CHARLOTTE, Mich., July 23 -- Spartan Motors, Inc. (Nasdaq:SPAR) reported results for its 2010 second quarter, which included the impact of the previously announced business realignment plan. Spartan posted a net loss for the quarter of $2.6 million, which included the unfavorable impact of these actions. Before one-time restructuring charges, adjusted net earnings from continuing operations was a positive $0.9 million, or $0.03 per diluted share.

Second-quarter highlights (which reflect Road Rescue as a discontinued operation):

• Net sales of $115.7 million
• Gross margin of 14.3 percent of sales (15.1 percent before restructuring charges)
• Operating expenses of 14.2 percent of sales (13.4 percent before restructuring charges)
• Restructuring charges of $1.8 million, or $0.03 per diluted share, net of tax
• Cash balance of $10.1 million (up $5.7 million from Q1 2010)
• Debt of $20.3 million (down $3.1 million from Q1 2010)
• Consolidated backlog of $205.7 million

Exit from Road Rescue Business

Spartan is fielding many inquiries from both strategic and financial buyers interested in acquiring Road Rescue Road Rescue has maintained the quality and reliability of shipments due to the dedication and commitment of the Marion, S.C. workforce All Road Rescue results are now classified as discontinued operations and presented below income from continuing operations, net of tax Spartan redefined reportable segments into Delivery and Service Vehicles, consisting of Utilimaster, and Specialty Vehicles, which consists of the Company's fire truck chassis, motorhome chassis, other vehicles, fire truck bodies and aftermarket parts and assemblies Net loss from Road Rescue for the second quarter was $2.4 million, which includes $1.8 million of impairment and restructuring charges, net of tax

Realigning Cost Structure

• Second quarter results from continuing operations included $1.8 million in restructuring charges related to realigning the business to current level and mix of revenues
• Adjusted gross profit reached $17.5 million, while adjusted gross margin increased to 15.1 percent – an improvement from first-quarter adjusted gross profit of $16.9 million, or 14.3 percent
• Excluding restructuring charges, operating expenses in the quarter were reduced by $0.7 million compared to the same period in 2009. In addition, the second quarter of 2010 included $3.5 million of operating expenses related to Utilimaster that were not present in 2009 results
• Operating cash flow was $22.1 million in the first six months of the year, driven by reduced working capital requirements that primarily consisted of a $16.0 million reduction in inventory levels

Investment in Profitable Growth Opportunities

• R&D investment of $1.2 million in the current quarter related to costs for two major product introductions – the recently announced Next Generation Commercial Van (NGCV) being developed in conjunction with Isuzu and the development of new cab and chassis products related to the 2010 emissions standards
• A prototype of the NGCV, a product of Spartan's alliance with Isuzu, rolled off the line at Utilimaster this past week; production still on track to begin in mid-2011
• Assembly relationship with Isuzu on the N-series chassis is proceeding according to plan, with production expected to begin in mid-2011
• Crimson Fire's new product, the "Transformer," is complete and is being well received in the marketplace having achieved its first sale in Texas

Joe Nowicki, Chief Financial Officer, said: "Despite the loss for the quarter, we are very pleased with the pace of progress in implementing cost management and balance sheet initiatives across the organization. We began last fall realigning our cost structure to current and near-term demand and focusing on areas of our business that generate profitable market share. The actions we are taking are difficult, but improvements in our operating results, excluding the one-time charges, demonstrate that we are gaining ground toward achieving our interim financial goal of mid single-digit operating income. In addition, we are making substantial progress on continuing to strengthen our balance sheet – improvements in receivables and inventories, both dollars and turns, enabled us to further pay down debt and grow our cash balances, providing enhanced financial stability and future opportunity."

Financial Overview

• Consolidated net sales for the quarter were $115.7 million, down 2.6 percent from the same quarter last year due to lower sales of aftermarket parts and assemblies (APA), partially offset by incremental revenues from Utilimaster
• Gross margin in the second quarter of 2010 fell to 14.3 percent of sales (15.1 percent before restructuring charges), from 20.7 percent in the second quarter of 2009, primarily due to the shift in revenue mix to lower-margin products
• Net loss from continuing operations for the quarter was $172,000, or $0.00 per diluted share, compared with net earnings from continuing operations of $5.5 million, or $0.17 per diluted share, in the prior year's second quarter. Excluding restructuring charges, adjusted net earnings from continuing operations for the second quarter of 2010 was $0.9 million, or $0.03 per diluted share
• Consolidated backlog, excluding discontinued operations, at June 30, 2010 increased to $205.7 million from $150.1 million at June 30, 2009, driven by the addition of Utilimaster's backlog of $43.3 million in the current period, which was not included in the consolidated backlog in the year-ago period
• Sequentially, consolidated backlog was relatively flat with increases at Utilimaster and APA (up 23 percent and 311 percent respectively), which were substantially offset by declines in Fire Truck Chassis and Fire Truck Bodies (down 22 percent and 19 percent respectively), illustrating the benefit of Spartan's efforts to diversify its revenue mix and end markets

Sztykiel concluded: "Looking forward, I continue to be optimistic about the future of Spartan Motors. We are making the difficult decisions and implementing the required actions to ensure our continued success in our existing markets. In addition, we continue to invest in the long-term opportunities that will fuel our growth in new and emerging markets. The first major catalyst, a prototype of our next generation commercial van and a product of our alliance with Isuzu, rolled off the line at Utilimaster this past week, and it looks great. The NGCV will definitely be a game-changer in the delivery and service marketplace. As we mentioned last quarter, we expect 2010 to be a year of implementation, and over the remainder of the year, our company-wide focus will be on maintaining solid profitability and top-line growth even in the midst of difficult market conditions. Our plan is simple and focused: compelling products, growth in profitable market share, cost and balance sheet management. The second quarter represents progress on all four fronts, and we expect that to continue as we move throughout the year."

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