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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended MARCH 31, 2004

or

[ ] 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
(Exact Name of Registrant as Specified in its Charter)

Ohio
(State or Other Jurisdiction of Incorporation or Organization)

38-1054690
(I.R.S. Employer Identification No.)

2400 East Ganson Street, Jackson, Michigan 49202
(Address of Principal Executive Offices, Zip Code)

(517) 787-8600
(Registrants Telephone Number, Including Area Code)

Indicate by checkmark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
         [X]
Yes [  ] No

Indicate by checkmark whether the registrant is an accelerated filer (as defined
by Rule 12b-2 of the Exchange Act).
     [  ] Yes [X] No

Indicate the number of shares outstanding of each of the
issuers classes of common stock, as of the latest practical date.

Shares Outstanding atClass of Common Stock
    
    April 30, 2004$1.25 Par Value
    
    
    8,346,025


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INDEX






Part I.
Financial InformationItem 1. Financial StatementsCondensed Consolidated Balance Sheets March 31, 2004 and June 30, 2003
    
    
    3Condensed Consolidated Statements of Operations
Three-Month and Nine-Month Periods ended March 31, 2004 and 2003
    
    
    4Condensed Consolidated Statements of Cash Flows
Nine-Month Periods ended March 31, 2004 and 2003
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    10Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    15Item 4. Controls and Procedures
    
    
    15Part II.
Other InformationItem 1. Legal Proceedings
    
    
    15Item 6. Exhibits and Reports on Form 8-K
    
    
    17Signatures
    
    
    17Exhibit 31.1Exhibit 31.2Exhibit 32.1


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SPARTON CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets (Unaudited)
March 31, 2004 and June 30, 2003

March 31
    
    June 30AssetsCurrent assets:Cash and cash equivalents
    
    $
    10,607,492
    
    
    $
    10,562,222Investment securities
    
    
    16,904,315
    
    
    
    23,214,783Accounts receivable
    
    
    20,241,433
    
    
    
    29,236,904Income taxes recoverable
    
    
    1,195,706
    
    
    
    Inventories and costs on contracts in progress
    
    
    38,284,340
    
    
    
    31,809,088Prepaid expenses
    
    
    1,462,954
    
    
    
    1,174,618Total Current assets
    
    
    88,696,240
    
    
    
    95,997,615Pension asset
    
    
    5,630,747
    
    
    
    6,176,085Other assets
    
    
    5,824,528
    
    
    
    5,583,577Property, plant and equipment, net
    
    
    12,562,695
    
    
    
    8,256,593Total Assets
    
    $
    112,714,210
    
    
    $
    116,013,870Liabilities and Shareowners EquityCurrent liabilities:Accounts payable
    
    $
    8,869,185
    
    
    $
    8,893,348Salaries and wages
    
    
    3,940,870
    
    
    
    3,879,947Accrued liabilities
    
    
    5,530,122
    
    
    
    4,532,795Income taxes payable
    
    
    
    
    
    
    709,443Total Current liabilities
    
    
    18,340,177
    
    
    
    18,015,533Environmental remediation  noncurrent portion
    
    
    6,601,832
    
    
    
    6,830,131Shareowners equity:Preferred stock, no par value; 200,000 shares authorized, none outstanding
    
    
    
    
    
    
    Common stock, $1.25 par value; 15,000,000 shares authorized, 8,346,025
and 7,943,671 shares outstanding at March 31 and June 30, respectively
    
    
    10,432,531
    
    
    
    9,929,589Capital in excess of par value
    
    
    7,122,296
    
    
    
    3,015,989Accumulated other comprehensive income
    
    
    484,439
    
    
    
    359,486Retained earnings
    
    
    69,732,935
    
    
    
    77,863,142Total Shareowners equity
    
    
    87,772,201
    
    
    
    91,168,206Total Liabilities and Shareowners equity
    
    $
    112,714,210
    
    
    $
    116,013,870


See accompanying notes.

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SPARTON CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Operations (Unaudited)
For the Three-Month and Nine-Month Periods ended March 31, 2004 and 2003

Three-Month Periods
    
    Nine-Month Periods2004
    
    2003
    
    2004
    
    2003Net sales
    
    $
    43,566,394
    
    
    $
    40,841,367
    
    
    $
    113,230,967
    
    
    $
    120,888,569Costs of goods sold
    
    
    39,985,009
    
    
    
    36,701,515
    
    
    
    107,775,123
    
    
    
    107,219,3883,581,385
    
    
    
    4,139,852
    
    
    
    5,455,844
    
    
    
    13,669,181Selling and administrative (income) expenses:Selling and administrative expenses
    
    
    3,345,108
    
    
    
    3,332,782
    
    
    
    10,574,176
    
    
    
    10,066,411EPA related  net environmental remediation
    
    
    103,012
    
    
    
    6,242
    
    
    
    239,959
    
    
    
    (5,223,320
    )3,448,120
    
    
    
    3,339,024
    
    
    
    10,814,135
    
    
    
    4,843,091Operating income (loss)
    
    
    133,265
    
    
    
    800,828
    
    
    
    (5,358,291
    )
    
    
    8,826,090Other income (expense):Interest and investment income
    
    
    157,079
    
    
    
    188,192
    
    
    
    510,325
    
    
    
    489,849Equity income (loss) in investment
    
    
    4,000
    
    
    
    29,000
    
    
    
    16,000
    
    
    
    (28,000
    )Other  net
    
    
    (65,331
    )
    
    
    (60,490
    )
    
    
    (374,756
    )
    
    
    (107,141
    )95,748
    
    
    
    156,702
    
    
    
    151,569
    
    
    
    354,708Income (loss) before income taxes
    
    
    229,013
    
    
    
    957,530
    
    
    
    (5,206,722
    )
    
    
    9,180,798Provision (credit) for income taxes
    
    
    73,000
    
    
    
    287,000
    
    
    
    (1,666,000
    )
    
    
    2,754,000Net income (loss)
    
    $
    156,013
    
    
    $
    670,530
    
    
    $
    (3,540,722
    )
    
    $
    6,426,798Earnings (loss) per share (1) :Basic
    
    $
    0.02
    
    
    $
    0.08
    
    
    $
    (0.42
    )
    
    $
    0.77Diluted
    
    $
    0.02
    
    
    $
    0.08
    
    
    $
    (0.42
    )
    
    $
    0.76


See accompanying notes.

(1) All share and per share
information have been adjusted to reflect the impact
of the 5% stock dividends declared in January and October 2003.

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SPARTON CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Unaudited)
For the Nine-Month Periods ended March 31, 2004 and 2003

2004
    
    2003Cash flows provided (used) by Operating Activities:Net income (loss)
    
    $
    (3,540,722
    )
    
    $
    6,426,798Add (deduct) noncash items affecting operations:Depreciation, amortization and accretion
    
    
    1,271,644
    
    
    
    1,219,067Change in pension asset
    
    
    545,338
    
    
    
    96,024Loss on sale of investments
    
    
    51,284
    
    
    
    9,366Equity (gain) loss on investment
    
    
    (16,000
    )
    
    
    28,000Add (deduct) changes in operating assets and liabilities:Accounts receivable
    
    
    8,995,471
    
    
    
    (905,623
    )Income taxes recoverable
    
    
    (1,195,706
    )
    
    
    1,055,965Inventories and prepaid expenses
    
    
    (6,671,942
    )
    
    
    2,939,751Accounts payable, salaries and wages, accrued liabilities and income taxes
    
    
    96,345
    
    
    
    3,451,601(464,288
    )
    
    
    14,320,949Cash flows provided (used) by Investing Activities:Purchases of investment securities
    
    
    (1,508,720
    )
    
    
    (7,746,001
    )Proceeds from sale of investment securities
    
    
    7,352,848
    
    
    
    1,175,605Purchases of property, plant and equipment, net
    
    
    (5,410,383
    )
    
    
    (685,567
    )Other, principally noncurrent other assets
    
    
    56,049
    
    
    
    220,914489,794
    
    
    
    (7,035,049
    )Cash flows provided (used) by Financing Activities:Proceeds from exercise of stock options
    
    
    23,451
    
    
    
    31,112Stock dividends  cash in lieu of fractional shares
    
    
    (3,687
    )
    
    
    (1,080
    )19,764
    
    
    
    30,032Increase in cash and cash equivalents
    
    
    45,270
    
    
    
    7,315,932Cash and cash equivalents at beginning of period
    
    
    10,562,222
    
    
    
    8,687,873Cash and cash equivalents at end of period
    
    $
    10,607,492
    
    
    $
    16,003,805Supplemental disclosures of cash paid during the period:Income taxes  net
    
    $
    247,000
    
    
    $
    1,254,000


See accompanying notes.

