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Spartan Motors Reports First Quarter 2013 Results



              Spartan Motors Reports First Quarter 2013 Results

Order Backlog Reaches $228.6 Million, Forecasts Profitable 2013

PR Newswire

CHARLOTTE, Mich., May 8, 2013

CHARLOTTE, Mich., May 8, 2013 /PRNewswire/ -- Spartan Motors, Inc. (NASDAQ:
SPAR) ("Spartan" or the "Company") today announced operating results for the
first quarter of 2013.  Revenues totaled $96.1 million versus $118.8 million,
down 19.1% from the first quarter of 2012 due to a decline in sales in the
Delivery & Service (DSV) segment.  Spartan posted a net loss of $0.13 per
diluted share compared to a net loss of $0.06 per diluted share in the first
quarter of 2012, primarily due to the impact of lower revenue, an accrual for
a product recall and costs related to the move of walk-in van production to
Bristol, Ind.

John Sztykiel, President and CEO of Spartan Motors, Inc., stated, "As we
indicated in our fourth quarter 2012 press release and conference call, we
expected an operating loss in the first quarter of 2013.  Most of the loss
during the quarter was due to lower DSV revenue and expenses incurred to move
and start walk-in van production at Bristol.  During the first quarter, we
moved the bulk of our Utilimaster business 22 miles to a much more efficient
plant and began ramping up production.  Our relocation plan was aggressive and
complex, so it is not surprising that we encountered some growing pains during
the launch phase at Bristol. 

"We believe the first quarter will prove to be the most difficult quarter of
2013 and is now behind us.   Although meeting our targets for the rest of the
year is not without its own challenges, I have confidence in our people, our
plan and our ability to turn strong backlog growth of 41.1% from the end of
2012, into a profitable second quarter and full year 2013."      

First Quarter 2013 Summary:
(Comparisons are Q1 2013 to Q1 2012 unless otherwise noted)

  o Net sales of $96.1 million (down 19.1% from Q1 2012 sales of $118.8
    million)

       o Emergency Response (ER) revenue rose 2.9% to $34.9 million from $33.9
         million
       o Delivery & Service (DSV) revenue declined 45.7% to $31.9 million from
         $58.8 million
       o Specialty Vehicles (SV) sales rose to $29.3 million from $26.1
         million, an increase of 12.3%

  o Gross margin of 6.6% of sales versus 11.6% in the first quarter of 2012
  o Operating loss of $6.8 million compared to an operating loss of $3.4
    million in Q1 2012
  o Net loss of $4.3 million, $0.13 per diluted share, compared to a net loss
    of $2.0 million, or $0.06 per diluted share, in the first quarter of 2012
  o Consolidated order backlog at March 31, 2013 increased 41.1% to $228.6
    million versus $162.0 million at December 31, 2012, and up 64.5% from
    $135.7 million at March 31, 2012
  o Cash balance of $16.6 million at March 31, 2013 compared to $21.7 million
    at December 31, 2012

"The first quarter of 2013 was about three items:  First, we completed the
move of Utilimaster's walk-in van business from Wakarusa, Ind. to Bristol,
Ind.  Our high-volume line is now running at expected rates.  Now we are
adding the lower-volume, mixed-model line, which should ramp up to expected
rates during the second quarter.  We are excited to see more than 12 months of
hard work come to fruition in the form of a high-quality product coming off
the line, 100% complete.

"Second, our order backlog reached $228.6 million, proving the strength of the
Spartan and Utilimaster brands.  Third, we achieved market acceptance of the
Reach™ with the receipt of an order for 1,900 units from a major fleet
customer," stated Mr. Sztykiel.

Mr. Sztykiel continued his comments, saying, "Although our work to enhance the
gross margin in the first quarter of 2013 was masked by seasonal factors and
the impact of Bristol-related costs, we expect Spartan's results for the rest
of the year to show positive results from these efforts.  Spartan's D.R.I.V.E.
strategy is sound and our focus is on the 'I' – Integrated Operational
Improvement – in D.R.I.V.E."

