NOV 1995)
(a) Definitions. As used in this clause:
(1) Computer data base means a collection of data recorded in a form capable of being processed by a computer. The term does not include computer software.
(2) Computer program means a set of instructions, rules, or routines recorded in a form that is capable of causing a computer to perform a specific operation or series of operations.
(3) Computer software means computer programs, source code, source code listings, object code listings, design details, algorithms, processes, flow charts, formulae and related material that would enable the software to be reproduced, recreated, or recompiled. Computer software does not include computer data bases or computer software documentation.
(4) Computer software documentation means owners manuals, users manuals, installation instructions, operating instructions, and other similar items, regardless of storage medium, that explain the capabilities of the computer software or provide instructions for using the software.
(5) Detailed manufacturing or process data means technical data that describe the steps, sequences, and conditions of manufacturing, processing or assembly used by the manufacturer to produce an item or component or to perform a process.
(6) Developed means that an item, component, or process exists and is workable. Thus, the item or component must have been constructed or the process practiced. Workability is generally established when the item, component, or process has been analyzed or tested sufficiently to demonstrate to reasonable people skilled in the applicable art that there is a high probability that it will operate as intended. Whether, how much, and what type of analysis or testing is required to establish workability depends on the nature of the item, component, or process, and the state of the art. To be considered developed, the item, component, or process need not be at the stage where it could be offered for sale or sold on the commercial market, nor must the item, component, or process be actually reduced to practice within the meaning of Title 35 of the United States Code.
(7) Developed exclusively at private expense means development was accomplished entirely with costs charged to indirect cost pools, costs not allocated to a government contract, or any combination thereof.
(i) Private expense determinations should be made at the lowest practicable level.
(ii) Under fixed-price contracts, when total costs are greater than the firm-fixed-price or ceiling price of the contract, the additional development costs necessary to complete development shall not be considered when determining whether development was at government, private, or mixed expense.
(8) Developed exclusively with government funds means development was not accomplished exclusively or partially at private expense.
(9) Developed with mixed funding means development was accomplished partially with costs charged to indirect cost pools and/or costs not allocated to a government contract, and partially with costs charged directly to a government contract.
(10) Form, fit, and function data means technical data that describes the required overall physical, functional, and performance characteristics (along with the qualification requirements, if applicable) of an item, component, or process to the extent necessary to permit identification of physically and functionally interchangeable items.
(11) Government purpose means any activity in which the United States Government is a party, including cooperative agreements with international or multi-national defense organizations, or sales or transfers by the United States Government to foreign governments or international organizations. Government purposes include competitive procurement, but do not include the rights to use, modify, reproduce, release, perform, display, or disclose technical data for commercial purposes or authorize others to do so.
(12) Government purpose rights means the rights to
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
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(i) Use, modify, reproduce, release, perform, display, or disclose technical data within the Government without restriction; and
(ii) Release or disclose technical data outside the Government and authorize persons to whom release or disclosure has been made to use, modify, reproduce, release, perform, display, or disclose that data for United States government purposes.
(13) Limited rights means the rights to use, modify, reproduce, release, perform, display, or disclose technical data, in whole or in part, within the Government. The Government may not, without the written permission of the party asserting limited rights, release or disclose the technical data outside the Government, use the technical data for manufacture, or authorize the technical data to be used by another party, except that the Government may reproduce, release or disclose such data or authorize the use or reproduction of the data by persons outside the Government if reproduction, release, disclosure, or use is
(i) Necessary for emergency repair and overhaul; or
(ii) A release or disclosure of technical data (other than detailed manufacturing or process data) to, or use of such data by, a foreign government that is in the interest of the Government and is required for evaluational or informational purposes;
(iii) Subject to a prohibition on the further reproduction, release, disclosure, or use of the technical data; and
(iv) The contractor or subcontractor asserting the restriction is notified of such reproduction, release, disclosure, or use.
(14) Technical data means recorded information, regardless of the form or method of the recording, of a scientific or technical nature (including computer software documentation). The term does not include computer software or data incidental to contract administration, such as financial and/or management information.
(15) Unlimited rights means rights to use, modify, reproduce, perform, display, release, or disclose technical data in whole or in part, in any manner, and for any purpose whatsoever, and to have or authorize others to do so.
(b) Rights in technical data. The Contractor grants or shall obtain for the Government the following royalty free, world-wide, nonexclusive, irrevocable license rights in technical data other than computer software documentation (see the Rights in Noncommercial Computer Software and Noncommercial Computer Software Documentation clause of this contract for rights in computer software documentation):
(1) Unlimited rights. The Government shall have unlimited rights in technical data that are
(i) Data pertaining to an item, component, or process which has been or will be developed exclusively with Government funds;
(ii) Studies, analyses, test data, or similar data produced for this contract, when the study, analysis, test, or similar work was specified as an element of performance;
(iii) Created exclusively with Government funds in the performance of a contract that does not require the development, manufacture, construction, or production of items, components, or processes;
(iv) Form, fit, and function data;
(v) Necessary for installation, operation, maintenance, or training purposes (other than detailed manufacturing or process data);
(vi) Corrections or changes to technical data furnished to the Contractor by the Government;
(vii) Otherwise publicly available or have been released or disclosed by the Contractor or subcontractor without restrictions on further use, release or disclosure, other than a release or disclosure resulting from the sale, transfer, or other assignment of interest in the technical data to another party or the sale or transfer of some or all of a business entity or its assets to another party;
(viii) Data in which the Government has obtained unlimited rights under another Government contract or as a result of negotiations; or
(ix) Data furnished to the Government, under this or any other Government contract or subcontract there under, with
(A) Government purpose license rights or limited rights and the restrictive condition(s) has/have expired; or
(B) Government purpose rights and the Contractors exclusive right to use such data for commercial purposes has expired.
(2) Government purpose rights.
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
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(i) The Government shall have government purpose rights for a five-year period, or such other period as may be negotiated, in technical data
(A) That pertain to items, components, or processes developed with mixed funding except when the Government is entitled to unlimited rights in such data as provided in paragraphs (b)(ii) and (b)(iv) through (b)(ix) of this clause; or
(B) Created with mixed funding in the performance of a contract that does not require the development, manufacture, construction, or production of items, components, or processes.
(ii) The five-year period, or such other period as may have been negotiated, shall commence upon execution of the contract, subcontract, letter contract (or similar contractual instrument), contract modification, or option exercise that required development of the items, components, or processes or creation of the data described in paragraph (b)(2)(i)(B) of this clause. Upon expiration of the five-year or other negotiated period, the Government shall have unlimited rights in the technical data.
(iii) The Government shall not release or disclose technical data in which it has government purpose rights unless
(A) Prior to release or disclosure, the intended recipient is subject to the non-disclosure agreement at 227.7103-7 of the Defense Federal Acquisition Regulation Supplement (DFARS); or
(B) The recipient is a Government contractor receiving access to the data for performance of a Government contract that contains the clause at DFARS 252.227-7025, Limitations on the Use or Disclosure of Government-Furnished Information Marked with Restrictive Legends.
(iv) The Contractor has the exclusive right, including the right to license others, to use technical data in which the Government has obtained government purpose rights under this contract for any commercial purpose during the time period specified in the government purpose rights legend prescribed in paragraph (f)(2) of this clause.
(3) Limited rights.
(i) Except as provided in paragraphs (b)(1)(ii) and (b)(1)(iv) through (b)(1)(ix) of this clause, the Government shall have limited rights in technical data
(A) Pertaining to items, components, or processes developed exclusively at private expense and marked with the limited rights legend prescribed in paragraph (f) of this clause; or
(B) Created exclusively at private expense in the performance of a contract that does not require the development, manufacture, construction, or production of items, components, or processes.
(ii) The Government shall require a recipient of limited rights data for emergency repair or overhaul to destroy the data and all copies in its possession promptly following completion of the emergency repair/overhaul and to notify the Contractor that the data have been destroyed.
(iii) The Contractor, its subcontractors, and suppliers are not required to provide the Government additional rights to use, modify, reproduce, release, perform, display, or disclose technical data furnished to the Government with limited rights. However, if the Government desires to obtain additional rights in technical data in which it has limited rights, the Contractor agrees to promptly enter into negotiations with the Contracting Officer to determine whether there are acceptable terms for transferring such rights. All technical data in which the Contractor has granted the Government additional rights shall be listed or described in a license agreement made part of the contract. The license shall enumerate the additional rights granted the Government in such data.
(4) Specifically negotiated license rights. The standard license rights granted to the Government under paragraphs (b)(1) through (b)(3) of this clause, including the period during which the Government shall have government purpose rights in technical data, may be modified by mutual agreement to provide such rights as the parties consider appropriate but shall not provide the Government lesser rights than are enumerated in paragraph (a)(13) of this clause. Any rights so negotiated shall be identified in a license agreement made part of this contract.
(5) Prior government rights. Technical data that will be delivered, furnished, or otherwise provided to the Government under this contract, in which the Government has previously obtained rights shall be delivered, furnished, or provided with the pre-existing rights, unless
(i) The parties have agreed otherwise; or
(ii) Any restrictions on the Governments rights to use, modify, reproduce, release, perform, display, or disclose the data have expired or no longer apply.
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
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(6) Release from liability. The Contractor agrees to release the Government from liability for any release or disclosure of technical data made in accordance with paragraph (a)(13) or (b)(2)(iii) of this clause, in accordance with the terms of a license negotiated under paragraph (b)(4) of this clause, or by others to whom the recipient has released or disclosed the data and to seek relief solely from the party who has improperly used, modified, reproduced, released, performed, displayed, or disclosed Contractor data marked with restrictive legends.
(c) Contractor rights in technical data. All rights not granted to the Government are retained by the Contractor.
(d) Third party copyrighted data. The Contractor shall not, without the written approval of the Contracting Officer, incorporate any copyrighted data in the technical data to be delivered under this contract unless the Contractor is the copyright owner or has obtained for the Government the license rights necessary to perfect a license or licenses in the deliverable data of the appropriate scope set forth in paragraph (b) of this clause, and has affixed a statement of the license or licenses obtained on behalf of the Government and other persons to the data transmittal document.
(e) Identification and delivery of data to be furnished with restrictions on use, release, or disclosure.
(1) This paragraph does not apply to restrictions based solely on copyright.
(2) Except as provided in paragraph (e)(3) of this clause, technical data that the Contractor asserts should be furnished to the Government with restrictions on use, release, or disclosure are identified in an attachment to this contract (the Attachment). The Contractor shall not deliver any data with restrictive markings unless the data are listed on the Attachment.
(3) In addition to the assertions made in the Attachment, other assertions may be identified after award when based on new information or inadvertent omissions unless the inadvertent omissions would have materially affected the source selection decision. Such identification and assertion shall be submitted to the Contracting Officer as soon as practicable prior to the scheduled date for delivery of the data, in the following format, and signed by an official authorized to contractually obligate the Contractor:
Identification and Assertion of Restrictions on
the Governments Use, Release, or Disclosure of Technical Data.
The Contractor asserts for itself, or the persons identified below, that the Governments rights to use, release, or disclose the following technical data should be restricted
Technical data to be furnished with restrictions |
Basis for assertion |
Asserted rights category |
Name of person asserting restrictions | |||
(LIST) |
(LIST) |
(LIST) |
(LIST)..... | |||
(1)Design Data under CDRL A001 | (2)Developed with company funds | (3)Limited until 16 April 2014 and then unrestricted | (4)Mark Belyea for ERAPSCO | |||
Any software code submitted under CDRL A00F | Developed under a Government contract | Government Purpose | Mark Belyea for ERAPSCO |
(1) | If the assertion is applicable to items, components or processes developed at private expense, identify both the data and each such item, component, or process. |
(2) | Generally, the development of an item, component, or process at private expense, either exclusively or partially, is the only basis for asserting restrictions on the Governments rights to use, release, or disclose technical data pertaining to such items, components, or processes. Indicate whether development was exclusively or partially at private expense. If development was not at private expense, enter the specific reason for asserting that the Governments rights should be restricted. |
(3) | Enter asserted rights category (e.g., government purpose license rights from a prior contract, rights in SBIR data generated under another contract, limited or government purpose rights under this or a prior contract, or specifically negotiated licenses). |
(4) | Corporation, individual, or other person, as appropriate. |
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
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Date |
Printed Name and Title |
Signature |
(End of identification and assertion)
(4) When requested by the Contracting Officer, the Contractor shall provide sufficient information to enable the Contracting Officer to evaluate the Contractors assertions. The Contracting Officer reserves the right to add the Contractors assertions to the Attachment and validate any listed assertion, at a later date, in accordance with the procedures of the Validation of Restrictive Markings on Technical Data clause of this contract.
(f) Marking requirements. The Contractor, and its subcontractors or suppliers, may only assert restrictions on the Governments rights to use, modify, reproduce, release, perform, display, or disclose technical data to be delivered under this contract by marking the deliverable data subject to restriction. Except as provided in paragraph (f)(5) of this clause, only the following legends are authorized under this contract: the government purpose rights legend at paragraph (f)(2) of this clause; the limited rights legend at paragraph (f)(3) of this clause; or the special license rights legend at paragraph (f)(4) of this clause; and/or a notice of copyright as prescribed under 17 U.S.C. 401 or 402.
(1) General marking instructions. The Contractor, or its subcontractors or suppliers, shall conspicuously and legibly mark the appropriate legend on all technical data that qualify for such markings. The authorized legends shall be placed on the transmittal document or storage container and, for printed material, each page of the printed material containing technical data for which restrictions are asserted. When only portions of a page of printed material are subject to the asserted restrictions, such portions shall be identified by circling, underscoring, with a note, or other appropriate identifier. Technical data transmitted directly from one computer or computer terminal to another shall contain a notice of asserted restrictions. Reproductions of technical data or any portions thereof subject to asserted restrictions shall also reproduce the asserted restrictions.
(2) Government purpose rights markings. Data delivered or otherwise furnished to the Government purpose rights shall be marked as follows:
GOVERNMENT PURPOSE RIGHTS
Contract No.
Contractor Name
Contractor Address
Expiration Date
The Governments rights to use, modify, reproduce, release, perform, display, or disclose these technical data are restricted by paragraph (b)(2) of the Rights in Technical DataNoncommercial Items clause contained in the above identified contract. No restrictions apply after the expiration date shown above. Any reproduction of technical data or portions thereof marked with this legend must also reproduce the markings.
(End of legend)
(3) Limited rights markings. Data delivered or otherwise furnished to the Government with limited rights shall be marked with the following legend:
Limited Rights
Contract No.
Contractor Name
Contractor Address
The Governments rights to use, modify, reproduce, release, perform, display, or disclose these technical data are restricted by paragraph (b)(3) of the Rights in Technical DataNoncommercial Items clause contained in the above identified contract. Any reproduction of technical data or portions thereof marked with this legend must also reproduce the markings. Any person, other than the Government, who has been provided access to such data must promptly notify the above named Contractor.
(End of legend)
(4) Special license rights markings.
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
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(i) Data in which the Governments rights stem from a specifically negotiated license shall be marked with the following legend:
SPECIAL LICENSE RIGHTS
The Governments rights to use, modify, reproduce, release, perform, display, or disclose these data are restricted by Contract No. (Insert contract number) , License No. (Insert license identifier) . Any reproduction of technical data or portions thereof marked with this legend must also reproduce the markings.
(End of legend)
(ii) For purposes of this clause, special licenses do not include government purpose license rights acquired under a prior contract (see paragraph (b)(5) of this clause).
(5) Pre-existing data markings. If the terms of a prior contract or license permitted the Contractor to restrict the Governments rights to use, modify, reproduce, release, perform, display, or disclose technical data deliverable under this contract, and those restrictions are still applicable, the Contractor may mark such data with the appropriate restrictive legend for which the data qualified under the prior contract or license. The marking procedures in paragraph (f)(1) of this clause shall be followed.
(g) Contractor procedures and records. Throughout performance of this contract, the Contractor and its subcontractors or suppliers that will deliver technical data with other than unlimited rights, shall
(1) Have, maintain, and follow written procedures sufficient to assure that restrictive markings are used only when authorized by the terms of this clause; and
(2) Maintain records sufficient to justify the validity of any restrictive markings on technical data delivered under this contract.
(h) Removal of unjustified and nonconforming markings.
(1) Unjustified technical data markings. The rights and obligations of the parties regarding the validation of restrictive markings on technical data furnished or to be furnished under this contract are contained in the Validation of Restrictive Markings on Technical Data clause of this contract. Notwithstanding any provision of this contract concerning inspection and acceptance, the Government may ignore or, at the Contractors expense, correct or strike a marking if, in accordance with the procedures in the Validation of Restrictive Markings on Technical Data clause of this contract, a restrictive marking is determined to be unjustified.
(2) Nonconforming technical data markings. A nonconforming marking is a marking placed on technical data delivered or otherwise furnished to the Government under this contract that is not in the format authorized by this contract. Correction of nonconforming markings is not subject to the Validation of Restrictive Markings on Technical Data clause of this contract. If the Contracting Officer notifies the Contractor of a nonconforming marking and the Contractor fails to remove or correct such marking within sixty (60) days, the Government may ignore or, at the Contractors expense, remove or correct any nonconforming marking.
(i) Relation to patents. Nothing contained in this clause shall imply a license to the Government under any patent or be construed as affecting the scope of any license or other right otherwise granted to the Government under any patent.
(j) Limitation on charges for rights in technical data.
(1) The Contractor shall not charge to this contract any cost, including, but not limited to, license fees, royalties, or similar charges, for rights in technical data to be delivered under this contract when
(i) The Government has acquired, by any means, the same or greater rights in the data; or
(ii) The data are available to the public without restrictions.
(2) The limitation in paragraph (j)(1) of this clause
(i) Includes costs charged by a subcontractor or supplier, at any tier, or costs incurred by the Contractor to acquire rights in subcontractor or supplier technical data, if the subcontractor or supplier has been paid for such rights under any other Government contract or under a license conveying the rights to the Government; and
(ii) Does not include the reasonable costs of reproducing, handling, or mailing the documents or other media in which the technical data will be delivered.
(k) Applicability to subcontractors or suppliers.
