Spartan Motors Reports Growth in Earnings and Backlog

CHARLOTTE, Mich., Aug. 2, 2012 /PRNewswire/ -- Spartan Motors, Inc. (NASDAQ: SPAR) ("Spartan" or the "Company") today announced operating results for the second quarter of 2012.  Revenues totaled $114.4 million, up 15% from the second quarter of 2011.  Spartan reported net income for the second quarter of 2012 of $2.4 million, or $0.07 per diluted share compared to a net loss of $2.2 million, or $0.07 per diluted share in the second quarter of 2011.  Excluding restructuring charges of $0.7 million, Spartan posted adjusted operating earnings of $0.08 per diluted share in the second quarter of 2012, versus an adjusted net loss of $0.01 per diluted share in the second quarter of 2011.  

Second Quarter 2012 Summary:

• Net sales of $114.4 million (up 15% from Q2 2011 sales of $99.4 million)
• GAAP results (including restructuring charges):
  • Gross margin of 16.4% of sales, up from 12.7% in Q2 2011
  • Operating income of $3.9 million and operating margin of 3.4%, compared to an operating loss of $3.6 million and operating margin of (3.7%) in Q2 2011
  • Net income of $0.07 per diluted share, or $2.4 million
• Adjusted operating results (non-GAAP) excluding restructuring charges:
  • Adjusted gross margin of 16.9% of sales, up from 14.5% in Q2 2011
  • Adjusted operating income of $4.6 million versus a loss of $0.9 million in Q2 2011
  • Adjusted operating margin of 4.0% versus (0.9%) in Q2 2011
  • Adjusted net income of $0.08 per diluted share, or $2.8 million
• Restructuring charges totaled $0.7 million, or $0.01 per diluted share in Q2 2012 versus $2.8 million, or $0.06 per diluted share in Q2 2011
• Earnings before interest, taxes, depreciation and amortization (EBITDA) was  $6.8 million in Q2 2012 versus $1.9 million in Q2 2011
• Ending consolidated backlog of $173.3 million at June 30, 2012 versus $135.7 million at March 31, 2012; Q2 2012 new orders totaled $150.5 million
  • Delivery & Service backlog increased to $75.1 million at June 30, 2012 from $40.0 million at March 31, 2012; Q2 2012 new orders totaled $82.1 million
  • Specialty Vehicles backlog rose to $98.2 million at June 30, 2012 from $95.6 million at March 31, 2012; Q2 2012 new orders totaled $68.5 million
• Revenue diversification continued in Q2 2012: sales to businesses and consumers were 60% of total revenue versus 58% in Q2 2011
• Cash balance of $33.3 million at June 30, 2012 compared to $39.4 million at March 31, 2012

John Sztykiel, Chief Executive Officer of Spartan Motors, Inc., commented on Spartan's performance, "Our strategy of blended growth combined with improved operating performance is the right plan for Spartan.  Our quarterly results showed the progress we have made on both fronts.  We expect to make further progress in operational improvements as we relocate Utilimaster's operations to Bristol and the Reach to Charlotte, among other operational initiatives."