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SPARTON CORPORATION & SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)

1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES- The following is a summary of
the Companys accounting policies not discussed elsewhere within this report.

Basis of presentation- The accompanying unaudited Condensed Consolidated
Financial Statements of Sparton Corporation and all active subsidiaries have
been prepared in accordance with accounting principles generally accepted in the
United States for interim financial information and with the instructions to
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by accounting principles generally accepted
in the United States for complete financial statements. All significant
intercompany transactions and accounts have been eliminated. The Condensed
Consolidated Balance Sheet at March 31, 2004, and the related Condensed
Consolidated Statements of Operations for the three-month and nine-month periods
ended March 31, 2004 and 2003, and cash flows for the nine-month periods ended
March 31, 2004 and 2003, are unaudited, but include all adjustments (consisting
of normal recurring accruals) which the Company considers necessary for a fair
presentation of such financial statements. Certain reclassifications of prior
period amounts have been made to conform to the current presentation. Operating
results for the three-month and nine-month periods ended March 31, 2004, are not
necessarily indicative of the results that may be expected for the fiscal year
ended June 30, 2004.

The balance sheet at June 30, 2003, has been derived from the audited financial
statements at that date but does not include all of the information and
footnotes required by accounting principles generally accepted in the United
States for complete financial statements. For further information, refer to the
Consolidated Financial Statements and footnotes thereto included in the
Companys Annual Report on Form 10-K for the year ended June 30, 2003.

Operations- The Company provides design and electronic manufacturing services,
which include a complete range of engineering, pre-manufacturing and
post-manufacturing services. Capabilities range from product design and
development through after market support. All facilities are registered to ISO
9001, with many having additional certifications. The Companys operations are
in one line of business, electronic contract manufacturing services (EMS).
Products and services include complete Box Build products for Original
Equipment Manufacturers, microprocessor-based systems, transducers, printed
circuit boards and assemblies, sensors and electromechanical devices. Markets
served are in the telecommunications, medical/scientific instrumentation,
electronics, aerospace, and other industries, with a focus on regulated markets.
The Company also develops and manufactures sonobuoys, anti-submarine warfare
(ASW) devices, used by the U.S. Navy and other free-world countries. Many of the
physical and technical attributes in the production of sonobuoys are the same as
those required in the production of the Companys other electrical and
electromechanical products and assemblies.

Use of estimates- Accounting principles generally accepted in the United States
require management to make estimates and assumptions that affect the disclosure
of assets and liabilities and the amounts reported in the financial statements
and accompanying notes. Actual results could differ from those estimates.

Revenue recognition- The Companys net sales are comprised primarily of product
sales, with supplementary revenues earned from engineering and design services.
Standard contract terms are FOB shipping point. Revenue from product sales is
generally recognized upon shipment of the goods; service revenue is recognized
as the service is performed or under the percentage of completion method,
depending on the nature of the arrangement. Long-term contracts relate
principally to government defense contracts. These contracts are accounted for
based on completed units accepted and their estimated average contract cost per
unit. Development contracts are accounted for based on percentage of completion.
Costs and fees billed under cost-reimbursement-type contracts are recorded as
sales. A provision for the entire amount of a loss on a contract is charged to
operations as soon as the loss is determinable. Shipping and handling costs are
included in costs of goods sold.

Market risk exposure- The Company manufactures its products in the United
States and Canada. Sales of the Companys products are in the U.S. and Canada,
as well as other foreign markets. The Company is potentially subject to foreign
currency exchange rate risk relating to intercompany activity and balances,
receipts from customers, and payments to suppliers in foreign currencies. Also,
adjustments related to the translation of the Companys Canadian financial
statements into U.S. dollars are included in current earnings. As a result, the
Companys financial results could be affected by factors such as changes in
foreign currency exchange rates or weak economic conditions in the foreign
markets in which the Company operates. However, minimal third party receivables
and payables are denominated in foreign currency and, historically, foreign
currency gains and losses have not been significant. The Company does not
consider the market risk exposure relating to currency exchange to be material.

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The Company has financial instruments that are subject to interest rate risk,
principally short-term investments. Historically, the Company has not
experienced material gains or losses due to such interest rate changes. Based on
the current holdings of short-term investments, the interest rate risk is not
considered to be material.

New accounting standards- In December 2003, the Financial Accounting Standards
Board (FASB) issued Statement of Financial Accounting Standards No. 132 Revised
(SFAS No.132 (R), Employers Disclosures about Pensions and Other
Postretirement Benefits, which amends SFAS Nos. 87, 88, and 106. The revised
Statement retains the disclosure requirements contained in SFAS No. 132, which
it replaces, and requires additional disclosures to those in the original SFAS
No. 132 about the assets, obligations, cash flows, and net periodic benefit cost
of defined benefit pension plans and other defined benefit postretirement plans.
SFAS No. 132 (R) is effective for financial statements with fiscal years ending
after December 15, 2003. The interim-period disclosures required by this
Statement are effective for interim periods beginning after December 15, 2003.
The adoption of this statement did not have a material effect on the Companys
disclosure requirements.

Periodic benefit cost- The Company follows the disclosure requirements of SFAS
No. 132 (R). For the nine months ended March 31, 2004, $545,000 of expense had
been recorded. Total net periodic benefit cost for fiscal 2004 is expected to be
$727,000. The components of net periodic pension expense for each of the periods
presented were as follows:

Three Months Ended
    
    Nine Months EndedMarch 31
    
    March 312004
    
    2003
    
    2004
    
    2003Service cost
    
    $
    358,000
    
    
    $
    119,000
    
    
    $
    406,000
    
    
    $
    357,000Interest cost
    
    
    446,000
    
    
    
    176,000
    
    
    
    505,000
    
    
    
    529,000Expected return on plan assets
    
    
    (566,000
    )
    
    
    (284,000
    )
    
    
    (641,000
    )
    
    
    (853,000
    )Amortization of prior service cost
    
    
    64,000
    
    
    
    21,000
    
    
    
    72,000
    
    
    
    63,000Amortization of net loss
    
    
    179,000
    
    
    
    
    
    
    
    203,000
    
    
    
    Net periodic benefit cost
    
    $
    481,000
    
    
    $
    32,000
    
    
    $
    545,000
    
    
    $
    96,000


Stock options- The Company follows Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees (APB 25), and related Interpretations
in accounting for its employee stock options. Under APB 25, no compensation
expense is recognized as the exercise price of the Companys employee stock
options equals the market price of the underlying stock on the date of grant.
The Company follows the disclosure requirements of SFAS No.123, Accounting for
Stock-Based Compensation, as amended by SFAS No. 148, Accounting for
Stock-Based Compensation-Transition and Disclosure.

At March 31, 2004, the per share weighted average exercise price of options
outstanding was $6.06. The weighted average remaining contractual life of those
options was approximately 3 years. At March 31, 2004, there were 321,047 options
exercisable at the weighted average per share price of $5.60. Remaining shares
available for grant under the plan were 183,741 at March 31, 2004.

The following sets forth a reconciliation of net income (loss) and earnings
(loss) per share information for the three months and nine months ended March
31, 2004 and 2003, as if the Company had recognized compensation expense based
on the fair value at the grant date for awards under the plan. For purposes of
computing pro forma net income (loss), the fair value of each option grant is
estimated on the date of grant using the Black-Scholes option pricing model.

