##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2008
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission File number 1-1000
 SPARTON CORPORATION
  OHIO
  38-1054690
  2400 East Ganson Street, Jackson, Michigan 49202
  (517) 787-8600
  þ o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer þ(Do not check if a smaller reporting company)
    
    Smaller reporting company o
 o þ
  Shares outstanding atClass of Common Stock
    
    April 30, 2008$1.25 Par Value
    
    9,811,507




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##### 



2  
 
 TABLE OF CONTENTS
 Part I. Financial InformationItem 1.
    
    Financial Statements (Interim, Unaudited)Condensed Consolidated Balance Sheets at March 31, 2008 and June 30, 2007
    
    3Condensed Consolidated Statements of Operations for the three months and nine months ended March 31, 2008 and 2007
    
    4Condensed Consolidated Statements of Cash Flows for the nine months ended March 31, 2008 and 2007
    
    5Condensed Consolidated Statements of Shareowners Equity for the nine months ended March 31, 2008 and 2007
    
    6Notes to Condensed Consolidated Financial Statements
    
    7Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    17Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    27Item 4T.
    
    Controls and Procedures
    
    27Part II. Other InformationItem 1.
    
    Legal Proceedings
    
    27Item 1(a).
    
    Risk Factors
    
    29Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    29Item 6.
    
    Exhibits
    
    30Signatures
    
    30EX-31.1EX-31.2EX-32.1




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3 
 Part I. Financial Information
 
 Item 1. Financial Statements (Interim, Unaudited)
 
 
 March 31, 2008
    
    
    June 30, 2007ASSETSCurrent assets:Cash and cash equivalents
    
    $
    3,681,344
    
    
    $
    3,982,485Accounts receivable
    
    
    28,063,463
    
    
    
    24,566,104Inventories and costs of contracts in
progress
    
    
    62,852,024
    
    
    
    53,520,533Income taxes recoverable
    
    
    
    
    
    
    485,074Deferred income taxes
    
    
    1,984,034
    
    
    
    2,287,438Prepaid expenses and other current
assets
    
    
    729,928
    
    
    
    949,092Total current assets
    
    
    97,310,793
    
    
    
    85,790,726Property, plant and equipment  net
    
    
    17,129,323
    
    
    
    17,721,812Deferred income taxes  non current
    
    
    6,586,461
    
    
    
    4,630,819Goodwill
    
    
    16,377,804
    
    
    
    16,378,327Other intangibles  net
    
    
    5,882,709
    
    
    
    6,243,647Other non current assets
    
    
    4,297,146
    
    
    
    6,242,467Total assets
    
    $
    147,584,236
    
    
    $
    137,007,798LIABILITIES AND SHAREOWNERS EQUITYCurrent liabilities:Short-term bank borrowings
    
    $
    8,500,000
    
    
    $
    1,000,000Current portion of long-term debt
    
    
    3,975,782
    
    
    
    3,922,350Accounts payable
    
    
    23,969,039
    
    
    
    15,781,046Salaries and wages
    
    
    4,351,858
    
    
    
    4,806,724Accrued health benefits
    
    
    1,263,162
    
    
    
    1,359,844Other accrued liabilities
    
    
    6,270,239
    
    
    
    5,931,638Total current liabilities
    
    
    48,330,080
    
    
    
    32,801,602Pension liability
    
    
    231,628
    
    
    
    12,495Long-term debt  non current portion
    
    
    9,560,850
    
    
    
    12,088,254Environmental remediation  non current
portion
    
    
    5,390,122
    
    
    
    5,625,776Total liabilities
    
    
    63,512,680
    
    
    
    50,528,127Shareowners equity:Preferred stock, no par value; 200,000
shares authorized, none outstanding
    
    
    
    
    
    
    Common stock, $1.25 par value;
15,000,000 shares authorized,
9,811,507 shares outstanding at March
31, 2008 and June 30, 2007
    
    
    12,264,384
    
    
    
    12,264,384Capital in excess of par value
    
    
    19,598,695
    
    
    
    19,474,097Retained earnings
    
    
    54,078,823
    
    
    
