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-Nov-2013All Recent SEC Filings

Show all filings for SPARTAN MOTORS INC | Request a Trial to NEW EDGAR Online Pro

Form 10-Q for SPARTAN MOTORS INC


7-Nov-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. There have been no significant financial transactions involving Spartan-Gimaex Innovations, LLC during the nine months ended September 30, 2013. 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 reducing 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 $126.1 million in the third quarter of 2013, an increase of 11.7% from the $112.9 million in sales we reported in the third quarter of 2012, as a result of unit volume increases in all of our segments. Our gross profit in the third quarter of 2013 was $16.1 million or 12.8% of sales, a 23.8% increase from the $13.0 million and 11.5% of sales we reported in the same period of 2012. The increase in gross profit was primarily due to the higher sales volumes recorded in the third quarter of 2013 compared to the same period in 2012, along with the absence of restructuring charges in 2013 compared to the $1.5 million recorded in 2012. Net earnings increased by $0.9 million, to $0.6 million, or $0.02 per share for the three months ended September 30, 2013, compared to a net loss of $0.3 million, or $0.01 per share for the same period in 2012, which included restructuring charges with an after tax impact of $1.0 million or $0.03 per share.

Our Specialty Vehicles segment posted stronger sales in the third quarter of 2013 with an increase of $4.3 million, or 18.0% compared to the third quarter of 2012. Our Delivery and Service Vehicles segment sales increased by $5.9 million, or 12.0%, while our Emergency Response Vehicles segment sales increased by $3.0 million, or 7.5% in the third quarter of 2013 compared with the same period in 2012.

Our overall backlog increased by 37.8% to $231.9 million at September 30, 2013 compared to $168.3 million at September 30, 2012, which reflects strong order intake during the first nine months of 2013 across all of our segments.


As of September 30, 2013 we had $20.0 million in cash. We did not borrow against our revolving credit facility during the nine months ended September 30, 2013.

We expect the fourth quarter of 2013 operating income to be comparable to that reported for the third quarter. A slowdown in orders for certain commercial delivery and service vehicles that began in the third quarter of 2013 is expected to negatively impact sales and net income results for the fourth quarter. We expect to record a modest net loss for full year 2013, mainly due to the Bristol move and start-up costs incurred in the first quarter.

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.

? Our 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 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 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 recently unveiled refrigerator and freezer configurations for Utilimaster's truck bodies. Utilimaster can up fit nearly any van or truck by installing an insulated liner that is completely seamless and tough enough to support forklift traffic, while integrating customized shelving and cargo containment.

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          Nine Months Ended
                                           September 30,              September 30,
                                         2013          2012          2013         2012
Sales                                      100.0        100.0          100.0       100.0
Cost of products sold                       87.2         87.1           88.9        85.2
Restructuring charge                           -          1.4              -         1.7
Gross profit                                12.8         11.5           11.1        13.1
Operating expenses:
Research and development                     2.2          2.6            2.5         2.9
Selling, general and administrative          9.2          9.1            9.8         9.6
Restructuring charge                           -          0.1              -         0.6
Operating income (loss)                      1.4         (0.3 )         (1.2 )       0.0
Other income (expense), net                  0.1          0.1            0.1         0.1
Income (loss) before taxes                   1.5         (0.2 )         (1.1 )       0.1
Taxes                                        1.1          0.1           (0.2 )       0.1
Net earnings (loss)                          0.4         (0.3 )         (0.9 )       0.0

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

Sales

For the three months ended September 30, 2013, we reported consolidated sales of $126.1 million, an increase of $13.2 million or 11.7% compared to $112.9 million reported for the same quarter in 2012. These results reflect sales increases in all of our segments. Please see the segment analyses below for more information on our sales for the quarters ended September 30, 2013 and 2012.

