10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2004

or

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

For the transition period from                    to                   

Commission File number 1-1000

SPARTON CORPORATION

(Exact Name of Registrant as Specified in its Charter)

Ohio
(State or Other Jurisdiction of Incorporation or Organization)

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

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

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

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

Indicate by checkmark whether the registrant is an accelerated filer (as defined by Rule 12b-2 of the Exchange Act).

[  ] Yes [X] No

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

	Shares Outstanding at
Class of Common Stock	October 31, 2004
$1.25 Par Value	8,352,352

INDEX

Part I.
Financial Information

Item 1. Financial Statements
Condensed Consolidated Balance Sheets September 30, 2004 and June 30, 2004	3
Condensed Consolidated Statements of Operations Three-Month Periods ended September 30, 2004 and 2003	4
Condensed Consolidated Statements of Cash Flows Three-Month Periods ended September 30, 2004 and 2003	5
Notes to Condensed Consolidated Financial Statements	6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	11
Item 3. Qualitative and Quantitative Disclosures About Market Risk	16
Item 4. Controls and Procedures	16
Part II. Other Information
Item 1. Legal Proceedings	16
Item 4. Submission of Matters to a Vote of Security Holders	18
Item 6. Exhibits	18
Signatures	18
Exhibit 3.1 Amended Articles of Incorporation
Exhibit 3.2 Amended Code of Regulation
Exhibit 31.1 Chief Executive Officer Under Section 302
Exhibit 31.2 Chief Financial Officer Under Section 302
Exhibit 32.1 Certifications Under Section 1350

2

Item 1. Financial Statements

SPARTON CORPORATION AND SUBSIDIARIES

Condensed Consolidated Balance Sheets (Unaudited)

September 30, 2004 and June 30, 2004

	September 30		June 30
Assets
Current assets:
Cash and cash equivalents	$	15,014,317	$	10,820,461
Investment securities		18,675,642		18,641,792
Accounts receivable		19,492,454		21,267,459
Income taxes recoverable		—		559,706
Inventories and costs on contracts in progress		36,735,785		37,210,259
Prepaid expenses		2,627,928		2,859,016
Total current assets		92,546,126		91,358,693
Pension asset		5,316,951		5,448,968
Other assets		5,652,661		5,570,773
Property, plant and equipment, net		12,715,496		12,041,062
Total assets	$	116,231,234	$	114,419,496
Liabilities and Shareowners’ Equity
Current liabilities:
Accounts payable	$	8,946,250	$	10,052,854
Salaries and wages		3,097,341		3,387,490
Accrued health benefits		942,206		1,044,810
Other accrued liabilities		4,844,188		4,526,234
Income taxes payable		576,294		—
Total current liabilities		18,406,279		19,011,388
Environmental remediation - noncurrent portion		6,472,953		6,542,009
Shareowners’ equity:
Preferred stock, no par value; 200,000 shares authorized, none outstanding		—		—
Common stock, $1.25 par value; 15,000,000 shares authorized, 8,352,352 and 8,351,538 shares outstanding at September 30 and June 30, respectively		10,440,440		10,439,423
Capital in excess of par value		7,139,277		7,134,149
Accumulated other comprehensive income		128,528		62,368
Retained earnings		73,643,757		71,230,159
Total shareowners’ equity		91,352,002		88,866,099
Total liabilities and shareowners’ equity	$	116,231,234	$	114,419,496

See accompanying notes.

3

SPARTON CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Operations (Unaudited)

For the Three-Month Periods ended September 30, 2004 and 2003

	2004			2003
Net sales	$	45,188,315		$	36,424,801
Costs of goods sold		38,721,599			35,980,600
		6,466,716			444,201
Selling and administrative expenses:
Selling and administrative expenses		3,387,053			3,759,004
EPA related - net environmental remediation		84,000			74,000
		3,471,053			3,833,004
Operating income (loss)		2,995,663			(3,388,803	)
Other income (expense):
Interest and investment income		215,473			230,542
Equity income (loss) in investment		(20,000	)		21,000
Other - net		358,462			(69,228	)
		553,935			182,314
Income (loss) before income taxes		3,549,598			(3,206,489	)
Provision (credit) for income taxes		1,136,000			(1,026,000	)
Net income (loss)	$	2,413,598		$	(2,180,489	)
Basic and diluted earnings (loss) per share(1)	$	0.29		$	(0.26	)

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

See accompanying notes.

4

SPARTON CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (Unaudited)

For the Three-Month Periods ended September 30, 2004 and 2003

	2004			2003
Cash flows provided (used) by Operating Activities:
Net income (loss)	$	2,413,598		$	(2,180,489	)
Add (deduct) noncash items affecting operations:
Depreciation, amortization and accretion		388,557			365,273
Change in pension asset		132,017			32,008
Loss on sale of investment securities		5,244			13,880
Equity (income) loss on investment		20,000			(21,000	)
Other		—			54,050
Add (deduct) changes in operating assets and liabilities:
Accounts receivable		1,775,005			9,434,873
Income taxes recoverable		559,706			(616,557	)
Inventories and prepaid expenses		678,450			(3,313,134	)
Accounts payable, salaries and wages, accrued liabilities and income taxes		(674,165	)		(274,597	)
Net cash provided by operating activities		5,298,412			3,494,307
Cash flows provided (used) by Investing Activities:
Purchases of investment securities		(2,260,706	)		(908,720	)
Proceeds from sale of investment securities		2,294,884			400,000
Purchases of property, plant and equipment, net		(1,062,991	)		(343,538	)
Other, principally noncurrent other assets		(81,888	)		149,852
Net cash used by investing activities		(1,110,701	)		(702,406	)
Cash flows provided (used) by Financing Activities:
Proceeds from exercise of stock options		6,145			14,685
Increase in cash and cash equivalents		4,193,856			2,806,586
Cash and cash equivalents at beginning of period		10,820,461			10,562,222
Cash and cash equivalents at end of period	$	15,014,317		$	13,368,808
Supplemental disclosures of cash paid during the period:
Income taxes - - net	$	13,000		$	300,000

See accompanying notes.

5

SPARTON CORPORATION & SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

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

Basis of presentation — The accompanying unaudited Condensed Consolidated Financial Statements of Sparton Corporation and all active subsidiaries have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. All significant intercompany transactions and accounts have been eliminated. The Condensed Consolidated Balance Sheet at September 30, 2004, and the related Condensed Consolidated Statements of Operations and Cash Flows for the three-month periods ended September 30, 2004 and 2003, are unaudited, but include all adjustments (consisting of normal recurring accruals) which the Company considers necessary for a fair presentation of such financial statements. Certain reclassification of prior period amounts have been made to conform to the current presentation. Operating results for the three-month period ended September 30, 2004, are not necessarily indicative of the results that may be expected for the fiscal year ended June 30, 2005.

The balance sheet at June 30, 2004, 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 of America for complete financial statements. For further information, refer to the Consolidated Financial Statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended June 30, 2004.

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

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

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

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

6

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

New accounting standards — In December 2002, the FASB issued SFAS No. 148, “Accounting for Stock-Based Compensation - Transition and Disclosure” (SFAS No. 148), which amends SFAS No. 123, “Accounting for Stock-Based Compensation.” The amendment permits two additional transition methods for a voluntary change to the fair value based method of accounting for stock-based compensation. In addition, SFAS No. 148 amends the disclosure requirements of SFAS No. 123 to require more prominent and frequent disclosures about the effects of stock-based compensation. SFAS No. 148 was effective for the Company’s fiscal year end June 30, 2003. SFAS No. 123, as amended by SFAS No. 148, permits companies to (i) recognize as expense the fair value of stock-based awards, or (ii) continue to apply the provisions of Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” and related Interpretations (APB 25), and provide pro forma net income and earnings per share disclosures for employee stock compensation as if the fair-value-based method defined in SFAS No. 123 had been applied.

