Sparton Corporation Reports Fiscal 2019 Second Quarter Results
SCHAUMBURG, Ill.--(BUSINESS WIRE)--Feb 6, 2019--Sparton Corporation (NYSE:SPA) today announced results for the second quarter of fiscal year 2019 ended December 30, 2018.
Second Quarter Financial Results and Highlights
• Net sales of $105.2 million; $97.8 million in prior year Q2
• Gross profit margin of 21.9%; 22.2% in prior year Q2
• SG&A expenses of $14.7 million or 14.0% of sales; adjusted SG&A of $12.3 million, 11.7% of sales
• Earnings per share of $0.19, adjusted earnings per share of $0.51; adjusted earnings per share of $0.52 in prior year Q2
• Adjusted EBITDA of $10.7 million, a 10.1% adjusted EBITDA margin
• Gross sales of $65.4 million; $58.4 million in prior year Q2
• Gross profit margin of 13.5%; 11.9% in prior year Q2
• Operating income of $1.7 million; loss of $0.2 million in prior year Q2
• Adjusted EBITDA of $6.0 million, a 9.1% adjusted EBITDA margin
• New program wins in Q2 have expected revenue of $15.5 million when fully ramped up into production
• Trailing four quarter new program win revenue of $61.9 million, which continues to support our future organic growth
• Backlog of $154 million; prior year Q2 backlog of $142 million
• Gross sales of $43.0 million; $42.5 million in prior year Q2
• Gross profit margin of 33.1%; 34.8% in prior year Q2
• Operating income of $9.0 million; $10.2 million in prior year Q2
• Adjusted EBITDA of $10.6 million, a 24.6% adjusted EBITDA margin
• Backlog of $144 million; prior year Q2 backlog of $130 million
Liquidity and Capital Resources
As of December 30, 2018, Sparton Corporation (“Sparton” or “the Company”) had $50 million available under its $120 million credit facility that expires in September 2019. The Company intends to restructure this facility upon its expiration in September 2019, or sooner as conditions dictate, to provide for appropriate ongoing liquidity. As of December 30, 2018, the Company was compliant with all covenants under its credit facility.
Pending Acquisition of the Company
On December 11, 2018, Sparton Corporation entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Striker Parent 2018, LLC (“Parent”), a Delaware limited liability company and affiliate of Cerberus Capital Management, L.P. (“Cerberus”), and Striker Merger Sub 2018, Inc. (“Merger Sub”), an Ohio corporation and a wholly owned subsidiary of Parent. Upon the terms and subject to the conditions set forth in the Merger Agreement, Merger Sub will be merged with and into the Company (the “Merger”) with the Company surviving the Merger as a wholly owned subsidiary of Parent.
At the effective time of the Merger (the “Effective Time”), each issued and outstanding share of common stock, par value $1.25 per share, of the Company (each, a “Share”) (other than (i) Shares that immediately prior to the Effective Time are owned by Parent, Merger Sub or any other wholly owned subsidiary of Parent or owned by the Company or any wholly owned subsidiary of the Company (including as treasury stock) and (ii) Shares that are held by any record holder who is entitled to demand and properly demands payment of the fair cash value of such Shares as a dissenting shareholder pursuant to, and who complies in all respects with, the provisions of Section 1701.85 of the Ohio General Corporation Law) will be canceled and converted into the right to receive $18.50 per Share in cash, without interest.
Consummation of the Merger is subject to the satisfaction or (to the extent permitted by law) waiver of specified closing conditions, including (i) the adoption of the Merger Agreement by the affirmative vote of the holders of at least two-thirds of all the outstanding Shares entitled to vote thereon at a special meeting of the Company’s shareholders (the “Shareholders Meeting”) to be held on March 1, 2019, as more fully described in the proxy statement of the Company, filed with the SEC on January 23, 2019 (the “Proxy Statement”), (ii) the absence of any law, executive order, ruling, injunction or other order (“Orders”) that restrains, enjoins or otherwise prohibits the consummation of the Merger (the “No Order Condition”), (iii) the expiration or early termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”) which expired on January 22, 2019, (such condition, the “HSR Act Condition”), (iv) any agreement with a governmental authority not to consummate the Merger, which agreement shall have been entered into with the prior written consent of both the Company and Parent, shall have expired or been terminated (the “Governmental Authority Agreement Condition”) and (v) other customary closing conditions, including the accuracy of each party’s representations and warranties and each party’s compliance with its covenants and agreements contained in the Merger Agreement (subject in the case of this clause (v) to certain qualifications as to materiality). Consummation of the Merger is not subject to Parent obtaining any financing for or related to the transactions contemplated by the Merger Agreement.
