Spartan Motors Reports First Quarter 2014 Results

              Spartan Motors Reports First Quarter 2014 Results  Operating Results Improve from First Quarter 2013  PR Newswire  CHARLOTTE, Mich., May 7, 2014  CHARLOTTE, Mich., May 7, 2014 /PRNewswire/ --Spartan Motors, Inc. (NASDAQ: SPAR) today reported its results for the first quarter of 2014.  First Quarter 2014 Overview  For the first quarter of 2014 compared to the first quarter of 2013:    oNet sales of $128.0 million, up 33.2% from $96.1 million   oGross margin of 10.0% of sales versus 6.6%   oOperating loss of $3.5 million compared to an operating loss of $6.8     million         oDelivery & Service (DSV) operating profit of $2.6 million versus          operating loss of $4.0 million        oEmergency Response (ER) operating loss of $3.7 million versus          operating loss of $2.6 million        oSpecialty Chassis & Vehicles (SCV) operating profit of $0.6 million          compared to operating profit of $1.3 million    oNet loss of $2.1 million, or $0.06 per share, versus a net loss of $4.3     million, or $0.13 per share   oCash balance of $27.2 million at March 31, 2014 compared to $16.6 million     at March 31, 2013   oOrder backlog increased to $274.0 million at March 31, 2014 from $242.7     million at December 31, 2013  John Sztykiel, Spartan's Chief Executive Officer, stated, "In the first quarter of 2014, our DSV and SCV segments reported operating profits while we continued to improve the performance of our ER group. DSV reported a $2.6 million operating profit and continued on their path to operating cost reductions. SCV was profitable for the quarter despite the anticipated drop in defense-related aftermarket parts revenue, demonstrating our focus on disciplined execution.  "Throughout the first quarter, we made incremental progress in the ER Body business, moving the business in a positive direction. We continued to invest in initiatives, including expanding production in Ocala, Florida and Charlotte, Michigan, which are expected to have a positive impact on performance in the second half of 2014. Interest in our innovative ER products remains high and we believe we are gaining market share, as reflected in our growing order intake and backlog."  First Quarter 2014 Segment Results:  Delivery & Service Vehicles (DSV)  (In thousands)                             First Quarter                              2014      2013         % Change Delivery and Service Vehicles  Revenue     Vehicles                $ 58,971 $   26,230 124.8%     Aftermarket & Service   6,205     5,683        9.2%     Total revenue           $ 65,176 $   31,913 104.2%     Operating income (loss) $ 2,596   $  (3,970) NA    oVehicle sales more than doubled driven by higher unit shipments,     particularly of the Reach™ commercial van. First quarter 2014 revenue     includes approximately $7 million in shipments of Reach units that were     delayed from the fourth quarter of 2013 due to a component shortage.     Total revenues doubled compared to the first quarter of 2013 when Spartan     was in the process of relocating walk-in van production from Wakarusa to     Bristol, Indiana.   oDSV shipped 2,752 vehicles during the first quarter with demand and     production increasing throughout the quarter. This compares to 1,344     vehicles shipped during the first quarter of 2013 which reflects the     relocation of walk-in van production, as well as lower truck body and     Reach production in that quarter. Sales of aftermarket parts and field     service solutions increased 9.2% to $6.2 million in the first quarter of     2014 due to higher sales of shelving systems and aftermarket parts.    oOperating profit for the first quarter of 2014 was $2.6 million versus an     operating loss of $4.0 million a year ago. First quarter profitability     was favorably impacted by higher production volume, profitability of the     Reach and operating efficiency gains at the Bristol facility. Partially     offsetting these gains was a $0.4 million product liability accrual.    oBacklog at the end of Q1 2014 totaled $83.4 million, down from $100.4     million at the end of Q1 2013. Backlog increased sequentially from $73.1     million at December 31, 2013 due to seasonal growth in orders and     production. Management expects DSV revenue of approximately $200 million     in 2014.   Emergency Response (ER)  (In thousands)                           First Quarter                            2014         2013        % Change Emergency Response  Revenue   ER Chassis Sales        $  13,625  $  17,403 -21.7%   ER Body Sales           22,317       17,546      27.2%   Total revenue           $  35,942  $  34,949 2.8%   Operating income (loss) $  (3,664) $  (2,562) -43.0%    oRevenue in the ER segment grew 2.8% to $35.9 million in the first quarter     of 2014 compared to $34.9 million in the first quarter of 2013. ER Chassis     sales declined compared to the prior year due to the timing of orders from     external customers. Sales in the ER Body business increased to $22.3     million from $17.5 million in Q1 2013 due to a higher-price and more     complex product mix in the most recent quarter. Management expects     significant revenue increases in ER Chassis and ER Body in the remaining     quarters of 2014 due to timing of chassis orders and expanded production     capacity within ER Body.   oIn April, Spartan attended the Fire Department Instructors Conference     (FDIC), one of the largest emergency response trade shows. ER Body     exhibited four units at FDIC that were completed but not invoiced during     the first quarter. These four units, plus another customer unit that was     in transit to the customer, totaling $2.9 million, will be invoiced in the     second quarter of 2014.   