Spartan Motors Reports Solid Growth in Sales and Earnings for the Third Quarter of 2010

Oct 28, 2010, 08:00 ET from Spartan Motors, Inc.

CHARLOTTE, Mich., Oct. 28 /PRNewswire-FirstCall/ -- Spartan Motors, Inc. (Nasdaq: SPAR) today reported improved sales and solid profitability for its 2010 third quarter.  The results also included the sale of the assets of its Road Rescue ambulance business for approximately $8 million.  Spartan's third quarter performance was highlighted by increased sales of specialty vehicles and motorhome products, and substantially reduced operating expense as a percentage of sales compared to the same quarter of 2009.  

Third quarter highlights:

  • Net sales of $120.6 million (up 39.7 percent from Q3 2009 which did not include Utilimaster)
  • Gross margin of 16.4 percent of sales (down from 18.8 percent in Q3 2009)
  • Operating expenses of 11.9 percent of sales (down from 15.8 percent in Q3 2009)
  • Net earnings from continuing operations of  $3.5 million (up 112.1 percent from Q3 2009)
  • Cash balance of $16.7 million (up $6.5 million from Q2 2010)
  • Debt of $15.3 million (down $5.0 million from Q2 2010)
  • Consolidated backlog of $172.6 million (down from $205.7 million in Q2 2010)

"We are pleased with our accomplishments in the quarter.  Our focus on creating compelling products and driving growth in profitable markets continues to serve us well.  Our profitable results were complemented by the sale of Road Rescue, which was completed well ahead of expectations.  The improvements made to our cost structure earlier in the year – while very difficult – contributed greatly to our performance in the quarter," said John Sztykiel, President and CEO of Spartan Motors.  "Innovation is a core element of our culture, which continues to prove vital to our success at creating products for transforming markets and driving profitable market share.  Our progress is evident as we recently showcased our 2010 emergency-response cab and chassis at the Fire-Rescue International Conference (FRI) with a 2010 EPA-certified Cummins diesel engine.  In addition, the next-generation commercial vehicle and the N-Series gasoline chassis, generated through our new partnership with Isuzu, strategically position Spartan for significant long-term growth as we look to the delivery and service market."

Continued Investment in Profitable Growth Opportunities

  • Spartan Chassis remains committed to its emergency response chassis OEM base and end-users with continued investment in its product offerings.  This commitment includes the redesign of its three cab and chassis models to develop a solution that affords a more common architecture among its product offerings.  This approach results in greater opportunity for customization, while meeting all 2010 emission standards. 
  • Spartan Chassis received approval from Cummins on the installation of their 2010 EPA-certified 15-liter ISX diesel engine, which Spartan Chassis showcased at the FRI tradeshow.
  • The next-generation commercial vehicle program continues to progress, with vehicle durability testing and customer reviews started.  Production remains on track to begin in mid-2011 with initial shipments planned for the third quarter of 2011.
  • The N-series chassis assembly continues on schedule as machinery, equipment and tooling have been ordered, installation of equipment in existing facilities has begun, and the process of hiring and training associates is in progress.
  • The "Transformer," Crimson Fire's new offering, continues to gain momentum in the marketplace with numerous requests for regional configurations underway.
  • Crimson Fire Aerial is relocating to a leased purpose-built aerial manufacturing plant that will improve efficiencies, reduce overall costs of production and provide incremental growth opportunity.
  • Crimson Fire Aerial has entered the growing refurbishment business, to be performed in the new facility, and has already received contracts within this new niche.
  • Achieving ISO certification for the defense and government segment was a significant milestone this quarter as it positions Spartan to expand its portfolio of defense-related contracts.
  • Motorhome sales show continued stability with sales in the quarter up 94 percent from the same quarter of 2009, and sequentially up 3 percent from the second quarter of 2010.

Sale of Road Rescue Operations

  • Spartan fulfilled its commitment to exit the Road Rescue operations.  Substantially all the assets of Road Rescue were sold for approximately $8.0 million in cash, resulting in a small gain of approximately $0.5 million before tax, pending final purchase price adjustments for working capital.  

Joe Nowicki, Chief Financial Officer, said: "We made solid progress on redefining our cost structure.  Our collective focus on cost containment and process improvement paid off as operating expense as a percent of sales fell from 15.8 percent to 11.9 percent year-over-year.  Without the impact of restructuring charges, there was a 320 basis point drop over these same periods.  Cash balances were up almost $7 million from last quarter, while debt was down $5 million.  Our relentless efforts to enhance efficiencies, streamline operations, curb costs and strengthen our balance sheet have paved the way for delivering improved results in a challenging market."    

