Spartan Motors Reports $1.1 Million Operating Income for Second Quarter 2013

 Spartan Motors Reports $1.1 Million Operating Income for Second Quarter 2013

All Segments Show Improved Results from Q1 2013

PR Newswire

CHARLOTTE, Mich., Aug. 1, 2013

CHARLOTTE, Mich., Aug. 1, 2013 /PRNewswire/ --

(Comparisons below are to Q2 2012)

  oNet sales of $120.9 million, up 5.7% from $114.4 million in Q2 2012

       oSpecialty Vehicles sales rose to $32.9 million in $23.1 million, up
         42.9%
       oEmergency Response revenue rose 0.5% to $43.8 million from $43.6
         million
       oDelivery & Service revenue declined 7.5% to $44.2 million from $47.8
         million

  oGross margin of 12.9% of sales versus 16.4% in Q2 2012
  oOperating income of $1.1 million compared to operating income of $3.9
    million in Q2 2012
  oNet income of $0.7 million, or $0.02 per diluted share, compared to net
    income of $2.4 million, or $0.07 per diluted share, Q2 2012
  oConsolidated order backlog at June 30, 2013 was $233.2 million, up 34.5%
    from $173.3 million at June 30, 2012

Spartan Motors, Inc. (NASDAQ: SPAR) ("Spartan" or the "Company") today
announced operating income of $1.1 million, or diluted EPS of $0.02, for the
second quarter of 2013. All of the Company's business segments posted
improved operating results compared to the first quarter of 2013, with
Specialty Vehicles and Emergency Response reporting higher operating income
compared to the year-ago second quarter. In the second quarter of 2012,
Spartan posted operating income of $3.9 million, or diluted EPS of $0.07, in
large part due to the positive contribution of Utilimaster's parts and field
service solutions.

Second quarter 2013 revenues grew to $120.9 million versus $114.4 million, up
5.7% from Q2 2012 due to growth in the Specialty Vehicles segment. Revenue in
the Specialty Vehicles segment increased $9.9 million from the second quarter
of 2012 to $32.9 million. Growth in Specialty Vehicles revenue was
attributable to an increase in RV sales of $4.2 million compared to the prior
year, and the completion of a limited-run ILAV (Iraqi Light Armored Vehicle)
order in the Defense unit. Emergency Response revenues increased slightly to
$43.8 million in Q2 2013 from $43.6 million in Q2 2012. Growth in these two
segments more than offset a year-over-year revenue decline of $3.6 million in
the Delivery & Service segment to $44.2 million in Q2 2013.

John Sztykiel, President and CEO of Spartan Motors, Inc., stated, "For
Spartan, the second quarter of 2013 was about demonstrating operational
improvement in every market segment from the first quarter of 2013 and backlog
growth, both sequentially and year-over-year. The Company generated improved
results by implementing the D (Diversified Growth) and I (Integrated
Operational Improvement) in DRIVE. We expect improved results in the third
and fourth quarters of 2013 as we execute our DRIVE strategy and deliver on
our shareholder commitments."

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

  oDiversified Growth
  oRedefining New Technologies
  oIntegrated Operational Improvement
  oVibrant Culture
  oExtend Our Core

Second Quarter 2013 Segment Results:

Specialty Vehicles (SV)

(In thousands)                  Second Quarter
                                2013       2012         % Change
Specialty Vehicles

Revenue
        Motorhome & Bus         $  20,378 $   16,224 25.6%
        Parts and Accessories   7,822      4,748        64.7%
        Other Specialty Vehicle 4,738      2,083        127.5%
        Total revenue           $  32,938 $   23,055 42.9%
        Operating income        $  3,900 $    560 596.4%

The SV segment drove Spartan's revenue growth for the second quarter of 2013.
Demand for Spartan's custom chassis grew, particularly for RV and bus
applications, which led to a revenue increase of 42.9% year-over-year.
Operating income for the SV segment rose sharply to $3.9 million from $0.6
million in Q2 2012. Growth in operating income was due to higher revenue in
the most recent quarter, as well as the operational improvement actions taken
in this segment over the past year.

Mr. Sztykiel commented on the SV segment's performance, stating, "Eighteen
months ago, the motorhome and bus chassis business was a serious drag on
Spartan's earnings. In early 2012, we began executing the DRIVE strategy in a
disciplined manner, increasing revenue and operating profit. The success we
have demonstrated in the SV segment should enhance confidence that we will
successfully address the operational challenges we are working through in the
Emergency Response Vehicles and Delivery & Service Vehicles units."

