Spartan Motors Reports Third Quarter 2012 Results PR Newswire CHARLOTTE, Mich., Oct. 30, 2012 CHARLOTTE, Mich., Oct. 30, 2012 /PRNewswire/ --Spartan Motors, Inc. (NASDAQ: SPAR) ("Spartan" or the "Company") today announced operating results for the third quarter of 2012. Revenues totaled $112.9 million compared to $120.3 million in the third quarter of 2011. Spartan reported a net loss of $0.3 million for the third quarter of 2012, or ($0.01) per diluted share compared to net income of $3.2 million, or $0.10 per diluted share in the third quarter of 2011. Excluding pre-tax restructuring charges of $1.6 million, Spartan posted adjusted operating earnings for the quarter of $0.02 per diluted share. For the quarter ended Sept. 30, 2012, Spartan began reporting its operating results in three segments: Emergency Response (ER), Delivery & Service Vehicles (DSV) and Specialty Vehicles (SV). Results for these segments are included below. Third Quarter 2012 Summary: oNet sales of $112.9 million (down 6% from Q3 2011 sales of $120.3 million): oEmergency Response sales totaled $39.9 million, up 12.9% from $35.3 million in Q3 2011 oDelivery & Service Vehicle sales totaled $49.0 million, down 20.0% from $61.2 million in Q3 2011 oSpecialty Vehicles sales totaled $23.9 million, up 0.8% from $23.8 million in Q3 2011 oGAAP results (including restructuring charges): oGross margin of 11.5% of sales, down from 17.0% in Q3 2011 oOperating loss of $0.3 million and operating margin of (0.2)%, compared to operating income of $5.3 million and operating margin of 4.4% in Q3 2011 oNet loss of $0.3 million, or ($0.01) per diluted share oAdjusted operating results (non-GAAP, excluding restructuring charges): oAdjusted gross margin of 12.9% of sales oAdjusted operating income of $1.4 million, or 1.2% of sales oAdjusted net income of $0.7 million, or $0.02 per diluted share oRestructuring charges totaled $1.6 million, or $0.03 per diluted share in Q3 2012, mostly related to the previously disclosed sale of the Wakarusa, Ind. campus and move to Bristol, Ind. oTax expense for the quarter included $0.2 million related to a prior period tax position oEarnings before interest, taxes, depreciation and amortization (EBITDA) was $3.6 million in Q3 2012 versus $7.6 million in Q3 2011 oEnding consolidated backlog of $168.3 million at Sept. 30, 2012 versus $173.3 million at June 30, 2012 and $142.6 million at Sept. 30, 2011; Q3 2012 new orders totaled $108.1 million oSales to businesses and consumers were 61% of total revenue versus 63% in Q2 2011 oCash balance of $26.7 million at Sept. 30, 2012 compared to $33.3 million at June 30, 2012 John Sztykiel, Chief Executive Officer of Spartan Motors, Inc., commented on the third quarter, "Spartan continued its trend of generating an adjusted operating profit through the third quarter of 2012 as our Emergency Response and Specialty Vehicles units posted growth in revenue and order backlog compared to the third quarter of 2011. The improved performance of these units underscores the importance of our diversification strategy as the growth in these segments partially offset a slower quarter in our Delivery & Service Vehicles unit. We are executing our plan and continuing our momentum in returning our ER and Specialty Vehicles units to growth and taking action to improve our operations." Emergency Response Vehicles and Specialty Vehicles Gain in Third Quarter 2012 oSpartan's Emergency Response Vehicles segment, which includes both the Emergency Response Chassis and Emergency Response Bodies operations, posted a sales gain of $4.6 million, or 12.9%, in the third quarter of 2012 compared to the prior year. Sales of Spartan's custom chassis accounted for most of the increase, as the market gradually recovered and responded favorably to Spartan's new product offerings. During the quarter, Spartan shipped the first few ER chassis equipped with the Spartan APS advanced airbag restraint system. oThe Specialty Vehicles segment generated revenue of $23.9 million in the third quarter of 2012, up 0.8% from $23.8 million in the year-ago third quarter. Most of the increase came from higher sales of recreational vehicle chassis, which totaled $17.1 million for the third quarter of 2012, an increase of $3.0 million, or 