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Spartan Motors Delivers Strong Second Quarter 2018 Results

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Spartan Motors Delivers Strong Second Quarter 2018 Results

EPS up 267% to $0.11, Adjusted EPS up 71% to $0.12

Maintaining 2018 Guidance

PR Newswire

CHARLOTTE, Mich., Aug. 2, 2018 /PRNewswire/ -- Spartan Motors, Inc. (NASDAQ:SPAR) ("Spartan" or the "Company"), a global leader in specialty chassis and vehicle design, manufacturing and assembly, today reported operating results for the second quarter ending June 30, 2018.   

Second Quarter 2018 Highlights

For the second quarter of 2018 compared to the second quarter of 2017:

  • Sales increased $14.3 million, or 8.4%, to $184.0 million, from $169.7 million.
  • Gross profit margin improved 280 basis points to 14.3% of sales, from 11.5% of sales. Commodity cost increases in 2018 resulted in a $1.0 million reduction to gross profit, primarily in Fleet Vehicles and Services, offset by operational and organizational improvements.
  • Net income improved $2.6 million, or 232.7%, to $3.7 million, or $0.11 per share, from $1.1 million, or $0.03 per share.
  • Adjusted EBITDA increased 79.6% to $8.9 million, or 4.8% of sales, from $4.9 million, or 2.9% of sales.
  • Adjusted net income improved $1.9 million, or 82.6%, to $4.3 million, or $0.12 per share, from $2.4 million, or $0.07 per share.
  • Backlog increased $151.3 million to $524.1 million at June 30, 2018, from $372.8 million at June 30, 2017.

Notes: As of January 1, 2018, the Company has adopted the new Revenue Recognition Standard ("ASC 606") using the modified retrospective transition method. The adoption of ASC 606 increased second quarter reported consolidated sales and net income by $5.7 million and $0.5 million, respectively, and reduced reported consolidated backlog by $37.1 million.  For more details regarding ASC 606 and its impact on the Company's financial results, see the Company's quarterly report on Form 10-Q for the quarter ended June 30, 2018.

"Spartan's second quarter results underscore our team's exceptional performance in the face of challenging conditions that are impacting the entire industry," said Daryl Adams, President and Chief Executive Officer. "Our team's continued focus on Spartan's core markets and their unwavering commitment to maximizing operational and organizational efficiencies, despite escalating commodity costs, have been essential in achieving our profitable growth this quarter."

Fleet Vehicles and Services (FVS)
FVS segment sales increased $24.9 million, or 46.5%, to $78.4 million from $53.5 million. The revenue increase was primarily due to higher truck body, Reach® vehicle, and upfit center volumes. The adoption of ASC 606 reduced reported segment sales by $1.8 million

Adjusted EBITDA increased $2.2 million to $8.4 million, or 10.7% of sales, from $6.2 million, or 11.5% of sales, a year ago.  The adjusted EBITDA increase is primarily due to volume and favorable sales mix, partially reduced by start-up costs associated with the new United States Postal Service (USPS) truck body plant in Ephrata, Pennsylvania.  The decrease in adjusted EBITDA as a percentage of sales was primarily due to $1.0 million of higher commodity costs and $0.5 million in USPS start-up costs.  The adoption of ASC 606 reduced reported segment adjusted EBITDA by $0.6 million.

The segment backlog at June 30, 2018, totaled $313.4 million, up 138.7%, compared to $131.3 million at June 30, 2017 due to the previously announced multi-year contract with the USPS. The adoption of ASC 606 reduced reported segment backlog by $8.4 million.

Emergency Response (ER)
ER segment sales decreased $21.2 million to $59.6 million, or 26.2%, from $80.8 million.  Included in the prior year sales is $8.3 million of revenue that resulted from the timing of revenue related to the Smeal acquisition.  Excluding these sales, revenue decreased $12.9 million, or 17.8%, over the prior year, reflecting primarily lower volume and unfavorable sales mix.  The adoption of ASC 606 increased reported segment sales by $7.5 million

Adjusted EBITDA improved $0.9 million to a profit of $0.2 million, or 0.3% of sales, from a loss of $0.7 million a year ago.  The improvement was primarily the result of pricing and operational and organizational improvements, partially reduced by lower volume.  The adoption of ASC 606 increased reported segment adjusted EBITDA by $1.3 million.