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
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(1) The Contractor shall ensure that the rights afforded its subcontractors and suppliers under 10 U.S.C. 2320, 10 U.S.C. 2321, and the identification, assertion, and delivery processes of paragraph (e) of this clause are recognized and protected.
(2) Whenever any technical data for noncommercial items is to be obtained from a subcontractor or supplier for delivery to the Government under this contract, the Contractor shall use this same clause in the subcontract or other contractual instrument, and require its subcontractors or suppliers to do so, without alteration, except to identify the parties. No other clause shall be used to enlarge or diminish the Governments, the Contractors, or a higher-tier subcontractors or suppliers rights in a subcontractors or suppliers technical data.
(3) Technical data required to be delivered by a subcontractor or supplier shall normally be delivered to the next higher-tier contractor, subcontractor, or supplier. However, when there is a requirement in the prime contract for data which may be submitted with other than unlimited rights by a subcontractor or supplier, then said subcontractor or supplier may fulfill its requirement by submitting such data directly to the Government, rather than through a higher-tier contractor, subcontractor, or supplier.
(4) The Contractor and higher-tier subcontractors or suppliers shall not use their power to award contracts as economic leverage to obtain rights in technical data from their subcontractors or suppliers.
(5) In no event shall the Contractor use its obligation to recognize and protect subcontractor or supplier rights in technical data as an excuse for failing to satisfy its contractual obligations to the Government.
252.227-7028TECHNICAL DATA OR COMPUTER SOFTWARE PREVIOUSLY DELIVERED TO THE GOVERNMENT (JUN 1995)
The Offeror shall attach to its offer an identification of all documents or other media incorporating technical data or computer software it intends to deliver under this contract with other than unlimited rights that are identical or substantially similar to documents or other media that the Offeror has produced for, delivered to, or is obligated to deliver to the Government under any contract or subcontract. The attachment shall identify
(a) The contract number under which the data or software were produced;
(b) The contract number under which, and the name and address of the organization to whom, the data or software were most recently delivered or will be delivered; and
(c) Any limitations on the Governments rights to use or disclose the data or software, including, when applicable, identification of the earliest date the limitations expire.
252.227-7037 VALIDATION OF RESTRICTIVE MARKINGS ON TECHNICAL DATA (SEP 1999)
(a) Definitions. The terms used in this clause are defined in the Rights in Technical DataNoncommercial Items clause of this contract.
(b) Contracts for commercial itemspresumption of development at private expense. Under a contract for a commercial item, component, or process, the Department of Defense shall presume that a Contractors asserted use or release restrictions are justified on the basis that the item, component, or process was developed exclusively at private expense. The Department shall not challenge such assertions unless information the Department provides demonstrates that the item, component, or process was not developed exclusively at private expense.
(c) Justification. The Contractor or subcontractor at any tier is responsible for maintaining records sufficient to justify the validity of its markings that impose restrictions on the Government and others to use, duplicate, or disclose technical data delivered or required to be delivered under the contract or subcontract. Except under contracts for commercial items, the Contractor or subcontractor shall be prepared to furnish to the Contracting Officer a written justification for such restrictive markings in response to a challenge under paragraph (e) of this clause.
(d) Prechallenge request for information.
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
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(1) The Contracting Officer may request the Contractor or subcontractor to furnish a written explanation for any restriction asserted by the Contractor or subcontractor on the right of the United States or others to use technical data. If, upon review of the explanation submitted, the Contracting Officer remains unable to ascertain the basis of the restrictive marking, the Contracting Officer may further request the Contractor or subcontractor to furnish additional information in the records of, or otherwise in the possession of or reasonably available to, the Contractor or subcontractor to justify the validity of any restrictive marking on technical data delivered or to be delivered under the contract or subcontract (e.g., a statement of facts accompanied with supporting documentation). The Contractor or subcontractor shall submit such written data as requested by the Contracting Officer within the time required or such longer period as may be mutually agreed.
(2) If the Contracting Officer, after reviewing the written data furnished pursuant to paragraph (d)(1) of this clause, or any other available information pertaining to the validity of a restrictive marking, determines that reasonable grounds exist to question the current validity of the marking and that continued adherence to the marking would make impracticable the subsequent competitive acquisition of the item, component, or process to which the technical data relates, the Contracting Officer shall follow the procedures in paragraph (e) of this clause.
(3) If the Contractor or subcontractor fails to respond to the Contracting Officers request for information under paragraph (d)(1) of this clause, and the Contracting Officer determines that continued adherence to the marking would make impracticable the subsequent competitive acquisition of the item, component, or process to which the technical data relates, the Contracting Officer may challenge the validity of the marking as described in paragraph (e) of this clause.
(e) Challenge.
(1) Notwithstanding any provision of this contract concerning inspection and acceptance, if the Contracting Officer determines that a challenge to the restrictive marking is warranted, the Contracting Officer shall send a written challenge notice to the Contractor or subcontractor asserting the restrictive markings. Such challenge shall
(i) State the specific grounds for challenging the asserted restriction;
(ii) Require a response within sixty (60) days justifying and providing sufficient evidence as to the current validity of the asserted restriction;
(iii) State that a DoD Contracting Officers final decision, issued pursuant to paragraph (g) of this clause, sustaining the validity of a restrictive marking identical to the asserted restriction, within the three-year period preceding the challenge, shall serve as justification for the asserted restriction if the validated restriction was asserted by the same Contractor or subcontractor (or any licensee of such Contractor or subcontractor) to which such notice is being provided; and
(iv) State that failure to respond to the challenge notice may result in issuance of a final decision pursuant to paragraph (f) of this clause.
(2) The Contracting Officer shall extend the time for response as appropriate if the Contractor or subcontractor submits a written request showing the need for additional time to prepare a response.
(3) The Contractors or subcontractors written response shall be considered a claim within the meaning of the Contract Disputes Act of 1978 (41 U.S.C. 601, et seq.), and shall be certified in the form prescribed at 33.207 of the Federal Acquisition Regulation, regardless of dollar amount.
(4) A Contractor or subcontractor receiving challenges to the same restrictive markings from more than one Contracting Officer shall notify each Contracting Officer of the existence of more than one challenge. The notice shall also state which Contracting Officer initiated the first in time unanswered challenge. The Contracting Officer initiating the first in time unanswered challenge after consultation with the Contractor or subcontractor and the other Contracting Officers, shall formulate and distribute a schedule for responding to each of the challenge notices to all interested parties. The schedule shall afford the Contractor or subcontractor an opportunity to respond to each challenge notice. All parties will be bound by this schedule.
(f) Final decision when Contractor or subcontractor fails to respond. Upon a failure of a Contractor or subcontractor to submit any response to the challenge notice, other than a failure to respond under a contract for commercial items, the Contracting Officer will issue a final decision to the Contractor or subcontractor in accordance with the Disputes clause of this contract pertaining to the validity of the asserted restriction. This final decision shall be issued as soon as possible after the expiration of the time period of paragraph (e)(1)(ii) or (e)(2) of
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
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this clause. Following issuance of the final decision, the Contracting Officer will comply with the procedures in paragraphs (g)(2) (ii) through (iv) of this clause.
(g) Final decision when Contractor or subcontractor responds.
(1) if the Contracting Officer determines that the Contractor or subcontractor has justified the validity of the restrictive marking, the Contracting Officer shall issue a final decision to the Contractor or subcontractor sustaining the validity of the restrictive marking, and stating that the Government will continue to be bound by the restrictive marking. This final decision shall be issued within sixty (60) days after receipt of the Contractors or subcontractors response to the challenge notice, or within such longer period that the Contracting Officer has notified the Contractor or subcontractor that the Government will require. The notification of a longer period for issuance of a final decision will be made within sixty (60) days after receipt of the response to the challenge notice.
(2)(i) If the Contracting Officer determines that the validity of the restrictive marking is not justified, the Contracting Officer shall issue a final decision to the Contractor or subcontractor in accordance with the Disputes clause of this contract. Notwithstanding paragraph (e) of the Disputes clause, the final decision shall be issued within sixty (60) days after receipt of the Contractors or subcontractors response to the challenge notice, or within such longer period that the Contracting Officer has notified the Contractor or subcontractor of the longer period that the Government will require. The notification of a longer period for issuance of a final decision will be made within sixty (60) days after receipt of the response to the challenge notice.
(ii) The Government agrees that it will continue to be bound by the restrictive marking of a period of ninety (90) days from the issuance of the Contracting Officers final decision under paragraph (g)(2)(i) of this clause. The Contractor or subcontractor agrees that, if it intends to file suit in the United States Claims Court it will provide a notice of intent to file suit to the Contracting Officer within ninety (90) days from the issuance of the Contracting Officers final decision under paragraph (g)(2)(i) of this clause. If the Contractor or subcontractor fails to appeal, file suit, or provide a notice of intent to file suit to the Contracting Officer within the ninety (90)-day period, the Government may cancel or ignore the restrictive markings, and the failure of the Contractor or subcontractor to take the required action constitutes agreement with such Government action.
(iii) The Government agrees that it will continue to be bound by the restrictive marking where a notice of intent to file suit in the United States Claims Court is provided to the Contracting Officer within ninety (90) days from the issuance of the final decision under paragraph (g)(2)(i) of this clause. The Government will no longer be bound, and the Contractor or subcontractor agrees that the Government may strike or ignore the restrictive markings, if the Contractor or subcontractor fails to file its suit within one (1) year after issuance of the final decision. Notwithstanding the foregoing, where the head of an agency determines, on a nondelegable basis, that urgent or compelling circumstances will not permit waiting for the filing of a suit in the United States Claims Court, the Contractor or subcontractor agrees that the agency may, following notice to the Contractor or subcontractor, authorize release or disclosure of the technical data. Such agency determination may be made at any time after issuance of the final decision and will not affect the Contractors or subcontractors right to damages against the United States where its restrictive markings are ultimately upheld or to pursue other relief, if any, as may be provided by law.
(iv) The Government agrees that it will be bound by the restrictive marking where an appeal or suit is filed pursuant to the Contract Disputes Act until final disposition by an agency Board of Contract Appeals or the United States Claims Court. Notwithstanding the foregoing, where the head of an agency determines, on a nondelegable basis, following notice to the Contractor that urgent or compelling circumstances will not permit awaiting the decision by such Board of Contract Appeals or the United States Claims Court, the Contractor or subcontractor agrees that the agency may authorize release or disclosure of the technical data. Such agency determination may be made at any time after issuance of the final decision and will not affect the Contractors or subcontractors right to damages against the United States where its restrictive markings are ultimately upheld or to pursue other relief, if any, as may be provided by law.
(h) Final disposition of appeal or suit.
(1) If the Contractor or subcontractor appeals or files suit and if, upon final disposition of the appeal or suit, the Contracting Officers decision is sustained
(i) The restrictive marking on the technical data shall be cancelled, corrected or ignored; and
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
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(ii) If the restrictive marking is found not to be substantially justified, the Contractor or subcontractor, as appropriate, shall be liable to the Government for payment of the cost to the Government of reviewing the restrictive marking and the fees and other expenses (as defined in 28 U.S.C. 2412(d)(2)(A)) incurred by the Government in challenging the marking, unless special circumstances would make such payment unjust.
(2) If the Contractor or subcontractor appeals or files suit and if, upon final disposition of the appeal or suit, the Contracting Officers decision is not sustained
(i) The Government shall continue to be bound by the restrictive marking; and
(ii) The Government shall be liable to the Contractor or subcontractor for payment of fees and other expenses (as defined in 28 U.S.C. 2412(d)(2)(A)) incurred by the Contractor or subcontractor in defending the marking, if the challenge by the Government is found not to have been made in good faith.
(i) Duration of right to challenge. The Government may review the validity of any restriction on technical data, delivered or to be delivered under a contract, asserted by the Contractor or subcontractor. During the period within three (3) years of final payment on a contract or within three (3) years of delivery of the technical data to the Government, whichever is later, the Contracting Officer may review and make a written determination to challenge the restriction. The Government may, however, challenge a restriction on the release, disclosure or use of technical data at any time if such technical data
(1) Is publicly available;
(2) Has been furnished to the United States without restriction; or
(3) Has been otherwise made available without restriction. Only the Contracting Officers final decision resolving a formal challenge by sustaining the validity of a restrictive marking constitutes validation as addressed in 10 U.S.C. 2321.
(j) Decision not to challenge. A decision by the Government, or a determination by the Contracting Officer, to not challenge the restrictive marking or asserted restriction shall not constitute validation.
(k) Privity of contract. The Contractor or subcontractor agrees that the Contracting Officer may transact matters under this clause directly with subcontractors at any tier that assert restrictive markings. However, this clause neither creates nor implies privity of contract between the Government and subcontractors.
(l) Flowdown. The Contractor or subcontractor agrees to insert this clause in contractual instruments with its subcontractors or suppliers at any tier requiring the delivery of technical data, except contractual instruments for commercial items or commercial components.
5252.223-9001 NOTICE TO OFFERORSUSE OF OZONE DEPLETING SUBSTANCES (AUG 1993)
(a) In accordance with section 326 of Pub L.102-484, the Department of Defense is prohibited from awarding any contract which includes a DoD-directed specification or standard that requires the use of a Class I ozone depleting substance (ODS) or that can be met only through the use of such a substance unless such use has been approved by a senior acquisition official (SAO). The SAO approval is based on a technical certification that no suitable substitute for the ODS is currently available.
(b) To comply with this statute, the Navy has screened the specifications and standards associated with this solicitation. To the extent that ODS requirements were revealed by this review they are identified below:
Class I ODS Identified |
Specification/Standard | |
Including, but not limited to, chlorofluorocarbons, halons, carbon tetrachloride, and methyl chloroform; or |
The contractor shall label products which contain or are manufactured with ozone-depleting substances in the manner and to the extend required by 42 U.S.C. 7671j(b),(c), and (d) and 40 CFR Part 82, Subpart E as follows: |
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
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Class II ODS Identified Including but not limited to hydro chlorofluorocarbons |
WARNING: Contains (or manufactured with, if applicable), a substance(s) which harm(s) public health and environment by destroying ozone in the upper atmosphere |
(c) If offerors possess knowledge about any other Class I ODS required directly or indirectly by the specification or standards, the Navy would appreciate such information in your response to this solicitation. Offerors are under no obligation to comply with this request and no compensation can be provided for doing so.
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
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Section J - List of Documents, Exhibits and Other Attachments
EXHIBITS AND ATTACHMENTS
Exhibit A Contract Data Requirements List (CDRL):
CDRL |
Description | |
A001 | Design Data and Calculations | |
A002 | Test Plan | |
A003 | Test/Inspection Report | |
A004 | Failure Analysis and Corrective Action Report | |
A005 | Engineering Change Proposal | |
A006 | Request for Deviation | |
A007 | Request for Waiver | |
A008 | Quality System Plan | |
A009 | Photographic Requirements | |
A00A | Bar Code Identification Report | |
A00B | Test Scheduling Report (90 Day Forecast) | |
A00C | Scientific/Technical Report (Deviation Summary) | |
A00D | Status Report (Monthly Status Report) | |
A00E | Production Status Report (IBP PP Questionnaire) | |
A00F | Test/Inspection Report (Q-53F Calibration data) | |
A00G | Operations Security (OPSEC) Plan |
Attachments: | ||
1 |
Production Sonobuoy Specification (PSS) for Bathythermograph Transmitting Set AN/SSQ-36B and Sonobuoys AN/SSQ-53F, 62E, 77C and 101A Oct 2008 (Revised 17 Mar 2011 REV A, CHG 1 | |
2 |
PSS Appendix A Launcher Container, A Size Sonobuoy LAU-126/A A Size Sonobuoy Launcher Container (SLC) Rev. A, Change 0 dated 14 August 2009 | |
3 |
PSS Appendix B Sonobuoy Decelerator Effective Drag Area, Ballistic Coefficient and Parachute Construction Requirements dated 1 October 2008 | |
4 |
PSS Appendix C Production Sonobuoy Program Marking Requirements dated 3 Mar 2011, REV B, CHG0 | |
5 |
PSS Appendix D Product Assurance Requirements for Sonobuoy Procurements dated 3 Mar 2011 REV A, CHG1 | |
6 |
PSS Appendix E Requirements for the Sonobuoy Command Function Selection System Rev. A, Change 0 dated 14 August 2009 | |
7 |
PSS Appendix F Hazards of Electromagnetic Radiation to Ordnance (HERO) Certification Requirements for Production and Development Sonobuoys dated 1 October 2008 | |
8 |
PSS Appendix G Pallet Loading Requirements dated 1 October 2008 | |
9 |
PSS Appendix H Sonobuoy Requirements for the Control of Radiated Electromagnetic Interference (EMI) Rev. A, Change 0 dated 14 August 2009 | |
10 |
Contract Security Classification Specification (DD Form 254) | |
11 |
Standard Operating Procedure for Laboratory & Ocean Testing of Sonobuoys, SLCs and Associated Packaging (4.5.14-SOP-004 REV E, CHG 0) dated 1 October 2008 | |
12 |
Open Ocean Test Defect Criteria (4.5.14-SOP-005 REV A, CHG 2) dated 1 September 2009 | |
13 |
Reserved | |
14 |
Reserved | |
15 |
GPS Sonobuoy Requirement for Analog VHF Uplink Rev. C dated 25 September 2006 | |
16 |
Reserved |
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
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17 | Air Antisubmarine Warfare (ASW) Configuration Management Plan (PMA264-CMP REV-, CHG 0) dated July 2009 | |
18 | Subcontracting Plan (USSI) | |
19 | Subcontracting Plan (Sparton) | |
20 | COR Appointment Letter (Kimble) | |
21 | COR Appointment Letter (Perry) |
Drawings and Data Lists: |
Description | |
NAVSEA Drawing 7375874 No Rev. |
Base, Bayonet | |
NAVAIR Drawing 1458AS202 Rev. C |
Container assembly, sonobuoy, unsealed, CNU/239E | |
NAVAIR DL 1458AS202 No Rev. |
Data List for Drawing 1458AS202 | |
NAVSEA DL 7375860 No Rev. |
Data List 36 and 48 Unit Pallet Assembly | |
NAVSEA Drawings 7375861 7375876 No. Rev. |
36 and 48 Unit Pallet Assembly | |
NAVAIR Drawing 3065AS100 Rev. A |
A Size Store Launch Container | |
ASTM D3953 |
Standard Specification for Strapping, Flat Steel and Seals |
DIDs may be accessed electronically at the following website:
http://assist.daps.dla.mil/quicksearch/
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
Exhibit 10.13
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
AMENDMENT OF SOLICITATION/MODIFICATION OF CONTRACT | 1. CONTRACT ID CODE | PAGE OF PAGES | ||||
J |
1 | 10 |
2. AMENDMENT/MODIFICATION NO. |
3. EFFECTIVE DATE | 4. REQUISITION/PURCHASE REQ. NO. | 5. PROJECT NO. (If applicable) | |||||||
P00001 |
05-May-2011 | SEE SCHEDULE | ||||||||
6. ISSUED BY | CODE | N00421 | 7. ADMINISTERED BY (If other than item 6) | CODE | S3605A | |||||
DCMA DAYTON | ||||||||||
NAVAL AIR WARFARE CENTER AD (PAX) | AREA C, BUILDING 30 | |||||||||
CODE 2.5.1.9 - BLDG 441 | 1725 VAN PATTON DRIVE | |||||||||
21983 BUNDY RD | WRIGHT-PATTERSON AFB OH 45433-5302 | |||||||||
PATUXENT RIVER MD 20670 | ||||||||||
8. NAME AND ADDRESS OF
CONTRACTOR (No., Street, County, State and Zip Code) ERAPSCO DAVID JOST 4578 EAST PARK 30 DR COLUMBIA CITY IN 46725-8869 |
9A. AMENDMENT OF SOLICITATION NO. | |||||
9B. DATED (SEE ITEM 11) | ||||||
X | 10A. MOD. OF CONTRACT/ORDER NO. N00421-11-C-0030 | |||||
X |
10B. DATED (SEE ITEM 13) 08-Apr-2011 | |||||
CODE 0CCL9 | FACILITY CODE | |||||
11. THIS ITEM ONLY APPLIES TO AMENDMENTS OF SOLICITATIONS |
¨ The above numbered solicitation is amended as set forth in Item 14. The hour and date specified for receipt of Offer | ¨ is extended, | ¨ is not extended. |
Offer must acknowledge receipt of this amendment prior to the hour and date specified in the solicitation or as amended by one of the following methods: |
(a) By completing Items 8 and 15, and returning copies of the amendment; (b) By acknowledging receipt of this amendment on each copy of the offer submitted; or (c) By separate letter or telegram which includes a reference to the solicitation and amendment numbers. FAILURE OF YOUR ACKNOWLEDGMENT TO BE RECEIVED AT THE PLACE DESIGNATED FOR THE RECEIPT OF OFFERS PRIOR TO THE HOUR AND DATE SPECIFIED MAY RESULT IN REJECTION OF YOUR OFFER. If by virtue of this amendment you desire to change an offer already submitted, such change may be made by telegram or letter, provided each telegram or letter makes reference to the solicitation and this amendment, and is received prior to the opening hour and date specified. |
12. ACCOUNTING AND APPROPRIATION DATA (If required)
|
13. THIS ITEM APPLIES ONLY TO MODIFICATIONS OF CONTRACTS/ORDERS. |
IT MODIFIES THE CONTRACT/ORDER NO. AS DESCRIBED IN ITEM 14. |
A. THIS CHANGE ORDER IS ISSUED PURSUANT TO: (Specify authority) THE CHANGES SET FORTH IN ITEM 14 ARE MADE IN THE CONTRACT ORDER NO. IN ITEM 10A.