20.9%, over the third quarter of 2011. RV chassis sales increased as RV manufacturers using Spartan's custom chassis increased their sales and market share during the third quarter of 2012. oThe Delivery & Service Vehicles segment posted third quarter 2012 revenue of $49.0 million, down from $61.2 million in the third quarter of 2011. The revenue decline was largely due to the decline in aftermarket accessory sales during the most recent third quarter. Vehicle sales in Q3 2012 were adversely affected to a lesser extent by a decline in walk-in van sales compared to Q3 2011 when DSV shipped a record number of units to a major customer. Shortages of some materials also pushed out production of some walk-in van units beyond Q3 2012. Partially offsetting the decline in walk-in van sales was an increase in truck body sales in Q3 2012 compared to Q3 2011. In addition, production of the Reach van in Charlotte commenced during the third quarter, with 182 units shipped during the period. oSpartan's gross margin excluding restructuring items was 12.9% in the third quarter of 2012 versus 17.0% in the third quarter of 2011. Compared to the third quarter of 2011, the gross margin was negatively impacted by lower revenue, including the absence of keyless entry sales at DSV. Including restructuring items of $1.5 million in the third quarter of 2012, gross margin was 11.5% of sales. oRestructuring charges were related to the relocation of DSV's Utilimaster operations to Bristol, Ind., including $0.9 million in impairment charges to the value of the Wakarusa, Ind. campus. The additional impairment was taken to reflect the expected realizable value of the buildings as discussed in the Company's prior releases. oOperating expenses in the third quarter of 2012 declined by $2.1 million to $13.1 million, or 11.6% of sales, excluding restructuring charges, compared to $15.2 million, or 12.6% of sales, in the third quarter of 2011. Including restructuring charges of $0.1 million, or 0.1% of sales, operating expenses for the third quarter of 2012 amounted to $13.2 million, or 11.7% of sales. Operating expenses declined year over year due to management's ongoing efforts to control expenses. oTax expense for the third quarter of 2012 was $0.1 million. The Company's effective tax rate was impacted unfavorably due to a state court ruling regarding a prior period tax position that occurred in the third quarter. This event was a non-recurring, discrete event for tax purposes that required recognizing the entire impact of the uncertain tax position in the third quarter. Investment at Bristol Continues, Inventories Rise Due to Product Shipment Timing oAt the end of the third quarter of 2012, the Company's cash balance stood at $26.7 million, down from $33.3 million at the end of the second quarter of 2012. Cash balances were reduced by $6.6 million due to an increase in inventory of $13.3 million, partially offset by an increase in accounts payable of $7.6 million. Inventories in the ER segment increased by $6.6 million, largely due to delays in receiving commercial chassis that pushed out production schedules and shipment dates beyond Sept. 30, 2012. During the quarter, the Company invested $4.3 million in capital equipment, including $3.6 million for the Bristol, Ind. facility. Gradual Recovery in Markets Continues, Management Cautiously Optimistic Joe Nowicki, Spartan's Chief Financial Officer, stated regarding the Company's third quarter performance and outlook, "Our Emergency Response and Specialty Vehicles units performed well in the third quarter of 2012 and are expected to maintain that momentum through the end of 2012. The third quarter was also a period of significant investment in Bristol which, along with higher inventories in the DSV and ER units, reduced our cash balances. We expect inventories to be reduced during the fourth quarter of 2012, along with lower capital spending. With orders booked for the rest of the year, we look for 2012 revenue to increase from 2011 in the mid- to upper-single digits and expect the adjusted gross margin for the year to be in the 14 – 14.5% range, with adjusted operating expenses of 12 – 12.5%. Looking ahead to 2013, we expect revenue to grow in the mid-single digits over 2012. We will