Spartan, a leading manufacturer of custom vehicle chassis and emergency- rescue vehicles, said net earnings grew to a record $7.2 million, or $0.33 per diluted share, on net sales of $142.9 million in the 2007 first quarter, compared with net earnings of $4.5 million, or $0.23 per diluted share, on net sales of $103.7 million in the first quarter of 2006.
Spartan attributed its strong profitability to improved execution of its strategic plan within its various markets. All financial information includes the adjustment for the Company's 3-for-2 stock split in Dec. 2006.
"We have begun 2007 in an excellent position, encouraged by our best-ever quarterly results on both the top and bottom line and thankful for our success," said John Sztykiel, president and CEO of Spartan Motors. "In addition, we are in the process of adding three manufacturing facilities to our Spartan Chassis operations, expanding our production capacity to allow us to capitalize on our growing backlog and become more effective and efficient in our execution.
"Though the RV industry is currently doing well and our sales and backlog for motorhome chassis increased in the first quarter of 2007 compared to the fourth quarter of 2006, we do have some concerns about the future impact of rising fuel prices on the overall RV market."
Spartan's gross margin improved to 17.3 percent in the first quarter of 2007, compared with 16.2 percent for the same period in 2006 and 16.8 percent in the fourth quarter of 2006, reflecting higher sales and improved product mix, overhead utilization and labor efficiencies. Operating margin also improved to 8.0 percent in the first quarter of 2007, compared with 6.6 percent in the same quarter of 2006.
Spartan Motors' consolidated backlog increased 37.6 percent over the same period of last year to approximately $250.1 million as of March 31, 2007, the largest backlog in company history. Spartan Motors anticipates filling its current backlog orders by the end of 2007.
"We are confident that our innovation, speed to market and current momentum in each business unit will help us grow market share in our existing products and support our new product initiatives during the remainder of 2007," Sztykiel said.
"We are expanding on a company-wide basis, but also have the market trend- winds at our backs. The aging U.S. population, with 11,000 Americans turning 50 each day, remains an opportunity for the RV and ambulance markets. More than 70 percent of U.S. casualties in Iraq are from improvised explosive devices (IEDs) and mine-resistant ambush-protected vehicles are protecting our troops from IEDs on the battlefield. Every 32 seconds there is an 'all- hazards, first-response call' to a U.S. fire department and this level is increasing, expanding the market for our emergency-rescue products."
On a consolidated basis, Spartan posted its best-ever quarterly return on invested capital (ROIC) of 25.7 percent in the first quarter of 2007, a 17.9 percent increase compared to ROIC of 21.8 percent for the same quarter in 2006. (Spartan defines return on invested capital as operating income less taxes, on an annualized basis, divided by total shareholders' equity.) ROIC for 2006 was 15.7 percent compared to ROIC of 10.4 percent in 2005.
The Company ended the quarter with $21.1 million in long-term debt, which includes financing for Spartan Chassis' new and renovated facilities and growth in working capital to support its increased sales. Spartan reported $1.3 million in cash and cash equivalents at the end of the first quarter of 2007.
"I want to thank of all of our team members at Spartan Chassis, Crimson Fire, Crimson Fire Aerials and Road Rescue for their focus on becoming efficient and effective," Sztykiel said.
Spartan Chassis
Sales at Spartan Chassis, the company's largest operating unit, increased 44.5 percent to $128.0 million, or 86.0 percent of Spartan Motors' total sales. Earnings at Spartan Chassis improved 50.0 percent in the current first quarter compared to the same quarter of last year, and the unit's backlog as of March 31, 2007 increased 52.4 percent compared to last year.
Sales of fire truck chassis increased 37.5 percent in the first quarter of 2007 compared to last year. Backlog for fire truck chassis at the end of the first quarter was $84.4 million, a 22.3 percent increase compared with last year. Other product sales, including specialty vehicle chassis and Spartan's subcontracts for military vehicle customers, increased 251.6 percent in the first quarter of 2007, and backlog for specialty vehicles increased 625.6 percent to $53.2 million as of March 31, 2007.
Spartan's RV chassis sales increased 2.9 percent in the first quarter, driven in part by an 8.0 percent increase in industry wholesale shipments for Class A motorhomes in the first two months of 2007, the latest industry data available from the Recreational Vehicle Industry Association (RVIA). Backlog for RV chassis decreased 2.5 percent year-over-year to $37.7 million as of March 31, 2007, though it increased 33.6 percent compared to RV chassis backlog at the end of the fourth quarter of 2006.
"Spartan Chassis as a whole continues to execute, as evidenced by its increasing profitability, while also growing market share, as seen in our record backlog," said Sztykiel. "Industry shipments for motorhomes increased in early 2007. This momentum may offset the possibility of higher fuel prices as we move into early summer. As we continue to pursue market share in RV, we expect to continue to see increased sales as more OEMs adopt a Spartan chassis as their platform."
Sztykiel continued: "Spartan Chassis unveiled a new product system at FDIC 2007 allowing fire truck customers to customize every chassis from two base models of chassis. This platform concept is a first for the industry, and we believe it will eventually become an industry standard, as it provides the customer with exactly what they want at greater operational efficiency.
"We also received several large orders from our military vehicle strategic partners in the last several months, including those for the important Mine Resistant Ambush Protected (MRAP) program, and we remain optimistic about our prospects as a supplier to this new market."
Emergency Vehicle Team (EVTeam)
Spartan's EVTeam operating unit, consisting of its Crimson Fire, Crimson Fire Aerials and Road Rescue subsidiaries, reported a sales increase of 8.6 percent in the 2007 first quarter, as compared to the same quarter of 2006. The EVTeam reported backlog of $74.8 million at the end of the quarter, a 12.1 percent increase compared to the unit's backlog in the first quarter of 2006.
Conference Call, Webcast and Presentation
Spartan Motors will host a conference call for analysts and portfolio managers at 10 a.m. ET today to discuss these results and current business trends.
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