| ||
B. THE ABOVE NUMBERED CONTRACT/ORDER IS MODIFIED TO REFLECT THE ADMINISTRATIVE CHANGES (such as changes in paying office, appropriation date, etc.) SET FORTH IN ITEM 14, PURSUANT TO THE AUTHORITY OF FAR 43.103(B).
| ||
C. THIS SUPPLEMENTAL AGREEMENT IS ENTERED INTO PURSUANT TO AUTHORITY OF:
| ||
X |
D. OTHER (Specify type of modification and authority) | |
Mutual agreement of the parties. |
E. IMPORTANT: Contractor ¨ is not, x is required to sign this document and return 1 copies to the issuing office. |
14. DESCRIPTION OF AMENDMENT/MODIFICATION (Organized by UCF section headings, including solicitation/contract subject matter where feasible.) |
Modification Control Number: jacksonr116015 |
The purpose of this modification is to revise the delivery schedule in Section F, change the Admin code (Block 7) to S3605A and update clause 252.227-7013 with the most recent version. |
Except as provided herein, all terms and conditions of the document referenced in Item 9A or 10A, as hereto fore changed, remains unchanged and in full force and effect. |
15A. NAME AND TITLE OF SIGNER (Type or print) | 16A. NAME AND TITLE OF CONTRACTING OFFICER (Type or print) | |||||||
SABANA N. MOORE-BARNES / CONTRACT SPECIALIST | ||||||||
Mark Belyea, Contract Manager | TEL: (301) 757-2611 | EMAIL: sabana.moore-barnes@navy.mil | ||||||
15B. CONTRACTOR/OFFEROR | 15C. DATE SIGNED | 16B. UNITED STATES OF AMERICA | 16C. DATE SIGNED | |||||
/s/ Mark Belyea | BY
![]() |
|||||||
(Signature of person authorized to sign) | 05-May 2011 | (Signature of Contracting Officer) | 05-May-2011 |
EXCEPTION TO SF 30 |
30-105-04 | STANDARD FORM 30 (Rev. 10-83) | ||
APPROVED BY OIRM 11-84 |
Prescribed by GSA | |||
FAR (48 CFR) 53.243 |
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
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SECTION SF 30 BLOCK 14 CONTINUATION PAGE
SUMMARY OF CHANGES
SECTION A - SOLICITATION/CONTRACT FORM
The following have been added by full text:
Block 6, Issued by, to include the following information:
Rebecca Jackson
(301) 342-4614
rebecca.jackson1@navy.mil
The administered by organization has changed from:
DCMA COMBAT VEHICLES DETROIT
6501 EAST ELEVEN MILE, BLDG 231
ATTN: DCMAG-MD
WARREN MI 48397-5000
To:
DCMA DAYTON
AREA C, BUILDING 30
1725 VAN PATTON DRIVE
WRIGHT-PATTERSON AFB OH 45433-5302
SECTION F - DELIVERIES OR PERFORMANCE
The following have been added by full text:
AN/SSQ-36B Sonobuoy
Delivery Date |
Lot # | Place of |
CLIN 0001 Production Units |
CLIN 0001 Test Samples |
Lot Size | |||||||||||
4/7/2012 |
1 | Sparton | [ | ] | [ | ] | [ | ] | ||||||||
8/23/2012 |
2 | Sparton | [ | ] | [ | ] | [ | ] | ||||||||
1/7/2013 |
3 | Sparton | [ | ] | [ | ] | [ | ] | ||||||||
[ | ] | [ | ] | |||||||||||||
TOTAL: |
[ | ] | [ | ] | [ | ] |
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
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AN/SSQ-53F Sonobuoy
Delivery Date |
Lot # | Place of |
CLIN 0005AA Production Units |
CLIN 0005AA Test Samples |
CLIN 0005AB Production Units |
CLIN 0005AB Test Samples |
CLIN 0005AC Production Units |
Lot Size |
||||||||||||||||||||
4/7/2012 |
1 | USSI | [ | ] | [ | ] | [ | ] | ||||||||||||||||||||
4/19/2012 |
51 | Sparton | [ | ] | [ | ] | [ | ] | ||||||||||||||||||||
5/1/2012 |
2 | USSI | [ | ] | [ | ] | [ | ] | ||||||||||||||||||||
5/13/2012 |
52 | Sparton | [ | ] | [ | ] | ||||||||||||||||||||||
5/25/2012 |
3 | USSI | [ | ] | [ | ] | [ | ] | ||||||||||||||||||||
6/6/2012 |
53 | Sparton | [ | ] | [ | ] | [ | ] | ||||||||||||||||||||
6/18/2012 |
4 | USSI | [ | ] | [ | ] | [ | ] | ||||||||||||||||||||
6/30/2012 |
54 | Sparton | [ | ] | [ | ] | [ | ] | ||||||||||||||||||||
7/12/2012 |
5 | USSI | [ | ] | [ | ] | [ | ] | ||||||||||||||||||||
7/24/2012 |
55 | Sparton | [ | ] | [ | ] | [ | ] | ||||||||||||||||||||
8/5/2012 |
6 | USSI | [ | ] | [ | ] | [ | ] | ||||||||||||||||||||
8/17/2012 |
56 | Sparton | [ | ] | [ | ] | [ | ] | ||||||||||||||||||||
8/29/2012 |
7 | USSI | [ | ] | [ | ] | [ | ] | ||||||||||||||||||||
9/10/2012 |
57 | Sparton | [ | ] | [ | ] | [ | ] | ||||||||||||||||||||
9/22/2012 |
8 | USSI | [ | ] | [ | ] | [ | ] | ||||||||||||||||||||
10/4/2012 |
58 | Sparton | [ | ] | [ | ] | [ | ] | ||||||||||||||||||||
10/16/2012 |
9 | USSI | [ | ] | [ | ] | [ | ] | ||||||||||||||||||||
10/28/2012 |
59 | Sparton | [ | ] | [ | ] | [ | ] | ||||||||||||||||||||
11/9/2012 |
10 | USSI | [ | ] | [ | ] | [ | ] | ||||||||||||||||||||
11/21/2012 |
60 | Sparton | [ | ] | [ | ] | [ | ] | ||||||||||||||||||||
12/3/2012 |
11 | USSI | [ | ] | [ | ] | [ | ] | ||||||||||||||||||||
12/15/2012 |
61 | Sparton | [ | ] | [ | ] | [ | ] | ||||||||||||||||||||
12/27/2012 |
12 | USSI | [ | ] | [ | ] | [ | ] | ||||||||||||||||||||
1/8/2013 |
62 | Sparton | [ | ] | [ | ] | [ | ] | ||||||||||||||||||||
1/20/2013 |
13 | USSI | [ | ] | [ | ] | [ | ] | ||||||||||||||||||||
2/1/2013 |
63 | Sparton | [ | ] | [ | ] | [ | ] | ||||||||||||||||||||
2/13/2013 |
14 | USSI | [ | ] | [ | ] | [ | ] | ||||||||||||||||||||
2/25/2013 |
64 | Sparton | [ | ] | [ | ] | [ | ] | ||||||||||||||||||||
3/9/2013 |
65 | Sparton | [ | ] | [ | ] | [ | ] | ||||||||||||||||||||
3/21/2013 |
66 | Sparton | [ | ] | [ | ] | [ | ] | [ | ] | [ | ] | ||||||||||||||||
4/2/2013 |
67 | Sparton | [ | ] | [ | ] | [ | ] | [ | ] | [ | ] | ||||||||||||||||
4/7/2013 |
68 | Sparton | [ | ] | [ | ] | [ | ] | [ | ] | [ | ] | ||||||||||||||||
TOTAL: |
[ | ] | [ | ] | [ | ] | [ | ] | [ | ] | [ | ] |
AN/SSQ-62E Sonobuoy
Delivery Date |
Lot # | Place of Performance |
CLIN 0009 Production Units |
CLIN 0009 Test Samples |
Lot Size | |||||||||||
4/7/2012 |
1 | USSI | [ | ] | [ | ] | [ | ] | ||||||||
5/30/2012 |
51 | Sparton | [ | ] | [ | ] | [ | ] | ||||||||
7/22/2012 |
2 | USSI | [ | ] | [ | ] | [ | ] | ||||||||
9/13/2012 |
52 | Sparton | [ | ] | [ | ] | [ | ] | ||||||||
11/5/2012 |
3 | USSI | [ | ] | [ | ] | [ | ] |
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
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Page 4 of 12
12/28/2012 |
53 | Sparton | [ | ] | [ | ] | [ | ] | ||||||||
2/19/2013 |
4 | USSI | [ | ] | [ | ] | [ | ] | ||||||||
4/7/2013 |
54 | Sparton | [ | ] | [ | ] | [ | ] | ||||||||
TOTAL: |
[ | ] | [ | ] | [ | ] |
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
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SECTION I - CONTRACT CLAUSES
Clause 252.227-7013 Rights of Technical DataNoncommercial Items (NOV 1995) has been deleted and replaced with the following:
252.227-7013 RIGHTS IN TECHNICAL DATANONCOMMERCIAL ITEMS (MAR 2011)
(a) Definitions. As used in this clause:
(1) Computer data base means a collection of data recorded in a form capable of being processed by a computer. The term does not include computer software.
(2) Computer program means a set of instructions, rules, or routines recorded in a form that is capable of causing a computer to perform a specific operation or series of operations.
(3) Computer software means computer programs, source code, source code listings, object code listings, design details, algorithms, processes, flow charts, formulae and related material that would enable the software to be reproduced, recreated, or recompiled. Computer software does not include computer data bases or computer software documentation.
(4) Computer software documentation means owners manuals, users manuals, installation instructions, operating instructions, and other similar items, regardless of storage medium, that explain the capabilities of the computer software or provide instructions for using the software.
(5) Covered Government support contractor means a contractor under a contract, the primary purpose of which is to furnish independent and impartial advice or technical assistance directly to the Government in support of the Governments management and oversight of a program or effort (rather than to directly furnish an end item or service to accomplish a program or effort), provided that the contractor
(i) Is not affiliated with the prime contractor or a first-tier subcontractor on the program or effort, or with any direct competitor of such prime contractor or any such first-tier subcontractor in furnishing end items or services of the type developed or produced on the program or effort; and
(ii) Receives access to technical data or computer software for performance of a Government contract that contains the clause at 252.227-7025, Limitations on the Use or Disclosure of Government-Furnished Information Marked with Restrictive Legends.
(6) Detailed manufacturing or process data means technical data that describe the steps, sequences, and conditions of manufacturing, processing or assembly used by the manufacturer to produce an item or component or to perform a process.
(7) Developed means that an item, component, or process exists and is workable. Thus, the item or component must have been constructed or the process practiced. Workability is generally established when the item, component, or process has been analyzed or tested sufficiently to demonstrate to reasonable people skilled in the applicable art that there is a high probability that it will operate as intended. Whether, how much, and what type of analysis or testing is required to establish workability depends on the nature of the item, component, or process, and the state of the art. To be considered developed, the item, component, or process need not be at the stage where it could be offered for sale or sold on the commercial market, nor must the item, component, or process be actually reduced to practice within the meaning of Title 35 of the United States Code.
(8) Developed exclusively at private expense means development was accomplished entirely with costs charged to indirect cost pools, costs not allocated to a government contract, or any combination thereof.
(i) Private expense determinations should be made at the lowest practicable level.
(ii) Under fixed-price contracts, when total costs are greater than the firm-fixed-price or ceiling price of the contract, the additional development costs necessary to complete development shall not be considered when determining whether development was at government, private, or mixed expense.
(9) Developed exclusively with government funds means development was not accomplished exclusively or partially at private expense.
(10) Developed with mixed funding means development was accomplished partially with costs charged to indirect cost pools and/or costs not allocated to a government contract, and partially with costs charged directly to a government contract.
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
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(11) Form, fit, and function data means technical data that describes the required overall physical, functional, and performance characteristics (along with the qualification requirements, if applicable) of an item, component, or process to the extent necessary to permit identification of physically and functionally interchangeable items.
(12) Government purpose means any activity in which the United States Government is a party, including cooperative agreements with international or multi-national defense organizations, or sales or transfers by the United States Government to foreign governments or international organizations. Government purposes include competitive procurement, but do not include the rights to use, modify, reproduce, release, perform, display, or disclose technical data for commercial purposes or authorize others to do so.
(13) Government purpose rights means the rights to
(i) Use, modify, reproduce, release, perform, display, or disclose technical data within the Government without restriction; and
(ii) Release or disclose technical data outside the Government and authorize persons to whom release or disclosure has been made to use, modify, reproduce, release, perform, display, or disclose that data for United States government purposes.
(14) Limited rights means the rights to use, modify, reproduce, release, perform, display, or disclose technical data, in whole or in part, within the Government. The Government may not, without the written permission of the party asserting limited rights, release or disclose the technical data outside the Government, use the technical data for manufacture, or authorize the technical data to be used by another party, except that the Government may reproduce, release, or disclose such data or authorize the use or reproduction of the data by persons outside the Government if
(i) The reproduction, release, disclosure, or use is
(A) Necessary for emergency repair and overhaul; or
(B) A release or disclosure to
(1) A covered Government support contractor, for use, modification, reproduction, performance, display, or release or disclosure to authorized person(s) in performance of a Government contract; or
(2) A foreign government, of technical data other than detailed manufacturing or process data, when use of such data by the foreign government is in the interest of the Government and is required for evaluational or informational purposes;
(ii) The recipient of the technical data is subject to a prohibition on the further reproduction, release, disclosure, or use of the technical data; and
(iii) The contractor or subcontractor asserting the restriction is notified of such reproduction, release, disclosure, or use.
(15) Technical data means recorded information, regardless of the form or method of the recording, of a scientific or technical nature (including computer software documentation). The term does not include computer software or data incidental to contract administration, such as financial and/or management information.
(16) Unlimited rights means rights to use, modify, reproduce, perform, display, release, or disclose technical data in whole or in part, in any manner, and for any purpose whatsoever, and to have or authorize others to do so.