The Company has called a special meeting on March 1, 2019, of holders of shares of common stock of the Company, at which time it is expected that the shareholders of record as of January 18, 2019, the record date for the special meeting, will vote on adoption of the Merger Agreement and the other related matters as described in the Proxy Statement.
Non-GAAP Financial Measures
In addition to reporting financial results in accordance with U.S. generally accepted accounting principles (“GAAP”), Sparton Corporation has provided certain non-GAAP financial measures as additional information for its operating results. These measures have not been prepared in accordance with GAAP and may be different from measures used by other companies. Whenever we use non-GAAP financial measures, we designate these measures, which exclude the effects of certain expenses and income, as “adjusted” and provide a reconciliation of non-GAAP financial measures to the most closely applicable GAAP financial measure. The non-GAAP financial measures eliminate or add certain items of expense and income from or to operating expense and income taxes. Management believes that this presentation is helpful to investors in evaluating the current operational and financial performance of our business and facilitates comparisons to historical results of operations. Management discloses this information along with a reconciliation of the comparable GAAP amounts to provide access to the detail and nature of adjustments made to GAAP financial results. While some of these excluded items have been periodically reported in our statements of operations, their occurrence in future periods depends on future business and economic factors, among other evaluation criteria, and the occurrence of such events and factors may frequently be beyond the control of management.
When we calculate adjusted earnings per share, adjusted EBITDA and other adjustments to the statements of operations, we exclude certain expenses and income because we believe that they are not related directly to the underlying performance of our fundamental business operations. We exclude these measures when reviewing financial results and for business planning. Although these events are reflected in our GAAP financial statements, these transactions may limit the comparability of our fundamental operations with prior and future periods. We believe EBITDA and adjusted EBITDA are commonly used by financial analysts and others in the industries in which the Company operates and, thus, provide useful information to investors. The Company does not intend, nor should the reader consider, EBITDA or adjusted EBITDA to be an alternative to operating income, net income, net cash provided by operating activities or any other items calculated in accordance with GAAP. The Company’s definition of adjusted EBITDA may not be comparable with other companies. Accordingly, the measurement has limitations depending on its use.
About Sparton Corporation
Sparton Corporation (NYSE:SPA), now in its 119th year, is a provider of complex and sophisticated electromechanical devices with capabilities that include concept development, industrial design, design and manufacturing engineering, production, distribution, field service and refurbishment. The primary markets served are Medical & Biotechnology, Military & Aerospace and Industrial & Commercial. Headquartered in Schaumburg, IL, Sparton currently has thirteen manufacturing locations and engineering design centers worldwide. Sparton’s Web site may be accessed at www.sparton.com.
Safe Harbor and Fair Disclosure Statement
Safe Harbor statement under the Private Securities Litigation Reform Act of 1995: To the extent any statements made in this release contain information that is not historical, these statements are essentially forward-looking and are subject to risks and uncertainties, including the difficulty of predicting future results, the regulatory environment, fluctuations in operating results and other risks detailed from time to time in Sparton’s filings with the Securities and Exchange Commission (SEC). The matters discussed in this press release may also involve risks and uncertainties concerning Sparton’s services described in Sparton’s filings with the SEC. In particular, see the risk factors described in Sparton’s most recent Form 10-K and Form 10-Q. Sparton assumes no obligation to update the forward-looking information contained in this press release.
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KEYWORD: UNITED STATES NORTH AMERICA ILLINOIS
INDUSTRY KEYWORD: TECHNOLOGY ELECTRONIC DESIGN AUTOMATION SOFTWARE OTHER TECHNOLOGY MANUFACTURING AEROSPACE ENGINEERING OTHER MANUFACTURING PROFESSIONAL SERVICES BANKING FINANCE COMMUNICATIONS PUBLIC RELATIONS/INVESTOR RELATIONS
SOURCE: Sparton Corporation
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PUB: 02/06/2019 04:05 PM/DISC: 02/06/2019 04:05 PM