Financial Overview

  • Consolidated net sales for the quarter were $120.6 million, up 39.7 percent from the same quarter last year due to increased sales of motorhomes and specialty vehicles and incremental revenues from delivery and service vehicles not present in 2009.  Specialty vehicle sales for the quarter were comprised of Iraqi Light Armored Vehicles (ILAV), Special Operations Command (SOCOM) units and drill rigs.  
  • Consolidated sales were also up sequentially by $4.9 million from second quarter of 2010, driven by service and delivery vehicle sales.
  • Gross margin in the third quarter of 2010 fell to 16.4 percent of sales from the third quarter of 2009 due to a shift in mix toward lower margin products.
  • Gross margin was up significantly compared to the second quarter of 2010, from 14.3 percent due to increased volumes at Utilimaster and improved efficiencies in the emergency response market.  
  • As a percent of revenues, operating expense fell from 15.8 percent in the third quarter of 2009 to 11.9 percent in the current quarter driven by restructuring efforts over the past year.
  • Net earnings from continuing operations for the quarter increased $1.9 million or 112.1 percent from $1.6 million, or $0.05 per diluted share in the prior year's third quarter to $3.5 million, or $0.11 per diluted share in the third quarter of 2010.
  • Debt was reduced by $31.1 million from Dec. 31, 2009 to $15.3 million at Sept. 30, 2010.
  • Consolidated backlog at Sept. 30, 2010 was $172.6 million, down from $205.7 million last quarter due to the overall economic climate and accelerated orders previously received and filled in advance of the 2010 engine emission change.

Sztykiel concluded:  "While there were a significant number of positive results posted in our third quarter, we remain cautious as we look forward given the continued uncertainty in the economic climate in North America.  Mounting budgetary pressure will continue to impact purchasing decisions at the government, municipal, business and personal levels.  Although these present challenges, which in some respect are reflected in the backlog, we have strategic and operational plans to deliver improved performance and visionary products that will serve the evolving specialty vehicle markets."    

Conference Call, Webcast and Roadcast™

Spartan Motors will host a conference call for analysts and portfolio managers at 10 a.m. ET today to discuss these results and current business trends.  To listen to a live webcast of the call, please visit www.spartanmotors.com, click on "Shareholders," and then on "Webcasts."

Spartan also will update the financial information on its Roadcast "digital roadshow" for investors.  To launch the Spartan Motors Roadcast, please visit www.spartanmotors.com and look for the "Virtual Road Show" link on the right side of the page.  

About Spartan Motors

Spartan Motors, Inc. (www.spartanmotors.com) designs, engineers and manufactures specialty chassis, specialty vehicles and truck bodies and aftermarket parts for the outdoor recreation/RV, emergency-response, defense, government services, and delivery and service markets.  The Company's brand names – Spartan™, Crimson Fire™, Crimson Fire Aerials™ and Utilimaster® – are known for quality, value, service and being the first to market with innovative products.  The Company employs approximately 1,600 at facilities in Michigan, Pennsylvania, South Dakota, Indiana and Texas.  Spartan reported sales of $430 million in 2009 and is focused on becoming a global leader in the manufacture of specialty vehicles and chassis.

This release contains several forward-looking statements that are not historical facts, including statements concerning our business, strategic position, financial strength, future plans, objectives, and the performance of our products. These statements can be identified by words such as "believe," "expect," "intend," "potential," "future," "may," "will," "should," and similar expressions regarding future expectations.  These forward-looking statements involve various known and unknown risks, uncertainties, and assumptions that are difficult to predict with regard to timing, extent, and likelihood.  Therefore, actual performance and results may materially differ from what may be expressed or forecasted in such forward-looking statements.  Factors that could contribute to these differences include operational and other complications that may arise affecting the implementation of our plans and business objectives; continued pressures caused by economic conditions and the pace and extent of the economic recovery; challenges that may arise in connection with the integration of new businesses or assets we acquire or the disposition of assets; issues unique to government contracting, such as competitive bidding processes, qualification requirements, and delays or changes in funding; disruptions within our dealer network; changes in our relationship with major customers, suppliers, or other business partners, including Isuzu; changes in the demand or supply of products within our markets or raw materials needed to manufacture those products; and changes in laws and regulations affecting our business.   Other factors that could affect outcomes are set forth in our Annual Report on Form 10-K and other filings we make with the Securities and Exchange Commission (SEC), which are available at www.sec.gov or our website.  All forward-looking statements in this release are qualified by this paragraph.  Investors should not place undue reliance on forward-looking statements as a prediction of actual results.  We undertake no obligation to publicly update or revise any forward-looking statements in this release, whether as a result of new information, future events, or otherwise.