Cost of Products Sold

Cost of products sold was $109.9 million in the third quarter of 2013 compared to $99.9 million in 2012, an increase of $10.0 million or 10.0%. This increase was driven by the higher overall sales levels experienced in 2013, partially offset by the $1.5 million of restructuring charges incurred in the third quarter of 2012 that did not recur in 2013. As a percentage of sales, cost of products sold decreased to 87.2% in the third quarter of 2013, compared to 88.5% in the third quarter of 2012, which was mainly due to the absence of restructuring charges in 2013, compared to the $1.5 million, or 1.4% of sales, incurred in the third quarter of 2012.

Gross Profit

Gross profit increased by $3.1 million, or 23.8%, to $16.1 million for the quarter ended September 30, 2013 from $13.0 million for the same period in 2012. Approximately $1.6 million of this increase is due to the overall increase in unit sales volumes in the third quarter of 2013 compared to the same time period in 2012. The remaining increase was due to the absence of restructuring charges in 2013, compared to the $1.5 million incurred in the same period of 2012.

Gross margin increased to 12.8% in 2013 from 11.5% in 2012, primarily due to the absence of restructuring charges in 2013.

Operating Expenses

Operating expenses increased by $1.1 million or 8.3% to $14.3 million for the quarter ended September 30, 2013, compared to $13.2 million for the same period in 2012. Selling, general and administrative expenses increased by $1.4 million, mainly due to higher selling expense, driven by the higher sales volumes experienced in 2013. Partially offsetting this increase were decreases of $0.2 million in R&D expense, primarily due to lower engineering spending on the Reach delivery vehicle, and $0.1 million due to the absence of restructuring charges in 2013.


Taxes

Our effective income tax rate was 70.5% in the third quarter of 2013, compared to (83.7)% in the third quarter of 2012. Our effective income tax rate in the third quarter of 2013 was impacted by an adjustment recorded in the quarter to increase our tax provision as a result of a change in our expectations for our full year financial performance. We recorded income tax expense of $1.3 million during the three months ended September 30, 2013, which included Q3 2013 income tax expense of $0.4 million, or 20.0% of the quarter's pre-tax income, and a year-to-date adjustment of $0.9 million to decrease the tax benefit recorded for the first half of 2013 to the Company's current estimated effective tax rate of 20.0%.

Our effective tax rate in the third quarter of 2012 was unfavorably impacted by a $0.2 million increase in our reserve for uncertain tax liabilities as a result of a state court ruling that occurred in the third quarter of 2012, in accordance with Accounting Standards Codification Topic 740, "Income Taxes". This adjustment was not normal or recurring in nature, and as such was a discrete event for tax purposes, with the entire impact of the uncertain tax position taken into account in the third quarter of 2012.

Order Backlog

At September 30, 2013, we had $231.9 million in backlog compared to $168.3 million at September 30, 2012, an increase of $63.6 million or 37.8%. This increase is mainly attributable to a $33.8 million increase in our emergency response vehicles backlog due to continued strong order intake, domestically and from outside North America, and a $22.5 million increase in our delivery and service vehicles backlog, driven by orders received for our Reach delivery van. Also contributing was a $7.3 million increase in our specialty vehicles backlog due to strong order intake for our motor home chassis in 2013. Intercompany orders are eliminated from the backlog dollars presented. We anticipate filling our current backlog orders by August, 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.

Nine Months Ended September 30, 2013 Compared to the Nine Months Ended September 30, 2012

Sales

For the nine months ended September 30, 2013, we recorded sales of $343.1 million, a decrease of $3.0 million or 0.9% from the $346.1 million that we recorded for the same period of 2012. This decrease was driven by a $24.6 million revenue decrease in our Delivery and Service Vehicles segment, largely as a result of lower aftermarket parts and 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 nine months ended September 30, 2013 and 2012.