D.R.I.V.E. is Spartan's operating strategy based on the five following tenets:

  o Diversified Growth
  o Redefining New Technologies
  o Integrated Operational Improvement
  o Vibrant Culture
  o Extend Our Core Markets

First Quarter 2013 Operating Results

  o Revenues for the first quarter of 2013 decreased to $96.1 million from
    $118.8 million in the prior year due to a decline in revenue in the DSV
    segment.  Lower revenue at DSV was primarily due to the absence of a large
    aftermarket parts program that ended in early Q3 2012, plus seasonally
    lower sales and the move of walk-in van production to Bristol, Ind.
     Although sales at DSV declined during the first quarter of 2013, order
    backlog at quarter end more than doubled to $100.4 million compared to
    $39.7 million at December 31, 2012 and $40.0 million at the end of the
    first quarter of 2012. 
  o Revenue in the ER segment increased 2.9% to $34.9 million as higher sales
    in Emergency Response Vehicles (ERV) more than offset lower sales of
    Emergency Response Chassis (ERC).  ERV sales for the quarter increased as
    production rates rose to meet higher demand and rising backlog while ERC
    sales for the quarter declined mainly due to timing of customer orders. 
    Order backlog for the ER segment at March 31, 2013 totaled $104.1 million,
    up 8.7% from $95.8 million at December 31, 2012 and up 26.6% from March
    31, 2012. 
  o Sales in the SV segment totaled $29.3 million in the first quarter of 2013
    versus $26.1 million in the first quarter of 2012, an increase of 12.3%.
     The revenue increase was due to higher sales of recreational vehicle
    chassis and Aftermarket Parts and Accessories (APA) more than offsetting a
    net decline in production of other specialty vehicles.  Chassis sales rose
    by $2.0 million to $20.4 million in the first quarter of 2013 while APA
    sales totaled $6.9 million, up $2.2 million from the first quarter of
    2012. 
  o Gross profit for the first quarter of 2013 totaled $6.3 million versus
    $13.7 million in the first quarter of 2012.  As a percentage of sales,
    gross margin for the first quarter of 2013 was 6.6% of sales versus 11.6%
    for the first quarter of 2012.  The decline in Q1 2013 gross profit and
    margin percentage was largely due to the decline in DSV revenue and
    approximately $1.0 million in Bristol production start-up expenses.  
    Other factors negatively impacting gross profit in Q1 2013 were a $1.0
    million recall accrual for certain motorhome chassis in the SV segment,
    $0.5 million related to an aerial unit service campaign and costs of $0.5
    million resulting from establishing a new ER distributor in the Pacific
    Northwest.  During the first quarter of 2012 there were $3.6 million of
    restructuring charges related to the Bristol relocation project. 
  o Operating expenses were reduced by $4.0 million compared to the prior
    year, totaling $13.2 million in the first quarter of 2013 versus $17.2
    million a year ago.  Operating expenses as a percentage of sales were
    13.7% in the first quarter of 2013 versus 14.4% in the first quarter of
    2012.  All operating segments saw reductions in operating expenses in the
    first quarter of 2013 compared to the prior year. 
  o Spartan posted an operating loss of $6.8 million in Q1 2013 versus an
    operating loss of $3.4 million in Q1 2012.  Most of the operating loss in
    the first quarter of 2013 was due to the reduction in DSV sales for the
    quarter.  For Q1 2013, DSV posted an operating loss of $4.0 million versus
    an operating profit of $1.3 million in Q1 2012.  Most of DSV's operating
    loss was attributable to lower production and costs related to the ramp-up
    of walk-in van operations at Bristol.   The ER segment posted a Q1 2013
    operating loss of $2.6 million versus an operating loss of $2.4 million in
    the prior year, primarily due to the costs of the aerial service campaign
    and establishing a distributor more than offsetting revenue growth. 
  o The SV segment posted a Q1 2013 operating profit of $1.3 million compared
    to an operating loss of $0.1 million in the prior year due to higher sales
    of aftermarket parts and assemblies and RV chassis, along with a positive
    impact from gross margin improvement and restructuring efforts implemented
    in 2012.  Reducing the SV segment's operating profit was a $1.0 million
    recall accrual for certain motorhome chassis. 

