Spartan Motors Reports Best-Ever Fourth Quarter and Year End Results
Sales in All Segments Grow; Consolidated Backlog Increases 38.3 Percent
CHARLOTTE, Mich., Feb. 15 -- Spartan Motors, Inc. today reported its earnings more than tripled for the fourth quarter ended Dec. 31, 2006, boosted by net sales gains of 63.8 percent.
Spartan had 2006 fourth quarter net earnings of $3.3 million, or $0.16 per diluted share, compared with net earnings of $986,000, or $0.05 per diluted share, in the fourth quarter of 2005. The 2006 fourth quarter net earnings included a non-cash charge of $2.1 million, or approximately $0.10 per share, related to a write-off of goodwill for Spartan's ambulance subsidiary, Road Rescue.
Net sales for the fourth quarter 2006 increased to a record $123.6 million, compared with net sales of $75.5 million for the fourth quarter of 2005. All financial information includes the adjustment for the Company's 3-for-2 stock split in Dec. 2006.
During its annual evaluation of subsidiary goodwill in the 2006 fourth quarter, it was concluded the goodwill for its Road Rescue subsidiary no longer had value. The write-off of the subsidiary's goodwill was a one-time charge to net earnings.
Spartan, a leading manufacturer of custom vehicle chassis and emergency- rescue vehicles, attributed its best-ever annual results to increased chassis sales to its RV, fire truck and specialty vehicle customers, as well as increased sales at its EVTeam companies.
"We had a strong fourth quarter and year in terms of improved execution across all our subsidiaries," said John Sztykiel, president and CEO of Spartan Motors. "In addition, the strength of our brands continues to increase and we are confident in our momentum based on our record-level sales and backlog.
"It is important to note our growth in 2006 increased without any new significant product introductions. We are in the process of introducing two new significant products to serve the fire apparatus market at Crimson Fire and Spartan Chassis in 2007, which we anticipate will make positive contributions into 2008. We are becoming a more disciplined group of people focused on becoming more effective and efficient."
For the year ended Dec. 31, 2006, Spartan's sales increased 29.8 percent and net earnings increased 102.9 percent compared to the same period last year. Spartan reported record net earnings of $16.8 million, or $0.83 per diluted share, on net sales of $445.4 million for 2006. Net earnings for the year ended 2006 include the non-cash charge related to the write-off of goodwill in the fourth quarter of 2006.
Spartan reported its gross margin improved to 16.8 percent in the fourth quarter of 2006, compared with 14.8 percent for the same period in 2005, reflecting higher sales and improved product mix, pricing, overhead utilization and labor efficiencies. Operating margin also improved to 5.0 percent in the fourth quarter of 2006, compared with 1.9 percent in the same quarter of 2005.
Spartan Motors' consolidated backlog at the end of 2006 increased 38.3 percent over last year's period to approximately $232.1 million. Spartan Motors anticipates filling the current backlog orders by the end of 2007.
On a consolidated basis, Spartan posted a return on invested capital (ROIC) of 12.3 percent in the fourth quarter of 2006, a 200.0 percent increase compared to ROIC of 4.1 percent for the same quarter in 2005. (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 $25.2 million in long-term debt, reflecting its investments in Spartan Chassis facilities and growth in working capital to support increased sales. Spartan reported $13.8 million in cash and cash equivalents at the end of 2006.
"We have always set aggressive goals when it comes to return on capital and are pleased that our performance in 2006 -- both in terms of earnings and sales growth as well as return on invested capital -- is being rewarded through share appreciation and increased value for our shareholders," said Jim Knapp, CFO of Spartan Motors.
Spartan Chassis
Earnings at Spartan Chassis, the company's largest operating subsidiary, improved 143.6 percent in the current fourth quarter compared to the same period of last year. Sales at Spartan Chassis increased 75.7 percent to $113.7 million, or 92.0 percent of total sales, and the subsidiary's backlog as of the end of the quarter increased 67.6 percent compared to last year.
Despite the downturn in the RV industry during the year, Spartan RV chassis sales increased 7.9 percent in 2006, compared with a 13.7 percent decline in industry sales for Class A motorhomes during the same period, according to the Recreational Vehicle Industry Association (RVIA). Spartan's RV chassis sales in the 2006 fourth quarter increased 32.4 percent compared to the prior year. Backlog for RV chassis decreased 9.3 percent year-over-year to $28.2 million as of Dec. 31, 2006.
