Search the web
Welcome, Guest
[Sign Out, My Account]
EDGAR_Online

Quotes & Info
Enter Symbol(s):
e.g. YHOO, ^DJI
Symbol Lookup | Financial Search
SPAR > SEC Filings for SPAR > Form 10-Q on 7-Aug-2013All Recent SEC Filings

Show all filings for SPARTAN MOTORS INC

Form 10-Q for SPARTAN MOTORS INC


7-Aug-2013

Quarterly Report


Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

Spartan Motors, Inc. was organized as a Michigan corporation on September 18, 1975, and is headquartered in Charlotte, Michigan. We began development of our first product that same year and shipped our first fire truck chassis in October 1975.

We are known as a leading niche-market engineer and manufacturer in the heavy-duty, specialty vehicles marketplace. We have five wholly-owned operating subsidiaries: Spartan Motors Chassis, Inc., located at our corporate headquarters in Charlotte, Michigan ("Spartan Chassis"); Crimson Fire, Inc., located in Brandon, South Dakota ("Crimson"); Crimson Fire Aerials, Inc., located in Ephrata, Pennsylvania ("Crimson Aerials"); Utilimaster Corporation, located in Bristol and Wakarusa, Indiana ("Utilimaster"); and Classic Fire, LLC ("Classic Fire"), located in Ocala, Florida. In November, 2012, Crimson entered into a joint venture with Gimaex Holding, Inc. to form Spartan-Gimaex Innovations, LLC. Spartan-Gimaex Innovations, LLC will be reported as a consolidated subsidiary of Spartan Motors, Inc. Our brand names, Spartan Chassis™, Spartan ERV™, and Utilimaster™ are known for quality, value, service and innovation.

Spartan Chassis is a leader in the design, engineering and manufacturing of specialty heavy-duty chassis. The chassis consists of a frame assembly, engine, transmission, electrical system, running gear (wheels, tires, axles, suspension and brakes) and, for emergency response chassis and some specialty chassis applications, a cab. Spartan Chassis customers are original equipment manufacturers ("OEMs") who manufacture the body or apparatus of the vehicle which is mounted on our chassis. Crimson specializes in the engineering and manufacturing of emergency response vehicles built on chassis platforms purchased from either Spartan Chassis or outside sources. Crimson Aerials engineers and manufactures aerial ladder components for fire trucks. Classic Fire specializes in manufacturing emergency response vehicles built on chassis from outside sources and provides strategic sourcing of pump modules. Collectively, Crimson, Crimson Aerials and Classic Fire operate under the Spartan ERV brand. Utilimaster is a leading manufacturer of vehicles made to customer specifications in the delivery and service market, including walk-in and hi-cube vans, truck bodies and the Reach commercial van.

Our business strategy is to further diversify product lines and develop innovative design, engineering and manufacturing expertise in order to be the best value producer of specialty vehicle products. We have an innovative team focused on building lasting relationships with our customers. This is accomplished by striving to deliver premium specialty vehicles, vehicle components, and services that inspire customer loyalty. Our diversification across several sectors creates numerous opportunities while minimizing overall risk. Additionally, our business model provides the agility to quickly respond to market needs, take advantage of strategic opportunities when they arise and correctly size operations to ensure stability and growth.

Executive Overview

We reported sales of $120.9 million in the second quarter of 2013, an increase of 5.7% from the $114.4 million in sales we reported in the second quarter of 2012. Our gross margin in the second quarter of 2013 was $15.6 million or 12.9% of sales, a 16.6% decrease from the $18.7 million and 16.4% of sales we reported in the same period of 2012, mainly due to lower sales of aftermarket parts and assemblies in our Delivery and Service Vehicles segment. We reported net earnings of $0.7 million, or $0.02 per share for the three months ended June 30, 2013, compared to net earnings of $2.4 million, or $0.07 per share for the same period in 2012, which included restructuring charges with an after tax impact of $0.4 million or $0.01 per share.