Three Months Ended
    
    Nine Months EndedMarch 31
    
    March 312004
    
    2003
    
    2004
    
    2003Net income (loss), as reported
    
    $
    156,000
    
    
    $
    671,000
    
    
    $
    (3,541,000
    )
    
    $
    6,427,000Deduct:Total stock-based compensation expense determined under
the fair value based method for all awards, net of tax effects
    
    
    47,000
    
    
    
    43,000
    
    
    
    140,000
    
    
    
    130,000Pro forma net income (loss)
    
    $
    109,000
    
    
    $
    628,000
    
    
    $
    (3,681,000
    )
    
    $
    6,297,000Pro forma earnings (loss) per share:Basic earnings (loss) per share  after stock dividends
    
    $
    0.01
    
    
    $
    0.08
    
    
    $
    (0.44
    )
    
    $
    0.76Diluted earnings (loss) per share  after stock dividends
    
    $
    0.01
    
    
    $
    0.07
    
    
    $
    (0.44
    )
    
    $
    0.75


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2) INVENTORIES- Inventories are valued at the lower of cost (first-in,
first-out basis) or market and include costs related to long-term contracts.
Inventories, other than contract costs, are principally raw materials and
supplies. The following are the major classifications of inventory:

March 31, 2004
    
    June 30, 2003Raw materials
    
    $
    25,576,000
    
    
    $
    20,157,000Work in process and finished goods
    
    
    12,708,000
    
    
    
    11,652,000$
    38,284,000
    
    
    $
    31,809,000


Work in progress and finished goods inventories include $1.3 and $1.1 million of
completed, but not yet accepted, sonobuoys at March 31, 2004 and June 30, 2003,
respectively. Inventories are reduced by progress billings to the U.S.
government of approximately $4,538,000 and $8,317,000 at March 31, 2004 and June
30, 2003, respectively.

3) EARNINGS (LOSS) PER SHARE- On October 21, 2003, Spartons Board of Directors
approved a 5% stock dividend. Eligible shareowners of record on November 21,
2003, received the stock dividend on December 19, 2003. Cash was paid in lieu of
fractional shares of stock. An amount equal to the fair market value of the
common stock issued was transferred from retained earnings ($4,589,000) to
common stock ($496,000) and capital in excess of par value ($4,089,000) to
record the stock dividend. Accordingly, all share and per share information for
fiscal 2004 and 2003 have been adjusted to reflect the impact of all stock
dividends declared for the periods shown.

Due to the Companys fiscal 2004 reported net loss, 139,203 share equivalents
from stock options outstanding were excluded from the computation of diluted
earnings per share during the nine months ended March 31, 2004, because their
inclusion would have been anti-dilutive for the period. For the three months and
nine months ended March 31, 2003, options to purchase 103,635 and 3,308 shares
of common stock were not included in the computation of diluted earnings per
share, respectively, as the options exercise prices were greater than the
average market price of the Companys common stock and, therefore, would be
anti-dilutive. Basic and diluted earnings per share were computed on the
following:

Three Months Ended
    
    Nine Months Ended2004
    
    2003
    
    2004
    
    2003Basic  weighted average shares outstanding
    
    
    8,345,787
    
    
    
    8,340,651
    
    
    
    8,344,863
    
    
    
    8,339,249Effect of dilutive stock options
    
    
    126,307
    
    
    
    78,921
    
    
    
    
    
    
    
    88,117Weighted average diluted shares outstanding
    
    
    8,472,094
    
    
    
    8,419,572
    
    
    
    8,344,863
    
    
    
    8,427,366Basic earnings (loss) per share  after stock dividends
    
    $
    0.02
    
    
    $
    0.08
    
    
    $
    (0.42
    )
    
    $
    0.77Diluted earnings (loss) per share  after stock dividends
    
    $
    0.02
    
    
    $
    0.08
    
    
    $
    (0.42
    )
    
    $
    0.76


4) COMPREHENSIVE INCOME (LOSS)- Comprehensive income (loss) includes net income
(loss) as well as unrealized gains and losses, net of tax, which are excluded
from net income. Unrealized gains and losses (net of tax), are reflected as a
direct charge or credit to shareowners equity. Total comprehensive income
(loss) is as follows for the three-month and nine-month periods ended March 31:

Three Months Ended
    
    Nine Months Ended2004
    
    2003
    
    2004
    
    2003Net income (loss)
    
    $
    156,000
    
    
    $
    671,000
    
    
    $
    (3,541,000
    )
    
    $
    6,427,000Other comprehensive income (loss), net of tax:Net unrealized gains (losses)  investment securities owned
    
    
    59,000
    
    
    
    43,000
    
    
    
    (156,000
    )
    
    
    252,000Net unrealized gains (losses)  investment securities held by
investee accounted for by the equity method
    
    
    74,000
    
    
    
    7,000
    
    
    
    281,000
    
    
    
    102,000Comprehensive income (loss)
    
    $
    289,000
    
    
    $
    721,000
    
    
    $
    (3,416,000
    )
    
    $
    6,781,000


At March 31, 2004 and June 30, 2003, shareowners equity includes accumulated
other comprehensive income of $484,000 and $359,000, respectively, net of tax.
These balances include $315,000 and $471,000 for unrealized gains on investment
securities owned, and unrealized gains and (losses) of $169,000 and $(112,000)
for investment securities held by an investee accounted for by the equity
method, as of March 31, 2004 and June 30, 2003, respectively.

5) INVESTMENT SECURITIES- The fair value of cash and cash equivalents, accounts
receivable, and accounts payable approximate their carrying value. Cash and cash
equivalents consist of demand deposits and other highly liquid investments with
an original term of three months or less. The investment portfolio has various
maturity dates up to 14 years. A daily market

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exists for all investment securities. The Company believes that the impact of
fluctuations in interest rates on its investment portfolio should not have a
material impact on financial position or results of operations. Investments in
debt securities that are not cash equivalents and marketable equity securities
have been designated as available-for-sale. Those securities are reported at
fair value, with net unrealized gains and losses included in accumulated other
comprehensive income, net of applicable taxes. Unrealized losses that are other
than temporary are recognized in earnings. Realized gains and losses on
investments are determined using the specific identification method. It is the
Companys intention to use these investment securities to provide working
capital and fund the expansion of its business and for other business purposes.

At March 31, 2004, the Company had net unrealized gains of $501,000. At that
date, the net after-tax effect of these gains was $315,000, which is included in
accumulated other comprehensive income within shareowners equity. For the nine
months ended March 31, 2004 and 2003, purchases of investments totaled
$1,509,000 and $7,746,000, and sales of investment securities totaled $7,353,000
and $1,176,000, respectively.

Sparton owns a 14% interest in Cybernet Systems Corporation (Cybernet). This
investment, with a carrying value of $1,861,000 and $1,400,000 at March 31, 2004
and June 30, 2003, respectively, is accounted for under the equity method and is
included in other assets on the condensed consolidated balance sheet. Spartons
share of unrealized gains (losses) on available-for-sale securities held by
Cybernet is carried in accumulated other comprehensive income (loss) within the
Shareowners Equity section of Spartons balance sheet.

The contractual maturities of debt securities, and total equity securities, as
of March 31, 2004, are as follows:

YearsWithin 1
    
    1 to 5
    
    5 to 10
    
    Over 10
    
    TotalDebt securities:Corporate  primarily U.S.
    
    $
    1,255,053
    
    
    $
    5,532,795
    
    
    $
    
    
    
    $
    
    
    
    $
    6,787,848U.S. government and federal agency
    
    
    527,204
    
    
    
    2,709,819
    
    
    
    1,100,135
    
    
    
    523,125
    
    
    
    4,860,283State and municipal
    
    
    101,050
    
    
    
    3,077,543
    
    
    
    1,478,187
    
    
    
    
    
    
    
    4,656,780Total debt securities
    
    
    1,883,307
    
    
    
    11,320,157
    
    
    
    2,578,322
    
    
    
    523,125
    
    
    
    16,304,911Equity securities  primarily preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    599,404Total investment securities
    
    $
    1,883,307
    
    
    $
    11,320,157
    
    
    $
    2,578,322
    
    
    $
    523,125
    
    
    $
    16,904,315


6) COMMITMENTS AND CONTINGENCIES- One of Spartons former manufacturing
facilities, located in Albuquerque, New Mexico (Coors Road), has been involved
with ongoing environmental remediation since the early 1980s. At March 31,
2004, Sparton has accrued $7,307,000 as its estimate of the minimum future
undiscounted financial liability, of which $705,000 is classified as a current
liability and included in accrued liabilities. Amounts charged to operations,
principally legal and consulting fees, for the nine months ended March 31, 2004
and 2003 were $240,000 and $277,000, respectively. These costs were generally
incurred in pursuit of various claims for reimbursement/recovery. The Companys
minimum cost estimate is based upon existing technology and excludes legal and
related consulting costs, which are expensed as incurred. The Companys estimate
includes equipment, operating, and continued monitoring costs for onsite and
offsite pump and treat containment systems.

