Spartan Motors Announces Strategic Plan to Realign Operations
3 October 2000
Spartan Motors Announces Strategic Plan to Realign Operations, Exit School Bus Business
CHARLOTTE, Mich., Oct. 3 The board of directors of Spartan
Motors, Inc. has approved a strategic plan aimed at
streamlining the Company's operations, including a move to focus on the
Company's core chassis and Emergency Vehicle Team (EVTeam) operations and halt
funding for its underperforming Carpenter Industries school bus affiliate.
The Charlotte, Mich.-based manufacturer of custom chassis and emergency
vehicles said effective immediately it will stop funding Richmond, Ind.-based
Carpenter. Spartan Motors, which owns a majority stake in Carpenter, said the
board of directors of Carpenter approved a plan to liquidate the company.
Spartan expects to take an after-tax charge of approximately $5 million to
reflect the discontinuance of Carpenter's operations and an additional after-
tax charge of approximately $2.1 million for the write-down of excess chassis
inventory related to the school bus business, Spartan's exit from the transit
bus business, and softness in the RV market. Both charges will be taken in
the third quarter ending September 30, 2000.
"Despite our efforts to support Carpenter with financial resources and
operating expertise, we believe there are too many hurdles to make this a
sustainable business for Spartan Motors," said George Sztykiel, Spartan Motors
chairman and chief executive officer. "Carpenter has been a painful and
costly experience for Spartan, particularly given my personal commitment to
turning around this business. Significant progress was made since Spartan
took control in November of 1998, but in the end, the financial burden was too
great and had to be eliminated. From this point on, Carpenter will no longer
cloud our results.
"Moving forward, we are refining our focus toward operations that are
proven winners: our core chassis business, which is perennially profitable
even in a challenging market as the RV business is today; and our EVTeam
companies, which are on track for a 50% increase in their profits in 2000 and
continue to show solid growth potential. Excluding the one-time charges, we
will be profitable in the third quarter and expect to finish the year on a
strong note."
Spartan also announced it has laid off 20 percent of its salaried
workforce, or approximately 40 jobs, and intends to consolidate one of its
four facilities at its headquarters in Charlotte, Mich. in an effort to
improve the Company's profitability and absorb a slowdown in the RV chassis
market. Spartan Motors is planning to move its Plant One administrative
offices and manufacturing into its three remaining facilities, while at the
same time consolidating its engineering staff in one location to facilitate
cross-platform design and product development. The Company's new
manufacturing layout will bring more operations under one roof at Spartan's
Plant Four chassis plant, which will improve work flow and reduce its
inventory levels.
"Our analysis of the school bus business and Carpenter was accompanied by
a review of all our operations," said John Sztykiel, president and chief
operating officer. "At Spartan chassis in 2000, we have reduced our inventory
from $31 million to $22 million, and remain on track to reduce our inventory
even further. This reduction has opened up space in our plants, and we are
focused on using this space more effectively.
"This consolidation will result in an annual savings of more than $2
million in 2001 and have a positive effect in the fourth quarter of 2000. All
of these improvements help free up cash to build the business and to restart
our stock repurchase program."
Without the cash flow and operating loss effects of Carpenter, Spartan's
chassis and EVTeam businesses would have earned $0.54 per share in the first
half of 2000. This would have marked Spartan's best six months of
profitability ever. While the Company's RV chassis business is experiencing
some softness, sales of its fire truck chassis have increased and the EVTeam
continues to grow both sales and profitability.
"Although the one-time charges associated with our investment in Carpenter
will have a short-term impact on earnings, it has minimal financial risk for
Spartan Motors," said Richard Schalter, executive vice president and chief
financial officer. "We continue to have a strong balance sheet and will be
able to continue to pay down debt and buy back stock from internally generated
cash flow."
George Sztykiel concluded: "As their results indicate, our management
team has done a good job in operating Spartan Chassis, Quality Manufacturing,
Road Rescue and Luverne. There are tremendous opportunities for growth in
sales and income. Without the distraction of Carpenter, Spartan Motors will
be able to focus its attention on leveraging its core strengths into solid
returns for shareholders. We are now positioned to focus on these
opportunities."