##### 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, 2006
 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
  o o þ
 o þ
  Shares Outstanding atClass of Common Stock
    
    April 30, 2006$1.25 Par Value
    
    9,395,919




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##### 



TABLE OF CONTENTS
 Part I. Financial InformationItem 1. Financial Statements (Interim, Unaudited)Condensed Consolidated Balance Sheets
At March 31, 2006 and June 30, 2005
    
    
    3Condensed Consolidated Statements of Operations
Three Months and Nine Months Ended March 31, 2006 and 2005
    
    
    4Condensed Consolidated Statements of Cash Flows
Nine Months Ended March 31, 2006 and 2005
    
    
    5Condensed Consolidated Statements of Shareowners
Equity Nine Months Ended March 31, 2006 and 2005
    
    
    6Notes
to Condensed Consolidated Financial Statements
    
    
    7Item 2.
Managements Discussion and Analysis of Financial Condition and
Results of Operations
    
    
    13Item 3.
Quantitative and Qualitative Disclosures About Market Risk
    
    
    20Item 4. Controls and Procedures
    
    
    20Part II. Other InformationItem 1. Legal Proceedings
    
    
    20Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    22Item 6. Exhibits
    
    
    22Signatures
    
    
    22EX-31.1 CERTIFICATION 302 - CEOEX-31.2 CERTIFICATION 302 - CFOEX-32.1 CERTIFICATIONS 906 - CEO AND CFO
  2




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##### Table of Contents



PART I
 
 Item 1. Financial Statements
 SPARTON CORPORATION AND SUBSIDIARIES
 
  March 31, 2006
    
    June 30, 2005AssetsCurrent assets:Cash and cash equivalents
    
    $
    13,195,036
    
    
    $
    9,368,120Short-term investments
    
    
    23,095,196
    
    
    
    20,659,621Accounts receivable
    
    
    20,058,502
    
    
    
    26,004,945Environmental settlement receivable
    
    
    
    
    
    
    5,455,000Inventories and costs on contracts in progress
    
    
    35,532,585
    
    
    
    36,847,385Deferred taxes
    
    
    2,087,059
    
    
    
    2,640,561Prepaid expenses and other current assets
    
    
    884,003
    
    
    
    631,132Total current assets
    
    
    94,852,381
    
    
    
    101,606,764Pension asset
    
    
    4,557,826
    
    
    
    4,968,507Other assets
    
    
    6,917,382
    
    
    
    6,454,526Property, plant and equipment, net
    
    
    15,336,204
    
    
    
    16,430,989Total assets
    
    $
    121,663,793
    
    
    $
    129,460,786Liabilities and Shareowners EquityCurrent liabilities:Accounts payable
    
    $
    10,054,875
    
    
    $
    12,694,057Salaries and wages
    
    
    3,416,839
    
    
    
    4,435,089Accrued health benefits
    
    
    1,264,325
    
    
    
    1,041,850Other accrued liabilities
    
    
    4,382,753
    
    
    
    5,518,920Income taxes payable
    
    
    160,265
    
    
    
    2,414,294Total current liabilities
    
    
    19,279,057
    
    
    
    26,104,210Environmental remediation  noncurrent portion
    
    
    5,977,090
    
    
    
    6,184,590Shareowners equity:Preferred stock, no par value; 200,000 shares authorized, none outstanding
    
    
    
    
    
    
    Common stock, $1.25 par value; 15,000,000 shares authorized, 9,391,822 shares
outstanding at March 31, 2006 and 8,830,428 shares outstanding at June 30,
2005
    
    
    11,739,778
    
    
    
    11,038,035Capital in excess of par value
    
    
    15,060,785
    
    
    
    10,558,757Accumulated other comprehensive loss
    
    
    (170,180
    )
    
    
    (44,198
    )Retained earnings
    
    
    69,777,263
    
    
    
    75,619,392Total shareowners equity
    
    
    96,407,646
    
    
    
    97,171,986Total liabilities and shareowners equity
    
    $
    121,663,793
    
    
    $
    129,460,786
 See accompanying notes to condensed consolidated financial statements.
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SPARTON CORPORATION AND SUBSIDIARIES
 