During the first quarter of fiscal 2003, Sparton reached an agreement with the
United States Department of Energy (DOE) and others to recover certain
remediation costs. Under the settlement terms, Sparton received $4,850,000 from
the DOE and others in fiscal 2003, plus an additional $1,000,000, which was
received during the first quarter of fiscal 2004. In addition, the DOE has
agreed to reimburse Sparton for 37.5% of certain future environmental expenses
in excess of $8,400,000 incurred from the date of settlement. The financial
impact of the settlement was recorded in the first quarter of fiscal 2003 with
$5,500,000 recorded as income.

Uncertainties associated with environmental remediation contingencies are
pervasive and often result in wide ranges of reasonably possible outcomes.
Estimates developed in the early stages of remediation can vary significantly.
Normally a finite estimate of cost does not become fixed and determinable at a
specific point in time. Rather, the costs associated with environmental
remediation become estimable over a continuum of events and activities that help
to frame and define a liability. Factors which cause uncertainties for the
Company include, but are not limited to, the effectiveness of the current work
plans in achieving targeted results and proposals of regulatory agencies for
desired methods and outcomes. It is possible that cash flows and results of
operations could be significantly affected by the impact of changes associated
with the ultimate resolution of this contingency.

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SPARTON CORPORATION AND SUBSIDIARIES
Managements Discussion and Analysis of Financial Condition and Results of Operations

OVERVIEW

The following is managements discussion and analysis of certain significant
events affecting the Companys earnings and financial condition during the
periods included in the accompanying financial statements. Additional
information regarding the Company can be accessed via Spartons website at
www.sparton.com. Information provided at the website includes, among other
items, the Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Quarterly
Earnings Releases, and News Releases, as well as various corporate charters. The
Companys operations are in one line of business, electronic contract
manufacturing services (EMS). Spartons capabilities range from product design
and development through aftermarket support, specializing in total business
solutions for government, medical, aerospace and industrial markets. This
includes the design, development and/or manufacture of electronic parts and
assemblies for both government and commercial customers worldwide. Governmental
sales are mainly sonobuoys.

The Private Securities Litigation Reform Act of 1995 reflects Congress
determination that the disclosures of forward-looking information is desirable
for investors and encourages such disclosure by providing a safe harbor for
forward-looking statements by corporate management. This report on Form 10-Q
contains forward-looking statements within the scope of the Securities Act of
1933 and the Securities Exchange Act of 1934. The words expects,
anticipates, believes, intends, plans, and similar expressions, and the
negatives of such expressions, are intended to identify forward-looking
statements. In addition, any statements which refer to expectations, projections
or other characterizations of future events or circumstances are forward-looking
statements. The Company undertakes no obligation to publicly disclose any
revisions to these forward-looking statements to reflect events or circumstances
occurring subsequent to filing this Form 10-Q with the Securities and Exchange
Commission (SEC). These forward-looking statements are subject to risks and
uncertainties, including, without limitation, those discussed below.
Accordingly, Spartons future results may differ materially from historical
results or from those discussed or implied by these forward-looking statements.
The Company notes that a variety of factors could cause the actual results and
experience to differ materially from anticipated results or other expectations
expressed in the Companys forward-looking statements.

Sparton, as a high-mix, low to medium-volume supplier, provides rapid product
turnaround for customers. High-mix pertains to customers needing multiple
product types that lend themselves to lower volume manufacturing runs. As a
contract manufacturer with customers in a variety of markets, the Company has
substantially less visibility of end user demand and, therefore, forecasting
sales can be problematic. Customers may cancel their orders, change production
quantities and/or reschedule production for a number of reasons. Depressed
economic conditions may result in customers delaying delivery of product, or the
placement of purchase orders for lower volumes than previously anticipated.
Unplanned cancellations, reductions, or delays by customers may negatively
impact the Companys results of operations. As many of the Companys costs and
operating expenses are relatively fixed, a reduction in customer demand can
disproportionately affect the Companys gross margins and operating income. The
majority of the Companys sales have historically come from a limited number of
customers. Significant reductions in sales to, or a loss of, one of these
customers could materially impact business if the Company were not able to
replace those sales with new business.

Other risks and uncertainties that may affect operations, performance, growth
forecasts and business results include, but are not limited to, timing and
fluctuations in U.S. and/or world economies, competition in the overall EMS
business, availability of production labor and management services under terms
acceptable to the Company, Congressional budget outlays for sonobuoy development
and production, Congressional legislation, foreign currency exchange rate risk,
uncertainties associated with the costs and benefits of new facilities and the
closing of others, uncertainties associated with the outcome of litigation,
changes in the interpretation of environmental laws and the uncertainties of
environmental remediation. A further risk factor is the availability and cost of
materials. The Company has encountered availability and extended lead time
issues on some electronic components in the past when market demand has been
strong, which have resulted in higher prices and late deliveries. Additionally,
the timing of sonobuoy sales to the U.S. Navy is dependent upon access to, and
successful passage of, product tests performed by the U.S. Navy. Reduced
governmental budgets have made access to the test range less predictable and
less frequent than in the past. Finally, the Sarbanes-Oxley Act of 2002 has
required changes in, and formalization of, some of the Companys Corporate
governance and compliance practices. The SEC and New York Stock Exchange have
also passed new rules or regulations requiring additional compliance activities.
Compliance with these rules has increased administrative costs, and it is
expected that certain of these costs will continue indefinitely. Management
cautions readers not to place undue reliance on forward-looking statements,
which are subject to influence by the enumerated risk factors as well as
unanticipated future events.

The following discussion should be read in conjunction with the Condensed
Consolidated Financial Statements and Notes thereto.

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RESULTS OF OPERATIONS

Three-Month Periods

Sales for the three-month period ended March 31, 2004, totaled $43,566,000, an
increase of $2,725,000 (7%) from the same quarter last year. Government sales
increased $4,223,000 (43%) to $14,061,000. This increase is principally due to
the successful passage of several sonobuoy drop tests during March, as well as
the resolution of previous technical difficulties related to one sonobuoy
contract. Industrial market sales of $11,169,000 showed a significant decline,
down $3,967,000 (26%) from the same period last year. Industrial sales have been
adversely impacted by the reduced demand for detection equipment for U.S.
airports. Medical/scientific instrumentation sales were consistent with third
quarter sales in fiscal 2003 ($4,451,000 versus $4,485,000 last year). Sales to
the aerospace markets were $13,885,000, versus $11,383,000 last year, an
increase of $2,502,000 (22%). This increase was mainly attributable to increased
orders from existing customers.

An operating profit of $133,000 was reported for the three months ended March
31, 2004, compared to $801,000 for the three months ended March 31, 2003. Gross
margin for the three months ended March 31, 2004, was 8%, up from 4% for the
previous three months ended December 31, 2003. The improved margin reflects the
conclusion of the start-up phase of several programs, as well as the completion
of one sonobuoy contract that had experienced technical problems. The 8% gross
margin for the three months ended March 31, 2004, was down from 10% in fiscal
2003. The decrease was partially due to a less favorable product mix. In
addition, the provision for pension costs was adjusted by $481,000 to reflect
the revised annual estimate of such costs, most of which are carried in cost of
goods sold. The costs have increased due to depressed market conditions and
lower than expected rate of return on pension assets. The Company is focused on
continuing to improve margins through cost reductions and/or recoupment of
unplanned expenses from several customers. There were no significant cost to
complete adjustments on long term contracts for the three months ended March 31,
2004. Gross profit varies from period to period and is affected by a number of
factors, including product mix, production efficiencies, component costs,
capacity utilization, and new product introduction. In addition, as many of the
Companys costs and operating expenses are fixed, a reduction in customer demand
depresses gross profit and operating income. Selling and administrative expenses
were consistent with the prior year period.

Interest and Investment Income decreased $31,000 to $157,000 in 2004. This
reduction was due to the reduced funds available for investment. Other
Expense-Net in 2004 was $65,000 versus $61,000 in 2003. Translation adjustments,
along with gains and losses from foreign currency transactions, are included in
current earnings and, in the aggregate, amounted to a loss of $10,000 during the
three months ended March 31, 2004.

