Stock to Watch: Sparton Corporation (NYSE: SPA)

On Friday, Shares of Sparton Corporation (NYSE: SPA) jumped 3.96% to $13.92. The stock recorded $13.43 as its minimum price and hit the max level of $14.28, during its most recent trading session. It traded total volume of 59,066 shares lower than the average volume of 66.41K shares.

Sparton Corporation (SPA) recently declared results for the fourth quarter of fiscal year 2018 ended July 1, 2018.

Fourth Quarter Financial Results and Highlights:

Consolidated:

  • Net sales of $100.50M. Gross profit margin of 21.9%.
  • SG&A expenses of $15.80M or 15.7% of sales; adjusted SG&A of $12.40M, 12.3% of sales. Earnings per share of $(0.03), adjusted earnings per share of $0.32
  • Adjusted EBITDA of $9.30M, a 9.3% adjusted EBITDA margin

MDS Segment:

  • Gross sales of $62.50M. Gross profit margin of 11.3%.
  • Operating loss of $0.60M
  • Adjusted EBITDA of $4.40M, a 7.1% adjusted EBITDA margin. New program wins in Q4 have expected revenue of $12.50M when fully ramped up into production
  • Trailing four quarter new program win revenue of $62.80M, which continues to support our future organic growth.
  • Backlog of $148.0M

ECP Segment:

  • Gross sales of $41.10M. Gross profit margin of 36.4%.
  • Operating income of $8.00M
  • Adjusted EBITDA of $9.80M, a 23.9% adjusted EBITDA margin
  • Backlog of $172.0M

Liquidity and Capital Resources:

As of July 1, 2018, Sparton Corporation (“the Company”) had $32.0M available under its $120.0M credit facility that expires in September 2019. On May 3, 2018, the Company reached Amendment No. 5 to its credit facility which offered for, among other things, increased permitted total funded debt to EBITDA ratio to 4.5x and reduced the facility from $125.0M to $120.0M. The Company was in compliance with its covenants as of July 1, 2018. Over the term of this agreement, the facility has been modified several times to allow for increases in this ratio, as well as other relief, to provide flexibility during the Company’s exploration of a sale transaction. The most recent amendment to the facility provides for a boost to the leverage ratio through September 30, 2018. We intend to restructure this facility upon its expiration in September 2019, or sooner as conditions dictate, to provide for appropriate ongoing liquidity. Renegotiating this facility will very likely require restructuring our long term debt and will increase the interest rates we pay on our long term debt. In Addition To, we may require a further amendment or waiver to our facility after September 30, 2018 to provide for liquidity through the closing of a potential sale transaction or through our negotiation of a new debt structure if no sale transaction is consummated. We believe that we will be able to secure the appropriate debt structure for the Company if no sale transaction is consummated and that our bank group will provide for the necessary amendments or waivers while such a structure is negotiated.

SPA has the market capitalization of $136.90M and its EPS growth ratio for the past five years was -21.40%. The return on assets ratio of the Company was -2.30% while its return on investment ratio stands at -1.20%. Price to sales ratio was 0.36 while 77.10% of the stock was owned by institutional investors.

Michelle Smith

Michelle Smith

I am Michelle Smith and I give “Stocks Market Cap” an insight into the most recent news hitting the “Technology” sector in Wall Street. I have been an independent financial adviser for over 11 years in the city and in recent years turned my experience in finance and passion for journalism into a full time role. I perform analysis of Companies and publicize valuable information for shareholder community.

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