Spartan Motors Reports Second Quarter 2010 Results; Progress on Implementing Business Realignment and Continued Investments in Growth Initiatives
CHARLOTTE, Mich., July 23 -- Spartan Motors, Inc. today reported results for its 2010 second quarter, which included the impact of the previously announced business realignment plan. Spartan posted a net loss for the quarter of $2.6 million, which included the unfavorable impact of these actions. Before one-time restructuring charges, adjusted net earnings from continuing operations was a positive $0.9 million, or $0.03 per diluted share.
Second-quarter highlights (which reflect Road Rescue as a discontinued operation):
-- Net sales of $115.7 million
-- Gross margin of 14.3 percent of sales (15.1 percent before
restructuring charges)
-- Operating expenses of 14.2 percent of sales (13.4 percent before
restructuring charges)
-- Restructuring charges of $1.8 million, or $0.03 per diluted share, net
of tax
-- Cash balance of $10.1 million (up $5.7 million from Q1 2010)
-- Debt of $20.3 million (down $3.1 million from Q1 2010)
-- Consolidated backlog of $205.7 million
John Sztykiel, President and CEO of Spartan Motors, said: "In the second quarter, we focused our efforts on three key areas: exiting the Road Rescue business to focus on our more profitable markets, aligning our cost structure with our current and near term sales volumes and investing in promising and profitable growth opportunities. While we have a lot of complexity in our financial reports this quarter, when you peel back the results you will see that we made solid progress in our key financial metrics and also continued to invest in our strategic growth initiatives."
Exit from Road Rescue Business
-- Spartan is fielding many inquiries from both strategic and financial
buyers interested in acquiring Road Rescue
-- Road Rescue has maintained the quality and reliability of shipments
due to the dedication and commitment of the Marion, S.C. workforce
-- All Road Rescue results are now classified as discontinued operations
and presented below income from continuing operations, net of tax
-- Spartan redefined reportable segments into Delivery and Service
Vehicles, consisting of Utilimaster, and Specialty Vehicles, which
consists of the Company's fire truck chassis, motorhome chassis, other
vehicles, fire truck bodies and aftermarket parts and assemblies
-- Net loss from Road Rescue for the second quarter was $2.4 million,
which includes $1.8 million of impairment and restructuring charges,
net of tax
Realigning Cost Structure
-- Second quarter results from continuing operations included $1.8
million in restructuring charges related to realigning the business to
current level and mix of revenues
-- Adjusted gross profit reached $17.5 million, while adjusted gross
margin increased to 15.1 percent - an improvement from first-quarter
adjusted gross profit of $16.9 million, or 14.3 percent
-- Excluding restructuring charges, operating expenses in the quarter
were reduced by $0.7 million compared to the same period in 2009. In
addition, the second quarter of 2010 included $3.5 million of
operating expenses related to Utilimaster that were not present in
2009 results
-- Operating cash flow was $22.1 million in the first six months of the
year, driven by reduced working capital requirements that primarily
consisted of a $16.0 million reduction in inventory levels
Investment in Profitable Growth Opportunities
-- R&D investment of $1.2 million in the current quarter related to costs
for two major product introductions - the recently announced Next
Generation Commercial Van (NGCV) being developed in conjunction with
Isuzu and the development of new cab and chassis products related to
the 2010 emissions standards
-- A prototype of the NGCV, a product of Spartan's alliance with Isuzu,
rolled off the line at Utilimaster this past week; production still on
track to begin in mid-2011
-- Assembly relationship with Isuzu on the N-series chassis is proceeding
according to plan, with production expected to begin in mid-2011
-- Crimson Fire's new product, the "Transformer," is complete and is
being well received in the marketplace having achieved its first sale
in Texas
Joe Nowicki, Chief Financial Officer, said: "Despite the loss for the quarter, we are very pleased with the pace of progress in implementing cost management and balance sheet initiatives across the organization. We began last fall realigning our cost structure to current and near-term demand and focusing on areas of our business that generate profitable market share. The actions we are taking are difficult, but improvements in our operating results, excluding the one-time charges, demonstrate that we are gaining ground toward achieving our interim financial goal of mid single-digit operating income. In addition, we are making substantial progress on continuing to strengthen our balance sheet - improvements in receivables and inventories, both dollars and turns, enabled us to further pay down debt and grow our cash balances, providing enhanced financial stability and future opportunity."