    56,730,643Accumulated other comprehensive loss
    
    
    (1,870,346
    )
    
    
    (1,989,453
    )Total shareowners equity
    
    
    84,071,556
    
    
    
    86,479,671Total liabilities and shareowners
equity
    
    $
    147,584,236
    
    
    $
    137,007,798




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4 
 
 Three months ended
    
    
    Nine months ended2008
    
    
    2007
    
    
    2008
    
    
    2007Net sales
    
    $
    58,138,830
    
    
    $
    47,725,992
    
    
    $
    171,941,620
    
    
    $
    149,099,220Costs of goods sold
    
    
    53,586,035
    
    
    
    47,030,124
    
    
    
    162,108,950
    
    
    
    144,193,397Gross profit
    
    
    4,552,795
    
    
    
    695,868
    
    
    
    9,832,670
    
    
    
    4,905,823Selling and administrative expenses
    
    
    4,901,246
    
    
    
    4,264,621
    
    
    
    14,393,913
    
    
    
    12,978,917Amortization of intangibles
    
    
    120,313
    
    
    
    120,313
    
    
    
    360,938
    
    
    
    362,049EPA related  net environmental remediation
    
    
    (8
    )
    
    
    (3,091
    )
    
    
    920
    
    
    
    (204,321
    )Net (gain) loss on sale of property, plant and equipment
    
    
    (44,663
    )
    
    
    3,872
    
    
    
    (976,685
    )
    
    
    (201,851
    )4,976,888
    
    
    
    4,385,715
    
    
    
    13,779,086
    
    
    
    12,934,794Operating loss
    
    
    (424,093
    )
    
    
    (3,689,847
    )
    
    
    (3,946,416
    )
    
    
    (8,028,971
    )Other income (expense):Interest and investment income (loss)
    
    
    43,654
    
    
    
    74,896
    
    
    
    121,900
    
    
    
    145,923Interest expense
    
    
    (248,953
    )
    
    
    (205,877
    )
    
    
    (849,293
    )
    
    
    (793,599
    )Equity income (loss) in investment
    
    
    (8,000
    )
    
    
    75,000
    
    
    
    (208,000
    )
    
    
    68,000Other  net
    
    
    (283,816
    )
    
    
    (23,730
    )
    
    
    309,989
    
    
    
    (283,635
    )(497,115
    )
    
    
    (79,711
    )
    
    
    (625,404
    )
    
    
    (863,311
    )Loss before income taxes
    
    
    (921,208
    )
    
    
    (3,769,558
    )
    
    
    (4,571,820
    )
    
    
    (8,892,282
    )Credit for income taxes
    
    
    (1,555,000
    )
    
    
    (1,476,000
    )
    
    
    (1,920,000
    )
    
    
    (2,757,000
    )Net income (loss)
    
    $
    633,792
    
    
    $
    (2,293,558
    )
    
    $
    (2,651,820
    )
    
    $
    (6,135,282
    )Income (loss) per share  basic and diluted
    
    $
    0.06
    
    
    $
    (0.23
    )
    
    $
    (0.27
    )
    
    $
    (0.62
    )




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Nine months ended March 31,2008
     
    
    2007Cash Flows From Operating Activities:Net loss
    
    $
    (2,651,820
    )
    
    $
    (6,135,282
    )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation, amortization and accretion
    
    
    1,655,169
    
    
    
    1,941,812Deferred income tax credit
    
    
    (1,713,596
    )
    
    
    Loss on sale of investment securities
    
    
    
    
    
    
    244,562Equity (income) loss in investment
    
    
    208,000
    
    
    
    (68,000
    )Pension expense
    
    
    399,598
    
    
    
    372,724Share-based compensation
    
    
    124,598
    
    
    
    187,901Gain on sale of property, plant and equipment
    
    
    (932,022
    )
    
    
    (3,176
    )Gain from sale of non-operating land
    
    
    (44,663
    )
    
    
    (198,675
    )Other, NRTC litigation loss
    
    
    1,643,396
    
    
    
