ý | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Ohio | 38-1054690 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
425 N. Martingale Road, Suite 1000, Schaumburg, Illinois | 60173-2213 | |
(Address of principal executive offices) | (Zip code) |
Large accelerated filer | ¨ | Accelerated filer | ý |
Non-accelerated filer | ¨ (Do not check if a smaller reporting company) | Smaller reporting company | ¨ |
PART I | ||
ITEM 1. | ||
ITEM 2. | ||
ITEM 3. | ||
ITEM 4. | ||
PART II | ||
ITEM 1. | ||
ITEM 1A. | ||
ITEM 6. | ||
CERTIFICATIONS |
January 1, 2017 | July 3, 2016 | ||||||
Assets | (Unaudited) | ||||||
Current Assets: | |||||||
Cash and cash equivalents | $ | 589 | $ | 132 | |||
Accounts receivable, net of allowance for doubtful accounts of $289 and $407, respectively | 47,396 | 46,759 | |||||
Inventories and cost of contracts in progress, net | 59,871 | 77,871 | |||||
Prepaid expenses and other current assets | 5,615 | 5,844 | |||||
Total current assets | 113,471 | 130,606 | |||||
Property, plant and equipment, net | 32,901 | 33,320 | |||||
Goodwill | 12,663 | 12,663 | |||||
Other intangible assets, net | 32,533 | 36,933 | |||||
Deferred income taxes | 25,752 | 25,784 | |||||
Other non-current assets | 5,852 | 6,692 | |||||
Total assets | $ | 223,172 | $ | 245,998 | |||
Liabilities and Shareholders’ Equity | |||||||
Current Liabilities: | |||||||
Accounts payable | $ | 29,798 | $ | 38,290 | |||
Accrued salaries and benefits | 10,303 | 11,512 | |||||
Current portion of capital lease obligations | 267 | 217 | |||||
Other accrued expenses | 10,696 | 12,420 | |||||
Total current liabilities | 51,064 | 62,439 | |||||
Credit facility | 85,706 | 97,206 | |||||
Capital lease obligations, less current portion | 302 | 332 | |||||
Environmental remediation | 5,700 | 6,117 | |||||
Pension liability | 1,204 | 1,276 | |||||
Total liabilities | 143,976 | 167,370 | |||||
Commitments and contingencies | |||||||
Shareholders’ Equity: | |||||||
Preferred stock, no par value; 200,000 shares authorized, none issued | — | — | |||||
Common stock, $1.25 par value; 15,000,000 shares authorized, 9,835,635 and 9,845,469 shares issued and outstanding, respectively | 12,295 | 12,307 | |||||
Capital in excess of par value | 17,696 | 16,407 | |||||
Retained earnings | 50,851 | 51,650 | |||||
Accumulated other comprehensive loss | (1,646 | ) | (1,736 | ) | |||
Total shareholders’ equity | 79,196 | 78,628 | |||||
Total liabilities and shareholders’ equity | $ | 223,172 | $ | 245,998 |
For the Second Quarter of Fiscal Years | For the First Two Quarters of Fiscal Years | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Net sales | $ | 97,399 | $ | 103,529 | $ | 197,766 | $ | 210,220 | |||||||
Cost of goods sold | 81,501 | 85,008 | 164,583 | 170,561 | |||||||||||
Gross profit | 15,898 | 18,521 | 33,183 | 39,659 | |||||||||||
Operating Expense: | |||||||||||||||
Selling and administrative expenses | 12,953 | 14,340 | 26,336 | 27,964 | |||||||||||
Internal research and development expenses | 533 | 438 | 884 | 951 | |||||||||||
Amortization of intangible assets | 2,191 | 2,459 | 4,410 | 4,962 | |||||||||||
Restructuring charges | — | 2,360 | — | 2,360 | |||||||||||
Reversal of accrued contingent consideration | — | (1,530 | ) | — | (1,530 | ) | |||||||||
Total operating expense | 15,677 | 18,067 | 31,630 | 34,707 | |||||||||||
Operating income | 221 | 454 | 1,553 | 4,952 | |||||||||||
Other income (expense) | |||||||||||||||
Interest expense, net | (1,067 | ) | (900 | ) | (2,252 | ) | (1,783 | ) | |||||||
Other, net | (11 | ) | 34 | 9 | 102 | ||||||||||
Total other expense, net | (1,078 | ) | (866 | ) | (2,243 | ) | (1,681 | ) | |||||||
Income (loss) before income taxes | (857 | ) | (412 | ) | (690 | ) | 3,271 | ||||||||
Income taxes | 50 | (680 | ) | 109 | 609 | ||||||||||
Net income (loss) | $ | (907 | ) | $ | 268 | $ | (799 | ) | $ | 2,662 | |||||
Income (loss) per share of common stock: | |||||||||||||||
Basic | $ | (0.09 | ) | $ | 0.03 | $ | (0.08 | ) | $ | 0.27 | |||||
Diluted | $ | (0.09 | ) | $ | 0.03 | $ | (0.08 | ) | $ | 0.27 | |||||
Weighted average shares of common stock outstanding: | |||||||||||||||
Basic | 9,802,664 | 9,783,237 | 9,793,046 | 9,781,884 | |||||||||||
Diluted | 9,802,664 | 9,783,237 | 9,793,046 | 9,781,884 |
For the Second Quarter of Fiscal Years | For the First Two Quarters of Fiscal Years | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Net income (loss) | $ | (907 | ) | $ | 268 | $ | (799 | ) | $ | 2,662 | |||||
Other comprehensive income, net: | |||||||||||||||
Pension amortization of unrecognized net actuarial loss, net of tax | 55 | 40 | 90 | 47 | |||||||||||
Unrecognized loss on marketable equity securities, net of tax | — | (102 | ) | — | (173 | ) | |||||||||
Other comprehensive income (loss), net | 55 | (62 | ) | 90 | (126 | ) | |||||||||
Comprehensive income (loss) | $ | (852 | ) | $ | 206 | $ | (709 | ) | $ | 2,536 |
For the First Two Quarters of Fiscal Years | |||||||
2017 | 2016 | ||||||
Cash Flows from Operating Activities: | |||||||
Net income (loss) | $ | (799 | ) | $ | 2,662 | ||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |||||||
Depreciation | 2,989 | 3,007 | |||||
Amortization of intangible assets | 4,410 | 4,962 | |||||
Deferred income taxes | 32 | 36 | |||||
Stock-based compensation expense | 1,277 | 869 | |||||
Reversal of accrued contingent consideration | — | (1,530 | ) | ||||
Amortization of deferred financing costs | 249 | 140 | |||||
Excess tax benefit from stock-based compensation | — | (161 | ) | ||||
Changes in operating assets and liabilities (net of acquisitions): | |||||||
Accounts receivable | (637 | ) | 14,363 | ||||
Inventories and cost of contracts in progress | 18,000 | (2,266 | ) | ||||
Prepaid expenses and other assets | 599 | (2,567 | ) | ||||
Performance based payments on customer contracts | 127 | 111 | |||||
Accounts payable and accrued expenses | (11,576 | ) | (6,517 | ) | |||
Net cash provided by operating activities | 14,671 | 13,109 | |||||
Cash Flows from Investing Activity: | |||||||
Acquisition of businesses, net of cash acquired | — | 750 | |||||
Purchases of property, plant and equipment | (2,570 | ) | (3,263 | ) | |||
Net cash used in investing activity | (2,570 | ) | (2,513 | ) | |||
Cash Flows from Financing Activities: | |||||||
Borrowings from credit facility | 59,644 | 46,300 | |||||
Repayments against credit facility | (71,144 | ) | (67,000 | ) | |||
Payments under capital lease agreements | (129 | ) | — | ||||
Payment of debt financing costs | (15 | ) | — | ||||
Repurchase of stock | — | (141 | ) | ||||
Excess tax benefit from stock-based compensation | — | 161 | |||||
Net cash used in financing activities | (11,644 | ) | (20,680 | ) | |||
Net increase (decrease) in cash and cash equivalents | 457 | (10,084 | ) | ||||
Cash and cash equivalents at beginning of period | 132 | 14,914 | |||||
Cash and cash equivalents at end of period | $ | 589 | $ | 4,830 | |||
Supplemental disclosure of cash flow information: | |||||||
Cash paid for interest | $ | 1,972 | $ | 1,508 | |||
Cash paid for income taxes | 354 | 766 | |||||
Supplemental disclosure of non-cash investing activities: | |||||||
Machinery and equipment financed under capital leases | 148 | — | |||||
Adjustments to acquired companies' opening balance sheets | — | 3,840 |
January 1, 2017 | July 3, 2016 | ||||||
Raw materials | $ | 34,740 | $ | 40,914 | |||
Work in process | 18,990 | 23,626 | |||||
Finished goods | 17,497 | 22,294 | |||||
Total inventory and cost of contracts in progress, gross | 71,227 | 86,834 | |||||
