Company Announcements

Spartan Motors Reports Strong Third Quarter 2019 Results

CHARLOTTE, Mich., Oct. 31, 2019 /PRNewswire/ -- Spartan Motors, Inc. (NASDAQ: SPAR) ("Spartan" or the "Company"), the North American leader in specialty vehicle manufacturing and assembly for the commercial and retail vehicle industries (including last mile delivery, specialty service and vocation-specific upfit segments), as well as for the emergency response and recreational vehicle markets, today reported operating results for the third quarter ending September 30, 2019.   

Third Quarter 2019 Highlights

For the third quarter of 2019 compared to the third quarter of 2018:

  • Sales increased $62.8 million, or 27.8%, to a record $289.0 million from $226.2 million.
  • Gross profit margin improved 300 basis points to 14.6% of sales from 11.6% of sales.
  • Net income increased $5.1 million, or 97.5%, to $10.4 million, or $0.29 per share, compared to $5.2 million, or $0.15 per share.
  • Adjusted net income increased $6.3 million, or 106.0%, to $12.3 million, or $0.35 per share, from $6.0 million, or $0.17 per share.
  • Adjusted EBITDA increased $8.6 million, or 81.4%, to $19.2 million, or 6.6% of sales, from $10.6 million, or 4.7% of sales.
  • Acquired Royal Truck Body (Royal), which further expands Spartan's geographic coverage with six additional manufacturing facilities located in California, Arizona, and Texas.
  • Consolidated backlog at September 30, 2019, totaled $458.8 million, up $132.9 million, or 41%, compared to $325.9 million at September 30, 2018, which excludes the one-time multi-year USPS truck body order. The increase was primarily driven by strong demand for delivery vehicles in all vehicle classes and the Royal acquisition.

"Spartan's record third-quarter sales led to strong overall results for the quarter, underscoring our growth strategy through both organic and acquisitions. The continued demand for delivery vehicles in all of our vehicle classes is driving our growth," said Daryl Adams, President and Chief Executive Officer.  "Overall, we expanded margins through lower material costs and continue to pursue innovation and optimization within our manufacturing processes.  Additionally, we have added eight manufacturing facilities in the past 10 months as part of our strategy to offer coast-to-coast manufacturing and distribution capabilities."

Fleet Vehicles and Services (FVS)
The FVS business unit continues to be well-positioned for accelerating eCommerce and last mile delivery growth.  Through flexible, regional facilities located across the nation, FVS has expanded capacity and increased efficiency.  The strong third quarter includes the completion of the USPS truck body build as well as the continued strength of delivery vehicles in all vehicle classes.  In addition, FVS was awarded its first Ford chassis pool at its Ephrata, Pennsylvania facility.

FVS segment sales increased $61.2 million, or 51.6%, to a record $179.6 million from $118.4 million. The improvement was primarily due to increased sales of delivery vehicles in all vehicle classes as well as increased pricing. 

Adjusted EBITDA increased $17.4 million to $24.7 million, or 13.7% of sales, from $7.2 million, or 6.1% of sales, a year ago.  The adjusted EBITDA increase is primarily due to volume and lower material costs, partially offset by start-up costs related to the Company's upfit centers and the reconfiguration of all five FVS facilities.  

FVS results for the current and year-ago period, include the USPS truck body order.  Excluding the USPS truck body order, adjusted EBITDA as a percentage of sales was approximately 15.8% compared to 7.6% a year ago.  

The segment backlog at September 30, 2019, totaled $223.8 million, up $107.6 million, or 93.0%, compared to $116.2 million at September 30, 2018, which excludes the one-time multi-year USPS truck body order and reflects the strong demand for delivery vehicles in all vehicle classes.   

Emergency Response (ER)
The ER business unit's operating improvements are not meeting expectations and are taking longer than anticipated.  ER continues to make progress with its realigned dealer network as sales quoting activity, order flow, and backlog continue to grow.  Additionally, the launch of Detroit Truck Manufacturing, the unit's aluminum cab fabrication facility, continues to ramp-up production and will provide material cost and quality benefits for ER, while fulfilling other fabrication needs across the organization.   

ER segment sales increased $4.0 million, or 6.6%, to $64.2 million from $60.3 million.  The increase was due to increased volume and improved pricing. 

Adjusted EBITDA decreased $1.7 million to a loss of $1.1 million, or 1.7% of sales, from a profit of $0.6 million a year ago.  The decline was primarily the result of mix and higher material costs, partially offset by pricing and volume.