Financial Overview
-- Consolidated net sales for the quarter were $115.7 million, down 2.6
percent from the same quarter last year due to lower sales of
aftermarket parts and assemblies (APA), partially offset by
incremental revenues from Utilimaster
-- Gross margin in the second quarter of 2010 fell to 14.3 percent of
sales (15.1 percent before restructuring charges), from 20.7 percent
in the second quarter of 2009, primarily due to the shift in revenue
mix to lower-margin products
-- Net loss from continuing operations for the quarter was $172,000, or
$0.00 per diluted share, compared with net earnings from continuing
operations of $5.5 million, or $0.17 per diluted share, in the prior
year's second quarter. Excluding restructuring charges, adjusted net
earnings from continuing operations for the second quarter of 2010 was
$0.9 million, or $0.03 per diluted share
-- Consolidated backlog, excluding discontinued operations, at June 30,
2010 increased to $205.7 million from $150.1 million at June 30, 2009,
driven by the addition of Utilimaster's backlog of $43.3 million in
the current period, which was not included in the consolidated backlog
in the year-ago period
-- Sequentially, consolidated backlog was relatively flat with increases
at Utilimaster and APA (up 23 percent and 311 percent respectively),
which were substantially offset by declines in Fire Truck Chassis and
Fire Truck Bodies (down 22 percent and 19 percent respectively),
illustrating the benefit of Spartan's efforts to diversify its revenue
mix and end markets
Sztykiel concluded: "Looking forward, I continue to be optimistic about the future of Spartan Motors. We are making the difficult decisions and implementing the required actions to ensure our continued success in our existing markets. In addition, we continue to invest in the long-term opportunities that will fuel our growth in new and emerging markets. The first major catalyst, a prototype of our next generation commercial van and a product of our alliance with Isuzu, rolled off the line at Utilimaster this past week, and it looks great. The NGCV will definitely be a game-changer in the delivery and service marketplace. As we mentioned last quarter, we expect 2010 to be a year of implementation, and over the remainder of the year, our company-wide focus will be on maintaining solid profitability and top-line growth even in the midst of difficult market conditions. Our plan is simple and focused: compelling products, growth in profitable market share, cost and balance sheet management. The second quarter represents progress on all four fronts, and we expect that to continue as we move throughout the year."
Reconciliation of Non-GAAP Financial Measures
This release contains Adjusted Gross Profit, Adjusted Gross Margin, Adjusted Operating Expenses, Adjusted Net Earnings from Continuing Operations and Adjusted Earnings Per Share from Continuing Operations measures, which are all Non-GAAP financial measures. These are calculated by excluding items that we believe to be infrequent or not indicative of our operating performance. For the periods covered by this release such items consist of expenses associated with restructuring actions taken to adjust our cost structure to the current business climate. We present these adjusted Non-GAAP measures because we consider them to be important supplemental measures of our performance and believe them to be useful to show ongoing results from operations distinct from items that are infrequent or not indicative of our operating performance.
The adjusted Non-GAAP measures are not measurements of our financial performance under GAAP and should not be considered as an alternative to Gross Profit, Gross Margin, Operating Expense, Net Earnings from Continuing Operations or Earnings Per Share from Continuing Operations under GAAP. These adjusted Non-GAAP measures have limitations as analytical tools and should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. In addition, in evaluating the adjusted Non-GAAP measures, you should be aware that in the future we may incur expenses similar to the adjustments in this presentation, despite our assessment that such expenses are infrequent or not indicative of our operating performance. Our presentation of the adjusted Non-GAAP measures should not be construed as an inference that our future results will be unaffected by unusual or infrequent items. We compensate for these limitations by providing equal prominence of our GAAP results and using adjusted Non-GAAP measures only as a supplement.