Our Specialty Vehicles segment posted stronger sales in the second quarter with an increase of $9.9 million, or 42.9% compared to the second quarter of 2012. Our Emergency Response Vehicles segment sales increased by $0.2 million, while our Delivery and Service Vehicles segment sales decreased by $3.6 million or 7.5% compared with the same period in 2012.

Our overall backlog increased by 34.5% to $233.2 million at June 30, 2013 compared to $173.3 million at June 30, 2012, which reflects strong order intake during the first six months of 2013 for our delivery and service vehicles and emergency response vehicles.

Our balance sheet remains strong with a healthy cash balance, low debt and an open line of credit.


We believe we are well positioned to take advantage of long-term opportunities, and continue our efforts to bring product innovations to each of the markets that we serve. Some of our recent innovations and strategic developments include:

? The CMP 300, an emergency response vehicle developed jointly by Spartan, Fout Bros. and Polybilt, which features an integrated Polyprene body and tank, a first for the emergency response industry. This innovative construction enables many operational benefits, including larger compartments, the ability to carry more water on-board and a lower center of gravity to improve vehicle stability.

? The MPA 65', a complete apparatus developed by the Spartan/Gimaex joint venture that combines the latest cutting edge technologies into a versatile 65-foot ladder on a single rear axle. This combination makes the MPA 65' the first complete pumper-aerial-rescue apparatus that fits the needs and budget for fire and rescue departments around the country.

? The recently announced joint venture with Gimaex. This 50/50 JV will leverage the complementary footprints, capabilities, brands, technologies and product portfolios of both companies, and will encompass technology sharing, joint product development, commercial agreements and additional purchasing leverage, enabling both companies to amass a true global presence.

? The introduction of the Spartan Chassis Series 75 Aerial, an easy to maneuver cab and chassis with a mounted 75'aerial ladder and 500 gallon water capacity that offers great overall serviceability and low cost of ownership. The Series 75 will immediately expand the market opportunity for all of Spartan's 44 original equipment manufacturer partners.

? The re-branding of Crimson Fire, Crimson Fire Aerials and Classic Fire under the Spartan ERVTM brand to focus on one brand and leverage the strength of the Spartan name.

? The introduction of the Spartan Telstar, a 138 foot telescopic and articulated aerial platform, which supplies an "up, over and down" range of motion to navigate over parapets for roof rescues, clear power lines and trees for access and provide for below-grade rescues.

? The start-up of production at our Utilimaster subsidiary's new, single-building facility that will enable greater manufacturing flexibility and efficiency, higher product quality and lower operating costs. Operations in this facility have reduced the distance a vehicle travels during assembly from 2.5 miles at the Wakarusa facilities to less than one-half mile, and eliminates a number of non-value added production steps.

The following section provides a narrative discussion about our financial condition and results of operations. The comments should be read in conjunction with our Condensed Consolidated Financial Statements and related Notes thereto included in Item 1 of this Form 10-Q and in conjunction with our Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 14, 2013.


RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, the components of the Company's Condensed Consolidated Statements of Operations as a percentage of sales (percentages may not sum due to rounding):

                                              Three Months Ended June 30,           Six Months Ended June 30,
                                               2013                2012              2013               2012
Sales                                              100.0               100.0            100.0              100.0
Cost of products sold                               87.1                83.1             89.9               84.3
Restructuring charge                                   -                 0.5                -                1.8
Gross profit                                        12.9                16.4             10.1               13.9
Operating expenses:
Research and development                             2.4                 2.8              2.6                3.0
Selling, general and administrative                  9.6                10.1             10.2                9.9
Restructuring charge                                   -                 0.1                -                0.8
Operating income (loss)                              0.9                 3.4             (2.7 )              0.2
Other income (expense), net                            -                   -                -                  -
Income (loss) before taxes                           0.9                 3.4             (2.6 )              0.2
Taxes                                                0.3                 1.3             (1.0 )              0.1
Net earnings (loss)                                  0.6                 2.1             (1.6 )              0.1

Quarter Ended June 30, 2013 Compared to the Quarter Ended June 30, 2012

For the three months ended June 30, 2013, we reported consolidated sales of $120.9 million, an increase of $6.5 million or 5.7% compared to $114.4 million reported for the same quarter in 2012. These results reflect an increase in our Specialty Vehicles segment revenue, which was partially offset by a decrease in our Delivery and Service Vehicles segment sales. Please see the segment analyses below for more information on our sales for the quarters ended June 30, 2013 and 2012.

