Charlotte, Mich.-based Spartan Motors Inc. today (May 1) reported a 25% increase in revenue for its first quarter while the company incurred a net loss, primarily due to restructuring costs from its Utilimaster Corp. subsidiary.
Revenue during the period totaled $118.8 million, an increase of 25% from $95.1 million in the first quarter of 2011. Revenue growth was led by the delivery and service vehicles segment, which posted sales of $58.8 million, up 149.2% from $23.6 million the previous year. Motorhome chassis sales generated by the Spartan Chassis Inc. subsidiary were $18.5 million.
Spartan reported a net loss for the first quarter of $2.0 million, or 6 cents per diluted share, compared to a net loss of $898,000, or 3 cents per diluted share, the year prior. Excluding restructuring charges of $5.4 million, Spartan posted adjusted operating earnings of 4 cents per diluted share.
Most of the restructuring cost resulted from the impaired asset value of Utilimaster’s Wakarusa, Ind., production complex. Management expects annual cost reductions of $4 million or more after Utilimaster’s relocation to Bristol, Ind., is complete.
John Sztykiel, president and CEO of Spartan Motors, noted, “Our blended growth strategy consists of organic growth, alliances and acquisitions, and Spartan’s improved results for the first quarter illustrate our strategy is sound. Beginning in late 2009, the acquisition of Utilimaster diversified our revenue stream. We then generated organic growth by developing new products for Utilimaster. Now, with the steps we recently announced with new partners Gimaex and Renault, we intend to strengthen the Spartan brand further and drive additional revenue growth through alliances.”
Adjusted gross profit for the first quarter of 2012 was $17.4 million, excluding a previously disclosed restructuring charge of $3.6 million. Excluding the restructuring charge, Spartan posted an adjusted gross margin of 14.6% of sales compared to 13.6% in the first quarter of 2011. On a GAAP basis, Spartan reported gross profit of $13.7 million, compared to gross profit of $13.0 million a year ago.
“Spartan continued to follow its operating plan during the first quarter, which translated into improved operating performance,” said Joe Nowicki, CFO of Spartan Motors. “Our Utilimaster business was particularly strong during the quarter, both in vehicle sales and aftermarket parts. We also believe we outperformed major competitors in the emergency response market and continued to gain share during the first quarter of 2012. While our results for the quarter showed progress compared to last year, we recognize that we still have much room for improvement. As we increase our focus on improving our operational efficiency, we expect to drive margins higher.”
To view the entire report click here.
The following is a column authored by Tom Walsh of the Detroit Free Press offering a look at Spartan Motors Inc.’s ability to roll with the times.
“Adapt. Evolve. Lead.”
John Sztykiel, president and CEO of Spartan Motors, kept repeating that mantra during our breakfast last week.
It may be the only way for him to keep his sanity.
In a topsy-turvy business world typified by last week’s stock market spasms, few companies have endured more extreme ups and downs in the past few years than Spartan Motors.
When I wrote in 2007 about Spartan — a builder of custom chassis and motor vehicles — the company was on a roll.
The Iraq war was in full swing and Spartan had suddenly become a favored supplier of Mine Resistant Ambush Protected (MRAP) armored vehicles to the U.S. military.
For a modest outfit whose previous product mix was mostly fire engines, ambulances and motorhome chassis, “it was like a gold rush,” Sztykiel recalled.
Employment at Spartan, based in Charlotte, about 20 miles southwest of Lansing, doubled to more than 1,000 within 20 months. Sales jumped 89% in two years, but then, as the Iraq war wound down and MRAP orders dried up, plummeted from $844 million in 2008 to $409 million a year later.
Net profit plunged from $42 million in 2008 to $12 million in 2009 and $4 million last year. Spartan started this year with two quarterly losses. Its stock price, near $25 per share in 2007, fell 90% to barely $2 in late 2008 and ’09, and has recently traded near $5, closing Friday at $4.51.
Changing the mix
Sztykiel and his team have had to reinvent Spartan — and they appear to be making progress. Order backlogs have risen 33% so far this year to $179 million.
The big move to shift away from reliance on military orders was the acquisition in late 2009 of Utilimaster, an Indiana-based maker of delivery and service vans.
“Internet shopping and other changes in society are working in their favor,” Sztykiel said of Utilimaster vans used by such companies as UPS and Federal Express.
An alliance with Isuzu followed. Three months ago, Spartan began assembling Isuzu N-series commercial trucks in Charlotte. The N-series had been built at General Motors’ Janesville, Wis., plant until it closed in 2009.
Meanwhile, Isuzu and Utilimaster are partnering on a next-generation commercial van called the Reach, which promises 35% fuel-economy improvement in the segment.
“In 2008,” Sztykiel said, “89% of our business was government-related, including military and emergency-response vehicles. Now it’s only 45% government and 55% private.”