continue to manage our cost structure and expect to make progress toward our goals of 17% gross margins, 11% operating expenses, and 6% operating income." John Sztykiel concluded, "Despite the challenging year-over-year comparison to the third quarter of 2011, we kept moving forward toward our goals. Some of our accomplishments include moving Reach production to Charlotte and shipping 182 units during the quarter, making more progress on relocating Utilimaster to Bristol, Ind. and receiving additional orders for the Reach from UPS and FedEx. Operationally, the fourth quarter of 2012 is important as we start the move of Utilimaster from Wakarusa, Ind. to Bristol, which we expect to yield annualized savings of $4 million. The investments we made in Emergency Response are paying off and our business is becoming stronger. In closing, we have two strong brands, Utilimaster and Spartan, as demonstrated by the 18% growth in backlog compared to the third quarter of 2011, that are leading us forward in these challenging times. Recognizing the positives with the challenges, we will continually refine and execute our plan to ensure that we move Spartan forward." Reconciliation of Non-GAAP Financial Measures This release contains adjusted gross profit, adjusted gross margin, adjusted operating expenses, adjusted operating income, adjusted net earnings (loss) and adjusted earnings (loss) per share measures, as well as earnings before interest, taxes, depreciation and amortization (EBITDA), which are all Non-GAAP financial measures. These are calculated by excluding items that we believe to be infrequent or not indicative of our operating performance. For the periods covered by this release such items consist of expenses associated with restructuring actions taken to improve the efficiency and profitability of certain of our manufacturing operations and adjust our cost structure to the current business climate. We present these adjusted Non-GAAP measures because we consider them to be important supplemental measures of our performance and believe them to be useful to show ongoing results from operations distinct from items that are infrequent or not indicative of our operating performance. We define EBITDA as operating income (loss) excluding restructuring charges, less depreciation and amortization. We believe EBITDA is a useful tool that allows comparison of financial performance by eliminating the impact of differences in capital structure, restructuring charges and capital spending, among others, between different time periods or industries. The adjusted Non-GAAP measures are not measurements of our financial performance under GAAP and should not be considered as an alternative to gross profit, gross margin, operating expense, operating income, net earnings (loss) or earnings (loss) per share under GAAP. These adjusted Non-GAAP measures have limitations as analytical tools and should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. In addition, in evaluating the adjusted Non-GAAP measures, you should be aware that in the future we may incur expenses similar to the adjustments in this presentation, despite our assessment that such expenses are infrequent or not indicative of our operating performance. Our presentation of the adjusted Non-GAAP measures should not be construed as an inference that our future results will be unaffected by unusual or infrequent items. We compensate for these limitations by providing equal prominence of our GAAP results and using adjusted Non-GAAP measures only as a supplement. The following table reconciles gross profit to adjusted gross profit, gross margin to adjusted gross margin, operating income to adjusted operating income, operating expense to adjusted operating expense, net earnings (loss) to adjusted net earnings (loss), earnings (loss) per share to adjusted earnings (loss) per share and operating income (loss) to EBITDA for the periods indicated. Financial Summary (Non-GAAP) (In thousands, except per share data) (Unaudited) Three Months Ended September Nine Months Ended September 30, 30, 2012 % of 2011 % of 2012 % of 2011 % of sales sales sales sales Gross profit/Gross $12,968 11.5 $20,446 17.0 $45,456 13.1 $46,136 14.7 margin Add back: restructuring 1,543 1.4 - - 5,760 