Spartan Motors, Inc. (NASDAQ: SPAR), which owns Utilimaster, reported a net loss of $2.2 million, or $0.07 per diluted share, for the second quarter of 2011.
Revenues were $99.4 million, down 14.1 percent compared to the same quarter of the prior year, driven by the overall economic climate and government budgetary constraints. Also contributing to the relative decline were increased prior year sales volumes related to emergency response orders placed in advance of the 2010 engine emissions change. These factors were combined with restructuring charges of $2.8 million and a product mix shift away from more profitable defense and service parts sales.
Spartan realigned operations in response to the softened defense and motorhome markets. The realignment is expected to reduce Spartan's fixed costs by approximately $4 million on an annual basis. Exclusive of the one-time restructuring charges, adjusted net loss from continuing operations was $0.4 million, or $0.01 per diluted share.
Consolidated backlog improved 8.0 percent, to $179.3 million over the first quarter of 2011, driven by order intake momentum in the delivery and service vehicle and emergency response chassis markets.
"While we anticipated another tough quarter, it was still a difficult experience," said John Sztykiel, President and CEO of Spartan Motors. "The restructuring costs were not easy, but they were necessary to resize our cost structure and position us for future growth and profitability. The motorhome market continues to be soft, and defense orders have been curtailed significantly in response to government budgetary cuts. However, the emergency response market, while down compared to 2010, is showing improvement, with better-than-expected order intake resulting in a stepped-up production schedule for the second half of 2011. Our delivery and service vehicle market continued its momentum with a 73 percent sales improvement and nearly double the backlog compared to the same quarter in 2010. We are very excited about the opportunity in this market and pleased with its contribution to our diversified product portfolio.
"Clearly, we still have challenges in some of our markets and must continue to reduce our cost of doing business. The good news is that our backlog has been up for two consecutive quarters, and we expect the second half of 2011 to be better than the first."
Profitable growth opportunities:
- The Reach, a commercial van offering up to 35 percent better fuel economy with improved safety and operational performance, will launch into production during the third quarter of 2011. Currently, final durability testing is nearing completion with 10 pilot vehicles in use by end customers. The distribution of the Reach will extend beyond Utilimaster's existing large fleet customers, as Isuzu's dealer network will also be offering and supporting this commercial van. This should allow extended market penetration into smaller fleet and business operations, a large growth opportunity.
- Given the size and commercial grade of the Reach, new markets will be addressed by competing with cargo and conversion vans that offer smaller cargo capacity and a significantly shorter life cycle.
- Classic Fire adds breadth to Spartan's emergency response vehicle lineup, covering additional market segments, applications and customer needs for a more price-sensitive market. Classic Fire's operating results are included in Spartan's reported financials for the first time during the quarter following the recently completed acquisition on April 1, 2011. The Classic Series complements the Legend and Star Series already offered by Crimson Fire and is expected to penetrate the lower-priced niche of the fire truck market.
- Air bag technology will be offered in 2012 on Spartan emergency response cabs, expanding the Company's bid opportunities while providing another compelling reason to choose a Spartan product. This significant investment reflects Spartan's commitment to technological advancement and improved safety standards in emergency response vehicles.
- Spartan Chassis' Idle Reduction Technology (IRT) provides an estimated 50 percent fuel consumption improvement in testing, and is proving to be a compelling product with a sizeable market opportunity. This technology expands vehicle service life and reduces maintenance needs, while limiting exhaust emissions and noise pollution.
- Launch of production and initial sales of the N-Series gas cab and chassis assembly, in partnership with Isuzu Commercial Truck of America, were achieved during the quarter with a future expected production rate of 21 units per day.
- Alliances with business partners continue to generate new opportunities, including the recently announced agreement with Lion Bus Inc. of Saint-Jerome, Quebec.
- Other existing profitable growth opportunities include field service solutions for existing customer fleets that enable performance improvement, increased safety and retrofitting with new vocational packages, such as the installation of keyless entry pads and safe loading systems. Utilimaster has been very active in this area, which offers an improved contribution margin.