Spartan Motors Reports Increased Earnings for Fourth Quarter
Record Emergency Rescue Orders Grow Sales and Backlog for 2005
CHARLOTTE, Mich., Feb. 16 -- Spartan Motors, Inc. today reported a 41.0 percent increase in net earnings for the year ended December 31, 2005, bolstered by increased profits in the fourth quarter. Spartan said increased sales of its fire truck chassis and fire trucks, along with revenue from its military vehicles contract, were the main growth drivers for the quarter and year.
Spartan Motors, a leading manufacturer of custom motorhome chassis, fire truck chassis and emergency-rescue vehicles, reported earnings of $986,000, or $0.08 per diluted share, on net sales of $75.5 million for the fourth quarter of 2005, compared with net earnings of $395,000, or $0.03 per diluted share, on net sales of $80.3 million for the fourth quarter of 2004.
The most recent quarterly results were Spartan Motors' fourth consecutive quarter of improved earnings when compared to the same quarter of the prior year, reflecting the strength of its largest operating unit, Spartan Chassis, as well as continued improvement at its other subsidiary companies.
For the year ended December 31, 2005, Spartan reported a 41.0 percent increase in profits, posting net earnings of $8.3 million, or $0.65 per diluted share, on record net sales of $343.0 million, compared with net earnings of $5.9 million, or $0.46 per diluted share, on net sales of $312.3 million for the prior year.
The Company said it had record orders for the year for fire truck chassis and fire trucks, as well as a strong backlog across the board. Consolidated backlog was $167.8 million as of December 31, 2005, compared with backlog of $146.7 million at the end of the third quarter of 2005 and $117.6 million at the end of the prior year's fourth quarter, a 42 percent increase year-over- year. Spartan Motors anticipates filling all of its current backlog orders by December 31, 2006.
Spartan Chassis, the company's largest operating subsidiary, reported improved earnings and profitability for the fourth quarter compared to the prior year, driven by increased sales of fire truck chassis and military vehicle chassis. This gain during the quarter was somewhat offset by softer sales of recreational vehicle (RV) chassis and a loss at Spartan's Emergency Vehicle Team (EVTeam), though the team cut its loss nearly 40 percent compared to the fourth quarter of 2004. Spartan's EVTeam consists of its Crimson Fire, Crimson Fire Aerials and Road Rescue subsidiaries.
"On the whole, we are pleased with the progress we made this year, especially considering that the RV market had a soft year," said John Sztykiel, president and CEO of Spartan Motors. "Our core Spartan Chassis business continues to perform very well with increased sales, profitability and record orders for fire truck chassis for the year. It also benefited from the military contract with Force Protection, Inc. for the Cougar military vehicle."
"At the same time, because of softer market conditions, our sales for RV chassis for 2005 were slightly less than last year," Sztykiel said. "However, we did gain profitable market share as evidenced by the fact unit shipments of Class A motorhomes were down 18.1 percent while our RV unit shipments declined by only 2.3 percent. We expect our RV chassis sales in 2006 to outpace 2005 because of our increased motorhome model presence and an overall improvement in the RV market. The EVTeam as a whole is on track to substantially reduce its loss in 2006 compared to 2005, as each of its companies moves toward profitability within its own timeframe."
Spartan reported its gross margin improved to 14.8 percent in the fourth quarter of 2005, compared with 11.9 percent for the same period in 2004, due to operating improvements as well as better pricing to match material cost increases. Likewise, operating margin also improved to 1.9 percent in the fourth quarter of 2005, compared with 1.1 percent in the same quarter of 2004.
Spartan Chassis
Net earnings at Spartan Chassis improved 23.9 percent in the quarter compared to the same period of the prior year, while sales declined by 9.2 percent, primarily due to a 33.7 percent decline in sales of recreational vehicle (RV) chassis compared to last year's fourth quarter. Spartan Chassis reported a 48.1 percent increase in sales of its fire truck chassis in the fourth quarter, and gained additional revenue from the Cougar military vehicle, which is currently in use by the U.S. military in Iraq.
"We had another good quarter and an excellent year at Spartan Chassis," Sztykiel said. "Our improved product quality, delivery time, marketing, design and customer service, as well as increased federal spending in the emergency-rescue market, allowed us to capture market share for our fire truck chassis. In our micro-niche products, we gained additional revenue from the Cougar contract and expect this to continue into early 2006.
"As expected, RV chassis sales were softer in the fourth quarter, primarily because of the current downturn in the RV market. Based on the record number of motorhome models at the most recent RVIA trade show that featured a Spartan chassis, it is clear to us that we have improved our market position. We remain optimistic that the RV market will begin recovering in mid-2006 as consumer confidence rises and fuel prices stabilize."
Emergency Vehicle Team (EVTeam)
Spartan's EVTeam posted a loss for the fourth quarter of 2005, though net sales increased 22.9 percent compared to the prior year's fourth quarter. Crimson Fire reported a 20.0 percent increase in sales over last year's fourth quarter, while Crimson Fire Aerials increased sales by 94.5 percent and Road Rescue improved its sales by 21.2 percent.
"We saw improvement at all three EVTeam companies in the fourth quarter and the group as a whole made great strides operationally," Sztykiel said. "Crimson Fire had record orders for the year, creating a strong backlog, and both Crimson Fire and Road Rescue reported improved gross margin in the quarter.
