Spartan Motors Inc. Reports $2.6M Q2 Loss
Spartan Motors Inc. today (July 23) 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 $900,000, 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% of sales (15.1 percent before restructuring charges).
- Operating expenses of 14.2% of sales (13.4% 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, its ambulance manufacturing business.
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%, 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, CFO, 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.”