Spartan Motors Reports Third Quarter Marked by Sales Growth, Record Backlog and Increased Capacity
CHARLOTTE, Mich., Oct. 25, 2007 -- Spartan Motors, Inc. reported a 36.8 percent year-over-year increase in net sales, a 66.0 percent year-over-year increase in backlog and a substantial increase in production capacity for the third quarter ended Sept. 30, 2007.
Spartan, a leading manufacturer of custom vehicle chassis and emergency-rescue vehicles, reported net earnings of $2.6 million, or $0.08 per diluted share, on net sales of $148.9 million in the third quarter of 2007, compared with net earnings of $4.1 million, or $0.13 per diluted share, on net sales of $108.9 million in the third quarter of 2006. All financial information includes adjustments for the Company's 3-for-2 stock splits in June 2007 and Dec. 2006.
Spartan reported gross margin of 11.8 percent in the third quarter of 2007, compared with 15.8 percent for the same period in 2006, reflecting the ramp up of capacity, production inefficiencies, shift in product mix and competitive pricing on specialty vehicle chassis, at Spartan Chassis as well as lower margins at the EVTeam.
"Based upon the urgent need and future opportunity, the decision was made to accelerate the process of increasing production capacity for our military and specialty vehicle business in the third quarter," said John Sztykiel, president and CEO of Spartan Motors. "This objective was achieved, as our production capacity is now at 40 military units per day, a more than 300 percent increase over where we were just six months ago. Short term, this did affect our earnings in the third quarter.
"However, our backlog has grown 32 percent over the second quarter of 2007 and 66 percent compared to last year's third quarter. Just as important, these efforts have improved Spartan's ability to support future growth. It is realistic that our backlog will exceed the total revenue for 2006 by the end of Nov. 2007, with these units being built by the end of the second quarter of 2008.
"As we look forward, the third quarter should be an anomaly in our 2007 results, and we are anticipating the fourth quarter will be more in line with our results in the first two quarters of the year. We made significant progress and remain bullish about our potential based on our current momentum and the build up we anticipate through the end of 2007 and into 2008. We are resolving the production challenges, are in a good position to execute using our expanded production capacity, and see higher run rates to absorb our increased overhead and orders."
Through the first nine months of 2007, Spartan's sales increased 38.1 percent compared with the same period of last year, while earnings increased 20.3 percent compared to the same nine-month period in 2006. The Company reported net earnings of $16.3 million, or $0.50 per diluted share, for the first nine months of 2007, compared with net earnings of $13.5 million, or $0.46 per diluted share, in the same period of 2006.
"During the third quarter, we received orders from three OEMs for specialty vehicle chassis related to the U.S. military's Mine Resistant Ambush Protected (MRAP) vehicle program," Sztykiel said. "We opened two new factories focused on MRAP production, and acquired two more buildings to expand our production capacity for specialty vehicle and RV chassis."
Spartan Motors' consolidated backlog increased 66.0 percent over the same quarter of last year to approximately $383.1 million as of Sept. 30, 2007. This marks the largest backlog in Company history and a $92.8 million increase from the second quarter 2007. Spartan Motors anticipates filling its current backlog orders by July 2008.
On a consolidated basis, Spartan posted a return on invested capital (ROIC) of 8.5 percent in the third quarter of 2007, compared to ROIC of 16.2 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.)
The Company ended the quarter with $44.9 million in long-term debt, which includes financing for Spartan Chassis' recently opened facilities and growth in working capital to support its increased orders. Spartan reported $3.6 million in cash and cash equivalents at the end of the third quarter of 2007.
Spartan Chassis
Sales at Spartan Chassis, the Company's largest operating unit, increased 48.6 percent to $138.9 million, or 93.3 percent of Spartan Motors' total sales. Net earnings at Spartan Chassis improved 3.3 percent in the 2007 third quarter compared to the same quarter of last year, and the unit's backlog as of Sept. 30, 2007 increased 94.6 percent year-over-year.