The segment backlog at September 30, 2019, totaled $195.1 million, up $19.4 million, or 11.1%, compared to $175.7 million at September 30, 2018. 

Specialty Chassis and Vehicles (SCV)
The SCV business unit remains focused on driving growth and advancing operating performance.  During the quarter, Spartan purchased Royal Truck Body, a leading, California-based designer, manufacturer, and installer of service truck bodies and accessories, with six facilities located in California, Arizona and Texas. Royal operating results for the 21 days ended September 30, 2019, are included in the consolidated financial statements within the Specialty Chassis and Vehicles business unit.

SCV segment sales decreased $6.6 million, or 12.7%, to $45.1 million from $51.7 million a year ago.  The revenue decrease was mainly due to lower luxury motor coach chassis and the completion of the Reach vehicle order.

Adjusted EBITDA decreased $1.8 million to $4.1 million, or 9.0% of sales, from $5.9 million, or 11.4% of sales, a year ago, mainly due to volume, mix, and manufacturing disruption due to an OEM strike. 

The segment backlog at September 30, 2019, totaled $39.9 million, up $5.9 million, or 17.5%, compared to $34.0 million at September 30, 2018.

2019 Outlook – Raising Guidance
"Spartan's financial performance in the first nine months of the year, combined with our successful acquisitions, improving backlogs, enhanced productivity, and low-cost country sourcing initiatives, gives us confidence that we will exceed our previous full-year expectations," said Rick Sohm, Chief Financial Officer of Spartan Motors. "We expect to see continued year-over-year profitability growth into the fourth quarter of 2019, driven primarily by delivery vehicle orders in all vehicle classes and continued margin expansion." 

The Company now expects financial results for 2019 as follows:

  • Revenue midpoint up 2% to a range of $990.0 - $1,000.0 million from $960.0 - $990.0 million
  • Net income midpoint up 11% to a range of $27.3 - $28.8 million from $24.1 - $26.4 million
  • Adjusted EBITDA midpoint up 18% to a range of $51.9 - $53.7 million from $43.3 - $46.2 million
  • Earnings per share midpoint up 10% to a range of $0.77 - $0.81 from $0.68 - $0.75
  • Adjusted earnings per share midpoint up 23% to a range of $0.89 - $0.93 from $0.70 - $0.77

"Our ability to execute and deliver according to our strategy gives us the confidence to raise our 2019 midpoint adjusted EPS guidance by 23 percent," concluded Adams. "We are excited about our results so far this year and the opportunity to close the year out strong. We believe we are laying the foundation to drive long-term profitable growth for Spartan and its shareholders."

Conference Call, Webcast, Investor Presentation and Investor Information
Spartan Motors will host a conference call for analysts and portfolio managers at 10 a.m. EDT today to discuss these results and current business trends.  The conference call and webcast will be available via:
Webcast: www.spartanmotors.com/webcasts
Conference Call: 1-844-868-8845 (domestic) or 412-317-6591 (international); passcode: 10135708

For more information about Spartan, please visit www.spartanmotors.com/investors

About Spartan Motors
Spartan Motors, Inc. is the North American leader in specialty vehicle manufacturing and assembly for the commercial and retail vehicle industries (including last mile delivery, specialty service and vocation-specific upfit segments), as well as for the emergency response and recreational vehicle markets. The Company is organized into three core business segments: Spartan Fleet Vehicles and Services, Spartan Emergency Response and Spartan Specialty Vehicles. Today, its family of brands also includes Spartan Authorized Parts, Spartan Factory Service Centers, Utilimaster, Royal Truck Body, Strobes-R-Us, Smeal, Ladder Tower, and UST. Spartan Motors and its go-to-market brands are well known in their respective industries for quality, durability, aftermarket product support and first-to-market innovation. The Company employs approximately 2,500 associates, and operates facilities in Michigan, Indiana, Pennsylvania, South Carolina, Florida, Missouri, California, Arizona, Texas, Nebraska, South Dakota; Saltillo, Mexico; and Lima, Peru. Spartan reported sales of $816 million in 2018. Learn more about Spartan Motors at www.spartanmotors.com.