The following table reconciles Gross Profit to Adjusted Gross Profit, Gross Margin to Adjusted Gross Margin, Operating Expense to Adjusted Operating Expense, Net Earnings (Loss) from Continuing Operations to Adjusted Net Earnings from Continuing Operations, and Earnings Per Share from Continuing Operations to Adjusted Earnings Per Share from Continuing Operations for the periods indicated.
Financial Summary (Non-GAAP)
(Unaudited)
Three Months Ended
------------------
June 30, March 31,
2010 2010
---- ----
Gross Profit / Gross Margin $16,493 14.3% $16,841 14.3%
Add Back: Restructuring Charges 977 0.8% 13 0.0%
Adjusted Gross Profit /Adjusted
Gross Margin $17,470 15.1% $16,854 14.3%
======= =======
Operating Expense /Operating
Expense as a Percent of Sales $16,364 14.2% $16,174 13.6%
Less: Restructuring Charges 841 0.8% 165 0.0%
--- ---
Adjusted Operating Expense 15,523 13.4% 16,009 13.6%
Net Earnings (Loss) from
Continuing Operations $(172) $270
Add Back: Restructuring Charges,
net of tax 1,089 116
Adjusted Net Earnings from
Continuing Operations $917 $386
==== ====
Earnings per Share from Continuing
Operations -Diluted $(0.00) $0.01
Add Back: Restructuring Charges,
net of tax $0.03 $0.00
Adjusted Earnings per Share from
Continuing Operations -Diluted $0.03 $0.01
===== =====
Conference Call, Webcast and Roadcast(TM)
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."
Spartan also will update the financial information on its Roadcast "digital roadshow" for investors. To launch the Spartan Motors Roadcast, please visit www.spartanmotors.com and look for the "Virtual Road Show" link on the right side of the page.
About Spartan Motors
Spartan Motors, Inc. (www.spartanmotors.com) designs, engineers and manufactures specialty chassis, specialty vehicles and truck bodies and aftermarket parts for the outdoor recreation/RV, emergency-response, defense, government services, and delivery and service markets. The Company's brand names - Spartan(TM), Crimson Fire(TM), Crimson Fire Aerials(TM), Road Rescue(TM) and Utilimaster® - are known for quality, value, service and being the first to market with innovative products. The Company employs approximately 1,600 at facilities in Michigan, Pennsylvania, South Carolina, South Dakota, Indiana and Texas. Spartan reported sales of $430 million in 2009 and is focused on becoming a global leader in the manufacture of specialty vehicles and chassis.
This release contains forward-looking statements, including, without limitation, statements concerning our business, future plans and objectives and the performance of our products. Forward looking statements are identifiable by words such as "believe," "anticipate," "will," "sustain," and "continue." These forward-looking statements involve certain risks and uncertainties that ultimately may not prove to be accurate. For example, we may encounter unforeseen difficulties and challenges in entering new markets or in pursuing strategic acquisitions. In addition, technical and other complications may arise that could prevent the timely implementation of our plans or that may impact the expected outcome of those plans. As a result, actual results and future events could differ materially from those anticipated in such statements. 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 Income
Three Months Ended June 30, 2010 and 2009
June 30, June 30,
2010 2009
--------- ---------
(Unaudited) (Unaudited)
----------- -----------
$-000- % $-000- %
------ --- ------ ---
Sales 115,654 118,788
Cost of Products Sold 98,184 94,106
Restructuring Charges 977 42
Gross Profit 16,493 14.3 24,640 20.7
------ ---- ------ ----