Cost of products sold was $105.2 million in the second quarter of 2013 compared to $95.7 million in 2012, an increase of $9.5 million or 9.9%. This increase was driven by the higher sales levels in our Specialty Vehicles segment, which accounted for approximately $6.6 million of the increase, and a change in product mix in our Delivery and Service Vehicles segment away from aftermarket parts and assemblies and towards vehicles, which accounted for approximately $4.4 million of the increase. Decreases in material costs in our Emergency Response segment partially offset these increases. As a percentage of sales, cost of products sold increased to 87.1% in the second quarter of 2013, compared to 83.6% in the second quarter of 2012, which was mainly due to a decrease in sales of delivery and service vehicle-related aftermarket parts and assemblies, which carry higher margins.

Gross profit decreased by $3.1 million, or 16.6%, to $15.6 million for the quarter ended June 30, 2013 from $18.7 million for the same period in 2012. Approximately $7.9 million of the decrease was a result of the unfavorable mix in our Delivery and Service Vehicles segment as a result of the lower aftermarket parts and assemblies sales. Partially offsetting this decrease were increases of $3.3 million in our Specialty Vehicles segment due to the higher sales volume and $1.5 million in our Emergency Response Vehicles segment due to more favorable pricing and material costs.

Gross margin decreased to 12.9% from 16.4% over the same time period, primarily due to the impact of the lower delivery and service vehicle related aftermarket parts and assemblies sales experienced in 2013. 50 basis points of the gross margin decrease was offset by the impact of restructuring charges incurred in the second quarter of 2012, which did not recur in 2013.


Operating expenses decreased by $0.3 million or 2.0% to $14.6 million for the quarter ended June 30, 2013, compared to $14.9 million for the same period in 2012, mainly due to a decrease in research and development expense as a result of lower spending on the Spartan Advanced Protection System, which went into production in the third quarter of 2012.

Our effective income tax rate was 37.0% in the second quarter of 2013, compared to 39.0% in the second quarter of 2012. Our effective income tax rate in the second quarter of 2012 was higher than that in the second quarter of 2013 due to the unavailability of the research and development tax credit, which was signed into law in January, 2013 and was used in computing the second quarter 2013 estimated rate.

We recorded net earnings of $0.7 million, or $0.02 per share, for the three months ended June 30, 2013, a decrease of $1.7 million or 70.8%, compared to net earnings of $2.4 million, or $0.07 per share for the same period in 2012. This decrease was primarily due to the lower delivery and service-related aftermarket parts and assemblies sales experienced in 2013, along with the other factors discussed above.

At June 30, 2013, we had $233.2 million in backlog compared to $173.3 million at June 30, 2012, an increase of $59.9 million or 34.5%. This increase is attributable to a $34.8 million increase in our emergency response vehicles backlog due to continued strong order intake, domestically and from outside North America, and a $25.3 million increase in our delivery and service vehicles backlog, driven by orders received for our Reach delivery van. Intercompany orders are eliminated from the backlog dollars presented. We anticipate filling our current backlog orders by February, 2014.

While orders in the backlog are subject to modification, cancellation or rescheduling by customers, this has not been a major factor in the past. Although the backlog of unfilled orders is one of many indicators of market demand, several factors, such as changes in production rates, available capacity, new product introductions and competitive pricing actions, may affect actual sales. Accordingly, a comparison of backlog from period-to-period is not necessarily indicative of eventual actual shipments.