 

This release contains several forward-looking statements that are not historical facts, including statements concerning our business, strategic position, financial projections, financial strength, future plans, objectives, and the performance of our products and operations.  These statements can be identified by words such as "believe," "expect," "intend," "potential," "future," "may," "will," "should," and similar expressions regarding future expectations.  These forward-looking statements involve various known and unknown risks, uncertainties, and assumptions that are difficult to predict with regard to timing, extent, and likelihood.  Therefore, actual performance and results may materially differ from what may be expressed or forecasted in such forward-looking statements. Factors that could contribute to these differences include operational and other complications that may arise affecting the implementation of our plans and business objectives; continued pressures caused by economic conditions and the pace and extent of the economic recovery; challenges that may arise in connection with the integration of new businesses or assets we acquire or the disposition of assets; restructuring of our operations, and/or our expansion into new geographic markets; issues unique to government contracting, such as competitive bidding processes, qualification requirements, and delays or changes in funding; disruptions within our dealer network; changes in our relationships with major customers, suppliers, or other business partners, including Isuzu; changes in the demand or supply of products within our markets or raw materials needed to manufacture those products; and changes in laws and regulations affecting our business.  Other factors that could affect outcomes are set forth in our Annual Report on Form 10-K and other filings we make with the Securities and Exchange Commission (SEC), which are available at www.sec.gov or our website.  All forward-looking statements in this release are qualified by this paragraph.  Investors should not place undue reliance on forward-looking statements as a prediction of actual results.  We undertake no obligation to publicly update or revise any forward-looking statements in this release, whether as a result of new information, future events, or otherwise.

CONTACT: 

Juris Pagrabs
Group Treasurer & IR
Spartan Motors, Inc.
(517) 997-3862

 

 

Spartan Motors, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(In thousands, except par value)

(Unaudited)



September 30, 

2019


December 31,
2018


ASSETS





Current assets:





Cash and cash equivalents

$  15,019


$           27,439


Accounts receivable, less allowance of $409 and $133

112,455


106,801


Contract assets

49,043


36,027


Inventories

87,936


69,992


Other receivables – chassis pool agreements

16,975


-


Other current assets

6,247


5,070


Total current assets

287,675


245,329







Property, plant and equipment, net

62,189


56,567


Right of use assets – operating leases

37,110


-


Goodwill

60,333


33,823


Intangible assets, net

55,149


8,611


Net deferred tax asset

7,463


7,141


Other assets

2,693


2,313


TOTAL ASSETS

$  512,612


$        353,784







LIABILITIES AND SHAREHOLDERS' EQUITY










Current liabilities:





Accounts payable

$   83,723


$          76,399


Accrued warranty

18,084


16,090


Accrued compensation and related taxes

17,362


10,520


Deposits from customers

11,369


22,632


Operating lease liability

5,133


-


Other current liabilities and accrued expenses

14,636


12,396


Short-term debt – chassis pool agreements

16,975


-


Current portion of long-term debt

213


60


Total current liabilities

167,495


138,097







Other non-current liabilities

4,376


4,058


Long-term operating lease liability

32,171


-


Long-term debt, less current portion

108,944


25,547


Total liabilities

312,986


167,702


Commitments and contingencies





Shareholders' equity:





Preferred stock, no par value: 2,000 shares authorized (none issued)

-


-


Common stock, $0.01 par value; 80,000 shares authorized; 35,333 and  
35,321 outstanding

353


353


Additional paid in capital

83,565


82,816


Retained earnings

116,380


103,571


Total Spartan Motors, Inc. shareholders' equity

200,298


186,740


  Non-controlling interest

(672)


(658)


Total shareholders' equity

199,626


186,082


TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$  512,612


$       353,784


 

 

Spartan Motors, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(In thousands, except per share data)

(Unaudited)



Three Months Ended
September 30,


Nine Months Ended
September 30,


2019


2018


2019


2018









Sales

$  288,951


$  226,183


$  770,850


$   583,203

Cost of products sold

246,769


199,965


677,216


508,457

Restructuring charges

6


25


60


25

Gross profit

42,176


26,193


93,574


74,721









Operating expenses:








Research and development

1,869


2,117


6,507


5,323

Selling, general and administrative

26,673


17,251


68,198


54,163

Restructuring charges

131


476


259


1,292

    Total operating expenses

28,673


19,844


74,964


60,778









Operating income

13,503


6,349


18,610


13,943









Other income (expense):








Interest expense

(144)


(225)


(831)


(817)

Interest and other income

480


156


1,963


2,581

Total other income (expense)

336


(69)


1,132


1,764









Income before taxes

13,839


6,280


19,742


15,707









Taxes

3,424


1,037


4,499


2,527









Net Income

10,415


5,243


15,243


13,180









Less: net income (loss) attributable to non-controlling interest

61


-


(14)


-









Net income attributable to Spartan Motors Inc.

