CHARLOTTE, Mich., July 24 /PRNewswire-FirstCall/ -- Spartan Motors, Inc. reported its best second quarter in company history with a 28.8 percent year-over-year increase in revenues and a 59.8 percent year-over-year increase in net earnings, overcoming challenges in several of its end markets.
Second Quarter Results
Spartan reported net earnings of $10.4 million, or $0.32 per diluted share, on net sales of $196.5 million for the second quarter ended June 30, 2008, compared with net earnings of $6.5 million, or $0.20 per diluted share, on net sales of $152.6 million in the same quarter of 2007.
"The company posted a solid second quarter, particularly given a shift in military business from the second quarter to the third quarter, and the sharp decline in the RV market," said John Sztykiel, president and CEO of Spartan Motors. "Despite these challenges, Spartan improved its earnings nearly 60 percent year-over-year, and our earnings for the first six months of 2008 have surpassed our earnings for the whole of 2007.
"This quarter is another illustration of how our market diversification and flexible manufacturing model has enabled us to grow sales, while controlling our cost structure in tough economic times. Our multiple markets -- emergency-rescue, RV and specialty vehicles, as well as our service, parts and accessories business -- are providing us with growth and enabling us to better manage risk."
Spartan said supply chain issues relative to a production ramp-up, as well as parts, shifted part of the production schedule of a significant military vehicle order from the second quarter to the second half of 2008, with a significant portion of this order remaining in the backlog as of the end of the quarter.
"As in past quarters, military vehicle production can be difficult to forecast month-to-month, as there are strategic supply ramp-up issues to overcome with each vehicle redesign," said Sztykiel. "At the same time, the company experienced softer than expected conditions in the motorhome chassis market, with industry wholesale shipments of Class A motorhomes down 39.5 percent year-over-year through May, according to the latest data from the Recreational Vehicle Industry Association (RVIA)."
Spartan Motors' consolidated backlog increased 10.3 percent year-over-year, to approximately $320.2 million as of June 30, 2008. Spartan Motors anticipates fulfilling its current backlog orders by May 2009.
Spartan reported gross margin of 17.2 percent in the second quarter of 2008, an increase over a gross margin of 15.7 percent in the same period in 2007. Spartan attributed the year-over-year increase in gross profit to increased sales, product mix, higher absorption of overhead and more favorable warranty costs.
Through the first six months of 2008, Spartan's sales increased 55.9 percent compared with the same period of last year, while net earnings increased 83.6 percent compared to the six-month period in 2007. The company reported net earnings per diluted share of $0.77 per share for the first six months of 2007, compared with net earnings per diluted share of $0.42 per share in the same period of 2007.
Spartan Chassis
Sales at Spartan Chassis, the company's largest subsidiary and operating unit, increased 31.6 percent year-over year to $180.8 million for the current quarter. Spartan Chassis represented 92 percent of Spartan Motors' total consolidated sales in the 2008 second quarter. Second quarter earnings at Spartan Chassis improved 53.9 percent year-over-year, and the unit's backlog as of June 30, 2008 increased 21.7 percent year-over-year.
Spartan's chassis sales to the Class A diesel motorhome market decreased 50.0 percent year-over-year in the quarter. Spartan's backlog for RV chassis decreased 47.3 percent year-over-year to $12.5 million as of June 30, 2008. Sales of fire truck chassis in the quarter decreased 11.2 percent compared to the same period of last year, though this segment reported significant improvement in gross margin. Backlog for fire truck chassis at the end of the 2008 second quarter was $75.9 million, a 5.3 percent increase compared to the prior year.
Other Product sales, including specialty chassis for MRAP military vehicles, and Spartan Chassis' growing service, parts and accessories (SPA) business, increased 159.5 percent year-over-year in the second quarter of 2008. Backlog for Other Products increased 43.1 percent year-over-year to $188.7 million as of June 30, 2008. The backlog for Other Products includes a significant order for military vehicles that Spartan expects to produce in the second half of 2008.
Emergency Vehicle Team (EVTeam)
Spartan's EVTeam operating unit, consisting of its Crimson Fire, Crimson Fire Aerials and Road Rescue subsidiaries, reported a 6.0 percent year-over-year increase in sales for the 2008 second quarter, and represented 8 percent of total company-wide sales in the quarter. Though the unit posted a net loss for the quarter, the EVTeam reported a 25.2 percent improvement in segment bottom-line compared to the second quarter of 2007.
"While our goal remains for each unit to be profitable on a stand-alone basis, without any preferential treatment or pricing, the pull-through of Spartan Chassis from the EVTeam continues to have a positive impact on Spartan Motors' bottom line," said Sztykiel.
Financial Position
Spartan reported an operating cash flow increase in the current quarter of $35.3 million, driven largely by decreased working capital needs. The company ended the quarter with $3.2 million in cash and cash equivalents and $53.4 million in long-term debt, a 14.8 percent reduction in long-term debt since the end of 2007.
