EX-99.2 3 d406539dex992.htm SLIDE PRESENTATION FOR CONFERENCE CALL DATED SEPTEMBER 6, 2012 Slide Presentation for Conference Call dated September 6, 2012
Fiscal 2012 Year-End
Financial Results
Conference Call
Exhibit 99.2
September 6, 2012


2
Safe Harbor Statement
Safe Harbor Statement
Certain statements herein constitute forward-looking statements within the meaning of the
Securities Act of 1933, as amended and the Securities Exchange Act of 1934, as amended.
When used herein, words such as “believe,” “expect,” “anticipate,” “project,” “plan,” “estimate,”
“will” or “intend” and similar words or expressions as they relate to the Company or its
management constitute forward-looking statements. These forward-looking statements reflect our
current views with respect to future events and are based on currently available financial,
economic and competitive data and our current business plans. The Company is under no
obligation to, and expressly disclaims any obligation to, update or alter its forward-looking
statements whether as a result of such changes, new information, subsequent events or
otherwise. Actual results could vary materially depending on risks and uncertainties that may
affect our operations, markets, prices and other factors. Important factors that could cause actual
results to differ materially from those forward-looking statements include those contained under
the heading of risk factors and in the management’s discussion and analysis contained from time-
to-time in the Company’s filings with the Securities and Exchange Commission.
Adjusted operating income, adjusted net income and adjusted income per share – basic and
diluted and adjusted earnings before interest, taxes, depreciation and amortization (”adjusted
EBIDTA”)  are non-GAAP financial measures that exclude or add the effect of certain gains and
charges, including, for fiscal 2011, imputing taxes at a 36% effective rate. Sparton believes that
the presentation of non-GAAP financial information provides useful supplemental information to
management and investors regarding financial and business trends relating to the Company’s
financial results. More detailed information, including period over period segment comparisons,
non-GAAP reconciliation tables and the reasons management believes non-GAAP measures
provide useful information to investors, is included in the Fiscal 2012 Fourth Quarter and Full
Year Financial Results press release and Form 10-Q dated September 5, 2012.


3
4
th
Quarter Highlights
Fiscal 2012 Fourth Quarter Results
Quarterly Adjusted EPS
Fiscal 2012 Year-End Results
Segmented Operating Results
Liquidity & Capital Resources
Growth Investments Summary
Outlook
Q & A
Today’s Agenda
Today’s Agenda


4
Adjusted net income of $4.0 million, or $0.40 per share, versus adjusted
net
income
of
$2.9
million,
or
$0.28
per
share
in
the
prior
year
quarter
Adjusted operating margin of 9.9% compared to 7.3% last year
Awarded 12 new business programs with 5 new customers
Quarter end sales backlog of approximately $148.4 million, up 8%
Adjusted
EBITDA
of
$6.8
million
versus
$5.1
million
in
the
prior
year
quarter, an increase of 32%.
Subsequent Event: July 2012 amendment and extension of the
Company’s revolving credit facility
4
th
Quarter Highlights


5
Consolidated Financial Results
Consolidated Financial Results
Fiscal 2012 Fourth Quarter
Fiscal 2012 Fourth Quarter
(Adjusted)
2012
2011
2012
2011
Net Sales
$    61,326
$    60,902
$    61,326
$   60,902
$       424
Gross Profit
12,261
10,393
12,261
10,393
1,868
20.0%
17.1%
20.0%
17.1%
Selling and Administrative Expense
5,777
5,176
5,777
5,176
(601)
9.4%
8.5%
9.4%
8.5%
Internal R&D Expense
330
546
330
546
216
Amortization of intangible assets
105
198
105
198
93
Restructuring/impairment charges
(9)
(2)
-
-
Impairment of intangible asset
-
3,663
-
-
Impairment of goodwill
-
13,153
-
-
Other operating expense, net
(9)
2
(9)
2
11
Operating Income (Loss)
6,067
(12,343)
6,058
4,471
1,587
9.9%
-20.3%
9.9%
7.3%
Income Before Provision For (Benefit From) Income Tax
6,084
(12,346)
6,075
4,468
1,607
Provision For (Benefit From) Income Taxes
2,032
(11,619)
2,032
1,608
(424)
Net Income
$      4,052
$        (727)
$      4,043
$     2,860
$    1,183
6.6%
-1.2%
6.6%
4.7%
Income per Share, Basic and Diluted
$        0.40
$       (0.07)
$        0.40
$       0.28
$      0.12
($ in 000’s, except per share)
(adjusted removes certain gains and charges, including, for fiscal 2011 imputing taxes at 36% effective rate)
YoY
Variance
(Reported)
(Adjusted)
Quarter ended June 30,
Quarter ended June 30,