If the Company were to start expensing stock options immediately, the applicable accounting rules would be those prescribed by SFAS 123, which require the use of fair value to report stock option expense. However, the FASB has proposed new rules that would replace SFAS 123, and those new rules, if adopted as proposed, would require companies to expense stock options and, for the Company, would be effective beginning in the first quarter of fiscal 2006. The Company will fully comply once final rules are published and effective. It is expected that these new rules will be different than SFAS 123. Differences between the two rules could include the tax accounting for stock options, the pattern and timing of recording each stock option’s expense, accounting for option plan modifications and share cancellations. Given that these new rules are not final, the Company believes that expensing stock options using SFAS 123 and then changing to the FASB’s new rules when finalized would confuse users of our financial statements. Therefore, given the changes under consideration by the FASB, the Company believes it is appropriate to await the official pronouncement of the FASB before changing its formal accounting method on this subject. The Company does not expect the final pronouncement to have a significant impact on results of operations or financial position.

Periodic benefit cost — The Company follows the disclosure requirements of SFAS No. 132 (R). For the three months ended September 30, 2004, $132,000 of expense had been recorded. Total net periodic benefit cost for fiscal 2005 is expected to be $528,000. The components of net periodic pension expense for each of the periods presented were as follows:

	Three Months Ended
	September 30
	2004			2003
Service cost	$	151,000		$	24,000
Interest cost		172,000			30,000
Expected return on plan assets		(253,000	)		(38,000	)
Amortization of prior service cost		24,000			4,000
Amortization of net loss		38,000			12,000
Net periodic benefit cost	$	132,000		$	32,000

Stock options — The Company follows APB 25 and related Interpretations in accounting for its employee stock options. Under APB 25, no compensation expense is recognized as the exercise price of the Company’s employee stock options equals the market price of the underlying stock on the date of grant. The Company follows the disclosure requirements of SFAS No.123 as amended by SFAS No. 148.

The Company has an incentive stock option plan under which 760,000 common shares were reserved for option grants to key employees and directors at the fair market value of the stock at the date of the grant. As of September 30, 2004, there were 558,136 shares under option outstanding with prices ranging from $3.40 to $9.35, a weighted contracted life of 2.60 years, and a weighted average exercise price of $6.10. The following table summarizes information about stock options outstanding and exercisable at September 30, 2004:

Options Outstanding							Options Exercisable
Range of	Number Outstanding		Wtd. Avg. Remaining		Wtd. Avg.		Number Exercisable		Wtd. Avg.
Exercise Prices	at 9/30/04		Contractual Life (years)		Exercise Price		at 9/30/04		Exercise Price
$3.40 to $6.36		409,324		1.9	$	5.49		244,009	$	5.23
$6.58 to $9.35		148,812		4.5	$	7.67		63,127	$	7.67

7

At September 30, 2004 exercisable options and per share weighted average exercise price were 307,136 and $5.72, respectively. At September 30, 2004, remaining shares available for grant under the plan were 186,472.

The following sets forth a reconciliation of net income (loss) and earnings (loss) per share information for the three months ended September 30, 2004 and 2003, as if the Company had recognized compensation expense based on the fair value at the grant date for awards under the plan. For purposes of computing pro forma net income (loss), the fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model.

	September 30,
	2004		2003
Net income (loss), as reported	$	2,414,000	$	(2,180,000	)
Deduct:
Total stock-based compensation expense determined under the fair value based method for all awards, net of tax effects		41,000		48,000
Pro forma net income (loss)	$	2,373,000	$	(2,228,000	)
Pro forma earnings (loss) per share:
Basic and diluted earnings (loss) per share	$	0.28	$	(0.27	)

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

	September 30, 2004		June 30, 2004
Raw materials	$	25,490,000	$	23,641,000
Work in process and finished goods		11,246,000		13,569,000
	$	36,736,000	$	37,210,000

Work in process and finished goods inventories include $1.9 and $4.3 million of completed, but not yet accepted, sonobuoys at September 30, 2004 and June 30, 2004, respectively. Inventories are reduced by progress billings to the U.S. government of approximately $5,166,000 and $2,125,000 at September 30, 2004 and June 30, 2004, respectively.

3. EARNINGS (LOSS) PER SHARE — For the three months ended September 30, 2004, options to purchase 2,700 shares of common stock were not included in the computation of diluted earnings per share, as the options’ exercise prices were greater than the average market price of the Company’s common stock and, therefore, would be anti-dilutive.

Due to the Company’s fiscal 2004 reported net loss, 148,558 outstanding stock option share equivalents were excluded from the computation of diluted earnings per share during the three months ended September 30, 2003, because their inclusion would have been anti-dilutive.

Basic and diluted earnings per share were computed on the following:

	September 30,
	2004		2003
Basic - weighted average shares outstanding		8,351,989		8,343,820
Effect of dilutive stock options		109,524		—
Weighted average diluted shares outstanding		8,461,513		8,343,820
Basic and diluted earnings (loss) per share	$	0.29	$	(0.26	)

8

4. COMPREHENSIVE INCOME (LOSS) — Comprehensive income (loss) includes net income (loss) as well as unrealized gains and losses, net of tax, on investment securities owned and investment securities held by an investee accounted for by the equity method, which are excluded from net income. Unrealized gains and losses, net of tax, are reflected as a direct charge or credit to shareowners’ equity. Total comprehensive income (loss) is as follows for the three-month periods ended September 30, 2004 and 2003, respectively:

	September 30,
	2004		2003
Net income (loss)	$	2,414,000	$	(2,180,000	)
Other comprehensive income (loss), net of tax:
Net unrealized gains (losses)
- - investment securities owned		63,000		(103,000	)
Net unrealized gains
- - investment securities held by investee accounted for by the equity method		20,000		218,000
Comprehensive income (loss)	$	2,497,000	$	(2,065,000	)

At September 30, 2004 and June 30, 2004, shareowners’ equity includes accumulated other comprehensive income of $129,000 and $62,000, respectively, net of tax. These balances include $63,000 and $16,000 for unrealized gains on investment securities owned, and unrealized gains of $66,000 and $46,000 for investment securities held by an investee accounted for by the equity method, as of September 30, 2004 and June 30, 2004, respectively.

5. INVESTMENT SECURITIES — The fair value of cash and cash equivalents, accounts receivable, and accounts payable approximate their carrying value. Cash and cash equivalents consist of demand deposits and other highly liquid investments with an original term of three months or less. The investment portfolio has various maturity dates up to 24 years. A daily market exists for all investment securities. The Company believes that the impact of fluctuations in interest rates on its investment portfolio should not have a material impact on financial position or results of operations. Investments in debt securities that are not cash equivalents and marketable equity securities have been designated as available-for-sale. Those securities are reported at fair value, with net unrealized gains and losses included in accumulated other comprehensive income, net of applicable taxes. Unrealized losses that are other than temporary are recognized in earnings. The Company does not believe there are any significant individual unrealized losses as of September 30, 2004, which would represent other than temporary losses, and there are no unrealized losses with a duration of one year or more. Realized gains and losses on investments are determined using the specific identification method. It is the Company’s intention to use these investment securities to provide working capital and fund the expansion of its business and for other business purposes.

At September 30, 2004, the Company had net unrealized gains of $100,000. At that date, the net after-tax effect of these gains was $63,000, which is included in accumulated other comprehensive income within shareowners’ equity. For the three months ended September 30, 2004 and 2003, purchases of investment securities totaled $2,261,000 and $909,000, and sales of investment securities totaled $2,295,000 and $400,000, respectively.

The Company owns a 14% interest in Cybernet Systems Corporation (Cybernet), 12% on a fully diluted basis. This investment, with a carrying value of $1,677,000 at September 30 and June 30, 2004, represents the Company’s equity interest in Cybernet’s net assets plus $770,000 of goodwill (no longer being amortized in accordance with SFAS No. 142, “Goodwill and Other Intangible Assets”). The investment in Cybernet is accounted for under the equity method, and is included in other assets on the condensed consolidated balance sheet. The Company’s share of unrealized gains (losses) on available-for-sale securities held by Cybernet is carried in accumulated other comprehensive income (loss) within the shareowners’ equity section of the Company’s balance sheet.