   Three Months Ended
    
    Nine Months Ended2006
    
    2005
    
    2006
    
    2005Net sales
    
    $
    45,303,199
    
    
    $
    41,561,001
    
    
    $
    120,302,471
    
    
    $
    121,276,223Costs of goods sold
    
    
    40,651,519
    
    
    
    38,238,550
    
    
    
    110,173,163
    
    
    
    108,010,683Gross profit
    
    
    4,651,680
    
    
    
    3,322,451
    
    
    
    10,129,308
    
    
    
    13,265,540Selling and administrative expenses
    
    
    3,930,958
    
    
    
    3,158,980
    
    
    
    11,694,855
    
    
    
    9,822,128EPA related  net environmental remediation
    
    
    29,994
    
    
    
    123,315
    
    
    
    796
    
    
    
    282,348Loss (gain) on sale of property, plant and equipment
    
    
    (5,693
    )
    
    
    42,342
    
    
    
    98,898
    
    
    
    42,342Operating income (loss)
    
    
    696,421
    
    
    
    (2,186
    )
    
    
    (1,665,241
    )
    
    
    3,118,722Other income (expense):Interest and investment income
    
    
    293,008
    
    
    
    231,095
    
    
    
    820,835
    
    
    
    653,336Equity income (loss) in investment
    
    
    3,000
    
    
    
    (5,000
    )
    
    
    2,000
    
    
    
    (10,000
    )Other  net
    
    
    77,903
    
    
    
    (29,602
    )
    
    
    298,597
    
    
    
    647,488373,911
    
    
    
    196,493
    
    
    
    1,121,432
    
    
    
    1,290,824Income (loss) before income taxes
    
    
    1,070,332
    
    
    
    194,307
    
    
    
    (543,809
    )
    
    
    4,409,546Provision (credit) for income taxes
    
    
    343,000
    
    
    
    (114,000
    )
    
    
    (174,000
    )
    
    
    1,235,000Net income (loss)
    
    $
    727,332
    
    
    $
    308,307
    
    
    $
    (369,809
    )
    
    $
    3,174,546Basic and diluted earnings (loss) per share (1)
    
    $
    0.08
    
    
    $
    0.03
    
    
    $
    (0.04
    )
    
    $
    0.34
 (1)
    
    All share and per share information have been adjusted to reflect the impact of the 5%
stock dividend declared in October 2005.
 See accompanying notes to condensed consolidated financial statements.
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SPARTON CORPORATION AND SUBSIDIARIES
 
  Nine Months Ended March 31,2006
    
    2005Cash flows from Operating Activities:Net income (loss)
    
    $
    (369,809
    )
    
    $
    3,174,546Add (deduct) noncash items affecting operations:Depreciation, amortization and accretion
    
    
    1,490,979
    
    
    
    1,241,533Deferred income taxes (benefit)
    
    
    679,731
    
    
    
    (635,706
    )Pension expense
    
    
    410,681
    
    
    
    360,346Share-based compensation
    
    
    253,420
    
    
    
    Loss on sale of property, plant and equipment
    
    
    98,898
    
    
    
    42,342Loss on sale of investment securities
    
    
    25,432
    
    
    
    34,510Equity (gain) loss in investment
    
    
    (2,000
    )
    
    
    10,000Other, primarily changes in customer and vendor claims
    
    
    (391,396
    )
    
    
    Add (deduct) changes in operating assets and liabilities:Accounts receivable
    
    
    5,946,443
    
    
    
    720,103Environmental settlement receivable
    
    
    5,455,000
    
    
    
    Income taxes recoverable
    
    
    
    
    
    
    559,706Inventories and prepaid expenses
    
    
    1,061,929
    
    
    
    823,956Accounts payable and accrued liabilities
    
    
    (7,032,653
    )
    
    
    972,522Net cash provided by operating activities
    
    
    7,626,655
    
    
    
    7,303,858Cash flows from Investing Activities:Purchases of investment securities
    
    
    (7,052,763
    )
    
    
    (8,870,255
    )Proceeds from sale of investment securities
    
    
    1,677,746
    
    
    
    5,535,722Proceeds from maturity of investment securities
    
    
    2,583,602
    
    
    
    965,000Purchases of property, plant and equipment
    
    
    (459,895
    )
    
    
    (5,166,303
    )Other, principally noncurrent other assets
    
    
    (26,460
    )
    
    
    (152,618
    )Net cash used by investing activities
    
    
    (3,277,770
    )
    