    47,420Changes in operating assets and liabilities:Accounts receivable
    
    
    (3,497,359
    )
    
    
    3,956,658Income taxes recoverable
    
    
    485,074
    
    
    
    (2,320,726
    )Inventories, prepaid expenses and other current assets
    
    
    (9,256,323
    )
    
    
    (5,759,353
    )Accounts payable and accrued liabilities
    
    
    7,735,578
    
    
    
    (5,604,852
    )Net cash used in operating activities
    
    
    (5,844,370
    )
    
    
    (13,338,987
    )Cash Flows From Investing Activities:Additional goodwill incurred in purchase of Astro
    
    
    
    
    
    
    (38,528
    )Proceeds from sale of investment securities
    
    
    
    
    
    
    15,619,068Proceeds from maturity of investment securities
    
    
    
    
    
    
    465,645Purchases of property, plant and equipment
    
    
    (701,742
    )
    
    
    (2,672,559
    )Proceeds from sale of non-operating land
    
    
    49,000
    
    
    
    811,175Proceeds from sale of property, plant and equipment
    
    
    1,076,018
    
    
    
    7,422Other, principally noncurrent other assets
    
    
    93,925
    
    
    
    9,420Net cash provided by investing activities
    
    
    517,201
    
    
    
    14,201,643Cash Flows From Financing Activities:Net short-term bank borrowings
    
    
    7,500,000
    
    
    
    Repayment of long-term debt
    
    
    (2,473,972
    )
    
    
    (2,423,266
    )Proceeds from the exercise of stock options
    
    
    
    
    
    
    1,346,208Tax effect from stock transactions
    
    
    
    
    
    
    183,093Stock dividends  cash paid in lieu of fractional shares
    
    
    
    
    
    
    (1,977
    )Repurchases of common stock
    
    
    
    
    
    
    (2,523,920
    )Net cash provided by (used in) financing activities
    
    
    5,026,028
    
    
    
    (3,419,862
    )Decrease in cash and cash equivalents
    
    
    (301,141
    )
    
    
    (2,557,206
    )Cash and cash equivalents at beginning of period
    
    
    3,982,485
    
    
    
    7,503,438Cash and cash equivalents at end of period
    
    $
    3,681,344
    
    
    $
    4,946,232




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6 
  
 Nine months ended March 31, 2008Capital
    
    
    
    
    
    
    Accumulated otherCommon Stock
    
    
    in excess
    
    
    Retained
    
    
    comprehensiveShares
    
    
    Amount
    
    
    of par value
    
    
    earnings
    
    
    income (loss)
    
    
    TotalBalance at July 1, 2007
    
    
    9,811,507
    
    
    $
    12,264,384
    
    
    $
    19,474,097
    
    
    $
    56,730,643
    
    
    $
    (1,989,453
    )
    
    $
    86,479,671Share-based compensation
    
    
    
    
    
    
    
    
    
    
    124,598
    
    
    
    
    
    
    
    
    
    
    
    124,598Comprehensive income (loss), net of tax:Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,651,820
    )
    
    
    
    
    
    
    (2,651,820
    )Amortization of unrecognized pension costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    119,107
    
    
    
    119,107Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,532,713
    )Balance at March 31, 2008
    
    
    9,811,507
    
    
    $
    12,264,384
    
    
    $
    19,598,695
    
    
    $
    54,078,823
    
    
    $
    (1,870,346
    )
    
    $
    84,071,556
 Nine months ended March 31, 2007Capital
    
    
    
    
    
    
    Accumulated otherCommon Stock
    
    
    in excess
    
    
    Retained
    
    
    comprehensiveShares
    
    
    Amount
    
    
    of par value
    
    
    earnings
    
    
    income (loss)
    
    
    TotalBalance at July 1, 2006
    
    
    9,392,305
    
    
    $
    11,740,381
    
    
    $
    15,191,990
    
    
    $
    70,183,104
    
    
    $
    (265,097
    )
    
    $
    96,850,378Stock dividend (5% declared October 25, 2006)
    
    
    466,365
    
    
    