The contractual maturities of debt securities, and total equity securities as of September 30, 2004, are as follows:

	Years
	Within 1		1 to 5		5 to 10		Over 10		Total
Debt securities:
Corporate - primarily U.S.	$	1,405,601	$	3,828,928	$	—	$	—	$	5,234,529
U.S. government and federal agency		317,967		3,133,539		1,473,811		1,485,767		6,411,084
State and municipal		100,037		3,171,381		1,315,239		—		4,586,657
Total debt securities		1,823,605		10,133,848		2,789,050		1,485,767		16,232,270
Equity securities - primarily preferred stock		2,443,372		—		—		—		2,443,372
Total investment securities	$	4,266,977	$	10,133,848	$	2,789,050	$	1,485,767	$	18,675,642

9

6. COMMITMENTS AND CONTINGENCIES — One of Sparton’s former manufacturing facilities, located in Albuquerque, New Mexico (Coors Road), has been involved with ongoing environmental remediation since the early 1980’s. At September 30, 2004, Sparton has accrued $7,072,000 as its estimate of the minimum future undiscounted financial liability, of which $599,000 is classified as a current liability and included in accrued liabilities. Amounts charged to operations, principally legal and consulting fees, for the three months ended September 30, 2004 and 2003 were $84,000 and $74,000, respectively. These costs were generally incurred in pursuit of various claims for reimbursement/recovery. The Company’s minimum cost estimate is based upon existing technology and excludes legal and related consulting costs, which are expensed as incurred. The Company’s estimate includes equipment, operating, and continued monitoring costs for onsite and offsite pump and treat containment systems.

In fiscal 2003, Sparton reached an agreement with the United States Department of Energy (DOE) and others to recover certain remediation costs. Under the settlement terms, Sparton received cash and the DOE agreed to reimburse Sparton for 37.5% of certain future environmental expenses in excess of $8,400,000 incurred from the date of settlement. Uncertainties associated with environmental remediation contingencies are pervasive and often result in wide ranges of reasonably possible outcomes. Estimates developed in the early stages of remediation can vary significantly. Normally a finite estimate of cost does not become fixed and determinable at a specific point in time. Rather, the costs associated with environmental remediation become estimable over a continuum of events and activities that help to frame and define a liability. Factors which cause uncertainties for the Company include, but are not limited to, the effectiveness of the current work plans in achieving targeted results and proposals of regulatory agencies for desired methods and outcomes. It is possible that cash flows and results of operations could be significantly affected by the impact of changes associated with the ultimate resolution of this contingency.

10

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

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

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

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

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

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

11

RESULTS OF OPERATIONS

	Three Months Ended September 30
	2004					2003
			%of					%of			%
	Sales		Total			Sales		Total			Change
Government	$	10,922,000		24.2	%	$	10,300,000		28.3	%		6.0	%
Industrial / Other		11,883,000		26.3			9,025,000		24.8			31.7
Aerospace		18,677,000		41.3			12,087,000		33.2			54.5
Medical/Scientific Instrumentation		3,706,000		8.2			5,013,000		13.7			(26.1	)
Totals	$	45,188,000		100.0	%	$	36,425,000		100.0	%		24.1

Sales for the three-month period ended September 30, 2004, totaled $45,188,000, an increase of $8,763,000 (24.1%) from the same quarter last year. Government sales increased slightly, and included $4.7 million of a delayed sonobuoy sale originally anticipated to ship in fiscal 2004. Government sales were lower than anticipated due to production interruptions at the Company’s Florida facilities, as several tropical storms disrupted operations in the first quarter of fiscal 2005. Industrial market sales also increased from the same period last year. This increase was attributed to increased demand from three existing customers. Sales to the aerospace markets continue to grow, increasing 54.5% from the prior year. In general, this reflects stronger demand in the commercial aerospace market. A large component of this increased demand was due to higher sales of products related to collision avoidance systems. The increased demand for the collision avoidance products is not anticipated to continue throughout the year. $6.0 million of the aerospace increase was attributable to increased orders from one customer, to which the Company supplies product to six manufacturing facilities. Medical/scientific instrumentation sales declined from the prior year. This decrease resulted from overall lower demand from existing customers in this market area. While the Company has added several new customers, and/or products in this area, the volume of new business has not been as much as previously anticipated.

During the month of October the Company, did not have access to the Navy’s test range; and access in November is also unlikely. If the Company does not have sufficient access during December, with resulting successful passage of product tests, government sales in the second quarter would be negatively impacted.

The following table presents income statement data as a percentage of net sales for the quarters ended September 30, 2004 and 2003, respectively:

	2004			2003
Net sales		100.0	%		100.0	%
Costs of goods sold		85.7			98.8
Gross profit		14.3			1.2
Selling and administrative		7.7			10.5
Operating income (loss)		6.6			(9.3	)
Other income - - net		1.2			.5
Income (loss) before income taxes		7.8			(8.8	)
Provision (credit) for income taxes		2.5			(2.8	)
Net income (loss)		5.3	%		(6.0	)%

An operating profit of $2,996,000 was reported for the three months ended September 30, 2004, compared to an operating loss of $3,389,000 for the three months ended September 30, 2003. Gross profit percentage for the three months ended September 30, 2004, was 14.3%, up from 1.2% for the same period last year. While the recent tropical storms largely bypassed the Company’s two Florida facilities, extensive preparations were undertaken to prepare for the storms. This unexpected activity, along with the minor damage that was experienced and unproductive wages, resulted in costs of approximately $500,000 being charged in the first quarter of fiscal 2005. The prior year’s depressed margin reflects the inclusion of costs on the start-up phase of several major programs, as well as final charges incurred at the completion of one sonobuoy

12

contract that had experienced technical problems. In addition, the prior year’s margin included a redesign effort on an existing product line, which resulted in a charge to operations of $496,000. The majority of the lowered selling and administrative expenses, as a percentage of sales, was due to the significant increase in sales for the first quarter of fiscal 2005, compared to the same period last year, without a related increase in these expenses. In addition, bid and proposal and unreimbursed research and development expenses for fiscal 2005 declined $340,000 from the same period last year.

Interest and investment income decreased $15,000 to $215,000 in 2004. This reduction was due to decreased funds available for investment. Other income-net in 2004 was $358,000, versus expense of $69,000 in 2003. Translation adjustments, along with gains and losses from foreign currency transactions, are included in other income and, in the aggregate, amounted to a gain of $361,000 and a loss of $10,000 during the three months ended September 30, 2004 and 2003, respectively. Other expense-net in 2003 includes $60,000 of charges for the Company’s previously owned automotive segment.

Due to factors described above, the Company reported net income of $2,414,000 ($0.29 per share, basic and diluted) for the three months ended September 30, 2004, versus a loss of $2,180,000 ($(0.26) per share, basic and diluted) for the corresponding period last year.

LIQUIDITY AND CAPITAL RESOURCES

For the three-month period ended September 30, 2004, Cash and Cash Equivalents increased $4,194,000 to $15,014,000. Operating activities provided $5,298,000 in net cash flows. The primary source of cash was from operations, compared to a loss in fiscal 2004 resulting in a use of cash, and a reduction in accounts receivable. The primary use of cash was a decrease in accounts payable. The primary source of cash in fiscal 2004 was a decrease in accounts receivable, reflective of receipt of payment for a large volume of sales recognized in June 2003. The change in cash flow from prior year due to inventory and prepaid expenses reflected a large increase in fiscal 2004 inventory due to delayed customer delivery schedules, as well as increased inventory for new customer contracts.

Cash flows used by investing activities for the three-month period ended September 30, 2004, totaled $1,111,000, primarily for purchases of property, plant and equipment, which is discussed below.

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

At September 30, 2004 and June 30, 2004, the aggregate government EMS backlog was approximately $37 million and $41 million, respectively. A majority of the September 30, 2004, backlog is expected to be realized in the next 12-15 months. Commercial EMS orders are not included in the backlog. The Company does not believe the amount of commercial activity covered by firm purchase orders is a meaningful measure of future sales, as such orders may be rescheduled or cancelled without significant penalty.

The Company is constructing a new facility in Vietnam, which is expected to provide increased growth opportunities. As the Company has not previously done business in this emerging market, there are many uncertainties and risks inherent in this potential venture. It is estimated that the Company will invest approximately $5-$7 million, which includes land, building, and initial operating expenses. The new operation will carry the name Spartronics, Inc. The Company is also continuing a program of identifying and evaluating potential acquisition candidates in both the defense and medical markets.

The Company has purchased a manufacturing facility in Albuquerque, New Mexico. This facility will replace an existing plant in Rio Rancho, New Mexico. The facility was purchased in December 2003 for approximately $4.5 million. Estimated additional costs totaling approximately $2.0 million are anticipated to be incurred as the Company completes its transition between facilities. At September 30, 2004, $5.5 million of cost for the new facility was included as construction in progress in the property, plant and equipment section of the condensed consolidated balance sheet. The existing Rio Rancho plant was sold in June 2004. The Company will continue to lease the Rio Rancho facility until the transition to the new facility is completed. The transition between facilities is anticipated to be completed by December 31, 2004.