Spartan’s employment in the Charlotte area fell to around to 600 with the decline in MRAP orders, but the ramp-up of Isuzu N-series work has recently added 56 jobs and total Spartan employment is expected to reach 1,750 by year-end, with the biggest clusters in Michigan and Indiana.
Sztykiel expects a return to profitability the second half of this year.
And true to his adapt-evolve-lead mantra, he’s scouting for new revenue streams.
The step-van truck segment where Utilimaster is a market leader “is about 12,000 trucks a year,” he noted. “But the larger market for commercial vehicles, where Ford and Nissan and others play, is about 225,000 units a year.”
“Now if we snag just 2% of that, it would be nearly 5,000 units a year and 400 or 500 more employees …”
Spartan Motors Inc., Charlotte, Mich., announced today (April 27) break-even results for its 2010 first quarter that ended March 31 which were underscored by the company’s relentless focus to strengthen its balance sheet while continuing to make new product investments that will enhance the long-term growth and profitability of the business, according to a press release.
First-quarter highlights include:
- Net sales of $122.5 million, up 6.1% from Q1 2009.
- Gross margin of 14%.
- R&D cost of $5.3 million, which included $1.8 million for two major product introductions.
- Operating expenses of $16.9 million, 13.8% of sales.
- Break-even results with net income of $3,000, or $0.00 per diluted share.
- Ending cash balance of $4.4 million.
- Ending long-term debt balance of $12.2 million, a $23 million reduction from year-end.
- Consolidated backlog of $218.9 million.
”While demand in the first quarter was challenging in a number of our markets, the current economic climate has not diminished our long-term view of the business,” said John Sztykiel, Spartan Motors president and CEO. “During the quarter, we saw continued improvement in motorhomes and emergency response, which was offset by soft sales in aftermarket parts and assemblies and defense.
”While this shift in revenue mix had a negative impact on our gross margins, we remained steadfast in managing our operating costs, which enabled us to break even while improving our balance sheet and our long-term prospects for growth as we expensed $1.8 million for two major R&D projects. Looking out over the longer term, we are encouraged by the many growth opportunities for Spartan, including our recent agreement with Isuzu to assemble chassis and jointly develop our next-generation commercial vehicle, which will provide a platform for future growth in a number of markets.”
Consolidated net sales for the quarter were $122.5 million, up 6.1% from last year due to incremental Utilimaster sales, higher sales of motorhome chassis and an increase in sales at EVTeam. On a sequential basis, net sales rose 22% from the fourth quarter of 2009, due mainly to the strength of motorhome chassis sales, improvement at EVTeam and the addition of a full quarter of Utilimaster sales. Spartan’s EVTeam operating segment, which consists of its Crimson Fire, Crimson Fire Aerials and Road Rescue subsidiaries, reported a 22.9% year-over-year increase in sales for the 2010 first quarter.
Sales of fire truck chassis in the quarter also increased 13.4% compared to the same period in 2009. Spartan’s chassis sales to the Class A diesel motorhome market increased by $24.3 million, driven by recent improvements in the overall recreational vehicle market. These gains in first-quarter sales were offset by a decrease of $48.5 million in other product sales, which consist primarily of APA and defense vehicle sales.
Given the significant shift in revenue mix away from APA and defense sales toward lower-margin products, gross margin in the first quarter of 2010 fell to 14% of sales from 22.6% in the first quarter of 2009. On a sequential basis, gross margins declined modestly, from 14.9% in the fourth quarter, due primarily to the continued shift in mix from APA and defense to motorhome and service and delivery vehicles.
Operating expenses for the 2010 first quarter increased by $0.1 million, or 0.8% compared to the same period last year. Spartan attributed the increase to the incremental operating expenses of Utilimaster, offset by the cost-reduction efforts put in place in the prior year. The company also spent $1.8 million on R&D-related costs for two major product introductions — the recently announced next-generation commercial vehicle being developed in conjunction with Isuzu and the development of a new cab and chassis related to the 2010 emissions standards.
Total operating expenses in the quarter were $16.9 million, up from $16.8 million in the same period last year. On a sequential basis, operating expenses increased from $15.0 million in the fourth quarter, primarily due to the additional incremental operating expenses from a full quarter of Utilimaster results, compared with the one month included in the final quarter of 2009.
Net income for the quarter was $3,000, or $0.00 per diluted share, compared with net income of $6.1 million, or $0.19 per diluted share in the prior year’s first quarter.
CFO Joe Nowicki said: “Some of our major accomplishments for the quarter lie within our balance sheet. We continued to work down receivables and were able to generate sufficient cash to repay all the incremental borrowings from our acquisition of Utilimaster. Despite this great progress in our working capital, we still have room for further improvement on our inventory levels. We also have additional potential to enhance efficiency and lower our operating costs. Over the next several months, we will continue to execute on the cost-reduction initiatives we put in place last year and seek out opportunities for additional improvement. We will look to implement processes that will enhance our manufacturing efficiencies and better flex our costs and operations with our current level and mix of revenue.”