(b) Rights in technical data. The Contractor grants or shall obtain for the Government the following royalty free, world-wide, nonexclusive, irrevocable license rights in technical data other than computer software documentation (see the Rights in Noncommercial Computer Software and Noncommercial Computer Software Documentation clause of this contract for rights in computer software documentation):
(1) Unlimited rights. The Government shall have unlimited rights in technical data that are
(i) Data pertaining to an item, component, or process which has been or will be developed exclusively with Government funds;
(ii) Studies, analyses, test data, or similar data produced for this contract, when the study, analysis, test, or similar work was specified as an element of performance;
(iii) Created exclusively with Government funds in the performance of a contract that does not require the development, manufacture, construction, or production of items, components, or processes;
(iv) Form, fit, and function data;
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
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(v) Necessary for installation, operation, maintenance, or training purposes (other than detailed manufacturing or process data);
(vi) Corrections or changes to technical data furnished to the Contractor by the Government;
(vii) Otherwise publicly available or have been released or disclosed by the Contractor or subcontractor without restrictions on further use, release or disclosure, other than a release or disclosure resulting from the sale, transfer, or other assignment of interest in the technical data to another party or the sale or transfer of some or all of a business entity or its assets to another party;
(viii) Data in which the Government has obtained unlimited rights under another Government contract or as a result of negotiations; or
(ix) Data furnished to the Government, under this or any other Government contract or subcontract there under, with
(A) Government purpose license rights or limited rights and the restrictive condition(s) has/have expired; or
(B) Government purpose rights and the Contractors exclusive right to use such data for commercial purposes has expired.
(2) Government purpose rights.
(i) The Government shall have government purpose rights for a five-year period, or such other period as may be negotiated, in technical data
(A) That pertain to items, components, or processes developed with mixed funding except when the Government is entitled to unlimited rights in such data as provided in paragraphs (b)(ii) and (b)(iv) through (b)(ix) of this clause; or
(B) Created with mixed funding in the performance of a contract that does not require the development, manufacture, construction, or production of items, components, or processes.
(ii) The five-year period, or such other period as may have been negotiated, shall commence upon execution of the contract, subcontract, letter contract (or similar contractual instrument), contract modification, or option exercise that required development of the items, components, or processes or creation of the data described in paragraph (b)(2)(i)(B) of this clause. Upon expiration of the five-year or other negotiated period, the Government shall have unlimited rights in the technical data.
(iii) The Government shall not release or disclose technical data in which it has government purpose rights unless
(A) Prior to release or disclosure, the intended recipient is subject to the non-disclosure agreement at 227.7103-7 of the Defense Federal Acquisition Regulation Supplement (DFARS); or
(B) The recipient is a Government contractor receiving access to the data for performance of a Government contract that contains the clause at DFARS 252.227-7025, Limitations on the Use or Disclosure of Government-Furnished Information Marked with Restrictive Legends.
(iv) The Contractor has the exclusive right, including the right to license others, to use technical data in which the Government has obtained government purpose rights under this contract for any commercial purpose during the time period specified in the government purpose rights legend prescribed in paragraph (f)(2) of this clause.
(3) Limited rights.
(i) Except as provided in paragraphs (b)(1)(ii) and (b)(1)(iv) through (b)(1)(ix) of this clause, the Government shall have limited rights in technical data
(A) Pertaining to items, components, or processes developed exclusively at private expense and marked with the limited rights legend prescribed in paragraph (f) of this clause; or
(B) Created exclusively at private expense in the performance of a contract that does not require the development, manufacture, construction, or production of items, components, or processes.
(ii) The Government shall require a recipient of limited rights data for emergency repair or overhaul to destroy the data and all copies in its possession promptly following completion of the emergency repair/overhaul and to notify the Contractor that the data have been destroyed.
(iii) The Contractor, its subcontractors, and suppliers are not required to provide the Government additional rights to use, modify, reproduce, release, perform, display, or disclose technical data furnished to the Government
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
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with limited rights. However, if the Government desires to obtain additional rights in technical data in which it has limited rights, the Contractor agrees to promptly enter into negotiations with the Contracting Officer to determine whether there are acceptable terms for transferring such rights. All technical data in which the Contractor has granted the Government additional rights shall be listed or described in a license agreement made part of the contract. The license shall enumerate the additional rights granted the Government in such data. *
(iv) The Contractor acknowledges that
(A) Limited rights data is authorized to be released or disclosed to covered Government support contractors;
(B) The Contractor will be notified of such release or disclosure;
(C) The Contractor (or the party asserting restrictions as identified in the limited rights legend) may require each such covered Government support contractor to enter into a non-disclosure agreement directly with the Contractor (or the party asserting restrictions) regarding the covered Government support contractors use of such data, or alternatively, that the Contractor (or party asserting restrictions) may waive in writing the requirement for a non-disclosure agreement;
(D) Any such non-disclosure agreement shall address the restrictions on the covered Government support contractors use of the limited rights data as set forth in the clause at 252.227-7025, and shall not include any additional terms and conditions unless mutually agreed to by the parties to the non-disclosure agreement; and (E) The Contractor shall provide a copy of any such non-disclosure agreement or waiver to the Contracting Officer, upon request.
(4) Specifically negotiated license rights. The standard license rights granted to the Government under paragraphs (b)(1) through (b)(3) of this clause, including the period during which the Government shall have government purpose rights in technical data, may be modified by mutual agreement to provide such rights as the parties consider appropriate but shall not provide the Government lesser rights than are enumerated in paragraph (a)(13) of this clause. Any rights so negotiated shall be identified in a license agreement made part of this contract.
(5) Prior government rights. Technical data that will be delivered, furnished, or otherwise provided to the Government under this contract, in which the Government has previously obtained rights shall be delivered, furnished, or provided with the pre-existing rights, unless
(i) The parties have agreed otherwise; or
(ii) Any restrictions on the Governments rights to use, modify, reproduce, release, perform, display, or disclose the data have expired or no longer apply.
(6) Release from liability. The Contractor agrees to release the Government from liability for any release or disclosure of technical data made in accordance with paragraph (a)(13) or (b)(2)(iii) of this clause, in accordance with the terms of a license negotiated under paragraph (b)(4) of this clause, or by others to whom the recipient has released or disclosed the data and to seek relief solely from the party who has improperly used, modified, reproduced, released, performed, displayed, or disclosed Contractor data marked with restrictive legends.
(c) Contractor rights in technical data. All rights not granted to the Government are retained by the Contractor.
(d) Third party copyrighted data. The Contractor shall not, without the written approval of the Contracting Officer, incorporate any copyrighted data in the technical data to be delivered under this contract unless the Contractor is the copyright owner or has obtained for the Government the license rights necessary to perfect a license or licenses in the deliverable data of the appropriate scope set forth in paragraph (b) of this clause, and has affixed a statement of the license or licenses obtained on behalf of the Government and other persons to the data transmittal document.
(e) Identification and delivery of data to be furnished with restrictions on use, release, or disclosure.
(1) This paragraph does not apply to restrictions based solely on copyright.
(2) Except as provided in paragraph (e)(3) of this clause, technical data that the Contractor asserts should be furnished to the Government with restrictions on use, release, or disclosure are identified in an attachment to this contract (the Attachment). The Contractor shall not deliver any data with restrictive markings unless the data are listed on the Attachment.
(3) In addition to the assertions made in the Attachment, other assertions may be identified after award when based on new information or inadvertent omissions unless the inadvertent omissions would have materially affected
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
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the source selection decision. Such identification and assertion shall be submitted to the Contracting Officer as soon as practicable prior to the scheduled date for delivery of the data, in the following format, and signed by an official authorized to contractually obligate the Contractor:
Identification and Assertion of Restrictions on
the Governments Use, Release, or Disclosure of Technical Data.
The Contractor asserts for itself, or the persons identified below, that the Governments rights to use, release, or disclose the following technical data should be restricted
Technical data to be furnished with |
Basis for assertion |
Asserted rights category |
Name of person asserting restrictions | |||
(LIST) | (LIST) | (LIST) | (LIST) | |||
(1)Design Data under CDRL A001 |
(2)Developed with company funds |
(3)Limited until 16 April 2014 and then unrestricted |
(4)Mark Belyea for ERAPSCO | |||
Any software code submitted under CDRL A00F |
Developed under a Government contract |
Government Purpose | Mark Belyea for ERAPSCO |
(1) | If the assertion is applicable to items, components or processes developed at private expense, identify both the data and each such item, component, or process. |
(2) | Generally, the development of an item, component, or process at private expense, either exclusively or partially, is the only basis for asserting restrictions on the Governments rights to use, release, or disclose technical data pertaining to such items, components, or processes. Indicate whether development was exclusively or partially at private expense. If development was not at private expense, enter the specific reason for asserting that the Governments rights should be restricted. |
(3) | Enter asserted rights category (e.g., government purpose license rights from a prior contract, rights in SBIR data generated under another contract, limited or government purpose rights under this or a prior contract, or specifically negotiated licenses). |
(4) | Corporation, individual, or other person, as appropriate. |
Date
Printed Name and Title
Signature
(End of identification and assertion)
(4) When requested by the Contracting Officer, the Contractor shall provide sufficient information to enable the Contracting Officer to evaluate the Contractors assertions. The Contracting Officer reserves the right to add the Contractors assertions to the Attachment and validate any listed assertion, at a later date, in accordance with the procedures of the Validation of Restrictive Markings on Technical Data clause of this contract.
(f) Marking requirements. The Contractor, and its subcontractors or suppliers, may only assert restrictions on the Governments rights to use, modify, reproduce, release, perform, display, or disclose technical data to be delivered under this contract by marking the deliverable data subject to restriction. Except as provided in paragraph (f)(5) of this clause, only the following legends are authorized under this contract: the government purpose rights legend at paragraph (f)(2) of this clause; the limited rights legend at paragraph (f)(3) of this clause; or the special license rights legend at paragraph (f)(4) of this clause; and/or a notice of copyright as prescribed under 17 U.S.C. 401 or 402.
(1) General marking instructions. The Contractor, or its subcontractors or suppliers, shall conspicuously and legibly mark the appropriate legend on all technical data that qualify for such markings. The authorized legends shall be placed on the transmittal document or storage container and, for printed material, each page of the printed material containing technical data for which restrictions are asserted. When only portions of a page of printed material are subject to the asserted restrictions, such portions shall be identified by circling, underscoring, with a
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
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note, or other appropriate identifier. Technical data transmitted directly from one computer or computer terminal to another shall contain a notice of asserted restrictions. Reproductions of technical data or any portions thereof subject to asserted restrictions shall also reproduce the asserted restrictions.
(2) Government purpose rights markings. Data delivered or otherwise furnished to the Government purpose rights shall be marked as follows:
GOVERNMENT PURPOSE RIGHTS
Contract No.
Contractor Name
Contractor Address
Expiration Date
The Governments rights to use, modify, reproduce, release, perform, display, or disclose these technical data are restricted by paragraph (b)(2) of the Rights in Technical DataNoncommercial Items clause contained in the above identified contract. No restrictions apply after the expiration date shown above. Any reproduction of technical data or portions thereof marked with this legend must also reproduce the markings.
(End of legend)
(3) Limited rights markings. Data delivered or otherwise furnished to the Government with limited rights shall be marked with the following legend:
Limited Rights
Contract No.
Contractor Name
Contractor Address
The Governments rights to use, modify, reproduce, release, perform, display, or disclose these technical data are restricted by paragraph (b)(3) of the Rights in Technical DataNoncommercial Items clause contained in the above identified contract. Any reproduction of technical data or portions thereof marked with this legend must also reproduce the markings. Any person, other than the Government, who has been provided access to such data must promptly notify the above named Contractor.
(End of legend)
(4) Special license rights markings.
(i) Data in which the Governments rights stem from a specifically negotiated license shall be marked with the following legend:
SPECIAL LICENSE RIGHTS
The Governments rights to use, modify, reproduce, release, perform, display, or disclose these data are restricted by Contract No. (Insert contract number) , License No. (Insert license identifier) . Any reproduction of technical data or portions thereof marked with this legend must also reproduce the markings.
(End of legend)
(ii) For purposes of this clause, special licenses do not include government purpose license rights acquired under a prior contract (see paragraph (b)(5) of this clause).
(5) Pre-existing data markings. If the terms of a prior contract or license permitted the Contractor to restrict the Governments rights to use, modify, reproduce, release, perform, display, or disclose technical data deliverable under this contract, and those restrictions are still applicable, the Contractor may mark such data with the appropriate restrictive legend for which the data qualified under the prior contract or license. The marking procedures in paragraph (f)(1) of this clause shall be followed.
(g) Contractor procedures and records. Throughout performance of this contract, the Contractor and its subcontractors or suppliers that will deliver technical data with other than unlimited rights, shall
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
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(1) Have, maintain, and follow written procedures sufficient to assure that restrictive markings are used only when authorized by the terms of this clause; and
(2) Maintain records sufficient to justify the validity of any restrictive markings on technical data delivered under this contract.
(h) Removal of unjustified and nonconforming markings.
(1) Unjustified technical data markings. The rights and obligations of the parties regarding the validation of restrictive markings on technical data furnished or to be furnished under this contract are contained in the Validation of Restrictive Markings on Technical Data clause of this contract. Notwithstanding any provision of this contract concerning inspection and acceptance, the Government may ignore or, at the Contractors expense, correct or strike a marking if, in accordance with the procedures in the Validation of Restrictive Markings on Technical Data clause of this contract, a restrictive marking is determined to be unjustified.
(2) Nonconforming technical data markings. A nonconforming marking is a marking placed on technical data delivered or otherwise furnished to the Government under this contract that is not in the format authorized by this contract. Correction of nonconforming markings is not subject to the Validation of Restrictive Markings on Technical Data clause of this contract. If the Contracting Officer notifies the Contractor of a nonconforming marking and the Contractor fails to remove or correct such marking within sixty (60) days, the Government may ignore or, at the Contractors expense, remove or correct any nonconforming marking.
(i) Relation to patents. Nothing contained in this clause shall imply a license to the Government under any patent or be construed as affecting the scope of any license or other right otherwise granted to the Government under any patent.
(j) Limitation on charges for rights in technical data.
(1) The Contractor shall not charge to this contract any cost, including, but not limited to, license fees, royalties, or similar charges, for rights in technical data to be delivered under this contract when
(i) The Government has acquired, by any means, the same or greater rights in the data; or
(ii) The data are available to the public without restrictions.
(2) The limitation in paragraph (j)(1) of this clause
(i) Includes costs charged by a subcontractor or supplier, at any tier, or costs incurred by the Contractor to acquire rights in subcontractor or supplier technical data, if the subcontractor or supplier has been paid for such rights under any other Government contract or under a license conveying the rights to the Government; and
(ii) Does not include the reasonable costs of reproducing, handling, or mailing the documents or other media in which the technical data will be delivered.
(k) Applicability to subcontractors or suppliers.
(1) The Contractor shall ensure that the rights afforded its subcontractors and suppliers under 10 U.S.C. 2320, 10 U.S.C. 2321, and the identification, assertion, and delivery processes of paragraph (e) of this clause are recognized and protected.
(2) Whenever any technical data for noncommercial items is to be obtained from a subcontractor or supplier for delivery to the Government under this contract, the Contractor shall use this same clause in the subcontract or other contractual instrument, and require its subcontractors or suppliers to do so, without alteration, except to identify the parties. No other clause shall be used to enlarge or diminish the Governments, the Contractors, or a higher-tier subcontractors or suppliers rights in a subcontractors or suppliers technical data.
(3) Technical data required to be delivered by a subcontractor or supplier shall normally be delivered to the next higher-tier contractor, subcontractor, or supplier. However, when there is a requirement in the prime contract for data which may be submitted with other than unlimited rights by a subcontractor or supplier, then said subcontractor or supplier may fulfill its requirement by submitting such data directly to the Government, rather than through a higher-tier contractor, subcontractor, or supplier.
(4) The Contractor and higher-tier subcontractors or suppliers shall not use their power to award contracts as economic leverage to obtain rights in technical data from their subcontractors or suppliers.
(5) In no event shall the Contractor use its obligation to recognize and protect subcontractor or supplier rights in technical data as an excuse for failing to satisfy its contractual obligations to the Government.
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
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(End of Summary of Changes)
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
Exhibit 10.14
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
AMENDMENT OF SOLICITATION/MODIFICATION OF CONTRACT | 1. CONTRACT ID CODE | PAGE OF PAGES | ||||
J | 1 | 4 |
2. AMENDMENT/MODIFICATION NO. |
3. EFFECTIVE DATE | 4. REQUISITION/PURCHASE REQ. NO. | 5. PROJECT NO. (If applicable) | |||||||
P00002 |
20-Jun-2011 | SEE SCHEDULE | ||||||||
6. ISSUED BY | CODE | N00421 | 7. ADMINISTERED BY (If other than item 6) | CODE | S3605A | |||||
DCMA DAYTON | ||||||||||
NAVAL AIR WARFARE CENTER AD (PAX) | AREA C, BUILDING 30 | |||||||||
CODE 2.5.1.9 - BLDG 441 | 1725 VAN PATTON DRIVE | |||||||||
21983 BUNDY RD | WRIGHT-PATTERSON AFB OH 45433-5302 | |||||||||
PATUXENT RIVER MD 20670 | ||||||||||
8. NAME AND ADDRESS OF
CONTRACTOR (No., Street, County, State and Zip Code) ERAPSCO DAVID JOST 4578 EAST PARK 30 DR COLUMBIA CITY IN 46725-8869 |
9A. AMENDMENT OF SOLICITATION NO. | |||||
9B. DATED (SEE ITEM 11) | ||||||
X | 10A. MOD. OF CONTRACT/ORDER NO. N00421-11-C-0030 | |||||
X |
10B. DATED (SEE ITEM 13) 08-Apr-2011 | |||||
CODE 0CCL9 | FACILITY CODE | |||||
11. THIS ITEM ONLY APPLIES TO AMENDMENTS OF SOLICITATIONS |
¨ The above numbered solicitation is amended as set forth in Item 14. The hour and date specified for receipt of Offer | ¨ is extended, | ¨ is not extended. | ||
Offer must acknowledge receipt of this amendment prior to the hour and date specified in the solicitation or as amended by one of the following methods: | ||||
(a) By completing Items 8 and 15, and returning copies of the amendment; (b) By acknowledging receipt of this amendment on each copy of the offer submitted; or (c) By separate letter or telegram which includes a reference to the solicitation and amendment numbers. FAILURE OF YOUR ACKNOWLEDGMENT TO BE RECEIVED AT THE PLACE DESIGNATED FOR THE RECEIPT OF OFFERS PRIOR TO THE HOUR AND DATE SPECIFIED MAY RESULT IN REJECTION OF YOUR OFFER. If by virtue of this amendment you desire to change an offer already submitted, such change may be made by telegram or letter, provided each telegram or letter makes reference to the solicitation and this amendment, and is received prior to the opening hour and date specified. | ||||
12. ACCOUNTING AND APPROPRIATION DATA (If required) | ||||
See Schedule | ||||
13. THIS ITEM APPLIES ONLY TO MODIFICATIONS OF CONTRACTS/ORDERS. | ||||
IT MODIFIES THE CONTRACT/ORDER NO. AS DESCRIBED IN ITEM 14. |
A. THISCHANGE ORDER IS ISSUED PURSUANT TO: (Specify authority) THE CHANGES SET FORTH IN ITEM 14 ARE MADE IN THE CONTRACT ORDER NO. IN ITEM 10A.