    582,956
    
    
    
    3,404,465
    
    
    
    (3,989,398
    )
    
    
    
    
    
    
    (1,977
    )Stock options exercised, net of common
stock surrendered to facilitate exercise
    
    
    234,444
    
    
    
    293,056
    
    
    
    1,053,152
    
    
    
    
    
    
    
    
    
    
    
    1,346,208Repurchases of common stock as part
of 2005 share repurchase program
    
    
    (292,744
    )
    
    
    (365,930
    )
    
    
    (463,554
    )
    
    
    (1,694,436
    )
    
    
    
    
    
    
    (2,523,920
    )Share-based compensation
    
    
    
    
    
    
    
    
    
    
    187,901
    
    
    
    
    
    
    
    
    
    
    
    187,901Tax effect of stock transactions
    
    
    
    
    
    
    
    
    
    
    183,093
    
    
    
    
    
    
    
    
    
    
    
    183,093Comprehensive income (loss), net of tax:Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,135,282
    )
    
    
    
    
    
    
    (6,135,282
    )Net unrealized loss on investment
securities owned
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    122,686
    
    
    
    122,686Reclassification adjustment for net gain
realized and reported in net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    161,411
    
    
    
    161,411Net unrealized gain on equity investment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26,000
    
    
    
    26,000Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,825,185
    )Balance at March 31, 2007
    
    
    9,800,370
    
    
    $
    12,250,463
    
    
    $
    19,557,047
    
    
    $
    58,363,988
    
    
    $
    45,000
    
    
    $
    90,216,498




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7   
 NOTE 1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Basis of presentation 
  Business Acquisition  Business Combinations
 Operations 
 Use of estimates 




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##### Table of Contents



8 Revenue recognition 
 Accounts receivable, credit practices, and allowance for probable losses 
  Fair value of financial instruments 
 Investment securities 
  Other investment 
 Market
risk exposure




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##### Table of Contents



9 Long-lived assets 
 Other assets 
 Common stock repurchases 
 Deferred income taxes 
 Supplemental cash flows information 
 2008
    
    
    2007Net cash paid (refunded) during the period for:Income taxes
    
    $
    (797,000
    )
    
    $
    (314,000
    )Interest
    
    $
    790,000
    
    
    $
    749,000
  New accounting standards The Fair Value Option for Financial Assets and Financial Liabilities Fair Value Measurements
 Employers Accounting for Defined Benefit
Pension and Other Postretirement Plans




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10  Accounting for Uncertainty in Income Taxes Accounting for Income Taxes. Definition of Settlement in FASB
Interpretation No. 48
  NOTE 2. INVENTORIES AND COSTS OF CONTRACTS IN PROGRESS
   March 31, 2008
    
    
    June 30, 2007Raw materials
    
    $
    47,531,000
    
    
    $
    36,627,000Work in process and finished goods
    
    
    15,321,000
    
    
    
    16,894,000$
    62,852,000
    
    
    $
    53,521,000




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11 NOTE 3. DEFINED BENEFIT PENSION PLAN
 Periodic benefit cost 
 Three months ended
    
    
    Nine months ended2008
    
    
    2007
    
    
    2008
    
    
    2007Service cost
    
    $
    134,000
    
    
    $
    124,000
    
    
    $
    403,000
    
    
    $
    371,000Interest cost
    
    
    152,000
    
    
    
    158,000
    
    
    
    455,000
    
    
    
    474,000Expected return on plan assets
    
    
    (187,000
    )
    
    
    (217,000
    )
    
    
    (560,000
    )
    
    
    (651,000
    )Amortization of prior service cost
    
    
    26,000
    
    
    
    26,000
    
    
    
    77,000
    
    
    
    77,000Amortization of unrecognized net actuarial loss
    
    
    35,000
    
    
    
    34,000
    
    
    
    104,000
    
    
    
    102,000Net periodic benefit cost
    
    $
    160,000
    
    
    $
    125,000
    
    
    $
    479,000
    
    
    $
    373,000
  NOTE 4. GOODWILL AND OTHER INTANGIBLES
 Business Combinations Goodwill and
Other Intangible Assets Accounting for the Impairment or Disposal
of Long-lived Assets
 Amortizable
    
