SPAR Spartan Motors Inc

Sales in All Segments Grow; Consolidated Backlog Increases 38.3 Percent CHARLOTTE, Mich., Feb. 15 /PRNewswire-FirstCall/ -- Spartan Motors, Inc. (NASDAQ:SPAR) today reported its earnings more than tripled for the fourth quarter ended Dec. 31, 2006, boosted by net sales gains of 63.8 percent. Spartan had 2006 fourth quarter net earnings of $3.3 million, or $0.16 per diluted share, compared with net earnings of $986,000, or $0.05 per diluted share, in the fourth quarter of 2005. The 2006 fourth quarter net earnings included a non-cash charge of $2.1 million, or approximately $0.10 per share, related to a write-off of goodwill for Spartan's ambulance subsidiary, Road Rescue. Net sales for the fourth quarter 2006 increased to a record $123.6 million, compared with net sales of $75.5 million for the fourth quarter of 2005. All financial information includes the adjustment for the Company's 3-for-2 stock split in Dec. 2006. During its annual evaluation of subsidiary goodwill in the 2006 fourth quarter, it was concluded the goodwill for its Road Rescue subsidiary no longer had value. The write-off of the subsidiary's goodwill was a one-time charge to net earnings. Spartan, a leading manufacturer of custom vehicle chassis and emergency- rescue vehicles, attributed its best-ever annual results to increased chassis sales to its RV, fire truck and specialty vehicle customers, as well as increased sales at its EVTeam companies. "We had a strong fourth quarter and year in terms of improved execution across all our subsidiaries," said John Sztykiel, president and CEO of Spartan Motors. "In addition, the strength of our brands continues to increase and we are confident in our momentum based on our record-level sales and backlog. "It is important to note our growth in 2006 increased without any new significant product introductions. We are in the process of introducing two new significant products to serve the fire apparatus market at Crimson Fire and Spartan Chassis in 2007, which we anticipate will make positive contributions into 2008. We are becoming a more disciplined group of people focused on becoming more effective and efficient." For the year ended Dec. 31, 2006, Spartan's sales increased 29.8 percent and net earnings increased 102.9 percent compared to the same period last year. Spartan reported record net earnings of $16.8 million, or $0.83 per diluted share, on net sales of $445.4 million for 2006. Net earnings for the year ended 2006 include the non-cash charge related to the write-off of goodwill in the fourth quarter of 2006. Spartan reported its gross margin improved to 16.8 percent in the fourth quarter of 2006, compared with 14.8 percent for the same period in 2005, reflecting higher sales and improved product mix, pricing, overhead utilization and labor efficiencies. Operating margin also improved to 5.0 percent in the fourth quarter of 2006, compared with 1.9 percent in the same quarter of 2005. Spartan Motors' consolidated backlog at the end of 2006 increased 38.3 percent over last year's period to approximately $232.1 million. Spartan Motors anticipates filling the current backlog orders by the end of 2007. On a consolidated basis, Spartan posted a return on invested capital (ROIC) of 12.3 percent in the fourth quarter of 2006, a 200.0 percent increase compared to ROIC of 4.1 percent for the same quarter in 2005. (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 $25.2 million in long-term debt, reflecting its investments in Spartan Chassis facilities and growth in working capital to support increased sales. Spartan reported $13.8 million in cash and cash equivalents at the end of 2006. "We have always set aggressive goals when it comes to return on capital and are pleased that our performance in 2006 -- both in terms of earnings and sales growth as well as return on invested capital -- is being rewarded through share appreciation and increased value for our shareholders," said Jim Knapp, CFO of Spartan Motors. Spartan Chassis Earnings at Spartan Chassis, the company's largest operating subsidiary, improved 143.6 percent in the current fourth quarter compared to the same period of last year. Sales at Spartan Chassis increased 75.7 percent to $113.7 million, or 92.0 percent of total sales, and the subsidiary's backlog as of the end of the quarter increased 67.6 percent compared to last year. Despite the downturn in the RV industry during the year, Spartan RV chassis sales increased 7.9 percent in 2006, compared with a 13.7 percent decline in industry sales for Class A motorhomes during the same period, according to the Recreational Vehicle Industry Association (RVIA). Spartan's RV chassis sales in the 2006 fourth quarter increased 32.4 percent compared to the prior year. Backlog for RV chassis decreased 9.3 percent year-over-year to $28.2 million as of Dec. 31, 2006. Fourth quarter sales of fire truck chassis increased 28.1 percent year- over-year and backlog at the end of the quarter for fire truck chassis was $84.5 million, a 64.9 percent increase compared with last year. Sales of specialty vehicles chassis, including Spartan's subcontracts