Spartan Motors Posts Record First Quarter Sales and Profits
Earnings Increase 60.8 Percent; Order Backlog Up 37.6 Percent
CHARLOTTE, Mich., May 1 -- Spartan Motors, Inc. reported record quarterly results, including a 37.8 percent year-over-year increase in net sales and a 60.8 percent year-over-year increase in net earnings for the first quarter ended March 31, 2007.
Spartan, a leading manufacturer of custom vehicle chassis and emergency- rescue vehicles, said net earnings grew to a record $7.2 million, or $0.33 per diluted share, on net sales of $142.9 million in the 2007 first quarter, compared with net earnings of $4.5 million, or $0.23 per diluted share, on net sales of $103.7 million in the first quarter of 2006.
Spartan attributed its strong profitability to improved execution of its strategic plan within its various markets. All financial information includes the adjustment for the Company's 3-for-2 stock split in Dec. 2006.
"We have begun 2007 in an excellent position, encouraged by our best-ever quarterly results on both the top and bottom line and thankful for our success," said John Sztykiel, president and CEO of Spartan Motors. "In addition, we are in the process of adding three manufacturing facilities to our Spartan Chassis operations, expanding our production capacity to allow us to capitalize on our growing backlog and become more effective and efficient in our execution.
"Though the RV industry is currently doing well and our sales and backlog for motorhome chassis increased in the first quarter of 2007 compared to the fourth quarter of 2006, we do have some concerns about the future impact of rising fuel prices on the overall RV market."
Spartan's gross margin improved to 17.3 percent in the first quarter of 2007, compared with 16.2 percent for the same period in 2006 and 16.8 percent in the fourth quarter of 2006, reflecting higher sales and improved product mix, overhead utilization and labor efficiencies. Operating margin also improved to 8.0 percent in the first quarter of 2007, compared with 6.6 percent in the same quarter of 2006.
Spartan Motors' consolidated backlog increased 37.6 percent over the same period of last year to approximately $250.1 million as of March 31, 2007, the largest backlog in company history. Spartan Motors anticipates filling its current backlog orders by the end of 2007.
"We are confident that our innovation, speed to market and current momentum in each business unit will help us grow market share in our existing products and support our new product initiatives during the remainder of 2007," Sztykiel said.
"We are expanding on a company-wide basis, but also have the market trend- winds at our backs. The aging U.S. population, with 11,000 Americans turning 50 each day, remains an opportunity for the RV and ambulance markets. More than 70 percent of U.S. casualties in Iraq are from improvised explosive devices (IEDs) and mine-resistant ambush-protected vehicles are protecting our troops from IEDs on the battlefield. Every 32 seconds there is an 'all- hazards, first-response call' to a U.S. fire department and this level is increasing, expanding the market for our emergency-rescue products."
On a consolidated basis, Spartan posted its best-ever quarterly return on invested capital (ROIC) of 25.7 percent in the first quarter of 2007, a 17.9 percent increase compared to ROIC of 21.8 percent for the same quarter in 2006. (Spartan defines return on invested capital as operating income less taxes, on an annualized basis, divided by total shareholders' equity.) ROIC for 2006 was 15.7 percent compared to ROIC of 10.4 percent in 2005.
The Company ended the quarter with $21.1 million in long-term debt, which includes financing for Spartan Chassis' new and renovated facilities and growth in working capital to support its increased sales. Spartan reported $1.3 million in cash and cash equivalents at the end of the first quarter of 2007.
"I want to thank of all of our team members at Spartan Chassis, Crimson Fire, Crimson Fire Aerials and Road Rescue for their focus on becoming efficient and effective," Sztykiel said.
Spartan Chassis
Sales at Spartan Chassis, the company's largest operating unit, increased 44.5 percent to $128.0 million, or 86.0 percent of Spartan Motors' total sales. Earnings at Spartan Chassis improved 50.0 percent in the current first quarter compared to the same quarter of last year, and the unit's backlog as of March 31, 2007 increased 52.4 percent compared to last year.