oThe ER segment posted an operating loss of $3.7 million in the first     quarter of 2014 compared to an operating loss of $2.6 million in the first     quarter of 2013. The operating loss increased approximately $1.6 million     due to greater complexity of vehicles produced and lower chassis sales,     and $0.5 million due to higher selling, marketing and export-related     expenses. These expenses were partially offset by a $0.5 million reduction     in warranty costs and $0.5 million incurred to establish a new distributor     in the first quarter of 2013.   oBacklog increased 69.4% to $176.4 million at March 31, 2014 compared to     $104.1 million at March 31, 2013, indicating the growing strength of the     Spartan brand. Backlog at December 31, 2013 was $156.5 million.  Specialty Chassis & Vehicles (SCV)  (In thousands)                                 First Quarter                                  2014       2013         % Change Specialty Chassis & Vehicles  Revenue         Motorhome & Bus         $  21,784 $   20,398 6.8%         Parts and Accessories   3,037      6,858        -55.7%         Other Specialty Vehicle 2,020      2,018        0.1%         Total revenue           $  26,841 $   29,274 -8.3%         Operating income        $  633   $   1,327 -52.3%    oThe SCV segment reported lower revenue and operating income in Q1 2014     compared to the prior year. Segment revenue declined 8.3% to $26.8 million     from $29.3 million in the first quarter of 2013. Sales of motorhome and     bus chassis climbed 6.8% to $21.8 million in Q1 2014 from $20.4 million a     year ago. Aftermarket Parts & Assemblies (APA) revenue declined to $3.0     million from $6.9 million due to lower demand for defense parts.   oOperating income decreased to $0.6 million in Q1 2014 from $1.3 million in     Q1 2013. Most of the decrease in operating income was due to lower APA     sales and higher expenses incurred to support future growth initiatives.   oBacklog at March 31, 2014 totaled $14.3 million versus $24.1 million at     the end of Q1 2013. Backlog for the first quarter of 2013 included $3.1     million in defense orders plus $7.3 million in APA orders. At December 31,     2013, SCV's backlog stood at $13.0 million.  Subsequent Event  In late April 2014, the Company experienced a network server malfunction at its Spartan ER manufacturing location in Brandon, South Dakota. The malfunction resulted in the loss of some engineering and manufacturing data, which the subsidiary is currently working to recover. At this time we are unable to estimate the number of units or dollar impact on sales that the malfunction may have for the second quarter and full year 2014. We expect to have greater clarity concerning the impact on Brandon's operations by the end of May and to provide an update at that time.  Financial Summary and Outlook  Lori Wade, Spartan's Chief Financial Officer, commented, "Gross margin for the first quarter of 2014 increased to 10.0% from 6.6% due to higher revenue leading to more favorable overhead absorption and the adverse impact of production inefficiencies and start-up costs at the Bristol facility in the first quarter of 2013. Selling, general and administrative expenses increased by $3.0 million compared to Q1 2013. Revenue growth in 2014 resulted in sales commissions and marketing expenses increasing by $1.6 million versus the first quarter of 2013. This year, restricted stock grant expense of $0.3 million was recorded in the first quarter, while in 2013 this expense was booked in the second quarter. We also took actions in the first quarter to simplify Spartan's organizational structure, resulting in the elimination of several corporate positions. These actions resulted in severance costs of $1.0 million in Q1 2014 but will reduce ongoing expenses by approximately $0.9 million per year.  "In the first quarter, DSV was able to complete and ship a large portion of Reach vehicle inventory that had been delayed at year-end due to a component shortage. These delayed Reach vehicle shipments increased first quarter 2014 revenue by approximately $7 million. During the second quarter, the first installment of the 70-unit fire truck order for Peru will be produced, with production ramping up through the third quarter. This may reduce cash levels in the third quarter, but cash is projected to increase by year-end as the remainder of the Peru order is shipped and converted to cash."  Continued Wade, "Our overall revenue expectations are unchanged for 2014, although we have some concern about demand for motorhome chassis due to higher dealer inventories and slowing orders from motorhome manufacturers. On the positive side, DSV revenues in the first quarter exceeded our forecasts and a new 670-unit Reach order enters production in the second quarter. Total backlog increased again at the end of the first quarter, indicating growing demand in markets other than the motorhome chassis market.  "The subsequent event involving the loss of engineering and manufacturing data in late April has not yet significantly impacted production at Spartan ER's Brandon facility, nor will it impact production of the Peru order. However, lost data is expected to negatively impact operations at Brandon by mid-May. Excluding the possible impact of the server malfunction on ER Body operations, we continue to expect Spartan to report a modest operating loss for the second quarter of 2014 but to be profitable for the second half of 2014 as well as the full year."  Business Summary  Sztykiel commented, "Spartan stayed on course during the first quarter of 2014, focusing on operational improvement and preparing for growth in the second half of the year. SCV reported a profit despite the challenges of lower defense-related aftermarket parts sales and slowing motorhome chassis sales. DSV demonstrated its capability for continuous improvement, making further efficiency gains at Bristol, with more improvement to come. DSV is on track with its cost reduction program and is making further progress in terms of labor efficiency and on-time completion and delivery. Today, the production cycle for a walk-in van is 3.8 days at Bristol versus 16.4 days at Wakarusa at the beginning of 2013. We are working on some growth initiatives in both the DSV and SCV segments that we hope to share with you in the fourth quarter of this year or first quarter of 2015.  "We are focused on fixing ER Body's operations first and from that perspective, progress was made from the fourth quarter of 2013. However, the server malfunction is likely to have some impact on the ER Body business. We are working to recover the data and continue production with minimal disruption. Once we regain momentum, I am confident that improved financial results will follow. We continue to make progress on leveraging our multi-location manufacturing base to increase production and revenue. The first trucks for Peru are expected to ship late in the second quarter, with the remainder of the order shipped during the second half of the year. Higher production and revenue, along with improved operational efficiency, are critical to returning ER to profitability in the second half of 2014."  Concluded Sztykiel, "We will continue to transition from defense to offense in 2014. Our order backlog has increased 19.9% over the past 12 months and has more than doubled over the past two years. The timing of our order backlog and pace of operational performance put us on track for a positive inflection point for the second half of 2014. Challenges remain, but as we execute our DRIVE strategy in a disciplined fashion, we are moving Spartan forward."  D.R.I.V.E. is Spartan's operating strategy based on five tenets:    oDiversified Growth   oRedefining New Technologies   oIntegrated Operational Improvement   oVibrant Culture   oExtend Our Core... Spartan Chassis  Conference Call, Webcast and Investor Information 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 visit www.spartanmotors.com.  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 and Florida. Spartan reported sales of $470 million in 2013 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  Consolidated Balance Sheets  (In thousands, except par value)                                             (Unaudited)                                             March 31,         December 31,                                             2014              2013 ASSETS Current assets: Cash and cash equivalents                   $     27,198  $     30,707 Accounts receivable, less allowance of $234 55,579            47,560 and $769 Inventories                                 75,388            81,419 Deferred income tax assets                  6,736             6,736 Income taxes receivable                     3,188             1,641 Assets held for sale                        373               373 Other current assets                        2,762             2,291 Total current assets                        171,224           170,727 Property, plant and equipment, net          53,159            54,278 Goodwill                                    15,961            15,961 Intangible assets, net                      9,810             10,094 Other assets                                2,315             2,222 TOTAL ASSETS                                $    252,469   $    253,282 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable                            $     30,270  $     30,525 Accrued warranty                            7,979             7,579 Accrued customer rebates                    1,724             2,190 Accrued compensation and related taxes      7,070             6,440 Deposits from customers                     18,383            18,006 Other current liabilities and accrued       6,108             5,333 expenses Current portion of long-term debt           66                79 Total current liabilities                   71,600            70,152 Other non-current liabilities               2,446             3,109 Long-term debt, less current portion        5,247             5,261 Deferred income