Consolidated backlog at March 31 increased to $218.9 million from $217.5 million at March 31, 2009. Compared with the same period last year, backlogs of fire truck and motorhome chassis increased by a combined $16.1 million and specialty vehicle backlog increased by $7.3 million. In addition, the ending backlog includes $35.1 million from the acquisition of Utilimaster in December 2009. These improvements were more than offset by a $39.9 million decrease in APA backlog and a $16.8 million decrease in EVTeam backlog.
Spartan reported operating cash flow of $10.2 million in the first three months of the year, due primarily to reduced working capital requirements. The company ended the first quarter with $4.4 million in cash and cash equivalents, and $12.2 million in long-term debt, an improvement from long-term debt of $35.2 million at Dec. 31, 2009 as Spartan utilized operating cash flow and existing cash balances to eliminate the incremental borrowings following the acquisition of Utilimaster in the fourth quarter of 2009. During the first quarter, Spartan maintained its reduced receivable levels from the end of 2009 while inventory levels improved by approximately $2.2 million from year-end.
Sztykiel concluded: “The first quarter marked a number of key accomplishments for Spartan, both strategically and operationally. As we complete the integration of Utilimaster, we continue to identify and exploit new opportunities to drive our growth. The ability of our flexible operations to adjust to changing market conditions, reduce costs and preserve cash flow, combined with our strong balance sheet, provide Spartan the ability to take advantage of new opportunities as they arise.
”These strengths strategically position Spartan for many future opportunities, as experienced with the recent agreement with Isuzu, whereby the N-Series gasoline chassis and the new commercial walk-in van are key market products with significant future opportunity. We view this new relationship as a starting point in our long-term vision to strategically enter new market niches that fit well with Spartan’s core strengths. In addition, ACT research is forecasting medium-duty vehicle (classes 5-7) production, which is largely tied to health of the housing and construction industries, is expected to see a more steady and gradual increase in production, growing 19% in 2010 and 32% in 2011. This is considered a leading economic indicator that positions Spartan well in the next two years in light of these product launches. 2009 was a year of transformation; 2010 will be a year of implementation.”
Spartan Motors hosted a conference call for analysts and portfolio managers today (April 27) 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. designs, engineers and manufactures specialty chassis, specialty vehicles and truck bodies and aftermarket parts for the outdoor recreation/RV, emergency-response, defense, government services, delivery and service markets. The company’s brand names – Spartan, Crimson Fire, Crimson Fire Aerials, Road Rescue 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.
Charlotte, Mich.-based Spartan Motors Inc. reported today (April 28) that sales for its Spartan Chassis Inc. subsidiary, the company’s largest subsidiary and operating unit, decreased 60% year-over-year to $98.2 million for the quarter ending March 31.
Spartan Chassis represented 85% of Spartan Motors’ total consolidated sales in the quarter.
Spartan Chassis’ sales to the Class A diesel motorhome market decreased 91.7% year-over-year in the quarter, while backlog for RV chassis decreased 75% year-over-year to $4.4 million as of March 31, the company reported.
“As expected, the outlook for motorhomes remains difficult,” said John Sztykiel, president and CEO of Spartan Motors. “We already have appropriately scaled our operations to match demand in the second half of 2009. We believe we have positioned ourselves to weather the storm until the industry eventually recovers. Spartan is continuing new product development and engineering innovations for motorhome chassis, some of which we plan to debut at the RVIA trade show later in 2009.”
Overall, the company, which also makes emergency rescue and military vehicles, reported first quarter net earnings of $6.1 million on net sales of $115.5 million, compared with net earnings of $14.8 million on net sales of $264.1 million in the same quarter of 2008. The decline in revenue is a result of lower sales of vehicles to the defense industry and a sharp decline in the RV market.
Spartan reported consolidated gross margin of 22.6% of sales in the first quarter, a 46.8% increase over the same period in 2008, and a 7.1% increase over its gross margin in the fourth quarter of 2008. Spartan attributed the gross margin increase to improved product mix that includes more sales related to service, parts and assemblies. Gross margins as a percentage of sales have consistently risen for four quarters in a row, a result of the company’s adherence to lean initiatives across its subsidiary companies and product mix diversification.
“The first quarter was another representation of how our diversified multiple-market strategy, along with our market, operational and strategic agility, will enable Spartan to profitably weather tough economic conditions while positioning the company for future growth,” said Sztykiel. “From a consolidated perspective, the recreational vehicle business continues to be difficult and the next large-scale mine-protected defense vehicle ramp-up is still several months away. Yet, sales of fire truck chassis increased year-over-year, the EVTeam as a whole was profitable in the quarter and consolidated gross margin as a percentage of sales continues to increase. Emergency-rescue remains Spartan’s largest, most stable market, and we expect continuous growth based on increased market share and new product and innovation initiatives.”