No cash dividends were declared in either period presented. At September 30, 2004, the Company had $91,352,000 in shareowners’ equity ($10.94 per share), $74,140,000 in working capital, and a 5.03:1.00 working capital ratio. For the foreseeable future (12-18 months), the Company believes it has sufficient liquidity for its anticipated needs, unless a significant business acquisition is identified and completed for cash.

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CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Management’s discussion and analysis of financial condition and results of operations is based upon the Company’s consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. Significant accounting policies are summarized in Note 1 to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended June 30, 2004. The preparation of these financial statements requires management to make estimates and assumptions that affect the amounts reported of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. Estimates are regularly evaluated and are based on historical experience and on various other assumptions believed to be reasonable under the circumstances. Actual results could differ from these estimates. The Company believes that of its significant accounting policies, the following involve a higher degree of judgment and complexity.

Environmental Contingencies

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

Government Contract Cost Estimates

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

Commercial Inventory Valuation Allowances

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

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

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Allowance for Possible Losses on Receivables

The accounts receivable balance is recorded net of allowances for amounts not expected to be collected from customers. The allowance is estimated based on historical experience of write-offs, the level of past due amounts, information known about specific customers with respect to their ability to make payments, and future expectations of conditions that might impact the collectibility of accounts. Accounts receivable are generally due under normal trade terms for the industry. Credit is granted, and credit evaluations are periodically performed, based on a customers’ financial condition and other factors. Although the Company does not generally require collateral, cash in advance or letters of credit may be required from customers in certain circumstances, including some foreign customers. When management determines that it is probable that an account will not be collected, it is charged against the allowance for possible losses. The Company reviews the adequacy of its allowance monthly. The allowance for doubtful accounts was $125,000 and $46,000 at September 30, 2004 and June 30, 2004, respectively. If the financial conditions of customers were to deteriorate, resulting in an impairment of their ability to make payment, additional allowances may be required. Given the Company’s significant balance of government receivables and letters of credit from foreign customers, collection risk is considered minimal. Historically, uncollectible accounts have been insignificant and the minimal allowance is deemed adequate.

Pension Obligations

The Company calculates the cost of providing pension benefits under the provisions of Statement of Financial Accounting Standards (SFAS) No. 87. The key assumptions required within the provisions of SFAS No. 87 are used in making these calculations. The most significant of these assumptions are the discount rate used to value the future obligations and the expected return on pension plan assets. The discount rate is consistent with market interest rates on high-quality, fixed income investments. The expected return on assets is based on long-term returns and assets held by the plan, which is influenced by historical averages. If actual interest rates and returns on plan assets materially differ from the assumptions, future adjustments to the financial statements would be required. While changes in these assumptions can have a significant effect on the pension benefit obligations reported in the Condensed Consolidated Balance Sheets and the unrecognized gain or loss accounts, the effect of changes in these assumptions is not expected to have the same relative effect on net periodic pension expense in the near term. While these assumptions may change in the future based on changes in long-term interest rates and market conditions, there are no known expected changes in these assumptions as of September 30, 2004. As indicated above, to the extent the assumptions differ from actual results, there would be a future impact on the financial statements. The extent to which this will result in future expense is not determinable at this time as it will depend upon a number of variables, including trends in interest rates and the actual return on plan assets. For example, an increase in the return on the plan assets due to improved market conditions would reduce the unrecognized loss account and thus reduce future expense. While net periodic pension expense has increased during the past two years, no cash payments are expected to be required for the next several years due to the plan’s funded status.

OTHER

LITIGATION

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

At September 30, 2004, Sparton has accrued $7,072,000 as its estimate of the future undiscounted minimum financial liability related to this site. The Company’s cost estimate is based upon existing technology and excludes legal and related consulting costs, which are expensed as incurred. The Company’s estimate includes equipment and operating costs for onsite and offsite operations and is based on existing methodology. Uncertainties associated with environmental remediation contingencies are pervasive and often result in wide ranges of reasonably possible outcomes. Estimates developed in the early stages of remediation can vary significantly. Normally a finite estimate of cost does not become fixed and determinable at a specific point in time. Rather, the costs associated with environmental remediation become estimable over a continuum of events and activities that help to frame and define a liability. It is possible that cash flows and results of operations could be affected by the impact of the ultimate resolution of this contingency.

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

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Item 3. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK

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

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

Item 4. CONTROLS AND PROCEDURES

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

As of September 30, 2004, an evaluation was updated by the Company’s management, including the CEO and CFO, on the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based on that evaluation, the Company’s management, including the CEO and CFO, concluded that the Company’s disclosure controls and procedures continue to be effective as of September 30, 2004. There have been no changes in the Company’s internal controls over financial reporting during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II
OTHER INFORMATION

Item 1. Legal Proceedings

One of Sparton’s former manufacturing facilities, located in Albuquerque, New Mexico (Coors Road), has been involved with ongoing environmental remediation since the early 1980’s. At September 30, 2004, Sparton has accrued $7,072,000 as its estimate of the minimum future undiscounted financial liability, of which $599,000 is classified as a current liability and included in accrued liabilities. The Company’s minimum cost estimate is based upon existing technology and excludes legal and related consulting costs, which are expensed as incurred. The Company’s estimate includes equipment, operating, and continued monitoring costs for onsite and offsite pump and treat containment systems.

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

In fiscal 2003, Sparton reached an agreement with the United States Department of Energy (DOE) and others to recover certain remediation costs. Under the settlement terms, Sparton received cash and the DOE agreed to reimburse Sparton for 37.5% of certain future environmental expenses in excess of $8,400,000 incurred from the date of settlement.

16

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

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

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

17

Item 4. Submission of Matters to a Vote of Security Holders

At the October 15, 2004, Special Meeting of Shareholders of Sparton Corporation, a continuation of the September 24, 2004, meeting, a total of 7,958,235 of the Company’s shares were present or represented by proxy at the meeting. This represented more than 95% of the Company’s shares outstanding. Total shares outstanding and eligible to vote were 8,351,538, of which 393,303 did not vote.

• The proposal to eliminate cumulative voting in the election of directors was approved, with 5,607,704 shares voting for, 2,335,140 shares voting against, and 15,391 shares abstaining.

• The proposal to require timely written notice of shareholder nominations for the election of directors was approved, with 5,783,636 shares voting for, 2,162,807 shares voting against, and 11,792 shares abstaining.

Item 6. Exhibits

3.1	Amended Articles of Incorporation of the Registrant are filed herewith and attached.
3.2	Amended Code of Regulation of the Registrant are filed herewith and attached.
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 herewith 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

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: November 12, 2004	/s/ DAVID W. HOCKENBROCHT
	David W. Hockenbrocht, Chief Executive Officer
Date: November 12, 2004	/s/ RICHARD L. LANGLEY
	Richard L. Langley, Chief Financial Officer

18

EX-3.1

                                                                     EXHIBIT 3.1

                        AMENDED ARTICLES OF INCORPORATION
                                       OF
                               SPARTON CORPORATION

                                    ARTICLE I

      The name of said corporation shall be SPARTON CORPORATION.

                                   ARTICLE II

      Said corporation is to be located at Cleveland, in Cuyahoga County, Ohio.

                                   ARTICLE III

      Said corporation is formed for the following purposes:

      1. To engage in any manufacturing business, including without limiting the
generality of said purpose, the manufacture and sale of automobile parts and
accessories and other metal parts and metal products of every kind and
description, the manufacture and sale of radio and television and other
electronic products, parts and equipment of every kind and description, and the
manufacture and sale of cabinets, furniture and other wood and wooden products
and plastics and plastic products of every kind and description.

      2. To purchase, lease, establish, or otherwise acquire, maintain, operate,
sell or otherwise dispose of broadcasting stations of all kinds for the purpose
of broadcasting, transmitting and disseminating information, music,
entertainment and advertisement of every kind, by radio, television, telephone,
or by any other means that have been or may hereafter be discovered or invented
for the receipt, transmission, delivery and conveyance of the same.