    
    TotalGoodwill
    
    
    Intangibles
    
    
    IntangiblesBalance at July 1, 2006
    
    $
    15,744,000
    
    
    $
    6,726,000
    
    
    $
    22,470,000Goodwill additions
    
    
    634,000
    
    
    
    
    
    
    
    634,000Amortization
    
    
    
    
    
    
    (482,000
    )
    
    
    (482,000
    )Balance at June 30, 2007
    
    $
    16,378,000
    
    
    $
    6,244,000
    
    
    $
    22,622,000Amortization
    
    
    
    
    
    
    (361,000
    )
    
    
    (361,000
    )Balance at March 31, 2008
    
    $
    16,378,000
    
    
    $
    5,883,000
    
    
    $
    22,261,000
 Goodwill 
 Other intangibles 




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##### Table of Contents



12 NOTE 5. BORROWINGS
 Short-term debt maturities and line of credit 
  Long-term debt 
 March 31, 2008
    
    
    June 30, 2007Industrial Revenue bonds, face value
    
    $
    2,293,000
    
    
    $
    2,376,000Less unamortized purchase discount
    
    
    133,000
    
    
    
    141,000Industrial Revenue bonds, carrying value
    
    
    2,160,000
    
    
    
    2,235,000Bank loan
    
    
    6,500,000
    
    
    
    8,000,000Notes payable
    
    
    4,877,000
    
    
    
    5,776,000Total long-term debt
    
    
    13,537,000
    
    
    
    16,011,000Less current portion
    
    
    3,976,000
    
    
    
    3,922,000Long-term debt, net of current portion
    
    $
    9,561,000
    
    
    $
    12,089,000




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13  NOTE 6. COMMITMENTS AND CONTINGENCIES
 Environmental Remediation
   Customer Relationships
    Product Issues




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14  NOTE 7. COMMON STOCK OPTIONS
 Share-Based Payment
    Three months ended
    
    Nine months ended2008
    
    2007
    
    2008
    
    2007Share-based compensation expense
    
    $
    52,000
    
    
    $
    $54,000
    
    
    $
    125,000
    
    
    $
    188,000Related tax benefit
    
    
    
    
    
    $
    1,000
    
    
    
    
    
    
    $
    $23,000Share-based compensation expense impacted basic and
diluted per share amounts by approximately
    
    
    
    
    
    $
    0.01
    
    
    
    
    
    
    $
    0.02




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15 Wtd. Avg.RemainingTotal Shares
    
    Wtd. Avg.
    
    Contractual
    
    AggregateUnder Option
    
    Exercise Price
    
    Term (years)
    
    Intrinsic ValueOutstanding at July 1, 2007
    
    
    300,303
    
    
    $
    7.82
    
    
    
    5.74
    
    
    $
    66,000Granted
    
    
    Exercised
    
    
    Forfeited or expired
    
    
    (76,918
    )Outstanding at March 31, 2008
    
    
    223,385
    
    
    $
    8.22
    
    
    
    6.90
    
    
    
    Exercisable at March 31, 2008
    
    
    124,594
    
    
    $
    7.96
    
    
    
    6.55
    
    
    
    
   NOTE 8. EARNINGS (LOSS) PER SHARE
   Three months ended
    
    
    Nine months ended2008
    
    
    2007
    
    
    2008
    
    
    2007Weighted average shares outstanding
    
    
    9,811,507
    
    
    
    9,798,902
    
    
    
    9,811,507
    
    
    
    9,822,999Basic and diluted income (loss) per share
    
    $
    0.06
    
    
    $
    (0.23
    )
    
    $
    (0.27
    )
    
    $
    (0.62
    )
 NOTE 9. COMPREHENSIVE INCOME (LOSS)
  Three months ended
    
    
    Nine months ended2008
    
    
    2007
    
    
    2008
    
    
    2007Net income (loss)
    
    $
    634,000
    
    
    $
    (2,294,000
    )
    
