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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