tax liabilities             3,209             3,209 Shareholders' equity: Preferred stock, no par value: 2,000 shares -                 - authorized (none issued) Common stock, $0.01 par value; 40,000 shares authorized; 34,483 and 34,210        345               342 outstanding Additional paid in capital                  75,629            75,075 Retained earnings                           93,992            96,132 Total Spartan Motors, Inc. shareholders'    169,966           171,549 equity Non-controlling interest                    1                 2 Total shareholders' equity                  169,967           171,551 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY  $    252,469   $    253,282    Spartan Motors, Inc. and Subsidiaries  Consolidated Statements of Operations  (In thousands, except per share data)  (Unaudited)                                             Three Months Ended March 31,                                             2014         % of  2013     % of                                                          sales           sales Sales                                       $  127,959         $                                                                   96,136 Cost of products sold                       115,214      90.0   89,789   93.4 Gross profit                                12,745       10.0   6,347    6.6 Operating expenses:      Research and development               2,859        2.2    2,801    2.9      Selling, general and administrative    13,428       10.5   10,374   10.8 Total operating expenses                    16,287       12.7   13,175   13.7 Operating loss                              (3,542)      (2.8)  (6,828)  (7.1) Other income (expense):      Interest expense                       (94)         (0.1)  (70)     (0.1)      Interest and other income              128          0.1    146      0.2 Total other income                          34           0.0    76       0.1 Loss before taxes                           (3,508)      (2.7)  (6,752)  (7.0) Taxes                                       (1,367)      (1.1)  (2,498)  2.6 Net loss                                    (2,141)      (1.7)  (4,254)  (4.4) Less: Net loss attributable to             (1)          0.0    -        - non-controlling interest Net loss attributable to Spartan Motors,    (2,140)      (1.7)  (4,254)  (4.4) Inc. Basic and diluted net loss per share        $                $                                                (0.06)             (0.13) Basic and diluted weighted average common   33,728              33,381 shares outstanding    Spartan Motors, Inc. and Subsidiaries Sales and Other Financial Information by Business Segment Unaudited Three Months Ended March 31, 2014 (in thousands of dollars)                   Business Segments                   Emergency  Delivery &     Specialty                   Response   Service        Chassis      Other    Consolidated                              Vehicles       &Vehicles Emergency         $        $        $       $     $    Response Chassis  13,625      -             -           -     13,625 Sales Emergency Response Bodies   22,317                                          22,317 Sales Utilimaster                  58,971                               58,971 Vehicle Sales Motorhome Chassis                           21,784                21,784 Sales Other Specialty                             2,020                 2,020 Vehicles Aftermarket Parts            6,205          3,037                 9,242 and Assemblies  Total      $        $  65,176     $ 26,841     $     $   Sales             35,942                                  -      127,959 Depreciation and  $                                  $      $     Amortization      259       $   1,113    $   293   594      2,259 Expense Operating Income  (3,664)    2,596          633          (3,107)  (3,542) (Loss) Segment Assets    74,959     82,580         26,728       68,202   252,469    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 31,                 2014          2013        2013         2013        2013 Emergency Response        $33,158       $25,598     $27,137      $28,388     $34,053 Chassis* Emergency Response        143,192       130,891     92,556       86,760      70,023 Bodies* Total Emergency Response        176,350       156,489     119,693      115,148     104,076 Backlog Motorhome       12,866        11,370      22,104       14,166      13,736 Chassis * Other Vehicles* -             -           -            -           3,056 Aftermarket Parts and       1,438         1,654       2,635        3,437       7,319 Assemblies Total Specialty Chassis &       14,304        13,024      24,739       17,603      24,111 Vehicles Backlog Delivery & Service         83,356        73,148      87,492       100,399     100,394 Vehicles Backlog * Total Backlog   $274,010      $242,661    $231,924     $233,150    $228,581 * Anticipated time to fill backlog orders at March 31, 2014; 6 months or less for emergency response chassis; 12 months or less for emergency response bodies; 2 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: Lori Wade, CFO, Spartan Motors, Inc., (517) 543-6400; Greg Salchow, Group Treasurer, Spartan Motors, Inc., (517) 543-6400  
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