Emergency Response (ER)

(In thousands)                Second Quarter
                              2013          2012         % Change
Emergency Response

Revenue
      ERC                     $  25,758   $  23,169  11.2%
      ERV                     18,023        20,444       -11.8%
      Total revenue           $  43,781   $  43,613  0.4%
      Operating income (loss) $     438 $   (979) NA

Emergency Response revenue was up slightly during the second quarter of 2013,
to $43.8 million from $43.6 million a year ago. Higher demand for custom fire
truck chassis generated the segment's revenue growth, offsetting a decline in
Emergency Response Vehicles (ERV) revenue. Lower ERV revenue was anticipated
and a result of management's decision to reduce the production rate while it
implemented measures to improve operational efficiency and performance.
Demand remains strong for Spartan's custom chassis and fire trucks, with a
combined order backlog at June 30, 2013 of $115.1 million, up 38.2% from $83.3
million a year ago. ERV backlog rose to $86.8 million at June 30 2013, up
66.9% from $52.0 million at June 30, 2012. Growth in ER order backlog
illustrates the strength of the Spartan brand as it was one year ago that all
of the Company's ER products were combined into the Spartan brand.

For the quarter ended June 30, 2013, the ER segment posted operating profit of
$0.4 million, a substantial improvement from an operating loss of $1.0 million
during Q2 2012 and an operating loss of $2.6 million in Q1 2013. Management
expects to make additional progress in improving operating performance at the
ERV unit during the second half of this year and for ERV to make a positive
contribution to the ER segment's fourth quarter 2013 profitability.

Delivery & Service (DSV)

(In thousands)           Second Quarter
                         2013      2012          % Change
Delivery and Service Vehicles

Revenue
 Vehicles                $ 38,591 $   25,030  54.2%
 Aftermarket & Service   5,564     22,721        -75.5%
 Total revenue           $ 44,155 $   47,751  -7.5%
 Operating income (loss) $ (1,640) $    6,230 NA

DSV revenue declined 7.5% to $44.2 million in the quarter ended June 30, 2013
as lower aftermarket parts and field service solutions sales more than offset
higher vehicle sales. The reduction in aftermarket parts revenue was
primarily due to the end of a major field service program in mid-2012.

For the second quarter of 2013, DSV posted an operating loss of $1.6 million
compared to an operating profit of $6.2 million in the second quarter of 2012,
and an operating loss of $4.0 million in the first quarter of 2013.
Profitability was reduced by lower aftermarket parts sales compared to Q2
2012, as well as the impact of launch costs incurred at the Bristol facility.


Financial Highlights

  oGross margin for the second quarter of 2013 was 12.9% of sales versus
    16.4% for the second quarter of 2012. The decline in gross profit and
    margin percentage was due to the decline in DSV revenue and higher
    expenses related to the relocation of walk-in van production to Bristol.
    Partially offsetting these factors were increases in gross profit and
    margin percentage in the ER and SV segments. Higher margins in the ER
    segment were due to more favorable pricing and improved quality. The SV
    segment generated a higher gross margin due to a more favorable product
    mix and higher sales in Q2 2013 versus the prior year.
  oOperating expenses were reduced by $0.3 million from the second quarter of
    2012, to $14.6 million from $14.9 million. Operating expenses as a
    percentage of sales were 12.0% in the second quarter of 2013 versus 13.0%
    in the second quarter of 2012. The SV and DSV segments saw declines in
    operating expenses, largely due to a lower earn-out accrual related to the
    Utilimaster acquisition, while ER incurred higher marketing and selling
    expenses during the quarter ended June 30, 2013.
  oSpartan's cash balance at June 30, 2013 was $15.6 million, down from $16.6
    million at March 31, 2013. Reflected in the June 30, 2013 cash balance is
    the payment of a cash dividend of $0.05 per share, totaling $1.7 million.

Operational Initiatives Update

DSV

Utilimaster continued production launch activities at Bristol during Q2 2013.
Production rates were increased on both the higher-volume fleet and
lower-volume van lines throughout the quarter. The Company continues to
improve its processes to increase output and reduce operating costs. 

John Forbes, President of Utilimaster, stated regarding the launch process,
"Production launch activities at Bristol continued throughout the second
quarter. Production increased from 93 units in the first quarter of 2013 to
914 units in the second quarter. Daily vehicle output continues to increase
and we are meeting delivery commitments to our customers. Our team continues
to make progress on materials storage and distribution, improving production
processes and increasing daily unit volumes in our operations. 

