Sparton Corporation F3Q10 (Qtr End 03/31/10) Earnings Call Transcript

Sparton Corporation F3Q10 (Qtr End 03/31/10) Earnings Call Transcript
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Sparton Corporation (SPA)

F3Q10 (Qtr End 03/31/10) Earnings Call Transcript

May 18, 2010 10:00 am ET

Executives

Mike Osborne – SVP, Business Development

Cary Wood – President and CEO

Greg Slome – CFO

Analysts

Andrew Shapiro – Lawndale Capital Management

John Roff – Argon Capital

Jonathan Haines [ph]

Question-and-Answer Session

Operator

(Operator instructions)

Our first question comes from the line of Andrew Shapiro, President of Lawndale Capital Management. Please go ahead.

Andrew Shapiro

Lawndale Capital Management

Hi, good morning. I'm calling in from offsite. Can you hear me okay first?

Cary Wood

Yes, we can Andrew.

Andrew Shapiro

Lawndale Capital Management

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Okay, great. I'll ask a few questions and get back in the queue because I know there maybe others here. Greg, can you discuss or point out what items of note, good or bad that non-recurring in the recent quarters financial results?

Greg Slome

Yes, Andrew. I'll take that. Really only three items of note. One of them is the gain on the sale of the investment in the Cybernet stock which amounted to income of $200,000 in the quarter. We then had the federal income tax carry tax benefit that was recognized in the quarter of $234,000 and those two items being partially offset an additional $237,000 of restructuring expense, the net impact of those three resulting in about a $200.000 positive impact of earnings in the quarter.

Andrew Shapiro

Lawndale Capital Management

Okay, thank you. And the other large vacant parcels, since in May you took care of the Coors Road. The other parcels – first up, they're generating about how much cost either quarter or a year in aggregate, you'd have to do individually, the status of the monetization of each of these other parcels.

Greg Slome

Just as a reminder to all callers, there's three separate parcels that are Jackson, London and Albuquerque. The book value as it stands today on the combined three is roughly $6.5 million, $900,000 of that attributable to both Jackson and London. We're in the midst of disengaging with the current listing companies on each of those three, at least two of the three. We're exploring two new options on both Jackson and London and in all cases, as you would expect by the end of this year will reassess the book value of each of the three by reengaging in appraisals. I think as we look ahead – I think our generally our budgeted expense across the totality of the three remaining units is about $500,000 in total and we expect that there is an opportunity for us to address that expense over the course of the next several quarters with some creative options.

Andrew Shapiro

Lawndale Capital Management

Okay. So the last quarter, you thought that by the end of the fiscal year that would end in the end of June, you might have had some developments on, or two of these remaining three is the disengagement of the broker imply that those due to a lot of bad orders still maybe feel your quarters.

Greg Slome

No I think that we continue to be optimistic that two of the three properties, we can achieve some kind of an engagement with a potential with a potential suitor. But this engagement with the broker doesn’t imply that those deals started to unravel. Frankly it was more matter of not needing to go through traditional commercial real estate channels to make it happen. So we continue to work on two of those three. The third, Albuquerque is one where we have entertained offers but they have been offers that have been muddied with significant contingencies including state funding and that made it difficult to get those things moved at the current asking price. We haven’t adjusted our asking price. We haven’t done anything with the current valuations on the property but we will be revisiting that so as to perhaps accelerate the attraction of that particular property given the expense and the carrying cost and potential CapEx types of liabilities that each of the three properties could present over the course of the next year. So we're moving diligently on each of those three, two of them again back to your fundamental question. I'm fairly optimistic we can get resolved in some way, shape or form between now and the end of our first quarter.

Andrew Shapiro

Lawndale Capital Management

Great. I do have questions on your segments as well as some of the other overall issues. I'll back out into the queue but please come back to us.

Cary Wood

Yes, thank you.

Operator

Thank you. Our next question comes from John Roff, Portfolio Manager at Argon Capital. Please go ahead.

John Roff –

Argon Capital

Hi guys, a few questions for you. Is it possible for you to give sort of an overall blended utilization rate across your facilities currently?

Greg Slome

Yes, I think with the downturn in what we call our EMS segment having gone previously from five significantly under utilized facilities to two, one in Vietnam and in Brooksville, I think generally its safe to suggest that our Brooksville facility will be about 50% utilized. Our Vietnam facility, while we project a significant uptick in volume going in to 2010 we're seeing significant uptick in 2009 compared to '08, its still significantly underutilized and we would suggest that its around 25% or thereabout. But we do believe, as we have been projecting all along and certainly as we look into 2010 that both Vietnam and our Brooksville will provide for opportunities and certainly be cash flow positive going into 2010.

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