1.7 1,731 0.5 charges Adjusted gross $ profit/Adjusted $ 14,511 12.9 $20,446 17.0 51,216 14.8 $47,867 15.2 gross margin Operating expenses $ 13,243 11.7 $15,170 12.6 $ 13.1 $45,831 14.6 45,266 Less: restructuring 100 0.1 - - 1,976 0.6 1,050 0.3 charges Adjusted operating $ 13,143 11.6 $15,170 12.6 $ 12.5 $44,781 14.2 expenses 43,290 Three Months Ended September Nine Months Ended September 30, 30, 2012 % of 2011 % of 2012 % of 2011 % of sales sales sales sales Operating income $ $ $ (loss)/Operating (275) (0.2) $ 5,276 4.4 190 0.1 305 0.1 margin Add back: restructuring 1,643 1.5 - - 7,736 2.2 2,781 0.9 charges Adjusted operating $ $ income/Adjusted 1,368 1.2 $ 5,276 4.4 7,926 2.3 $ 3,086 1.0 operating margin Net income (loss) $ (0.3) $ 3,198 2.7 $ 0.0 $ 0.0 (327) 9 80 Add back: restructuring 1,002 0.9 - - 4,719 1.4 1,796 0.6 charges, net of tax Adjusted net $ 0.6 $ 3,198 2.7 $ 1.4 $ 1,876 0.6 income 675 4,728 Net earnings per $ $ $ $ share - basic and (0.01) 0.10 - - diluted Add back: restructuring 0.03 - 0.14 0.06 charges, net of tax Adjusted net $ $ $ $ earnings per share 0.02 0.10 0.14 0.06 - diluted Operating income $ $ 5,276 (loss) (275) Add back: restructuring 1,643 - charges Adjusted operating 1,368 5,276 income (loss) Add back: depreciation and 2,229 2,291 amortization Earnings before interest, taxes, $ $ depreciation and 3,597 7,567 amortization 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." For more information about Spartan, please view the Company's Roadcast "digital roadshow" designed 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. designs, engineers and manufactures specialty chassis, specialty vehicles, truck bodies and aftermarket parts for the recreational vehicle (RV), emergency response, government services, defense, and delivery and service markets. The Company's brand names – Spartan™, Spartan Chassis™, Spartan ER™, Spartan ERV™ and Utilimaster® - are known for quality, performance, service and first-to-market innovation. The Company employs approximately 1,800 associates at facilities in Michigan, Pennsylvania, South Dakota, Indiana, Florida and Texas. Spartan reported sales of $426 million in 2011 and is focused on becoming a global leader in the design, engineering and manufacture of specialty vehicles and chassis. Visit Spartan Motors at www.spartanmotors.com. 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 assumptionsthat 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; restructuring of our operations, and/or our expansion into new geographic markets; 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 relationships 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 Balance Sheets (In thousands, except par value) September 30, 2012 December 31, (Unaudited) 2011 ASSETS Current assets: Cash and cash equivalents $ 26,690 $ 31,677 Accounts receivable, less allowance of 50,043 40,042 $1,010 and $749 Inventories 70,796 66,991 Deferred income tax assets 6,425 6,425 Income taxes receivable 5,368 1,479 Assets held for sale 4,973 - Other current assets 2,247 2,455 Total current assets 166,542 149,069 Property, plant and equipment, net 58,273 65,399 Goodwill 20,815 20,815 Intangible assets, net 11,275 11,943 Other assets 1,601 1,383 TOTAL ASSETS $ 258,506 $ 248,609 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 30,092 $ 21,649 Accrued warranty 6,262 5,802 Accrued customer rebates 2,115 1,546 Accrued compensation and related taxes 6,295 5,670 Deposits from customers 6,550 7,902 Other current liabilities and accrued 8,738 7,772 expenses Current portion of long-term debt 55 55 Total current liabilities 60,107 50,396 Other non-current liabilities 3,742 2,932 Long-term debt, less current portion 5,046 5,084 Deferred income tax liabilities 7,359 7,359 Shareholders' equity: Preferred stock, no par value: 2.0 shares authorized (none issued) - - Common stock, $0.01 par value; 40,000 shares authorized; 33,821 and 33,596 338 336 outstanding Additional paid in capital 72,240 71,145 Retained earnings 109,674 111,357 Total shareholders' equity 182,252 182,838 TOTAL LIABILITIES AND SHAREHOLDERS' $ 258,506 $ 248,609 EQUITY Spartan Motors, Inc. and Subsidiaries Condensed Consolidated Statements of Operations (In thousands, except per share data) (Unaudited) Three Months