I’m confident in the vision I’m articulating. I surround myself with the smartest, hardestworking people who are at least as passionate as I am. I’ve never felt any shame in saying I don’t have all the answers. I’m pretty capable in every area and just dangerous enough to understand what’s going on in all areas, but not so deeply skilled that I have all the answers.
I’ve carried teams with me to three or four different companies. Most of my staff has been with me in multiple places. It makes it easier when you know just how smart a guy or gal is and they just keep going with you from one cash-strapped turnaround bankruptcy to the next one. I have personal relationships across all levels of the company, which is why I don’t ever want it to get so big it loses that intimacy.
Getting employees who may be discouraged about their roles fully on board can be tough. As people own it and feel a role in it, they will become part of the solution. I think we have a highly technical, highly engaged, highly accountable workforce from top to bottom.
We’ve created a variety of incentives within the company for generating ideas, and we have a recognition methodology. We reward people monetarily on a quarterly basis. What’s really important is that people understand what their role is in that. Otherwise it just becomes a handout program in which people don’t really understand why they receive what they do. I see that time and again in acquisitions where they have these interesting profit-sharing indexes that nobody seems to be able to explain.
Among its peers, Sparton Corporation has a unique set of capabilities, a unique geographic breadth, and a different philosophical approach to how it supports the market. We have innovative quality techniques that have us performing in rare air, service techniques that have us performing in ways that others choose not to, and in-house engineering and testing capabilities that others lack. We’ve maintained these investments and they have paid dividends in growth and earnings and the way we partner with customers. Total shareholder return over the past five years has been about 1,800 percent. Our stock has beaten every major index it could be compared against and outpaced just about every one of our comparables over that time frame.
Our business is approximately 50 percent in the medical arena and 33 percent in the defense space, with the remainder being in the industrial market. Within that end-market mix we are about two-thirds manufacturing services and one-third in naval defense products. We have our own proprietary underwater listening and communication device, which was recently involved in the search for the missing MH 370 Malaysian aircraft.
As a result of recent acquisitions, we can now help with up-front design work, software development, product development, and prototyping. In addition to manufacturing and distribution, we’ve got the engineering resources to support it. Furthermore, we’ll continue to integrate our services and product offerings to provide a more robust supply chain for our customers. This can include the design and manufacturing of a medical device, and the single-source supply of the monitor on that device, as well as other components.
Our first five-year strategy focused on our current markets as a manufacturing services provider. We want to provide additional engineered products as well. Now we’re opening up that aperture. I wouldn’t say the strategy for the next five years is a 180 degree turn, but it’s a bit of a pivot to offer products to the services we provide.
As we introduce the next five-year strategy that will take us out to 2020, we will build on those table stakes of service, geographic breadth, and capabilities. Give me a napkin with an idea, and I can help bring it to market with all of our engineering expertise, then manufacture, supply, and service it. Currently, about five percent of our business is design and engineering. We expect that to be a bigger piece going forward. Additionally, we plan to further expand our geographic reach, deepen our engineering capabilities, continue to extend into our current end markets, and add products intended to solve customer needs.