6
Quarterly Adjusted EPS
Quarterly Adjusted EPS
Diluted
Diluted
$0.64
$0.91
$-
$0.10
$0.20
$0.30
$0.40
$0.50
$0.60
$0.70
$0.80
$0.90
$1.00
Q1
Q2
Q3
Q4
YTD
FY11 YTD
FY12 YTD
FY11
FY12


7
Consolidated Financial Results
Consolidated Financial Results
Fiscal 2012
Fiscal 2012
(Adjusted)
2012
2011
2012
2011
Net Sales
$ 223,577
$ 203,352
$ 223,577
$   203,352
$  20,225
Gross Profit
38,502
33,168
38,396
33,168
5,228
17.2%
16.3%
17.2%
16.3%
Selling and Administrative Expense
22,232
20,842
22,232
20,842
(1,390)
9.9%
10.2%
9.9%
10.2%
Internal R&D Expense
1,293
1,110
1,293
1,110
(183)
Amortization of intangible assets
435
545
435
545
110
Restructuring/impairment charges
(68)
75
-
-
Gain on acquisition
-
(2,550)
-
-
Gain on sale of property
-
(139)
-
-
Impairment of intangible asset
-
3,663
-
-
Impairment of goodwill
-
13,153
-
-
Other operating expense, net
65
298
65
298
233
Operating Income (Loss)
14,545
(3,829)
14,371
10,373
3,998
6.5%
-1.9%
6.4%
5.1%
Income Before Provision For (Benefit From) Income Tax
14,586
(3,943)
14,285
10,259
4,026
Provision For (Benefit From) Income Taxes
5,078
(11,404)
4,973
3,693
(1,280)
Net Income
$      9,508
$      7,461
$      9,312
$      6,566
$    2,746
4.3%
3.7%
4.2%
3.2%
Income per Share (Diluted)
$        0.93
$        0.73
$        0.91
$        0.64
$      0.27
($ in 000’s, except per share)
(adjusted removes certain gains and charges, including, for fiscal 2011 imputing taxes at 36% effective rate)
YoY
Variance
(Reported)
(Adjusted)
Fiscal
Fiscal


8
Sales & Gross Margin Results
Sales & Gross Margin Results
Medical
Medical
SEGMENT
2012
% of Total
2011
% Change
2012
% of Total
2011
% Change
Medical
$    28,361
46%
$    27,956
1%
$ 110,894
50%
$    98,028
13%
Complex Systems
15,688
26%
14,704
7%
53,609
24%
49,835
8%
DSS
20,976
34%
22,594
-7%
74,102
33%
69,720
6%
Eliminations
(3,699)
-6%
(4,352)
-15%
(15,028)
-7%
(14,231)
6%
Totals
$    61,326
100%
$    60,902
1%
$ 223,577
100%
$ 203,352
10%
SEGMENT
2012
GP % 
2011
GP % 
2012
GP % 
2011
GP % 
Medical
(a)
$       4,152
15%
$       3,727
13%
$    15,136
14%
$    12,938
13%
Complex Systems
2,435
16%
1,815
12%
5,762
11%
4,835
10%
DSS
5,674
27%
4,851
21%
17,498
24%
15,395
22%
Totals
$    12,261
20%
$    10,393
17%
$    38,396
17%
$    33,168
16%
($ in 000’s)
3 Months Ended June 30,
3 Months Ended June 30,
Fiscal
Fiscal
SALES
ADJUSTED GROSS MARGIN
(a) Fiscal 2012 Medical gross margins are adjusted to remove the effect of an acquisition related inventory contingency settlement.


9
Sales & Gross Margin Results
Sales & Gross Margin Results
Complex Systems
Complex Systems
SEGMENT
2012
% of Total
2011
% Change
2012
% of Total
2011
% Change
Medical
$    28,361
46%
$    27,956
1%
$ 110,894
50%
$    98,028
13%
Complex Systems
15,688
26%
14,704
7%
53,609
24%
49,835
8%
DSS
20,976
34%
22,594
-7%
74,102
33%
69,720
6%
Eliminations
(3,699)
-6%
(4,352)
-15%
(15,028)
-7%
(14,231)
6%
Totals
$    61,326
100%
$    60,902
1%
$ 223,577
100%
$ 203,352
10%
SEGMENT
2012
GP % 
2011
GP % 
2012
GP % 
2011
GP % 
Medical
(a)
$       4,152
15%
$       3,727
13%
$    15,136
14%
$    12,938
13%
Complex Systems
2,435
16%
1,815
12%
5,762
11%
4,835
10%
DSS
5,674
27%
4,851
21%
17,498
24%
15,395
22%
Totals
$    12,261
20%
$    10,393
17%
$    38,396
17%
$    33,168
16%
($ in 000’s)
3 Months Ended June 30,
3 Months Ended June 30,
Fiscal
Fiscal
SALES
ADJUSTED GROSS MARGIN
(a) Fiscal 2012 Medical gross margins are adjusted to remove the effect of an acquisition related inventory contingency settlement.