"While our efforts have demonstrated positive results, as shown in reducing in
half DSV's operating loss from the first quarter to the second quarter of
2013, we believe we are about 90 – 120 days behind plan to attain projected
cost and labor efficiency targets. We continue to work overtime in order to
meet production targets, which increases our costs during the launch phase at
Bristol. This delay will push back realizing anticipated operating cost
savings until sometime during the fourth quarter of 2013. Despite the delay,
we expect Utilimaster to be profitable for the second half of 2013."

Mr. Forbes stated regarding the Reach™ launch, "The Reach launch process is
going well and is currently ahead of schedule. We have made more progress
than anticipated on our 2013 plan to improve the profitability of the Reach.
Efforts to reduce material and assembly costs of the Reach have been
successful, with additional cost-reduction measures currently undergoing
validation. These cost reductions and the start of production on a 1,900-unit
order for FedEx during Q3 2013 are two important milestones in the Reach
launch process."

ERV

During the second quarter, Spartan took steps to strengthen the Emergency
Response management team. By adding experienced management and concentrating
on improving the assembly process, ERV made significant progress toward its
goal of profitability by Q4 2013. ERV management expects to increase
production rates during the third and fourth quarters of 2013 as it eliminates
bottlenecks and improves its internal processes.

Dennis Schneider, President of Spartan Emergency Response, stated, "Our ERV
business improved significantly in the second quarter compared to the first
quarter of 2013. We have better aligned our engineering and manufacturing
activities to ensure that we are able to build our highly customized products
efficiently and with superior quality. We expect further improvement in ERV's
performance during the second half of 2013, making a greater contribution to
ER segment profitability, especially in the fourth quarter."

2013 Outlook

Spartan's Interim Chief Financial Officer, Lori Wade, provided an outlook for
the remainder of 2013, "Spartan met our expectations, posting a modest profit
for the second quarter of 2013. We expect revenue and operating income in the
third and fourth quarters of 2013 to increase from Q2 2013 and the respective
comparable quarters of 2012. The challenges we face in the DSV segment will
impact our Q3 2013 performance but should be resolved prior to the end of
2013. Despite these challenges, we expect DSV to be profitable in the third
and fourth quarters of this year, with performance continuing to improve in
2014 as anticipated cost savings are realized.

"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 0.5% - 1.5% for the year, with the second half of 2013
expected to exceed the full-year average." 

John Sztykiel concluded his remarks, stating, "Spartan met its target of
reporting a profit for the second quarter of 2013. We also generated
outstanding growth in order backlog – up 34.5% from Q2 2012 – due to the
growing demand for our innovative products. Growth in backlog is critical to
our future since a strong future revenue stream is needed for operational
improvement to have an impact on profitability.

"It is important to note that all three of our operating segments showed
improvement in Q2 from Q1 2013, with two of the three reporting operating
income in Q2. We project further improvements in operating performance in the
third and fourth quarters of 2013 compared to the second quarter of 2013, and
expect Spartan to be profitable for the year. We are committed to increasing
shareholder value and are moving forward every day."

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 projections, financial strength, future plans, objectives,
and the performance of our products and operations. 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)
                                       June 30, 2013        December 31,
                                       (Unaudited)          2012
ASSETS
Current assets:
Cash and cash equivalents              $      15,618  $      21,748
Accounts receivable, less allowance of 50,552               47,139
$964 and $1,021
Inventories                            73,691               67,591
Deferred income tax assets             6,291                6,291
Income taxes receivable                4,180                3,011
Assets held for sale                   716                  716
Other current assets                   2,583                6,027
 Total current assets                153,631              152,523
Property, plant and equipment, net     57,442               59,122
Goodwill                               20,815               20,815
Intangible assets, net                 10,573               11,052
Other assets                           1,867                1,639
TOTAL ASSETS                           $     244,328   $     245,151
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable                       $      24,233  $      23,000
Accrued warranty                       7,575                6,062
Accrued customer rebates               1,727                2,299
Accrued compensation and related taxes 6,056                7,748
Deposits from customers                11,006               6,386
Other current liabilities and accrued  5,825                8,113
expenses
Current portion of long-term debt      104                  82
 Total current liabilities           56,526               53,690
Other non-current liabilities          3,448                3,071
Long-term debt, less current portion   5,290                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; 34,120              341                  339

and 33,862 outstanding
Additional paid in capital             74,020               72,873
Retained earnings                      100,249              105,517
 Total shareholders' equity          174,610              178,729
TOTAL LIABILITIES AND SHAREHOLDERS'    $     244,328   $     245,151
EQUITY