Ended September 30, Nine Months Ended September 30, 2012 % of 2011 % of 2012 % of 2011 % of sales sales sales sales Sales $112,857 $ $ $ 120,303 346,087 314,800 Cost of products 98,346 87.1 99,857 83.0 294,871 85.2 266,933 84.8 sold Restructuring 1,543 1.4 - - 5,760 1.7 1,731 0.5 charges Gross profit 12,968 11.5 20,446 17.0 45,456 13.1 46,136 14.7 Operating expenses: Research and 2,909 2.6 3,274 2.7 9,902 2.9 10,472 3.3 development Selling, general and 10,234 9.1 11,896 9.9 33,388 9.6 34,309 10.9 administrative Restructuring 100 0.1 - - 1,976 0.6 1,050 0.3 charges Total operating 13,243 11.7 15,170 12.6 45,266 13.1 45,831 14.6 expenses Operating income (275) (0.2) 5,276 4.4 190 0.1 305 0.1 (loss) Other income (expense): Interest (81) (0.1) (88) (0.1) (253) (0.1) (260) (0.1) expense Interest and other income 178 0.2 (72) (0.1) 434 0.1 83 0.0 (expense) Total other 97 0.1 (160) (0.1) 181 0.1 (177) (0.1) income (expense) Income (loss) (178) (0.2) 5,116 4.3 371 0.1 128 0.0 before taxes Taxes 149 0.1 1,918 1.6 362 0.1 48 0.0 Net earnings $ (0.3) $ 3,198 2.7 $ 0.0 $ 0.0 (loss) (327) 9 80 Basic net $ $ $ $ earnings (loss) (0.01) 0.10 0.00 0.00 per share Diluted net $ $ $ $ earnings (loss) (0.01) 0.10 0.00 0.00 per share Basic weighted average common 33,374 33,506 33,795 33,391 shares outstanding Diluted weighted average common 33,374 33,525 33,824 33,459 shares outstanding Spartan Motors, Inc. and Subsidiaries Sales and Other Financial Information by Business Segment (amounts in thousands of dollars) (Unaudited) Three Months Ended September 30, 2012 (amounts in thousands of dollars) Business Segments Emergency Delivery & Response Service Specialty Other Consolidated Vehicles Vehicles Vehicles Emergency $ Response Chassis 29,109 $ 29,109 Sales Emergency Response Body 10,781 10,781 Sales Utilimaster 40,329 40,329 Vehicle Sales Motorhome Chassis 17,129 17,129 Sales Other Specialty 1,279 1,279 Vehicles Aftermarket Parts 8,696 5,534 14,230 and Assemblies Total Sales $ $ 49,025 $ 23,942 $ $112,857 39,890 - Depreciation and $ $ $ $ $ Amortization 207 689 162 1,171 2,229 Expense Operating Income 89 600 504 (1,468) (275) (Loss) Segment Assets 71,798 85,118 24,483 77,107 258,506 Nine Months Ended September 30, 2012 (amounts in thousands of dollars) Business Segments Emergency Delivery & Response Service Specialty Other Consolidated Vehicles Vehicles Vehicles Emergency $ Response Chassis 81,702 $ 81,702 Sales Emergency Response Body 35,687 35,687 Sales Utilimaster 103,757 103,757 Vehicle Sales Motorhome Chassis 51,715 51,715 Sales Other Specialty 6,410 6,410 Vehicles Aftermarket Parts 51,867 14,949 66,816 and Assemblies Total Sales $ 117,389 $ 155,624 $ 73,074 $ $ 346,087 - Depreciation and $ $ $ Amortization 670 $ 2,025 510 3,665 $ 6,870 Expense Operating Income (3,256) 8,157 994 (5,705) 190 (Loss) Segment Assets 71,798 85,118 24,483 77,107 258,506 Spartan Motors, Inc. and Subsidiaries Sales and Other Financial Information by Business Segment Unaudited Period End Backlog (amounts in thousands of dollars) Sept. 30, Dec. 31, March 31, June 30, Sept. 2011 2011 2012 2012 30, 2012 Emergency Response $ 48,151 $ 45,567 $ $ $ 47,926 48,698 46,633 Chassis* Emergency Response 26,007 28,432 34,235 34,604 39,279 Bodies* Total Emergency 74,158 73,999 82,161 83,302 85,912 Response Backlog Motorhome 11,640 10,018 10,712 10,885 12,863 Chassis * Other Vehicles* 1,668 2,287 150 - - Aftermarket Parts and 1,203 2,955 2,610 3,989 4,536 Assemblies Total Specialty 14,511 15,260 13,472 14,874 17,399 Vehicles Backlog Delivery & 53,888 47,694 40,032 75,116 65,026 Service Vehicles * Total Backlog $ 142,557 $ 136,953 $ $ $ 135,665 173,292 168,337 * Anticipated time to fill backlog orders at September 30, 2012; 5 months or less for emergency response chassis; 7 months or less for emergency response bodies; 3 months or less for motorhome chassis; 6 months or less for delivery and service vehicles; and 1 month or less for other products. SOURCE Spartan Motors, Inc. Website: http://www.spartanmotors.com Contact: Joseph Nowicki, CFO, Spartan Motors, Inc., +1-517-543-6400, or Greg Salchow, Director IR & Treasury, Spartan Motors, Inc., +1-517-543-6400
Spartan Motors Reports Third Quarter 2012 Results
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