Six Months Ended June 30, 2013 Compared to the Six Months Ended June 30, 2012

For the six months ended June 30, 2013, we recorded sales of $217.0 million, a decrease of $16.2 million or 6.9% from the $233.2 million that we recorded for the same period of 2012. This decrease was driven by a $30.5 million revenue decrease in our Delivery and Service Vehicles segment, largely as a result of lower aftermarket and parts assemblies, which was partially offset by increases in our Specialty Vehicles and Emergency Response Vehicles segments. Please see the segment analyses below for further information on our sales for the six months ended June 30, 2013 and 2012.

Cost of products sold was $195.0 million for the six months ended June 30, 2013, compared to $200.7 million for the same period in 2012, a decrease of $5.7 million or 2.8%. This decrease was driven by the lower sales levels experienced in our Delivery and Service Vehicles segment, which resulted in a decrease of $14.9 million. Partially offsetting this decrease was an increase in our Specialty Vehicles segment of $9.2 million as a result of higher sales volumes of motor home chassis and aftermarket parts and assemblies. As a percentage of sales, cost of products sold increased to 89.9% in the six months ended June 30, 2013, an increase of 380 basis points compared to 86.1% in 2012, which is mainly attributable to impact of the reduced aftermarket parts and assemblies sales in our Delivery and Service Vehicles segment, which more than offset a 180 basis point gain from the lack of restructuring charges in 2013.

Gross profit decreased by $10.5 million, or 32.3%, to $22.0 million for the six months ended June 30, 2013 from $32.5 million for the same period in 2012. $15.6 million of the decrease is attributable to our Delivery and Service Vehicles segment, mainly as a result of the lower aftermarket parts and assemblies sales. This decrease was partially offset by additional gross profit as a result of the higher sales volumes in our Specialty Vehicles segment. Gross margin decreased to 10.1% from 13.9% over the same time period. This 380 basis points decrease was mainly due to the impact of the lower delivery and service vehicle-related aftermarket parts and assemblies sales, which was partially offset by the 180 basis point impact of restructuring charges incurred in 2012 that did not recur in 2013.


Operating expenses decreased by $4.3 million or 13.4% to $27.7 million for the six months ended June 30, 2013, compared to $32.0 million for the same period in 2012. Research and development expense decreased by $1.3 million as a result of lower spending on the Spartan Advanced Protection System, which went into production in the third quarter of 2012, and other engineering projects. Selling, general and administrative expense decreased by $1.0 million due to a reduction in provisions for certain earn-out payments associated with our 2009 acquisition of Utilimaster, along with a $0.1 million decrease in legal and other administrative expense. In addition, we recorded $1.9 million of restructuring charges during the six months ended June 30, 2012, which did not recur in 2013.

Our effective income tax rate was 37.0% in the six months ended June 30, 2013, compared to 39.0% in the same period of 2012. Our effective income tax rate in 2012 was higher than that in 2013 due to the unavailability of the research and development tax credit, which was signed into law in January, 2013 and was used in computing the 2013 estimated rate.

We recorded a net loss of $3.6 million, or $0.11 per share, for the six months ended June 30, 2013, a decrease of $3.9 million compared to net earnings of $0.3 million, or $0.01 per share for the same period in 2012. This decrease was primarily due to the lower delivery and service related aftermarket parts and assemblies sales experienced in 2013.

Our Segments

As a result of a realignment of our operations completed during the course of the third quarter of 2012, we realigned our reportable segments into three segments: Emergency Response Vehicles, Delivery and Service Vehicles, and Specialty Vehicles. Our Emergency Response Vehicles segment consists of the emergency response chassis operations of Spartan Chassis and the Spartan ERV operations. Our Delivery and Service Vehicles segment is comprised of our Utilimaster operations and our Specialty Vehicles segment is comprised of the motorhome, defense and other specialty vehicle operations and the related aftermarket parts and assemblies sales of Spartan Chassis. The reportable segments have been identified based on the financial data utilized by our chief operating decision makers to assess segment performance and allocate resources among our operating units. Segment results from prior periods are shown reflecting the change. For certain financial information related to each segment, see Note 7 - Business Segments, of the Notes to Condensed Consolidated Financial Statements appearing in Item 1 of this Form 10-Q.


