Spartan Motors Inc. Reports Operating Results (10-Q)

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Aug 07, 2009
Spartan Motors Inc. (SPAR, Financial) filed Quarterly Report for the period ended 2009-06-30.

Spartan is a leading designer engineer and manufacturer of customheavy-duty chassis. The Company\'s chassis consist of a frame assemblyengine transmission electrical systems running gear (wheels tiresaxles suspension and brakes) and for some applications a cab. TheCompany\'s customers are original equipment manufacturers (``OEMs``) whocomplete their vehicle product by mounting the body or apparatus on aSpartan chassis. Spartan Motors Inc. has a market cap of $214.5 million; its shares were traded at around $6.61 with a P/E ratio of 6.2 and P/S ratio of 0.3. The dividend yield of Spartan Motors Inc. stocks is 1.5%. Spartan Motors Inc. had an annual average earning growth of 18% over the past 10 years. GuruFocus rated Spartan Motors Inc. the business predictability rank of 3-star.

Highlight of Business Operations:

Net earnings decreased $5.0 million ($0.16 per diluted share) from $10.4 million ($0.32 per diluted share) in 2008 to $5.4 million ($0.16 per diluted share) in 2009 as a result of the factors discussed above.

Six Months Ended June 30, 2009, Compared to the Six Months Ended June 30, 2008 For the six months ended June 30, 2009, consolidated sales decreased $220.8 million (47.9%) to $239.8 million, from $460.6 million in the first six months of 2008. This decrease in sales is mainly due to a decrease in sales of $223.5 million (52.5%) at Chassis. The decrease in sales at Chassis was primarily due to the reduction of other product sales of $177.2 million (58.6%) coupled with the decrease in motorhome sales of $62.8 million (91.9%) for the six months ending June 30, 2009 compared to six months ending June 30, 2008. The decline in sales was partially offset by an increase in fire truck chassis sales of $16.5 million (29.8%). The decrease in other product chassis sales was due to the completion of shipments under the MRAP program. See Item 1A Risk Factors of Part II of this Quarterly Report on Form 10-Q and of Part I of the Companys Annual Report on Form 10-K for the year ended December 31, 2008, relating to governmental contracts for more details. The decrease in motorhome chassis sales was due to lower order volume as a result of weakened economic conditions impacting the motorhome market as a whole. Increased sales in the fire truck sales were a result of increased sales volume for the reason discussed above.

Net earnings decreased by $13.8 million ($0.42 per diluted share) to $11.4 million ($0.35 per diluted share) in the first six months of 2009 from $25.2 million ($0.77 per diluted share) in the same period of 2008 as a result of the factors discussed above.

The net impact of changes in accounts receivable, inventory and accounts payable which are the largest drivers of working capital changes represented the largest source of cash at $24.0 million. For the six-month period ended June 30, 2008, accounts receivable generated $30.3 million of cash compared to a use of $1.3 million for the same period in 2009. Record 2007 fourth quarter sales followed by higher sales in the first quarter of 2008 drove the source of cash in 2008. These net to a $31.6 million change in use of cash between the periods noted for accounts receivable. Inventory balances provided $7.9 million in cash for these same periods while accounts payable provided $47.7 million. The increase in cash provided by accounts payable is primarily a result of high accounts payable balances in December of 2007 and moderate increases to inventory balances, both in preparation for the ramp up of production in early 2008. See the Financial Condition section in Item 2 of this Form 10-Q for further discussion regarding the accounts receivable and accounts payable balances at June 30, 2009.

Uses of cash for investing activities for the six-months ended June 30, 2009 consisted of $4.3 million related to purchases of property, plant and equipment (PP&E), net of proceeds from sales of PP&E, while the use of $2.7 million for financing activities was primarily for dividends paid of $2.6 million. See the Condensed Consolidated Statements of Cash Flows contained in Item 1 of this Form 10-Q for further information regarding the increase in cash and cash equivalents from $13.7 million at December 31, 2008 to $16.8 million as of June 30, 2009.

Shareholders equity increased $10.2 million, from $170.6 million as of December 31, 2008 to $180.8 million as of June 30, 2009. The increase was driven by $11.4 million in net income and $1.8 million from compensation related to restricted stock and direct stock grants. These were partially offset by $2.6 million paid in dividends and $0.4 million used to repurchase stock.

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