Due to factors described above, the Company reported net income of $156,000
($0.02 per share, basic and diluted) for the three months ended March 31, 2004,
versus $671,000 ($0.08 per share, basic and diluted) for the corresponding
period last year.

Nine-Month Periods

Sales for the nine-month period ended March 31, 2004, totaled $113,231,000, a
decline of $7,658,000 (6%), compared to the same period last year. All markets,
with the exception of aerospace, are down from the same period last year.
Government sales were $30,746,000 for the nine months ended March 31, 2004, down
slightly from prior years sales of $32,715,000, a decline of 6%.
Medical/scientific instrumentation sales were $13,497,000 for the nine months
ended March 31, 2004, compared to $14,274,000 for the prior year period, a
decline of 5%. Industrial sales also declined from the prior year, with sales of
$29,089,000 for the nine months ended March 31, 2004, compared to $41,157,000
for the prior year period, a decline of 29%. While other markets have declined,
aerospace sales increased by $7,155,000 (22%) to $39,899,000 from the prior year
period, primarily due to increased orders from existing customers. Government
sales declined from last year in part due to the overall decline in sonobuoy
sales to the U.S. Navy and delayed foreign sonobuoy sales. Technical
difficulties have also adversely impacted sales and margins on several current
sonobuoy contracts. Industrial sales have declined sharply due to reduced sales
for homeland security. Prior years sales benefited from strong demand for
homeland security products, principally driven by the demand for detection
equipment in U.S. and Canadian airports. These sales totaled approximately $2
million in fiscal 2004 compared to approximately $22 million last year. This
decline in the industrial market was partially offset by increased sales to
other existing industrial customers.

The majority of our sales come from a small number of customers. Sales to our 6
largest customers, including government sales, accounted for approximately 75%
of net sales in both periods. Four of the customers, including government, were
the same both years. One of these customers, with 24% and 16% of the sales as of
March 31, 2004 and 2003, respectively, is comprised of several separate
facilities.

An operating loss of $5,358,000 was reported for the nine months ended March 31,
2004, versus an operating profit of $8,826,000 for the same period last year.
Included in prior years operating income was a $5,500,000 recovery ($3,630,000
net

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of tax) of certain environmental remediation costs. It reflects Spartons
settlement with the DOE and others regarding the reimbursement of costs incurred
at the Companys Sparton Technology Coors Road property. Also included were
charges related to the New Mexico environmental remediation effort, principally
litigation, of $240,000 in 2004 and $277,000 in 2003, respectively. Several
programs were in start-up mode during the nine months ended March 31, 2004, and
contributed minimal or negative margins. An engineering redesign on an existing
proprietary product line this year resulted in charges of $519,000. Finally, as
discussed above, increased pension costs further depressed gross margin. Pension
costs of $545,000 and $96,000 have been incurred as of March 31, 2004 and 2003,
respectively. The majority of pension costs are carried in cost of goods sold,
with the remainder in selling and administrative expense. While pension expense
has increased, no cash payment will be required this year due to the plans
funded status. Selling and administrative expenses have increased slightly from
the prior year. Most of this increase was due to research and development
activities, primarily related to government contracts. Research and development,
including bid and proposal, expenses totaled $2.5 million as of March 31, 2004,
compared to $1.0 million for the same period in 2003. While these expenses have
shown a larger increase as a percentage of sales over the prior year, many
expenses in this area are somewhat fixed and do not fluctuate directly based on
sales volume.

Interest and Investment Income increased $20,000 to $510,000 in 2004. Other
Expense-Net in 2004 was $375,000 versus $107,000 in 2003. Other Expense-Net in
2004 and 2003 includes a charge of $538,000 and $120,000, respectively, for
insurance adjustments related to Spartons previously owned automotive segment.
The change was for a previously disputed claim, which has since been settled.
Translation adjustments, along with gains and losses from foreign currency
transactions, included in current earnings and, in the aggregate, resulted in a
gain of $163,000 for the nine months ended March 31, 2004.

Due to the factors described above, the Company reported a loss of $3,541,000
($(0.42) per share, basic and diluted) for the nine months ended March 31, 2004,
versus net income of $6,427,000 ($0.77 per share basic, $0.76 per share diluted)
for the corresponding period last year.

LIQUIDITY AND CAPITAL RESOURCES

For the nine-month period ended March 31, 2004, Cash and Cash Equivalents
increased $45,000 to $10,607,000. Operating activities used $464,000 in net cash
flows. The primary source of cash was collections on accounts receivable,
reflective of receipts for the unusually large balance in receivables at June
30, 2003. The primary use of cash was an increase in inventories, along with
operating losses. A portion of the increase in inventories is reflective of
delayed customer delivery schedules and material purchased for new program
start-ups.

Cash flows provided by investing activities for the nine-month period ended
March 31, 2004, totaled $490,000. Purchases of property, plant and equipment
were principally for the purchase of a new manufacturing facility in
Albuquerque, New Mexico. This new facility will replace the Companys existing
facility in Rio Rancho, New Mexico, which will be sold. The transition between
facilities is anticipated to be completed in the next 3-5 months. The new
facility, which was purchased for approximately $4.5 million, is included in
property, plant, and equipment within the asset section of the balance sheet as
of March 31, 2004. The building was funded through the sale of investment
securities. The existing facility will continue in use through the transition,
at which point the Company plans to sell it at an anticipated gain. With the new
facility, the Company anticipates additional contract opportunities that were
previously not available.

Cash flow provided by financing activities for the nine months ended March 31,
2004, totaled $20,000, primarily from stock options exercised.

The Companys market risk exposure to foreign currency exchange and interest
rates are not considered to be material, principally due to their short term
nature and minimal receivables and payables designated in foreign currency. The
Company has had no short-term bank debt since December 1996, and currently has
an unused informal line of credit totaling $20 million.

At March 31, 2004 and June 30, 2003, the aggregate government EMS backlog was
approximately $53 million and $51 million, respectively. A majority of the March
31, 2004, backlog is expected to be realized in the next 12-15 months.
Commercial EMS orders are not included in the backlog. The Company does not
believe the amount of commercial activity covered by firm purchase orders is a
meaningful measure of future sales, as such orders may be rescheduled or
cancelled without significant penalty.

Sparton has continued to pursue operations in Vietnam, which should provide
increased growth opportunities. As the Company has not previously done business
in this emerging market, there are many uncertainties and risks inherent in this
potential venture. On April 23, 2004, the Board of Directors approved a proposal
to proceed with this expansion. The venture will not be

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conducted as a joint venture with Texatronics, Inc. as previously described, as
they have voluntarily withdrawn from the plan. Meetings have been held with
architects and contractors to investigate the type, design and cost of a new
manufacturing facility in Vietnam. It is estimated that Sparton will invest
approximately $5-$7 million, which includes land, building, and initial
operating expenses. The new operation will carry the name Spartronics, Inc. The
Company is also continuing a program of identifying and evaluating potential
acquisition candidates in both the defense and medical markets.

No cash dividends were declared in either period presented. At March 31, 2004,
the Company had $87,772,000 in shareowners equity ($10.52 per share),
$70,356,000 in working capital, and a 4.84:1.00 working capital ratio. For the
foreseeable future (12-18 months), the Company believes it has sufficient
liquidity for its anticipated needs.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Managements discussion and analysis of financial condition and results of
operations is based upon the Companys consolidated financial statements, which
have been prepared in accordance with accounting principles generally accepted
in the United States of America. Significant accounting policies are summarized
in Note 1 to the Consolidated Financial Statements included in our Annual Report
on Form 10-K for the year ended June 30, 2003. The preparation of these
financial statements requires estimates, assumptions, and judgements that affect
the amounts reported of assets, liabilities, revenues and expenses, and related
disclosure of contingent assets and liabilities. Estimates are regularly
evaluated and are based on historical experience and on various other
assumptions believed to be reasonable under the circumstances. Actual results
may differ from these estimates. The following critical accounting policies
affect the more significant judgements and estimates used in the preparation of
the Companys consolidated financial statements.

