Spartan Motors, Inc. (NASDAQ: SPAR) announced that revenues for the fourth quarter of 2011 were $111.2 million, a drop of 12% from $126.9 million in the fourth quarter of 2010, and $426 million for the year, an 11.4% decline from $480.7 million in 2010.
Results reflected weaker demand in Spartan's government-related business units. The Emergency Response Chassis unit outperformed the overall industry, posting revenue that declined 4% compared to an industry-wide decline of 20% or more during the fourth quarter of 2011.
The Service and Delivery unit posted revenue gains for the quarter due in part to strong aftermarket sales, partially offset by delays in shipping a number of walk-in vans and the new Reach commercial van. Shipments of the walk-in vans were delayed by the need to fit an additional component required by updated regulatory requirements, while Reach shipments were held until quality compliance was demonstrated. Subsequent to quarter end, both the walk-in and Reach vans were shipped to customers.
"We faced some challenges with top-line growth and gross margins during the fourth quarter, but continued to execute on our diversified growth strategy while controlling our operating costs," said John Sztykiel, President and CEO of Spartan Motors. "Revenue in our Delivery and Service business rose nearly 7% in the fourth quarter of 2011 versus the year-ago fourth quarter, and was up nearly 47% for all of 2011. The performance of our Delivery and Service group demonstrates Spartan's ability to diversify our revenue stream and improve operating income. The performance demonstrated by Delivery and Service, combined with growth in our order backlog at yearend places Spartan in a good position as we enter the first half of 2012."
Spartan announced it will move its Utilimaster operations to a new leased facility in Bristol, Indiana from its current Wakarusa, Indiana campus in an effort to reduce cost and enhance productivity. The move to the Bristol facility will consolidate Utilimaster's operations into one large facility from its current campus of 16 buildings.
“We expect the transfer of Utilimaster to a new facility to result in greater manufacturing efficiency, higher product quality and lower operating costs,” Sztykiel said. “This move will reduce the distance a van or truck body travels during assembly from 2.5 miles to less than a half-mile. As a result, we will eliminate a number of non-value added steps such as moving work-in-process from one building to another during production.
"This is the third step of our strategic plan to enhance Utilimaster's performance. Our first step was to improve operating income in the current facilities, task accomplished. The second step was to bring the Reach to market, also accomplished. Our third step is to consolidate Utilimaster into one modern facility in order to enhance operational efficiency and income growth, and position us for future sales growth."
Management expects the transfer of operations to Bristol to result in annual savings of approximately $4 million due to reduced building maintenance, lower operating costs and the elimination of redundant functions. Reflecting the current weakness in the commercial real estate market in Wakarusa, the Company will incur an asset impairment charge of $4- 6 million in the first quarter of 2012 as a result of closing the facility. The move is expected to begin during the second quarter of 2012 and be completed by yearend.
Gross profit for the year totaled $60.6 million, or 14.2% of sales, for 2011. For 2010, gross profit totaled $72.5 million, or 15.1% of sales. Lower gross profit in 2011 was due to lower total revenue as well as the lack of higher-margin defense parts sales and a less profitable product mix in the Emergency Response Bodies business.
Operating expenses for 2011 declined by $2.5 million, to $59.3 million, from $61.8 million in 2010. Lower operating expenses in 2011 were due to staffing reductions made in the second quarter of 2011 as well as successful cost-control efforts in general. These cost reductions are net of additional costs associated with the Classic Fire acquisition and a $1.1 million accrual for contingent earn-out payments associated with the Utilimaster acquisition.
"As we focus on 2012, we will continue to execute our plan, a blended strategy of acquisitions, alliances, organic growth and systematically reducing our operating costs,” Sztykiel said. “Our total order backlog increased nearly 2% over the fourth quarter of 2010, with Utilimaster more than doubling its backlog compared to last year. We reduced the lead time to produce an Emergency Response chassis from seven months to four, significantly shortening our cash conversion cycle. We accomplished all of this despite operating in challenging markets. We are dedicated to capitalizing on the progress we have made and expect to deliver sustained revenue and profit growth in 2012 and beyond."
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