Bristol Update – Ramping Production and Targeting Efficiency Improvements

John Forbes, President of Utilimaster, commented on the Bristol move, "We
completed the relocation of Utilimaster's walk-in van production to Bristol
early in the first quarter of 2013.  We moved these operations from a
sprawling, 16-building campus with a 2.5-mile long production line and outdoor
inventory storage to one, efficient, self-contained facility.  Production on
the high-volume walk-in van line at Bristol began in mid-February, with
production rates increasing throughout the quarter.  During the ramp-up, we
validated new assembly processes and equipment, and began training associates,
a process that continues into the second quarter.  We are currently
implementing the mixed-model van line and expect to increase production
throughout the second quarter of 2013.

"The Bristol project represents a shift in culture as well as production
methods and location.  As we increase production volume, we are making
adjustments and changes to assembly processes along the way.  These changes
are necessary to improve production flow and efficiency so that we realize the
anticipated project savings of $4 million per year.  We are making steady
progress and expect to see most of these changes in place by the end of the
second quarter of 2013.  As we move into the third quarter of this year we
expect to start to realize operational savings at Bristol and begin to deliver
the financial performance we expect," stated Mr. Forbes.  

Mr. Sztykiel commented on the Bristol project, "I am confident in our ability
to execute these moves successfully because we have done this before, most
recently in our SV segment.  Early last year we assigned a gross margin
improvement team that implemented a plan that returned the business to
profitability.  We also learned lessons in improving operating efficiency that
we are now applying to our other business units."   

ERV Update – Adding Leadership, Metrics Improving

Dennis Schneider, President of Spartan Emergency Response stated, "While our
investments at Bristol have received the most attention, we have also invested
in Emergency Response, most recently in our ERV business.  Our ERV business is
an important complement to our ER chassis business and critical to export
growth.  Last year we integrated all of our emergency response units into one
entity.  This year, the steps we took included introducing important new
products at the FDIC show in late April and in strengthening our management
team.  We recently named Kevin Crump as ERV's Managing Director of
Manufacturing Operations.  Kevin led Crimson Fire, a predecessor of one of our
ERV entities, from 2007 through early 2011.  Under Kevin's leadership, Crimson
Fire was profitable and he has an in-depth knowledge of manufacturing.  He was
most recently assigned to the Bristol project where he was instrumental in the
start of walk-in van production.  Kevin's return to ERV is one of the
important steps we are taking to restore operational and financial
performance.

"We believe the operational issues we face were brought about by rapid growth
and pricing pressures that led to a loss for the quarter.  While pricing
pressures will remain an issue for the rest of 2013, we are making progress on
improving product quality, meeting delivery targets and are working to reduce
complexity and raise profitability.  Despite ERV's short-term challenges, we
see growth in exports, new products and our alliance with Gimaex all pointing
to a bright future," concluded Mr. Schneider.

Strategic Update - Utilimaster

"We are sometimes asked questions about our strategy and why we are
undertaking projects such as the Utilimaster relocation.  In effect, the
question is, 'why the pain?'  The answer is that we have some outstanding
businesses and we are investing in their long-term future.  We know we cannot
stand still and prosper long-term.  We must continue to grow, and to grow we
must change and invest in our future," said Mr. Sztykiel.

"We have invested heavily in Utilimaster to take a business with good
financial performance to the next level – outstanding financial performance. 
Utilimaster has already been a great acquisition for Spartan.  Since 2010, its
revenues have grown by 84% through 2012, with operating income averaging 3%
from  Q1 2011 through Q1 2013, including restructuring charges.  Enduring a
bit of short-term pain to generate even greater gains in profitability is
worth it and is the right way to increase Utilimaster's value to
shareholders."

2013 Financial Outlook

Spartan's Interim Chief Financial Officer, Lori Wade, provided an outlook for
the remainder of 2013, "We expect the Company to be modestly profitable in the
second quarter of 2013, with improving profitability during the second half of
2013.  We expect Spartan to be profitable for the year as a whole. 

"For the year, we expect to realize mid-single-digit revenue growth.  Lower
margins in the first quarter of 2013 are expected to reduce full-year
operating margins, but margins are expected to improve throughout the
remainder of the year.  For 2013 as a whole, we expect average operating
expenses to increase to support growth initiatives, but to remain within a
range of 11.5% - 12.0% of sales for the year.  Operating margins are projected
to be approximately 1.5% - 2.5% for the year, with the second half of 2013
expected to exceed the full-year average.