The segment backlog at June 30, 2018 totaled $175.6 million, down 18.2%, compared to $214.8 million at June 30, 2017.  The adoption of ASC 606 reduced reported segment backlog by $28.7 million.

Specialty Chassis and Vehicles (SCV)
SCV segment sales increased 32.7% to $47.5 million from $35.8 million a year ago.  Revenues were driven mainly by a $9.0 million increase in luxury motor coach chassis sales, due to increased unit volume driven by market share gains and continued strong industry demand.

Adjusted EBITDA increased $1.6 million to $4.4 million, or 9.2% of sales, from $2.8 million, or 7.7% of sales, a year ago, mainly due to the strong momentum in luxury motor coach chassis.

The segment backlog at June 30, 2018, totaled $35.1 million, up 31.5%, compared to $26.7 million at June 30, 2017.

Second Half 2018 Outlook
"The Company's first-half performance reflects solid topline growth and an acceleration in profitability, despite inflationary commodity costs," said Matt Long, Interim Chief Financial Officer of Spartan Motors.  "Our commitment and ability to achieve profitable growth continues to reflect operational and organizational improvements across all production facilities. 

"Although we expect to see stronger year-over-year revenue growth in the second half of 2018, driven primarily by last-mile delivery vehicle orders, which include USPS truck body, Reach® and walk-in vans, we do foresee continued headwinds from rising commodity costs." 

As such, the Company is maintaining its previous guidance for 2018 as follows:

  • Revenue to be in the range of $790.0 - $815.0 million
  • Net income of $20.2 - $22.4 million
  • Adjusted EBITDA of $39.0 - $42.0 million
  • Effective tax rate of approximately 23%
  • Earnings per share of $0.58 - $0.64, assuming approximately 35.3 million shares outstanding
  • Adjusted earnings per share of $0.60 - $0.66

"We drove growth in the second quarter through our investment in continued operational and organizational efficiencies at our existing facilities, and a sharp focus on our key product offerings, further affirming that our strategy is yielding strong returns," concluded Adams.  "These results inspire additional confidence as we work hard to mitigate the effect of commodity cost increases expected in the back half of 2018.  Fueled by these recent successes, and further building on the momentum of this year, our team will continue to drive meaningful, positive results for the Company 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: 10122065

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

About Spartan Motors
Spartan Motors, Inc. is a leading designer, engineer, manufacturer and marketer of a broad range of specialty vehicles, specialty chassis, vehicle bodies and parts for the fleet and delivery, recreational vehicle (RV), emergency response, defense forces and contract assembly (light/medium duty truck) markets. The Company's brand names — Spartan Motors, Spartan Specialty Vehicles, Spartan Emergency Response, Spartan Parts and Accessories, Smeal and its family of brands, including Ladder Tower™ and UST®; and Utilimaster®, a Spartan Motors Company — are known for quality, durability, performance, customer service and Second-to-market innovation. The Company employs approximately 2,300 associates, and operates facilities in Michigan, Indiana, Pennsylvania, Missouri, Nebraska, South Dakota; Saltillo, Mexico; and Lima, Peru. Spartan reported sales of $707 million in 2017. Visit 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.

 

 

Spartan Motors, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(In thousands, except par value)

(Unaudited)




June 30, 2018


December 31, 2017





ASSETS




Current assets:




Cash and cash equivalents

$           21,664


$         33,523

Accounts receivable, less allowance of $141 and $139

92,556


83,147

Contract assets

46,418


-

Inventories

64,613


77,692

Other current assets

4,441


4,425

Total current assets

229,692


198,787





Property, plant and equipment, net

54,630


55,177

Goodwill

27,417


27,417

Intangible assets, net

9,019


9,427

Other assets

2,614


3,072

Net deferred tax asset

6,312


7,284

TOTAL ASSETS

$         329,684


$       301,164





LIABILITIES AND SHAREHOLDERS' EQUITY








Current liabilities:




Accounts payable

$           78,574


$         40,643

Accrued warranty

16,194


18,268

Accrued compensation and related taxes

10,800


13,264

Deposits from customers

15,067


25,422

Other current liabilities and accrued expenses

8,680


12,071

Current portion of long-term debt

57


64

Total current liabilities

129,372


109,732





Other non-current liabilities

4,782


5,238

Long-term debt, less current portion

17,896


17,925

Total liabilities

152,050


132,895

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; 35,194 and 35,097
outstanding

352


351

Additional paid in capital

79,239


79,721

Retained earnings

98,701


88,855

Total Spartan Motors, Inc. shareholders' equity

178,292


168,927

    Non-controlling interest

(658)


(658)

Total shareholders' equity

177,634


168,269

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$         329,684


$       301,164





 

 

Spartan Motors, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(In thousands, except per share data)

(Unaudited)




Three Months Ended June 30,


Six Months Ended June 30,


2018


2017


2018


2017









Sales

$ 183,981


$ 169,739


$   357,019


$   336,814

Cost of products sold

157,612


150,232


308,492


300,763

Restructuring charges

-


6


-


156

Gross profit

26,369


19,501


48,527


35,895









Operating expenses:








Research and development

1,817


1,524


3,205


3,666

Selling, general and administrative

19,040


16,503


36,911


31,104

Restructuring charges

797


319


817


812

    Total operating expenses

21,654


18,346


40,933


35,582









Operating income

4,715


1,155


7,594


313









Other income (expense):








Interest expense

(270)


(129)


(592)


(393)

Interest and other income

832


190


2,425


280

Total other income (expense)

562


61


1,833


(113)

Income before taxes

5,277


1,216


9,427


200









Taxes

1,537


92


1,490


175









Net Income

3,740


1,124


7,937


25









Less: net loss attributable to non-controlling interest

-


-


-


(1)









Net income attributable to Spartan Motors Inc.

$         3,740


$         1,124


$       7,937


$            26


$           0.11


$           0.03


$        0.23


$        0.00

Basic net earnings per share





$           0.11


$           0.03


$        0.23


$        0.00

Diluted net earnings per share












Basic weighted average common shares outstanding

35,260


35,127


35,177


34,768









Diluted weighted average common shares outstanding

35,260


35,127


35,177


34,768

 

 

Spartan Motors, Inc. and Subsidiaries

Sales and Other Financial Information by Business Segment

(Unaudited)


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




Business Segments







Fleet
Vehicles and
Services


Emergency
Response


Specialty
Chassis and
Vehicles


Other


Consolidated

Fleet vehicle sales

$      53,107


$                 -


$        1,528


$    (1,528)


$       53,107

Emergency response vehicle sales

-


56,935


-


-


56,935

Motorhome chassis sales

-


-


37,184


-


37,184

Other specialty chassis and vehicles

-


-


5,748


-


5,748

Aftermarket parts and assemblies

25,308


2,680


3,019


-


31,007

       Total sales


$     78,415


$      59,615


$      47,479


$    (1,528)


$     183,981












Adjusted EBITDA

$       8,374


$           193


$        4,391


$    (4,073)


$          8,885


 

 

Spartan Motors, Inc. and Subsidiaries

Sales and Other Financial Information by Business Segment

(Unaudited)


Three Months Ended June 30, 2017 (in thousands of dollars)




Business Segments







Fleet
Vehicles and
Services


Emergency
Response


Specialty
Chassis and
Vehicles


Other


Consolidated

Fleet vehicle sales

$      44,186


$                -


$            427


$      (427)


$        44,186

Emergency response vehicle sales

-


78,757


-


-


78,757

Motorhome chassis sales

-


-


28,162


-


28,162

Other specialty chassis and vehicles

-


-


4,193


-


4,193

Aftermarket parts and assemblies

9,344


2,091


3,006


-


14,441

       Total sales


$      53,530


$     80,848


$      35,788


$       (427)


$     169,739












Adjusted EBITDA

$       6,174


$        (652)


$       2,765


$   (3,339)


$          4,948












 

 

Spartan Motors, Inc. and Subsidiaries

Sales and Other Financial Information by Business Segment

(Unaudited)



Period End Backlog (amounts in thousands of dollars) 