10
Sales & Gross Margin Results
Sales & Gross Margin Results
Defense & Security Systems
Defense & Security Systems
SEGMENT
2012
% of Total
2011
% Change
2012
% of Total
2011
% Change
Medical
$    28,361
46%
$    27,956
1%
$ 110,894
50%
$    98,028
13%
Complex Systems
15,688
26%
14,704
7%
53,609
24%
49,835
8%
DSS
20,976
34%
22,594
-7%
74,102
33%
69,720
6%
Eliminations
(3,699)
-6%
(4,352)
-15%
(15,028)
-7%
(14,231)
6%
Totals
$    61,326
100%
$    60,902
1%
$ 223,577
100%
$ 203,352
10%
SEGMENT
2012
GP % 
2011
GP % 
2012
GP % 
2011
GP % 
Medical
(a)
$       4,152
15%
$       3,727
13%
$    15,136
14%
$    12,938
13%
Complex Systems
2,435
16%
1,815
12%
5,762
11%
4,835
10%
DSS
5,674
27%
4,851
21%
17,498
24%
15,395
22%
Totals
$    12,261
20%
$    10,393
17%
$    38,396
17%
$    33,168
16%
($ in 000’s)
3 Months Ended June 30,
3 Months Ended June 30,
Fiscal
Fiscal
SALES
ADJUSTED GROSS MARGIN
(a) Fiscal 2012 Medical gross margins are adjusted to remove the effect of an acquisition related inventory contingency settlement.


11
Liquidity & Capital Resources
Liquidity & Capital Resources
25,588
22,959
1,917
1,796
1,669
0.36
0.42
0.03
0.02
0.02
0
0.05
0.1
0.15
0.2
0.25
0.3
0.35
0.4
0.45
0
25,000
50,000
Jun-08
Jun-09
Jun-10
Jun-11
Jun-12
($ in '000)
Jun-11
Sep-11
Dec-11
Mar-12
Jun-12
Credit Revolver
-
       
-
       
-
       
-
       
-
       
IRB (Ohio)
1,796
  
1,766
  
1,735
  
1,702
  
1,669
  
Total
1,796
  
1,766
  
1,735
  
1,702
  
1,669
  
($ in '000)
Jun-11
Sep-11
Dec-11
Mar-12
Jun-12
Net Inventory
38,752
41,816
38,545
39,252
35,102
Debt
Inventory
($ in '000)
Jun-11
Sep-11
Dec-11
Mar-12
Jun-12
Cash and equivalents
24,550
26,984
30,610
26,682
46,950
LOC Availability
17,541
17,533
17,290
16,469
16,277
Total
42,091
44,517
47,900
43,151
63,227
Cash Availability


12
Growth Investments
Growth Investments
Fiscal 2012 Summary
Fiscal 2012 Summary
Focus:
Use growth investments to achieve sustainable year-over-year revenue and profit increases
and to further place protective barriers around Sparton.
Supported by market research &       
go-to-market programs
FY11
FY12
FY11
FY12
FY11
FY12
Q1
5
    
9
    
3
    
3
    
2.2
$  
6.0
$  
Q2
6
    
7
    
2
    
5
    
4.4
    
5.0
    
Q3
12
  
12
  
5
    
7
    
9.1
    
7.6
    
Q4
3
    
12
  
1
    
5
    
2.0
    
5.2
    
Total
26
  
40
  
11
  
20
  
17.7
$
23.8
$
Gyro-enhanced digital compass
Hydrophone
($ in millions)
GEDC-6
PHOD-1
AHRS-8
Internal Research & Development
Fiscal 2011
Fiscal 2012
Temperature compensated attitude
heading reference system
New Business Awards
Programs
New
Customers
Potential  Annual
Revenue
Acquisitions
Fiscal 2011
Fiscal 2012
Delphi Medical
Byers Peak
none


13
Implementation of the strategic growth plan
Continue
to
gain
traction
on
a
nationally
focused
direct
selling
effort
Further leverage Viet Nam as a low cost country alternative and in-region provider
Maintain our level of investment in internal research & development to commercially extend our
product lines
Continue to enable our engineering workforce to develop new and innovative proprietary solutions
for our end markets
Continue to seek out complementary and compatible acquisitions
Focus on sustained profitability
Continue margin improvements in Complex Systems
Increase capacity utilization
Improve the working capital turnover rate
Continue additional improvements in operating performance through lean and quality efforts
Year-over-year increases in revenue and profitability with the second half
of fiscal
2013 being stronger than the first half as experienced in the previous two fiscal
years
Fiscal 2013 Outlook
Fiscal 2013 Outlook


14
Q & A