    
    (7,688,454
    )Cash flows from Financing Activities:Proceeds from exercise of stock options
    
    
    571,251
    
    
    
    254,400Tax effect from stock transactions
    
    
    70,029
    
    
    
    Stock dividends  cash paid in lieu of fractional shares
    
    
    (3,654
    )
    
    
    (2,937
    )Repurchases of common stock
    
    
    (270,186
    )
    
    
    Cash dividend
    
    
    (889,409
    )
    
    
    Net cash (used) provided by financing activities
    
    
    (521,969
    )
    
    
    251,463Increase (decrease) in cash and cash equivalents
    
    
    3,826,916
    
    
    
    (133,133
    )Cash and cash equivalents at beginning of period
    
    
    9,368,120
    
    
    
    10,820,461Cash and cash equivalents at end of period
    
    $
    13,195,036
    
    
    $
    10,687,328Supplemental disclosures of cash paid during the period:Income taxes  net
    
    $
    1,395,000
    
    
    $
    95,000
 See accompanying notes to condensed consolidated financial statements.
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SPARTON CORPORATION AND SUBSIDIARIES
 
  Nine Months Ended March 31, 2006Capital
    
    Accumulated otherCommon Stock
    
    in excess
    
    comprehensive
    
    RetainedShares
    
    Amount
    
    of par value
    
    income (loss)
    
    earnings
    
    TotalBalance at
July 1, 2005
    
    
    8,830,428
    
    
    $
    11,038,035
    
    
    $
    10,558,757
    
    
    $
    (44,198
    )
    
    $
    75,619,392
    
    
    $
    97,171,986Repurchases of common stock as part of 2005
share repurchase program
    
    
    (28,237
    )
    
    
    (35,296
    )
    
    
    (34,199
    )
    
    
    
    
    
    
    (200,691
    )
    
    
    (270,186
    )Cash dividend ($0. 10 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (889,409
    )
    
    
    (889,409
    )Stock options exercised, net of common stock
surrendered to facilitate exercise
    
    
    143,294
    
    
    
    179,118
    
    
    
    392,133
    
    
    
    
    
    
    
    
    
    
    
    571,251Share-based compensation
    
    
    
    
    
    
    
    
    
    
    253,420
    
    
    
    
    
    
    
    
    
    
    
    253,420Tax effect from stock transactions
    
    
    
    
    
    
    
    
    
    
    70,029
    
    
    
    
    
    
    
    
    
    
    
    70,029Stock dividend (5% declared October 25,
2005)
    
    
    446,337
    
    
    
    557,921
    
    
    
    3,820,645
    
    
    
    
    
    
    
    (4,382,220
    )
    
    
    (3,654
    )Comprehensive income (loss), net of tax:Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (369,809
    )
    
    
    (369,809
    )Net unrealized loss on investment securities
owned
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (224,767
    )
    
    
    
    
    
    
    (224,767
    )Reclassification adjustment for net loss
realized and reported in net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,785
    
    
    
    
    
    
    
    16,785Net unrealized gain on equity investment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    82,000
    
    
    
    
    
    
    
    82,000Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (495,791
    )Balance at March 31, 2006
    
    
    9,391,822
    
    
    $
    11,739,778
    
    
    $
    15,060,785
    
    
    $
    (170,180
    )
    
    $
    69,777,263
    
    
    $
    96,407,646
 Nine Months Ended March 31, 2005Capital
    
    Accumulated otherCommon Stock
    
    in excess
    
    comprehensive
    
    RetainedShares
    
    Amount
    
    of par value
    
    income (loss)
    
    earnings
    
    TotalBalance at
July 1, 2004
    
    
    8,351,538
    
    
    $
    10,439,423
    
    
    $
    7,134,149
    
    
    $
    62,368
    
    
    $
    71,230,159
    
    
    $
    88,866,099Stock options exercised
    
    
    52,419
    
    
    
    65,524
    
    
    
    188,876
    
    
    
    
    
    
    
    
    
    
    
    254,400Stock dividend (5% declared
November 9, 2004)
    
    
    417,507
    
    
    
    521,883
    
    
    
    3,198,104
    
    
    
    
    
    
    
    (3,722,924
    )
    
    
    (2,937
    )Comprehensive income (loss), net of
tax:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,174,546
    
    
    