| ||
B. THE ABOVE NUMBERED CONTRACT/ORDER IS MODIFIED TO REFLECT THE ADMINISTRATIVE CHANGES (such as changes in paying office, appropriation date, etc.) SET FORTH IN ITEM 14, PURSUANT TO THE AUTHORITY OF FAR 43.103(B).
| ||
C. THIS SUPPLEMENTAL AGREEMENT IS ENTERED INTO PURSUANT TO AUTHORITY OF:
| ||
X |
D. OTHER (Specify type of modification and authority) | |
IAW FAR 52.232.22; Limitation of Funds | ||
E. IMPORTANT: Contractor ¨ is not, ¨ is required to sign this document and return copies to the issuing office. | ||
14. DESCRIPTION OF AMENDMENT/MODIFICATION (Organized by UCF section headings, including solicitation/contract subject matter where feasible.) | ||
Modification Control Number: mooresn117730 | ||
POC:Sabana Moore-Barnes | ||
301-757-2611 | ||
1. The purpose of this modification is to purchase additional Q-53 units with PMA-264 Sweep Up Funds in the amount of $2,323,844 | ||
Except as provided herein, all terms and conditions of the document referenced in Item 9A or 10A, as heretofore changed, remains unchanged and in full force and effect. |
15A. NAME AND TITLE OF SIGNER (Type or print) | 16A. NAME AND TITLE OF CONTRACTING OFFICER (Type or print) | |||||||
SABANA N. MOORE-BARNES / CONTRACT SPECIALIST | ||||||||
Mark Belyea, Contract Manager | TEL: (301) 757-2611 | EMAIL: sabana.moore-barnes@navy.mil | ||||||
15B. CONTRACTOR/OFFEROR | 15C. DATE SIGNED | 16B. UNITED STATES OF AMERICA | 16C. DATE SIGNED | |||||
/s/ Mark Belyea | BY
![]() |
|||||||
(Signature of person authorized to sign) | 20-June 2011 | (Signature of Contracting Officer) | 20-Jun-2011 |
EXCEPTION TO SF 30 |
30-105-04 | STANDARD FORM 30 (Rev. 10-83) | ||
APPROVED BY OIRM 11-84 |
Prescribed by GSA | |||
FAR (48 CFR) 53.243 |
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
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SECTION SF 30 BLOCK 14 CONTINUATION PAGE
SUMMARY OF CHANGES
SECTION A - SOLICITATION/CONTRACT FORM
The total cost of this contract was increased by $[ ] from $[ ] to $[ ].
SECTION B - SUPPLIES OR SERVICES AND PRICES
CLIN 0006
The CLIN type priced has been deleted.
The pricing detail quantity [ ] has been deleted.
The unit price amount has decreased by $[ ] from $[ ] to $[ ].
The total cost of this line item has decreased by $[ ] from $[ ] to [ ].
SUBCLIN 0006AA is added as follows:
ITEM NO |
SUPPLIES/SERVICES |
QUANTITY | UNIT | UNIT PRICE | AMOUNT | |||||||||||||
0006AA |
[ | ] | Each | $ | [ | ] | $ | [ | ] | |||||||||
PMA264 U3QZ AN/SSQ-53 SONOBUOYS FY11 FFP PROCUREMENT OF AN/SSQ-53 SONOBUOYS, OPN, SUBHEAD U3QZ, FOB: Destination NSN: 5895010774537 PURCHASE REQUEST NUMBER: 1300209711 |
|
|||||||||||||||||
|
|
|||||||||||||||||
NET AMT |
|
$ | [ | ] | ||||||||||||||
ACRN AF CIN: 130020971100001 |
|
$ | [ | ] |
SUBCLIN 0006AB is added as follows:
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
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ITEM NO |
SUPPLIES/SERVICES |
QUANTITY | UNIT | UNIT PRICE |
AMOUNT | |||||||||||||
0006AB |
[ | ] | Each | $ | [ | ] | $ | [ | ] | |||||||||
PMA264 U3QZ AN/SSQ-53 SONOBUOYS FY10 FFP PROCUREMENT OF AN/SSQ-53 SONOBUOYS, OPN, SUBHEAD U3QZ, FOB: Destination NSN: 5895010774537 PURCHASE REQUEST NUMBER: 1300209711 |
|
|||||||||||||||||
|
|
|||||||||||||||||
NET AMT |
|
$ | [ | ] | ||||||||||||||
ACRN AG CIN: 130020971100002 |
|
$ | [ | ] |
SECTION E - INSPECTION AND ACCEPTANCE
The following Acceptance/Inspection Schedule was added for SUBCLIN 0006AA:
INSPECT AT |
INSPECT BY |
ACCEPT AT |
ACCEPT BY | |||
N/A |
N/A | N/A | Government |
The following Acceptance/Inspection Schedule was added for SUBCLIN 0006AB:
INSPECT AT |
INSPECT BY |
ACCEPT AT |
ACCEPT BY | |||
N/A |
N/A | N/A | Government |
SECTION F - DELIVERIES OR PERFORMANCE
The following Delivery Schedule Item has been deleted from CLIN 0006:
DELIVERY DATE |
QUANTITY | SHIP TO ADDRESS |
UIC | |||||
07-APR-2013 | [ | ] | NAVAL AIR WARFARE CENTER, AD CHARLES KIMBLE 27684 WESTGATE COURT BUILDING: ONE MARTIN COUNTY, CRANE IN 47522 (812) 863-7075 FOB: Origin |
N00421 |
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
N00421-11-C-0030
P00002
Page 4 of 4
SECTION G - CONTRACT ADMINISTRATION DATA
Accounting and Appropriation
Summary for the Payment Office
As a result of this modification, the total funded amount for this document was increased by $[ ] from $[ ] to $[ ].
SUBCLIN 0006AA:
Funding on SUBCLIN 0006AA is initiated as follows:
ACRN: AF
CIN: 130020971100001
Acctng Data: 1711810 U3QZ 310 00019 0 050120 2D 000000
Increase: $[ ]
Total: $[ ]
Cost Code: A00000780492
SUBCLIN 0006AB:
Funding on SUBCLIN 0006AB is initiated as follows:
ACRN: AG
CIN: 130020971100002
Acctng Data: 1701810 U3QZ 310 00019 0 050120 2D 000000
Increase: $[ ]
Total: $[ ]
Cost Code: A00000780492
(End of Summary of Changes)
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
Exhibit 10.15
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
AMENDMENT OF SOLICITATION/MODIFICATION OF CONTRACT | 1. CONTRACT ID CODE | PAGE OF PAGES | ||||
J | 1 | 6 |
2. AMENDMENT/MODIFICATION NO. |
3. EFFECTIVE DATE | 4. REQUISITION/PURCHASE REQ. NO. | 5. PROJECT NO. (If applicable) | |||||||
P00003 |
25 July 2011 | SEE SCHEDULE | ||||||||
6. ISSUED BY | CODE | N00421 | 7. ADMINISTERED BY (If other than item 6) | CODE | S3605A | |||||
DCMA DAYTON | ||||||||||
NAVAL AIR WARFARE CENTER AD (PAX) | AREA C, BUILDING 30 | |||||||||
CODE 2.5.1.9 - BLDG 441 | 1725 VAN PATTON DRIVE | |||||||||
21983 BUNDY RD | WRIGHT-PATTERSON AFB OH 45433-5302 | |||||||||
PATUXENT RIVER MD 20670 | ||||||||||
8. NAME AND ADDRESS OF
CONTRACTOR (No., Street, County, State and Zip Code) ERAPSCO DAVID JOST 4578 EAST PARK 30 DR COLUMBIA CITY IN 46725-8869 |
9A. AMENDMENT OF SOLICITATION NO. | |||||
9B. DATED (SEE ITEM 11) | ||||||
X | 10A. MOD. OF CONTRACT/ORDER NO. N00421-11-C-0030 | |||||
X |
10B. DATED (SEE ITEM 13) 08-Apr-2011 | |||||
CODE 0CCL9 | FACILITY CODE | |||||
11. THIS ITEM ONLY APPLIES TO AMENDMENTS OF SOLICITATIONS |
¨ The above numbered solicitation is amended as set forth in Item 14. The hour and date specified for receipt of Offer | ¨ is extended, | ¨ is not extended. | ||
Offer must acknowledge receipt of this amendment prior to the hour and date specified in the solicitation or as amended by one of the following methods: | ||||
(a) By completing Items 8 and 15, and returning copies of the amendment; (b) By acknowledging receipt of this amendment on each copy of the offer submitted; or (c) By separate letter or telegram which includes a reference to the solicitation and amendment numbers. FAILURE OF YOUR ACKNOWLEDGMENT TO BE RECEIVED AT THE PLACE DESIGNATED FOR THE RECEIPT OF OFFERS PRIOR TO THE HOUR AND DATE SPECIFIED MAY RESULT IN REJECTION OF YOUR OFFER. If by virtue of this amendment you desire to change an offer already submitted, such change may be made by telegram or letter, provided each telegram or letter makes reference to the solicitation and this amendment, and is received prior to the opening hour and date specified. | ||||
12. ACCOUNTING AND APPROPRIATION DATA (If required) | ||||
13. THIS ITEM APPLIES ONLY TO MODIFICATIONS OF CONTRACTS/ORDERS. | ||||
IT MODIFIES THE CONTRACT/ORDER NO. AS DESCRIBED IN ITEM 14. |
A. THIS CHANGE ORDERIS ISSUED PURSUANT TO: (Specify authority) THE CHANGES SET FORTH IN ITEM 14 ARE MADE IN THE CONTRACT ORDER NO. IN ITEM 10A.
| ||
B. THE ABOVE NUMBERED CONTRACT/ORDER IS MODIFIED TO REFLECT THE ADMINISTRATIVE CHANGES (such as changes in paying office, appropriation date, etc.) SET FORTH IN ITEM 14, PURSUANT TO THE AUTHORITY OF FAR 43.103(B).
| ||
C. THIS SUPPLEMENTAL AGREEMENT IS ENTERED INTO PURSUANT TO AUTHORITY OF:
| ||
X |
D. OTHER (Specify type of modification and authority) | |
Mutual agreement of the parties | ||
E. IMPORTANT: Contractor ¨ is not, x is required to sign this document and return 1 copies to the issuing office. | ||
14. DESCRIPTION OF AMENDMENT/MODIFICATION (Organized by UCF section headings, including solicitation/contract subject matter where feasible.) | ||
Modification Control Number: leitchj118144 | ||
The purpose of this modification is to add revised delivery schedule P00003 and incorporate Deviation(s) D-0030-2 and D-0030-1R1 to contract N00421-11-C-0030. In consideration for these Deviations, Sparton has agreed to add 48 AN/SSQ-53F sonobuoys to Lot 68 of the contract. | ||
Except as provided herein, all terms and conditions of the document referenced in Item 9A or 10A, as heretofore changed, remains unchanged and in full force and effect. |
15A. NAME AND TITLE OF SIGNER (Type or print) | 16A. NAME AND TITLE OF CONTRACTING OFFICER (Type or print) | |||||||
Gregory T. Blew | ||||||||
Mark Belyea, Contract Manager | TEL: | EMAIL: | ||||||
15B. CONTRACTOR/OFFEROR | 15C. DATE SIGNED | 16B. UNITED STATES OF AMERICA | 16C. DATE SIGNED | |||||
/s/ Mark Belyea | 25 July 2011 | BY /s/ Gregory T. Blew | 25 July 2011 | |||||
(Signature of person authorized to sign) | (Signature of Contracting Officer) |
EXCEPTION TO SF 30 |
30-105-04 | STANDARD FORM 30 (Rev. 10-83) | ||
APPROVED BY OIRM 11-84 |
Prescribed by GSA | |||
FAR (48 CFR) 53.243 |
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
N00421-11-C-0030
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Page 2 of 7
SECTION SF 30 BLOCK 14 CONTINUATION PAGE
SUMMARY OF CHANGES
SECTION B - SUPPLIES OR SERVICES AND PRICES
CLIN 0027 is added as follows:
ITEM NO |
SUPPLIES/SERVICES |
QUANTITY | UNIT | UNIT PRICE | AMOUNT | |||||||||
0027 |
$ | [ | ] | |||||||||||
Consideration FFP FOB: Destination |
|
|||||||||||||
|
|
|||||||||||||
NET AMT | $ | [ | ] |
SUBCLIN 0027AA is added as follows:
ITEM NO |
SUPPLIES/SERVICES |
QUANTITY | UNIT | UNIT PRICE | AMOUNT | |||||||||||||
0027AA |
[ | ] | Each | $ | [ | ] | ||||||||||||
AN/SSQ-53F Sonobuoys FFP [ ] AN/SSQ-53Fsonobuoys FOB: Destination |
|
|||||||||||||||||
|
|
|||||||||||||||||
NET AMT | $ | [ | ] |
SECTION E - INSPECTION AND ACCEPTANCE
The following Acceptance/Inspection Schedule was added for CLIN 0027:
INSPECT AT |
INSPECT BY | ACCEPT AT | ACCEPT BY | |||
N/A |
N/A | N/A | Government |
The following Acceptance/Inspection Schedule was added for SUBCLIN 0027AA:
INSPECT AT |
INSPECT BY | ACCEPT AT | ACCEPT BY | |||
N/A |
N/A | N/A | Government |
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
N00421-11-C-0030
(leitchj118144)
Page 3 of 7
SECTION F - DELIVERIES OR PERFORMANCE
The following have been added by full text:
REVISE DELIVERY SCHED P00003
Revised Delivery Schedule P00003
AN/SSQ-36B Sonobuoy
Delivery Date |
Lot # | Place of Performance |
CLIN 0001 Production Units |
CLIN 0001 Test Samples |
Lot Size | |||||||||||
4/7/2012 |
1 | Sparton | [ | ] | [ | ] | [ | ] | ||||||||
8/23/2012 |
2 | Sparton | [ | ] | [ | ] | [ | ] | ||||||||
1/7/2013 |
3 | Sparton | [ | ] | [ | ] | [ | ] | ||||||||
TOTAL: |
[ | ] | [ | ] | [ | ] |
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
N00421-11-C-0030
(leitchj118144)
Page 4 of 7
AN/SSQ-53F Sonobuoy
Delivery Date |
Lot # | Place of Performance |
CLIN 0005AA PU |
CLIN 0005AA TS |
CLIN 0005AB PU |
CLIN 0005AB TS |
CLIN 0005AC PU |
CLIN 0006AA PU |
CLIN 0006AB PU |
CLIN 0027AA PU |
Lot Size | |||||||||||||||||||||||||||||
4/7/2012 |
1 | USSI | [ | ] | [ | ] | [ | ] | ||||||||||||||||||||||||||||||||
4/19/2012 |
51 | Sparton | [ | ] | [ | ] | [ | ] | ||||||||||||||||||||||||||||||||
5/1/2012 |
2 | USSI | [ | ] | [ | ] | [ | ] | ||||||||||||||||||||||||||||||||
5/13/2012 |
52 | Sparton | [ | ] | [ | ] | [ | ] | ||||||||||||||||||||||||||||||||
5/25/2012 |
3 | USSI | [ | ] | [ | ] | [ | ] | ||||||||||||||||||||||||||||||||
6/6/2012 |
53 | Sparton | [ | ] | [ | ] | [ | ] | ||||||||||||||||||||||||||||||||
6/18/2012 |
4 | USSI | [ | ] | [ | ] | [ | ] | ||||||||||||||||||||||||||||||||
6/30/2012 |
54 | Sparton | [ | ] | [ | ] | [ | ] | ||||||||||||||||||||||||||||||||
7/12/2012 |
5 | USSI | [ | ] | [ | ] | [ | ] | ||||||||||||||||||||||||||||||||
7/24/2012 |
55 | Sparton | [ | ] | [ | ] | [ | ] | ||||||||||||||||||||||||||||||||
8/5/2012 |
6 | USSI | [ | ] | [ | ] | [ | ] | ||||||||||||||||||||||||||||||||
8/17/2012 |
56 | Sparton | [ | ] | [ | ] | [ | ] | ||||||||||||||||||||||||||||||||
8/29/2012 |
7 | USSI | [ | ] | [ | ] | [ | ] | ||||||||||||||||||||||||||||||||
9/10/2012 |
57 | Sparton | [ | ] | [ | ] | [ | ] | ||||||||||||||||||||||||||||||||
9/22/2012 |
8 | USSI | [ | ] | [ | ] | [ | ] | ||||||||||||||||||||||||||||||||
10/4/2012 |
58 | Sparton | [ | ] | [ | ] | [ | ] | ||||||||||||||||||||||||||||||||
10/16/2012 |
9 | USSI | [ | ] | [ | ] | [ | ] | ||||||||||||||||||||||||||||||||
10/28/2012 |
59 | Sparton | [ | ] | [ | ] | [ | ] | ||||||||||||||||||||||||||||||||
11/9/2012 |
10 | USSI | [ | ] | [ | ] | [ | ] | ||||||||||||||||||||||||||||||||
11/21/2012 |
60 | Sparton | [ | ] | [ | ] | [ | ] | ||||||||||||||||||||||||||||||||
12/3/2012 |
11 | USSI | [ | ] | [ | ] | [ | ] | ||||||||||||||||||||||||||||||||
12/15/2012 |
61 | Sparton | [ | ] | [ | ] | [ | ] | ||||||||||||||||||||||||||||||||
12/27/2012 |
12 | USSI | [ | ] | [ | ] | [ | ] | ||||||||||||||||||||||||||||||||
1/8/2013 |
62 | Sparton | [ | ] | [ | ] | [ | ] | ||||||||||||||||||||||||||||||||
1/20/2013 |
13 | USSI | [ | ] | [ | ] | [ | ] | ||||||||||||||||||||||||||||||||
2/1/2013 |
63 | Sparton | [ | ] | [ | ] | [ | ] | ||||||||||||||||||||||||||||||||
4/7/2013 |
14 | USSI | [ | ] | [ | ] | [ | ] | [ | ] | ||||||||||||||||||||||||||||||
2/25/2013 |
64 | Sparton | [ | ] | [ | ] | [ | ] | ||||||||||||||||||||||||||||||||
3/9/2013 |
65 | Sparton | [ | ] | [ | ] | [ | ] | ||||||||||||||||||||||||||||||||
3/21/2013 |
66 | Sparton | [ | ] | [ | ] | [ | ] | [ | ] | [ | ] | ||||||||||||||||||||||||||||
4/2/2013 |
67 | Sparton | [ | ] | [ | ] | [ | ] | [ | ] | [ | ] | [ | ] | ||||||||||||||||||||||||||
4/7/2013 |
68 | Sparton | [ | ] | [ | ] | [ | ] | [ | ] | [ | ] | [ | ] | [ | ] | [ | ] | [ | ] | ||||||||||||||||||||
