Spartan Motors, Inc. (NASDAQ: SPAR) reported a net loss of $300,000 for the third quarter of 2012, or ($0.01) per diluted share compared to net income of $3.2 million, or $0.10 per diluted share in the third quarter of 2011.
Revenues totaled $112.9 million compared to $120.3 million in the third quarter of 2011. Excluding pre-tax restructuring charges of $1.6 million, Spartan posted adjusted operating earnings for the quarter of $0.02 per diluted share.
For the quarter ended Sept. 30, 2012, Spartan began reporting its operating results in three segments: Emergency Response (ER), Delivery & Service Vehicles (DSV) and Specialty Vehicles (SV). Results for these segments are included below.
- Net sales of $112.9 million (down 6% from Q3 2011 sales of $120.3 million):
- Emergency Response sales totaled $39.9 million, up 12.9% from $35.3 million in Q3 2011
- Delivery & Service Vehicle sales totaled $49.0 million, down 20.0% from $61.2 million in Q3 2011
- Specialty Vehicles sales totaled $23.9 million, up 0.8% from $23.8 million in Q3 2011
- GAAP results (including restructuring charges):
- Gross margin of 11.5% of sales, down from 17.0% in Q3 2011
- Operating loss of $0.3 million and operating margin of (0.2)%, compared to operating income of $5.3 million and operating margin of 4.4% in Q3 2011
- Net loss of $0.3 million, or ($0.01) per diluted share
- Adjusted operating results (non-GAAP, excluding restructuring charges):
- Adjusted gross margin of 12.9% of sales
- Adjusted operating income of $1.4 million, or 1.2% of sales
- Adjusted net income of $0.7 million, or $0.02 per diluted share
- Restructuring charges totaled $1.6 million, or $0.03 per diluted share in Q3 2012, mostly related to the previously disclosed sale of the Wakarusa, Ind. campus and move to Bristol, Ind.
- Tax expense for the quarter included $0.2 million related to a prior period tax position
- Earnings before interest, taxes, depreciation and amortization (EBITDA) was $3.6 million in Q3 2012 versus $7.6 million in Q3 2011
- Ending consolidated backlog of $168.3 million at Sept. 30, 2012 versus $173.3 million at June 30, 2012 and $142.6 million at Sept. 30, 2011; Q3 2012 new orders totaled $108.1 million
- Sales to businesses and consumers were 61% of total revenue versus 63% in Q2 2011
- Cash balance of $26.7 million at Sept. 30, 2012 compared to $33.3 million at June 30, 2012
"Spartan continued its trend of generating an adjusted operating profit through the third quarter of 2012 as our Emergency Response and Specialty Vehicles units posted growth in revenue and order backlog compared to the third quarter of 2011,” said John Sztykiel, Chief Executive Officer of Spartan Motors. “The improved performance of these units underscores the importance of our diversification strategy as the growth in these segments partially offset a slower quarter in our Delivery & Service Vehicles unit. We are executing our plan and continuing our momentum in returning our ER and Specialty Vehicles units to growth and taking action to improve our operations."
- Spartan's Emergency Response Vehicles segment, which includes both the Emergency Response Chassis and Emergency Response Bodies operations, posted a sales gain of $4.6 million, or 12.9%, in the third quarter of 2012 compared to the prior year. Sales of Spartan's custom chassis accounted for most of the increase, as the market gradually recovered and responded favorably to Spartan's new product offerings. During the quarter, Spartan shipped the first few ER chassis equipped with the Spartan APS advanced airbag restraint system.
- The Specialty Vehicles segment generated revenue of $23.9 million in the third quarter of 2012, up 0.8% from $23.8 million in the year-ago third quarter. Most of the increase came from higher sales of recreational vehicle chassis, which totaled $17.1 million for the third quarter of 2012, an increase of $3.0 million, or 20.9%, over the third quarter of 2011. RV chassis sales increased as RV manufacturers using Spartan's custom chassis increased their sales and market share during the third quarter of 2012.
- The Delivery & Service Vehicles segment posted third quarter 2012 revenue of $49.0 million, down from $61.2 million in the third quarter of 2011. The revenue decline was largely due to the decline in aftermarket accessory sales during the most recent third quarter. Vehicle sales in Q3 2012 were adversely affected to a lesser extent by a decline in walk-in van sales compared to Q3 2011 when DSV shipped a record number of units to a major customer. Shortages of some materials also pushed out production of some walk-in van units beyond Q3 2012. Partially offsetting the decline in walk-in van sales was an increase in truck body sales in Q3 2012 compared to Q3 2011. In addition, production of the Reach van in Charlotte commenced during the third quarter, with 182 units shipped during the period.
- Spartan's gross margin excluding restructuring items was 12.9% in the third quarter of 2012 versus 17.0% in the third quarter of 2011. Compared to the third quarter of 2011, the gross margin was negatively impacted by lower revenue, including the absence of keyless entry sales at DSV. Including restructuring items of $1.5 million in the third quarter of 2012, gross margin was 11.5% of sales.
- Restructuring charges were related to the relocation of DSV's Utilimaster operations to Bristol, Ind., including $0.9 million in impairment charges to the value of the Wakarusa, Ind. campus. The additional impairment was taken to reflect the expected realizable value of the buildings as discussed in the Company's prior releases.
- Operating expenses in the third quarter of 2012 declined by $2.1 million to $13.1 million, or 11.6% of sales, excluding restructuring charges, compared to $15.2 million, or 12.6% of sales, in the third quarter of 2011. Including restructuring charges of $0.1 million, or 0.1% of sales, operating expenses for the third quarter of 2012 amounted to $13.2 million, or 11.7% of sales. Operating expenses declined year over year due to management's ongoing efforts to control expenses.
- Tax expense for the third quarter of 2012 was $0.1 million. The Company's effective tax rate was impacted unfavorably due to a state court ruling regarding a prior period tax position that occurred in the third quarter. This event was a non-recurring, discrete event for tax purposes that required recognizing the entire impact of the uncertain tax position in the third quarter.
"Despite the challenging year-over-year comparison to the third quarter of 2011, we kept moving forward toward our goals,” Sztykiel said. “Some of our accomplishments include moving Reach production to Charlotte and shipping 182 units during the quarter, making more progress on relocating Utilimaster to Bristol, Ind. and receiving additional orders for the Reach from UPS and FedEx. Operationally, the fourth quarter of 2012 is important as we start the move of Utilimaster from Wakarusa, Ind. to Bristol, which we expect to yield annualized savings of $4 million.“The investments we made in Emergency Response are paying off and our business is becoming stronger. In closing, we have two strong brands, Utilimaster and Spartan, as demonstrated by the 18% growth in backlog compared to the third quarter of 2011, that are leading us forward in these challenging times. Recognizing the positives with the challenges, we will continually refine and execute our plan to ensure that we move Spartan forward."