Sparton Corp. 2Q sales up, but demand decreases
SCHAUMBURG - Sparton Corp. reported sales for the second quarter of fiscal year 2016 of $103.5 million, an increase of 21 percent, from $85.6 million for the second quarter of fiscal 2015.
Operating income for the second quarter of fiscal 2016 was $500,000, compared to $2.7 million in the second quarter of fiscal 2015. Net income for the second quarter of fiscal 2016 was $0.3 million or $0.03 per share, basic and diluted compared to net income of $1.6 million or $0.16 per share, basic and diluted in the same quarter a year ago. Adjusted net income for the second quarter of fiscal 2016 was $2.5 million or $0.25 per share compared to $2.7 million or $0.27 per share in the same quarter a year ago.
"The second quarter $0.25 adjusted earnings per share, as compared to $0.27 adjusted earnings per share in the prior year, was the result of continued MDS legacy business revenue challenges," said Sparton President and CEO Cary Wood. "Gross margins for the quarter remained consistent with those of the prior year quarter. Total revenue in the quarter was up 21 percent from the prior year quarter; legacy business revenues decreased by 5 percent.
"Legacy business growth continues to be strong in the ECP segment, up 35 percent from the prior year, primarily driven by increased sonobuoy sales to foreign governments," he added.
In the MDS segment, legacy business revenues decreased by 26 percent due to fluctuations in customer demand as well as product insourcing.
"As disappointing as the results in the MDS segment have been in recent quarters, we continue to see momentum from new business development activities and anticipate 36 new program launches starting the second half of fiscal 2016 and continuing into the following fiscal year and, barring any customer related delays, these new programs could add over $30 million of new revenues in fiscal 2017," Wood said.
Selling and administrative expenses increased $3.5 million and, as a percent of sales, was 13.9 percent as compared to 12.6 percent of sales in the prior year quarter. The increase in selling and administrative expense was due to the selling and administrative expenses of acquired companies, as well as expenses associated with a corporate reorganization, and additional legal, insurance and other costs related to prior periods.
"In addition to the recently announced closures and consolidations of the Lawrenceville manufacturing facility and the Irvine Design Engineering Center, we continue to evaluate our overhead structure within the MDS segment," Wood said. "These actions will continue to increase the capacity utilization and reduce overhead expense, which will result in increasing our bottom line earnings once restructuring efforts are complete."