Spartan Motors, Inc. and Subsidiaries
Condensed Consolidated Statements of Income
(In thousands, except per share data)
(Unaudited)
                        Three Months Ended June 30,  Six Months Ended June 30,
                        2013            2012         2013         2012
Sales                   $   120,874  $          $          $  
                                        114,419      217,010     233,231
Cost of products sold   105,248         95,072       195,038      196,525
Restructuring charge    -               602          -            4,217
Gross profit            15,626          18,745       21,972       32,489
Operating expenses:
Research and            2,897           3,217        5,698        6,993
development
Selling, general and    11,661          11,559       22,035       23,155
administrative
Restructuring charge    -               83           -            1,876
Total operating         14,558          14,859       27,733       32,024
expenses
Operating income (loss) 1,068           3,886        (5,761)      465
Other income (expense):
Interest expense        (87)            (81)         (156)        (172)
Interest and other      115             49           261          256
income
Total other income      28              (32)         105          84
(expense)
Income (loss) before    1,096           3,854        (5,656)      549
taxes
Taxes                   405             1,503        (2,093)      213
Net earnings (loss)     $         $        $         $     
                        691             2,351        (3,563)     336
Basic net earnings      $          $       $        $     
(loss) per share        0.02           0.07         (0.11)      0.01
Diluted net earnings    $          $       $        $     
(loss) per share        0.02           0.07         (0.11)      0.01
Basic weighted average
common shares           34,105          33,883       33,447       33,768
outstanding
Diluted weighted
average common shares   34,139          33,892       33,447       33,796
outstanding



Spartan Motors, Inc. and Subsidiaries

Sales and Other Financial Information by Business Segment

Unaudited
Three Months Ended June 30, 2013 (amounts in thousands of dollars)
                 Business Segments
                              Delivery &
                 Emergency                 Specialty
                              Service                 Other      Consolidated
                 Response                  Vehicles
                              Vehicles
Emergency        $        $       $      $      $    
Response Chassis 25,758         -       -        -   25,758
Sales
Emergency
Response Vehicle 18,023       -            -          -          18,023
Sales
Utilimaster      -            38,591       -          -          38,591
Vehicle Sales
Motorhome        -            -            20,378     -          20,378
Chassis Sales
Other Specialty  -            -            4,738      -          4,738
Vehicles
Aftermarket
Parts and        -            5,564        7,822      -          13,386
Assemblies
Total Sales      $        $         $         $      $   
                 43,781      44,155       32,938       -   120,874
Depreciation and $       $        $      $      $     
Amortization       365      1,065        399        683       2,512
Expense
Operating Income $       $         $        $        $     
(Loss)             438      (1,640)     3,900     (1,630)    1,068
Segment Assets   $        $         $         $        $   
                 83,567      74,722       24,980    61,059     244,328



Spartan Motors, Inc. and Subsidiaries
Sales and Other Financial Information by Business Segment
Unaudited


Period End Backlog (amounts in thousands of dollars)
                          June 30,  March 31,  Dec. 31,  Sept. 30,   June 30,

                          2013      2013       2012       2012        2012
Emergency Response        $ 28,388  $ 34,053   $ 37,005  $  32,454  $  
Chassis*                                                              31,323
Emergency Response        86,760    70,023     58,764     53,458      51,979
Vehicles*
Total Emergency Response  115,148   104,076    95,769     85,912      83,302
Backlog
Motorhome Chassis *       14,166    13,736     13,453     12,863      10,885
Other Vehicles*           -         3,056      3,968      -           -
Aftermarket Parts and     3,437     7,319      9,179      4,536       3,989
Assemblies
Total Specialty Vehicles  17,603    24,111     26,600     17,399      14,874
Backlog
 Delivery & Service   100,399   100,394    39,656     65,026      75,116
Vehicles *
Total Backlog             $233,150  $228,581   $162,025   $ 168,337  $ 
                                                                      173,292

* Anticipated time to fill backlog orders at June 30, 2013; 4 months or less
for emergency response chassis; 10 months or less for emergency response
vehicles; 2 months or less for motorhome chassis; 8 months or less for
delivery and service vehicles.



SOURCE Spartan Motors, Inc.

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