Spartan Motors Announces 1998 Results
18 February 1999
Spartan Motors Announces 1998 Results; Chassis Maker Posts Record Sales, Sharply Higher Net Income
CHARLOTTE, Mich., Feb. 18 -- Spartan Motors, Inc.
today reported its best full-year of results in four years,
posting strong profitability on record sales for the year ended December 31,
1998.
The Charlotte, Mich.-based manufacturer of custom chassis, emergency
vehicles and buses reported net income of $3.5 million, or $0.28 per share, in
1998, compared with a net loss of $13.1 million, or $1.06 per share, in 1997.
The earnings performance, driven by improved operations and strong demand for
Spartan's core chassis and custom vehicle products, represents the Company's
best year of net income since 1994. In the fourth quarter of 1998, Spartan
Motors reported net income of $942,000, or $0.08 per share, on record net
sales of $71.0 million, compared with a net loss of $11.3 million, or
$0.91 per share, on net sales of $55.4 million in the 1997 fourth quarter.
Spartan said its core chassis business and Emergency Vehicle Team (EVTeam)
operations contributed net earnings of approximately $0.61 per share in 1998,
including $0.16 per share in the fourth quarter. Improved operating
performance at Spartan Motors' chassis operation helped offset losses by the
Company's Carpenter Industries affiliate. Carpenter contributed an equity in
loss of $0.33 per share in 1998, including $0.07 per share in the fourth
quarter, compared with an equity in loss of $1.24 per share in 1997, of which
$0.86 per share came in the year-ago fourth quarter.
Spartan Motors said sales increased 42.9% in 1998, to a record
$255.3 million, versus $178.6 million in 1997. Spartan attributed the
increase to strong sales in its core chassis business and the addition of
sales from its new EVTeam subsidiaries, acquired during the past 16 months.
The 1998 consolidated figures also include partial fourth-quarter results of
Carpenter Industries, the Richmond, Ind.-based school-bus builder.
"We finished the year on a strong note, with our fourth quarter building
on the solid performance we posted in the third quarter," said John Sztykiel,
president and chief operating officer of Spartan Motors. "The last half of
1998 provided us with strong momentum that we are carrying into the first
quarter of 1999. Strong global demand for value-added custom chassis and
heavy-duty vehicles fueled our progress in 1998. Sales of Spartan Motors
motorhome chassis increased more than 36% over the previous year, building on
double-digit growth in the overall Class 'A' RV market. Our EVTeam operations
-- Road Rescue, Luverne Fire Apparatus and Quality Manufacturing --
contributed $51.9 million in sales in 1998. Additionally, our transit bus
operations showed solid growth in 1998, as did our niche of specialty vehicle
chassis."
Spartan Motors said the improvements helped offset a modest sales decline
in fire truck chassis and lower sales at Carpenter. Spartan said both
segments are expected to grow in 1999, led by stronger fire truck chassis
sales. Backlog for all products rose by nearly a third to more than
$120.7 million at year-end, versus $92.7 million at the end of 1997.
Sztykiel continued: "We are pleased, but not content, with our results in
1998. Though we made considerable progress on several fronts, we have only
begun to tap the earnings potential of our operations. We expect continued
sales growth will contribute to earnings growth, but we are also focused on
improving quality, increasing productivity and integrating acquisitions in
order to sustain the profit momentum we created in 1998. Additionally, new
products and a focused sales effort are helping Spartan Motors' operating
units carry forward the sales growth begun last year."
In December, Spartan Motors introduced the new Summit Series motorhome
chassis, a line of entry-level diesel pusher chassis for the RV market.
Designed to bridge the gap between premium diesel pushers and the gas-powered
market, the Summit Series gives Spartan Motors the widest range of
diesel-powered chassis in the market. Several motorhome original equipment
manufacturers (OEMs) have placed prototype orders for the Summit Series
chassis, which will debut on model-year 2000 motorhomes beginning in
July 1999.
Additionally, the three companies that comprise Spartan's EVTeam hosted a
first annual dealer meeting in the fourth quarter, drawing more than
200 dealers, guests and factory representatives. Luverne Fire Apparatus
introduced two key new products at the four-day conference, which helped
generate more than $6 million in new orders for the EVTeam.
"The EVTeam is benefiting from our efforts to consolidate sales and
marketing resources," Sztykiel said. "Quality Manufacturing, for example,
posted the best month of sales orders in its history in January, reflecting
customer acceptance of new products and improvements in operations.
Additionally, our fire truck chassis sales are expected to grow 15% in 1999,
due to increased demand for our premium chassis such as the Advantage model."
Spartan Motors also reported that its Carpenter Industries unit has made
progress since a new management team, lead by Spartan Executive Vice President
Anthony Sommer and Carpenter President and COO Marc Kennedy, was installed.
Spartan, which had owned a minority interest in Carpenter since 1996, acquired
a majority stake in the bus builder in October 1998, following a
recapitalization. As a result of the increase in ownership, Spartan Motors
now controls operations and has begun consolidating the financial results of
Carpenter in its corporate results.