Spartan's RV chassis sales increased 10.8 percent in the 2007 third quarter, outpacing the 3.6 percent year-to-date increase in industry wholesale shipments for Class A motorhomes as of Aug. 2007, which is the latest industry data available from the Recreational Vehicle Industry Association (RVIA). The RVIA is forecasting a 5.8 percent increase in Class A motorhome shipments for 2007. Backlog for RV chassis slightly decreased year-over-year to $26.1 million as of Sept. 30, 2007.
Sales of fire truck chassis declined 10.5 percent in the third quarter of 2007 compared to the same period last year. The slowdown in sales for fire truck chassis is primarily due to a shortage of components and a reduction in the production schedule due to the lower backlog. Backlog for fire truck chassis at the end of the third quarter was $67.1 million, an 18.1 percent decrease compared with last year, reflecting decreased demand due to increased backlogs among Spartan's OEM customers, and a slowdown in the market due to pre-buying of vehicles in 2006 due to the emissions change in 2007.
Other product sales, including specialty vehicle chassis, parts and Spartan's subcontracts for military vehicle customers, increased 236.3 percent in the third quarter of 2007. Backlog for other products increased 307.3 percent to $228.8 million as of Sept. 30, 2007. As reported in Aug. 2007, Spartan Chassis received subcontract orders from Force Protection, BAE Systems and General Dynamics Land Systems totaling $163 million in the third quarter of 2007.
"We are ramping up production at our new facilities and remain on track for an excellent year for Spartan Chassis," Sztykiel said. "Spartan Chassis accomplished a major challenge by increasing the production capacity for MRAP vehicles threefold in the quarter to support our troops in Iraq. Scheduling changes and parts shortages compounded the production inefficiencies due to the ramp up in capacity. This caused a significant decline in third quarter gross margins for specialty vehicles.
"We remain in great position for future contracts related to our current MRAP products, and we expect margins to improve. In addition, we have opportunity from the MRAP-2 program in 2008. Further, we have already seen improvement in margins for fire truck chassis as of September."
Emergency Vehicle Team (EVTeam)
Spartan's EVTeam operating unit, consisting of its Crimson Fire, Crimson Fire Aerials and Road Rescue subsidiaries, reported a sales decrease of 8.0 percent in the 2007 third quarter compared with the prior year period. The EVTeam reported backlog of $61.2 million at the end of the quarter, a 6.4 percent decrease compared to the unit's backlog in the third quarter of 2006.
"While we saw some improvements within Road Rescue, production inefficiencies and lower year-over-year sales led to an increased loss in the quarter at Crimson Fire and Crimson Fire Aerials," Sztykiel said. "Crimson Fire experienced temporary missteps in execution in the third quarter and we are expecting significant improvement in the fourth quarter. We had measurable success at Road Rescue in the third quarter, with the new operating management implementing significant production and cultural changes, resulting in better execution and improved sales."
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 1,300 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 Balance Sheets
September 30, December 31,
2007 2006
$-000- $-000-
ASSETS
Current assets:
Cash and cash equivalents $3,550 $13,835
Accounts receivable, net 84,415 62,620
Inventories 90,940 64,173
Deferred income tax assets 4,371 4,567
Deposits on engines 2,117 10,900
Taxes receivable 5,918
Other current assets 454 1,882
Total current assets 191,765 157,977
Property, plant and equipment, net 51,479 29,659
Goodwill 2,457 2,457
Other assets 524 555
Total assets $246,225 $190,648
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $49,156 $30,704
Accrued warranty 8,925 6,381
Accrued compensation and related taxes 6,729 7,712
Accrued vacation 1,681 1,483