Fourth quarter sales of fire truck chassis increased 28.1 percent year- over-year and backlog at the end of the quarter for fire truck chassis was $84.5 million, a 64.9 percent increase compared with last year. Sales of specialty vehicles chassis, including Spartan's subcontracts for Force Protection's Cougar and BAE Systems' ILAV military vehicles, increased 876.6 percent in the fourth quarter of 2006. At the end of the quarter, backlog for specialty vehicles was at $49.7 million, an increase of 240.2 percent compared with last year.
"Industry analysts are forecasting an RV industry recovery late in the second quarter of 2007," said Sztykiel. "We seem to be accelerating at a faster pace than the market based on our order intake for motorhome chassis in the first quarter of 2007, which is already higher than the previous quarter and compared to the first quarter of 2006. With our market share gains, we are in a good position to capitalize on this recovery. Spartan Chassis is also addressing the mid- to entry-level market of Class A motorhomes through strategic market presence.
"Sales of fire truck chassis remain near record levels and we are in the process of solving a minor production constraint with a new cab assembly and paint facility coming on-line in June 2007. We are optimistic about our specialty vehicle market, now 14.5 percent of consolidated annual sales, and continue to work effectively and efficiently with Force Protection and BAE Systems, our two primary military customers, as they seek new contracts from the U.S. military."
Emergency Vehicle Team (EVTeam)
Spartan's EVTeam operating group, consisting of its Crimson Fire, Crimson Fire Aerials and Road Rescue subsidiaries, reported an increase in 2006 fourth quarter sales by 4.7 percent compared to the same period last year. The EVTeam reported backlog of $69.7 million at the end of the quarter, which is on par with its backlog in the fourth quarter of 2005.
"Crimson Fire, along with Crimson Fire Aerials, continues to pull through Spartan-brand chassis as their sales grow," Sztykiel said. "Since every Crimson Fire Aerial rides on a Spartan chassis, its profitability is determined, in part, by timely deliveries of Spartan chassis. For the EVTeam, 2006 was a year of solid progress and we expect even more progress in 2007."
Future Outlook
"Our future performance is based on being effective -- doing the right things, and efficient -- doing things right, while building a culture of excellence across all of our operating subsidiaries," said Sztykiel. "This focus, along with capital investments in production capacity at Spartan Chassis, ongoing product development and the diversification of our business model into RV, emergency-rescue and specialty vehicles, bodes well for 2007 and beyond."
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. (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.
This release contains forward-looking statements, including, without limitation, statements concerning our business, future plans and objectives and the performance of our products. These forward-looking statements involve certain risks and uncertainties that ultimately may not prove to be accurate. Actual results and future events could differ materially from those anticipated in such statements. Technical complications may arise that could prevent the prompt implementation of the plans outlined above. The company cautions that these forward-looking statements are further qualified by other factors including, but not limited to, those set forth in the company's Annual Report on Form 10-K filing and other filings with the United States Securities and Exchange Commission (available at http://www.sec.gov/). Government contracts and subcontracts typically involve long payment and purchase cycles, competitive bidding, qualification requirements, delays or changes in funding, extensive specification development and changes, price negotiations and milestone requirements. An announced award of a governmental contract is not equivalent to a finalized executed contract and does not assure that orders will be issued and filled. Government agencies also often retain some portion of fees payable upon completion of a project and collection of contract fees may be delayed for long periods, which can negatively impact both prime contractors and subcontractors. The company undertakes no obligation to publicly update or revise any statements in this release, whether as a result of new information, future events or otherwise, except as required by law.