Sales of fire truck chassis increased 37.5 percent in the first quarter of 2007 compared to last year. Backlog for fire truck chassis at the end of the first quarter was $84.4 million, a 22.3 percent increase compared with last year. Other product sales, including specialty vehicle chassis and Spartan's subcontracts for military vehicle customers, increased 251.6 percent in the first quarter of 2007, and backlog for specialty vehicles increased 625.6 percent to $53.2 million as of March 31, 2007.
Spartan's RV chassis sales increased 2.9 percent in the first quarter, driven in part by an 8.0 percent increase in industry wholesale shipments for Class A motorhomes in the first two months of 2007, the latest industry data available from the Recreational Vehicle Industry Association (RVIA). Backlog for RV chassis decreased 2.5 percent year-over-year to $37.7 million as of March 31, 2007, though it increased 33.6 percent compared to RV chassis backlog at the end of the fourth quarter of 2006.
"Spartan Chassis as a whole continues to execute, as evidenced by its increasing profitability, while also growing market share, as seen in our record backlog," said Sztykiel. "Industry shipments for motorhomes increased in early 2007. This momentum may offset the possibility of higher fuel prices as we move into early summer. As we continue to pursue market share in RV, we expect to continue to see increased sales as more OEMs adopt a Spartan chassis as their platform."
Sztykiel continued: "Spartan Chassis unveiled a new product system at FDIC 2007 allowing fire truck customers to customize every chassis from two base models of chassis. This platform concept is a first for the industry, and we believe it will eventually become an industry standard, as it provides the customer with exactly what they want at greater operational efficiency.
"We also received several large orders from our military vehicle strategic partners in the last several months, including those for the important Mine Resistant Ambush Protected (MRAP) program, and we remain optimistic about our prospects as a supplier to this new market."
Emergency Vehicle Team (EVTeam)
Spartan's EVTeam operating unit, consisting of its Crimson Fire, Crimson Fire Aerials and Road Rescue subsidiaries, reported a sales increase of 8.6 percent in the 2007 first quarter, as compared to the same quarter of 2006. The EVTeam reported backlog of $74.8 million at the end of the quarter, a 12.1 percent increase compared to the unit's backlog in the first quarter of 2006.
"The first quarter was another step in the right direction for the EVTeam," Sztykiel said. "Our chassis production constraint affecting Crimson Fire and Crimson Fire Aerials will be solved by our new Spartan cab and chassis plant opening in the next month. All three EVTeam companies had several new products on display at FDIC 2007, including Crimson Fire Aerial's new, cost-effective Boomer, which is targeted to the 25,000 fire departments in the U.S. that do not have an aerial or waterway device due to cost."
Conference Call, Webcast and Presentation
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 http://www.spartanmotors.com/webcasts.asp.
About Spartan Motors
Spartan Motors, Inc. (http://www.spartanmotors.com/) designs, engineers and manufactures custom chassis and vehicles for the recreational vehicle, fire truck, ambulance, emergency-rescue and specialty vehicle markets. The Company's brand names -- Spartan(TM), Crimson Fire(TM), Crimson Fire Aerials(TM), and Road Rescue(TM) -- are known for quality, value, service and being the first to market with innovative products. The Company employs approximately 1,100 at facilities in Michigan, Pennsylvania, South Carolina, and South Dakota. Spartan reported sales of $445 million in 2006 and is focused on becoming the premier manufacturer of specialty vehicles and chassis in North America.