$       10,354


$         5,243


$    15,257


$     13,180


Basic net earnings per share

$           0.29


$           0.15


$        0.43


$         0.37


Diluted net earnings per share

$           0.29


$           0.15


$        0.43


$         0.37









Basic weighted average common shares outstanding

35,317


35,182


35,311


35,179









Diluted weighted average common shares outstanding

35,463


35,182


35,355


35,179

 

 

Spartan Motors, Inc. and Subsidiaries

Sales and Other Financial Information by Business Segment

(Unaudited)


Three Months Ended September 30, 2019 (in thousands of dollars)



Business Segments





Fleet
Vehicles and
Services


Emergency
Response


Specialty
Chassis and

Vehicles


Other


Consolidated

Fleet vehicle sales

$      179,594


$                 -


$                 -


$               -


$     179,594

Emergency response vehicle sales

-


60,874


-


-


60,874

Motorhome chassis sales

-


-


33,038


-


33,038

Other specialty chassis and vehicles

-


-


9,377


-


9,377

Aftermarket parts and assemblies

-


3,367


2,701


-


6,068

       Total sales

$     179,594


$      64,241


$      45,116


$               -


$     288,951











Adjusted EBITDA

$         24,689


$     (1,063)


$        4,079


$     (8,507)


$       19,198


 

 

Spartan Motors, Inc. and Subsidiaries

Sales and Other Financial Information by Business Segment

(Unaudited)


Three Months Ended September 30, 2018 (in thousands of dollars)















Business Segments





Fleet
Vehicles and
Services


Emergency
Response


Specialty
Chassis and
Vehicles


Other


Consolidated

Fleet vehicle sales

$      91,984


$                -


$       4,188


$    (4,188)


$       91,984

Emergency response vehicle sales

-


57,549


-


-


57,549

Motorhome chassis sales

-


-


38,892


-


38,892

Other specialty chassis and vehicles

-


-


5,453


-


5,453

Aftermarket parts and assemblies

26,449


2,714


3,142


-


32,305

       Total sales

$     118,433


$     60,263


$      51,675


$    (4,188)


$     226,183











Adjusted EBITDA

$        7,243


$          601


$       5,919


$    (3,180)


$        10,583


 

 

Spartan Motors, Inc. and Subsidiaries

Sales and Other Financial Information by Business Segment

(Unaudited)


Period End Backlog (amounts in thousands of dollars) 


Sep. 30,
2019


Jun. 30,
2019


Mar. 31,
2019


Dec. 31,
2018


Sep. 30,
2018

Fleet Vehicles and Services*

$  223,753


$  272,399


$  188,528


$  218,775


$  275,216











Emergency Response Vehicles*

195,139


189,716


214,659


216,526


175,699











    Motorhome Chassis *

26,719


31,852


28,470


36,584


32,137

    Other Vehicles

11,769


-


-


-


-

    Aftermarket Parts and Assemblies

1,459


565


667


1,072


1,861

Total Specialty Chassis and Vehicles

39,947


32,417


29,137


37,656


33,998











Total Backlog

$  458,839


$  494,532


$  432,324


$  472,957


$  484,913











* Anticipated time to fill backlog orders at September 30, 2019; 9 months or less for emergency response vehicles; 3 months or less for motorhome chassis; 6 months or less for fleet vehicles and services; and 1 month or less for other products.

 

Reconciliation of Non-GAAP Financial Measures
This release contains adjusted EBITDA (earnings before interest, taxes, depreciation and amortization), which is a non-GAAP financial measure. This non-GAAP measure is calculated by excluding items that we believe to be infrequent or not indicative of our continuing operating performance. For the periods covered by this release such include expenses associated with restructuring actions taken to improve the efficiency and profitability of our manufacturing operations, various items related to business acquisition and litigation activities, and the impact executive severance and stock based compensation.