Environmental Contingencies

One of Spartons former manufacturing facilities, located in Albuquerque, New
Mexico (Coors Road), has been the subject of ongoing investigations and
remediation efforts conducted with the Environmental Protection Agency (EPA)
under the Resource Conservation and Recovery Act (RCRA). Sparton has accrued its
estimate of the minimum future non-discounted financial liability. The estimate
was developed using existing technology and excludes legal and related
consulting costs. The minimum cost estimate includes equipment, operating and
monitoring costs for both onsite and offsite remediation. Sparton recognizes
legal and consulting services in the periods incurred and reviews its EPA
accrual activity quarterly. Uncertainties associated with environmental
remediation contingencies are pervasive and often result in wide ranges of
reasonably possible outcomes. It is possible that cash flows and results of
operations could be materially affected by the impact of changes in these
estimates.

Government Contract Cost Estimates

Government production contracts are accounted for based on completed units
accepted with respect to revenue recognition and their estimated average cost
per unit regarding costs. Losses for the entire amount of a contract are
recognized in the period when such losses are determinable. Significant judgment
is exercised in determining estimated total contract costs including, but not
limited to, cost experience to date, estimated length of time to contract
completion, costs for materials, production labor and support services to be
expended, and known issues on remaining units to be completed. Estimated costs
developed in the early stages of contracts can change significantly as the
contracts progress, and events and activities take place. Significant changes in
estimates can also occur when new designs are initially placed into production.
The Company formally reviews its costs incurred-to-date and estimated costs to
complete on all significant contracts on a quarterly basis. Revised estimated
total contract costs are reflected in the financial statements. Depending upon
the circumstances, it is possible that the Companys financial position, results
of operations and cash flows could be materially affected by changes in
estimated costs to complete on one or more significant contracts.

Commercial Inventory Valuation Allowances

Inventory valuation allowances for commercial customer inventories require a
significant degree of judgment and is influenced by the Companys experience to
date with both customers and other markets, prevailing market conditions for raw
materials, contractual terms and customers ability to satisfy these
obligations, environmental or technological materials obsolescence, changes in
demand for customer products, and other factors resulting in acquiring materials
in excess of customer product demand. Contracts with some commercial customers
may be based upon estimated quantities of product manufactured for shipment over
estimated time periods. Raw material inventories are purchased to fulfill these
customer requirements. Within these arrangements, customer demand for products
frequently changes, sometimes creating excess and obsolete inventories.

The Company regularly reviews raw material inventories by customer for both
excess and obsolete quantities, with adjustments made accordingly. Wherever
possible, the Company attempts to recover its full cost of excess and obsolete
inventories from

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customers or, in some cases, through other markets. When it is determined that
the Companys carrying cost of such excess and obsolete inventories cannot be
recovered in full, a charge is taken against income and a valuation allowance is
established for the difference between the carrying cost and the estimated
realizable amount. Conversely, should the disposition of adjusted excess and
obsolete inventories result in recoveries in excess of these reduced carrying
values, the remaining portion of the valuation allowances are reversed and taken
into income when such determinations are made. It is possible that the Companys
financial position, results of operations and cash flows could be materially
affected by changes to inventory valuation allowances for commercial customer
excess and obsolete inventories.

Allowance for Possible
Losses on Receivables

The accounts receivable balance is recorded net of allowances for amounts not
expected to be collected from customers. The Company maintains an allowance for
possible estimated losses on receivables. The allowance is estimated based on
historical experience of write-offs, the level of past due amounts, information
known about specific customers with respect to their ability to make payments,
and future expectations of conditions that might impact the collectibility of
accounts. Accounts receivable are generally due under normal trade terms for the
industry. Credit is granted, and credit evaluations are periodically performed,
based on a customers financial condition and other factors. Although the
Company does not generally require collateral, cash in advance or letters of
credit may be required from customers in certain circumstances, including some
foreign customers. When management determines that it is probable that an
account will not be collected, it is charged against the allowance for possible
losses. The Company reviews the adequacy of its allowance monthly. The allowance
for doubtful accounts was $316,000 and $739,000 at March 31, 2004 and June 30, 2003,
respectively. If the financial conditions of customers were to deteriorate,
resulting in an impairment of their ability to make payment, additional
allowances may be required. The significant reduction in allowance for doubtful
accounts from June 30 was primarily due to the write off of $440,000 for one
account. The account, which was previously reserved, was deemed uncollectable
and, therefore, written off.

Pension Obligations

The Company calculates the cost of providing pension benefits under the
provisions of Statement of Financial Accounting Standards (SFAS) No. 87. The key
assumptions required within the provisions of SFAS No. 87 are used in making
these calculations. The most significant of these assumptions are the discount
rate used to value the future obligations and the expected return on pension
plan assets. The discount rate is consistent with market interest rates on
high-quality, fixed income investments. The expected return on assets is based
on long-term returns and assets held by the plan, which is influenced by
historical averages. If actual interest rates and returns on plan assets
materially differ from the assumptions, future adjustments to the financial
statements would be required. While changes in these assumptions can have a
significant effect on the pension benefit obligations reported in the
Consolidated Balance Sheets and the unrecognized gain or loss accounts, the
effect of changes in these assumptions is not expected to have a significant
effect on net periodic pension costs in the near term. While these assumptions
may change in the future based on changes in long-term interest rates and market
conditions, there are no known expected changes in these assumptions as of March
31, 2004. As indicated above, to the extent the assumptions differ from actual
results, there would be a future impact on the financial statements. The extent
to which this will result in future expense is not determinable at this time as
it will depend upon a number of variables, including trends in interest rates
and the actual return on plan assets. For example, an increase in the return on
the plan assets due to improved market conditions would reduce the unrecognized
loss account and thus reduce future expense. During the quarter ended March 31,
2004, the annual actuarial valuation of the pension plan was received. Based on
the most recent valuation, pension expense for fiscal 2004 is estimated to be
$727,000, versus the prior years cost of $128,000. The following factors
contributed to this increase: market values at July 1, 2003 (the valuation date)
were very low causing a significant decrease in the value of pension assets, the
actual rate of return in the current market environment was lower than previous
estimates, and the use of a lower discount rate in the calculation further
unfavorably impacted the valuation results. While pension expense has increased,
no cash payments will be required this year due to the plans funded status.

OTHER

Litigation

One of Spartons facilities, located in Albuquerque, New Mexico, has been the
subject of ongoing investigations conducted with the Environmental Protection
Agency (EPA) under the Resource Conservation and Recovery Act (RCRA). The
investigation began in the early 1980s and involved a review of onsite and
offsite environmental impacts.

At March 31, 2004, Sparton has accrued $7,307,000 as its estimate of the future
undiscounted minimum financial liability related to this site. The Companys
cost estimate is based upon existing technology and excludes legal and related
consulting costs, which are expensed as incurred. The Companys estimate
includes equipment and operating costs for onsite and

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offsite operations and is based on existing methodology. Uncertainties
associated with environmental remediation contingencies are pervasive and often
result in wide ranges of reasonably possible outcomes. Estimates developed in
the early stages of remediation can vary significantly. Normally a finite
estimate of cost does not become fixed and determinable at a specific point in
time. Rather, the costs associated with environmental remediation become
estimable over a continuum of events and activities that help to frame and
define a liability. It is possible that cash flows and results of operations
could be affected by the impact of the ultimate resolution of this contingency.

Sparton is currently involved with two legal actions, which are disclosed in
Part II  Other Information, Item 1. Legal Proceedings of this report. At this
time, the Company is unable to predict the outcome of either of these claims.




Item 3. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK

The Company manufactures its products in the United States and Canada. Sales are
to the U.S. and Canada, as well as other foreign markets. The Company is
potentially subject to foreign currency exchange rate risk relating to
intercompany activity and balances and to receipts from customers and payments
to suppliers in foreign currencies. Also, adjustments related to the translation
of the Companys Canadian financial statements into U.S. dollars are included in
current earnings. As a result, the Companys financial results could be affected
by factors such as changes in foreign currency exchange rates or weak economic
conditions in the foreign markets in which the Company operates. However,
minimal third party receivables and payables are denominated in foreign currency
and, historically, foreign currency gains and losses have not been significant.
The Company does not consider the market risk exposure relating to currency
exchange to be material.

The Company has financial instruments that are subject to interest rate risk,
principally short-term investments. Historically, the Company has not
experienced material gains or losses due to such interest rate changes. Based on
the current holdings of short-term investments, the interest rate risk is not
considered to be material.