"Debt related to working capital in the second quarter decreased compared to the 2008 first quarter to match the lower production volumes, another indication of the flexibility of our business model," said Jim Knapp, chief financial officer of Spartan Motors. "We are closely monitoring material costs to mitigate the impact on margins."
On a consolidated basis, Spartan posted a return on invested capital (ROIC) of 27.7 percent in the second quarter of 2008, compared to ROIC of 22.5 percent for the same quarter in 2007. Spartan defines return on invested capital as operating income less taxes, on an annualized basis, divided by total shareholders' equity.
Market Outlook
"The outlook for motorhome chassis is challenging, though the RVIA is predicting the industry will reach its bottom for shipments in 2008 or early 2009," said Sztykiel. "With greater competitive pressures, our motorhome OEM partners will likely need Spartan more than ever to protect their market share. Our focus in motorhome chassis remains on expanding the number of models riding on our chassis and increasing the Spartan content per motorhome through more up-fit work, such as the new bridge-beam product.
"We continue to see smaller orders for mine-blast protected vehicles. These military orders, though not large enough individually to warrant separate announcements, are for specialty variants of existing MRAP vehicles, or for related, lighter vehicles. This trend of smaller orders for specialized and lighter hardened vehicles is expected to stabilize into 2009."
"Our emergency-rescue products made good progress in the quarter, and this progress is expected to continue into the second half of 2008. Recent product introductions, as well as anticipated demand for fire truck chassis and fire trucks ahead of the emissions change in 2010, are expected to drive Spartan's emergency-rescue business into 2009. Several large players in the emergency-rescue market continue to struggle, creating new opportunities for Spartan. We also expect our service, parts and accessories business to become a greater percentage of sales."
Sztykiel concluded: "While the rise in fuel costs are challenging, they are also forcing a restructuring of society and its vehicles. Spartan's model has always been centered on specialty vehicles evolving in advance of society, which creates new opportunities for our flexible, fast and multi-market business model. Our customer-centric philosophy and customized products fill growing niches within our core markets. Spartan's strength in innovation and track record of transforming markets from commercial to custom allows us to create new niche markets. We remain cautiously optimistic about our prospects in 2008 and beyond."
Conference Call & Webcast
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 http://www.spartanmotors.com/ , click on "Shareholders," and then on "Webcasts."
About Spartan Motors
Spartan Motors, Inc. (http://www.spartanmotors.com/) designs, engineers and manufactures custom chassis and vehicles for the recreational vehicle, fire truck, ambulance, emergency-rescue and specialty vehicle markets. The Company's brand names -- Spartan(TM), Crimson Fire(TM), Crimson Fire Aerials(TM), and Road Rescue(TM) -- are known for quality, value, service and being the first to market with innovative products. The Company employs approximately 1,500 at facilities in Michigan, Pennsylvania, South Carolina and South Dakota. Spartan reported sales of $681.9 million in 2007 and is focused on becoming the premier manufacturer of specialty vehicles and chassis in North America.
This release contains forward-looking statements, including, without limitation, statements concerning our business, future plans and objectives and the performance of our products. Forward looking statements are identifiable by words such as "believe," "anticipate," "will," "sustain," and "continue." These forward-looking statements involve certain risks and uncertainties that ultimately may not prove to be accurate. Actual results and future events could differ materially from those anticipated in such statements. Technical complications may arise that could prevent the prompt implementation of the plans outlined above. The company cautions that these forward-looking statements are further qualified by other factors including, but not limited to, those set forth in the company's Annual Report on Form 10-K filing and other filings with the United States Securities and Exchange Commission (available at http://www.sec.gov/). Government contracts and subcontracts typically involve long payment and purchase cycles, competitive bidding, qualification requirements, delays or changes in funding, extensive specification development and changes, price negotiations and milestone requirements. An announced award of a governmental contract is not equivalent to a finalized executed contract and does not assure that orders will be issued and filled. Government agencies also often retain some portion of fees payable upon completion of a project and collection of contract fees may be delayed for long periods, which can negatively impact both prime contractors and subcontractors. The company undertakes no obligation to publicly update or revise any statements in this release, whether as a result of new information, future events or otherwise, except as required by law.
