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:
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.
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.
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SOURCE Spartan Motors, Inc.