Spartan Motors, Inc. (NASDAQ: SPAR) announced that second-quarter revenues grew to $120.9 million, up 5.7% from the same quarter in 2012, due to growth in the Specialty Vehicles segment.
Revenue in the Specialty Vehicles segment increased $9.9 million from the second quarter of 2012 to $32.9 million. Growth in Specialty Vehicles revenue was attributable to an increase in RV sales of $4.2 million compared to the prior year, and the completion of a limited-run ILAV (Iraqi Light Armored Vehicle) order in the Defense unit.
Emergency Response revenues increased slightly to $43.8 million in Q2 2013 from $43.6 million in Q2 2012. Growth in these two segments more than offset a year-over-year revenue decline of $3.6 million in the Delivery & Service segment to $44.2 million in Q2 2013.
All of the company's business segments posted improved operating results compared to the first quarter of 2013.
"For Spartan, the second quarter of 2013 was about demonstrating operational improvement in every market segment from the first quarter of 2013 and backlog growth, both sequentially and year-over-year,” said John Sztykiel, President and CEO of Spartan Motors, Inc. “The Company generated improved results by implementing the D (Diversified Growth) and I (Integrated Operational Improvement) in DRIVE. We expect improved results in the third and fourth quarters of 2013 as we execute our DRIVE strategy and deliver on our shareholder commitments."
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
Specialty Vehicles (SV)
- The SV segment drove Spartan's revenue growth for the second quarter of 2013. Demand for Spartan's custom chassis grew, particularly for RV and bus applications, which led to a revenue increase of 42.9% year-over-year. Operating income for the SV segment rose sharply to $3.9 million from $0.6 million in Q2 2012. Growth in operating income was due to higher revenue in the most recent quarter, as well as the operational improvement actions taken in this segment over the past year.
- Mr. Sztykiel commented on the SV segment's performance, stating, "Eighteen months ago, the motorhome and bus chassis business was a serious drag on Spartan's earnings. In early 2012, we began executing the DRIVE strategy in a disciplined manner, increasing revenue and operating profit. The success we have demonstrated in the SV segment should enhance confidence that we will successfully address the operational challenges we are working through in the Emergency Response Vehicles and Delivery & Service Vehicles units."
Emergency Response (ER)
- Emergency Response revenue was up slightly during the second quarter of 2013, to $43.8 million from $43.6 million a year ago. Higher demand for custom fire truck chassis generated the segment's revenue growth, offsetting a decline in Emergency Response Vehicles (ERV) revenue. Lower ERV revenue was anticipated and a result of management's decision to reduce the production rate while it implemented measures to improve operational efficiency and performance. Demand remains strong for Spartan's custom chassis and fire trucks, with a combined order backlog at June 30, 2013 of $115.1 million, up 38.2% from $83.3 million a year ago. ERV backlog rose to $86.8 million at June 30 2013, up 66.9% from $52.0 million at June 30, 2012. Growth in ER order backlog illustrates the strength of the Spartan brand as it was one year ago that all of the Company's ER products were combined into the Spartan brand.
- For the quarter ended June 30, 2013, the ER segment posted operating profit of $0.4 million, a substantial improvement from an operating loss of $1.0 million during Q2 2012 and an operating loss of $2.6 million in Q1 2013. Management expects to make additional progress in improving operating performance at the ERV unit during the second half of this year and for ERV to make a positive contribution to the ER segment's fourth quarter 2013 profitability.
Delivery & Service (DSV)
DSV revenue declined 7.5% to $44.2 million in the quarter ended June 30, 2013, as lower aftermarket parts and field service solutions sales more than offset higher vehicle sales. The reduction in aftermarket parts revenue was primarily due to the end of a major field service program in mid-2012.
For the second quarter of 2013, DSV posted an operating loss of $1.6 million compared to an operating profit of $6.2 million in the second quarter of 2012, and an operating loss of $4.0 million in the first quarter of 2013. Profitability was reduced by lower aftermarket parts sales compared to Q2 2012, as well as the impact of launch costs incurred at the Bristol facility.
- Gross margin for the second quarter of 2013 was 12.9% of sales versus 16.4% for the second quarter of 2012. The decline in gross profit and margin percentage was due to the decline in DSV revenue and higher expenses related to the relocation of walk-in van production to Bristol. Partially offsetting these factors were increases in gross profit and margin percentage in the ER and SV segments. Higher margins in the ER segment were due to more favorable pricing and improved quality. The SV segment generated a higher gross margin due to a more favorable product mix and higher sales in Q2 2013 versus the prior year.
- Operating expenses were reduced by $0.3 million from the second quarter of 2012, to $14.6 million from $14.9 million. Operating expenses as a percentage of sales were 12.0% in the second quarter of 2013 versus 13.0% in the second quarter of 2012. The SV and DSV segments saw declines in operating expenses, largely due to a lower earn-out accrual related to the Utilimaster acquisition, while ER incurred higher marketing and selling expenses during the quarter ended June 30, 2013.
- Spartan's cash balance at June 30, 2013 was $15.6 million, down from $16.6 million at March 31, 2013. Reflected in the June 30, 2013 cash balance is the payment of a cash dividend of $0.05 per share, totaling $1.7 million.