Spartan Motors, Inc. (Nasdaq: SPAR) announced that consolidated net sales for the first quarter were $122.5 million, up 6.1 percent 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 percent 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 percent year-over-year increase in sales for the 2010 first quarter. Sales of fire truck chassis in the quarter also increased 13.4 percent 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 (RV) 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 14.0 percent of sales from 22.6 percent in the first quarter of 2009. On a sequential basis, gross margins declined modestly, from 14.9 percent 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 percent, 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.
"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, President and CEO of Spartan Motors. "During the quarter, we saw continued improvement in Motorhomes and Emergency Response, which was offset by soft sales in Aftermarket Parts and Assemblies (APA) 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 breakeven 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."
Joe Nowicki, Chief Financial Officer, 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."