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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Act of 1934
Date of Report (Date of earliest event reported) December 5, 1996.
----------------------------
Commission File Number 1-1000
SPARTON CORPORATION
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(Exact name of registrant as specified in its charter)
Ohio 38-1054690
- ------------------------------- ----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2400 East Ganson Street, Jackson, Michigan 49202
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(Address of principal executive offices) (Zip Code)
517-787-8600
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(Registrant's telephone number, including area code)
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Item 2 - Acquisition or Disposition of Assets
- ---------------------------------------------
Effective December 5, 1996 ( the Closing date ), Sparton Corporation ( Sparton )
sold all of its shares of two of its automotive operating subsidiaries and
substantially all of the net assets of a third automotive subsidiary
(collectively referred to herein as "the Subsidiaries") to Dura Automotive
Systems, Inc., a Delaware Corporation ( Dura ), under a Stock and Asset Purchase
Agreement ( Agreement ) dated October 3, 1996. Dura is a publicly traded
corporation whose headquarters is in Minneapolis, Minnesota. The two
subsidiaries whose stock was sold are Sparton Engineered Products, Inc., KPI
Group, a Michigan corporation and Sparton Engineered Products, Inc., KPI Group,
an Indiana corporation. Substantially all of the net assets of Sparton
Engineered Products, Inc., Lake Odessa Group, a Michigan corporation, were sold
to Dura. Collectively, the Subsidiaries comprise approximately 80% of the
automotive operations of Sparton. This sale does not include the stock or assets
of Sparton Engineered Products, Inc., Flora Group ( Flora ), the remaining
automotive subsidiary , which will be held by Sparton as a discontinued
operation until its disposition. Flora is being actively offered for sale at the
present time, but Sparton has no binding commitments or other agreements
relating to the sale of this subsidiary.
Under the terms of the Agreement and subject to certain adjustments, Sparton
sold the stock and net assets of the Subsidiaries for $80,500,000 in cash at the
Closing date. The ultimate purchase price was determined based on the highest
bid received pursuant to a confidential offering document. The specific terms
and conditions of the sale are set forth in the Agreement, a copy of which is
filed as an exhibit to this Report.
Sparton used a portion of the Subsidiaries' sale proceeds to eliminate
short-term bank borrowings and intends to use the remaining proceeds to provide
working capital for its expanding electronic contract manufacturing business.
Item 7 - Financial Statements and Exhibits
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(a) Financial Statements of Business Acquired
Not applicable
(b) Proforma Financial Information
The following unaudited proforma consolidated condensed financial statements are
filed with this report:
<TABLE>
<CAPTION>
Page
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<S> <C>
Proforma Consolidated Condensed Balance Sheet as of September 30, 1996 4
Proforma Consolidated Condensed Statements of Operations:
Fiscal Year Ended June 30, 1996 5
Three Months Ended September 30, 1996 5
Notes to Proforma Financial Information 6-7
</TABLE>
The Proforma Consolidated Condensed Balance Sheet and Notes as of September 30,
1996 reflect the financial position of Sparton after giving effect to the
disposition of the stock and net assets of the three subsidiaries discussed in
Item 2 and assumes the disposition took place on September 30, 1996. The
Proforma Consolidated Condensed Statements of Operations and Notes for the
fiscal year ended June 30, 1996 and for the three months ended September 30,
1996 assumes that the disposition occurred on July 1, 1995, and are based on the
operations of Sparton for the fiscal year ended June 30, 1996 and for the three
months ended September 30, 1996.
The unaudited proforma consolidated condensed financial statements have been
prepared by Sparton based upon assumptions deemed proper by it. The unaudited
proforma consolidated condensed financial statements presented herein are shown
for illustrative purposes only and are not necessarily indicative of the future
financial position or future results of operations of Sparton, or of the
financial position or results of operations of Sparton that would have actually
occurred had the transaction been in effect as of the date or for the periods
presented.
The unaudited proforma financial information should be read in conjunction with
Sparton's historical consolidated financial statements and notes thereto
contained in the 1996 Annual Report on Form 10-K as of June 30, 1996 and the
Quarterly Report on Form 10-Q as of September 30, 1996.