"Our balance sheet should strengthen as cash balances increase throughout
2013.  We anticipate lower capital requirements for the year and conversion of
2010-spec diesel engine inventories into cash, combined with improved
profitability, to replenish cash during the year.  Our bank credit and private
note placement facilities remain in place, providing additional resources to
support future growth," said Ms. Wade.  

John Sztykiel commented on Spartan's outlook, stating, "Over the past three
years, Spartan has transformed itself in many ways.  Our task for 2013 is to
turn growth in order backlog into growth in net income.  As part of our
D.R.I.V.E. strategy, 'I' stands for  'Integrated Operational Improvement' and
is centered on four major initiatives shown below."

  o Gross margin – A disciplined focus on gross margin improvement permeates
    every operational aspect of Spartan.  We expect the second quarter of 2013
    to show significant improvement compared to the first quarter and look for
    continuing progress throughout 2013. 
  o Bristol – We expect to have both production lines running at full rate by
    the end of the second quarter and to begin realizing operational savings
    in the third quarter.  Our efforts to reduce costs and increase
    profitability will make Utilimaster an even more valuable part of Spartan.
    While we expect the mixed-model launch to be easier, we also know there
    will be unforeseen challenges.  This is "situation normal" for any
    production ramp-up.  These challenges will be systematically overcome in
    Q2 just as this was accomplished on the high-volume line in Q1.
  o Reach™ - The Reach™ is demonstrating market acceptance and ability to
    expand its market.  Although its financial performance is not to an
    acceptable level today, we are on track to realize significant improvement
    this year.
  o Spartan ERV – We are slightly ahead of our plan to turn outstanding order
    growth into improved financial performance.  We expect performance to
    improve throughout 2013.

John Sztykiel concluded his remarks, noting, "Transformation is a
time-consuming process but is now coming to an end, allowing us to focus on
growth and gross margin improvement.  While we realize delivering improved
operating results is never a simple task, we are committed to making it
happen.  D.R.I.V.E. is the right strategy and our commitment is to execute
that strategy consistently this year and beyond.  I think it's worth repeating
that while our task is never easy, we believe the heaviest lifting is done and
the outlook for the rest of 2013 improves as we move through the year."

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 road show" 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 1,700 associates at facilities in Michigan, Pennsylvania, South
Dakota, Indiana, Florida and Texas. Spartan reported sales of $471 million in
2012 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
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; 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)
                                     March 31, 2013        December 31,
                                     (Unaudited)           2012
ASSETS
Current assets:
Cash and cash equivalents            $             16,617  $            21,748
Accounts receivable, less allowance  40,309                47,139
of $1,014 and $1,021
Inventories                          77,685                67,591
Deferred income tax assets           6,291                 6,291
Income taxes receivable              4,349                 3,011
Assets held for sale                 716                   716
Other current assets                 5,227                 6,027
Total current assets                 151,194               152,523
Property, plant and equipment, net   58,734                59,122
Goodwill                             20,815                20,815
Intangible assets, net               10,813                11,052
Other assets                         1,868                 1,639
TOTAL ASSETS                         $           243,424   $          245,151
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable                     $             23,295  $            23,000
Accrued warranty                     7,765                 6,062
Accrued customer rebates             1,477                 2,299
Accrued compensation and related     5,806                 7,748
taxes
Deposits from customers              10,482                6,386
Other current liabilities and        6,472                 8,113
accrued expenses
Current portion of long-term debt    98                    82
Total current liabilities            54,395                53,690
Other non-current liabilities        3,382                 3,071
Long-term debt, less current portion 5,270                 5,207
Deferred income tax liabilities      4,454                 4,454
Shareholders' equity:
Preferred stock, no par value: 2,000 -                     -
shares authorized (none issued)
Common stock, $0.01 par value;
40,000 shares authorized; 33,841 and 338                   339
33,862 outstanding
Additional paid in capital           73,322                72,873
Retained earnings                    101,263               105,517
Total shareholders' equity           174,923               178,729
TOTAL LIABILITIES AND SHAREHOLDERS'  $           243,424   $          245,151
EQUITY

 