Spartan Motors, Inc. and Subsidiaries Condensed Consolidated Balance Sheets June 30, 2008 December 31, 2007 $-000- $-000- ASSETS Current assets: Cash and cash equivalents $3,166 $13,527 Accounts receivable, net 102,641 132,907 Inventories 113,107 103,076 Deferred income tax assets 6,925 6,925 Taxes receivable 1,908 Other current assets 2,144 1,978 Total current assets 229,891 258,413 Property, plant and equipment, net 62,043 56,673 Goodwill 2,457 2,457 Deferred income tax assets 775 775 Other assets 209 346 Total assets $295,375 $318,664 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $50,808 $90,769 Accrued warranty 11,339 10,824 Accrued compensation and related taxes 9,650 10,431 Accrued vacation 2,055 1,758 Accrued customer rebates 2,179 1,963 Deposits from customers 5,843 5,540 Taxes on income 551 Other current liabilities and accrued expenses 4,641 3,367 Current portion of long-term debt 524 522 Total current liabilities 87,039 125,725 Other non-current liabilities 1,108 1,025 Long-term debt, less current portion 53,433 62,696 Shareholders' equity: Common stock 326 324 Additional paid in capital 63,644 62,648 Retained earnings 89,825 66,246 Total shareholders' equity 153,795 129,218 Total liabilities and shareholders' equity $295,375 $318,664 Spartan Motors, Inc. and Subsidiaries Condensed Consolidated Statements of Income Three Months Ended June 30, 2008 and 2007 June 30, 2008 June 30, 2007 $-000- % $-000- % Sales 196,520 152,583 Cost of Products Sold 162,772 128,570 Gross Profit 33,748 17.2 24,013 15.7 Operating Expenses: Research and Development 4,743 2.4 3,696 2.4 Selling, General and Administrative 12,886 6.6 9,670 6.3 Total Operating Expenses 17,629 9.0 13,366 8.7 Operating Income 16,119 8.2 10,647 7.0 Other Income (Expense): Interest Expense (436) (0.2) (436) (0.3) Interest and Other Income 199 0.1 192 0.1 Total Other Income (Expense) (237) (0.1) (244) (0.2) Earnings before Taxes on Income 15,882 8.1 10,403 6.8 Taxes on Income 5,467 2.8 3,887 2.5 Net Earnings 10,415 5.3 6,516 4.3 Basic Net Earnings per Share 0.33 0.20 Diluted Net Earnings per Share 0.32 0.20 Basic Weighted Average Common Shares Outstanding 32,001 32,073 Diluted Weighted Average Common Shares Outstanding 32,705 32,947 Spartan Motors, Inc. and Subsidiaries Condensed Consolidated Statements of Income Six Months Ended June 30, 2008 and 2007 June 30, 2008 June 30, 2007 $-000- % $-000- % Sales 460,615 295,465 Cost of Products Sold 386,238 246,761 Gross Profit 74,377 16.1 48,704 16.5 Operating Expenses: Research and Development 9,430 2.0 7,486 2.5 Selling, General and Administrative 25,426 5.5 19,151 6.5 Total Operating Expenses 34,856 7.5 26,637 9.0 Operating Income 39,521 8.6 22,067 7.5 Other Income (Expense): Interest Expense (1,169) (0.3) (682) (0.3) Interest and Other Income 293 0.1 329 0.1 Total Other Income (Expense) (876) (0.2) (353) (0.2) Earnings before Taxes on Income 38,645 8.4 21,714 7.3 Taxes on Income 13,449 2.9 7,992 2.7 Net Earnings 25,196 5.5 13,722 4.6 Basic Net Earnings per Share 0.79 0.43 Diluted Net Earnings per Share 0.77 0.42 Basic Weighted Average Common Shares Outstanding 31,957 31,828 Diluted Weighted Average Common Shares Outstanding 32,554 32,549 Spartan Motors, Inc. and Subsidiaries Sales and Other Financial Information by Business Segment Quarter and Six Months Ended June 30, 2008 Three Months Ended June 30, 2008 (amounts in thousands of dollars) Business Segments Chassis EVTeam Other Consolidated Motorhome Chassis Sales 30,206 30,206 Fire Truck Chassis Sales 25,627 (6,259) 19,368 EVTeam Product Sales 22,007 22,007 Other Product Sales 124,939 124,939 Total Net Sales 180,772 22,007 (6,259) 196,520 Interest Expense 64 372 436 Depreciation Expense 649 297 463 1,409 Segment Net Earnings (Loss) 12,433 (714) (1,304) 10,415 Six Months Ended June 30, 2008 (amounts in thousands of dollars) Business Segments Chassis EVTeam Other Consolidated Motorhome Chassis Sales 68,351 68,351 Fire Truck Chassis Sales 55,364 (11,708) 43,656 EVTeam Product Sales 46,259 46,259 Other Product Sales 302,349 302,349 Total Net Sales 426,064 46,259 (11,708) 460,615 Interest Expense 13 769 387 1,169 Depreciation Expense 1,238 578 920 2,736 Segment Net Earnings (Loss) 29,077 (1,150) (2,731) 25,196 Period End Backlog (amounts in thousands of dollars) June 30, Sept. 30, Dec.31, March 31, June 30, 2007 2007 2007 2008 2008 Motorhome Chassis * 23,768 26,097 27,312 17,465 12,533 Fire Truck Chassis * 72,097 67,071 60,374 70,720 75,931 Other Product * 131,801 228,803 199,362 166,457 188,665 Total Chassis 227,666 321,971 287,048 254,642 277,129 EVTeam Product * 62,691 61,178 51,316 49,975 43,094 Total Backlog 290,357 383,149 338,364 304,617 320,223 * Anticipated time to fill backlog orders; 2 months or less for motorhome chassis and 10 months or less for fire truck chassis, other product and EVTeam product.
