Raw Materials
Materials for Sparton's operations are generally available from a variety of worldwide sources, except for selected components.
Access to competitively priced materials is critical to success in the company's businesses. In certain markets, the volume purchasing power
of Sparton's larger competitors creates a cost advantage for them. Sparton has encountered availability and extended lead time issues
on some electronic components due to strong market demand, and this condition resulted in higher prices and late deliveries.
However, Sparton does not expect to encounter significant long-term problems in obtaining sufficient raw materials.
The risk of material obsolescence in the company's businesses is less significant than that which exists in many other markets since
raw materials and component parts are generally purchased only upon receipt of a customer's order. However, excess material
resulting from order lead-time is a risk factor due to potential order cancellation or design changes by customers.
A significant portion of the company's costs are related to electronic components purchased to produce its products.
In some cases Sparton's customers dictate it to purchase particular components from a single or limited number of suppliers.
Supply shortages for a particular component can delay production, and thus delay shipments to customers and the associated
revenue of all products using that component. This could cause Sparton to experience a reduction in sales, increased
inventory levels and costs, and could adversely affect relationships with existing and prospective customers. In the past,
Sparton has secured sufficient allocations of constrained components so that revenue was not materially impacted. If Sparton is unable
to purchase necessary components under favorable terms, including at favorable prices and with the order lead times
needed for the efficient and profitable operation of the company's factories, its results of operations could suffer.
According to Sparton, alternative suppliers are available to provide the components, including unique components, necessary to manufacture
its customers' products.
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