Inventory to which the U.S. government has title due to interim billings | (11,356 | ) | (8,963 | ) | |||
Total inventory and cost of contracts in progress, net | $ | 59,871 | $ | 77,871 |
January 1, 2017 | July 3, 2016 | ||||||
Land and land improvements | $ | 1,429 | $ | 1,429 | |||
Buildings and building improvements | 27,693 | 27,660 | |||||
Machinery and equipment | 43,956 | 43,134 | |||||
Construction in progress | 3,042 | 1,372 | |||||
Total property, plant and equipment | 76,120 | 73,595 | |||||
Less accumulated depreciation | (43,219 | ) | (40,275 | ) | |||
Total property, plant and equipment, net | $ | 32,901 | $ | 33,320 |
Net Carrying Value at July 3, 2016 | Additions | Amortization | Net Carrying Value at January 1, 2017 | |||||||||||||
Non-compete agreements | $ | 2,193 | $ | — | $ | (441 | ) | $ | 1,752 | |||||||
Customer relationships | 32,625 | — | (3,763 | ) | 28,862 | |||||||||||
Trademarks/Tradenames | 1,382 | — | (81 | ) | 1,301 | |||||||||||
Unpatented technology | 733 | — | (124 | ) | 609 | |||||||||||
Patents | — | 10 | (1 | ) | 9 | |||||||||||
Other intangible assets, net | $ | 36,933 | $ | 10 | $ | (4,410 | ) | $ | 32,533 |
For the Second Quarter of Fiscal Years | For the First Two Quarters of Fiscal Years | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Fair value expense of stock option awards | $ | 49 | $ | 195 | $ | 97 | $ | 317 | |||||||
Restricted stock units | 525 | 349 | 804 | 567 | |||||||||||
Restricted and unrestricted stock | 394 | (107 | ) | 376 | (15 | ) | |||||||||
Total stock-based compensation expense | $ | 968 | $ | 437 | $ | 1,277 | $ | 869 |
Stock Options | Restricted stock units | Restricted shares | ||||||
Outstanding at July 3, 2016 | 115,415 | 79,274 | 52,651 | |||||
Granted | — | 79,889 | — | |||||
Forfeited | (10,630 | ) | (6,029 | ) | (26,739 | ) | ||
Outstanding at January 1, 2017 | 104,785 | 153,134 | 25,912 |
For the Second Quarter of Fiscal Years | For the First Two Quarters of Fiscal Years | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Numerator: | |||||||||||||||
Net income (loss) | $ | (907 | ) | $ | 268 | $ | (799 | ) | $ | 2,662 | |||||
Less net income allocated to contingently issuable participating securities | — | (3 | ) | — | (28 | ) | |||||||||
Net income (loss) available to common shareholders | $ | (907 | ) | $ | 265 | $ | (799 | ) | $ | 2,634 | |||||
Weighted average shares outstanding – Basic | 9,802,664 | 9,783,237 | 9,793,046 | 9,781,884 | |||||||||||
Dilutive effect of stock options | — | — | — | — | |||||||||||
Weighted average shares outstanding – Diluted | 9,802,664 | 9,783,237 | 9,793,046 | 9,781,884 | |||||||||||
Net income (loss) available to common shareholders per share: | |||||||||||||||
Basic | $ | (0.09 | ) | $ | 0.03 | $ | (0.08 | ) | $ | 0.27 | |||||
Diluted | $ | (0.09 | ) | $ | 0.03 | $ | (0.08 | ) | $ | 0.27 |
For the Second Quarter of Fiscal Year 2017 | |||||||||||||||||||
MDS | ECP | Unallocated | Eliminations | Total | |||||||||||||||
Net sales | $ | 67,382 | $ | 32,350 | $ | — | $ | (2,333 | ) | $ | 97,399 | ||||||||
Gross profit | 8,357 | 7,541 | — | — | 15,898 | ||||||||||||||
Selling and administrative expenses (incl. depreciation) | 5,561 | 3,545 | 3,847 | — | 12,953 | ||||||||||||||
Internal research and development expenses | — | 533 | — | — | 533 | ||||||||||||||
Operating income | 986 | 3,082 | (3,847 | ) | — | 221 | |||||||||||||
Capital expenditures | 464 | 423 | 564 | — | 1,451 | ||||||||||||||
Total assets at January 1, 2017 | $ | 151,020 | $ | 63,143 | $ | 9,009 | $ | — | $ | 223,172 | |||||||||
For the Second Quarter of Fiscal Year 2016 | |||||||||||||||||||
MDS | ECP | Unallocated | Eliminations | Total | |||||||||||||||
Net sales | $ | 67,586 | $ | 40,642 | $ | — | $ | (4,699 | ) | $ | 103,529 | ||||||||
Gross profit | 6,989 | 11,532 | — | — | 18,521 | ||||||||||||||
Selling and administrative expenses (incl. depreciation) | 6,646 | 3,715 | 3,979 | — | 14,340 | ||||||||||||||
Internal research and development expenses | — | 438 | — | — | 438 | ||||||||||||||
Restructuring charges | 2,360 | — | — | — | 2,360 | ||||||||||||||
Reversal of accrued contingent consideration | (1,530 | ) | — | — | — | (1,530 | ) | ||||||||||||
Operating income (loss) | (2,524 | ) | 6,957 | (3,979 | ) | — | 454 | ||||||||||||
Capital expenditures | 427 | 228 | 1,128 | — | 1,783 | ||||||||||||||
Total assets at July 3, 2016 | $ | 167,277 | $ | 69,627 | $ | 9,094 | $ | — | $ | 245,998 | |||||||||
For the First Two Quarters of Fiscal Year 2017 | |||||||||||||||||||
MDS | ECP | Unallocated | Eliminations | Total | |||||||||||||||
Net sales | $ | 132,384 | $ | 69,942 | $ | — | $ | (4,560 | ) | $ | 197,766 | ||||||||
Gross profit | 15,651 | 17,532 | — | — | 33,183 | ||||||||||||||
Selling and administrative expenses (incl. depreciation) | 11,537 | 7,369 | 7,430 | — | 26,336 | ||||||||||||||
Internal research and development expenses | — | 884 | — | — | 884 | ||||||||||||||
Operating income | 472 | 8,511 | (7,430 | ) | — | 1,553 | |||||||||||||
Capital expenditures | $ | 670 | $ | 758 | $ | 1,142 | $ | — | $ | 2,570 | |||||||||
For the First Two Quarters of Fiscal Year 2016 | |||||||||||||||||||
MDS | ECP | Unallocated | Eliminations | Total | |||||||||||||||
Net sales | $ | 141,543 | $ | 78,731 | $ | — | $ | (10,054 | ) | $ | 210,220 | ||||||||
Gross profit | 17,285 | 22,374 | — | — | 39,659 | ||||||||||||||
Selling and administrative expenses (incl. depreciation) | 12,527 | 7,312 | 8,125 | — | 27,964 | ||||||||||||||
Internal research and development expenses | — | 951 | — | — | 951 | ||||||||||||||
Restructuring charges | 2,360 | — | — | — | 2,360 | ||||||||||||||
Reversal of accrued contingent consideration | (1,530 | ) | — | — | — | (1,530 | ) | ||||||||||||
Operating income (loss) | (183 | ) | 13,260 | (8,125 | ) | — | 4,952 | ||||||||||||
Capital expenditures | $ | 1,433 | $ | 273 | $ | 1,557 | $ | — | $ | 3,263 |
For the Second Quarter of Fiscal Years | |||||||||||||
2017 | % of Sales | 2016 | % of Sales | ||||||||||
Net sales | $ | 97,399 | 100.0 | % | $ | 103,529 | 100.0 | % | |||||
Cost of goods sold | 81,501 | 83.7 | 85,008 | 82.1 | |||||||||
Gross profit | 15,898 | 16.3 | 18,521 | 17.9 | |||||||||
Selling and administrative expenses | 12,953 | 13.3 | 14,340 | 13.9 | |||||||||
Internal research and development expenses | 533 | 0.5 | 438 | 0.4 | |||||||||
Amortization of intangible assets | 2,191 | 2.3 | 2,459 | 2.4 | |||||||||
Restructuring charges | — | — | 2,360 | 2.3 | |||||||||
Reversal of accrued contingent consideration | — | — | (1,530 | ) | (1.5 | ) | |||||||
Operating income | 221 | 0.2 | 454 | 0.4 | |||||||||
Other expense, net | (1,078 | ) | (1.1 | ) | (866 | ) | (0.8 | ) | |||||
Income (loss) before income taxes | (857 | ) | (0.9 | ) | (412 | ) | (0.4 | ) | |||||
Income taxes | 50 | — | (680 | ) | (0.7 | ) | |||||||
Net income (loss) | $ | (907 | ) | (0.9 | )% | $ | 268 | 0.3 | % |
For the Second Quarter of Fiscal Years | |||||||||||||||||
2017 | % of Sales | 2016 | % of Sales | $ Chg | |||||||||||||
Gross sales | $ | 67,382 | 100.0 | % | $ | 67,586 | 100.0 | % | $ | (204 | ) | ||||||
Intercompany sales | (2,333 | ) | (3.5 | ) | (4,640 | ) | (6.9 | ) | 2,307 | ||||||||
Net sales | 65,049 | 96.5 | 62,946 | 93.1 | 2,103 | ||||||||||||
Gross profit | 8,357 | 12.4 | 6,989 | 10.3 | 1,368 | ||||||||||||
Selling and administrative expenses | 5,561 | 8.2 | 6,646 | 9.8 | (1,085 | ) | |||||||||||
Amortization of intangible assets | 1,810 | 2.7 | 2,037 | 3.0 | (227 | ) | |||||||||||
Restructuring charges | — | — | 2,360 | 3.5 | (2,360 | ) | |||||||||||
Reversal of accrued contingent consideration | — | — | (1,530 | ) | (2.3 | ) | 1,530 | ||||||||||