June 30,
2018


Mar. 31,
2018


Dec. 31,
2017


Sept. 30,
2017


June 30,
2017

Fleet Vehicles and Services*

$  313,374


$  335,325


$  267,698


$  292,540


$  131,280











Emergency Response Vehicles*

175,603


189,627


233,583


213,334


214,794











    Motorhome Chassis *

33,511


28,463


33,191


31,179


25,823

    Other Vehicles

-


36


-


-


-

    Aftermarket Parts and Assemblies

1,612


1,164


615


694


892

Total Specialty Chassis and Vehicles

35,123


29,663


33,806


31,873


26,715











Total Backlog

$  524,100


$  554,615


$  535,087


$  537,747


$  372,789











* Anticipated time to fill backlog orders at June 30, 2018; 12 months or less for emergency response vehicles; 3
months or less for motorhome chassis; 10 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), adjusted net income, adjusted earnings per share, forecasted adjusted EBITDA, and forecasted adjusted earnings per share, which are all non-GAAP financial measures. These non-GAAP measures are 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 items include expenses associated with restructuring actions taken to improve the efficiency and profitability of certain of our operations, various items related to business acquisition and strategic planning activities, and the impact that our deferred tax asset valuation allowance that we recorded in 2015 has had on our tax expense and net income in 2017.

We present the non-GAAP measures adjusted EBITDA, adjusted net income and adjusted earnings per share because we consider them to be important supplemental measures 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. The presentation of adjusted net income and adjusted earnings per share enables investors to better understand our operations by removing the impact of tax adjustments, including the impact that our deferred tax asset valuation allowance that we recorded in 2015 has had on our tax expense and net income in 2017, and other items that we believe are not indicative of our longer term operating trends. We believe these measures 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 these non-GAAP measures 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 these non-GAAP measures, when considered together with the corresponding GAAP financial measures and the reconciliations to those measures, provides investors with additional understanding of the factors and trends affecting our business than could be obtained in the absence of these disclosures.

Our management uses adjusted EBITDA to evaluate the performance of and allocate resources to our segments. In addition, non-GAAP measures are used by management to review and analyze our operating performance and, along with other data, as internal measures for setting annual budgets and forecasts, assessing financial performance, and comparing our financial performance with our peers. Adjusted EBITDA is also used, along with other financial and non-financial measures, for purposes of determining annual and long-term incentive compensation for our management team.

 

 

Financial Summary (Non-GAAP)

Consolidated

(In thousands, except per share data)

(Unaudited)











Three Months Ended June 30,



Spartan Motors, Inc.


2018



2017



Net income attributable to Spartan Motors, Inc.


$        3,740



$      1,124



Add (subtract): 








Restructuring charges


797



325



Impact of acquisition on timing of chassis revenue recognition


-



853



Impact of acquisition adjustments for net working capital and contingent liability


(693)



-



Acquisition related expenses


373



60



Recall expense


(443)



-



Long-term strategic planning expenses


718



-



Tax effect of adjustments


(178)



-



Adjusted net income attributable to Spartan Motors, Inc.


$        4,314



$      2,362











Net income attributable to Spartan Motors, Inc.


$        3,740



$     1,124



Add (subtract): 








Depreciation and amortization


2,586



2,365



Taxes on income


1,537



92



Interest expense


270



129



EBITDA


$        8,133



$      3,710











Add (subtract): 








Restructuring charges


797



325



Impact of acquisition on timing of chassis revenue recognition


-



853



Impact of acquisition adjustments for net working capital and contingent liability


(693)



-



Acquisition related expenses


373



60



Recall expense


(443)



-



Long-term strategic planning expenses


718



-



Adjusted EBITDA


$        8,885



$      4,948











Diluted net earnings per share


$          0.11



$       0.03



Add (subtract): 








Restructuring charges


0.02



0.01



Impact of acquisition on timing of chassis revenue recognition


-



0.03



Impact of acquisition adjustments for net working capital and contingent liability


(0.02)



-



Acquisition related expenses


0.01



-



Recall expense


(0.01)



-



Long-term strategic planning expenses


0.02



-











Tax effect of adjustments


(0.01)