Spartan Motors, Inc. and Subsidiaries
Condensed Consolidated Statements of Income
(In thousands, except per share data)
(Unaudited)
                                            Three Months Ended March 31,
                                            2013        % of  2012        % of
                                                       sales             sales
Sales                                       $                 $    
                                             96,136            118,812
Cost of products sold                       89,789     93.4   101,453    85.4
Restructuring charge                        -          -      3,615      3.0
Gross profit                                6,347      6.6    13,744     11.6
Operating expenses:
Research and development                    2,801      2.9    3,775      3.2
Selling, general and administrative         10,374     10.8   11,596     9.8
Restructuring charge                        -          -      1,793      1.5
Total operating expenses                    13,175     13.7   17,164     14.4
Operating loss                              (6,828)    (7.1)  (3,420)    (2.9)
Other income (expense):
Interest expense                            (70)       (0.1)  (91)       (0.1)
Interest and other income                   146        0.2    207        0.2
Total other income (expense)                76         0.1    116        0.1
Loss before taxes                           (6,752)    (7.0)  (3,304)    (2.8)
Taxes                                       (2,498)    (2.6)  (1,289)    (1.1)
Net loss                                    $          (4.4)  $          (1.7)
                                             (4,254)           (2,015)
Basic and Diluted net loss per share        $                 $        
                                             (0.13)            (0.06)
Basic and Diluted weighted average common   33,381            33,019
shares outstanding

 

Spartan Motors, Inc. and Subsidiaries
Sales and Other Financial Information by Business Segment
Unaudited
Three Months Ended March 31,  2013 (amounts in
thousands of dollars)
                     Business Segments
                                  Delivery
                     Emergency    &          Specialty  Other     Consolidated
                     Response     Service    Vehicles
                                  Vehicles
Emergency Response   $    17,403  $          $          $         $      
Chassis Sales                      -           -          -       17,403
Emergency Response   17,546       -          -          -         17,546
Vehicle Sales
Utilimaster Vehicle  -            26,230     -          -         26,230
Sales
Motorhome Chassis    -            -          20,398     -         20,398
Sales
Other Specialty      -            -          2,018      -         2,018
Vehicles
Aftermarket Parts    -            5,683      6,858      -         12,541
and Assemblies
Total Sales          $    34,949  $31,913    $29,274    $         $      
                                                         -        96,136
Depreciation and     $            $     587  $     427  $    652  $        
Amortization Expense 372                                          2,038
Operating Income     (2,562)      (3,970)    1,327      (1,623)   (6,828)
(Loss)
Segment Assets       77,601       72,414     29,677     63,732    243,424

 

Spartan Motors, Inc. and Subsidiaries
Sales and Other Financial Information by Business Segment
Unaudited
Period End Backlog
(amounts in
thousands of
dollars)
                     March 31,    Dec. 31,     Sept. 30,  June 30,  March
                     2013         2012         2012       2012      31, 2012
     Emergency       $ 34,053     $37,005      $32,454    $31,323   $    
Response Chassis*                                                    34,644
     Emergency       70,023       58,764       53,458     51,979    47,517
Response Vehicles*
          Total
Emergency Response   104,076      95,769       85,912     83,302    82,161
Backlog
     Motorhome       13,736       13,453       12,863     10,885    10,712
Chassis *
     Other Vehicles* 3,056        3,968        -          -         150
     Aftermarket     7,319        9,179        4,536      3,989     2,610
Parts and Assemblies
          Total
Specialty Vehicles   24,111       26,600       17,399     14,874    13,472
Backlog
     Delivery &      100,394      39,656       65,026     75,116    40,032
Service Vehicles *
Total Backlog        $228,581     $162,025     $168,337   $173,292  $    
                                                                    135,665
* Anticipated time to fill backlog orders at March 31, 2013; 6 months or less
for emergency response chassis; 7 months or less for emergency response
vehicles; 2 months or less for motorhome chassis; 4 months or less for
delivery and service vehicles; and 6 month or less for other products.
Note:  Effective with Q4 2012, eliminations for intercompany orders of
emergency response chassis are reflected in the emergency response chassis
sales and backlog figures.  Previously these eliminations were reflected in
the emergency response vehicles sales and backlog figures.  Amounts for prior
quarters have been adjusted to reflect this change.

SOURCE Spartan Motors, Inc.

Website: http://www.spartanmotors.com
Contact: Lori Wade, Interim CFO, Spartan Motors, Inc., (517) 543-6400 or Greg
Salchow, Director IR & Treasury, Spartan Motors, Inc., (517) 543-6400
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