TOTAL: |
[ | ] | [ | ] | [ | ] | [ | ] | [ | ] | [ | ] | [ | ] |
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
N00421-11-C-0030
(leitchj118144)
Page 5 of 7
AN/SSQ-62E Sonobuoy
Delivery Date |
Lot # | Place of Performance |
CLIN 0009 Production Units |
CLIN 0009 Test Samples |
Lot Size | |||||||||||
4/7/2012 |
1 | USSI | [ | ] | [ | ] | [ | ] | ||||||||
5/30/2012 |
51 | Sparton | [ | ] | [ | ] | [ | ] | ||||||||
7/22/2012 |
2 | USSI | [ | ] | [ | ] | [ | ] | ||||||||
9/13/2012 |
52 | Sparton | [ | ] | [ | ] | [ | ] | ||||||||
11/5/2012 |
3 | USSI | [ | ] | [ | ] | [ | ] | ||||||||
12/28/2012 |
53 | Sparton | [ | ] | [ | ] | [ | ] | ||||||||
2/19/2013 |
4 | USSI | [ | ] | [ | ] | [ | ] | ||||||||
4/7/2013 |
54 | Sparton | [ | ] | [ | ] | [ | ] | ||||||||
TOTAL: |
[ | ] | [ | ] | [ | ] |
SECTION J - LIST OF DOCUMENTS, EXHIBITS AND OTHER ATTACHMENTS
The following have been modified:
EXHIBITS AND ATTACHMENTS
Exhibit A Contract Data Requirements List (CDRL):
CDRL |
Description | |
A001 |
Design Data and Calculations | |
A002 |
Test Plan | |
A003 |
Test/Inspection Report | |
A004 |
Failure Analysis and Corrective Action Report | |
A005 |
Engineering Change Proposal | |
A006 |
Request for Deviation | |
A007 |
Request for Waiver | |
A008 |
Quality System Plan | |
A009 |
Photographic Requirements | |
A00A |
Bar Code Identification Report | |
A00B |
Test Scheduling Report (90 Day Forecast) | |
A00C |
Scientific/Technical Report (Deviation Summary) | |
A00D |
Status Report (Monthly Status Report) | |
A00E |
Production Status Report (IBP PP Questionnaire) |
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
N00421-11-C-0030
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Page 6 of 7
A00F |
Test/Inspection Report (Q-53F Calibration data) | |
A00G |
Operations Security (OPSEC) Plan |
Attachments:
1 |
Production Sonobuoy Specification (PSS) for Bathythermograph Transmitting Set AN/SSQ-36B and Sonobuoys AN/SSQ-53F, 62E, 77C and 101A Oct 2008 (Revised 17 Mar 2011 REV A, CHG 1 | |
2 |
PSS Appendix A Launcher Container, A Size Sonobuoy LAU-126/A A Size Sonobuoy Launcher Container (SLC) Rev. A, Change 0 dated 14 August 2009 | |
3 |
PSS Appendix B Sonobuoy Decelerator Effective Drag Area, Ballistic Coefficient and Parachute Construction Requirements dated 1 October 2008 | |
4 |
PSS Appendix C Production Sonobuoy Program Marking Requirements dated 3 Mar 2011, REV B, CHG0 | |
5 |
PSS Appendix D Product Assurance Requirements for Sonobuoy Procurements dated 3 Mar 2011 REV A, CHG1 | |
6 |
PSS Appendix E Requirements for the Sonobuoy Command Function Selection System Rev. A, Change 0 dated 14 August 2009 | |
7 |
PSS Appendix F Hazards of Electromagnetic Radiation to Ordnance (HERO) Certification Requirements for Production and Development Sonobuoys dated 1 October 2008 | |
8 |
PSS Appendix G Pallet Loading Requirements dated 1 October 2008 | |
9 |
PSS Appendix H Sonobuoy Requirements for the Control of Radiated Electromagnetic Interference (EMI) Rev. A, Change 0 dated 14 August 2009 | |
10 |
Contract Security Classification Specification (DD Form 254) | |
11 |
Standard Operating Procedure for Laboratory & Ocean Testing of Sonobuoys, SLCs and Associated Packaging (4.5.14-SOP-004 REV E, CHG 0) dated 1 October 2008 | |
12 |
Open Ocean Test Defect Criteria (4.5.14-SOP-005 REV A, CHG 2) dated 1 September 2009 | |
13 |
Reserved | |
14 |
Reserved | |
15 |
GPS Sonobuoy Requirement for Analog VHF Uplink Rev. C dated 25 September 2006 | |
16 |
Reserved | |
17 |
Air Antisubmarine Warfare (ASW) Configuration Management Plan (PMA264-CMP REV-, CHG 0) dated July 2009 | |
18 |
Subcontracting Plan (USSI) | |
19 |
Subcontracting Plan (Sparton) | |
20 |
COR Appointment Letter (Kimble) | |
21 |
COR Appointment Letter (Perry) | |
22 |
Request for Deviation D-0030-2 (Approved 07/01/11) | |
23 |
Request for Deviation D-0030-1R1 (Approved 07/01/11) |
Drawings and Data Lists: |
Description | |
NAVSEA Drawing 7375874 No Rev. |
Base, Bayonet | |
NAVAIR Drawing 1458AS202 Rev. C |
Container assembly, sonobuoy, unsealed, CNU/239E | |
NAVAIR DL 1458AS202 No Rev. |
Data List for Drawing 1458AS202 | |
NAVSEA DL 7375860 No Rev. |
Data List 36 and 48 Unit Pallet Assembly | |
NAVSEA Drawings 7375861 7375876 No. Rev. |
36 and 48 Unit Pallet Assembly | |
NAVAIR Drawing 3065AS100 Rev. A |
A Size Store Launch Container | |
ASTM D3953 |
Standard Specification for Strapping, Flat Steel and Seals |
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
N00421-11-C-0030
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Page 7 of 7
DIDs may be accessed electronically at the following website:
http://assist.daps.dla.mil/quicksearch/
(End of Summary of Changes)
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
Exhibit 10.16
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
AMENDMENT OF SOLICITATION/MODIFICATION OF CONTRACT | 1. CONTRACT ID CODE | PAGE OF PAGES | ||||
J | 1 | 2 |
2. AMENDMENT/MODIFICATION NO. |
3. EFFECTIVE DATE | 4. REQUISITION/PURCHASE REQ. NO. | 5. PROJECT NO.(If applicable) | |||||||
P00004 |
18-Aug-2011 | SEE SCHEDULE | ||||||||
6. ISSUED BY | CODE | N00421 | 7. ADMINISTERED BY (If other than item 6) | CODE | S3605A | |||||
DCMA DAYTON | ||||||||||
NAVAL AIR WARFARE CENTER AD (PAX) | AREA C, BUILDING 30 | |||||||||
CODE 2.5.1.9 - BLDG 441 | 1725 VAN PATTON DRIVE | |||||||||
21983 BUNDY RD | WRIGHT-PATTERSON AFB OH 45433-5302 | |||||||||
PATUXENT RIVER MD 20670 | ||||||||||
8. NAME AND ADDRESS OF
CONTRACTOR (No., Street, County, State and Zip Code) ERAPSCO DAVID JOST 4578 EAST PARK 30 DR COLUMBIA CITY IN 46725-8869 |
9A. AMENDMENT OF SOLICITATION NO.
| |||||
9B. DATED (SEE ITEM 11)
| ||||||
X | 10A. MOD. OF CONTRACT/ORDER NO. N00421-11-C-0030 | |||||
X |
10B. DATED (SEE ITEM 13) 08-Apr-2011 | |||||
CODE 0CCL9 | FACILITY CODE | |||||
11. THIS ITEM ONLY APPLIES TO AMENDMENTS OF SOLICITATIONS |
¨ The above numbered solicitation is amended as set forth in Item 14. The hour and date specified for receipt of Offer | ¨ is extended, | ¨ is not extended. | ||
Offer must acknowledge receipt of this amendment prior to the hour and date specified in the solicitation or as amended by one of the following methods: | ||||
(a) By completing Items 8 and 15, and returning copies of the amendment; (b) By acknowledging receipt of this amendment on each copy of the offer submitted; or (c) By separate letter or telegram which includes a reference to the solicitation and amendment numbers. FAILURE OF YOUR ACKNOWLEDGMENT TO BE RECEIVED AT THE PLACE DESIGNATED FOR THE RECEIPT OF OFFERS PRIOR TO THE HOUR AND DATE SPECIFIED MAY RESULT IN REJECTION OF YOUR OFFER. If by virtue of this amendment you desire to change an offer already submitted, such change may be made by telegram or letter, provided each telegram or letter makes reference to the solicitation and this amendment, and is received prior to the opening hour and date specified. | ||||
12. ACCOUNTING AND APPROPRIATION DATA (If required)
| ||||
13. THIS ITEM APPLIES ONLY TO MODIFICATIONS OF CONTRACTS/ORDERS. | ||||
IT MODIFIES THE CONTRACT/ORDER NO. AS DESCRIBED IN ITEM 14. |
A. THIS CHANGE ORDER IS ISSUED PURSUANT TO: (Specify authority) THE CHANGES SET FORTH IN ITEM 14 ARE MADE IN THE CONTRACT ORDER NO. IN ITEM 10A.
| ||
B. THE ABOVE NUMBERED CONTRACT/ORDER IS MODIFIED TO REFLECT THE ADMINISTRATIVE CHANGES (such as changes in paying office, appropriation date, etc.) SET FORTH IN ITEM 14, PURSUANT TO THE AUTHORITY OF FAR 43.103(B).
| ||
C. THIS SUPPLEMENTAL AGREEMENT IS ENTERED INTO PURSUANT TO AUTHORITY OF:
| ||
X |
D. OTHER (Specify type of modification and authority) | |
mutual agreement of the parties. | ||
E. IMPORTANT: Contractor ¨ is not, x is required to sign this document and return 1 copies to the issuing office. | ||
14. DESCRIPTION OF AMENDMENT/MODIFICATION (Organized by UCF section headings, including solicitation/contract subject matter where feasible.) | ||
Modification Control Number: jacksonr119473 | ||
The purpose of this modification is to update the performance based payment schedule to include milestones 19, 20, 21 and 22 due to the award of additional Q53F buoys against CLIN 0006AA and 0006AB. | ||
Except as provided herein, all terms and conditions of the document referenced in Item 9A or 10A, as heretofore changed, remains unchanged and in full force and effect. |
15A. NAME AND TITLE OF SIGNER (Type or print) | 16A. NAME AND TITLE OF CONTRACTING OFFICER (Type or print) | |||||||
SABANA N. MOORE-BARNES / CONTRACT SPECIALIST
| ||||||||
Mark Belyea, Contract Manager | TEL: (301) 757-2611 | EMAIL: sabana.moore-barnes@navy.mil | ||||||
15B. CONTRACTOR/OFFEROR | 15C. DATE SIGNED | 16B. UNITED STATES OF AMERICA | 16C. DATE SIGNED | |||||
/s/ Mark Belyea | BY
![]() |
|||||||
(Signature of person authorized to sign) | 18-Aug-2011 | (Signature of Contracting Officer) | 18-Aug-2011 | |||||
EXCEPTION TO SF 30 |
30-105-04 | STANDARD FORM 30 (Rev. 10-83) | ||
APPROVED BY OIRM 11-84 |
Prescribed by GSA | |||
FAR (48 CFR) 53.243 |
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
N00421-11-C-0030
P00004
Page 2 of 3
SECTION SF 30 BLOCK 14 CONTINUATION PAGE
SUMMARY OF CHANGES
SECTION G - CONTRACT ADMINISTRATION DATA
The following replaces the previous performance based payment schedule in Section G:
Event # |
Event Type, Serverable (S) or Cumulative (C) |
Milestone Sparton (S) or USSI (U) |
Estimated Date |
Method of Evaluation |
Event Value | |||||||
1 | S | Q53F, 62E, 36B Kick Off Meeting S | NLT 60 Days after Task Order Award | Power Point Presentation | $ | [ | ] | |||||
2 | S | Q53F and 62E Kick Off Meeting U | NLT 60 Days after Task Order Award | Power Point Presentation | $ | [ | ] | |||||
3 | S | Q36B Long Lead Material Order S | NLT 180 Days after Task Order Award | PO Report review by PMA264 | $ | [ | ] | |||||
4 | S | Q53F Long Lead Material Order S | NLT 180 Days after Task Order Award | PO Report review by PMA264 | $ | [ | ] | |||||
5 | S | Q53F Long Lead Material Order U | NLT 180 Days after Task Order Award | PO Report review by PMA264 | $ | [ | ] | |||||
6 | S | Q62E Long Lead Material Order S | NLT 180 Days after Task Order Award | PO Report review by PMA264 | $ | [ | ] | |||||
7 | S | Q62E Long Lead Material Order U | NLT 180 Days after Task Order Award | PO Report review by PMA264 | $ | [ | ] | |||||
8 | S | Q36B Acceptance of Production Readiness Review S | NLT 45 Days prior to submission of Lot 1 test samples | Power Point Presentation | $ | [ | ] | |||||
9 | S | Q53F Acceptance of Production Readiness Review S | NLT 45 Days prior to submission of Lot 1 test samples | Power Point Presentation | $ | [ | ] | |||||
10 | S | Q53F Acceptance of Production Readiness Review U | NLT 45 Days prior to submission of Lot 1 test samples | Power Point Presentation | $ | [ | ] | |||||
11 | S | Q62E Acceptance of Production Readiness Review S | NLT 45 Days prior to submission of Lot 1 test samples | Power Point Presentation | $ | [ | ] | |||||
12 | S | Q62E Acceptance of Production Readiness Review U | NLT 45 Days prior to submission of Lot 1 test samples | Power Point Presentation | $ | [ | ] | |||||
13 | S | Q36B Start Lot 1 Production S | NLT 45 Days after PRR acceptance | Production Date Certified by DCMA QAR | $ | [ | ] | |||||
14 | S | Q53F Start Lot 1 Production S | NLT 45 Days after PRR acceptance | Production Date Certified by DCMA QAR | $ | [ | ] | |||||
15 | S | Q53F Start Lot 1 Production U | NLT 45 Days after PRR acceptance | Production Date Certified by DCMA QAR | $ | [ | ] | |||||
16 | S | Q62E Start Lot 1 Production S | NLT 45 Days after PRR acceptance | Production Date Certified by DCMA QAR | $ | [ | ] | |||||
17 | S | Q62E Start Lot 1 Production U | NLT 45 Days after PRR acceptance | Production Date Certified by DCMA QAR | $ | [ | ] | |||||
18 | S | Q53F CLIN 6AA/6AB Long Lead Material Ordered U | NLT Than 180 days after modification award | PO Report review by PMA264 | $ | [ | ] | |||||
19 | S | Q53F CLIN 6AA/6AB Long Lead Material Ordered S | NLT Than 180 days after modification award | PO Report review by PMA264 | $ | [ | ] | |||||
20 | S | Q53F CLIN 6AA/6AB Start Production U | NLT Than 180 days after modification award | Production Date Certified by DCMA QAR | $ | [ | ] | |||||
21 | S | Q53F CLIN 6AA/6AB Start Production S | NLT Than 180 days after modification award | Production Date Certified by DCMA QAR | $ | [ | ] | |||||
PBP Schedule is to be treated on a whole contract basis whereas recoupment can be taken from any ACRN. |
$ | [ | ] | |||||||||
Cumulative: |
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
N00421-11-C-0030
P00004
Page 3 of 3
(Final [ ]% of Payment to be liquidated upon shipment) |
(End of Summary of Changes)
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
Exhibit 10.17
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
4578 East Park 30 Drive | ||||||
Columbia City, Indiana | ||||||
USA 46725-8869 |
Subcontractor: |
Sparton Electronics Florida, Inc. | |
Subcontract Number: |
ERAPS011-106 | |
Subcontract Modification: |
Initial | |
Effective Date: |
8 April 2011 | |
Customer: |
US Navy - NAWCAD | |
Customer Contract Number: |
N00421-11-D-0030 | |
Program: |
Common Sonobuoy | |
Total Contract Value: |
$55,481,634.64 | |
USSI: |
$24,402,325.15 | |
Sparton: |
$31,079,309.49 |
This subcontract is entered into by and between ERAPSCO (ERAPSCO or Buyer), a general partnership comprised of Sparton Electronics Florida, Inc. and UnderSea Sensor Systems Inc. (USSI or Seller), with offices located at 4578 East Park 30 Drive, Columbia City, Indiana 46725 and Sparton Electronics Florida, Inc., 5612 Johnson Lake Road, DeLeon Springs, Florida 32130 (Sparton or Seller). As such, ERAPSCO provides authorization for the Seller to perform requirements identified in the attached customer contract and as summarized herein.
