Spartan Motors’ Revenues Down 19% in 1Q

Spartan Motors, Inc. (NASDAQ: SPAR), Utilimaster’s parent company, said first-quarter revenues totaled $96.1 million versus $118.8 million, down 19.1% from the first quarter of 2012 due to a decline in sales in the Delivery & Service (DSV) segment.

Spartan posted a net loss of $0.13 per diluted share compared to a net loss of $0.06 per diluted share in the first quarter of 2012, primarily due to the impact of lower revenue, an accrual for a product recall and costs related to the move of walk-in van production to Bristol, Ind.

"As we indicated in our fourth quarter 2012 press release and conference call, we expected an operating loss in the first quarter of 2013,” said John Sztykiel, President and CEO of Spartan Motors, Inc. “Most of the loss during the quarter was due to lower DSV revenue and expenses incurred to move and start walk-in van production at Bristol. During the first quarter, we moved the bulk of our Utilimaster business 22 miles to a much more efficient plant and began ramping up production. Our relocation plan was aggressive and complex, so it is not surprising that we encountered some growing pains during the launch phase at Bristol.

"We believe the first quarter will prove to be the most difficult quarter of 2013 and is now behind us. Although meeting our targets for the rest of the year is not without its own challenges, I have confidence in our people, our plan and our ability to turn strong backlog growth of 41.1% from the end of 2012, into a profitable second quarter and full year 2013."

First Quarter 2013 Summary: (Comparisons are Q1 2013 to Q1 2012 unless otherwise noted)

  • Net sales of $96.1 million (down 19.1% from Q1 2012 sales of $118.8 million)
    • Emergency Response (ER) revenue rose 2.9% to $34.9 million from $33.9 million
    • Delivery & Service (DSV) revenue declined 45.7% to $31.9 million from $58.8 million
    • Specialty Vehicles (SV) sales rose to $29.3 million from $26.1 million, an increase of 12.3%
  • Gross margin of 6.6% of sales versus 11.6% in the first quarter of 2012
  • Operating loss of $6.8 million compared to an operating loss of $3.4 million in Q1 2012
  • Net loss of $4.3 million, $0.13 per diluted share, compared to a net loss of $2.0 million, or $0.06 per diluted share, in the first quarter of 2012
  • Consolidated order backlog at March 31, 2013 increased 41.1% to $228.6 million versus $162.0 million at December 31, 2012, and up 64.5% from $135.7 million at March 31, 2012
  • Cash balance of $16.6 million at March 31, 2013 compared to $21.7 million at December 31, 2012

"The first quarter of 2013 was about three items: First, we completed the move of Utilimaster's walk-in van business from Wakarusa, Ind. to Bristol, Ind. Our high-volume line is now running at expected rates. Now we are adding the lower-volume, mixed-model line, which should ramp up to expected rates during the second quarter. We are excited to see more than 12 months of hard work come to fruition in the form of a high-quality product coming off the line, 100% complete.

"Second, our order backlog reached $228.6 million, proving the strength of the Spartan and Utilimaster brands. Third, we achieved market acceptance of the Reach™ with the receipt of an order for 1,900 units from a major fleet customer.

"Although our work to enhance the gross margin in the first quarter of 2013 was masked by seasonal factors and the impact of Bristol-related costs, we expect Spartan's results for the rest of the year to show positive results from these efforts. Spartan's D.R.I.V.E. strategy is sound and our focus is on the 'I' – Integrated Operational Improvement – in D.R.I.V.E."

D.R.I.V.E. is Spartan's operating strategy based on the five following tenets:

  • Diversified Growth
  • Redefining New Technologies
  • Integrated Operational Improvement
  • Vibrant Culture
  • Extend Our Core Markets

First Quarter 2013 Operating Results

  • Revenues for the first quarter of 2013 decreased to $96.1 million from $118.8 million in the prior year due to a decline in revenue in the DSV segment. Lower revenue at DSV was primarily due to the absence of a large aftermarket parts program that ended in early Q3 2012, plus seasonally lower sales and the move of walk-in van production to Bristol, Ind. Although sales at DSV declined during the first quarter of 2013, order backlog at quarter end more than doubled to $100.4 million compared to $39.7 million at December 31, 2012 and $40.0 million at the end of the first quarter of 2012.
  • Revenue in the ER segment increased 2.9% to $34.9 million as higher sales in Emergency Response Vehicles (ERV) more than offset lower sales of Emergency Response Chassis (ERC). ERV sales for the quarter increased as production rates rose to meet higher demand and rising backlog while ERC sales for the quarter declined mainly due to timing of customer orders. Order backlog for the ER segment at March 31, 2013 totaled $104.1 million, up 8.7% from $95.8 million at December 31, 2012 and up 26.6% from March 31, 2012.
  • Sales in the SV segment totaled $29.3 million in the first quarter of 2013 versus $26.1 million in the first quarter of 2012, an increase of 12.3%. The revenue increase was due to higher sales of recreational vehicle chassis and Aftermarket Parts and Accessories (APA) more than offsetting a net decline in production of other specialty vehicles. Chassis sales rose by $2.0 million to $20.4 million in the first quarter of 2013 while APA sales totaled $6.9 million, up $2.2 million from the first quarter of 2012.
  • Gross profit for the first quarter of 2013 totaled $6.3 million versus $13.7 million in the first quarter of 2012. As a percentage of sales, gross margin for the first quarter of 2013 was 6.6% of sales versus 11.6% for the first quarter of 2012. The decline in Q1 2013 gross profit and margin percentage was largely due to the decline in DSV revenue and approximately $1.0 million in Bristol production start-up expenses. Other factors negatively impacting gross profit in Q1 2013 were a $1.0 million recall accrual for certain motorhome chassis in the SV segment, $0.5 million related to an aerial unit service campaign and costs of $0.5 million resulting from establishing a new ER distributor in the Pacific Northwest. During the first quarter of 2012 there were $3.6 million of restructuring charges related to the Bristol relocation project.
  • Operating expenses were reduced by $4.0 million compared to the prior year, totaling $13.2 million in the first quarter of 2013 versus $17.2 million a year ago. Operating expenses as a percentage of sales were 13.7% in the first quarter of 2013 versus 14.4% in the first quarter of 2012. All operating segments saw reductions in operating expenses in the first quarter of 2013 compared to the prior year.
  • Spartan posted an operating loss of $6.8 million in Q1 2013 versus an operating loss of $3.4 million in Q1 2012. Most of the operating loss in the first quarter of 2013 was due to the reduction in DSV sales for the quarter. For Q1 2013, DSV posted an operating loss of $4.0 million versus an operating profit of $1.3 million in Q1 2012. Most of DSV's operating loss was attributable to lower production and costs related to the ramp-up of walk-in van operations at Bristol. The ER segment posted a Q1 2013 operating loss of $2.6 million versus an operating loss of $2.4 million in the prior year, primarily due to the costs of the aerial service campaign and establishing a distributor more than offsetting revenue growth.
  • The SV segment posted a Q1 2013 operating profit of $1.3 million compared to an operating loss of $0.1 million in the prior year due to higher sales of aftermarket parts and assemblies and RV chassis, along with a positive impact from gross margin improvement and restructuring efforts implemented in 2012. Reducing the SV segment's operating profit was a $1.0 million recall accrual for certain motorhome chassis.
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