Operating income (loss) | $ | 986 | 1.5 | % | $ | (2,524 | ) | (3.7 | )% | $ | 3,510 |
For the Second Quarter of Fiscal Years | |||||||||||||||||
2017 | % of Sales | 2016 | % of Sales | $ Chg | |||||||||||||
Gross sales | $ | 32,350 | 100.0 | % | $ | 40,642 | 100.0 | % | $ | (8,292 | ) | ||||||
Intercompany sales | — | — | (59 | ) | (0.2 | ) | 59 | ||||||||||
Net sales | 32,350 | 100.0 | 40,583 | 99.8 | (8,233 | ) | |||||||||||
Gross profit | 7,541 | 23.3 | 11,532 | 28.4 | (3,991 | ) | |||||||||||
Selling and administrative expenses | 3,545 | 11.0 | 3,715 | 9.1 | (170 | ) | |||||||||||
Internal research and development expenses | 533 | 1.6 | 438 | 1.1 | 95 | ||||||||||||
Amortization of intangible assets | 381 | 1.2 | 422 | 1.0 | (41 | ) | |||||||||||
Operating income | $ | 3,082 | 9.5 | % | $ | 6,957 | 17.1 | % | $ | (3,875 | ) |
For the Second Quarter of Fiscal Years | |||||||||||
2017 | 2016 | $ Chg | |||||||||
Intercompany sales elimination | $ | (2,333 | ) | $ | (4,699 | ) | $ | 2,366 | |||
Selling and administrative expenses unallocated | 3,847 | 3,979 | (132 | ) |
For the First Two Quarters of Fiscal Years | |||||||||||||
2017 | % of Sales | 2016 | % of Sales | ||||||||||
Net sales | $ | 197,766 | 100.0 | % | $ | 210,220 | 100.0 | % | |||||
Cost of goods sold | 164,583 | 83.2 | 170,561 | 81.1 | |||||||||
Gross profit | 33,183 | 16.8 | 39,659 | 18.9 | |||||||||
Selling and administrative expenses | 26,336 | 13.3 | 27,964 | 13.3 | |||||||||
Internal research and development expenses | 884 | 0.5 | 951 | 0.5 | |||||||||
Amortization of intangible assets | 4,410 | 2.2 | 4,962 | 2.3 | |||||||||
Restructuring charges | — | — | 2,360 | 1.1 | |||||||||
Reversal of accrued contingent consideration | — | — | (1,530 | ) | (0.7 | ) | |||||||
Operating income | 1,553 | 0.8 | 4,952 | 2.4 | |||||||||
Other expense, net | (2,243 | ) | (1.1 | ) | (1,681 | ) | (0.8 | ) | |||||
Income (loss) before income taxes | (690 | ) | (0.3 | ) | 3,271 | 1.6 | |||||||
Income taxes | 109 | 0.1 | 609 | 0.3 | |||||||||
Net (loss) income | $ | (799 | ) | (0.4 | )% | $ | 2,662 | 1.3 | % |
For the First Two Quarters of Fiscal Years | |||||||||||||||||
2017 | % of Sales | 2016 | % of Sales | $ Chg | |||||||||||||
Gross sales | $ | 132,384 | 100.0 | % | $ | 141,543 | 100.0 | % | $ | (9,159 | ) | ||||||
Intercompany sales | (4,533 | ) | (3.4 | ) | (9,869 | ) | (7.0 | ) | 5,336 | ||||||||
Net sales | 127,851 | 96.6 | 131,674 | 93.0 | (3,823 | ) | |||||||||||
Gross profit | 15,651 | 11.8 | 17,285 | 12.2 | (1,634 | ) | |||||||||||
Selling and administrative expenses | 11,537 | 8.7 | 12,527 | 8.9 | (990 | ) | |||||||||||
Amortization of intangible assets | 3,642 | 2.7 | 4,111 | 2.9 | (469 | ) | |||||||||||
Restructuring charges | — | — | 2,360 | 1.6 | (2,360 | ) | |||||||||||
Reversal of accrued contingent consideration | — | — | (1,530 | ) | (1.1 | ) | 1,530 | ||||||||||
Operating income (loss) | $ | 472 | 0.4 | % | $ | (183 | ) | (0.1 | )% | $ | 655 |
For the First Two Quarters of Fiscal Years | |||||||||||||||||
2017 | % of Sales | 2016 | % of Sales | $ Chg | |||||||||||||
Gross sales | $ | 69,942 | 100.0 | % | $ | 78,731 | 100.0 | % | $ | (8,789 | ) | ||||||
Intercompany sales | (27 | ) | — | (185 | ) | (0.2 | ) | 158 | |||||||||
Net sales | 69,915 | 100.0 | 78,546 | 99.8 | (8,631 | ) | |||||||||||
Gross profit | 17,532 | 25.1 | 22,374 | 28.4 | (4,842 | ) | |||||||||||
Selling and administrative expenses | 7,369 | 10.5 | 7,312 | 9.3 | 57 | ||||||||||||
Internal research and development expenses | 884 | 1.3 | 951 | 1.2 | (67 | ) | |||||||||||
Amortization of intangible assets | 768 | 1.1 | 851 | 1.1 | (83 | ) | |||||||||||
Operating income | $ | 8,511 | 12.2 | % | $ | 13,260 | 16.8 | % | $ | (4,749 | ) |
For the First Two Quarters of Fiscal Years | |||||||||||
2017 | 2016 | $ Chg | |||||||||
Intercompany sales elimination | $ | (4,560 | ) | $ | (10,054 | ) | $ | 5,494 | |||
Selling and administrative expenses unallocated | 7,430 | 8,125 | (695 | ) |
For the First Two Quarters of Fiscal Years | |||||||
CASH FLOWS | 2017 | 2016 | |||||
Operating activities, excluding net changes in working capital | $ | 8,158 | $ | 9,985 | |||
Net changes in working capital | 6,513 | 3,124 | |||||
Operating activities | 14,671 | 13,109 | |||||
Investing activity | (2,570 | ) | (2,513 | ) | |||
Financing activities | (11,644 | ) | (20,680 | ) |
Exhibit Number | Description | ||
3.1 | Second Amended Articles of Incorporation of the Registrant, incorporated herein by reference from the Registrant’s Proxy Statement on Form DEF 14A filed with the SEC on September 21, 2010. | ||
3.2 | Amended and Restated Code of Regulations of the Registrant, incorporated herein by reference from Exhibit 3.2 to the Registrant’s Current Report on Form 8-K filed with the SEC on May 5, 2015. | ||
31.1* | Interim 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* | Interim 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. | ||
101.INS* | XBRL Instance Document | ||
101.SCH* | XBRL Taxonomy Extension Schema Document | ||
101.CAL* | XBRL Taxonomy Calculation Linkbase Document | ||
101.DEF* | XBRL Taxonomy Extension Definition Linkbase Document | ||
101.LAB* | XBRL Taxonomy Extension Label Linkbase Document | ||
101.PRE* | XBRL Taxonomy Extension Presentation Linkbase Document |
* | Filed herewith. |
Sparton Corporation | |||
Date: February 7, 2017 | By: | /s/ JOSEPH J. HARTNETT | |
Joseph J. Hartnett | |||
Interim President and Chief Executive Officer | |||
(Principal Executive Officer) | |||
Date: February 7, 2017 | By: | /s/ JOSEPH G. MCCORMACK | |
Joseph G. McCormack | |||
Senior Vice President and Chief Financial Officer | |||
(Principal Financial Officer) |
1. | I have reviewed this Quarterly Report on Form 10-Q of Sparton Corporation; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ JOSEPH J. HARTNETT |
Joseph J. Hartnett, Interim President and Chief Executive Officer |
1. | I have reviewed this Quarterly Report on Form 10-Q of Sparton Corporation; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ JOSEPH G. MCCORMACK |
Joseph G. McCormack, Senior Vice President and Chief Financial Officer |
1 | The Periodic Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2 | The information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: February 7, 2017 | /s/ JOSEPH J. HARTNETT | |
Joseph J. Hartnett, Interim President and Chief Executive Officer | ||
Date: February 7, 2017 | /s/ JOSEPH G. MCCORMACK | |
Joseph G. McCormack, Senior Vice President and Chief Financial Officer |
Document and Entity Information - shares |
6 Months Ended | |
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Jan. 01, 2017 |
Feb. 03, 2017 |
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Document And Entity Information [Abstract] | ||
Entity Registrant Name | Sparton Corp. | |
Entity Central Index Key | 0000092679 | |
Current Fiscal Year End Date | --07-02 | |
Entity Filer Category | Accelerated Filer | |
Document Type | 10-Q | |
Document Period End Date | Jan. 01, 2017 | |
Document Fiscal Year Focus | 2017 | |
Document Fiscal Period Focus | Q2 | |
Amendment Flag | false | |
Entity Common Stock, Shares Outstanding | 9,835,635 |
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands |
Jan. 01, 2017 |
Jul. 03, 2016 |
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Statement of Financial Position [Abstract] | ||
Accounts receivable, allowance for doubtful accounts | $ 289 | $ 407 |
Preferred stock, shares authorized | 200,000 | 200,000 |
Preferred stock, shares issued | 0 | 0 |
Common stock, par value (usd per share) | $ 1.25 | $ 1.25 |