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(c) Exhibits
(2) Stock and Asset Purchase Agreement among Sparton Corporation, as
shareholder of its KPI Group of Subsidiaries, Sparton Engineered Products,
Inc.-Lake Odessa Group, and Dura Automotive Systems, Inc., dated October 3,
1996, was filed with the Notice of Annual Meeting of Shareholders and Proxy
Statement on November 1, 1996 and is incorporated herein by reference.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SPARTON CORPORATION
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Registrant
Date: December 20, 1996 /s/ John J. Smith
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John J. Smith, Chairman of the Board & Chief
Executive Officer
Date: December 20, 1996 /s/ Richard Langley
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Richard Langley, Vice President - Treasurer &
Principal Financial Officer
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SPARTON CORPORATION AND SUBSIDIARIES:
Proforma Consolidated Condensed Balance Sheet (Unaudited) (A)
September 30, 1996
<TABLE>
<CAPTION>
Proforma
Historical Adjustments Proforma
------------ ------------ ------------
ASSETS
<S> <C> <C> <C>
Current assets:
Cash $ 1,038,800 $ 78,603,435 (B) $ 1,038,800
(31,472,726) (C)
(47,130,709) (C)
Short-term investments 47,130,709 (C) 46,455,109
(675,600) (C)
Income taxes recoverable 403,520 403,520
Accounts receivable 18,614,968 18,614,968
Inventories 33,613,650 33,613,650
Prepaid expenses 2,820,589 2,820,589
Current assets of discontinued operations 29,368,197 (20,793,961) (B) 8,919,201
344,965 (B)
------------ ------------ ------------
Total current assets 85,859,724 26,006,113 111,865,837
Other assets 3,946,108 3,946,108
Property, plant and equipment-net 10,188,639 10,188,639
Noncurrent assets, principally property plant and
equipment, of discontinued operations-net 12,358,175 (7,939,988) (B) 5,093,787
675,600 (C)
------------ ------------ ------------
Total assets $112,352,646 $ 18,741,725 $131,094,371
============ ============ ============
LIABILITIES AND SHAREOWNERS' EQUITY
Current liabilities:
Notes payable $ 31,472,726 ($31,472,726) (C) $ ---
Accounts payable 12,255,012 12,255,012
Income taxes 206,826 20,426,000 (B)(D) 20,632,826
Accrued liabilities 5,276,916 5,276,916
Current liabilities of discontinued operations 7,577,055 (5,739,929) (B) 2,587,126
750,000 (B)
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Total current liabilities 56,788,535 (16,036,655) 40,751,880
Non current liabilities 4,195,562 4,195,562
Non current liabilities-discontinued operations 209,632 209,632
Shareowners' equity:
Common stock- $1.25 par value;
8,500,000 shares authorized,
7,811,370, shares outstanding after deducting
123,342 shares in Treasury 9,764,213 9,764,213
Capital in excess of par value 403,067 403,067
Retained earnings 40,991,637 34,778,380 (B) 75,770,017
------------ ------------ ------------
Total shareowners' equity 51,158,917 34,778,380 85,937,297
============ ============ ============
Total liabilities and shareowners' equity $112,352,646 $ 18,741,725 $131,094,371
============ ============ ============
</TABLE>
See accompanying notes to proforma financial information.
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SPARTON CORPORATION AND SUBSIDIARIES:
Proforma Consolidated Condensed Statements of Operations (Unaudited) (A)
<TABLE>
<CAPTION>
For the Fiscal Year Ended June 30, 1996
Proforma
Historical Adjustments Proforma
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<S> <C> <C> <C>
Net sales $ 102,824,946 $102,824,946
Costs and expenses 104,926,455 104,926,455
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(2,101,509) (2,101,509)
Other income ( expenses):
Interest (1,202,143) $1,202,143 (E) ---
Other - net (16,142) --- (F) (16,142)
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Income ( loss ) from continuing operations
before income taxes (3,319,794) 1,202,143 (2,117,651)
Provision ( credit ) for income taxes (509,000) 445,000 (D) (64,000)
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Income ( loss ) from continuing operations ($2,810,794) $ 757,143 ($2,053,651)
============= ========== ===========
Income ( loss ) per share of common stock -
continuing operations $ (.36) $ (.26)
============= ===========
Weighted average common shares outstanding 7,811,370 7,811,370
============= ===========
</TABLE>
<TABLE>
<CAPTION>
For the Three-Month Period Ended September 30, 1996
Proforma
Historical Adjustments Proforma
-------------- -------------- --------------
<S> <C> <C> <C>
Net sales $33,280,285 $ 33,280,285
Costs and expenses 33,315,983 33,315,983
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(35,698) (35,698)
Other income ( expense):
Interest (407,662) $ 407,662 (E) ---
Other - net 64,118 --- (F) 64,118
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Income ( loss ) from continuing operations
before income taxes (379,242) 407,662 28,420
Provision ( credit ) for income taxes (137,000) 151,000 (D) 14,000
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Income ( loss ) from continuing operations ($242,242) ($256,662) $ 14,420
=========== ============ ============
Income ( loss ) per share of common stock -
continuing operations $ (.03) $ ---
=========== ============
Weighted average common shares outstanding 7,811,370 7,811,370
=========== ============
</TABLE>
See accompanying notes to proforma financial information.