We present the non-GAAP measure adjusted EBITDA because we consider it to be an important supplemental measure of our performance. The presentation of adjusted EBITDA enables investors to better understand our operations by removing items that we believe are not representative of our continuing operations and may distort our longer term operating trends. We believe this measure to be useful to improve the comparability of our results from period to period and with our competitors, as well as to show ongoing results from operations distinct from items that are infrequent or not indicative of our continuing operating performance. We believe that presenting this non-GAAP measure is useful to investors because it permits investors to view performance using the same tools that management uses to budget, make operating and strategic decisions, and evaluate our historical performance. We believe that the presentation of this non-GAAP measure, when considered together with the corresponding GAAP financial measures and the reconciliations to that measure, provides investors with additional understanding of the factors and trends affecting our business than could be obtained in the absence of this disclosure.

Our management uses adjusted EBITDA to evaluate the performance of and allocate resources to our segments. Adjusted EBITDA is also used, along with other financial and non-financial measures, for purposes of determining certain incentive compensation for our management team.

 

Financial Summary (Non-GAAP)

Consolidated

(In thousands, except per share data)

(Unaudited)






Three Months Ended
September 30,

Spartan Motors, Inc.


2019


2018

Net income attributable to Spartan Motors, Inc.


$      10,354


$        5,243

Add (subtract): 





Restructuring charges


137


501

Acquisition related expenses, including stock compensation


1,684


267

Recall expense


-


112

Long-term strategic planning expenses


-


277

Litigation settlement


-


321

Executive compensation plan


531


-

Severance costs


234


-

DTA valuation allowance


-


(373)

Tax effect of adjustments


(605)


(360)

Adjusted net income attributable to Spartan Motors, Inc.


$      12,335


$        5,988






Net income attributable to Spartan Motors, Inc.


$      10,354


$        5,243

Add (subtract): 





Depreciation and amortization


2,691


2,600

Taxes on income


3,423


1,037

Interest expense


144


225

EBITDA


$       16,612


$        9,105






Add (subtract): 





Restructuring charges


137


501

Acquisition related expenses, including stock compensation


1,684


267

Recall expense


-


112

Long-term strategic planning expenses


-


277

Litigation settlement


-


321

Executive compensation plan


531


-

Severance costs


234


-

Adjusted EBITDA


$      19,198


$      10,583






Diluted net earnings per share


$          0.29


$          0.15

Add (subtract): 





Restructuring charges


-


0.01

Acquisition related expenses, including stock compensation


0.05


0.01

Long-term strategic planning expenses


-


0.01

Litigation settlement


-


0.01

Executive compensation plan


0.02


-

Severance costs


0.01


-

DTA valuation allowance


-


(0.01)

Tax effect of adjustments


(0.02)


(0.01)

Adjusted diluted net earnings per share


$         0.35


$        0.17


 

 

Financial Summary (Non-GAAP)

(In thousands)

(Unaudited)



Three Months Ended
September 30,



2019


2018







Total segment adjusted EBITDA

$         27,705


$         13,763


Add (subtract):





Interest expense

(144)


(225)


Depreciation and amortization expense

(2,691)


(2,600)


Restructuring expense

(371)


(501)


Acquisition related expenses, including stock compensation

(1,684)


(267)


Litigation settlement

-


(321)


Recall expense

-


(112)


Long-term strategic planning expenses

-


(277)


Executive compensation plan

(531)


-


Unallocated corporate expenses

(8,445)


(3,180)


Consolidated income before taxes

$         13,839


$          6,280

 

 

Financial Summary (Non-GAAP)

Consolidated

(In thousands, except per share data)

(Unaudited)












Forecast

Year Ending December 31, 2019




Low


Mid


High

Net income



$       27,314


$      28,037


$       28,759

Add: 








Depreciation and amortization



9,885


9,885


9,885

Interest expense



2,518


2,518


2,518

Taxes



6,800


7,000


7,200

EBITDA



$       46,517


$       47,440


$       48,362









Add (subtract): 








Restructuring, acquisition and other charges



5,362


5,362


5,362

Adjusted EBITDA



$       51,879


$       52,802


$       53,724









Earnings per share



$           0.77


$           0.79


$           0.81

Add: 








Restructuring, acquisition and other charges



0.15


0.15


0.15

Less tax effect of adjustments



(0.03)


(0.03)


(0.03)

Adjusted earnings per share



$           0.89


$           0.91


$           0.93

 

Cision View original content:http://www.prnewswire.com/news-releases/spartan-motors-reports-strong-third-quarter-2019-results-300948648.html

SOURCE Spartan Motors, Inc.