Common stock, shares authorized | 15,000,000 | 15,000,000 |
Common stock, shares issued | 9,835,635 | 9,845,469 |
Common stock, shares outstanding | 9,835,635 | 9,845,469 |
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
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Jan. 01, 2017 |
Dec. 27, 2015 |
Jan. 01, 2017 |
Dec. 27, 2015 |
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Income Statement [Abstract] | ||||
Net sales | $ 97,399 | $ 103,529 | $ 197,766 | $ 210,220 |
Cost of goods sold | 81,501 | 85,008 | 164,583 | 170,561 |
Gross profit | 15,898 | 18,521 | 33,183 | 39,659 |
Operating Expense: | ||||
Selling and administrative expenses | 12,953 | 14,340 | 26,336 | 27,964 |
Internal research and development expenses | 533 | 438 | 884 | 951 |
Amortization of intangible assets | 2,191 | 2,459 | 4,410 | 4,962 |
Restructuring charges | 0 | 2,360 | 0 | 2,360 |
Reversal of accrued contingent consideration | 0 | (1,530) | 0 | (1,530) |
Total operating expense | 15,677 | 18,067 | 31,630 | 34,707 |
Operating income | 221 | 454 | 1,553 | 4,952 |
Other income (expense) | ||||
Interest expense, net | (1,067) | (900) | (2,252) | (1,783) |
Other, net | (11) | 34 | 9 | 102 |
Total other expense, net | (1,078) | (866) | (2,243) | (1,681) |
Income (loss) before income taxes | (857) | (412) | (690) | 3,271 |
Income taxes | 50 | (680) | 109 | 609 |
Net income (loss) | $ (907) | $ 268 | $ (799) | $ 2,662 |
Income (loss) per share of common stock: | ||||
Basic (in dollars per share) | $ (0.09) | $ 0.03 | $ (0.08) | $ 0.27 |
Diluted (in dollars per share) | $ (0.09) | $ 0.03 | $ (0.08) | $ 0.27 |
Weighted average shares of common stock outstanding: | ||||
Basic (in shares) | 9,802,664 | 9,783,237 | 9,793,046 | 9,781,884 |
Diluted (in shares) | 9,802,664 | 9,783,237 | 9,793,046 | 9,781,884 |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jan. 01, 2017 |
Dec. 27, 2015 |
Jan. 01, 2017 |
Dec. 27, 2015 |
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Statement of Comprehensive Income [Abstract] | ||||
Net income (loss) | $ (907) | $ 268 | $ (799) | $ 2,662 |
Other comprehensive income, net: | ||||
Pension amortization of unrecognized net actuarial loss, net of tax | 55 | 40 | 90 | 47 |
Unrecognized loss on marketable equity securities, net of tax | 0 | (102) | 0 | (173) |
Other comprehensive income (loss), net | 55 | (62) | 90 | (126) |
Comprehensive income (loss) | $ (852) | $ 206 | $ (709) | $ 2,536 |
Business and Basis of Presentation |
6 Months Ended |
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Jan. 01, 2017 | |
Accounting Policies [Abstract] | |
Business and Basis of Presentation | Business and Basis of Presentation The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Certain reclassifications of prior year amounts have been made to conform to the current year presentation. Subsequent events have been evaluated through the date these financial statements were issued. Additionally, the consolidated financial statements should be read in conjunction with Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations, included in this Quarterly Report on Form 10-Q. Operating results for the quarter and two quarters ended January 1, 2017 are not necessarily indicative of the results that may be expected for the year ending July 2, 2017. The consolidated balance sheet at July 3, 2016 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 ("GAAP") 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 fiscal year ended July 3, 2016. The Company reports fiscal years on a 52-53 week year (5-4-4 basis) ending on the Sunday closest to June 30. On April 27, 2016, Sparton announced that its Board of Directors had authorized a process to identify parties interested in acquiring the Company. This process is ongoing and there can be no assurance that this process will result in a consummation of any transaction. The Company cannot currently determine if the process will ultimately conclude in a sale of all or some of its assets. As such, no adjustments have been made to the Company’s carrying value of its assets or liabilities as a result of the contemplated sale. |
Inventories and Cost of Contracts in Progress, net |
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Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventories and Cost of Contracts in Progress, net | Inventories and Cost of Contracts in Progress, net The following are the major classifications of inventory, net of interim billings:
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Property, Plant and Equipment, net |
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Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment, Net | Property, Plant and Equipment, net Property, plant and equipment, net consists of the following:
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Other Intangible Assets |
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Goodwill and Intangible Assets Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Intangible Assets | Other Intangible Assets The components of other intangible assets, net consist of the following:
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Debt |
6 Months Ended |
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Jan. 01, 2017 | |
Debt Disclosure [Abstract] | |
Debt | Debt On September 11, 2014, the Company entered into a revolving line-of-credit facility with a group of banks (the “Credit Facility”). The Company amended the Credit Facility on April 13, 2015 and again on June 27, 2016. As of the June 27, 2016 amendment, the Credit Agreement permits the Company to borrow up to $175,000, and the Company has the right to request an increase of the facility in an amount of up to $50,000, subject to restrictions. The facility is secured by substantially all assets of the Company and its subsidiaries and expires on September 11, 2019. As of January 1, 2017, the Company had $84,163 available under the facility, which included letters of credit of $4,562 and capital leases of $569. The letters of credit balance includes a $3,114 standby letter of credit issued during the second quarter of fiscal 2017 to support environmental remediation obligations. (See Note 8, Commitments and Contingencies, of the “Notes to Unaudited Consolidated Financial Statements” in this Quarterly Report on Form 10-Q for further information). All borrowings under the Facility are classified as long-term. Outstanding borrowings under the Credit Facility will bear interest, at the Company’s option, at either LIBOR, fixed for interest periods of one, two, three or six month periods, plus 1.00% to 3.00%, or at the bank’s base rate, as defined, plus 0.00% to 2.00%, based upon the Company’s Total Funded Debt/EBITDA Ratio, as defined. The Company is also required to pay commitment fees on unused portions of the Credit Facility ranging from 0.20% to 0.50%, based on the Company’s Total Funded Debt/EBITDA Ratio, as defined. The Credit Facility includes representations, covenants and events of default that are customary for financing transactions of this nature. The effective interest rate on outstanding borrowings under the Credit Facility was 3.36% at January 1, 2017. As a condition of the Credit Facility, the Company is subject to certain customary covenants, with which it was in compliance at January 1, 2017. |
Income Taxes |
6 Months Ended |