Spartan Motors, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
Three Months Ended December 31, 2006 and 2005
December 31, 2006 December 31, 2005
$- 000 - % $- 000 - %
Sales 123,608 75,450
Cost of Products Sold 102,840 64,301
Gross Profit 20,768 16.8 11,149 14.8
Operating Expenses:
Research and Development 3,720 3.0 2,579 3.4
Selling, General and Administrative 8,779 7.1 7,164 9.5
Goodwill Impairment 2,086 1.7
Total Operating Expenses 14,585 11.8 9,743 12.9
Operating Income 6,183 5.0 1,406 1.9
Other Income (Expense):
Interest Expense (196) (0.2) (34) (0.0)
Interest and Other Income 291 0.3 275 0.3
Total Other Income (Expense) 95 0.1 241 0.3
Earnings before Taxes on Income 6,278 5.1 1,647 2.2
Taxes on Income 2,998 2.4 661 0.9
Net Earnings 3,280 2.7 986 1.3
Basic Net Earnings per Share 0.16 0.05
Diluted Net Earnings per Share 0.16 0.05
Basic Weighted Average Common Shares
Outstanding 20,621 18,950
Diluted Weighted Average Common Shares
Outstanding 20,957 19,284
Spartan Motors, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
Twelve Months Ended December 31, 2006 and 2005
December 31, 2006 December 31, 2005
$- 000 - % $- 000 - %
Sales 445,378 343,007
Cost of Products Sold 372,002 294,232
Gross Profit 73,376 16.5 48,775 14.2
Operating Expenses:
Research and Development 12,622 2.8 9,431 2.7
Selling, General and
Administrative 31,360 7.1 26,693 7.8
Goodwill Impairment 2,086 0.5
Total Operating Expenses 46,068 10.4 36,124 10.5
Operating Income 27,308 6.1 12,651 3.7
Other Income (Expense):
Interest Expense (347) (0.1) (141) (0.0)
Interest and Other Income 1,011 0.3 859 0.2
Total Other Income (Expense) 664 0.2 718 0.2
Earnings before Taxes on Income 27,972 6.3 13,369 3.9
Taxes on Income 11,144 2.5 5,077 1.5
Net Earnings 16,828 3.8 8,292 2.4
Basic Net Earnings per Share 0.85 0.44
Diluted Net Earnings per Share 0.83 0.43
Basic Weighted Average Common Shares
Outstanding 19,737 18,836
Diluted Weighted Average Common
Shares Outstanding 20,255 19,212
Spartan Motors, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
December 31, 2006 December 31, 2005
$- 000 - $- 000 -
ASSETS
Current assets:
Cash and cash equivalents $13,835 $9,702
Marketable securities - 1,988
Accounts receivable, net 62,620 37,017
Inventories 64,173 44,265
Deferred income tax assets 4,567 3,745
Taxes receivable - 990
Other current assets 12,782 1,949
Total current assets 157,977 99,656
Property, plant and equipment, net 29,659 18,478
Goodwill 2,457 4,543
Other assets 555 531
Total assets $190,648 $123,208
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $30,704 $20,746
Accrued warranty 6,381 4,503
Accrued compensation and related
taxes 7,712 4,241
Accrued vacation 1,483 1,189
Deposits from customers 7,465 13,640
Taxes on income 1,566 -
Other current liabilities and
accrued expenses 6,062 4,608
Current portion of long-term debt 521 53
Total current liabilities 61,894 48,980
Long-term debt, less current portion 25,218 1,317
Deferred income tax liabilities 355 309
Shareholders' equity:
Preferred stock - -
Common stock 141 126
Additional paid in capital 54,409 37,040
Retained earnings 48,631 35,448
Accumulated other comprehensive
loss - (12)
Total shareholders' equity 103,181 72,602
Total liabilities and shareholders'
equity $190,648 $123,208
Spartan Motors, Inc. and Subsidiaries
Sales and Other Financial Information by Business Segment
Year Ended December 31, 2006
Three Months Ended December 31, 2006
(amounts in thousands)
Business Segments
Chassis EVTeam Other Consolidated
Motorhome Chassis Sales 47,574 47,574
Fire Truck Chassis Sales 28,473 (6,593) 21,880
EVTeam Product Sales 16,490 16,490
Other Product Sales 37,664 37,664
Total Net Sales 113,711 16,490 (6,593) 123,608
Interest Expense (Income) 307 (111) 196
Depreciation Expense 350 337 104 791
Segment Net Earnings (Loss) 7,456 (3,112) (1,064) 3,280
Twelve Months Ended December 31, 2006
(amounts in thousands)
Business Segments
Chassis EVTeam Other Consolidated
Motorhome Chassis Sales 204,165 204,165
Fire Truck Chassis Sales 108,302 (23,631) 84,671
EVTeam Product Sales 77,365 77,365
Other Product Sales 79,177 79,177
Total Net Sales 391,644 77,365 (23,631) 445,378
Interest Expense (Income) 1 942 (596) 347
Depreciation Expense 1,142 1,298 423 2,863
Segment Net Earnings (Loss) 24,681 (5,453) (2,400) 16,828
Period End Backlog
(amounts in thousands)
December March 31, June 30, September December
31, 2005 2006 2006 30, 2006 31, 2006
Motorhome Chassis * 31,075 38,640 29,141 27,416 28,198
Fire Truck Chassis * 51,201 69,008 112,874 81,889 84,445
Other Product * 14,616 7,329 31,636 56,175 49,729
Total Chassis 96,892 114,977 173,651 165,480 162,372
EVTeam Product * 70,932 66,741 68,176 65,387 69,715
Total Backlog 167,824 181,718 241,827 230,867 232,087
* 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