for Force Protection's Cougar and BAE Systems' ILAV military vehicles, increased 876.6 percent in the fourth quarter of 2006. At the end of the quarter, backlog for specialty vehicles was at $49.7 million, an increase of 240.2 percent compared with last year. "Industry analysts are forecasting an RV industry recovery late in the second quarter of 2007," said Sztykiel. "We seem to be accelerating at a faster pace than the market based on our order intake for motorhome chassis in the first quarter of 2007, which is already higher than the previous quarter and compared to the first quarter of 2006. With our market share gains, we are in a good position to capitalize on this recovery. Spartan Chassis is also addressing the mid- to entry-level market of Class A motorhomes through strategic market presence. "Sales of fire truck chassis remain near record levels and we are in the process of solving a minor production constraint with a new cab assembly and paint facility coming on-line in June 2007. We are optimistic about our specialty vehicle market, now 14.5 percent of consolidated annual sales, and continue to work effectively and efficiently with Force Protection and BAE Systems, our two primary military customers, as they seek new contracts from the U.S. military." Emergency Vehicle Team (EVTeam) Spartan's EVTeam operating group, consisting of its Crimson Fire, Crimson Fire Aerials and Road Rescue subsidiaries, reported an increase in 2006 fourth quarter sales by 4.7 percent compared to the same period last year. The EVTeam reported backlog of $69.7 million at the end of the quarter, which is on par with its backlog in the fourth quarter of 2005. "Crimson Fire, along with Crimson Fire Aerials, continues to pull through Spartan-brand chassis as their sales grow," Sztykiel said. "Since every Crimson Fire Aerial rides on a Spartan chassis, its profitability is determined, in part, by timely deliveries of Spartan chassis. For the EVTeam, 2006 was a year of solid progress and we expect even more progress in 2007." Future Outlook "Our future performance is based on being effective -- doing the right things, and efficient -- doing things right, while building a culture of excellence across all of our operating subsidiaries," said Sztykiel. "This focus, along with capital investments in production capacity at Spartan Chassis, ongoing product development and the diversification of our business model into RV, emergency-rescue and specialty vehicles, bodes well for 2007 and beyond." 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. To listen to a live webcast of the call, please visit http://www.spartanmotors.com/webcasts.asp. About Spartan Motors Spartan Motors, Inc. (http://www.spartanmotors.com/) designs, engineers and manufactures custom chassis and vehicles for the recreational vehicle, fire truck, ambulance, emergency-rescue and specialty vehicle markets. The Company's brand names -- Spartan(TM), Crimson Fire(TM), Crimson Fire Aerials(TM), and Road Rescue(TM) -- are known for quality, value, service and being the first to market with innovative products. The Company employs approximately 1,100 at facilities in Michigan, Pennsylvania, South Carolina, and South Dakota. Spartan reported sales of $445 million in 2006 and is focused on becoming the premier manufacturer of specialty vehicles and chassis in North America. This release contains forward-looking statements, including, without limitation, statements concerning our business, future plans and objectives and the performance of our products. These forward-looking statements involve certain risks and uncertainties that ultimately may not prove to be accurate. Actual results and future events could differ materially from those anticipated in such statements. Technical complications may arise that could prevent the prompt implementation of the plans outlined above. The company cautions that these forward-looking statements are further qualified by other factors including, but not limited to, those set forth in the company's Annual Report on Form 10-K filing and other filings with the United States Securities and Exchange Commission (available at http://www.sec.gov/). Government contracts and subcontracts typically involve long payment and purchase cycles, competitive bidding, qualification requirements, delays or changes in funding, extensive specification development and changes, price negotiations and milestone requirements. An announced award of a governmental contract is not equivalent to a finalized executed contract and does not assure that orders will be issued and filled. Government agencies also often retain some portion of fees payable upon completion of a project and collection of contract fees may be delayed for long periods, which can negatively impact both prime contractors and subcontractors. The company undertakes no obligation to publicly update or revise any statements in this release, whether as a result of new information, future events or otherwise, except as required by law. Spartan Motors, Inc. and Subsidiaries Condensed Consolidated Statements of Operations Three Months Ended December 31, 2006 and 2005 