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Jan. 01, 2017 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes The Company recognized a discrete income tax expense of $350 in the second quarter of fiscal year 2017 for a tax event at its Vietnam subsidiary and a discrete income tax benefit of $536 in the second quarter of fiscal year 2016 as a result of the reversal of previously accrued contingent purchase price consideration liability. The Company's effective income tax rate for interim periods was determined based on the Company's estimated annual effective tax rate for the applicable year using the federal statutory income tax rate, permanent tax differences, foreign income taxes and state income taxes. Excluding the discrete tax events described above, the Company's estimated annual effective rate for the second quarters and first two quarters of fiscal year 2017 and 2016 was determined to be approximately 35%. |
Defined Benefit Pension Plan |
6 Months Ended |
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Jan. 01, 2017 | |
Compensation and Retirement Disclosure [Abstract] | |
Defined Benefit Pension Plan | Defined Benefit Pension Plan The Company has a frozen defined benefit pension plan. The Company recorded net periodic pension expense of $24 and $12 for the second quarter of fiscal year 2017 and 2016, respectively. Net periodic pension expense was $37 for the first two quarters of fiscal year 2017 and net periodic pension income was $23 for the first two quarters of 2016, respectively. No contributions were made to the pension plan during the first two quarters of fiscal years 2017 and 2016, respectively. |
Commitments and Contingencies |
6 Months Ended |
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Jan. 01, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies From time to time, the Company is involved in various legal proceedings relating to claims arising in the ordinary course of business. The Company is not currently a party to any such legal proceedings, the adverse outcome of which, individually or in the aggregate, is expected to have a material adverse effect on the Company's financial condition or results of operations. Additionally, the Company believes it has sufficient insurance coverage to effectively mitigate any litigation exposure. The Company is a party to an environmental remediation matter in Albuquerque, New Mexico ("Coors Road"). As of January 1, 2017 and July 3, 2016, Sparton had accrued $6,192 and $6,701, respectively, as its estimate of the remaining minimum future discounted financial liability regarding this matter, of which $492 and $584, respectively, was classified as a current liability and included on the balance sheets in other accrued expenses. As of January 1, 2017 and July 3, 2016, the Company had accrued $1,379 and $1,606, respectively, in relation to expected reimbursements from the Department of Energy, which are included in other non-current assets on the balance sheets and are considered collectible. On October 3, 2016, the Company established the Sparton Corporation Standby Financial Assurance Trust and issued a standby letter of credit in the amount of $3,114 related to the Coors Road environmental remediation liability. The trust was established to meet the United States Environmental Protection Agency’s financial assurance requirements. As a result of the goodwill write-off of $64,174 in the prior fiscal year, the Company was not in compliance with these requirements. The release of such funds would only occur should the Company not meet its financial remediation requirements. The trust will remain in place until the Company is in compliance with the financial requirements. Upon successful compliance with the financial requirements, the trust will be dissolved and the letter of credit canceled. See the Company’s Annual Report on Form 10-K for the fiscal year ended July 3, 2016 for further information. The Company is subject to audits by certain federal government agencies, including the Defense Contract Audit Agency and the Defense Contract Management Agency. The agencies audit and evaluate government contracts and government contractors’ administrative processes and systems. These agencies review the Company’s performance on contracts, pricing practices, cost structure, financial capability and compliance with applicable laws, regulations and standards. They also review the adequacy of the Company’s internal control systems and policies, including the Company’s purchasing, accounting, estimating, compensation and management information processes and systems. The Company works closely with these agencies to ensure compliance. From time to time, the Company is notified of claims related to noncompliance arising from the audits performed by agencies. Such claims have historically been subject to actions of remediation and/or financial claims that are typically subject to negotiated settlements. The Company believes that it has appropriate reserves established for outstanding issues and is not aware of any other issues of noncompliance that would have a material effect on the Company’s financial position or results of operations. |
Stock-Based Compensation |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-Based Compensation | Stock-Based Compensation The Company has a long-term incentive plan to offer incentive and non-qualified stock options, stock appreciation rights, restricted stock or restricted stock units, performance awards and other stock-based awards, including grants of shares under the Sparton Corporation 2010 Long-Term Incentive Plan (the “2010 Plan”). The following table shows stock-based compensation expense by type of share-based award included in the consolidated statements of income:
No stock options were granted during the first or second quarters of fiscal year 2017. During the first and second quarters of fiscal year 2016, the Company awarded an aggregate of 129,798 stock options to certain members of management with an average exercise price of $23.02, of which 5,076 stock options were granted during the second quarter of fiscal year 2016. Unrestricted shares of 16,905 and 14,234 were granted to the Company's board of directors in the second quarters of fiscal year 2017 and 2016, respectively, as part of their annual compensation. The following is a summary of activity for the first two quarters of fiscal year 2017 related to the 2010 Plan:
As of January 1, 2017, 33,829 stock options were exercisable, of which 356 and 20,011 vested in the second quarter and first two quarters of fiscal year 2017, respectively. |
Earnings Per Share Data |
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Earnings Per Share Data | Earnings Per Share Data The following table sets forth the computation of basic and diluted net income (loss) per share:
The number of shares excluded from the calculation of diluted net income (loss) per share because the shares were either contingently issuable or their inclusion would be anti-dilutive was 283,831 and 463,031 for the second quarter and first two quarters of fiscal years 2017 and 2016, respectively. |
Business Segments |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Segments | Business Segments The Company has identified two reportable segments; Manufacturing & Design Services ("MDS") and Engineered Components & Products ("ECP"). The Company uses an internal management reporting system, which provides important financial data to evaluate performance and allocate the Company's resources on a segment basis. The Company’s Chief Operating Decision Maker assesses segment performance and allocates resources to each segment individually. Operating results and certain other financial information about the Company’s two reportable segments for the second quarters and first two quarters of fiscal years 2017 and 2016 were as follows:
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New Accounting Standards |
6 Months Ended |
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Jan. 01, 2017 | |
Accounting Policies [Abstract] | |
New Accounting Standards | New Accounting Standards In May 2014, the FASB issued Accounting Standards Update No. 2014-09 ("ASU 2014-09"), Revenue from Contracts with Customers, which amends guidance for revenue recognition. Under the new standard, revenue will be recognized when control of the promised goods or services is transferred to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods and services. The standard creates a five-step model that will generally require companies to use more judgment and make more estimates than under current guidance when considering the terms of contracts along with all relevant facts and circumstances. These include the identification of customer contracts and separating performance obligations, the determination of transaction price that potentially includes an estimate of variable consideration, allocating the transaction price to each separate performance obligation, and recognizing revenue in line with the pattern of transfer. In August 2015, the FASB issued an amendment to defer the effective date for all entities by one year. The new standard will become effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Early adoption is permitted as of annual reporting periods beginning after December 15, 2016. Companies have the option of using either a full or modified retrospective approach in applying this standard. During fiscal 2016, the FASB issued three additional updates which further clarify the guidance provided in ASU 2014-09. The Company is currently in the process of evaluating the impact of adoption on its consolidated financial statements. In July 2015, the FASB issued Accounting Standards Update No. 2015-11 ("ASU 2015-11"), Simplifying the Measurement of Inventory. ASU 2015-11 clarifies that inventory should be held at the lower of cost or net realizable value. Net realizable value is defined as the estimated selling price, less the estimated costs to complete, dispose and transport such inventory. ASU 2015-11 will be effective for fiscal years and interim periods beginning after December 15, 2016. ASU 2015-11 is required to be applied prospectively and early adoption is permitted. The Company is currently in the process of evaluating the impact of adoption on its consolidated financial statements. In February 2016, the FASB issued Accounting Standards Update No. 2016-02 (“ASU 2016-02”), Leases (Topic 842). ASU 2016-02 establishes a right-of-use (ROU) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. A modified retrospective transition approach is required for capital leases and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company is currently in the process of evaluating the impact of adoption on its consolidated financial statements. In March 2016, the FASB issued Accounting Standards Update No. 2016-09 ("ASU 2016-09"), Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. ASU 2016-09 will directly impact the tax administration of equity plans. ASU 2016-09 is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. Early adoption is permitted and any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. The Company has elected to early adopt ASU 2016-09 as of July 4, 2016 on a prospective basis. There was no impact on the Company's financial statements as a result of early adoption in the first quarter of fiscal year 2017. In June 2016, the FASB issued Accounting Standards Update No. 2016-13 ("ASU 2016-13"), Financial Instruments—Credit Losses (Topic 326). ASU 2016-13 requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. ASU 2016-13 is effective for fiscal years beginning after December 15, 2019 and early adoption is permitted. The Company is currently in the process of evaluating the impact of adoption on its consolidated financial statements. In August 2016, the FASB issued Accounting Standards Update No. 2016-15 ("ASU 2016-15"), Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. ASU 2016-15 will make eight targeted changes to how cash receipts and cash payments are presented and classified in the statement of cash flows. ASU 2016-15 is effective for fiscal years beginning after December 15, 2017. The new standard will require adoption on a retrospective basis unless it is impracticable to apply, in which case it would be required to apply the amendments prospectively as of the earliest date practicable. The Company is currently in the process of evaluating the impact of adoption on its consolidated financial statements. In October 2016, the FASB issued ASU 2016-16 ("ASU 2016-16"), Income Taxes - Intra-Entity Transfers of Assets Other Than Inventory, which requires entities to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. ASU 2016-16 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted as of the beginning of a fiscal year. ASU 2016-16 must be adopted using a modified retrospective transition method which is a cumulative-effective adjustment to retained earnings as of the beginning of the first effective reporting period. The Company is currently in the process of evaluating the impact of adoption on its consolidated financial statements. In November 2016, The FASB issued ASU No. 2016-18 ("ASU 2016-18"), Restricted Cash, which addresses classification and presentation of changes in restricted cash on the statement of cash flows. ASU 2016-18 requires an entity’s reconciliation of the beginning-of-period and end-of-period total amounts shown on the statement of cash flows to include in cash and cash equivalents amounts generally described as restricted cash and restricted cash equivalents. ASU 2016-18 does not define restricted cash or restricted cash equivalents, but an entity will need to disclose the nature of the restrictions. ASU 2016-18 is effective for public business entities for annual and interim periods in fiscal years beginning after December 15, 2017. Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, adjustments should be reflected at the beginning of the fiscal year that includes that interim period. Entities should apply this ASU using a retrospective transition method to each period presented. The Company is currently in the process of evaluating the impact of adoption on its consolidated financial statements. |
Business and Basis of Presentation (Policies) |
6 Months Ended |
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Jan. 01, 2017 | |
Accounting Policies [Abstract] | |
Business and Basis of Presentation | Business and Basis of Presentation The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Certain reclassifications of prior year amounts have been made to conform to the current year presentation. Subsequent events have been evaluated through the date these financial statements were issued. Additionally, the consolidated financial statements should be read in conjunction with Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations, included in this Quarterly Report on Form 10-Q. Operating results for the quarter and two quarters ended January 1, 2017 are not necessarily indicative of the results that may be expected for the year ending July 2, 2017. The consolidated balance sheet at July 3, 2016 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 ("GAAP") 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 fiscal year ended July 3, 2016. The Company reports fiscal years on a 52-53 week year (5-4-4 basis) ending on the Sunday closest to June 30. On April 27, 2016, Sparton announced that its Board of Directors had authorized a process to identify parties interested in acquiring the Company. This process is ongoing and there can be no assurance that this process will result in a consummation of any transaction. The Company cannot currently determine if the process will ultimately conclude in a sale of all or some of its assets. As such, no adjustments have been made to the Company’s carrying value of its assets or liabilities as a result of the contemplated sale. |
