Spartan Motors Reports First Quarter Results
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CHARLOTTE, Mich., April 28, 2009: Spartan Motors, Inc. reported its first quarter operating results, highlighted by increased sales and orders for its emergency rescue products in difficult economic conditions.
For the first quarter ended March 31, 2009, Spartan reported: -- Net earnings of $0.19 per diluted share -- Net sales of $115.5 million -- Gross margin of 22.6% of sales -- Return on invested capital of 14.0% -- Consolidated backlog of $217.5 million First Quarter Results
Spartan reported first quarter net earnings of $6.1 million, or $0.19 per diluted share, on net sales of $115.5 million, compared with net earnings of $14.8 million, or $0.46 per diluted share, 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 percent of sales in the first quarter of 2009, a 46.8 percent increase over the same period in 2008 and a 7.1 percent 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 John Sztykiel, president and CEO of Spartan Motors. "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."
Spartan Chassis
Sales at Spartan Chassis, the company's largest subsidiary and operating unit, decreased 60.0 percent year-over year to $98.2 million for the current quarter. Spartan Chassis represented 85.0 percent of Spartan Motors' total consolidated sales in the 2009 first quarter.
Spartan Chassis' net earnings declined 59.8 percent year-over-year in the quarter, due primarily to the decline in sales.
Sales of fire truck chassis in the 2009 first quarter increased 11.8 percent compared to the same period in 2008, and backlog for fire truck chassis as of March 31, 2009 was $98.0 million, a 38.6 percent year-over-year increase. The company reported increased demand for fire truck chassis, due in part to increased demand from changes to industry safety regulations and the 2010 engine emission standards.
Spartan Chassis' sales to the Class A diesel motorhome market decreased 91.7 percent year-over-year in the quarter, while backlog for RV chassis decreased 75.0 percent year-over-year to $4.4 million as of March 31, 2009.
"As expected, the outlook for motorhomes remains difficult," said Sztykiel. "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."
Other Products sales, including specialty chassis for mine-resistant defense vehicles, and the company's service, parts and assemblies (SPA) business, decreased 65.2 percent year-over-year in the first quarter of 2009, reflecting the completion of several large orders for military customers in the second half of 2008. Other Products backlog, which for the first time includes backlog for SPA of $47.8 million, was $55.8 million as of March 31, 2009, compared to $166.5 million at the end of the 2008 first quarter, and compared to $8.5 million at the end of the 2008 fourth quarter.
Emergency Vehicle Team (EVTeam)
Spartan's EVTeam operating unit, consisting of its Crimson Fire, Crimson Fire Aerials and Road Rescue subsidiaries, reported operating income of $395 thousand in the 2009 first quarter, compared to an operating loss of $365 thousand in the same quarter of 2008. Spartan attributed the profitability of the EVTeam as a whole to improved operating efficiencies within the subsidiaries. Backlog for the EVTeam was $83.3 million as of March 31, 2009, a 35.3 percent year-over-year increase.
Financial Position
Spartan reported positive operating cash flow of $15.1 million in the current quarter and the company ended the first quarter with $27.2 million in cash and cash equivalents, as well as $16.4 million in long-term debt.
Spartan reported it has repurchased 140,738 shares of its common stock in the open market since January 2009, reflecting the company's belief that the stock is undervalued. The company completed the recent share buyback at an average price of $3.09 per share. This repurchase is the first under the board-authorized one million-share buyback program announced in July 2008.
"Our cash generation gives us the flexibility to pursue multiple avenues to create shareholder value, such as investing in the business, buying back stock or evaluating strategic opportunities," said Chief Financial Officer Jim Knapp. "The board believes our share price is trading at a discount in relation to our long-term earnings potential, balance sheet strength and diversified product and end-market mix."
On a consolidated basis, Spartan posted a return on invested capital (ROIC) of 14.0 percent in the first quarter of 2009, compared to ROIC of 42.6 percent for the same quarter in 2008, and 7.2 percent in the fourth quarter of 2008. Spartan defines return on invested capital as operating income less taxes, on an annualized basis, divided by total shareholders' equity.
Market Outlook
In line with management's previously communicated outlook, Spartan reported it continues to expect its consolidated 2009 results to be less than 2008 because of market and macro-economic conditions, as well as a reduction in specialty vehicle sales, primarily related to large-scale defense contracts. However, Spartan reiterated that the potential for significant orders from the defense industry remains.
"Our order intake for emergency rescue products increased in the 2009 first quarter, due largely to the influx of orders received by OEMs in the 2008 fourth quarter, which was driven by changes to industry safety regulations," said Sztykiel. "Longer term, there are trends that indicate steadily increasing demand for emergency-rescue products, regardless of the economic conditions, and we are investing in R&D and unveiling new products to address this long-term demand.
"The Pentagon has indicated it plans to order between 2,000 and 10,000 of M-ATV vehicles starting later this year, though we don't expect clarity on specific orders until May or June. We believe Spartan's production capacity will be an asset for any future production runs of M-ATVs, as well as our proven capabilities in speed-to-market, manufacturing flexibility, on-time delivery, product performance and service, parts and support. We continue to produce smaller orders of specialized mine-resistant variants for the U.S. military and other nations, such as the ILAV vehicles.
"We expect to enter several new strategic markets over the next 18 months. In closing, we will not just weather 2009, but this year will position us for future growth into 2010 and beyond," Sztykiel concluded.
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 SPARTIN, click on "Shareholders," and then on "Webcasts."