December 31, 2006 December 31, 2005 $- 000 - % $- 000 - % Sales 123,608 75,450 Cost of Products Sold 102,840 64,301 Gross Profit 20,768 16.8 11,149 14.8 Operating Expenses: Research and Development 3,720 3.0 2,579 3.4 Selling, General and Administrative 8,779 7.1 7,164 9.5 Goodwill Impairment 2,086 1.7 Total Operating Expenses 14,585 11.8 9,743 12.9 Operating Income 6,183 5.0 1,406 1.9 Other Income (Expense): Interest Expense (196) (0.2) (34) (0.0) Interest and Other Income 291 0.3 275 0.3 Total Other Income (Expense) 95 0.1 241 0.3 Earnings before Taxes on Income 6,278 5.1 1,647 2.2 Taxes on Income 2,998 2.4 661 0.9 Net Earnings 3,280 2.7 986 1.3 Basic Net Earnings per Share 0.16 0.05 Diluted Net Earnings per Share 0.16 0.05 Basic Weighted Average Common Shares Outstanding 20,621 18,950 Diluted Weighted Average Common Shares Outstanding 20,957 19,284 Spartan Motors, Inc. and Subsidiaries Condensed Consolidated Statements of Operations Twelve Months Ended December 31, 2006 and 2005 December 31, 2006 December 31, 2005 $- 000 - % $- 000 - % Sales 445,378 343,007 Cost of Products Sold 372,002 294,232 Gross Profit 73,376 16.5 48,775 14.2 Operating Expenses: Research and Development 12,622 2.8 9,431 2.7 Selling, General and Administrative 31,360 7.1 26,693 7.8 Goodwill Impairment 2,086 0.5 Total Operating Expenses 46,068 10.4 36,124 10.5 Operating Income 27,308 6.1 12,651 3.7 Other Income (Expense): Interest Expense (347) (0.1) (141) (0.0) Interest and Other Income 1,011 0.3 859 0.2 Total Other Income (Expense) 664 0.2 718 0.2 Earnings before Taxes on Income 27,972 6.3 13,369 3.9 Taxes on Income 11,144 2.5 5,077 1.5 Net Earnings 16,828 3.8 8,292 2.4 Basic Net Earnings per Share 0.85 0.44 Diluted Net Earnings per Share 0.83 0.43 Basic Weighted Average Common Shares Outstanding 19,737 18,836 Diluted Weighted Average Common Shares Outstanding 20,255 19,212 Spartan Motors, Inc. and Subsidiaries Condensed Consolidated Balance Sheets December 31, 2006 December 31, 2005 $- 000 - $- 000 - ASSETS Current assets: Cash and cash equivalents $13,835 $9,702 Marketable securities - 1,988 Accounts receivable, net 62,620 37,017 Inventories 64,173 44,265 Deferred income tax assets 4,567 3,745 Taxes receivable - 990 Other current assets 12,782 1,949 Total current assets 157,977 99,656 Property, plant and equipment, net 29,659 18,478 Goodwill 2,457 4,543 Other assets 555 531 Total assets $190,648 $123,208 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $30,704 $20,746 Accrued warranty 6,381 4,503 Accrued compensation and related taxes 7,712 4,241 Accrued vacation 1,483 1,189 Deposits from customers 7,465 13,640 Taxes on income 1,566 - Other current liabilities and accrued expenses 6,062 4,608 Current portion of long-term debt 521 53 Total current liabilities 61,894 48,980 Long-term debt, less current portion 25,218 1,317 Deferred income tax liabilities 355 309 Shareholders' equity: Preferred stock - - Common stock 141 126 Additional paid in capital 54,409 37,040 Retained earnings 48,631 35,448 Accumulated other comprehensive loss - (12) Total shareholders' equity 103,181 72,602 Total liabilities and shareholders' equity $190,648 $123,208 Spartan Motors, Inc. and Subsidiaries Sales and Other Financial Information by Business Segment Year Ended December 31, 2006 Three Months Ended December 31, 2006 (amounts in thousands) Business Segments Chassis EVTeam Other Consolidated Motorhome Chassis Sales 47,574 47,574 Fire Truck Chassis Sales 28,473 (6,593) 21,880 EVTeam Product Sales 16,490 16,490 Other Product Sales 37,664 37,664 Total Net Sales 113,711 16,490 (6,593) 123,608 Interest Expense (Income) 307 (111) 196 Depreciation Expense 350 337 104 791 Segment Net Earnings (Loss) 7,456 (3,112) (1,064) 3,280 Twelve Months Ended December 31, 2006 (amounts in thousands) Business Segments Chassis EVTeam Other Consolidated Motorhome Chassis Sales 204,165 204,165 Fire Truck Chassis Sales 108,302 (23,631) 84,671 EVTeam Product Sales 77,365 77,365 Other Product Sales 79,177 79,177 Total Net Sales 391,644 77,365 (23,631) 445,378 Interest Expense (Income) 1 942 (596) 347 Depreciation Expense 1,142 1,298 423 2,863 Segment Net Earnings (Loss) 24,681 (5,453) (2,400) 16,828 Period End Backlog (amounts in thousands) December March 31, June 30, September December 31, 2005 2006 2006 30, 2006 31, 2006 Motorhome Chassis * 31,075 38,640 29,141 27,416 28,198 Fire Truck Chassis * 51,201 69,008 112,874 81,889 84,445 Other Product * 14,616 7,329 31,636 56,175 49,729 Total Chassis 96,892 114,977 173,651 165,480 162,372 EVTeam Product * 70,932 66,741 68,176 65,387 69,715 Total Backlog 167,824 181,718 241,827 230,867 232,087 * Anticipated time to fill backlog orders; 2 months or less for motorhome chassis and 4-10 months for fire truck chassis, other product and EVTeam product DATASOURCE: Spartan Motors, Inc. CONTACT: John Sztykiel, CEO, or Jim Knapp, CFO, both of Spartan Motors, Inc., +1-517-543-6400; or Jeff Lambert, or Ryan McGrath, , both of Lambert, Edwards & Associates, Inc., +1-616-233-0500 Web site: http://www.spartanmotors.com/webcasts.asp http://www.spartanmotors.com/

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