Accrued customer rebates 2,367 3,471
Deposits from customers 6,383 7,465
Taxes on income 1,566
Other current liabilities and
accrued expenses 881 2,591
Current portion of long-term debt 522 521
Total current liabilities 76,644 61,894
Long-term debt, less current portion 44,865 25,218
Other non-current liabilities 1,078
Deferred income tax liabilities 89 355
Shareholders' equity:
Common stock 326 317
Additional paid in capital 60,349 54,233
Retained earnings 62,874 48,631
Total shareholders' equity 123,549 103,181
Total liabilities and
shareholders' equity $246,225 $190,648
Spartan Motors, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
Three Months Ended September 30, 2007 and 2006
September 30, September 30,
2007 2006
$-000- % $-000- %
Sales 148,891 108,876
Cost of Products Sold 131,316 91,709
Gross Profit 17,575 11.8 17,167 15.8
Operating Expenses:
Research and Development 3,840 2.6 3,092 2.9
Selling, General and
Administrative 9,690 6.5 7,852 7.2
Total Operating Expenses 13,530 9.1 10,944 10.1
Operating Income 4,045 2.7 6,223 5.7
Other Income (Expense):
Interest Expense (235) (0.1) (65) (0.1)
Interest and Other Income 190 0.1 205 0.2
Total Other Income (Expense) (45) (0.0) 140 0.1
Earnings before Taxes on Income 4,000 2.7 6,363 5.8
Taxes on Income 1,430 1.0 2,289 2.1
Net Earnings 2,570 1.7 4,074 3.7
Basic Net Earnings per Share 0.08 0.14
Diluted Net Earnings per Share 0.08 0.13
Basic Weighted Average Common
Shares Outstanding 32,200 29,993
Diluted Weighted Average Common
Shares Outstanding 32,862 30,551
Spartan Motors, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
Nine Months Ended September 30, 2007 and 2006
September 30, September 30,
2007 2006
$-000- % $-000- %
Sales 444,356 321,769
Cost of Products Sold 378,077 269,161
Gross Profit 66,279 14.9 52,608 16.3
Operating Expenses:
Research and Development 11,326 2.5 8,903 2.7
Selling, General and
Administrative 28,841 6.5 22,580 7.0
Total Operating Expenses 40,167 9.0 31,483 9.7
Operating Income 26,112 5.9 21,125 6.6
Other Income (Expense):
Interest Expense (918) (0.2) (151) (0.0)
Interest and Other Income 520 0.1 720 0.1
Total Other Income (Expense) (398) (0.1) 569 0.1
Earnings before Taxes on Income 25,714 5.8 21,694 6.7
Taxes on Income 9,421 2.1 8,146 2.5
Net Earnings 16,293 3.7 13,548 4.2
Basic Net Earnings per Share 0.51 0.46
Diluted Net Earnings per Share 0.50 0.46
Basic Weighted Average Common
Shares Outstanding 31,927 29,189
Diluted Weighted Average Common
Shares Outstanding 32,582 29,639
Spartan Motors, Inc. and Subsidiaries
Sales and Other Financial Information by Business Segment
Quarter Ended September 30, 2007
Three Months Ended September 30, 2007 (amounts in thousands)
Business Segments
Chassis EVTeam Other Consolidated
Motorhome Chassis Sales 48,536 48,536
Fire Truck Chassis Sales 27,845 (9,748) 18,097
EVTeam Product Sales 19,693 19,693
Other Product Sales 62,565 62,565
Total Net Sales 138,946 19,693 (9,748) 148,891
Interest Expense (Income) (2) 470 (233) 235
Depreciation Expense 475 283 333 1,091
Segment Net Earnings (Loss) 5,386 (1,613) (1,203) 2,570
Nine Months Ended September 30, 2007 (amounts in thousands)
Business Segments
Chassis EVTeam Other Consolidated
Motorhome Chassis Sales 165,080 165,080
Fire Truck Chassis Sales 87,337 (21,864) 65,473
EVTeam Product Sales 61,863 61,863
Other Product Sales 151,940 151,940
Total Net Sales 404,357 61,863 (21,864) 444,356
Interest Expense (Income) 1,149 (231) 918
Depreciation Expense 1,267 893 623 2,783
Segment Net Earnings (Loss 21,824 (3,290) (2,241) 16,293
Period End Backlog (amounts in thousands)
Sept. 30, Dec. 31, Mar. 31, Jun. 30, Sept. 30,
2006 2006 2007 2007 2007
Motorhome Chassis * 27,416 28,198 37,679 23,768 26,097
Fire Truck Chassis * 81,889 84,445 84,416 72,097 67,071
Other Product * 56,175 49,729 53,178 131,801 228,803
Total Chassis 165,480 162,372 175,273 227,666 321,971
EVTeam Product * 65,387 69,715 74,843 62,691 61,178
Total Backlog 230,867 232,087 250,116 290,357 83,149
* 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