Item 4. CONTROLS AND PROCEDURES

The Company maintains internal controls over financial reporting intended to
provide reasonable assurance that all material transactions are executed in
accordance with proper authorization and are properly recorded and reported in
the financial statements, and that assets are adequately safeguarded. The
Company also maintains a system of disclosure controls and procedures to ensure
that information required to be disclosed in Company reports, filed or submitted
under the Securities Exchange Act of 1934, is properly reported in the Companys
periodic and other reports.

As of March 31, 2004, an evaluation was updated by the Companys management,
including the CEO and CFO, on the effectiveness of the design and operation of
the Companys disclosure controls and procedures. Based on that evaluation, the
Companys management, including the CEO and CFO, concluded that the Companys
disclosure controls and procedures continue to be effective as of March 31,
2004. There have been no changes in the Companys internal controls over
financial reporting during the last fiscal quarter that have materially
affected, or are reasonably likely to materially affect, the Companys internal
control over financial reporting.

PART II
OTHER INFORMATION




Item 1. LEGAL PROCEEDINGS

One of Spartons former manufacturing facilities, located in Albuquerque, New
Mexico (Coors Road), has been involved with ongoing environmental remediation
since the early 1980s. At March 31, 2004, Sparton has accrued $7,307,000 as its
estimate of the minimum future undiscounted financial liability, of which
$705,000 is classified as a current liability and included in accrued
liabilities. The Companys minimum cost estimate is based upon existing
technology and excludes legal and related consulting costs, which are expensed
as incurred. The Companys estimate includes equipment, operating, and continued
monitoring costs for onsite and offsite pump and treat containment systems.

Factors which cause uncertainties with respect to the Companys estimate
include, but are not limited to, the effectiveness of the current work plans in
achieving targeted results and proposals of regulatory agencies for desired
methods and outcomes. It is possible that cash flows and results of operations
could be significantly affected by the impact of changes associated with the
ultimate resolution of this contingency. Uncertainties associated with
environmental remediation contingencies are pervasive and often result in wide
ranges of reasonably possible outcomes. Estimates developed in the early stages
of remediation can vary significantly. Normally a finite estimate of cost does
not become fixed and determinable at a specific point in time. Rather, the costs
associated with environmental remediation become estimable over a continuum of
events and

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activities that help to frame and define a liability. It is possible that cash
flows and results of operations could be materially affected by the impact of
the ultimate resolution of this contingency.

During the first quarter of fiscal 2003, Sparton reached an agreement with the
United States Department of Energy (DOE) and others to recover certain
remediation costs. Under the settlement terms, Sparton received $4,850,000 from
the DOE and others in fiscal 2003, plus an additional $1,000,000, which was
received during the first quarter of fiscal 2004. In addition, the DOE has
agreed to reimburse Sparton for 37.5% of certain future environmental expenses
in excess of $8,400,000 incurred from the date of settlement. The financial
impact of the settlement was recorded in the first quarter of fiscal 2003 with
$5,500,000 recorded as operating income.

In 1995, Sparton Corporation and Sparton Technology, Inc. filed a Complaint in
the Circuit Court of Cook County, Illinois, against Lumbermens Mutual Casualty
Company and American Manufacturers Mutual Insurance Company demanding
reimbursement of expenses incurred in connection with its remediation efforts at
the Coors Road facility based on various primary and excess comprehensive
general liability policies in effect between 1959 and 1975. In 1999, the
Complaint was amended to add various other excess insurers, including certain
London market insurers and Firemans Fund Insurance Company. The case remains in
pretrial activity.

In September 2002, Sparton Technology, Inc. (STI) filed an action in the U.S.
District Court for the Eastern District of Michigan to recover certain
unreimbursed costs incurred as a result of a manufacturing relationship with two
entities, Util-Link, LLC (Util-Link) of Delaware and National Rural
Telecommunications Cooperative (NRTC) of the District of Columbia. On or about
October 21, 2002, the defendants filed a counterclaim seeking money damages,
alleging that STI breached its duties in the manufacture of products for the
defendants. The defendant Util-Link has asked for damages in the amount of
$25,000,000 for lost profits. The defendant NRTC has asked for damages in the
amount $20,000,000 for the loss of its investment in and loans to Util-Link.
Sparton believes that the damages sought by NRTC are included in Util-Links
claim for damages and as such, are duplicative. Sparton also believes the
counterclaim to be without merit and is vigorously positioning itself to defend
against it. This case is in the discovery stage.

At this time, the Company is unable to predict the outcome of either of these
two claims.

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Item 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

3 & 4
    
    The amended By-Laws of the Registrant are filed herewith and
attached.Amended Articles of Incorporation of the Registrant were filed
on Form 10-Q for the three-month period ended September 30,
2002, and are incorporated herein by reference.Amended Code of Regulation of the Registrant were filed with
Form 10-Q for the three-month period ended September 30, 1982,
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.


(b) Reports on Form 8-K filed in the third quarter of fiscal 2004:



| |  | On February 13, 2004, the Company filed a report on Form 8-K
disclosing under Item 7 Exhibits and Item 12 Results of
Operation and Financial Condition; that the Company issued a
press release, dated February 13, 2004, announcing the
financial results for the second quarter and six months ending
December 31, 2003.
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




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 CORPORATIONDate: May 14, 2004
    
    /s/ DAVID W. HOCKENBROCHT
David W. Hockenbrocht, Chief Executive OfficerDate: May 14, 2004
    
    /s/ RICHARD L. LANGLEY
Richard L. Langley, Chief Financial Officer


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ATTACHMENT

SPARTON CORPORATION
BY-LAWS

ARTICLE I  MEETING OF DIRECTORS

A regular meeting of the Board of Directors shall be held immediately
following the annual meeting of the shareholders at the place where such
shareholders meeting is held, and regular meetings of the Board of Directors
shall also be held at such time and place, within or without the State of Ohio,
as may be fixed by the Board of Directors.

Special meetings of the Board of Directors may be called at any time by
the Chairman of the Board of Directors or by the President (on notice to each
director as hereinafter provided) to be held at such time and place, within or
without the State of Ohio, as shall be fixed by the officer calling the meeting,
and special meetings shall be called by the Chairman of the Board of Directors
or by the President (on notice to each director as hereinafter provided) on the
written request of a majority of the members of the Executive Committee or of
the Board of Directors, to be held at such time and place, within or without the
State of Ohio, as shall be designated in such written request.

The Secretary of the Company shall give notice of the time and place of
each regular or special meeting of the Board or mailing or telegraphing such
notice to each director at least three (3) days, or telephoning such notice at
least two (2) days before the time fixed for such meeting, except the meeting
following the annual shareholders meeting, which meeting shall require no
notice.

A majority of the directors then holding office shall be necessary to
constitute a quorum for the transaction of business, provided, however, that the
directors present at any directors meeting, though less than such majority, may
adjourn such meeting from time to time. No notice of any adjourned meeting need
be given other than by announcement at the meeting at which such adjournment is
taken.

Any action which may be authorized or taken at a meeting of the directors
may be authorized or taken without a meeting in a writing or writings signed by
all the directors, which writing or writings shall be filed with or entered upon
the records of the corporation.

ARTICLE II  EXECUTIVE COMMITTEE

An Executive Committee, to consist of not less than three (3) nor more
than five (5) directors, may be elected by the Board of Directors. The Board of
Directors may appoint one or more directors as alternate members of the
Executive Committee, who may take the place of any absent member or members at
any meeting of the Committee. The Board of Directors shall have the power to
remove from the Executive Committee at any time any member or members of said
Committee and to elect another director or directors as a member or members of
the Executive Committee in place of the person or persons so removed from the
said Committee. The Executive Committee may act by the affirmative vote of a
majority of its members at a meeting or may take any action without a meeting if
such action is authorized by a writing (which may be in two or more
counterparts) signed by all of its members. The Executive Committee shall have
and exercise all the powers of the Board of Directors in the intervals between
the meetings of the Board of Directors in the management of the business and
affairs of the Company, including the right to authorize the seal of the Company
to be affixed to all corporate papers which may require it, and generally shall
perform such other duties and exercise such other powers as may be specifically
directed or delegated to the Executive Committee by the Board from time to time.

The Executive Committee shall record full and complete the minutes of all
its proceedings and acts and shall submit the same to the Board of Directors at
the next succeeding meeting of the Board of Directors and shall submit the same
at any other time to the Board of Directors or to any member thereof upon its or
his request.

Vacancies in the Executive Committee shall be filled by the Board of
Directors, provided that any such vacancy may be temporarily filled by an
alternate member until filled by the Board of Directors.