-



Adjusted diluted net earnings per share


$        0.12



$       0.07



 

 

Financial Summary (Non-GAAP)

(In thousands)

(Unaudited)






Three Months Ended June 30,






2018


2017










Total segment adjusted EBITDA


$          12,958


$           8,287


Add (subtract):







Interest expense



(270)


(129)


Depreciation and amortization expense


(2,586)


(2,365)


Restructuring expense



(797)


(325)


Acquisition expense



(373)


(60)


Recall expense


443


-


Long-term strategic planning expenses


718


-


Impact of acquisition on timing of chassis revenue recognition


-


(853)


Impact of acquisition adjustments for net working capital and contingent liability

693


-


Unallocated corporate expenses



(4,073)


(3,339)


Consolidated income before taxes

$           5,277


$          1,216

 

 

 

Fleet Vehicles and Services Segment (Non-GAAP)

(In thousands, unaudited)



Three Months Ended June 30,



2018

% of
sales


2017

% of
sales

Net income


$      7,667

9.8%


$      4,968

9.3%

Add (subtract): 







Depreciation and amortization


570



887


Taxes on income


-



-


Interest expense


137



12


Earnings before interest, taxes, depreciation and amortization


$      8,374

10.7%


$      5,867

11.0%








Earnings before interest, taxes, depreciation and amortization


$      8,374

10.7%


$      5,867

11.0%

Restructuring


-



307


Adjusted earnings before interest, taxes, depreciation and amortization


$      8,374

10.7%


$      6,174

11.5%


Emergency Response Segment (Non-GAAP)

(In thousands, unaudited)






Three Months Ended June 30,



2018

% of
sales


2017

% of
sales

Net income (loss)


$      1,879

3.2%


$     (2,100)

(2.6%)

Add (subtract): 







Depreciation and amortization


628



584


Taxes on income


-



-


Interest expense


-



-


Earnings before interest, taxes, depreciation and amortization


$      2,507

4.2%


$     (1,516)

(1.9%)








Earnings before interest, taxes, depreciation and amortization


$      2,507

4.2%


$     (1,516)

(1.9%)

Restructuring


322



11


Recall expense


(443)



-


Impact of acquisition on timing of chassis revenue recognition


-



853


Impact of acquisition adjustments for net working capital and contingent liability


(2,193)



-


Adjusted earnings before interest, taxes, depreciation and amortization


$         193

0.3%


$        (652)

(0.8%)


















Specialty Chassis and Vehicles Segment (Non-GAAP)

(In thousands, unaudited)



Three Months Ended June 30,



2018

% of
sales


2017

% of
sales

Net income


$      4,022

8.5%


$      2,502

7.0%

Add (subtract): 







Depreciation and amortization


369



263


Taxes on income


-



-


Interest expense


-



-


Earnings before interest, taxes, depreciation and amortization


$      4,391

9.2%


$      2,765

7.7%








Earnings before interest, taxes, depreciation and amortization


$      4,391

9.2%


$      2,765

7.7%

Restructuring


-



-


Adjusted earnings before interest, taxes, depreciation and amortization


$      4,391

9.2%


$      2,765

7.7%

 

 


Financial Summary (Non-GAAP)



Consolidated


(In thousands, except per share data)


(Unaudited)












Forecast
Year Ending December 31, 2018




Low


Mid


High


Net income attributable to Spartan Motors, Inc.


$      20,242


$     21,303


$      22,363


Add: 








Depreciation and amortization


11297


11,297


11,297


Interest expense


727


755


783


Taxes


5,909


6,320


6,732


EBITDA


38,175


39,675


41,175










Add: 








Restructuring charges


825


825


825


Adjusted EBITDA


$      39,000


$     40,500


$     42,000










Earnings per share


$          0.58


$         0.61


$         0.64


Add: 








Restructuring charges


0.02


0.02


0.02


Less tax effect of adjustments


-


-


-


Adjusted earnings per share


$          0.60


$         0.63


$         0.66

 

 

Cision View original content:http://www.prnewswire.com/news-releases/spartan-motors-delivers-strong-second-quarter-2018-results-300691022.html

SOURCE Spartan Motors, Inc.

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