    3,174,546Net unrealized loss on investment
securities owned
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (194,724
    )
    
    
    
    
    
    
    (194,724
    )Reclassification adjustment for net
loss realized and reported in net
income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    22,777
    
    
    
    
    
    
    
    22,777Net unrealized gain on equity
investment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    44,000
    
    
    
    
    
    
    
    44,000Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,046,599Balance at March 31, 2005
    
    
    8,821,464
    
    
    $
    11,026,830
    
    
    $
    10,521,129
    
    
    $
    (65,579
    )
    
    $
    70,681,781
    
    
    $
    92,164,161
 See accompanying notes to condensed consolidated financial statements.
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SPARTON CORPORATION AND SUBSIDIARIES
 
  1. SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
 Basis
of presentation
  Operations
 Use of estimates
 Revenue
recognition
 Short-term
investments
 Other
investment
 7




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Market
risk exposure
  New
accounting standards
  Periodic
benefit cost
 Three Months
    
    Nine Months2006
    
    2005
    
    2006
    
    2005Service cost
    
    $
    128,000
    
    
    $
    110,000
    
    
    $
    410,000
    
    
    $
    412,000Interest cost
    
    
    163,000
    
    
    
    154,000
    
    
    
    511,000
    
    
    
    498,000Expected return on plan assets
    
    
    (227,000
    )
    
    
    (228,000
    )
    
    
    (726,000
    )
    
    
    (734,000
    )Amortization of prior service cost
    
    
    24,000
    
    
    
    24,000
    
    
    
    75,000
    
    
    
    72,000Amortization of net loss
    
    
    49,000
    
    
    
    36,000
    
    
    
    141,000
    
    
    
    112,000Net periodic benefit cost
    
    $
    137,000
    
    
    $
    96,000
    
    
    $
    411,000
    
    
    $
    360,000
 Common
stock repurchases
 8




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Stock
options
     Three Months
    
    Nine MonthsNet income, as reported
    
    $
    308,000
    
    
    $
    3,175,000Deduct:Total share-based compensation expense determined under the fair value
method for all awards, net of tax effects
    
    
    42,000
    
    
    
    125,000Pro forma net income
    
    $
    266,000
    
    
    $
    3,050,000Pro forma basic and diluted earnings per share  after stock dividends
    
    
    $0.03
    
    
    
    $0.33
  Options Outstanding
    
    
    Options ExercisableRange of
    
    
    
    
    
    Wtd. Avg. Remaining
    
    
    Wtd. Avg.
    
    
    
    
    
    
    Wtd. Avg.Exercise Prices
    
    Number Outstanding
    
    
    Contractual Life (years)
    
    
    Exercise Price
    
    
    Number Exercisable
    
    
    Exercisable Price$5.77 to $6.99
    
372,546
    
    
1.57
    
    
$6.17
    
    
330,551
    
    
$6.08$8.08 to $9.00
    
157,957
    
    
9.06
    
    
$8.97
    
    
1,295
    
    
$8.31530,503
    
    
3.80
    
    
$7.01
    
    
331,846
    
    
$6.09
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Weighted AverageShares
    
    Weighted Average
    
    Remaining
    
    AggregateUnder Option
    
    Exercise Price
    
    Contractual Term
    
    Intrinsic ValueOutstanding at June 30,
2005 (1)
    
    
    709,004
    
    
    
    $6.38
    
    
    
    3.75Granted
    
    
    
    
    
    
    Exercised
    
    
    (156,621
    )
    
    
    $4.40
    
    
    
    
    
    
    $
    789,000Forfeited or expired
    
    
    (21,880
    )
    
    
    $6.59Outstanding at March 31, 2006
    
    
    530,503
    
    
    
    $7.01
    
    
    
    3.80
    
    
    $
    944,000Exercisable at March 31, 2006
    
    
    331,846
    
    
    
    $6.09
    
    
    
    
    
    
    $
    896,000Shares remaining
available for grant at March 31, 2006
    
    
    162,384
 (1)
    
    Options at June 30, 2005, have been adjusted to reflect the impact of the 5% stock dividend
declared in October 2005.
  2. INVENTORIES
 March 31, 2006
    
    June 30, 2005Raw materials
    
    $
    21,123,000
    
    
    $
    23,463,000Work in process and finished goods
    
    
    14,410,000
    
    
    