New Accounting Standards | New Accounting Standards In May 2014, the FASB issued Accounting Standards Update No. 2014-09 ("ASU 2014-09"), Revenue from Contracts with Customers, which amends guidance for revenue recognition. Under the new standard, revenue will be recognized when control of the promised goods or services is transferred to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods and services. The standard creates a five-step model that will generally require companies to use more judgment and make more estimates than under current guidance when considering the terms of contracts along with all relevant facts and circumstances. These include the identification of customer contracts and separating performance obligations, the determination of transaction price that potentially includes an estimate of variable consideration, allocating the transaction price to each separate performance obligation, and recognizing revenue in line with the pattern of transfer. In August 2015, the FASB issued an amendment to defer the effective date for all entities by one year. The new standard will become effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Early adoption is permitted as of annual reporting periods beginning after December 15, 2016. Companies have the option of using either a full or modified retrospective approach in applying this standard. During fiscal 2016, the FASB issued three additional updates which further clarify the guidance provided in ASU 2014-09. The Company is currently in the process of evaluating the impact of adoption on its consolidated financial statements. In July 2015, the FASB issued Accounting Standards Update No. 2015-11 ("ASU 2015-11"), Simplifying the Measurement of Inventory. ASU 2015-11 clarifies that inventory should be held at the lower of cost or net realizable value. Net realizable value is defined as the estimated selling price, less the estimated costs to complete, dispose and transport such inventory. ASU 2015-11 will be effective for fiscal years and interim periods beginning after December 15, 2016. ASU 2015-11 is required to be applied prospectively and early adoption is permitted. The Company is currently in the process of evaluating the impact of adoption on its consolidated financial statements. In February 2016, the FASB issued Accounting Standards Update No. 2016-02 (“ASU 2016-02”), Leases (Topic 842). ASU 2016-02 establishes a right-of-use (ROU) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. A modified retrospective transition approach is required for capital leases and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company is currently in the process of evaluating the impact of adoption on its consolidated financial statements. In March 2016, the FASB issued Accounting Standards Update No. 2016-09 ("ASU 2016-09"), Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. ASU 2016-09 will directly impact the tax administration of equity plans. ASU 2016-09 is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. Early adoption is permitted and any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. The Company has elected to early adopt ASU 2016-09 as of July 4, 2016 on a prospective basis. There was no impact on the Company's financial statements as a result of early adoption in the first quarter of fiscal year 2017. In June 2016, the FASB issued Accounting Standards Update No. 2016-13 ("ASU 2016-13"), Financial Instruments—Credit Losses (Topic 326). ASU 2016-13 requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. ASU 2016-13 is effective for fiscal years beginning after December 15, 2019 and early adoption is permitted. The Company is currently in the process of evaluating the impact of adoption on its consolidated financial statements. In August 2016, the FASB issued Accounting Standards Update No. 2016-15 ("ASU 2016-15"), Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. ASU 2016-15 will make eight targeted changes to how cash receipts and cash payments are presented and classified in the statement of cash flows. ASU 2016-15 is effective for fiscal years beginning after December 15, 2017. The new standard will require adoption on a retrospective basis unless it is impracticable to apply, in which case it would be required to apply the amendments prospectively as of the earliest date practicable. The Company is currently in the process of evaluating the impact of adoption on its consolidated financial statements. In October 2016, the FASB issued ASU 2016-16 ("ASU 2016-16"), Income Taxes - Intra-Entity Transfers of Assets Other Than Inventory, which requires entities to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. ASU 2016-16 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted as of the beginning of a fiscal year. ASU 2016-16 must be adopted using a modified retrospective transition method which is a cumulative-effective adjustment to retained earnings as of the beginning of the first effective reporting period. The Company is currently in the process of evaluating the impact of adoption on its consolidated financial statements. In November 2016, The FASB issued ASU No. 2016-18 ("ASU 2016-18"), Restricted Cash, which addresses classification and presentation of changes in restricted cash on the statement of cash flows. ASU 2016-18 requires an entity’s reconciliation of the beginning-of-period and end-of-period total amounts shown on the statement of cash flows to include in cash and cash equivalents amounts generally described as restricted cash and restricted cash equivalents. ASU 2016-18 does not define restricted cash or restricted cash equivalents, but an entity will need to disclose the nature of the restrictions. ASU 2016-18 is effective for public business entities for annual and interim periods in fiscal years beginning after December 15, 2017. Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, adjustments should be reflected at the beginning of the fiscal year that includes that interim period. Entities should apply this ASU using a retrospective transition method to each period presented. The Company is currently in the process of evaluating the impact of adoption on its consolidated financial statements. |
Inventories and Cost of Contracts in Progress, net (Tables) |
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Jan. 01, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Classifications of Inventory, Net of Interim Billings | The following are the major classifications of inventory, net of interim billings:
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Property, Plant and Equipment, net (Tables) |
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Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment, net | Property, plant and equipment, net consists of the following:
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Other Intangible Assets (Tables) |
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Goodwill and Intangible Assets Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Intangible Assets, Net | The components of other intangible assets, net consist of the following:
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Stock-Based Compensation (Tables) |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-Based Compensation Expense by Type of Share-Based Award | The following table shows stock-based compensation expense by type of share-based award included in the consolidated statements of income:
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Summary of Options Outstanding and Exercisable | The following is a summary of activity for the first two quarters of fiscal year 2017 related to the 2010 Plan:
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Earnings Per Share Data (Tables) |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share | The following table sets forth the computation of basic and diluted net income (loss) per share:
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Business Segments (Tables) |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Operating Results and Other Financial Information by Segment | Operating results and certain other financial information about the Company’s two reportable segments for the second quarters and first two quarters of fiscal years 2017 and 2016 were as follows:
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Inventories and Cost of Contracts in Progress, net (Detail) - USD ($) $ in Thousands |
Jan. 01, 2017 |
Jul. 03, 2016 |
---|---|---|
Inventory Disclosure [Abstract] | ||
Raw materials | $ 34,740 | $ 40,914 |
Work in process | 18,990 | 23,626 |
Finished goods | 17,497 | 22,294 |
Total inventory and cost of contracts in progress, gross | 71,227 | 86,834 |
Inventory to which the U.S. government has title due to interim billings | (11,356) | (8,963) |
Total inventory and cost of contracts in progress, net | $ 59,871 | $ 77,871 |
Property, Plant and Equipment, net (Detail) - USD ($) $ in Thousands |
Jan. 01, 2017 |
Jul. 03, 2016 |
---|---|---|
Property, Plant and Equipment [Line Items] | ||
Total property, plant and equipment | $ 76,120 | $ 73,595 |
Less accumulated depreciation | (43,219) | (40,275) |
Total property, plant and equipment, net | 32,901 | 33,320 |
Land and land improvements | ||
Property, Plant and Equipment [Line Items] | ||
Total property, plant and equipment | 1,429 | 1,429 |
Buildings and building improvements | ||
Property, Plant and Equipment [Line Items] | ||
Total property, plant and equipment | 27,693 | 27,660 |
Machinery and equipment | ||
Property, Plant and Equipment [Line Items] | ||
Total property, plant and equipment | 43,956 | 43,134 |
Construction in progress | ||
Property, Plant and Equipment [Line Items] | ||
Total property, plant and equipment | $ 3,042 | $ 1,372 |
Income Taxes (Detail) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jan. 01, 2017 |
Dec. 27, 2015 |
Jan. 01, 2017 |
Dec. 27, 2015 |
|
Income Tax Disclosure [Abstract] | ||||
Income tax expense adjustment | $ 350 | $ (536) | ||
Effective income tax rate reconciliation percent | 35.00% | 35.00% | 35.00% | 35.00% |
Defined Benefit Pension Plan (Detail) - USD ($) |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jan. 01, 2017 |
Dec. 27, 2015 |
Jan. 01, 2017 |
Dec. 27, 2015 |
|
Compensation and Retirement Disclosure [Abstract] | ||||
Periodic pension income (expense) | $ 24,000 | $ 12,000 | $ 37,000 | $ (23,000) |
Pension plan contributions | $ 0 | $ 0 |
Commitments and Contingencies (Detail) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Jul. 03, 2016 |
Jan. 01, 2017 |
Oct. 03, 2016 |
|
Loss Contingencies [Line Items] | |||
Environmental remediation accrual | $ 6,701 | $ 6,192 | |
Amount of financial liability included in other accrued expenses of current liability | 584 | 492 | |
Expected reimbursement accrual | 1,606 | 1,379 | |
Goodwill write-off | $ 64,174 | ||
Financial Standby Letter of Credit | |||
Loss Contingencies [Line Items] | |||
Environmental remediation accrual | $ 3,114 | $ 3,114 |
Stock-Based Compensation - Expense by Type of Share-Based Award (Detail) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jan. 01, 2017 |
Dec. 27, 2015 |
Jan. 01, 2017 |
Dec. 27, 2015 |
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Total stock-based compensation expense | $ 968 | $ 437 | $ 1,277 | $ 869 |
Fair value expense of stock option awards | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Total stock-based compensation expense | 49 | 195 | 97 | 317 |
Restricted stock units | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Total stock-based compensation expense | 525 | 349 | 804 | 567 |
Restricted and unrestricted stock | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Total stock-based compensation expense | $ 394 | $ (107) | $ 376 | $ (15) |
Stock-Based Compensation - Additional Information (Detail) - $ / shares |
3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|
Jan. 01, 2017 |
Oct. 02, 2016 |
Dec. 27, 2015 |
Jan. 01, 2017 |
Dec. 27, 2015 |
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Options granted in period intrinsic value (in shares) | 0 | 0 | 0 | ||
Stock options exercisable (in shares) | 33,829 | 33,829 | |||
Number of shares vested (in shares) | 356 | 20,011 | |||
Management | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Options granted in period intrinsic value (in shares) | 5,076 | 129,798 | |||
Options granted in period (in dollars per share) | $ 23.02 | ||||
Director | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Options granted in period intrinsic value (in shares) | 16,905 | 14,234 |
Stock-Based Compensation - Summary of Options Outstanding and Exercisable (Detail) - shares |
3 Months Ended | 6 Months Ended | |
---|---|---|---|
Jan. 01, 2017 |
Oct. 02, 2016 |
Jan. 01, 2017 |
|
Stock Options | |||
Outstanding, beginning balance (in shares) | 115,415 | 115,415 | |
Granted (in shares) | 0 | 0 | 0 |
Forfeited (in shares) | (10,630) | ||
Outstanding, ending balance (in shares) | 104,785 | 104,785 | |
Restricted stock units | |||
Restricted Stock Units/Shares | |||
Outstanding, beginning balance (in shares) | 79,274 | 79,274 | |
Granted (in shares) | 79,889 | ||
Forfeited (in shares) | (6,029) | ||
Outstanding, ending balance (in shares) | 153,134 | 153,134 | |
Restricted shares | |||
Restricted Stock Units/Shares | |||
Outstanding, beginning balance (in shares) | 52,651 | 52,651 | |
Granted (in shares) | 0 | ||
Forfeited (in shares) | (26,739) | ||
Outstanding, ending balance (in shares) | 25,912 | 25,912 |
Earnings Per Share Data (Detail) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jan. 01, 2017 |
Dec. 27, 2015 |
Jan. 01, 2017 |
Dec. 27, 2015 |
|
Earnings Per Share [Abstract] | ||||
Net income (loss) | $ (907) | $ 268 | $ (799) | $ 2,662 |
Less net income allocated to contingently issuable participating securities | 0 | (3) | 0 | (28) |
Net income (loss) available to common shareholders | $ (907) | $ 265 | $ (799) | $ 2,634 |
Weighted average shares outstanding – Basic (in shares) | 9,802,664 | 9,783,237 | 9,793,046 | 9,781,884 |
Dilutive effect of stock options (in shares) | 0 | 0 | 0 | 0 |
Weighted average shares outstanding – Diluted (in shares) | 9,802,664 | 9,783,237 | 9,793,046 | 9,781,884 |
Income (loss) per share of common stock: | ||||
Net income per share: Basic (in dollars per share) | $ (0.09) | $ 0.03 | $ (0.08) | $ 0.27 |
Net income per share: Diluted (in dollars per share) | $ (0.09) | $ 0.03 | $ (0.08) | $ 0.27 |
Earnings Per Share Data - Additional Information (Detail) - shares |
6 Months Ended | |
---|---|---|
Jan. 01, 2017 |
Dec. 27, 2015 |
|
Earnings Per Share [Abstract] | ||
Number of shares excluded from computation (in shares) | 283,831 | 463,031 |
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