Cost of Products Sold

Cost of products sold was $305.0 million for the nine months ended September 30, 2013, compared to $300.6 million for the same period in 2012, an increase of $4.4 million or 1.5%. This increase was driven by the increased sales levels in our Specialty Vehicles and Emergency Response Vehicles segments in 2013, which contributed approximately $12.1 million and $2.1 million, respectively, to the increase. These increases were partially offset by the absence of restructuring charges in the nine months ended September 30, 2013 compared to the $5.8 million recorded in the same period of 2012, along with a decrease in our Delivery and Service Vehicles segment of $4.0 million, which was driven by change in sales mix as a result of lower aftermarket parts and assemblies sales and higher sales of vehicles in 2013. As a percentage of sales, cost of products sold increased to 88.9% in the nine months ended September 30, 2013, an increase of 200 basis points compared to 86.9% in the same period of 2012. This increase is mainly attributable to the impact of the reduced aftermarket parts and assemblies sales in our Delivery and Service Vehicles segment, which more than offset a 170 basis point decrease from the lack of restructuring charges in 2013.


Gross Profit

Gross profit decreased by $7.4 million, or 16.3%, to $38.1 million for the nine months ended September 30, 2013 from $45.5 million for the same period in 2012. Approximately $20.6 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 an increase of $2.1 million in our Emergency Response Vehicles segment due to higher unit volume and favorable pricing in 2013, a $5.3 million increase in our Specialty Vehicles segment driven by higher unit volume, and a $5.8 million restructuring charge incurred in 2012, which did not recur in 2013. Gross margin decreased to 11.1% from 13.1% over the same time period. This 200 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 170 basis point impact of restructuring charges incurred in 2012 that did not recur in 2013.

Operating Expenses

Operating expenses decreased by $3.2 million or 7.1% to $42.1 million for the nine months ended September 30, 2013, compared to $45.3 million for the same period in 2012. Research and development expense decreased by $1.5 million, mainly as a result of lower spending on the Spartan Advanced Protection System, which went into production in the third quarter of 2012. Selling, general and administrative expense increased by $0.2 million, driven by increased selling expense associated with the higher unit sales volumes in our Emergency Response Vehicles and Specialty Vehicles segments. In addition, we recorded $2.0 million of restructuring charges during the nine months ended September 30, 2012, which did not recur in 2013.

Taxes

Our effective income tax rate was 20.0% for the nine months ended September 30, 2013, compared to 97.6% for the same period of 2012. Our effective rate for the nine months ended September 30, 2013 differs from the statutory rate mainly due to the impact of provisions for state income tax expense that partially offset a tax benefit expected for the year due to a projected loss for 2013.

Our effective income tax rate for the nine months ended September 30, 2012 was unfavorably impacted by a $0.2 million increase in our reserve for uncertain tax liabilities as a result of a state court ruling that occurred in the third quarter of 2012.

Net Earnings

We recorded a net loss of $3.0 million, or $0.09 per share, for the nine months ended September 30, 2013, a decrease of $3.0 million compared to net earnings at break even for the same period in 2012. This decrease was primarily due to the lower delivery and service vehicles related aftermarket parts and assemblies sales experienced in 2013, which was partially offset by the absence of restructuring charges with an after-tax impact of $4.7 million recorded in the nine months ended September 30, 2012, which did not recur in 2013.

Our Segments

We manage our operations through three operating segments based on product:
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. 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 September 30,
                             2013                      2012
                      Amount         %          Amount         %
  Sales              $ 42,902       100.00 %   $ 39,890       100.00 %

  Operating income        726          1.7 %         89          0.2 %

  Segment assets       79,840                    71,798

                            Nine Months Ended September 30,
                            2013                       2012
                    Amount          %          Amount          %
  Sales            $ 121,633       100.00 %   $ 117,389       100.00 %

  Operating loss      (1,398 )       -1.1 %      (3,256 )       -2.8 %

  Segment assets      79,840                     71,798

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

Sales

Sales in our Emergency Response Vehicles segment increased by $3.0 million, or 7.5% to $42.9 million in the third quarter of 2013 compared to $39.9 million for the same period of 2012. Sales of emergency response chassis decreased by $1.1 million, with $3.0 million of the decrease due to lower unit volume, partially offset by a $1.9 million increase due to more favorable mix and pricing. Sales of emergency response vehicles (chassis, body and apparatus) increased by $4.1 million, mainly due to a more favorable product mix, with $0.3 million of the increase due to more favorable pricing.