The Executive Committee shall meet upon call of the Chairman of the Board
of Directors or of the President or of a majority of the Executive Committee,
provided, however, that notice of the time and place of such meeting shall be
given by mailing or telegraphing such notice to each member of the Committee at
least three (3) days or telephoning such notice to each member of the Committee
at least two (2) days before the time fixed for such meeting. It shall be the
duty of the Secretary of the Executive Committee to give such notice upon the
request of the officer or members of the Executive Committee calling the
meeting.

The meetings of the Executive Committee shall be held at such place,
within or without the State of Ohio, as the Board of Directors or the Executive
Committee or the President may designate.

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ARTICLE III  OFFICERS

The Board of Directors shall annually elect a President, one or more Vice
Presidents, a Secretary and a Treasurer, and may also annually elect a Chairman
of the Board, one or more Assistant Secretaries and one or more Assistant
Treasurers. The Board of Directors may further elect or appoint such other
officers or agents as the Board of Directors may from time to time deem
necessary who shall have such authority and perform such duties as may be
prescribed by the Board of Directors. Each officer shall hold office until the
next annual shareholders meeting and until his successor is elected and
qualified unless sooner removed by the Board of Directors, which the Board of
Directors shall have power to do at any time, with or without cause, without
prejudice to the contract rights of such officer.

The President shall have power to suspend or remove any officer of the
Company, except the Chairman of the Board of Directors, subject to the right of
the Board of Directors or the Executive Committee to reinstate such officer.

ARTICLE IV  CHAIRMAN OF THE BOARD OF DIRECTORS

The Chairman of the Board of Directors shall preside at all meetings of
the Board of Directors. He shall also have such other powers and duties as the
Board of Directors may from time to time authorize or impose.

ARTICLE V  PRESIDENT

The President shall be the chief executive officer of the Company and
shall perform such duties as are specifically imposed upon him by statute and as
from time to time may be imposed upon him by the Board of Directors or by the
Executive Committee. He shall have the general management of the Companys
business and affairs, subject, however, at all times to the control of the Board
of Directors and of the Executive Committee and to the right of the Board of
Directors or the Executive Committee to delegate any specific power or duty,
except such as may be by statute conferred exclusively upon the President, to
any other officer or officers of the Company.

In the event of the absence of disability of the Chairman of the Board of
Directors or in the event no Chairman of the Board is elected, the President
shall preside at all meetings of the Board of Directors and the Executive
Committee of the Board of Directors.

ARTICLE VI  VICE PRESIDENTS

The Vice Presidents of the Company shall perform such duties as from time
to time may be respectively imposed upon them by the Board of Directors or by
the Executive Committee or by the President, and in case of the absence or
disability of the President or of a vacancy in his office, the Vice President
who is then the senior in office shall be vested with all the Presidents powers
and be required to perform all the Presidents duties, unless the Board of
Directors shall otherwise provide.

The Board of Directors may specifically designate any Vice President of
the Company as Executive Vice President or Senior Vice President or other
designation or title and assign to him such powers and duties as the Board of
Directors may determine.

ARTICLE VII  SECRETARY

The Secretary shall perform such duties as from time to time may be
imposed upon the Secretary by the Board of Directors, the Executive Committee or
the President.

The Board of Directors or the Executive Committee shall from time to time
designate an officer(s) or a director(s) who shall be responsible to record the
minutes of meetings of the Board of Directors, the Executive Committee and all
other committees of the Board of Directors. The Board of Directors or the
Executive Committee may designate any officer(s) or director(s) to be
responsible to record the minutes, and may designate different officers or
directors to record the minutes of different meetings.

ARTICLE VIII  ASSISTANT SECRETARIES

The Assistant Secretaries of the Company shall perform such duties as from
time to time may be respectively imposed upon them by the Board of Directors or
by the Executive Committee or by the President, and in case of the absence or
disability of the Secretary or of a vacancy in his office, the Assistant
Secretary (or if there be more than one Assistant Secretary, then the Assistant
Secretary who is then the senior in office) shall be vested with all the
Secretarys powers and required to perform all the Secretarys duties.

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ARTICLE IX  TREASURER

The Treasurer shall be the chief financial officer of the Company and
shall have charge and custody of and be responsible for all funds and securities
of the Company, and shall deposit all such funds in the name and to the credit
of the Company in such depositaries as may be designated by the Board of
Directors or by the Executive Committee. He shall keep or cause to be kept full
and accurate accounts of receipts and disbursements in books belonging to the
Company. He shall have full authority to receive and receipt for all moneys due
the company, and shall render to the President and to the Chairman of the Board
of Directors and to the Board of Directors and to the Executive Committee,
whenever any of them may require it, an account of all his transactions as
Treasurer, and shall perform such other duties as may be required by the Board
of Directors or by the Executive Committee or by the President.

ARTICLE X  ASSISTANT TREASURERS

The Assistant Treasurers of the Company shall perform such duties as
from time to time may be respectively imposed upon them by the Board of
Directors or by the Executive Committee or by the President, and in case of the
absence or disability of the Treasurer or of a vacancy in his office, the
Assistant Treasurer (or if there be more than one Assistant Treasurer, then the
Assistant Treasurer who is then the senior in office) shall be vested with all
the Treasurers powers and required to perform all the Treasurers duties.

ARTICLE XI  GENERAL PROVISIONS

In case of the absence or disability of any officer of the Company, or for
any reason that may seem sufficient to the Board of Directors or to the
Executive Committee, the Board of Directors or the Executive Committee, except
as prohibited by law, may delegate his powers and duties to any other officer or
to any director.

ARTICLE XII  RESIGNATIONS

Any director or other elected officer may resign at any time. The
acceptance of his resignation shall not be required to make it valid.

ARTICLE XIII  FISCAL YEAR

The fiscal year of the Company shall begin on the first day of July and
end on the thirtieth day of June in each year.

ARTICLE XIV  CHECKS, NOTES, ETC.

All checks, drafts and orders for the payment of money of the Company
shall be signed by the President or by any Vice President and the Treasurer or
Assistant Treasurer or by any two Vice Presidents or by the Treasurer and the
Assistant Treasurer except when otherwise specifically provided by resolution of
the Board of Directors or of the Executive Committee. Either the President, any
Vice President, the Treasurer or any Assistant Treasurer is authorized to
endorse for collection or deposit to the credit of the Company any and all
checks, drafts, bills of exchange, promissory notes, orders, certificates of
deposit and acceptances.

All notes of the Company for the payment of money shall be signed by
the Chairman of the Board of Directors or the President or any Vice President
and by the Secretary or the Treasurer, or any Assistant Secretary or Assistant
Treasurer, unless otherwise provided by the Board of Directors or by the
Executive Committee, provided, however, that one person shall not sign in more
than one capacity.

Contracts, deeds and other documents executed by the Company may be
signed in the name and on behalf of the Company by the President or any Vice
President and by the Secretary or any Assistant Secretary or the Treasurer or
any Assistant Treasurer unless the Board of Directors or the Executive Committee
shall otherwise determine, provided, however, that one person shall not sign in
more than one capacity unless the Board of Directors or Executive Committee
shall so direct. The Board of Directors or the Executive Committee may authorize
any other officer or officers or agent or agents of the Company to enter into
any contract or to execute and deliver any contract or other instrument in the
name and on behalf of the Company.

ARTICLE XV  SEAL

The common corporate seal of the corporation shall consist of a round seal
with the words SPARTON CORPORATION, OHIO in the margin thereof and the word
SEAL in the center thereof.

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ARTICLE XVI  METHOD OF GIVING NOTICE

Whenever the By-Laws require notice, it shall not be construed to mean
personal notice except where the statutes require personal notice, but such
notice may be given in writing by depositing the same in a post office or letter
box in a postpaid sealed wrapper, directed to the address as the same appears on
the books or records of the Company, or by a telegram containing such notice
directed to the address as the same appears on the books or records of the
Company, or by telephone, and such notice, if given by mail, shall be deemed
given when so mailed, and if given by telegraph, shall be deemed given when the
telegram is so sent.

ARTICLE XVII  ALTERATION OF BY-LAWS

The Board of Directors, by a vote of a majority of the full Board of
Directors, may, at any regular or special meeting, alter, amend or repeal the
By-Laws.

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