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SPARTON CORPORATION AND SUBSIDIARIES
Notes to Proforma Financial Information
(A) The Proforma Consolidated Condensed Statements of Operations for the fiscal
year ended June 30, 1996 and for the three-month period ended September 30, 1996
present the consolidated results of operations of Sparton Corporation
(Sparton), assuming that the sale of three wholly-owned subsidiaries, Sparton
Engineered Products, Inc. - KPI Group, a Michigan corporation, Sparton
Engineered Products, Inc.- KPI Group, an Indiana corporation, and Sparton
Engineered Products, Inc.- Lake Odessa Group, A Michigan corporation
(collectively referred to herein as the "Subsidiaries") had taken place as of
July 1, 1995. The statements include all material adjustments necessary to
present the historical results to reflect the assumptions. The Subsidiaries had
been classified as part of discontinued automotive operations in Sparton's
historical statement of operations for the fiscal year ended June 30, 1996 and
for the three-month period ended September 30, 1996; accordingly, the
Subsidiaries' operating results had already been excluded from results of
continuing operations.
The Proforma Consolidated Condensed Balance Sheet as of September 30, 1996
presents Sparton's financial position assuming the sale of the Subsidiaries had
taken place at September 30, 1996.
The proforma information is not necessarily indicative of the results of
operations or the financial position which may have actually been obtained if
the sale transaction had been consummated on the dates indicated. In addition,
the proforma financial information does not purport to be indicative of results
of operations or financial position which may be obtained in the future. Sparton
has prepared these proforma financial statements based upon assumptions deemed
appropriate by management. The proforma financial information should be read in
conjunction with Sparton's historical consolidated financial statements and
notes thereto contained in the 1996 Annual Report on Form 10-K as of June 30,
1996 and the Quarterly Report on Form 10-Q as of September 30, 1996.
(B) The sale of the Subsidiaries was recorded as having taken place on September
30, 1996. Included in this adjustment was the cash selling price less certain
purchase price adjustments and related sales commissions and expenses to net
$78,603,000 to cash, the net assets sold and the liabilities assumed of the
Subsidiaries by the Buyer of $22,994,000, the assets retained of $345,000 and
the liabilities assumed of $750,000 of the Subsidiaries by Sparton, estimated
income taxes of $20,426,000 from the gain on sale, and the estimated after tax
gain on sale of $34,778,000. The Subsidiaries' assets retained by Sparton
include various machinery and equipment, the Lake Odessa, Michigan production
facility and vacant land in Lake Odessa, Michigan originally purchased for a
plant expansion. The Subsidiaries' liabilities assumed by Sparton included
provisions for certain contingent trade payables, and accruals related to
employee benefits and specific ongoing litigation.
No gain or loss was recorded for the disposition of Sparton Engineered Products,
Inc.-Flora Group (Flora), the remaining discontinued automotive operation
currently offered for sale and not part of the Subsidiaries' sale transaction.
Through September 1996, the entire discontinued automotive operations were
expected to be sold in a single transaction to one buyer. With the sale of the
Subsidiaries, Flora is now being offered for sale separately. While the Company
is actively pursuing the sale of Flora at the present time, information is not
presently available to reliably estimate its ultimate selling price. The
potential exists that the Company may incur a loss on the sale of Flora.
(C) The cash proceeds from the sale of the Subsidiaries were used to eliminate
outstanding borrowings under Sparton's revolving credit facilities with the
remaining cash proceeds invested in short-term U.S. Treasury instruments. The
cash proceeds were also reduced by $676,000 for the purchase of the Grand Haven
and White Cloud, Michigan real estate from Mr. and Mrs. John J. Smith and
Lawson K. Smith.
(D) The income tax effects of the proforma adjustments referred to on Notes (A)
through (C), and (E) and (F), were recorded assuming an estimated annualized
combined Federal and State income tax rate of 37% as substantially all of the
proforma adjustments affected U.S. operations only. For the fiscal year ended
June 30, 1996, the adjustments resulted in a proforma loss before income taxes
from U.S. continuing operations of $386,603 and a proforma loss before income
taxes from Canadian continuing operations of $1,731,048. As the Canadian
operations are in an income tax loss carryforward position, no income tax
benefits were available with respect to the Canadian loss.
(E) Interest expense was eliminated under the assumption that the cash proceeds
from the sale of the Subsidiaries were used to eliminate outstanding borrowings
under the existing credit facilities.
(F) Interest income from the investments of sales proceeds, after the
elimination of outstanding borrowings and the payment of applicable income
taxes, was not included in the proforma consolidated condensed statements of
operations as such a use of sale proceeds was not considered to be a certainty.
Under the assumptions, however, that the remaining sales proceeds were
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invested in short-term U.S. Treasury instruments at an estimated one-year
Treasury yield of 6.0%, approximately $2,678,000 of interest income would have
been earned by the Company for the fiscal year ended June 30, 1996 and
approximately $390,000 of interest income would have been earned by the Company
for the three-month period ended September 30, 1996.
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