    $
    (2,652,000
    )
    
    $
    (6,135,000
    )Other comprehensive income (loss), net of taxInvestment securities owned
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    284,000Investment securities held by investee accounted for
by the equity method
    
    
    
    
    
    
    (24,000
    )
    
    
    
    
    
    
    26,000Amortization of unrecognized pension costs
    
    
    40,000
    
    
    
    
    
    
    
    119,000
    
    
    
    40,000
    
    
    
    (24,000
    )
    
    
    119,000
    
    
    
    310,000Comprehensive income (loss)
    
    $
    674,000
    
    
    $
    (2,318,000
    )
    
    $
    (2,533,000
    )
    
    $
    (5,825,000
    )




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16  NOTE 10. PLANT CLOSURE
    Current assets  net of assets held for sale
    
    $
    9,000Property and plant (net), held for sale
    
    
    29,000Total assets (all current)
    
    $
    38,000Liabilities (all current)
    
    $
    136,000




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17 
 Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations




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18  EXECUTIVE SUMMARY
  
    
    Consistent and successful sonobuoy drop tests contributing to increased sales and improved
margins.
    
    Continued sales growth in the Medical/Scientific Instrumentation market and a number of
significant new program orders now in start-up.
    
    Improved margins from a better product mix, improved performance, and repricing on some
products.
    
    The completion of the sale of the Deming, New Mexico facility at a gain of
approximately $0.9 million.
  
    
    Sales of several lots of sonobuoys in the early part of fiscal 2008, which contracts
carried minimal or no margin. These programs are now essentially complete.
    
    Significant new program start-up costs related to hiring staff, training personnel and
ordering material in advance of production, compounded by customer delays which has lead to
further unexpected cost growth.
    
    Increased selling and administrative expenses to support new
program start-ups.
    
    Decreased sales and depressed margins in the Industrial/Other market, due primarily to
reduced sales and pricing concessions to one customer.
    
    The write-off of a $1.6 million litigation claim (previously recorded as a deferred asset),
due to an adverse court opinion.
    
    Increased outside service costs related to managements obligation to report on internal
control over financial reporting which begins at the end of this fiscal year.
  RESULTS OF OPERATIONS
 Three months ended March 31:CURRENT QUARTER
    
    2008
    
    
    2007MARKET
    
    Sales
    
    
    % of Total
    
    
    Sales
    
    
    % of Total
    
    
    % ChangeMedical/Scientific Instrumentation
    
    $
    19,174,000
    
    
    
    33.0
    %
    
    $
    14,891,000
    
    
    
    31.2
    %
    
    
    28.8
    %Aerospace
    
    
    16,234,000
    
    
    
    27.9
    
    
    
    13,441,000
    
    
    
    28.2
    
    
    
    20.8Government
    
    
    12,847,000
    
    
    
    22.1
    
    
    
    7,101,000
    
    
    
    14.8
    
    
    
    80.9Industrial/Other
    
    
    9,884,000
    
    
    
    17.0
    
    
    
    12,293,000
    
    
    
    25.8
    
    
    
    (19.6
    )Totals
    
    $
    58,139,000
    
    
    
    100.0
    %
    
    $
    47,726,000
    
    
    
    100.0
    %
    
    
    21.8
    %
   2008
    
    2007Net sales
    
    
    100.0
    %
    
    
    100.0
    %Costs of goods sold
    
    
    92.2
    
    
    
    98.5Gross profit
    
    
    7.8
    
    
    
    1.5Selling and administrative expenses
    
    
    8.4
    
    
    
    8.9Other operating expense  net
    
    
    0.1
    
    
    
    0.3Operating loss
    
    
    (0.7
    )
    
    
    (7.7
    )Other expense  net
    
    
    (0.9
    )
    
    
    (0.2
    )Loss before income taxes
    
    
    (1.6
    )
    
    
    (7.9
    )Credit for income taxes
    
    
    (2.7
    )
    
    
    (3.1
    )Net income (loss)
    