      3. To produce, extract, manufacture, process, refine, purchase or
otherwise acquire, sell, deal in, transport, distribute and market coal, oil,
gas, lumber, minerals and metals, chemicals and chemical compositions, of every
kind and description and the products and by-products thereof.

      4. To purchase, lease, exchange or otherwise acquire, sell, mortgage and
deal in oil, gas mineral and mining lands, properties, claims, leases and
rights, timber and lumber properties, oil and gas wells; and to explore, drill,
develop and operate such land, properties, mines and wells.

      5. To manufacture, process, purchase, sell and generally to trade in, deal
in and with goods, wares and merchandise of every kind and description, and to
engage in and participate in any manufacturing or mercantile business of every
kind and description.

      6. To acquire by purchase, exchange, lease or otherwise, and to own, hold,
use, develop and operate, and to sell, assign, lease, transfer, convey,
exchange, mortgage, pledge, or otherwise dispose of, deal in and with real
estate, lands, options, grants, mineral, oil and gas rights and royalties of
every kind and description, and personal property, chattels and choses in action
of every kind and description.

      7. To apply for, register, purchase, lease or take licenses under or
otherwise acquire, hold, own, use, develop and grant licenses for, and to sell,
assign, mortgage, pledge or otherwise dispose of patents, inventions,
copyrights, designs, trademarks, trade names, processes, formulae and devices.

      8. To acquire by purchase, lease, contract or otherwise, the whole or any
part of the property, assets, business and control of any person, firm,
association or corporation, either for cash or for stock, bonds, notes, or other
obligations or securities of the corporation or for property of the corporation;
to hold, operate, liquidate, sell or in any manner dispose of the whole or any
part thereof; and in connection therewith, to assume or guarantee performance of
any liabilities or contracts of such person, firm, association or corporation.

      9. To conduct and carry on any experimental, research or development work,
incident to the foregoing or otherwise.

      The foregoing enumeration shall not limit or restrict in any manner the
powers or authority which the corporation is or may be permitted to exercise
under the laws of the State of Ohio; provided however that nothing contained
herein shall be construed as authorizing the corporation to carry on the
business of a public utility or common carrier.

                                       19


                                   ARTICLE IV

      The capital stock of said corporation shall be as follows:

      (a) The total number of shares of Common Stock which the Company shall
have authority to issue is Fifteen Million (15,000,000) shares of Common Stock,
par value $1.25 per share.

      (b) Two Hundred Thousand (200,000) shares of Serial Preferred Stock,
without par value, to have the following terms and provisions:

            Section 1. The Serial Preferred Stock may be issued from time to
time in series. Each share of Serial Preferred Stock of any one series shall be
identical with each other in all respects, except as to the date from which
dividends thereon shall be cumulative. All shares of Serial Preferred Stock
shall rank equally and shall be identical, except in respect of the terms which
may be fixed by the Board of Directors as hereinafter provided. Subject to the
provisions of Sections 2 to 9, both inclusive, of this Subdivision (b), which
provisions shall apply to all shares of Serial Preferred Stock, of all series,
the Board of Directors is hereby authorized to cause such shares of Serial
Preferred Stock to be issued in one or more series and with respect to each such
series prior to the issuance thereof to fix:

            (a) The designation of the series, which may be by distinguishing
number, letter or title.

            (b) The number of shares of the series, which number the Board of
Directors may increase or decrease, except where otherwise provided in the
creation of the series.

            (c) The dividend rate of the series.

            (d) The dates at which dividends, if declared, shall be payable, and
the dates from which dividends shall be cumulative.

            (e) The liquidation price of the series.

            (f) The redemption rights and price or prices, if any, for shares of
the series.

            (g) The terms and amount of any sinking fund provided for the
purchase or redemption of shares of the series.

            (h) Whether the shares of the series shall be convertible into
common stock, and if so, the conversion rate or rates or price or prices and the
adjustments thereof, if any, and all other terms and conditions upon which such
conversion may be made.

            (i) Restrictions (in addition to those set forth in Sections 6(b)
and 6(c) of this Subdivision (b)) on the issuance of shares of the same series
or of any other class or series.

            The Board of Directors is authorized to adopt from time to time
amendments to the Articles of Incorporation or Amended Articles of Incorporation
of the Corporation fixing, with respect to each such series, the matters
specified in clauses (a) to (i) both inclusive of this Section 1.

            Section 2. The holders of Serial Preferred Stock of each series, in
preference to the holders of common stock and any other class of shares ranking
junior to the Serial Preferred Stock, shall be entitled to receive out of any
funds legally available and when and as declared by the Board of Directors cash
dividends at the rate (and no more) for such series fixed in accordance with the
provisions of Section 1 of this Subdivision (b), payable quarterly on the dates
fixed for such series. Such dividends shall be cumulative, in the case of shares
of each particular series, from and after the date or dates fixed with respect
to such series. No dividends may be paid upon or declared and set apart for any
of the Serial Preferred Stock for any quarterly dividend period unless at the
same time a like proportionate dividend for the same quarterly dividend period,
ratably in proportion to the respective annual dividend rates fixed therefore,
shall be paid upon or declared or set apart for all Serial Preferred Stock of
all series then outstanding and entitled to receive such dividend.

                                       20


            Section 3. So long as any Serial Preferred Stock is outstanding, no
dividend, except a dividend payable in common stock or any other shares of the
Corporation ranking junior to the Serial Preferred Stock, shall be paid or
declared or any distribution be made except as aforesaid on the common stock or
any other shares of the Corporation ranking junior to the Serial Preferred
Stock, nor shall any common stock or any other shares of the Corporation ranking
junior to the Serial Preferred Stock be purchased, retired or otherwise acquired
by the Corporation (except out of the proceeds of the sale of common stock or
any other shares of the Corporation ranking junior to the Serial Preferred Stock
received by the Corporation subsequent to June 30, 1968):

            (a) Unless all accrued and unpaid dividends on the Serial Preferred
      Stock, including the full dividends for the current quarterly dividend
      period, shall have been declared and paid or a sum sufficient for payment
      thereof set apart; and

            (b) Unless there shall be no default with respect to the redemption
      of Serial Preferred Stock of any series from, and no default with respect
      to any required payment into, any sinking fund provided for shares of such
      series in accordance with the provisions of Section 1 of this Subdivision
      (b).

            Section 4.

            (a) Subject to the express terms of each series and to the
      provisions of Section 6(b)(iii) of this Subdivision (b), the Corporation
      (i) may from time to time redeem all or any part of the Serial Preferred
      Stock of any series at the time outstanding at the option of the Board of
      Directors at the applicable redemption price for such series fixed in
      accordance with the provisions of Section 1 of this Subdivision (b), or
      (ii) shall from time to time make such redemptions of the Serial Preferred
      Stock as may be required to fulfill the requirements of any sinking fund
      provided for shares of such series at the applicable sinking fund
      redemption price fixed in accordance with the provisions of Section 1 of
      this Subdivision (b), together in each case with accrued and unpaid
      dividends to the redemption date.

            (b) Notice of every such redemption shall be mailed, by first class
      mail, postage prepaid, to the holders of record of the Serial Preferred
      Stock to be redeemed at their respective addresses then appearing on the
      books of the Corporation, not less than thirty (30) nor more than sixty
      (60) days prior to the date fixed for such redemption. At any time before
      or after notice has been given as above provided, the Corporation may
      deposit the aggregate redemption price of the shares of Serial Preferred
      Stock to be redeemed, together with accrued and unpaid dividends thereon
      to the redemption date, with any bank or trust company in New York, New
      York, Cleveland, Ohio, Chicago, Illinois, or Grand Rapids, Michigan,
      having capital and surplus of more than Five Million Dollars ($5,000,000),
      named in such notice, directed to be paid to the respective holders of the
      shares of Serial Preferred Stock so to be redeemed, in amounts equal to
      the redemption price of all shares of Serial Preferred Stock so to be
      redeemed, together with accrued and unpaid dividends thereon to the
      redemption date, on surrender of the stock certificate or certificates
      held by such holders, and upon the giving of such notice and the making of
      such deposit such holders shall cease to be shareholders with respect to
      such shares, and after such notice shall have been given and such deposit
      shall have been made such holders shall have no claim against the
      Corporation with respect to such shares except only to receive such money
      from such bank or trust company without interest or the right to exercise,
      before the redemption date, any unexpired rights of conversion. In case
      less than all of the outstanding shares of Serial Preferred Stock are to
      be redeemed, the Corporation shall select by lot the shares so to be
      redeemed in such manner as shall be prescribed by its Board of Directors.