Operating Expenses:
Research and Development 4,053 3.5 4,194 3.5
Selling, General and
Administrative 11,470 9.9 12,030 10.1
Restructuring Charges 841 0.8 6 0.0
Total Operating Expenses 16,364 14.2 16,230 13.6
Operating Income 129 0.1 8,410 7.1
--- --- ----- ---
Other Income (Expense):
Interest Expense (257) (0.2) (324) (0.3)
Interest and Other Income
(Expense) (132) (0.1) 184 0.2
----
Total Other Income (Expense) (389) (0.3) (140) (0.1)
Earnings (Loss) Before Taxes (260) (0.2) 8,270 7.0
---- ---- ----- ---
Taxes (88) (0.0) 2,762 2.4
Net Earnings (Loss) from Continuing
Operations (172) (0.2) 5,508 4.6
Discontinued Operations (net of
tax), Including Impairment Charges (2,438) (2.1) (130) (0.1)
Net Earnings (Loss) (2,610) (2.3) 5,378 4.5
====== ==== ===== ===
Earnings (Loss) from Continuing
Operations - 0.17
Earnings (Loss) from Discontinued
Operations (0.08) -
Basic Net Earnings (Loss) per Share (0.08) 0.17
===== ====
Earnings (Loss) from Continuing
Operations - 0.16
Earnings (Loss) from Discontinued
Operations (0.08) -
Diluted Net (Loss) Earnings per
Share (0.08) 0.16
===== ====
Basic Weighted Average Common Shares
Outstanding 32,287 32,587
Diluted Weighted Average Common
Shares Outstanding 32,287 32,934
Spartan Motors, Inc. and Subsidiaries
Condensed Consolidated Statements of Income
Six Months Ended June 30, 2010 and 2009
June 30, June 30,
2010 2009
--------- ---------
(Unaudited) (Unaudited)
----------- -----------
$-000- % $-000- %
------ --- ------ ---
Sales 233,290 226,696
Cost of Products Sold 198,966 176,876
Restructuring Charges 990 42
Gross Profit 33,334 14.3 49,778 22.0
------ ---- ------ ----
Operating Expenses:
Research and Development 8,942 3.8 8,796 3.9
Selling, General and
Administrative 22,590 9.8 23,355 10.3
Restructuring Charges 1,006 0.4 6 0.0
Total Operating Expenses 32,538 14.0 32,157 14.2
Operating Income 796 0.3 17,621 7.8
--- --- ------ ---
Other Income (Expense):
Interest Expense (575) (0.2) (648) (0.3)
Interest and Other Income
(Expense) (66) (0.1) 327 0.1
---
Total Other Income (Expense) (641) (0.3) (321) (0.2)
Earnings Before Taxes 155 0.0 17,300 7.6
--- --- ------ ---
Taxes 56 0.0 5,873 2.6
Net Earnings from Continuing
Operations 99 0.0 11,427 5.0
Discontinued Operations (Net of
Tax), Including Impairment Charges (2,706) (1.1) 9 0.0
Net Earnings (Loss) (2,607) (1.1) 11,436 5.0
====== ==== ====== ===
Earnings (Loss) from Continuing
Operations - 0.35
Earnings (Loss) from Discontinued
Operations (0.08) -
Basic Net Earnings (Loss) per Share (0.08) 0.35
===== ====
Earnings (Loss) from Continuing
Operations - 0.35
Earnings (Loss) from Discontinued
Operations (0.08) -
Diluted Net Earnings (Loss) per
Share (0.08) 0.35
===== ====
Basic Weighted Average Common Shares
Outstanding 32,313 32,583
Diluted Weighted Average Common
Shares Outstanding 32,313 32,798
Spartan Motors, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
June 30, December 31,
2010 2009
---- ----
(Unaudited) (Unaudited)
----------- -----------
$-000- $-000-
------ ------
ASSETS
Current assets:
Cash and cash equivalents $10,066 $18,327
Accounts receivable, net 43,738 44,974
Inventories 80,325 96,330
Deferred income tax assets 6,567 6,567
Income taxes receivable 2,483 3,237
Other current assets 2,681 3,223
Other current assets from discontinued
operations 8,593 8,481
Total current assets 154,453 181,139
Property, plant and equipment, net 74,537 77,581
Goodwill and other intangible assets, net 29,516 29,895
Other assets 952 1,041
Other assets from discontinued operations - 2,647
Total assets $259,458 $292,303
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $22,437 $19,523
Accrued warranty 6,849 6,296