Second Quarter 2012 Benefits from Higher Volume, Greater Efficiency

• Revenue for the second quarter of 2012 totaled $114.4 million, up 15.1% from $99.4 million in the second quarter of 2011.  Revenue growth was generated by the Delivery & Service Vehicles group, which posted $9.0 million in higher revenue year-over-year, followed by $4.4 million in additional revenue from our Spartan Chassis group.  Emergency Response and Recreational & Specialty Chassis both generated higher sales during the second quarter of 2012, compared to Q2 2011, more than offsetting a decline in Defense sales. 
• The Delivery & Service Vehicles ("DSV") unit posted second quarter 2012 revenue of $47.8 million, up 23.2% from $38.8 million in the second quarter of 2011.  Sales of walk-in vans, truck bodies and aftermarket products including keyless entry, all rose from the prior-year second quarter.  Vehicles sales in Q2 2012 rose to $25.0 million from $22.9 million in Q2 2011 while aftermarket parts and field service solutions revenue totaled $22.7 million in Q2 2012 compared to $15.8 million in Q2 2011. 
• Spartan's Emergency Response ("ERC") and Recreational & Specialty ("RSC") chassis businesses posted higher sales during the second quarter of 2012 compared to the prior-year period.  Sales at the ERC unit totaled $28.0 million in the most recent quarter, up from $22.2 million in the second quarter of 2011.  Revenue for RSC increased to $16.2 million in the second quarter of 2012 versus $15.2 million in the prior-year second quarter. 
• Sales at Spartan's Emergency Response Vehicles ("ERV") group rose to $15.6 million in the second quarter of 2012, from $13.9 million in the second quarter of 2011.  ERV sales grew from the prior year despite a short-term lack of commercial chassis availability during the quarter.  One of the two suppliers affected returned to more normal chassis production toward the end of the second quarter of 2012, thereby alleviating most of the chassis shortage.  The shortage of commercial chassis negatively impacted second quarter 2012 revenue by approximately $1.2 million.
• Spartan's gross margin excluding restructuring items was 16.9% in the second quarter of 2012 versus 14.5% in the second quarter of 2011.  Positively impacting gross profit and gross margin were higher chassis production volumes, favorable mix at Utilimaster due to higher aftermarket parts sales, plus improved operating efficiency throughout the Company.  Including restructuring items of $0.6 million in the second quarter of 2012 and $1.7 million in the second quarter of 2011, gross margin was 16.4% and 12.7% for the second quarter of 2012 and 2011, respectively.  Restructuring charges in the second quarter of 2012 were mainly related to the relocation of DSV's Utilimaster operations to Bristol, Ind.
• Operating expenses in the second quarter of 2012 totaled $14.8 million, or 12.9% of sales, excluding restructuring charges, compared to $15.3 million, or 15.4% of sales, in the second quarter of 2011.  Restructuring charges in the second quarter of 2012 were $0.1 million, or 0.1% of sales, versus $1.1 million, or 1.1% of sales in the second quarter of 2011. Restructuring charges for the most recent quarter were due primarily to the transfer of Reach walk-in van production to Spartan's Charlotte, Mich. facility.  Including restructuring charges, operating expense in the second quarter of 2012 was $14.9 million or 13.0% of sales, compared to $16.3 million or 16.4% of sales in the prior-year second quarter.

Balance Sheet Remains Healthy, Investment at Bristol Accelerates

• Accounts receivable increased $7.5 million from March 31, 2012 to $50.6 million at June 30, 2012.  The increase was due to significant sales growth in Spartan's chassis businesses and in ERV during the second quarter of 2012.  Contributing to the increase in accounts receivable was the timing of several shipments of chassis and completed fire trucks, which shipped during the last two weeks of June 2012.  At the end of the second quarter of 2012, receivables outstanding stood at 34 days sales, up from 32 days at the end of the first quarter of 2012, but down from 37 days at the end of the second quarter of 2011. 
• At the end of the second quarter of 2012, the Company's cash balance stood at $33.3 million, down from $39.4 million at the end of the first quarter of 2012, but above the $30.6 million balance at June 30, 2011.  Cash balances were reduced by the increase in accounts receivable, a $1.7 million dividend payment as well as capital spending that ramped up during the second quarter. 
• During the second quarter of 2012, Spartan began the more intensive investment phase of its relocation of Utilimaster to Bristol, Ind. and the transfer of Reach production to Charlotte, Mich.  Investment in plant and equipment during the quarter totaled $4.2 million, of which $3.2 million was at Utilimaster.

Full Year 2012 on Track to Meet Expectations

Joe Nowicki, Spartan's Chief Financial Officer, stated regarding the Company's outlook, "Our expectations for the year remain largely unchanged.  We expect 2012 revenue to increase from 2011 in the mid- to upper-single digits, a slight increase from our last update.  We are adjusting our projected gross margin for the year down slightly, to the 14.5 – 15% range, with operating expenses of 12 – 12.5%.  For the year, we expect revenue growth in our Emergency Response businesses as well as at Utilimaster, but remind investors that Utilimaster's margins will be negatively impacted by the completion of our keyless entry program in July and less efficient vehicle production until the relocation to Bristol is complete.  We continue to move forward with our initiatives and expect to generate continued profitability in future quarters."  