Operating Income

Operating income for our Emergency Response Vehicles segment increased by $0.6 million to $0.7 million in the third quarter of 2013 compared to $0.1 million in the third quarter of 2012, driven by improving margins as a result of pricing and content changes in our chassis and complete vehicles.

Comparison of the Nine Month Periods Ended September 30, 2013 and 2012

Sales

Sales in our Emergency Response Vehicles segment for the nine months ended September 30, 2013 increased by $4.2 million, or 3.6% to $121.6 million compared to $117.4 million for the same period in 2012. Sales of emergency response vehicles (chassis, body and apparatus) increased by $4.7 million, while sales of emergency response chassis decreased by $0.4 million in 2013 compared to 2012. $2.7 million of the increase in emergency response vehicles sales was due to higher unit volumes, $1.1 million of the increase was due to more favorable product mix in 2013 and $0.9 million of the increase was due to more favorable pricing in 2013 compared to 2012. The decrease in emergency response chassis sales was due to a $4.7 million decrease as a result of lower unit volumes in the nine months ended September 30, 2013, which was partially offset by a $4.3 million increase due to more favorable pricing and mix in 2013 compared to 2012.

Operating Income

Operating loss for our Emergency Response Vehicles segment decreased by $1.9 million, or 57.6% to $1.4 million for the nine months ended September 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 September 30,
                             2013                     2012
                      Amount         %         Amount         %
  Sales              $ 54,929       100.0 %   $ 49,025       100.0 %

  Operating income      1,276         2.3 %        600         1.2 %

  Segment assets       81,728                   85,118

                                    Nine Months Ended September 30,
                                    2013                       2012
                             Amount          %          Amount          %
  Sales                     $ 130,997       100.0 %    $ 155,624       100.0 %

  Operating income (loss)      (4,334 )      (3.3 )%       8,157         5.2 %

  Segment assets               81,728                     85,118

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

Sales

Sales for the third quarter of 2013 in our Delivery and Service Vehicles segment increased by $5.9 million or 12.0% to $54.9 million compared to $49.0 million for the third quarter of 2012. This change is attributable to an increase of $8.9 million in vehicle sales driven by higher unit volume sales in walk-in vans in the third quarter of 2013 compared to the third quarter of 2012. Partially offsetting this increase was a decrease of $3.0 million in aftermarket parts and assemblies sales in the third quarter of 2013 compared to 2012. 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 third quarter of 2013 to the same period of 2012.

Operating Income

Operating income in our Delivery and Service Vehicles segment for the third quarter of 2013 increased by $0.7 million, or 116.7%, to $1.3 million, compared to $0.6 million for the same period of 2012. $0.6 million of this increase was due to the higher sales volumes experienced in the third quarter of 2013, along with the absence of the $1.5 million of restructuring charges incurred in the third quarter of 2012, which did not recur in 2013. Partially offsetting these increases was a decrease of $1.5 million as a result of a less favorable mix of products sold in the third quarter of 2013 compared to the same period in 2012.

Comparison of the Nine Month Periods Ended September 30, 2013 and 2012

Sales

Sales for the nine months ended September 30, 2013 decreased by $24.6 million or 15.8% to $131.0 million compared to $155.6 for the same period of 2012. A decrease in aftermarket parts and assemblies sales, primarily keyless entry systems, of $35.0 million in the nine months ended September 30, 2013 was partially offset by a $10.4 million increase in vehicle sales.

. . .

  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
Sign Up for a Free Trial to the NEW EDGAR Online Pro
Detailed SEC, Financial, Ownership and Offering Data on over 12,000 U.S. Public Companies.
Actionable and easy-to-use with searching, alerting, downloading and more.
Request a Trial      Sign Up Now


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.