Sparton Corporation releases 2Q08 results

Electronic Design and Manufacturing Service provider Sparton Corporation releases fiscal 2008 Second Quarter results.

Net sales for the second quarter of fiscal 2008 were $54,951,000, an increase of $1,895,000 (3.6%) from the same period last year. Net sales for the six months ended December 31, 2007, totaled $113,803,000, an increase of $12,430,000 (12.3%) from fiscal 2007. Government sales for the three and six months ended December 31, 2007, totaled $10,798,000 and $24,531,000, respectively, an increase of $3,275,000 (43.5%) and $12,254,000 (99.8%), respectively, from the same periods in fiscal 2007. This increase was primarily due to the increase in successful sonobuoy drop tests this year.

Medical/Scientific Instrumentation sales increased by $3,583,000 (22.4%) and $7,938,000 (25.8%) for the three and six months ended December 31, 2007, respectively. This increase was primarily due to new programs and expanded sales to the existing customer base. In addition, during the second quarter of fiscal 2008 one customer contributed $1,969,000, and during the first six months of fiscal 2008 two customers contributed a combined total of $5,458,000, of additional sales from their prior year levels. Medical/Scientific Instrumentation sales are expected to continue to expand. Sales in the Aerospace market increased slightly in both periods from the prior year.

Industrial/Other sales declined by $6,012,000 (38.9%) and $8,711,000 (29.5%) from the prior year during the three months and six months ended December 31, 2007, respectively. This decrease was primarily due to reduced sales to two customers, which accounted for a combined reduction in sales of $5,302,000 and $9,184,000, respectively, during these same periods. We are uncertain at this time as to the level of future sales to these two customers. At December 31, 2007, the aggregate government funded backlog was approximately $24 million, compared to $42 million at June 30, 2007. The decrease in backlog is due to the timing of the awarding of Government sonobuoy contracts. Awards for the coming year are anticipated to be received within the next month.

Year to date, fiscal 2008 has been favorably impacted by:

+Consistent and successful sonobuoy drop tests contributing to increased sales and improved margins. 

+Continued sales growth in the Medical/Scientific Instrumentation market and a number of significant new program orders now in start-up. 

+Improved margins from a better product mix, improved performance, and repricing on some products. 

+The completion of the sale of the Deming New Mexico facility at a gain.

These factors, however, have partially been offset by: 

+Sales of several lots of sonobuoys in the six month period which carried minimal or no margin, which programs are now essentially complete. 

+Significant new program start-up costs related to hiring staff, training personnel and ordering material in advance of production, compounded by customer delays leading to further unexpected cost growth. 

+Increased selling and administrative expenses to support new program start-ups. 

+Decreased sales and depressed margins in the Industrial/Other market, due primarily to reduced sales and pricing concessions to one customer. 

+The write-off of a $1.6 million claim (previously recorded as a deferred asset), due to an adverse court opinion. 

+Increased outside service costs related to the obligation to report on internal control over financial reporting which begins at the end of this fiscal year.

Operating losses of $1,469,000 and $3,522,000 and $831,000 and $4,339,000 were reported for the three months and six months ended December 31, 2007 and 2006, respectively. Gross profit percentage for the three months and six months ended December 31, 2007, were 6.7%, and 4.6%, respectively.