Thu Nov 2, 2017
CHARLOTTE, Mich.—Spartan Motors Inc. has reported a 390 percent increase to its net income, along with a 27.3 percent increase in sales in the third quarter. The company reported net income of $13.5 million, or $0.38 per share, compared to $2.7 million, or $0.08 per share, in the third quarter of 2016.
For the third quarter of 2017 compared to the third quarter of 2016:
• Sales increased 27.3 percent to $189.2 million from $148.7 million.
• Gross margin improved 300 basis points, or 24.8 percent, to 15.1 percent of sales compared to 12.1 percent of sales.
• Net income rose $10.7 million, or 390.9 percent, to $13.5 million, or $0.38 per share, and reflects the release of a $6.3 million, or $0.18 per share, tax valuation allowance recorded in 2015, as a result of the company's improved financial condition. This compares to a net income of $2.7 million, or $0.08 per share, in the prior year.
• Adjusted EBITDA increased $5.5 million, or 74.9 percent, to $12.9 million, or 6.8 percent of sales, compared to $7.4 million, or 5 percent of sales.
• Adjusted net income rose 119.7 percent to $7.4 million, or $0.21 per share, which excludes the $6.3 million, or $0.18 per share, tax valuation allowance adjustment. This compares to adjusted net income of $3.4 million, or $0.10 per share, in the prior year.
• Emergency Response segment was profitable on both a GAAP and an adjusted basis – achieving $2.5 million of adjusted EBITDA.
• Backlog was up 97.6 percent to $537.7 million at Sept. 30, and reflects the recently announced $214 million USPS order and the acquisition of Smeal in January 2017. This compares to $272.1 million at Sept. 30, 2016.
"We are very pleased with the strong operating results achieved for the quarter," Spartan Motors President and CEO Daryl Adams says. “Not only does it represent, on an adjusted basis, our seventh profitable quarter in a row, it also highlights a significant milestone as our Emergency Response segment returned to profitability generating $2.5 million of adjusted EBITDA for the quarter – up $3.7 million from last year. Our strong financial performance across all business segments reflects a continued focus on sales growth and operational performance by the entire Spartan team."
Specialty Chassis & Vehicles (SCV) Third Quarter Results
SCV segment revenue increased $18.2 million, or 59 percent, to $49 million from $30.8 million. Sales of motorhome chassis increased 65.7 percent to $37 million from $22.3 million, due primarily to increased shipments as a result of market share gains.
Adjusted EBITDA increased $3.8 million, or 287.1 percent, to $5.1 million, or 10.5 percent of sales, from $1.3 million, or 4.3 percent of sales, a year ago, primarily due to increased sales and improved operational performance.
Segment backlog at Sept. 30 totaled $31.9 million, up 58.4 percent, compared to $20.1 million at Sept. 30, 2016.
Smeal Fire Apparatus Co. ("Smeal"), which was acquired effective Jan. 1, 2017, is expected to generate about $105 million in sales during 2017.
"The tireless efforts of our Spartan integration team are inspiring as we continue to realize more synergies than originally anticipated," Adams says. “The integration is running ahead of schedule and we will complete the process during the current fourth quarter. We expect the entire Emergency Response segment to be profitable on both a GAAP and an adjusted basis in the fourth quarter of 2017, and it remains on track to return to profitability on an adjusted basis for full year 2017."
Fourth Quarter and 2017 Outlook
"Looking ahead to the fourth quarter of 2017, which typically has lower sales volumes than the third quarter, we expect to see continued year-over-year sales growth and improved operational performance resulting in eight profitable quarters in a row, on an adjusted basis," Spartan Motors Chief Financial Officer Rick Sohm says.
Based on the company's improved earnings trend over the past seven quarters, the valuation allowance recorded in 2015 on certain deferred tax assets was reversed and, as a result, its effective tax rate going forward will be more closely aligned with the statutory rate. This will impact the 2017 fourth quarter and, accordingly, the company’s adjusted EPS guidance for the full year.
The company is maintaining its previously stated 2017 revenue and adjusted EBITDA mid-point guidance and modifying the income tax expense and adjusted earnings per share guidance as follows:
• Revenue of $690 - $710 million.
• Adjusted EBITDA of $29.3 - $30.3 million.
• A tax benefit of $3.7 million recorded in the 2017 third quarter and an expected effective tax rate of about 35 percent in the 2017 fourth quarter.
• Adjusted earnings per share of $0.40 to $0.42, which excludes the $6.3 million, or $0.18 per share, tax valuation allowance adjustment recorded in the 2017 third quarter and includes the impact of the expected fourth quarter income tax expense.