Accrued compensation and related taxes 4,895 5,411
Accrued vacation 1,904 1,783
Accrued customer rebates 1,507 1,324
Deposits from customers 5,683 11,571
Other current liabilities and accrued
expenses 5,692 6,199
Current portion of long-term debt 10,107 11,146
Other current liabilities from
discontinued operations 712 796
Total current liabilities 59,786 64,049
Other non-current liabilities 4,143 4,189
Long-term debt, less current portion 10,173 35,204
Deferred income tax liabilities 8,341 8,341
Shareholders' equity:
Common stock 329 329
Additional paid in capital 67,843 67,099
Retained earnings 108,843 113,092
Total shareholders' equity 177,015 180,520
Total liabilities and shareholders'
equity $259,458 $292,303
======== ========
Spartan Motors, Inc. and Subsidiaries
Sales and Other Financial Information by Business Segment
Three and Six Months Ended June 30, 2010
Unaudited
Three Months Ended June 30, 2010 (amounts in thousands of dollars)(1)
---------------------------------------------------------------------
Business Segments
-----------------
Specialty Delivery & Other Consolidated
Vehicles Service ----- ------------
-------- Vehicles
--------
Fire Truck Chassis Sales 39,196 39,196
Fire Truck Body Sales 11,588 11,588
Motorhome Chassis Sales 20,809 20,809
Utilimaster Product Sales 22,464 22,464
Other Product Sales
Vehicles 8,677 8,677
Aftermarket Parts and
Assemblies 12,920 12,920
Total Net Sales 93,190 22,464 - 115,654
====== ====== === =======
Interest Expense (Income) 328 20 (91) 257
Depreciation and
Amortization Expense 1,244 901 594 2,739
Net Earnings (Loss) from
Continuing Operations 2,058 (1,474) (756) (172)
Discontinued Operations, net
of tax (2,438) (2,438)
Net Earnings (Loss) 2,058 (1,474) (3,194) (2,610)
Six Months Ended June 30, 2010 (amounts in thousands of dollars)(1)
Business Segments
-----------------
Specialty Delivery & Other Consolidated
Vehicles Service ----- ------------
-------- Vehicles
--------
Fire Truck
Chassis Sales 76,888 76,888
Fire Truck Body
Sales 27,028 27,028
Motorhome Chassis
Sales 48,321 48,321
Utilimaster
Product Sales 46,209 46,209
Other Product
Sales
Vehicles 10,003 10,003
Aftermarket Parts
and Assemblies 24,841 24,841
------ ------
Total Net Sales 187,081 46,209 - 233,290
======= ====== === =======
Interest Expense
(Income) 704 67 (196) 575
Depreciation and
Amortization
Expense 2,473 1,854 1,188 5,515
Net Earnings
(Loss) from
Continuing
Operations 4,302 (2,403) (1,800) 99
Discontinued
Operations, net
of tax (2,706) (2,706)
Net Earnings
(Loss) 4,302 (2,403) (4,506) (2,607)
(1) Amounts restated retrospectively for segment reclassification and
new discontinued operations.
Period End Backlog (amounts in thousands of dollars)
September
June 30, 30, December March 31, June 30,
31,
2009 2009 2009 2010 2010
---- --- --- ---- ----
Fire Truck
Chassis* 84,840 82,386 123,791 101,730 79,336
Fire Truck
Bodies* 35,471 40,381 27,736 29,065 23,475
Motorhome
Chassis * 6,743 9,589 20,022 16,731 13,048
Other Products
*
Vehicles 2,781 4,214 16,970 15,396 14,276
Aftermarket
Parts and
Assemblies 20,249 8,725 11,467 7,864 32,311
------ ----- ------ ----- ------
Total Specialty
Vehicles 150,084 145,295 199,986 170,786 162,446
Delivery &
Service
Vehicles* 34,059 35,146 43,292
------ ------ ------
Total Backlog
(Continuing
Operations) 150,084 145,295 234,045 205,932 205,738
======= ======= ======= ======= =======
* Anticipated time to fill backlog orders; 2 months or less for
motorhome chassis, 6 months or less for delivery and service
vehicles
and 10 months or less for fire truck and other products. Beginning in
December 2009, Utilimaster was included in the backlog.