Emergency Response Vehicles



Financial Data
(Dollars in thousands)
                                    Three Months Ended June 30,
                                  2013                      2012
                           Amount         %          Amount         %

Sales                     $ 43,781       100.00 %   $ 43,613       100.00 %

Operating income (loss)        438          1.0 %       (979 )       -2.2 %

Segment assets              83,567                    68,539



                            Six Months Ended June 30,
                         2013                      2012
                  Amount         %          Amount         %

Sales            $ 78,731       100.00 %   $ 77,499       100.00 %

Operating loss     (2,123 )       -2.7 %     (3,346 )       -4.3 %

Segment assets     83,567                    68,539

Comparison of the Three Month Periods Ended June 30, 2013 and 2012

Sales in our Emergency Response Vehicles segment increased by $0.2 million, or 0.5% to $43.8 million in the second quarter of 2013 compared to $43.6 million for the same period of 2012. Sales of emergency response chassis increased by $2.6 million, with $1.7 million of the increase due to higher unit volumes in 2013 and an additional increase of $0.9 million due to more favorable pricing in 2013 compared to 2012. Sales of emergency response vehicles (chassis, body and apparatus) decreased by $2.4 million due to a unit volume related decrease of $3.0 million, which was partially offset by a $0.6 million increase due to more favorable pricing.

Operating income for our Emergency Response Vehicles segment increased by $1.4 million to income of $0.4 million in the second quarter of 2013 compared to an operating loss of $1.0 million in the second quarter of 2012, driven by improving margins as a result of pricing and content changes in our chassis and complete vehicles.

Comparison of the Six Month Periods Ended June 30, 2013 and 2012

Sales in our Emergency Response Vehicles segment for the six months ended June 30, 2013 increased by $1.2 million, or 1.5% to $78.7 million compared to $77.5 million for the same period in 2012. Sales of emergency response chassis increased by $0.7 million, with a $1.8 million increase due to more favorable pricing in 2013 compared to 2012, which was partially offset by a decrease of $1.1 million due to lower unit volumes in 2013. Sales of emergency response vehicles (chassis, body and apparatus) increased by $0.5 million, with a $0.8 million increase due to more favorable pricing in 2013 compared to 2012, partially offset by a decrease of $0.3 million due to lower unit volume in 2013.

Operating loss for our Emergency Response Vehicles segment decreased by $1.2 million, or 36.4% to $2.1 million for the six months ended June 30, 2013 compared to an operating loss of $3.3 million for the same period in 2012, driven by improving margins as a result of pricing and content changes in our chassis and complete vehicles.


Delivery and Service Vehicles



Financial Data
(Dollars in thousands)
                                   Three Months Ended June 30,

                                  2013                      2012
                           Amount         %          Amount         %

Sales                     $ 44,155       100.0 %    $ 47,751       100.0 %

Operating income (loss)     (1,640 )      (3.7 )%      6,230        13.0 %

Segment assets              74,722                    75,684



                                     Six Months Ended June 30,

                                  2013                      2012
                           Amount         %          Amount          %

Sales                     $ 76,068       100.0 %    $ 106,599       100.0 %

Operating income (loss)     (5,609 )      (7.4 )%       7,558         7.1 %

Segment assets              74,722                     75,684

Comparison of the Three Month Periods Ended June 30, 2013 and 2012

Sales for the second quarter of 2013 in our Delivery and Service Vehicles segment decreased by $3.6 million or 7.5% to $44.2 million compared to $47.8 million for the second quarter of 2012. This change is attributable to a decrease of $17.2 million in aftermarket parts and assemblies sales, primarily keyless entry systems, compared to the high level of such sales during the second quarter of 2012. Partially offsetting this decrease was an increase in vehicle unit sales volume which resulted in an $11.4 million increase in revenue in 2013 compared to 2012 and an increase of $2.2 million due to change in vehicle mix which resulted in an overall higher content level for vehicles produced in 2013. There were no changes in pricing of products sold by our Delivery and Service Vehicles segment that had a significant impact on our financial statements when comparing the second quarter of 2013 to the same period of 2012.