    
    1.1
    %
    
    
    (4.8
    )%




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19




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20 Nine months ended March 31:YEAR-TO-DATE
    
    2008
    
    
    2007MARKET
    
    Sales
    
    
    % of Total
    
    
    Sales
    
    
    % of Total
    
    
    % ChangeMedical/Scientific Instrumentation
    
    $
    57,928,000
    
    
    
    33.7
    %
    
    $
    45,707,000
    
    
    
    30.7
    %
    
    
    26.7
    %Aerospace
    
    
    45,929,000
    
    
    
    26.7
    
    
    
    42,187,000
    
    
    
    28.3
    
    
    
    8.9Government
    
    
    37,378,000
    
    
    
    21.7
    
    
    
    19,378,000
    
    
    
    13.0
    
    
    
    92.9Industrial/Other
    
    
    30,707,000
    
    
    
    17.9
    
    
    
    41,827,000
    
    
    
    28.0
    
    
    
    (26.6
    )Totals
    
    $
    171,942,000
    
    
    
    100.0
    %
    
    $
    149,099,000
    
    
    
    100.0
    %
    
    
    15.3
    %
    2008
    
    2007Net sales
    
    
    100.0
    %
    
    
    100.0
    %Costs of goods sold
    
    
    94.3
    
    
    
    96.7Gross profit
    
    
    5.7
    
    
    
    3.3Selling and administrative expenses
    
    
    8.4
    
    
    
    8.7Other operating income  net
    
    
    (0.4
    )
    
    
    0.0Operating loss
    
    
    (2.3
    )
    
    
    (5.4
    )Other expense  net
    
    
    (0.4
    )
    
    
    (0.6
    )Loss before income taxes
    
    
    (2.7
    )
    
    
    (6.0
    )Credit for income taxes
    
    
    (1.2
    )
    
    
    (1.9
    )Net loss
    
    
    (1.5
    )%
    
    
    (4.1
    )%




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21




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22 LIQUIDITY AND CAPITAL RESOURCES




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23   CONTRACTUAL OBLIGATIONS AND COMMITMENTS
  CRITICAL ACCOUNTING POLICIES AND ESTIMATES
  Environmental Contingencies
  Government Contract Cost Estimates




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24  Commercial Inventory Valuation Allowances
   Allowance for Probable Losses on Receivables
  Pension Obligations
 Employers Accounting for Pensions




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25  Employers Accounting for Defined Benefit Pension and Other Postretirement Plans
 Business Combinations
   Valuation of Property, Plant and Equipment
 Accounting for the Impairment or Disposal of Long-lived Assets
 Goodwill and Customer Relationships
 Goodwill and Other Intangible Assets.




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26 Accounting for the
Impairment or Disposal of Long-lived Assets
  Income Taxes
  OTHER
 Change of Executive Officers
  Litigation




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27   
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
 MARKET RISK EXPOSURE
   
 Item 4T. Controls and Procedures
   
 Part II. Other Information
 
 Item 1. Legal Proceedings
  Environmental Remediation




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##### Table of Contents



28      Customer Relationships




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29   Product Issues
   
 Item 1(a). Risk Factors
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds




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30 
 Item 6. Exhibits
 3.1
    
    Amended Articles of Incorporation of the Registrant were filed on Form 10-Q for the
three-month period ended September 30, 2004, and are incorporated herein by reference.3.2
    
    Amended Code of Regulation of the Registrant were filed on Form 10-Q for the three-month
period ended September 30, 2004, and are incorporated herein by reference.3.3
    
    The amended By-Laws of the Registrant were filed on Form 10-Q for the nine-month period ended
March 31, 2004, and are incorporated herein by reference.31.1
    
    Chief Executive Officer certification under Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    Chief Financial Officer certification under Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    Chief Executive Officer and Chief Financial Officer certification pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 SIGNATURES
  Date: May 9, 2008
    
    /s/ RICHARD L. LANGLEYRichard L. Langley, Chief Executive OfficerDate: May 9, 2008
    
    /s/ JOSEPH S. LERCZAKJoseph S. Lerczak, Chief Financial Officer