A Letter From CEO Cary B. Wood

Welcome to a new era at Sparton Corporation. My tenure with Sparton began in late November of 2008 and my mandate is to improve Sparton's fortunes in both the near term and for the future. Along with the leadership team of Sparton, I have started to implement proven methods to begin our transformation. The changes will be immediate, aggressive, appropriate, focused and will be sustainable.

I am very excited about what the future holds for our Company and wish to highlight some of the necessary measures which have either been taken, or will be taken, to ensure the viability of Sparton Corporation for both today and tomorrow.

First, we are nearing completion of organizing a strong, lean and highly competent leadership team. The Company has repositioned current personnel, playing to their strengths, while we have added an exemplary team of leaders who excel in managing the functional areas of operations, manufacturing engineering, business development, supply chain and finance, particularly in a performance and financial turn-around climate. These individuals bring in a vast array of knowledge and skills such as Lean Manufacturing, Six Sigma, leadership building, financial management and the strategic growth expertise which will streamline our processes, remove waste and improve performance, while carefully and deliberately growing the Company. We believe their contributions will have an immediate and positive impact upon our organization.

In conjunction with upgrading our operating expertise, Sparton has also contracted with a financial expert who will assist the Company in the strategic management of its cash flow in funding our turn-around strategy. With the aid of the consultant’s guidance, management is pursuing all avenues to optimize Sparton's liquidity in the near term. As of recent, we entered into an extension of our agreement for a secured credit facility to aid in immediate term liquidity. In addition, the Company is exploring all of its options to enhance availability of cash through such actions as divesting real estate holdings, intellectual property and other prior investments. The Company is fortunate to have a great many assets. Essentially, I am committed to doing what needs to be done so that Sparton will continue operating on a daily basis until such time an extended financing package is secured. Our ultimate objective is to expand the facility to provide the liquidity to fund the Company’s turn-around plan as well as other strategic ambitions. Sparton has hired an outside firm, NachmanHaysBrownstein, Inc. (NHB), to assist us in obtaining that financing. NHB has a great deal of experience in searching and obtaining financing for companies like ours.

Next, we are assessing the advantage of segmenting our Company's financial reporting. The newly proposed organizational structure of Sparton will coincide with the alignment of the Company's financial reporting structure, emphasizing cost accounting at the source. Sparton is moving toward operating as three separate business units - electronics manufacturing, medical devices and government systems. All units will be responsible for the performance of the corresponding facilities that support the business unit. This will allow new visibility within the business units enabling management to quickly discern where performance issues are, as well as the strengths and weaknesses within the various business units, heightening leadership accountability for the various P&L statements.

Simultaneously, the Company is exploring its current asset utilization strategy, exploring ways to optimize facilities, capital equipment and overhead, ensuring the success of Sparton long after it achieves profitability. Sparton will operate at full capacity in upgraded facilities that have been streamlined to accommodate the volume, while optimizing the economic impact of our assets such as equipment, materials and personnel. Our team is quickly mapping out our course of action and will take the necessary steps to optimize Sparton resources within the next fiscal quarter.

Beyond effectively managing our financial fortunes, we are determined that the new Sparton will be a "best in class" operational performer. Within my first 100 days, we have already begun deploying a robust and comprehensive Lean/Quality Strategy. Top performers have been chosen from each facility to champion these efforts and they will receive the proper training to execute a "best in class" set of standards with the attributes from lean deployment strategies implemented by many of the high performance companies. We expect the teams to begin baselining the business thru the use value stream mapping within the next month. This effort will assist in determining the opportunities to better streamline and reduce costs of operations. The proper execution and deployment of our Lean/Quality Strategy is imperative to the financial success of Sparton.

In conjunction with our new Lean enterprise strategy, Sparton will introduce a new, robust and efficient New Product Introduction (NPI) process to effectively transition new customers' assemblies from concept to pre-production and ultimately to full scale production. The new NPI process is the key to successfully managing a manufacturing workflow designed to accommodate the shorter production runs of our business. Our new system will marginalize the downtime of a product's introduction into manufacturing and ensure the continuous movement of our customers' assemblies through operations.

Be assured that while we address today's immediate needs, we are also looking toward the future and are very optimistic about Sparton's growth and longevity in the EMS market. Our team will focus on maintaining and growing the product market portfolio, while exploring the potential of diversification into emerging markets. Along with exploring new market opportunities, Sparton will fully utilize its offshore operations and seeks to expand its geographical reach offering customers a lower cost solution. Within its current markets, Sparton will implement and manage a controlled growth strategy through acquisitions, organically or through other business opportunities.

Time is of the essence and we are moving forward quickly and decisively. There are many difficult decisions to yet make. I will be a proactive communicator to all of our partners, providing timely updates and information on our progress.

I am encouraged and optimistic about the future of Sparton Corporation and hope that you will also share my enthusiasm. Thank you for your continuing support.

Cary B. Wood
CEO, Sparton Corporation