Operating income in our Delivery and Service Vehicles segment for the second quarter of 2013 decreased by $7.8 million to a loss of $1.6 million, compared to operating income of $6.2 million for the same period of 2012. Driving the decrease was the reduction in sales of aftermarket parts and assemblies, which was partially offset by the $0.6 million of restructuring charges recorded in 2012, which were absent in the second quarter of 2013. See Note 4, Restructuring of the Notes to Condensed Consolidated Financial Statements appearing in Item 1 of this Form 10-Q for more information on our restructuring charges in the second quarter of 2012.

Comparison of the Six Month Periods Ended June 30, 2013 and 2012

Sales for the six months ended June 30, 2013 decreased by $30.5 million or 28.6% to $76.1 million compared to $106.6 for the same period of 2012, mainly due to a decrease in aftermarket parts and assemblies sales, primarily keyless entry systems, compared to the high level of such sales during the first half of 2012. Sales of vehicles during the six months ended June 30, 2013 were comparable to the levels achieved in the same period of 2012.

Operating income decreased by $13.2 million to an operating loss of $5.6 million in 2013 compared to operating income of $7.6 million in 2012. Approximately $14.8 million of this decrease was attributable to the decrease in aftermarket parts and assemblies sales, while $4.5 million of the decrease is attributable to material sourcing issues and labor and overhead inefficiencies related to the launch of production at our Bristol, Indiana facility. These decreases were partially offset by the lack of restructuring charges in 2013 compared to the $5.2 million incurred in 2012, along with a $0.9 million decrease in the expense recorded for the provision for earn-out payments related to our purchase of Utilimaster.


Specialty Vehicles



Financial Data
(Dollars in thousands)
                            Three Months Ended June 30,
                           2013                     2012
                    Amount         %         Amount         %

Sales              $ 32,938       100.0 %   $ 23,055       100.0 %

Operating Income      3,900        11.8 %        560         2.4 %

Segment assets       24,980                   25,222




                             Six Months Ended June 30,
                           2013                      2012
                    Amount          %         Amount         %

Sales              $  62,211       100.0 %   $ 49,133       100.0 %

Operating Income       5,227         8.4 %        490         1.0 %

Segment assets        24,980                   25,222

Comparison of the Three Month Periods Ended June 30, 2013 and 2012

Sales for the second quarter of 2013 in our Specialty Vehicles segment increased by $9.9 million or 42.9% to $32.9 million compared to $23.1 million for the first quarter of 2012, due to a $4.2 million increase in motor home chassis sales as a result of the strong performance in the market of our MG and K3 model chassis, a $3.1 million increase in defense related aftermarket parts and assemblies sales along with an approximately $2.6 million increase in other specialty vehicle sales resulting from the fulfillment in the second quarter of 2013 of orders for defense related vehicles received in 2012. There were no changes in pricing of products sold by our Specialty Vehicles segment that had a . . .

  Add SPAR to Portfolio     Set Alert         Email to a Friend  
Get SEC Filings for Another Symbol: Symbol Lookup
Quotes & Info for SPAR - All Recent SEC Filings
Copyright © 2014 Yahoo! Inc. All rights reserved. Privacy Policy - Terms of Service
SEC Filing data and information provided by EDGAR Online, Inc. (1-800-416-6651). All information provided "as is" for informational purposes only, not intended for trading purposes or advice. Neither Yahoo! nor any of independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. By accessing the Yahoo! site, you agree not to redistribute the information found therein.