"We have made considerable progress transitioning Carpenter from a mass
production operation to a niche manufacturer that is focused on quality and
innovation," Sztykiel said. "This is in line with the Spartan Motors
philosophy and will help us reduce Carpenter's breakeven point from
22 vehicles manufactured per day to 8 by the third quarter of 1999. The
efforts of Tony Sommer, Marc Kennedy and all of our associates at Carpenter
are putting us in position to capitalize on the growing North American market
for school buses, which represents 35,000 units annually."
Richard J. Schalter, Spartan Motors Chief Financial Officer, said:
"Consolidated gross margins on a comparable basis improved 20 basis points to
14.6% in 1998, despite the changing product mix following our EVTeam
acquisitions and increased ownership of Carpenter. Stronger growth came on an
operating basis as we showed a 20% increase in operating income as a
percentage of sales, due mostly to our efforts to control costs and share
resources. On the balance sheet, total company inventories increased 54.5% at
year-end versus the year-ago period, with the bulk of the increase
attributable to higher order levels in the motorhome chassis business, as well
as the accounting consolidation of Carpenter and the inclusion of Road Rescue,
which was acquired in January 1998."
"We continued to invest in new product and selling initiatives in 1998,
but were still able to lower our selling, general and administrative expenses
on a comparable basis as a percentage of overall sales by more than 6%
compared with the previous year," Schalter continued. "We continue to focus
on cost controls to ensure that all operating units perform according to plan
in the coming year. Additionally, as we continue to integrate functions such
as purchasing and accounting at a corporate level, the cost-savings should
help us further improve margins in the coming year."
Sztykiel concluded: "Our performance during the final six months of 1998
established a momentum for us that has continued into the first quarter of
1999. Today, we are in a solid position to continue this momentum throughout
1999 and in the future. The majority of the markets we serve are on the
upswing, and we are focusing on continued improvement at every operating unit
in the Spartan Motors family."
Spartan Motors, Inc. (http://www.spartanmotors.com) is a leading developer
and manufacturer of custom chassis for fire trucks, recreational vehicles,
transit buses, school buses, and other specialty vehicles. The Company also
owns fire and rescue vehicle manufacturers Luverne Fire Apparatus, Quality
Manufacturing and Road Rescue, Inc. and an equity interest in school bus body
manufacturer Carpenter Industries, Inc.
The statements contained in this news release include certain predictions
and projections that may be considered forward-looking statements by the
securities laws. These statements involve a number of risks and
uncertainties, including but not limited to economic, competitive,
governmental and technological factors affecting the Company's operations,
markets, products, services and prices, and actual results may differ
materially.
SPARTAN MOTORS, INC. AND SUBSIDIARIES
Consolidated Income Statements
Fourth Quarters of 1998 and 1997
December 31, 1997 December 31, 1998
$-000 % $-000 %
Sales 55,400 71,044
Cost of Sales 50,423 59,651
Gross Profit 4,977 9.0 11,393 16.0
Operating Expenses:
Research and
Development 1,368 2.5 1,486 2.1
Selling, General and
Administration 5,119 9.2 5,858 8.2
Total Operating
Expenses 6,487 11.7 7,344 10.3
Operating Income (1,510) (2.7) 4,049 5.7
Other Income (Expense):
Interest Expense (223) (0.4) (445) (0.6)
Interest and
Other Income 32 0.1 (419) (0.6)
Total Other Income
(Expense) (191) (0.3) (864) (1.2)
Earnings before Equity
Investment and Taxes (1,701) (3.0) 3,185 4.5
Income (Loss) on Equity
Investment in Affiliate (10,638) (19.2) (956) (1.3)
Earnings before Taxes (12,339) (22.2) 2,229 3.2
Taxes (1,044) (1.9) 1,287 1.8
Net Earnings (11,295) (20.3) 942 1.3
Net Earnings per Share (0.91) 0.08
Weighted Average Shares 12,381 12,537
SPARTAN MOTORS, INC. AND SUBSIDIARIES
Consolidated Income Statements
Twelve Months Ended December 31, 1998 and 1997
December 31, 1997 December 31, 1998
$-000 % $-000 %
Sales 178,641 255,338
Cost of Sales 155,291 217,978
Gross Profit 23,350 13.1 37,360 14.6
Operating Expenses:
Research and
Development 4,693 2.6 5,517 2.2
Selling, General and
Administration 15,800 8.8 19,148 7.5
Total Operating
Expenses 20,493 11.4 24,665 9.7
Operating Income 2,857 1.7 12,695 4.9
Other Income (Expense):
Interest Expense (846) (0.5) (1,215) (0.5)
Interest and
Other Income 899 0.5 300 0.1
Total Other Income
(Expense) 53 0.0 (915) (0.4)
Earnings before Equity
Investment and Taxes 2,910 1.7 11,780 4.5
Income (Loss) on Equity
Investment in Affiliate (15,404) (8.6) (4,059) (1.6)
Earnings before Taxes (12,494) (6.9) 7,721 2.9
Taxes 630 0.4 4,236 1.7
Net Earnings (13,124) (7.3) 3,485 1.4
Net Earnings per Share (1.06) 0.28
Weighted Average Shares 12,381 12,507