    13,384,000$
    35,533,000
    
    
    $
    36,847,000
  3. EARNINGS
(LOSS) PER SHARE
  Three Months
    
    Nine Months2006
    
    2005
    
    2006
    
    2005Weighted average basic shares outstanding
    
    
    9,322,647
    
    
    
    9,232,062
    
    
    
    9,320,181
    
    
    
    9,217,590Effect of dilutive stock options
    
    
    39,173
    
    
    
    132,361
    
    
    
    
    
    
    
    127,170Weighted average diluted shares outstanding
    
    
    9,361,820
    
    
    
    9,364,423
    
    
    
    9,320,181
    
    
    
    9,344,760Basic and diluted earnings (loss) per share  after stock dividends
    
    
    $0.08
    
    
    
    $0.03
    
    
    
    $(0.04
    )
    
    
    $0.34
 10




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4. COMPREHENSIVE INCOME (LOSS)
 Three Months
    
    
    Nine Months2006
    
    
    2005
    
    
    2006
    
    
    2005Net income (loss)
    
    $
    727,000
    
    
    $
    308,000
    
    
    $
    (370,000
    )
    
    $
    3,175,000Other comprehensive income (loss), net of taxInvestment securities owned
    
    
    (48,000
    )
    
    
    (138,000
    )
    
    
    (208,000
    )
    
    
    (172,000
    )Investment securities held by investee accounted for by the equity method
    
    
    26,000
    
    
    
    (59,000
    )
    
    
    82,000
    
    
    
    44,000(22,000
    )
    
    
    (197,000
    )
    
    
    (126,000
    )
    
    
    (128,000
    )Comprehensive income (loss)
    
    $
    705,000
    
    
    $
    111,000
    
    
    $
    (496,000
    )
    
    $
    3,047,000
  March 31, 2006
    
    June 30, 2005Accumulated other comprehensive income (loss), net of tax:Investment securities owned
    
    $
    (299,000
    )
    
    $
    (91,000
    )Investment securities held by investee accounted for by
the equity method
    
    
    129,000
    
    
    
    47,000Accumulated other comprehensive loss
    
    $
    (170,000
    )
    
    $
    (44,000
    )
 5. INVESTMENT SECURITIES
   11




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YearsWithin 1
    
    1 to 5
    
    5 to 10
    
    Over 10
    
    TotalDebt securities:Corporate  primarily U.S.
    
    $
    1,258,000
    
    
    $
    3,721,000
    
    
    $
    193,000
    
    
    $
    143,000
    
    
    $
    5,315,000U.S. government and federal agency
    
    
    513,000
    
    
    
    3,882,000
    
    
    
    1,537,000
    
    
    
    1,997,000
    
    
    
    7,929,000State and municipal
    
    
    1,051,000
    
    
    
    2,892,000
    
    
    
    698,000
    
    
    
    200,000
    
    
    
    4,841,000Bond fund
    
    
    5,010,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,010,000Total debt securities
    
    $
    7,832,000
    
    
    $
    10,495,000
    
    
    $
    2,428,000
    
    
    $
    2,340,000
    
    
    $
    23,095,000
 6. COMMITMENTS AND CONTINGENCIES
   7. STOCK REPURCHASE PROGRAM 
 12




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
      13




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RESULTS OF OPERATIONS
 Three Months Ended March 31CURRENT QUARTER
    
    2006
    
    2005%
    
    
    
    
    
    %
    
    %MARKET
    
    Net sales
    
    of Total
    
    Net sales
    
    of Total
    
    ChangeGovernment
    
    $
    10,785,000
    
    
    
    23.8
    %
    
    $
    10,143,000
    
    
    
    24.4
    %
    
    
    6.3
    %Industrial/Other
    
    
    16,147,000
    
    
    
    35.6
    
    
    
    11,641,000
    
    
    
    28.0
    
    
    
    38.7Aerospace
    
    
    14,531,000
    
    
    
    32.1
    
    
    
    16,741,000
    
    
    
    40.3
    
    
    
    (13.2
    )Medical/Scientific Instrumentation
    
    
    3,840,000
    
    
    
    8.5
    
    
    
    3,036,000
    
    
    
    7.3
    
    
    
    26.5Totals
    
    $
    45,303,000
    
    
    
    100.0
    %
    
    $
    41,561,000
    
    
    
