Spartan Reports Operating Loss of $12.5 Million in 2015

Spartan Motors, Inc. (NASDAQ: SPAR) reported revenue of $550.4 million in 2015, up 8.6% versus $506.8 million in 2014, and an operating loss of $12.5 million versus an operating loss of $1.2 million in 2014.

Spartan Motors, Inc. (NASDAQ: SPAR) reported revenue of $550.4 million in 2015, up 8.6% versus $506.8 million in 2014, and an operating loss of $12.5 million versus an operating loss of $1.2 million in 2014.

The operating loss for 2015 included pre-tax charges totaling $17 million, including:

  • Asset impairment charges of $2.2 million
  • Regulatory settlement costs of $2.3 million
  • Restructuring charges of $2.9 million
  • Non-recurring service campaign and warranty accruals of $8.6 million
  • Charge of $1.0 million to wind-down our joint venture with Gimaex ($0.5 million attributable to Spartan.                                                                                                                                                                Spartan had adjusted operating income of $4.5 million versus adjusted operating income of $1.3 million, excluding charges and non-recurring expenses in both years.

   In the fourth quarter of 2015, Spartan had net sales of $140.6 million, an increase of 18.4% from $118.8 million.

There was an operating loss of $10 million versus operating loss of $1.9 million, including non-recurring warranty accruals of $6.3 million; a charge of $1 million for wind-down of joint venture with Gimaex ($0.5 million attributable to Spartan; and restructuring expenses of $400,000.

Daryl Adams, Spartan's Chief Executive Officer, said, "One year ago, we began our multi-year effort to transform Spartan Motors. Results for the fourth quarter and full year demonstrated both the progress and the remaining challenges we face in executing our turnaround plan. Past issues have been addressed, as shown in the non-recurring charges taken for warranty accruals and asset impairments. New product designs and engineering changes should reduce future warranty expense, while gains in operating efficiency should drive greater profitability."

Revenue in the Delivery & Service Vehicles (DSV) segment for the full year increased 8.2% to $227.7 million from $210.5 million with both vehicle and aftermarket revenue increasing from the prior year. Operating income increased nearly 75% to $14.5 million from $8.3 million. Growth in operating income was due to higher revenue from aftermarket parts and up-fit centers in particular, as well as a slight decline in operating expenses compared to 2014.

Emergency Response (ER) revenue for 2015 rose to $187.1 million from $184.5 million on higher unit shipments. The ER segment reported an operating loss of $24.8 million versus an operating loss of $7.1 million in 2014. The higher operating loss in 2015 was due to several factors that included:

  • Increase in one-time warranty and service campaign accruals of $7.2 million
  • Asset impairment charges of $2.2 million
  • NHTSA settlement costs of $0.7 million
  • Restructuring charges of $2.9 million
  • Unfavorable mix and production inefficiencies resulting from relocating operations from Ocala, Fla. to Brandon, S. Dak. and Charlotte, Mich. of approximately $6.9 million

Specialty Chassis & Vehicles (SCV) revenue increased 21.4% to $135.6 million in 2015 from $111.7 million, with all business units reporting revenue growth for the year. Operating income declined to $6.0 million from $7.4 million due to competitive pricing actions on motorhome chassis, NHTSA settlement costs and higher warranty accruals.

Rick Sohm, Chief Financial Officer at Spartan, said, "While 2015 was a difficult year, adjusted fourth quarter results were generally in line with our guidance and we're making solid progress toward our objectives. Due to disciplined working capital management in the fourth quarter, we strengthened the balance sheet and ended the year with more than $32 million in cash. After reviewing our capital spending and working capital projections for 2016, we expect to have cash in excess of our requirements for the year. The Company has authority to repurchase approximately 618,000 shares under our existing share repurchase plan that we will consider exercising as we monitor cash needs throughout the year. "

Said Adams, "Our outlook for 2016 is improving as our turnaround plan continues to yield results. We believe that our continued focus on growing Spartan's customer base, improving our cost structure and building the strength of our leadership team will enhance the value of Spartan for our shareholders. During my first year as Spartan's CEO, actions we have taken have generated positive momentum that we are using to propel our transformation and return the company to profitability in 2016."

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