                If the holders of shares of Serial Preferred Stock which shall
      have been called for redemption shall not, within six years after such
      deposit, claim the amount deposited for the redemption thereof, any such
      bank or trust company shall, upon demand, pay over to the Corporation such
      unclaimed amounts and thereupon such bank or trust company and the
      Corporation shall be relieved of all responsibility in respect thereof and
      to such holders.

            (c) Any shares of Serial Preferred Stock which are redeemed by the
      Corporation pursuant to the provisions of this Section 4 of this
      Subdivision (b) and any shares of Serial Preferred Stock which are
      purchased and delivered in satisfaction of any sinking fund requirements
      provided for shares of such series and any shares of Serial Preferred
      Stock which are converted in accordance with their express terms shall be
      cancelled and not reissued. Any shares of Serial Preferred Stock otherwise
      acquired by the Corporation shall be restored to the status of authorized
      and unissued shares of Serial Preferred Stock without serial designation.

                                       21


      Section 5.

      (a) The holders of Serial Preferred Stock of any series shall, in case of
liquidation, dissolution or winding up of the Corporation, be entitled to
receive in full out of the assets of the Corporation, including its capital,
before any amount shall be paid or distributed among the holders of common stock
or any other shares ranking junior to the Serial Preferred Stock, the amounts
fixed with respect to shares of such series in accordance with Section 1 of this
Subdivision (b), plus in any such event an amount equal to all dividends accrued
and unpaid thereon to the date of payment of the amount due pursuant to such
liquidation, dissolution or winding up of the Corporation. In case the net
assets of the Corporation legally available therefore are insufficient to permit
the payment upon all outstanding shares of Serial Preferred Stock of the full
preferential amount to which they are respectively entitled, then such net
assets shall be distributed ratably upon outstanding shares of Serial Preferred
Stock in proportion to the full preferential amount to which each such share is
entitled.

            After payment to holders of Serial Preferred Stock of the full
preferential amounts as aforesaid, holders of Serial Preferred Stock as such
shall have no right or claim to any of the remaining assets of the Corporation.

      (b) The merger or consolidation of the Corporation into or with any other
corporation, or the merger of any other corporation into it, or the sale, lease,
or conveyance of all or substantially all of the property or business of the
Corporation, shall not be deemed to be a dissolution, liquidation or winding up
of the Corporation for the purposes of this Section 5 of this Subdivision (b).

      Section 6.

      (a) The holders of Serial Preferred Stock shall be entitled to one vote
for each share of such stock upon all matters presented to shareholders; and,
except as otherwise provided herein or required by law, the holders of Serial
Preferred Stock and the holders of common stock shall vote together as one class
on all matters.

            If, and so often as, the Corporation shall be in default in the
payment of the equivalent of six quarterly dividends (whether or not
consecutive) on any series of Serial Preferred Stock at any time outstanding,
whether or not earned or declared, the holders of Serial Preferred Stock of all
series voting separately as a class and in addition to all other rights to vote
for Directors shall thereafter be entitled to elect, as herein provided, two
members of the Board of Directors of the Corporation; provided, however, that
the special class voting rights provided for herein when the same shall have
become vested shall remain so vested until all accrued and unpaid dividends on
the Serial Preferred Stock of all series then outstanding shall have been paid,
whereupon the terms of the Directors elected by the holders of Serial Preferred
Stock shall terminate and the holders of Serial Preferred Stock shall be
divested of their special class voting rights in respect of subsequent elections
of Directors, subject to the revesting of such special class voting rights in
the event hereinabove specified in this Section 6(a).

            In the event of default entitling the holders of Serial Preferred
Stock to elect two Directors as above specified, a special meeting of the
shareholders for the purpose of electing such Directors shall be called by the
Secretary of the Corporation upon written request of, or may be called by, the
holders of record of at least 10% of the shares of Serial Preferred Stock of all
series at the time outstanding, and notice thereof shall be given in the same
manner as that required for the annual meeting of shareholders; provided,
however, that the Corporation shall not be required to call such special meeting
if the annual meeting of the shareholders shall be held within ninety (90) days
after the date of receipt of the foregoing written request from the holders of
Serial Preferred Stock. At any meeting at which the holders of Serial Preferred
Stock shall be entitled to elect Directors, the holders of not less than
one-third of the outstanding shares of Serial Preferred Stock of all series,
present in person or by proxy, shall be sufficient to constitute a quorum, and
the vote of the holders of a majority of such shares so present at any such
meeting at which there shall be a quorum shall be sufficient to elect the
members of the Board of Directors which the holders of Serial Preferred Stock
are entitled to elect as hereinbefore provided.

            The two Directors who may be elected by the holders of Serial
Preferred stock pursuant to the foregoing provisions shall be in addition to any
other Directors then in office or proposed to be elected otherwise than pursuant
to such provisions, and nothing in such provisions shall prevent any change
otherwise permitted in the total number of Directors of the Corporation or
require the resignation of any Director elected otherwise than pursuant to such
provisions.

                                       22


            (b) The affirmative vote or consent of the holders of at least
      two-thirds of the then outstanding shares of Serial Preferred Stock, given
      in person or by proxy, either in writing or at a meeting called for the
      purpose at which the holders of Serial Preferred Stock shall vote
      separately as a class, shall be necessary to effect any one or more of the
      following (but insofar as the holders of Serial Preferred Stock are
      concerned, such action may be effected with such vote or consent):

                  (i) Any amendment, alteration or repeal of any of the
            provisions of the Articles of Incorporation or of the Regulations of
            the Corporation which affects adversely the voting powers, rights or
            preferences of the holders of Serial Preferred Stock; provided,
            however, that for the purpose of this clause (i) only, neither the
            amendment of the Articles of Incorporation of the Corporation to
            authorize, or to increase the authorized or outstanding number of
            shares of, Serial Preferred Stock or of any shares of any class
            ranking on a parity with or junior to the Serial Preferred Stock,
            nor the increase by the shareholders pursuant to the Regulations of
            the number of Directors of the Corporation shall be deemed to affect
            adversely the voting powers, rights or preferences of the holders of
            Serial Preferred Stock; and provided further, that if such
            amendment, alteration or repeal affects adversely the rights or
            preferences of one or more but not all then outstanding series of
            Serial Preferred Stock, only the affirmative vote or consent of the
            holders of a least two-thirds of the number of the then outstanding
            shares of the series so affected shall be required;

                  (ii) The authorization, or the increase in the authorized
            number of any shares of any class ranking prior to the Serial
            Preferred Stock; or

                  (iii) The purchase or redemption (whether for sinking fund
            purposes or otherwise) of less than all the then outstanding shares
            of Serial Preferred Stock except in accordance with a purchase offer
            made to all holders of record of Serial Preferred Stock, unless all
            dividends on all Serial Preferred Stock then outstanding for all
            previous quarterly dividend periods shall have been declared and
            paid or funds therefore set apart and all accrued sinking fund
            obligations applicable to all Serial Preferred Stock shall have been
            complied with.

            (c) The affirmative vote or consent of the holders of at least a
      majority of the then outstanding shares of Serial Preferred Stock, given
      in person or by proxy, either in writing or at a meeting called for the
      purpose at which the holders of Serial Preferred Stock shall vote
      separately as a class, shall be necessary (but insofar as the holders of
      Serial Preferred Stock are concerned such action may be effected with such
      affirmative vote or consent) to authorize any shares ranking on a parity
      with the Serial Preferred Stock or an increase in the authorized number of
      shares of Serial Preferred Stock.

            Section 7. No holder of Serial Preferred Stock of any series shall
be entitled as such as a matter of right to subscribe for or purchase any part
of any issue of shares of the Corporation, of any class whatsoever, or any part
of any issue of securities convertible into shares of the Corporation, of any
class whatsoever, and whether issued for cash, property, services, or otherwise.

            Section 8. For the purposes of the Subdivision (b):

            (a) Whenever reference is made to shares "ranking prior to the
      Serial Preferred Stock," such reference shall mean and include all shares
      of the Corporation, if any, in respect of which the rights of the holders
      thereof as to the payment of dividends or as to distributions in the event
      of a voluntary or involuntary liquidation, dissolution or winding up of
      the Corporation are given preference over the rights of the holders of
      Serial Preferred Stock.