Spartan Motors, Inc. and Subsidiaries

Condensed Consolidated Statements of Income

Three Months Ended September 30, 2010 and 2009

September 30, 2010

September 30, 2009

(Unaudited)

(Unaudited)

$-000-

%

$-000-

%

Sales

120,572

86,306

Cost of products sold

100,802

69,885

Restructuring charges

-

223

Gross profit

19,770

16.4

16,198

18.8

Operating expenses:

Research and development

4,001

3.3

3,958

4.6

Selling, general and administrative

10,400

8.6

9,077

10.6

Restructuring charges

-

0.0

550

0.6

Total operating expenses

14,401

11.9

13,585

15.8

Operating income

5,369

4.5

2,613

3.0

Other income (expense):

Interest expense

(238)

(0.2)

(324)

(0.4)

Interest and other income

305

0.2

223

0.3

Total other income (expense)

67

0.0

(101)

(0.1)

Earnings before taxes

5,436

4.5

2,512

2.9

Taxes

1,952

1.6

869

1.0

Net earnings from continuing operations

3,484

2.9

1,643

1.9

Loss from discontinued operations (net of tax),

 including gain on sale in 2010

(167)

(0.1)

(894)

(1.0)

Net earnings

3,317

2.8

749

0.9

Basic net earnings (loss) per share

Earnings from continuing operations

Loss from discontinued operations

$     0.11

$   0.05

(0.01)

(0.03)

$     0.10

$   0.02

Diluted net earnings (loss) per share

Earnings from continuing operations

$     0.11

$   0.05

Loss from discontinued operations

(0.01)

(0.03)

$     0.10

$   0.02

Basic Weighted Average Common Shares Outstanding

33,056

32,914

Diluted Weighted Average Common Shares Outstanding

33,079

33,126

Spartan Motors, Inc. and Subsidiaries

Condensed Consolidated Statements of Income

Nine Months Ended September 30, 2010 and 2009

September 30, 2010

September 30, 2009

(Unaudited)

(Unaudited)

$-000-

%

$-000-

%

Sales

353,861

313,002

Cost of products sold

299,767

246,762

Restructuring charges

990

264

Gross profit

53,104

15.0

65,976

21.1

Operating expenses:

Research and development

12,943

3.7

12,753

4.1

Selling, general and administrative

32,990

9.3

32,432

10.4

Restructuring charges

1,006

0.3

556

0.2

Total operating expenses

46,939

13.3

45,741

14.7

Operating income

6,165

1.7

20,235

6.4

Other income (expense):

Interest expense

(812)

(0.2)

(973)

(0.3)

Interest and other income

238

0.1

549

0.2

Total other income (expense)

(574)

(0.1)

(424)

(0.1)

Earnings before taxes

5,591

1.6

19,811

6.3

Taxes

2,009

0.6

6,742

2.1

Net earnings from continuing operations

3,582

1.0

13,069

4.2

Loss from discontinued operations (net of tax),

 including gain on sale in 2010

(2,872)

(0.8)

(884)

(0.3)

Net earnings

710

0.2

12,185

3.9

Basic net earnings (loss) per share

Earnings from continuing operations

$     0.11

$     0.40

Loss from discontinued operations

(0.09)

(0.03)

$     0.02

$     0.37

Diluted net earnings (loss) per share

Earnings from continuing operations

$     0.11

$     0.40

Loss from discontinued operations

(0.09)

(0.03)

$     0.02

$     0.37

Basic Weighted Average Common Shares Outstanding

32,961

32,678

Diluted Weighted Average Common Shares Outstanding

33,043

32,892

Spartan Motors, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

Three Months Ended September 30, 2010 and 2009

September 30,  2010

December 31, 2009

(Unaudited)

(Unaudited)

