Spartan Motors Reports 147% Net Income Growth in Q3

Spartan Motors Reports 147% Net Income Growth in Q3

Spartan Motors, Inc. (NASDAQ: SPAR) reported net income of $2.7 million in the third quarter, compared to a net loss of $5.8 million in the third quarter of 2015.

Spartan Motors, Inc. (NASDAQ: SPAR) reported net income of $2.7 million in the third quarter, compared to a net loss of $5.8 million in the third quarter of 2015.

Sales increased 8.9% to $148.7 million from $136.6 million. Gross margin improved 270 basis points to 12.1% of sales compared to 9.4% of sales. Operating margin increased 200 basis points to 1.7% of sales from (0.3%) of sales. Operating income improved $3.1 million to $2.6 million from an operating loss of $0.5 million.

“Our solid third-quarter 2016 financial performance was primarily led by another strong contribution from our Fleet Vehicles and Services segment that continued to help drive both revenue and profit growth," said Daryl Adams, President and Chief Executive Officer of Spartan Motors.  "Our other businesses performed as anticipated during the quarter, and we are very pleased to see our improvement efforts continuing to gain momentum across all three of our business segments, as we achieved our most profitable year-to-date results since 2009.  Our talented and dedicated team remained focused on delivering the operational efficiencies and improved processes that are part of our ongoing, multi-year turnaround plan for the Company."

Fleet Vehicles and Services (FVS) Third Quarter Results

FVS segment revenue grew to $78.0 million from $54.2 million, an increase of 43.9%.  Revenue growth was primarily due to favorable revenue mix and higher volume at vehicle up-fit centers.

Operating income for the segment increased $5.5 million to $9.6 million, or 12.3% of sales, from $4.1 million, or 7.5% of sales, a year ago.  Growth in operating income was primarily due to favorable revenue mix and the continued positive impact of process improvement and lean initiatives introduced earlier this year.  

Segment backlog at September 30, 2016, totaled $102.2 million compared to $107.7 million at September 30, 2015.

Specialty Chassis & Vehicles (SCV) Third Quarter Results

SCV segment revenue decreased $10.1 million, or 26.1%, to $28.6 million from $38.7 million.  Sales of motorhome chassis declined 31.1% to $22.3 million from $32.4 million, due primarily to lower unit shipments year-over-year, resulting from a customer implemented, one-time inventory adjustment related to its dealer and on-hand inventory.  Shipments to this customer are expected to return to pre-adjustment levels during the current fourth quarter.   

Operating income decreased to $0.9 million from $2.4 million last year, a 63% decrease, reflecting the lower sales volume.  

Segment backlog at September 30, 2016, totaled $20.1 million compared to $22.6 million at September 30, 2015.

Emergency Response (ER) Third Quarter Results

ER segment revenue decreased $1.6 million, or 3.7%, to $42.1 million from $43.7 million.  Lower revenue resulted from fewer shipments of complete fire apparatus and custom cab and chassis compared to a year ago.

The ER segment reported an operating loss of $3.8 million, an improvement of $1.8 million, or 31.8%, from $5.6 million last year.  

ER adjusted operating loss for the quarter was $1.4 million, improving $0.9 million, or 40.3%, from $2.3 million last year. 

Segment backlog at September, 2016 totaled $149.8 million compared to $145.1 million at September 30, 2015.

Fourth Quarter and 2016 Outlook

"Our balance sheet remains strong, with cash on hand improving by $19.1 million year-over-year to $40.0 million," said Rick Sohm, Chief Financial Officer of Spartan Motors.  "Our performance to date has enabled us to further improve our liquidity and strengthen our balance sheet.  On October 31, 2016, we repaid our $5 million senior note due December 1, 2016 with cash on hand and we entered into a new, three-year, $100 million revolving credit facility with essentially the same terms as our previous $70 million facility.   

"Looking ahead to the fourth quarter of 2016, which is typically our lowest sales volume quarter, we expect to see continued year-over-year operational improvements resulting in a profitable quarter.  This will represent our fourth quarter in a row, an achievement not accomplished since 2009.  The above factors will allow us to maintain our previously stated 2016 mid-point EPS guidance of $0.225."  

The company expects 2016 results as follows:

  • Revenue in the range of $570 - $590 million, unchanged from previous guidance
  • Operating  income of $8.0 - $10.0 million, including restructuring expenses of $0.5 - $1.0 million, unchanged from previous guidance
  • Income tax expense of essentially zero, a decrease from previous guidance of $1.0 - $1.2 million
  • Earnings per share of $0.20 to $0.25 (midpoint $0.225), assuming approximately 34.5 million shares outstanding, unchanged from previous guidance

Adams added, "While we are about one-third of the way into our multi-year turnaround plan, our results through the nine months ended September 30, 2016, indicate that we continue to make great strides in our transformation.  We intend to continue implementing and executing our multi-year turnaround plan as one Spartan team.  Our focus remains on improving our processes while maintaining financial discipline, in order to drive growth, profitability and increase shareholder value." 

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