            (b) Whenever reference is made to shares "on a parity with the
      Serial Preferred Stock," such reference shall mean and include all shares
      of the Corporation in respect of which the rights of the holders thereof
      as to the payment of dividends and as to distributions in the event of a
      voluntary or involuntary liquidation, dissolution or winding up of the
      affairs of the Corporation rank on an equality with the rights of the
      holders of Serial Preferred Stock.

            (c) Whenever reference is made to shares "ranking junior to the
      Serial Preferred Stock," such reference shall mean and include all shares
      of the Corporation other than those referred to or defined under clauses
      (a) and (b) of this Section 8 as shares "ranking prior to" or "on a parity
      with" the Serial Preferred Stock.

                                       23


                                    ARTICLE V

      No holder of shares of the Corporation of any class shall have any
pre-emptive right to purchase or have offered to them for purchase or subscribe
for any shares of the Corporation of any class or any part of any issue of
securities convertible into shares of the Corporation of any class, whether
issued or offered for cash, property, services or otherwise. No holder of shares
of the Corporation of any class may vote cumulatively in the election of
directors.

                                   ARTICLE VI

      The Corporation shall have the right, to the extent permitted by law, to
purchase, hold, sell and transfer shares of its own common stock from time to
time to such extent and in such manner and upon such terms as the Board of
Directors shall from time to time determine.

                                   ARTICLE VII

      These Amended Articles of Incorporation shall supersede and take the place
of the existing Articles of Incorporation of the Corporation and all amendments
thereto.

Amendment Log:

Amended & Restated Articles:

                                                                                           
                                                                                                 June 1970
Amendment: Article Fourth, subparagraph (a)       3M shares to 6M shares                           7/17/72
Amendment: Article Fourth, subparagraph (a)       6M shares to 8.5M shares                         1026/83
Amendment: Article Fourth, subparagraph (a)       8.5M shares to 15M shares                       10/23/02
Amendment: Article Fifth                          Elimination of Cumulative Voting                10/15/04



                                       24

EX-3.2

                                                                     EXHIBIT 3.2

                              SPARTON CORPORATION

                               CODE OF REGULATIONS

                                    LOCATION

                                    ARTICLE I

      The principal office of this Company shall be in the City of Cleveland,
Cuyahoga County, Ohio. The Company shall also have an office at its principal
place of business in Jackson, Michigan, and may also have offices at such other
places as the Board of Directors may designate.

                                  SHAREHOLDERS

                                   ARTICLE II

      All meetings of the shareholders shall be held at the principal office of
the Company, in the City of Cleveland, Cuyahoga County, Ohio, or at such other
place, within or without the State of Ohio, as may be directed by the Board of
Directors.

                                   ARTICLE III

      The annual meeting of shareholders, for the election of directors and the
consideration of the reports to be laid before such meeting shall be held each
year on the fourth Wednesday in October at ten o'clock a.m., or for any
particular year at such other date and time not later than six months after the
end of the fiscal year of the Company as shall be designated by vote or written
consent of a majority of the Board of Directors. Special meetings of the
shareholders may be called at any time by the Chairman of the Board of Directors
or by the President or by a majority of the members of the Board of Directors,
acting with or without a meeting, or by the persons who hold twenty-five percent
(25%), or more, of all the shares outstanding and entitled to vote at such
shareholders' meetings. Said person or persons calling such meeting may deliver
a request in writing to the President or the Secretary of the Company that such
meeting be called and state in such written request the object of the meeting;
and upon the delivery of such request, it shall be the duty of the President or
the Secretary to give notice of such meeting to the shareholders entitled to
vote at such meeting, and if such request be refused, then the person or persons
making such request may call a meeting by giving notice in the manner provided
by law or as provided by the Regulations of the Company.

                                   ARTICLE IV

      A notice in writing of each annual or special meeting of the shareholders,
stating the purpose or purposes for which the meeting is called and the time
when and the place where it is to be held shall be served or mailed by the
Secretary upon or to each shareholder of record entitled to vote at such
meeting, not more than sixty (60) days nor less than seven (7) days prior to the
date fixed for the holding of such meeting, and if mailed, such notice shall be
directed to a shareholder at his address as it appears upon the stock records of
the corporation.

                                    ARTICLE V

      Except as is otherwise provided in the Company's Articles, each
shareholder present in person or by proxy at any annual meeting of the
shareholders shall be entitled to one vote for each share of stock registered in
his name; provided however that no shares in the Company owned or controlled by
it shall be voted at any shareholders' meeting. The Board of Directors may fix a
date, which shall not be a past date, and shall not be more than sixty (60) days
preceding the date of any meeting of shareholders, as a record date for the
determination of shareholders entitled to notice of and to vote at any such
meeting or any adjournments thereof. If the Board of Directors shall not fix
such a record date, shareholders of record on the 15th day preceding the
meeting, exclusive of such day, shall be entitled to notice of and to vote at
the meeting or any adjournments thereof.

                                       25


                                   ARTICLE VI

      A majority in amount of the registered holders of the outstanding shares
entitled to vote thereat must be present in person or by proxy to constitute a
quorum at any meeting of the shareholders, but any less number may adjourn said
meeting from time to time without notice other than by announcement at the
meeting, and if a quorum be present at any such adjourned meeting, any business
which might properly have come before the original meeting may be considered and
acted upon, and such action be binding upon the corporation.

                                   ARTICLE VII

      The Chairman of the Board of Directors or, in the event of his absence,
the President of the Company shall preside at all meetings of the shareholders,
and in the event of the absence of both the Chairman of the Board of Directors
and the President, a chairman shall be chosen by the meeting. The Secretary of
the Company shall act as secretary of all meetings of the shareholders, but in
the event of his absence at any meeting of the shareholders, the presiding
officer may appoint any person to act as secretary of the meeting. The order of
business of any shareholders' meeting shall be determined by the meeting.

                                  ARTICLE VII-2

      Except as otherwise provided by the Articles of Incorporation or by law,
any contract, act, or transaction, prospective or past, of the Company, or the
Board of Directors or of the officers may be approved or ratified by majority
vote at a meeting of the shareholders, and such approval or ratification shall
be as valid and binding as though affirmatively voted for or consented to by
every shareholder of the Company.

                                  ARTICLE VIII

      The Board of Directors shall be divided into three classes, each to be as
nearly equal in number as possible, but no class shall consist of less than
three directors. Subject to the foregoing, the number of directors in each class
may be fixed or changed as follows: (a) at any meeting of shareholders called to
elect directors at which a quorum is present, by the vote of the holders of a
majority of the shares represented at the meeting and entitled to vote on the
proposal or (b) at any meeting of the Board of Directors by a vote of a majority
of the entire Board of Directors, who shall also have authority to fill any
director's office that is created by an increase in the number of directors.
Unless and until otherwise so fixed or changed, the first class shall consist of
three directors and the second and third classes shall each consist of four
directors. A separate election shall be held for each class of directors at any
meeting of the shareholders at which a member or members of more than one class
of directors is being elected. At the 1982 annual meeting of shareholders three
directors in the first class, whose terms of office expire at such meeting,
shall be elected for a term of three years and until their respective successors
are elected, a fourth director shall be elected to the second class for a term
of one year and until his successor is elected and a fourth director shall be
elected to the third class for a term of two years and until his successor is
elected. At each annual election thereafter the directors elected to the class
whose term shall expire in that year shall be elected to hold office for a term
of three years and until their respective successors are elected. If the number
of directors of any class is increased, any additional directors elected to such
class shall hold office for a term which shall coincide with the full term or
the remainder of the term, as the case may be, of such class.