"All three companies have stabilized operating expenses on higher sales. Moving into 2006, we expect improved results from market share gains, efficiency improvements and as higher-priced units move through the backlog. We expect that when Crimson Fire, Crimson Fire Aerials and Road Rescue achieve their 2006 sales targets, it will be 80 percent higher than their revenues in 2004. The EVTeam's growth engine is now in gear to drive profitability."
Financial Highlights
On a consolidated basis, Spartan posted a return on invested capital (ROIC) of 4.1 percent in the fourth quarter of 2005, compared with ROIC of 1.8 percent in the same quarter in 2004. Spartan said ROIC was 10.4 percent for the full year 2005 compared with 8.4 percent in 2004. (Spartan defines return on invested capital as operating income, less taxes, on an annualized basis, divided by total shareholders' equity.)
The company also posted a consolidated return on equity (ROE) of 11.8 percent in 2005, compared with 9.1 percent in 2004. (Spartan defines return on equity as net income on an annualized basis, divided by average total shareholders' equity.) Spartan's balance sheet remains strong, and the company ended the quarter with $11.7 million in cash, cash equivalents and investment securities.
"Looking ahead to 2006, we are focused on achieving year-over-year top and bottom line growth through superior people, products and processes," said Sztykiel. "Based on our market share penetration, we expect to build more RV chassis in 2006 than we did in 2005. We also expect to see continued results from our fire truck chassis, new opportunities in micro-niche markets and increased sales and significant operational improvement from the EVTeam."
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 and emergency-rescue markets. The Company's brand names -- Spartan(TM), Crimson Fire(TM), Crimson Fire Aerials(TM), and Road Rescue(TM) -- are known in their market niches for quality, value, service and being the first to market with innovative products. The Company employs approximately 900 at facilities in Michigan, Alabama, Pennsylvania, South Carolina, and South Dakota. Spartan Motors is publicly traded on The Nasdaq Stock Market under the ticker symbol SPAR.
Spartan Motors, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
Three Months Ended December 31, 2005 and 2004
December 31, 2005 December 31, 2004
$-000- % $-000- %
Sales 75,450 80,291
Cost of Sales 64,301 70,744
Gross Profit 11,149 14.8 9,547 11.9
Operating Expenses:
Research and Development 2,579 3.4 2,189 2.7
Selling, General and
Administrative 7,164 9.5 6,514 8.1
Total Operating Expenses 9,743 12.9 8,703 10.8
Operating Income 1,406 1.9 844 1.1
Other Income (Expense):
Interest Expense (35) (0.0) (60) (0.1)
Interest and Other Income 276 0.3 152 0.2
Total Other Income (Expense) 241 0.3 92 0.1
Earnings before Taxes 1,647 2.2 936 1.2
Taxes 661 0.9 541 0.7
Net Earnings 986 1.3 395 0.5
Basic Net Earnings per Share 0.08 0.03
Diluted Net Earnings per Share 0.08 0.03
Basic Weighted Average Common Shares
Outstanding 12,638 12,511
Diluted Weighted Average Common
Shares Outstanding 12,861 12,884
Spartan Motors, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
Twelve Months Ended December 31, 2005 and 2004
December 31, 2005 December 31, 2004
$-000- % $-000- %
Sales 343,007 312,270
Cost of Sales 294,232 270,891
Gross Profit 48,775 14.2 41,379 13.3
Operating Expenses:
Research and Development 9,431 2.7 7,944 2.5
Selling, General and
Administrative 26,693 7.8 24,450 7.9
Total Operating Expenses 36,124 10.5 32,394 10.4
Operating Income 12,651 3.7 8,985 2.9
Other Income (Expense):
Interest Expense (141) (0.0) (366) (0.1)
Interest and Other Income 859 0.2 575 0.1
Total Other Income (Expense) 718 0.2 209 0.0
Earnings before Taxes 13,369 3.9 9,194 2.9
Taxes 5,077 1.5 3,312 1.0
Net Earnings 8,292 2.4 5,882 1.9
Basic Net Earnings per Share 0.66 0.48
Diluted Net Earnings per Share 0.65 0.46
Basic Weighted Average Common Shares
Outstanding 12,559 12,351
Diluted Weighted Average Common
Shares Outstanding 12,809 12,743
Spartan Motors, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
December 31, 2005 December 31, 2004
$-000 $-000
ASSETS
Current assets:
Cash and cash equivalents $9,702 $10,463
Short-term investments 1,988 1,507
Accounts receivable, net 37,017 32,359
Inventories 44,265 32,442
Taxes receivable 990 1,957
Other current assets 5,694 4,488
Total current assets 99,656 83,216
Property, plant and equipment, net 18,478 18,239
Goodwill, net 4,543 4,543
Other assets 531 915
Total assets $123,208 $106,913
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $20,746 $19,248
Other current liabilities and
accrued expenses 4,609 3,397
Accrued warranty 4,503 3,671
Accrued vacation, compensation
and related taxes 5,332 4,352
Deposits from customers 13,640 8,588
Current portion of long-term debt 53 6
Total current liabilities 48,883 39,262
Long-term debt, less current portion 1,317 140
Deferred tax liabilities 309
Shareholders' equity:
Preferred stock -
Common stock 126 125
Additional paid in capital 37,983 36,211
Retained earnings 35,448 31,182
Unearned compensation (846) -
Accumulated other comprehensive
loss (12) (7)
Total shareholders' equity 72,699 67,511
Total liabilities and shareholders'
equity $123,208 $106,913