ERAPSCO | Sparton Electronics, Florida, Inc.. | |||||||
By: | /s/ Dave Jost | By: | /s/ J. Lackemacher | |||||
Name: | Dave Jost | Name: | J. Lackemacher |
A Sparton Electronics Florida, Inc. and Ultra Electronics UnderSea Sensor Systems Joint Venture
Columbia City, Indiana 260-248-3645: DeLeon Springs, Florida 386-740-5335
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
4578 East Park 30 Drive Columbia City, Indiana USA 46725-8869 | ||||||||
Title: | General Manager | Title: | VP DSS | |||||
Date: | Date: |
A Sparton Electronics Florida, Inc. and Ultra Electronics UnderSea Sensor Systems Joint Venture
Columbia City, Indiana 260-248-3645: DeLeon Springs, Florida 386-740-5335
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
Page 3 of 4
Customer Information
Customer Name: |
NSWC (Pax) | Bid Log No.: 10,692 | ||
Customer Contact: |
Jessica Flynn | Contract: N00421-11-D-0030 | ||
Purchasing Contact: |
same | Technical Contact: Chuck Kimble | ||
Phone: 301-757-2526 |
Phone: | |||
Fax: |
Fax: |
Product Information
Model No.: |
AN/SSQ-36B AN/SSQ-62E AN/SSQ-53F |
USML Category: | XI(2)(a) | NSN: N/A | ||||
Product Name: Bathythermograph, DICASS, DTFAR |
||||||||
Packaging: |
Per Contract PSS Rev A Chg 1 17 March 2011 and Appendix D and C Rev 3 March 2011 | |||||||
Product Specification: Per Contract PSS Rev A Chg 1 dated 17 March 2011 and associated Appendix | ||||||||
Requested Modification(s): |
Data Items: per CDRL |
Requested Schedule
Description: |
Common Sonobuoy | Quantity: | Start: 08 April 11 | Complete: 31 March 13 | ||||
Production: |
yes | |||||||
Notes: SEE PRODUCTION DELIVERABLE EXHIBIT |
Contract Requirements
Description: |
Common Sonobuoy | Comments: | Surge Order period valid through 30 Sept 2011 | |||
FOB Point: |
Columbia City/DeLeon Spings | EX-Works: | N/A | |||
End User: |
US Navy - NAWCAD | Destination: | ||||
Freight Forwarder: N/A |
Domestic: | N/A | ||||
Phone: |
||||||
Export License Application: N/A |
Performance Bond: N/A | |||||
Payment Terms: Net 30 |
||||||
Certifications: QAR at Source |
CLIN 0001 AN/SSQ-36B Qty: [ ]/CLIN 0002 AN/SSQ-36B Qty: [ ]
CLIN 0005 AN/SSQ-53F Qty: [ ]/CLIN 0006 AN/SSQ-53F Qty [ ]
A Sparton Electronics Florida, Inc. and Ultra Electronics UnderSea Sensor Systems Joint Venture
Columbia City, Indiana 260-248-3645: DeLeon Springs, Florida 386-740-5335
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
Page 4 of 4
CLIN 0009 AN/SSQ-62E Qty: [ ] / CLIN 0010 AN/SSQ-62E Qty: [ ]
CLIN 0026 CDRLs
Notes:
1) test sample Qty: [ ]
2) Q36B AQL 6.5 on all Lots
3) Performance Based Payments (See PBP Exhibit)
Pricing
Description: Common Sonobuoy |
Assumptions: | |||||
Price: |
CLIN 0001: [ ] X $[ ] = $[ ] | Del: | March 12 - March 2013 | |||
Price: |
CLIN 005: [ ] X $[ ] = $[ ] | Del: | March 12 - March 2013 | |||
Price: |
CLIN 009: [ ] X $[ ] = $[ ] | Del: | March 12 - March 2013 |
Note: Add $24,714.60 for buoy unit price adjustment
Special Instructions: See ERAPS011-107 for USSI content
A Sparton Electronics Florida, Inc. and Ultra Electronics UnderSea Sensor Systems Joint Venture
Columbia City, Indiana 260-248-3645: DeLeon Springs, Florida 386-740-5335
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
Exhibit 10.18
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
4578 East Park 30 Drive Columbia City, Indiana USA 46725-8869 |
Subcontractor: |
Sparton Electronics Florida, Inc. | |
Subcontract Number: |
ERAPS011-106 | |
Subcontract Modification: |
Mod 1 (P00002) | |
Effective Date: |
20 June 2011 | |
Customer: |
US Navy - NAWCAD | |
Customer Contract Number: |
N00421-11-C-0030 | |
Program: |
Common Buoy | |
Total Contract Value: |
$57,805,478.64 | |
USSI: |
$25,564,769.61 | |
Sparton: |
$32,240,709.03 |
This subcontract is entered into by and between ERAPSCO (ERAPSCO or Buyer), a general partnership comprised of Sparton Electronics Florida, Inc. and UnderSea Sensor Systems Inc. (USSI or Seller), with offices located at 4578 East Park 30 Drive, Columbia City, Indiana 46725 and Sparton Electronics Florida, Inc., 5612 Johnson Lake Road, DeLeon Springs, Florida 32130 (Sparton or Seller). As such, ERAPSCO provides authorization for the Seller to perform requirements identified in the attached customer contract and as summarized herein.
ERAPSCO | Sparton Electronics, Florida, Inc.. | |||||||
By: | /s/ Dave Jost | By: | /s/ J. Lackemacher | |||||
Name: | Dave Jost | Name: | J. Lackemacher | |||||
Title: | General Manager | Title: | VP DSS | |||||
Date: | _________________ | Date: | _________________ |
A Sparton Electronics Florida, Inc. and Ultra Electronics UnderSea Sensor Systems Joint Venture
Columbia City, Indiana 260-248-3645: DeLeon Springs, Florida 386-740-5335
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
Page 2 of 3
Customer Information | ||
Customer Name: NSWC (Pax) |
Bid Log No.: 10,692 | |
Customer Contact: Jessica Flynn |
Contract: N00421-11-D-0030 | |
Technical Contact: | ||
Purchasing Contact: same |
Chuck Kimble | |
Phone: 301-757-2526 |
Phone: | |
Fax: |
Fax: |
Product Information
Model No.: |
AN/SSQ-36B AN/SSQ-62E AN/SSQ-53F |
USML Category: | XI(2)(a) | NSN: | N/A |
Product Name: |
Bathythermograph, DICASS, DTFAR |
Packaging: |
Per Contract PSS Rev A Chg 1 17 March 2011 and Appendix D and C Rev 3 March 2011 |
Product Specification: |
Per Contract PSS Rev A Chg 1 dated 17 March 2011 and associated Appendix |
Requested Modification(s): |
Data Items: per CDRL |
Requested Schedule | ||
Description: |
Common Sonobuoy Quantity: Start: 08 April 11 Complete: 31 March 13 | |
Production: |
yes |
Notes: |
SEE PRODUCTION DELIVERABLE EXHIBIT |
Contract Requirements | ||
Description: Common Sonobuoy | Comments: Surge Order period valid through 30 Sept 2011 | |
FOB Point: Columbia City/DeLeon Spings | EX-Works: N/A | |
End User: US Navy - NAWCAD | Destination: | |
Freight Forwarder: N/A | Domestic: N/A | |
Phone: | ||
Export License Application: N/A | Performance Bond: N/A | |
Payment Terms: Net 30 | ||
Certifications: QAR at Source |
CLIN 0001 AN/SSQ-36B Qty: [ ] / CLIN 0002 CLIN 0005 AN/SSQ-53F Qty: [ ] CLIN 0006- AN/SSQ- 53F Qty: [ ] CLIN 0009 AN/SSQ-62E Qty: [ ] |
A Sparton Electronics Florida, Inc. and Ultra Electronics UnderSea Sensor Systems Joint Venture
Columbia City, Indiana 260-248-3645: DeLeon Springs, Florida 386-740-5335
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
CERTAIN PORTIONS OF THESE MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED AND HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A [ ] AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF SPARTON CORPORATION.
Page 3 of 3
CLIN 0026 CDRLs Notes: 1) test sample Qty: [ ] 2) Q36B AQL 6.5 on all Lots 3) Performance Based Payments (See PBP Exhibit) | ||||||
Pricing |
Description: Common Sonobuoy |
Assumptions: | |||||||
Price: |
CLIN 0001: [ ] X $[ ] = $[ ] | Del: | March 12 -March 2013 | |||||
Price: |
CLIN 0005: [ ] X $[ ] = $[ ] + CLIN 0006: [ ] X $[ ] + $[ ] = $[ ] |
Del: | March 12 -March 2013 | |||||
Price: |
CLIN 0009: [ ] X $[ ] = $[ ] | Del: | March 12 -March 2013 | |||||
Note: Add $25,222.28 for buoy unit price adjustment See ERAPS011-107 for USSI content Special Instructions: Per ERAPS010- $2,156,544 of cash to be returned upon Sparton completion of PBP KO Milestone |
M1- Addition of Sweep up money ($[ ]). Sparton [ ] 53F buoys @ a total $ amount of $[ ] and USSI [ ] buoys @ a total dollar amount of $[ ].
A Sparton Electronics Florida, Inc. and Ultra Electronics UnderSea Sensor Systems Joint Venture
Columbia City, Indiana 260-248-3645: DeLeon Springs, Florida 386-740-5335
[ ] CONFIDENTIAL TREATMENT REQUESTED BY SPARTON CORPORATION.
Exhibit 10.19
EXECUTIVE EMPLOYMENT AGREEMENT
THIS AGREEMENT shall be effective as of December 8, 2008 (the Effective Date), and is made between SPARTON CORPORATION, an Ohio corporation, whose headquarters are located at 2400 East Ganson, Jackson, Michigan 49203, hereafter called the Corporation, as the employer, and STEVEN KORWIN, whose current address is 10710 Michigan Drive, Spring Grove, IL 60081, hereafter called the Executive, as the employee.
WHEREAS:
(a) The Corporation wishes to retain the services of the Executive in the capacity of a Group Vice President/Electronics SBU; and
(b) the Executive wishes to be employed by the Corporation in that capacity; and
(c) the parties desire to set forth the terms and conditions of the employment of the Executive by the Corporation in writing;
NOW THEREFORE, in consideration of the mutual covenants and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows:
ARTICLE 1
EMPLOYMENT AND DUTIES
1.1 The Corporation hereby agrees to employ the Executive as Group Vice President/Electronics SBU, and the Executive agrees to such employment, all in accordance with the express terms, conditions, duties and obligations set forth in this Agreement. The parties agree that the relationship between the Corporation and the Executive created by this Agreement is that of employer and employee.
1.2 The Executive shall be based at the Corporations headquarters located at 2400 East Ganson, in Jackson, Michigan. Some travel may be required, however, the Executives main place of employment shall be the corporate headquarters in Jackson, Michigan.
1.3 The Executive shall, during the term of this Agreement:
(a) | perform all duties and responsibilities assigned to him as Group Vice President/Electronics SBU, and shall report directly to the CEO of the Corporation. The Executive also will be required to perform such other related duties and responsibilities as may be assigned to the Executive by the CEO and the President of the Corporation, or their designee, from time to time, which related duties and responsibilities shall be in keeping with the general nature of the duties of Group Vice President/Electronics SBU. |
(b) | devote the whole of his working time, attention and ability to the performance of his employment duties and responsibilities as set out herein, and truly and faithfully serve the best interests of the Corporation at all times. |
1.4 The Executive agrees to comply with all applicable laws, exercise the utmost degree of integrity, honesty, fidelity and good faith, and perform his duties with the utmost degree of expertise, care and ability that may be expected of a person having the education, training and experience equivalent to the education, training and experience of the Executive.
ARTICLE 2
TERM
2.1 The Executives employment shall be at will employment, with no set term. The employment relationship may be terminated by either the Executive or the Corporation at any time, for any reason or for no reason, as is further set forth herein.
ARTICLE 3
COMPENSATION
3.1 The Executive shall be paid a base salary of One Hundred Seventy-Five Thousand ($175,000.00) Dollars per year, (the Base Salary) subject to all applicable statutory withholding, and an annual automobile allowance of Nine Thousand Six Hundred ($9,600.00) Dollars, both of which shall be paid in accordance with the Corporations regular payroll periods. The compensation payable to the Executive as contemplated by this Agreement shall be subject to annual review by the CEO.
3.2 In addition to the Base Salary provided for in Article 3.1 above, the Executive will be eligible for:
(a) | A performance bonus of Thirty-five (35%) percent of Executives Base Salary, provided certain target objectives, which will be established by the CEO, have been attained. Fifty (50%) percent of the bonus amount, on a pro-rated basis, is guaranteed for the fiscal year ending June 30, 2009. The bonus will be paid after a determination has been made regarding whether the required objectives were met, but in any event not later than ninety days after the end of the particular fiscal year for which the bonus is being paid. |
(b) | Participation in the Corporations relocation benefits package, as outlined in the Relocation and Moving Expense policy and agreement, previously provided to the Executive. |
2
ARTICLE 4
BENEFITS
4.1 The Executive shall be entitled to receive or to participate in all employee benefits offered to the salaried employees of the Corporation for which he qualifies, under the same terms and subject to the same conditions as are then in effect for other salaried employees, and as such benefits may exist from time to time during the period of his employment, including, without limitation, the Corporations health insurance coverage plan, disability plan, the 401 K plan, and any applicable incentive programs.
ARTICLE 5
VACATION
5.1 The Executive shall be eligible for two weeks of vacation, immediately upon the Effective Date of this Agreement. Eligibility for additional vacation time will be reviewed after the first year of employment. Any accrued but unused vacation remaining at the end of each year shall be subject to the Corporations policy regarding accrual of paid time off.
ARTICLE 6
TERMINATION
6.1 Either the Executive or the Corporation shall be entitled, upon written notice to the other party, to terminate this Agreement at any time, for any reason or for no reason, as the Executives employment is at will. The Executives employment with the Corporation also may be terminated by the Corporation at any time, for just cause. For the purposes of this Agreement just cause shall mean any of the following: the commission of any illegal act; the commission of any act of dishonesty, fraud, gross negligence, or willful deceit in connection with his employment; use of alcohol or drugs to the extent such use adversely affects the Executives ability to perform his duties or adversely affects the business reputation of the Executive or the Corporation; a material and willful failure of the Executive to perform his assigned duties; use of illegal drugs or conviction of a crime which is a felony or which involves theft, dishonesty, unethical conduct, or moral turpitude; willful violation of any of the provisions of the Sarbanes Oxley Act which are applicable to the Executive; willful and material violation of the Corporations written policies; or a willful and material breach of this Agreement by Executive.
6.2 In the event of the death or disability of the Executive, the Corporation shall be entitled to terminate this Agreement. Upon such termination, the Corporation shall pay to the Executive, or in the event termination is due to death, to his legal personal representative, that portion of the Executives Base Salary owed up to and including the date of termination. This payment will be made within thirty days following termination of employment. Following such payment, the Corporation shall have no further obligation to the Executive or his heirs and beneficiaries, under this Agreement. For the purposes of this Agreement, Disability shall be defined as the inability of the Executive to effectively perform his duties due to physical or mental illness or injury, in the sole judgment of the Corporation, for a total of 90 days out of any 180 day period. Eligibility for any benefits which may be available to the Executive or his
3
survivors through any employee plans or benefit programs of the Corporation due to death or disability, will be determined in accordance with the terms of such plans or programs.
6.3 If the Corporation terminates the Executives employment for any reason other than just cause, death, or disability, the Corporation shall pay to the Executive a one-time, lump-sum payment equivalent to nine months of Base Salary, less applicable withholding, which payment is conditioned upon receipt from the Executive of a signed release, releasing all claims against the corporation arising out of the Executives employment and the return to the Corporation of any property belonging to the Corporation which is in the Executives possession or under his control.
6.4 Unless otherwise consented to by the Corporation in writing, the Executive shall be entitled, upon thirty (30) days written notice to the Corporation, to terminate this Agreement and his employment with the Corporation for any reason or for no reason, and in the event of such termination the Corporation shall only be required to pay the Executive, on a pro-rata basis, his Base Salary which has accrued up to the date of termination.
6.5 Upon termination of this Agreement for whatever reason, the Executive shall immediately deliver to the Corporation, all property of the Corporation which the Executive has in his possession or under his control.
ARTICLE 7
CONFIDENTIALITY AND COVENANT -NOT -TO-COMPETE
7.1 The Executive will execute the confidentiality agreement(s) and any such other agreements as are normally required to be executed by other Sparton salaried employees. During the period of his employment and thereafter, the Executive will abide by the terms of the said agreements and keep confidential all confidential information pertaining to the Corporation which the Executive learned while employed by the Corporation, as such confidential information is defined in the applicable confidentiality agreement(s). The promises, rights and obligations stated in Article 7 shall survive the termination of this Agreement.
7.2 The Executive shall not, directly or indirectly, within the territory comprising the United States and Canada, for a period of two (2) years following the date of termination of his employment for whatever reason, either individually or in partnership or jointly or in conjunction with any person or persons, firm, association, joint venture, syndicate, company or corporation as principal, agent, shareholder, employee, or consultant, engage in any of the same business endeavors engaged in by Sparton Corporation and any of its subsidiaries, or:
(a) | induce or attempt to influence or induce any of the employees of the Corporation (including its subsidiaries) to leave their employment; or |
(b) | hire, employ or utilize the services of any employee of the Corporation (including its subsidiaries). |
7.3 It is agreed between the parties that the terms of this section are reasonable and that the Executive has received adequate consideration for the covenants and obligations undertaken by him, as contained herein. The Executive acknowledges that a breach or threatened
4
breach by the Executive of the provisions of this Article may result in the Corporation suffering irreparable harm which cannot be calculated or fully or adequately compensated by recovery of damages alone. Accordingly, the Executive agrees that the Corporation shall be entitled to interim or permanent injunctive relief, specific performance and other equitable remedies, in addition to any other relief to which the Corporation may become entitled, in the event of any such breach.
ARTICLE 8
NOTICE
8.1 Any notice required to be given hereunder shall be in writing and may be delivered personally or sent by facsimile transmission or other means of recorded electronic communications or sent by registered mail to the parties hereto at the following addresses:
TO THE CORPORATION:
Sparton Corporation
2400 East Ganson
Jackson, MI 49203
Attention: Cary Wood, CEO
TO THE EXECUTIVE:
Steven Korwin
10710 Michigan Drive
Spring Grove, IL 60081
Any notice given shall be deemed to have been given and received on the business day on which it was so delivered, and if not a business day, then on the business day next following the day of delivery, and, if sent by electronic communications or facsimile shall be deemed to have been received on the next business day following the date of transmission and if mailed, shall be deemed to have been given and received on the fifth day following the day on which it was so mailed.