Spartan Motors, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
March 31, 2007 December 31, 2006
$-000- $-000-
ASSETS
Current assets:
Cash and cash equivalents $1,291 $13,835
Accounts receivable, net 79,243 62,620
Inventories 72,793 64,173
Deferred income tax assets 4,371 4,567
Deposits on engines 4,742 10,900
Other current assets 1,706 1,882
Total current assets 164,146 157,977
Property, plant and equipment, net 35,874 29,659
Goodwill 2,457 2,457
Other assets 521 555
Total assets $202,998 $190,648
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $36,324 $30,704
Accrued warranty 8,192 6,381
Accrued compensation and related
taxes 4,760 7,712
Accrued vacation 1,689 1,483
Accrued customer rebates 2,386 3,471
Deposits from customers 7,139 7,465
Taxes on income 2,106 1,566
Other current liabilities and
accrued expenses 3,796 2,591
Current portion of long-term debt 521 521
Total current liabilities 66,913 61,894
Long-term debt, less current portion 21,126 25,218
Other non-current liabilities 972 -
Deferred income tax liabilities 89 355
Shareholders' equity:
Common stock 215 211
Additional paid in capital 58,177 54,339
Retained earnings 55,506 48,631
Accumulated other comprehensive
loss -
Total shareholders' equity 113,898 103,181
Total liabilities and shareholders'
equity $202,998 $190,648
Spartan Motors, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
Three Months Ended March 31, 2007 and 2006
March 31, 2007 March 31, 2006
$-000- % $-000- %
Sales 142,882 103,666
Cost of Products Sold 118,190 86,898
Gross Profit 24,692 17.3 16,768 16.2
Operating Expenses:
Research and Development 3,790 2.7 2,845 2.8
Selling, General and
Administrative 9,482 6.6 7,056 6.8
Total Operating Expenses 13,272 9.3 9,901 9.6
Operating Income 11,420 8.0 6,867 6.6
Other Income (Expense):
Interest Expense (246) (0.2) (56) (0.1)
Interest and Other Income 137 0.1 304 0.3
Total Other Income (Expense) (109) (0.1) 248 0.2
Earnings before Taxes on Income 11,311 7.9 7,115 6.8
Taxes on Income 4,104 2.9 2,634 2.5
Net Earnings 7,207 5.0 4,481 4.3
Basic Net Earnings per Share 0.34 0.24
Diluted Net Earnings per Share 0.33 0.23
Basic Weighted Average Common Shares
Outstanding 21,103 18,924
Diluted Weighted Average Common
Shares Outstanding 21,740 19,178
Spartan Motors, Inc. and Subsidiaries
Sales and Other Financial Information by Business Segment
Quarter Ended March 31, 2007
Three Months Ended March 31, 2007 (amounts in thousands)
Business Segments
Chassis EVTeam Other Consolidated
Motorhome Chassis Sales 56,154 56,154
Fire Truck Chassis Sales 30,624 (6,531) 24,093
EVTeam Product Sales 21,400 21,400
Other Product Sales 41,235 41,235
Total Net Sales 128,013 21,400 (6,531) 142,882
Interest Expense (Income) 308 (62) 246
Depreciation Expense 385 309 130 824
Segment Net Earnings (Loss) 8,360 (722) (431) 7,207
Three Months Ended March 31, 2006 (amounts in thousands)
Business Segments
Chassis EVTeam Other Consolidated
Motorhome Chassis Sales 54,570 54,570
Fire Truck Chassis Sales 22,277 (4,608) 17,669
EVTeam Product Sales 19,698 19,698
Other Product Sales 11,729 11,729
Total Net Sales 88,576 19,698 (4,608) 103,666
Interest Expense (Income) 1 158 (103) 56
Depreciation Expense 229 305 109 643
Segment Net Earnings (Loss) 5,572 (832) (259) 4,481
Period End Backlog (amounts in thousands)
March 31, June 30, September December March 31,
2006 2006 30, 2006 31, 2006 2007
Motorhome Chassis * 38,640 29,141 27,416 28,198 37,679
Fire Truck Chassis * 69,008 112,874 81,889 84,445 84,416
Other Product * 7,329 31,636 56,175 49,729 53,178
Total Chassis 114,977 173,651 165,480 162,372 175,273
EVTeam Product * 66,741 68,176 65,387 69,715 74,843
Total Backlog 181,718 241,827 230,867 232,087 250,116
* Anticipated time to fill backlog orders; 2 months or less for motorhome
chassis and 4-10 months for fire truck chassis, other product and EVTeam
product