      Nominations of persons for election to the Board of Directors of the
Company may be made at a meeting of shareholders by or at the direction of the
Board of Directors or by any shareholder of the Company entitled to vote for the
election of directors at the meeting who complies with the notice procedures set
forth herein. Such nominations, other than those made by or at the direction of
the Board of Directors, shall be made pursuant to timely notice in writing to
the Secretary of the Company. To be timely, a shareholder shall provide the
Company with written notice of the shareholder's intent to nominate the person
(a "Notice of Intent"), either by personal delivery or by United States mail,
postage prepaid, and received by the Company (i) with respect to an election to
be held at an annual meeting of shareholders, not later than sixty (60) days in
advance of the date of such meeting, and (ii) with respect to an election to be
held at a special meeting of shareholders called for that purpose, not later
than the close of business on the tenth (10th) day following the date on which
notice of the special meeting was first mailed to the shareholders by the
Company. The shareholder's Notice of Intent shall set forth (i) the name and
address of the shareholder and of the person or persons to be nominated, (ii) a
representation that the shareholder (A) is a holder of record of stock of the
Company entitled to vote at the meeting at which the nomination will be

                                       26


made, (B) will continue to hold such stock through the date on which the meeting
is held, and (C) intends to appear in person or by proxy at the meeting to
nominate the person or persons specified in the Notice of Intent, (iii) a
description of all arrangements or understandings between the shareholder and
each nominee and any other person or persons (naming such person or persons)
pursuant to which the nomination is to be made by the shareholder, (iv)
appropriate biographic information and a statement as to the individual's
qualifications, (v) such other information regarding each nominee proposed by
such shareholder as would be required to be in a proxy statement filed pursuant
to the proxy rules of the Securities and Exchange Commission had the nominee
been nominated by the Board of Directors, and (vi) the consent of each nominee
to serve as a director of the Company if so elected. No person shall be eligible
for election as a director of the Company unless nominated in accordance with
the procedures set forth herein. The Chairman of the meeting shall, if the facts
warrant, determine and declare to the meeting that a nomination was not made in
accordance with the procedures prescribed herein, and if he or she should so
determine, he or she shall so declare to the meeting and the defective
nomination shall be disregarded.

              INDEMNIFICATION OF DIRECTORS, OFFICERS AND EMPLOYEES

ARTICLE VIII-A

      The Company shall indemnify any person who is or has been a director,
officer, or employee of the Company, or who is serving or has served at its
request as a director, officer or employee of another corporation, against
expenses (including attorneys' fees), judgments, decrees, fines, penalties and
amounts paid in settlement incurred in connection with the defense of any
pending or threatened action, suit or proceeding, criminal or civil, to which he
is or may be made a party by reason of being or having been such director,
officer or employee; provided a determination is made

            (1) that he was not, and has not been adjudicated to have been,
      negligent or guilty of misconduct in the performance of his duty to the
      Company or other corporation of which he is or was a director, officer or
      employee; and

            (2) that he acted in good faith in what he reasonably believed to be
      the best interests of the Company or other corporation of which he is or
      was a director, officer or employee; and

            (3) that in any matter the subject of a criminal action, suit or
      proceeding, he had no reasonable cause to believe that his conduct was
      unlawful.

      The determination as to (2) or (3) of the preceding paragraph, and, in the
absence of an adjudication by a court of competent jurisdiction, as to (1) shall
be made by the directors of the Company acting at a meeting at which a quorum
consisting of directors who are not parties to or threatened with any such
action, suit or proceeding is present. Any director who is a party to or
threatened with any such action, suit or proceeding shall not be qualified to
vote and, if for this reason a quorum of directors cannot be obtained to vote on
such determination, it shall be made by independent legal counsel selected by
the directors of the Company (who may be the regular counsel of the Company) in
a written opinion.

      Expenses with respect to any pending or threatened action, suit or
proceeding may be paid by the Company in advance of the final disposition
thereof, upon receipt of an undertaking by or on behalf of the recipient to
repay such expenses unless it shall ultimately be determined that he is entitled
to be indemnified by the Company.

      The Company may purchase and maintain insurance on behalf of any person
who is or was a director, officer or employee, or any person who is or was
serving at the request of the Company as a director, officer or employee of
another corporation against any liability asserted against him or incurred by
him in any such capacity, or arising out of his status as such, whether or not
the Company would have the power to indemnify hi, against such liability under
the provisions of this Article VIII-A or of Chapter 1701 of the Ohio Revised
Code.

      The indemnification provided for by this Article VIII-A shall not be
deemed exclusive of any other rights to which any person may be entitled under
the articles, the regulations, any agreement, any insurance purchased by the
Company, vote of shareholders, or otherwise, and shall inure to the benefit of
the heirs, executors and administrators of such person.

                                       27


                         POWERS AND DUTIES OF DIRECTORS

                                   ARTICLE IX

      The Board of Directors shall have complete and absolute jurisdiction over
all questions relating to the property, affairs, management and business of the
corporation, including the election, removal, appointment, tenure, duties and
compensation of the officers of the Company. The Board shall meet at such times
and places, within or without the State of Ohio, as they from time to time
determine, may adopt such By-Laws for their government and may exercise all such
powers and do all such things as may be lawfully exercised and done by the
corporation, subject only to its Articles, this Code of Regulations and the
Constitution and Law of the State of Ohio.

      Any two or more offices may be held by the same person if so provided by
the Board of Directors in the Company's By-Laws, but no officer shall execute,
acknowledge or verify any instrument in more than one capacity if such
instrument is required by law or by the Company's By-Laws to be executed,
acknowledged or verified by any two or more officers.

      Without in anywise limiting the general powers hereinabove conferred and
subject to the provisions of the Company's Articles, the Board of Directors
shall have the following express powers:

      To purchase or otherwise acquire for the Company any property, rights, or
      privileges which the corporation may have the right to acquire, to enter
      into any contracts which they may deem advantageous to the corporation,
      and to fix the price to be paid by the corporation for any such property
      or contracts:

      To sell, transfer, lease, mortgage, pledge or otherwise dispose of its
      property; to pay for any property or rights acquired by the Company either
      wholly or partly in money, stock, debentures or other securities of the
      Company; to borrow money, and to issue the obligations of the Company
      therefore, and to secure the same by mortgage or pledge of all or any part
      of the property of the corporation, real or personal, and to pledge or
      sell the same for such sums and at such prices as in their uncontrolled
      discretion they may deem expedient;

      To appoint and to remove or suspend any such officers, agents or employees
      as the Board may from time to time think best, and to fix and determine,
      and, from time to time, change the duties of such officers, agents or
      employees, and to fix and change their salaries or emoluments;

      To fix and determine from time to time, and to vary the amount of working
      capital of the corporation, and to direct and determine and use and
      disposition of any surplus or net profits over and above the amount of
      capital paid in;

      To create an Executive Committee, composed of members of the Board of
      Directors, and to delegate to such Executive Committee such powers of the
      Board of Directors, and to such extent, as the Board of Directors may
      determine.

                                    ARTICLE X

      These Regulations may be amended at any time by the affirmative vote of
the holders of record of shares entitling them to exercise a majority of the
voting power on such proposal, or, without a meeting, by the written consent of
the holders of record of shares entitling them to exercise two-thirds of the
voting power on such proposal.

Effective Date: October 15, 2004.

                                       28

EX-31.1

                                                                    EXHIBIT 31.1

       CERTIFICATION UNDER SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, David W. Hockenbrocht, certify that:

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)) 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 quarterly report is
      being prepared;

      (b) 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

      (c) 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 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.

Date: November 12, 2004           /s/ DAVID W. HOCKENBROCHT
                                  ----------------------------------------------
                                  David W. Hockenbrocht, Chief Executive Officer

                                       29

EX-31.2

                                                                    EXHIBIT 31.2

        CERTIFICATION UNDER SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Richard L. Langley, certify that:

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)) 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 quarterly report is
      being prepared;

      (b) 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

      (c) 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 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.

Date: November 12, 2004              /s/ RICHARD L. LANGLEY
                                     -------------------------------------------
                                     Richard L. Langley, Chief Financial Officer

                                       30

EX-32.1

                                                                    EXHIBIT 32.1

                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Sparton Corporation (the "Company")
on Form 10-Q for the period ending September 30, 2004, as filed with the
Securities and Exchange Commission on the date hereof (the "Periodic Report"),
we, David W. Hockenbrocht, Chief Executive Officer of the Company, and Richard
L. Langley, Chief Financial Officer of the Company, certify, pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that:

      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: November 12, 2004          /s/DAVID W. HOCKENBROCHT
                                 ----------------------------------------------
                                 David W. Hockenbrocht, Chief Executive Officer

Date: November 12, 2004          /s/RICHARD L. LANGLEY
                                 -----------------------------------------------
                                 Richard L. Langley, Chief Financial Officer

                                       31