8.2 Either party may change their address for notice in the aforesaid manner.
ARTICLE 9
GENERAL
9.1 Time shall be of the essence in the performance of this Agreement.
9.2 This Agreement constitutes the entire agreement between the parties hereto with respect to the matters contained herein and supersedes and replaces any previous agreements, contracts, oral understandings or discussions. This Agreement may not be amended or modified in any respect except by written instrument signed by the parties hereto.
9.3 This Agreement shall be construed and enforced in accordance with the laws of the State of Michigan, without regard to choice of law or conflicts of laws principles, and the
5
parties hereby irrevocably consent to the jurisdiction of the Courts of the County of Jackson, Michigan, or for those matters which would be properly brought in federal court, to the jurisdiction of the Federal Courts of the Eastern District of Michigan.
9.4 This language of this Agreement reflects the mutual intent of the parties and shall not be strictly construed against either party, therefore no rule of strict construction shall apply in construing the terms of this Agreement.
9.5 This is a personal services agreement and may not be assigned by either party without the prior written consent of the other party.
9.6 This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, legal personal representatives, successors and permitted assigns.
9.7 If for any reason, any provision or part of this Agreement shall be held to be invalid, illegal or unenforceable, the validity, legality or enforceability of the remaining provisions or part provisions of this Agreement shall not in any way be affected or impaired thereby.
9.8 The waiver by either party of any breach of the provisions of this Agreement shall not operate or be construed as a waiver by that party of any other breach of the same or any other provision of this Agreement.
9.9 Except as specifically altered in this Agreement, nothing in this Agreement shall detract from, alter, modify or amend any obligations or duties owed by the Executive to the Corporation, pursuant to any statute, regulation, or at common law or equity.
9.10 This Agreement may be executed in any number of counter-parts, all of which when taken together, shall constitute one original Agreement.
IN WITNESS WHEREOF the parties hereto acknowledge and agree that they have read and understand the terms of this Agreement, and that they have executed this Agreement of their own free act, on the dates set forth below, to be effective as of the Effective Date set forth herein.
SPARTON CORPORATION | ||||||||
Date: 12/9/08 | By: | /s/ Cary Wood | ||||||
Cary Wood Its: CEO | ||||||||
EXECUTIVE | ||||||||
Date: 12/9/08 | By: | /s/ Steven M. Korwin | ||||||
Steven Korwin, an individual |
6
Exhibit 10.20
EXECUTIVE EMPLOYMENT AGREEMENT
THIS AGREEMENT shall be effective as of January 5, 2009 (the Effective Date), and is made between SPARTON CORPORATION, an Ohio corporation, whose headquarters are located at 2400 East Ganson, Jackson, Michigan 49203, hereafter called the Corporation, as the employer, and MICHAEL OSBORNE, whose current address is 490 Fox Trail Drive, Batavia, IL 60510, hereafter called the Executive, as the employee.
WHEREAS:
(a) The Corporation wishes to retain the services of the Executive in the capacity of Sr. Vice President/Supply Chain and Business Development; and
(b) the Executive wishes to be employed by the Corporation in that capacity; and
(c) the parties desire to set forth the terms and conditions of the employment of the Executive by the Corporation in writing;
NOW THEREFORE, in consideration of the mutual covenants and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows:
ARTICLE 1
EMPLOYMENT AND DUTIES
1.1 The Corporation hereby agrees to employ the Executive as Sr. Vice President/Supply Chain and Business Development, and the Executive agrees to such employment, all in accordance with the express terms, conditions, duties and obligations set forth in this Agreement. The parties agree that the relationship between the Corporation and the Executive created by this Agreement is that of employer and employee.
1.2 The Executive shall be based at the Corporations headquarters located at 2400 East Ganson, in Jackson, Michigan. Some travel may be required, however, the Executives main place of employment shall be the corporate headquarters in Jackson, Michigan.
1.3 The Executive shall, during the term of this Agreement:
(a) | perform all duties and responsibilities assigned to him as Sr. Vice President/Supply Chain and Business Development, and shall report directly to Cary Wood, the Chief Executive Officer. The Executive also will be required to perform such other related duties and responsibilities as may be assigned to the Executive by the CEO and the President of the Corporation, or their designee, from time to time, which related duties and responsibilities shall be in keeping with the general nature of the duties of Sr. Vice President/Supply Chain and Business Development. |
(b) | devote the whole of his working time, attention and ability to the performance of his employment duties and responsibilities as set out |
herein, and truly and faithfully serve the best interests of the Corporation at all times. |
1.4 The Executive agrees to comply with all applicable laws, exercise the utmost degree of integrity, honesty, fidelity and good faith, and perform his duties with the utmost degree of expertise, care and ability that may be expected of a person having the education, training and experience equivalent to the education, training and experience of the Executive.
ARTICLE 2
TERM
2.1 The Executives employment shall be at will employment, with no set term. The employment relationship may be terminated by either the Executive or the Corporation at any time, for any reason or for no reason, as is further set forth herein.
ARTICLE 3
COMPENSATION
3.1 The Executive shall be paid a base salary of Two Hundred Twenty-Five Thousand ($225,000.00) Dollars per year, (the Base Salary) subject to all applicable statutory withholding, which shall be paid in accordance with the Corporations regular payroll periods. The compensation payable to the Executive as contemplated by this Agreement shall be subject to annual review by the CEO.
3.2 In addition to the Base Salary provided for in Article 3.1 above, the Executive will be eligible for a performance bonus of Forty (40%) percent of Executives Base Salary provided certain target objectives, which will be established by the CEO, have been attained. The bonus will be paid after a determination has been made regarding whether the required objectives were met, but in any event not later than ninety days after the end of the particular fiscal year for which the bonus is being paid.
ARTICLE 4
BENEFITS
4.1 The Executive shall be entitled to receive or to participate in all employee benefits offered to the salaried employees of the Corporation for which he qualifies, under the same terms and subject to the same conditions as are then in effect for other salaried employees, and as such benefits may exist from time to time during the period of his employment, including, without limitation, the Corporations health insurance coverage plan, disability plan, the 401K plan, and any applicable incentive programs.
2
ARTICLE 5
VACATION
5.1 The Executive shall be eligible for two weeks of vacation, immediately upon the Effective Date of this Agreement. Eligibility for additional vacation time will be reviewed after the first year of employment. Any accrued but unused vacation remaining at the end of each year shall be subject to the Corporations policy regarding accrual of paid time off.
ARTICLE 6
TERMINATION
6.1 Either the Executive or the Corporation shall be entitled, upon written notice to the other party, to terminate this Agreement at any time, for any reason or for no reason, as the Executives employment is at will. The Executives employment with the Corporation also may be terminated by the Corporation at any time, for just cause. For the purposes of this Agreement just cause shall mean any of the following: the commission of any illegal act; the commission of any act of dishonesty, fraud, gross negligence, or willful deceit in connection with his employment; use of alcohol or drugs to the extent such use adversely affects the Executives ability to perform his duties or adversely affects the business reputation of the Executive or the Corporation; a material and willful failure of the Executive to perform his assigned duties; use of illegal drugs or conviction of a crime which is a felony or which involves theft, dishonesty, unethical conduct, or moral turpitude; willful violation of any of the provisions of the Sarbanes Oxley Act which are applicable to the Executive; willful and material violation of the Corporations written policies; or a willful and material breach of this Agreement by Executive.
6.2 In the event of the death or disability of the Executive, the Corporation shall be entitled to terminate this Agreement. Upon such termination, the Corporation shall pay to the Executive, or in the event termination is due to death, to his legal personal representative, that portion of the Executives Base Salary owed up to and including the date of termination. This payment will be made within thirty days following termination of employment. Following such payment, the Corporation shall have no further obligation to the Executive or his heirs and beneficiaries, under this Agreement. For the purposes of this Agreement, Disability shall be defined as the inability of the Executive to effectively perform his duties due to physical or mental illness or injury, in the sole judgment of the Corporation, for a total of 90 days out of any 180 day period. Eligibility for any benefits which may be available to the Executive or his survivors through any employee plans or benefit programs of the Corporation due to death or disability, will be determined in accordance with the terms of such plans or programs.
6.3 If the Corporation terminates the Executives employment for any reason other than just cause, death, or disability, the Corporation shall pay to the Executive a one-time, lump-sum payment of up to twelve (12) weeks severance in accordance with company policy, less applicable withholding, which payment is conditioned upon receipt from the Executive of a signed release, releasing all claims against the corporation arising out of the Executives employment and the return to the Corporation of any property belonging to the Corporation which is in the Executives possession or under his control.
3
6.4 Unless otherwise consented to by the Corporation in writing, the Executive shall be entitled, upon thirty (30) days written notice to the Corporation, to terminate this Agreement and his employment with the Corporation for any reason or for no reason, and in the event of such termination the Corporation shall only be required to pay the Executive, on a pro-rata basis, his Base Salary which has accrued up to the date of termination.
6.5 Upon termination of this Agreement for whatever reason, the Executive shall immediately deliver to the Corporation, all property of the Corporation which the Executive has in his possession or under his control.
ARTICLE 7
CONFIDENTIALITY AND COVENANT -NOT -TO-COMPETE
7.1 The Executive will execute the confidentiality agreement(s) and any such other agreements as are normally required to be executed by other Sparton salaried employees. During the period of his employment and thereafter, the Executive will abide by the terms of the said agreements and keep confidential all confidential information pertaining to the Corporation which the Executive learned while employed by the Corporation, as such confidential information is defined in the applicable confidentiality agreement(s). The promises, rights and obligations stated in Article 7 shall survive the termination of this Agreement.
7.2 The Executive shall not, directly or indirectly, within the territory comprising the United States and Canada, for a period of two (2) years following the date of termination of his employment for whatever reason, either individually or in partnership or jointly or in conjunction with any person or persons, firm, association, joint venture, syndicate, company or corporation as principal, agent, shareholder, employee, or consultant, engage in any of the same business endeavors engaged in by Sparton Corporation and any of its subsidiaries, or:
(a) | induce or attempt to influence or induce any of the employees of the Corporation (including its subsidiaries) to leave their employment; or |
(b) | (b) hire, employ or utilize the services of any employee of the Corporation (including its subsidiaries). |
7.3 It is agreed between the parties that the terms of this section are reasonable and that the Executive has received adequate consideration for the covenants and obligations undertaken by him, as contained herein. The Executive acknowledges that a breach or threatened breach by the Executive of the provisions of this Article may result in the Corporation suffering irreparable harm which cannot be calculated or fully or adequately compensated by recovery of damages alone. Accordingly, the Executive agrees that the Corporation shall be entitled to interim or permanent injunctive relief, specific performance and other equitable remedies, in addition to any other relief to which the Corporation may become entitled, in the event of any such breach.
4
ARTICLE 8
NOTICE
8.1 Any notice required to be given hereunder shall be in writing and may be delivered personally or sent by facsimile transmission or other means of recorded electronic communications or sent by registered mail to the parties hereto at the following addresses:
TO THE CORPORATION:
Sparton Corporation
2400 East Ganson
Jackson, MI 49203
Attention: Cary Wood, CEO
TO THE EXECUTIVE:
Michael Osborne
490 Fox Trail Drive
Batavia, IL 60510
Any notice given shall be deemed to have been given and received on the business day on which it was so delivered, and if not a business day, then on the business day next following the day of delivery, and, if sent by electronic communications or facsimile shall be deemed to have been received on the next business day following the date of transmission and if mailed, shall be deemed to have been given and received on the fifth day following the day on which it was so mailed.
8.2 Either party may change their address for notice in the aforesaid manner.
ARTICLE 9
GENERAL
9.1 Time shall be of the essence in the performance of this Agreement.
9.2 This Agreement constitutes the entire agreement between the parties hereto with respect to the matters contained herein and supersedes and replaces any previous agreements, contracts, oral understandings or discussions. This Agreement may not be amended or modified in any respect except by written instrument signed by the parties hereto.
9.3 This Agreement shall be construed and enforced in accordance with the laws of the State of Michigan, without regard to choice of law or conflicts of laws principles, and the parties hereby irrevocably consent to the jurisdiction of the Courts of the County of Jackson, Michigan, or for those matters which would be properly brought in federal court, to the jurisdiction of the Federal Courts of the Eastern District of Michigan
5
9.4 This language of this Agreement reflects the mutual intent of the parties and shall not be strictly construed against either party, therefore no rule of strict construction shall apply in construing the terms of this Agreement.
9.5 This is a personal services agreement and may not be assigned by either party without the prior written consent of the other party.
9.6 This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, legal personal representatives, successors and permitted assigns.
9.7 If for any reason, any provision or part of this Agreement shall be held to be invalid, illegal or unenforceable, the validity, legality or enforceability of the remaining provisions or part provisions of this Agreement shall not in any way be affected or impaired thereby.
9.8 The waiver by either party of any breach of the provisions of this Agreement shall not operate or be construed as a waiver by that party of any other breach of the same or any other provision of this Agreement.
9.9 Except as specifically altered in this Agreement, nothing in this Agreement shall detract from, alter, modify or amend any obligations or duties owed by the Executive to the Corporation, pursuant to any statute, regulation, or at common law or equity.
9.10 This Agreement may be executed in any number of counter-parts, all of which when taken together, shall constitute one original Agreement.
IN WITNESS WHEREOF the parties hereto acknowledge and agree that they have read and understand the terms of this Agreement, and that they have executed this Agreement of their own free act, on the dates set forth below, to be effective as of the Effective Date set forth herein.
SPARTON CORPORATION | ||||||||
Date: | By: | /s/ Cary Wood | ||||||
Cary Wood Its: CEO | ||||||||
EXECUTIVE | ||||||||
Date: | 1/5/09 | By: | /s/ Michael W. Osborne | |||||
Michael Osborne, an individual |
6
Exhibit 10.21
AMENDMENT TO THE
SPARTON CORPORATION
2010 LONG-TERM INCENTIVE PLAN
Sparton Corporation (Employer) has previously adopted the Sparton Corporation 2010 Long-Term Incentive Plan (Plan) for the benefit of its Employees.
SECTION 1
RECITALS
1.1 Plan Amendment. Employer has deemed it necessary and desirable to amend the Plan.
1.2 Effective Date of Amendment. This amendment of the Plan shall be effective June 24, 2010.
1.3 Intent. Employer is amending the Plan to modify the definition of Change of Control other than for the application of Section 409A of the Internal Revenue Code.
1.4 Effect of Restatement of Plan. If Employer restates the Plan, this amendment shall remain in effect after the restatement unless the provisions of this amendment are restated or superseded by the restatement.
1.5 Terms. Capitalized words and phrases used in this amendment have the same meanings given to them in the Plan, as amended, or this amendment, unless the language or context clearly indicates that a different meaning was intended.
1.6 Agreement. It is agreed by and between the parties hereto that the Plan shall be amended as follows.
SECTION 2
AMENDMENT TO PLAN
2.1 Change of Control. Exhibit A, CHANGE OF CONTROL, of the Plan is amended by deleting Section A.1. in its entirety and renumbering Section A accordingly.
SECTION 3
REAFFIRMATION OF THE PLAN
3.1 Affirmation. The Plan, as amended, is reaffirmed in all respects.
SECTION 4
SIGNATURES
This Plan amendment is signed on June 24, 2010.
Employer: Sparton Corporation | ||
By: | /s/ Cary B. Wood | |
Its: | President and Chief Executive Officer |
2
EXHIBIT 21.1
LIST OF SUBSIDIARIES
The Registrant, Sparton Corporation, an Ohio Corporation, had the following subsidiaries at June 30, 2011:
Domestic Operations: |
Incorporated In: | |
Sparton Electronics Florida, Inc. |
Florida | |
Sparton Technology, Inc. |
New Mexico | |
Spartronics, Inc. |
Michigan | |
Sparton Medical Systems, Inc. |
Michigan | |
(Formerly Astro Instrumentation, LLC) |
||
Sparton BP Medical Denver, LLC |
Colorado | |
Sparton Medical Systems Colorado, LLC |
Colorado | |
Foreign Operations: |
Incorporated In: | |
Sparton of Canada, Limited |
Ontario, Canada | |
Spartronics Vietnam Co., LTD |
Vietnam |
EXHIBIT 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Sparton Corporation
Schaumburg, Illinois
We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 333-82380, 333-156388 and 333-164057) of Sparton Corporation of our reports dated September 7, 2011, relating to the consolidated financial statements and financial statement schedule, and the effectiveness of Sparton Corporations internal control over financial reporting, which appear in this Form 10-K.
/s/ BDO USA, LLP
Grand Rapids, Michigan
September 7, 2011
EXHIBIT 31.1
CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER
PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002
I, Cary B. Wood, certify that:
1. I have reviewed this Annual Report on Form 10-K of Sparton Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d. Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an Annual Report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and
5. The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of registrants board of directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.
Date: September 7, 2011
/S/ CARY B. WOOD |
Cary B. Wood |
President and Chief Executive Officer |
EXHIBIT 31.2
CERTIFICATION OF THE CHIEF FINANCIAL OFFICER
PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002
I, Gregory A. Slome, certify that:
1. I have reviewed this Annual Report on Form 10-K of Sparton Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d. Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an Annual Report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and
5. The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of registrants board of directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.
Date: September 7, 2011
/S/ GREGORY A. SLOME |
Gregory A. Slome |
Senior Vice President and |
EXHIBIT 32.1
CERTIFICATIONS OF THE CHIEF EXECUTIVE OFFICER
AND THE CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT
TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Sparton Corporation (the Company) on Form 10-K for the year ended June 30, 2011 as filed with the Securities and Exchange Commission on the date hereof (the Report), each of the undersigned certify, pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Sec. 906 of the Sarbanes Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
September 7, 2011
/s/ Cary B. Wood |
Cary B. Wood, President and Chief Executive Officer |
/s/ Gregory A. Slome |
Gregory A. Slome, Senior Vice President and Chief Financial Officer |
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