    100.0
    %
    
    
    9.0
    %
   2006
    
    2005Net sales
    
    
    100.0
    %
    
    
    100.0
    %Costs of goods sold
    
    
    89.7
    
    
    
    92.0Gross profit
    
    
    10.3
    
    
    
    8.0Selling and administrative expenses
    
    
    8.7
    
    
    
    7.6Other operating expenses
    
    
    0.1
    
    
    
    0.4Operating income (loss)
    
    
    1.5
    
    
    
    0.0Other income  net
    
    
    0.9
    
    
    
    0.5Income before income taxes
    
    
    2.4
    
    
    
    0.5Provision (credit) for income taxes
    
    
    0.8
    
    
    
    (0.2
    )Net income
    
    
    1.6
    %
    
    
    0.7
    %
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Nine Months Ended March 31YEAR-TO-DATE
    
    2006
    
    2005%
    
    
    
    
    
    %
    
    %MARKET
    
    Net sales
    
    of Total
    
    Net sales
    
    of Total
    
    ChangeGovernment
    
    $
    27,889,000
    
    
    
    23.2
    %
    
    $
    24,510,000
    
    
    
    20.2
    %
    
    
    13.8
    %Industrial/Other
    
    
    43,513,000
    
    
    
    36.2
    
    
    
    35,042,000
    
    
    
    28.9
    
    
    
    24.2Aerospace
    
    
    38,363,000
    
    
    
    31.9
    
    
    
    51,729,000
    
    
    
    42.7
    
    
    
    (25.8
    )Medical/Scientific Instrumentation
    
    
    10,537,000
    
    
    
    8.7
    
    
    
    9,995,000
    
    
    
    8.2
    
    
    
    5.4Totals
    
    $
    120,302,000
    
    
    
    100.0
    %
    
    $
    121,276,000
    
    
    
    100.0
    %
    
    
    (0.8
    )%
    2006
    
    2005Net sales
    
    
    100.0
    %
    
    
    100.0
    %Costs of goods sold
    
    
    91.6
    
    
    
    89.1Gross profit
    
    
    8.4
    
    
    
    10.9Selling and administrative expenses
    
    
    9.7
    
    
    
    8.1Other operating expenses
    
    
    0.1
    
    
    
    0.2Operating income (loss)
    
    
    (1.4
    )
    
    
    2.6Other income  net
    
    
    0.9
    
    
    
    1.0Income (loss) before income taxes
    
    
    (0.5
    )
    
    
    3.6Provision (credit) for income taxes
    
    
    (0.2
    )
    
    
    1.0Net income (loss)
    
    
    (0.3
    )%
    
    
    2.6
    %
  15




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LIQUIDITY AND CAPITAL RESOURCES
   16




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CONTRACTUAL OBLIGATIONS AND COMMITMENTS
  CRITICAL ACCOUNTING POLICIES AND ESTIMATES
  17




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Environmental Contingencies
  Government Contract Cost Estimates
  Commercial Inventory Valuation Allowances
 
  Allowance for Probable Losses on Receivables
  18




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Pension Obligations
  OTHER
 Litigation
     19




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##### Table of Contents



Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
   
 Item 4. CONTROLS AND PROCEDURES
   
 PART II
 OTHER INFORMATION
 
 Item 1. Legal Proceedings
  20




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21




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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
 Total number
    
    Maximum numberof shares
    
    (or approximate dollar value)Total number
    
    
    
    
    
    purchased as
    
    of shares that mayof shares
    
    Average price
    
    part of publicly
    
    yet be purchasedPeriod
    
    purchased
    
    paid per share
    
    announced programs
    
    under the programJanuary 1-31
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    3,800,000February 1-28
    
    
    3,600
    
    
    
    8.72
    
    
    
    3,600
    
    
    
    3,769,000March 1-31
    
    
    4,400
    
    
    
    8.64
    
    
    
    4,400
    
    
    
    3,730,000Total
    
    
    8,000
    
    
    
    
    
    
    
    8,000
    
    
    
    3,730,000
  
 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 12, 2006
    /s/ DAVID W. HOCKENBROCHTDavid W. Hockenbrocht, Chief Executive Officer Date: May 12, 2006
    /s/ RICHARD L. LANGLEYRichard L. Langley, Chief Financial Officer 22