$-000-

$-000-

ASSETS

Current assets:

Cash and cash equivalents

$            16,742

$          18,475

Accounts receivable, net

49,976

44,974

Inventories

78,451

96,330

Deferred income tax assets

6,984

6,984

Income taxes receivable

2,966

4,212

Other current assets

3,566

3,223

Other current assets from discontinued operations

-

10,562

Total current assets

158,685

184,760

Property, plant and equipment, net

72,930

77,581

Goodwill and other intangible assets, net

29,441

29,895

Other assets

1,039

1,041

Total assets

$          262,095

$        293,277

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Accounts payable

$            29,218

$          19,523

Accrued warranty

5,738

6,296

Accrued compensation and related taxes

3,873

5,410

Accrued vacation

1,750

1,783

Accrued customer rebates

1,542

1,324

Deposits from customers

5,063

11,571

Other current liabilities and accrued expenses

6,527

6,200

Current portion of long-term debt

10,109

11,146

Other current liabilities from discontinued operations

-

1,770

Total current liabilities

63,820

65,023

Other non-current liabilities

4,066

4,189

Long-term debt, less current portion

5,142

35,204

Deferred income tax liabilities

8,341

8,341

Shareholders' equity:

Common stock

332

329

Additional paid in capital

68,234

67,099

Retained earnings

112,160

113,092

Total shareholders' equity

180,726

180,520

Total liabilities and shareholders' equity

$          262,095

$        293,277

Spartan Motors, Inc. and Subsidiaries

Sales and Other Financial Information by Business Segment

Three and Nine Months Ended September 30, 2010

Unaudited

Three Months Ended September 30, 2010 (amounts in thousands of dollars) (1)

Business Segments

Specialty Vehicles

Delivery & Service Vehicles

Other

Consolidated

Fire Truck Chassis Sales

33,437

33,437

Fire Truck Body Sales

9,546

9,546

Motorhome Chassis Sales

21,526

21,526

Utilimaster Product Sales

27,616

27,616

Other Product Sales

  Vehicles

8,336

8,336

  Aftermarket Parts and Assemblies

20,111

20,111

Total Net Sales

92,956

27,616

-

120,572

Interest Expense (Income)

348

34

(114)

268

Depreciation and Amortization Expense

1,232

788

592

2,612

Net Earnings (Loss) from Continuing Operations

4,053

25

(594)

3,484

Nine Months Ended September 30, 2010 (amounts in thousands of dollars) (1)

Business Segments

Specialty Vehicles

Delivery & Service Vehicles

Other

Consolidated

Fire Truck Chassis Sales

110,325

110,325

Fire Truck Body Sales

36,573

36,573

Motorhome Chassis Sales

69,847

69,847

Utilimaster Product Sales

73,825

73,825

Other Product Sales

  Vehicles

18,339

18,339

  Aftermarket Parts and Assemblies

44,952

44,952

Total Net Sales

280,036

73,825

-

353,861

Interest Expense (Income)

1,051

101

(340)

812

Depreciation and Amortization Expense

3,705

2,642

1,780

8,127

Net Earnings (Loss) from Continuing Operations

8,356

(2,378)

(2,396)

3,582

(1)  Amounts restated retrospectively for segment reclassification and new discontinued operations.

Period End Backlog (amounts in thousands of dollars)

September 30, 2009

December 31, 2009

March 31, 2010

June 30, 2010

September 30, 2010

    Fire Truck Chassis*

82,386

123,791

101,730

79,336

67,629

    Fire Truck Bodies*

40,381

27,736

29,065

23,475

22,011

    Motorhome Chassis *

9,589

20,022

16,731

13,048

13,049

    Other Product *

       Vehicles

4,214

16,970

15,396

14,276

12,514

       Aftermarket Parts and Assemblies

8,725

11,467

7,864

32,311

18,375

         Total Specialty Vehicles

145,295

199,986

170,786

162,446

133,578

    Delivery and Service Vehicles *

34,059

35,146

43,292

38,989

         Total Backlog (Continuing Operations)

145,295

234,045

205,932

205,738

172,567

* Anticipated time to fill backlog orders; 2 months or less for motorhome chassis, 5 months or less for Utilimaster and 6 months or less for fire truck and other products. Beginning in December 2009, Utilimaster was included in the backlog.

SOURCE Spartan Motors, Inc.



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http://www.spartanmotors.com