John Sztykiel concluded his remarks, commenting, "Our second quarter performance showed substantial gains from the second quarter of 2011, with more upside remaining as we raise operating efficiency.  We see more opportunities for growth by developing innovative new products, such as the TelStar aerial fire apparatus and the Advanced Protection System ("APS") that we displayed in April at FDIC.  We are also starting to see more potential opportunities for acquisitions, another part of our blended growth strategy.  At the same time, we realize that the global economic environment continues to exert pressure on some of our market segments, especially our higher-end chassis businesses.  While we are pleased with our results and confident in our ability to execute our strategy, we recognize these risks and remain cautiously optimistic about the second half of 2012."    

Reconciliation of Non-GAAP Financial Measures

This release contains adjusted gross profit, adjusted gross margin, adjusted operating expenses, adjusted operating income, adjusted net earnings (loss) and adjusted earnings (loss) per share measures, as well as earnings before interest, taxes, depreciation and amortization (EBITDA), 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 improve the efficiency and profitability of certain of our manufacturing operations and 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.  We define EBITDA as operating income (loss) excluding restructuring charges, less depreciation and amortization.  We believe EBITDA is a useful tool that allows comparison of financial performance by eliminating the impact of differences in capital structure, restructuring charges and capital spending, among others, between different time periods or industries.

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, operating income, net earnings (loss) or earnings (loss) per share 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 income to adjusted operating income, operating expense to adjusted operating expense, net earnings (loss) to adjusted net earnings (loss), earnings (loss) per share to adjusted earnings (loss) per share and operating income (loss) to EBITDA for the periods indicated.

Conference Call, Webcast and Roadcast®

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."

For more information about Spartan, please view the Company's Roadcast "digital road show" designed 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, truck bodies and aftermarket parts for the recreational vehicle (RV), emergency response, government services, defense, and delivery and service markets. The Company's brand names – Spartan™, Spartan Chassis™, Spartan ER™, Spartan ERV™ and Utilimaster® - are known for quality, performance, service and first-to-market innovation. The Company employs approximately 1,600 associates at facilities in Michigan, Pennsylvania, South Dakota, Indiana, Florida and Texas. Spartan reported sales of $426 million in 2011 and is focused on becoming a global leader in the design, engineering and manufacture of specialty vehicles and chassis. Visit Spartan Motors at www.spartanmotors.com.

This release contains several forward-looking statements that are not historical facts, including statements concerning our business, strategic position, financial strength, future plans, objectives, and the performance of our products. These statements can be identified by words such as "believe," "expect," "intend," "potential," "future," "may," "will," "should," and similar expressions regarding future expectations.  These forward-looking statements involve various known and unknown risks, uncertainties, and assumptions that are difficult to predict with regard to timing, extent, and likelihood.  Therefore, actual performance and results may materially differ from what may be expressed or forecasted in such forward-looking statements.  Factors that could contribute to these differences include operational and other complications that may arise affecting the implementation of our plans and business objectives; continued pressures caused by economic conditions and the pace and extent of the economic recovery; challenges that may arise in connection with the integration of new businesses or assets we acquire or the disposition of assets; issues unique to government contracting, such as competitive bidding processes, qualification requirements, and delays or changes in funding; disruptions within our dealer network; changes in our relationships with major customers, suppliers, or other business partners, including Isuzu; changes in the demand or supply of products within our markets or raw materials needed to manufacture those products; and changes in laws and regulations affecting our business.   Other factors that could affect outcomes are set forth in our Annual Report on Form 10-K and other filings we make with the Securities and Exchange Commission (SEC), which are available at www.sec.gov or our website.  All forward-looking statements in this release are qualified by this paragraph.  Investors should not place undue reliance on forward-looking statements as a prediction of actual results.  We undertake no obligation to publicly update or revise any forward-looking statements in this release, whether as a result of new information, future events, or otherwise.

SOURCE Spartan Motors, Inc.