Spartan Motors Inc. (



Q1 2011 Earnings Call Transcript

April 26, 2011 10:00 a.m. ET


Paula Droste - Director, IR and Treasury

John Sztykiel - President and CEO

Joe Nowicki - CFO


David Fondrie - Heartland Funds

Ned Borland - Hudson Securities



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Good morning, and welcome to Spartan Motors first quarter 2011 conference call. All participants will be in a listen-only mode until the question-and-answer session of the conference call. This call is being recorded at the request of Spartan Motors. If anyone has any objections, you may now disconnect at this time.

At this time, I would now like to introduce Ms. Paula Droste, Director of Investor Relations and Treasury for Spartan Motors. Ms. Droste, you may proceed.

Paula Droste

Good morning, everyone, and welcome to Spartan Motors first quarter 2011 earnings call. I'm Paula Droste, Director of Investor Relations and Treasury for Spartan Motors. And I’m joined in the call today by John Sztykiel, President and CEO, and Joe Nowicki, our Chief Financial Officer.

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I assume all of you saw the company's earnings release on the news wire and Internet this morning. John and Joe would take a few minutes to discuss the results for the quarter. However, before we do, it is my responsibility to inform you that certain predictions and projections made on today's conference call regarding Spartan Motors and its operations may be considered forward-looking statements under the Securities Laws.

As a result, I must caution you that as with any prediction or projection, there are a number of factors that could cause Spartan's results to differ materially. All known risks or management beliefs could materially affect the results identified in our Form 10-K and 10-Q filed with the SEC. However, there may be other risks we face.

With that, I’d like to turn the call over to our CEO, John Sztykiel.

John Sztykiel

Thank you Paula. Good morning to all of you listening on today’s call and those on the internet. Today, I will review the financial results, followed by our strategic plan in growth agenda, as these lay the ground work for all that we do.

Next I will give you an overview of each of our market, then Joe Nowicki, our CFO will provide details of the quarterly financial results. In summary, we will wrap it up with the Q&A session.

First an overview of the first quarter financial results. First quarter sales were down 19% compared to the same quarter in 2010, a reflection of our depressed Q4 backlog. Revenues were largely down in the ER market as expected, given the continued tightening of the state municipal budgets in the pull-ahead orders received in the prior year, as a result of the EPA’s 2010 emission standards.

Consolidated gross margin dropped due to the shift in product mix, away from more profitable APA business. However, margins also dropped within our existing emergency response lines, as we are selling less complex and lower content products.

Operating expense improved by nearly 2 million compared to the prior year, truly reflecting the achievements we made in realigning our cost structure. As a percent of sales, operating expense increased to 15% from nearly 14% in the same quarter of 2010, driven by the revenue [inaudible].

In the quarter, we had a $900,000 loss or approximately $0.03 per diluted share, compared to breakeven results in the prior year. On a very positive note, order intake was up 43% year-over-year and also up sequentially from Q4 of 2010.

Despite the significant achievement in our strategic plan, we generated a loss in the first quarter of 2011, driven in part by the softening of three of our four markets, due to the tough economic climate, plus also the timing of investments in new product launched and one-time cost associated with trade shows, partnership meetings and items relative to marketing in the first quarter.

To be frank, although we expected a tough first half in 2011, a loss is a loss and it’s tough to handle. This does not happen very often for us a [month].

This next quarter will also prove to be challenging, but we do see improvements in the second half again, with continued recovery in our service and delivery market, launch of new products that we’ll talk about shortly that fit nicely in the lower price niches in the market place; the rebalancing of our operational expense base and continued pursuit of profitable growth initiatives.

Again, Joe will cover the financials in more detail, but next I’ll review our strategic plan and then I will go in to detail in to each of the markets.

From a strategic plan perspective and a growth agenda perspective; we are guided by our 10 strategic directives. Operationally, we have a four part plan and it is very, very simple and this simple plan has helped Spartan to weather the tough economic climate over the past two years and also enhance our strategic position, as we look to the future.

First, growth and profitable market share, as Spartan blended three-point plan; second, compelling products and services; third, cost structure that is in alignment with our top line while supporting our strategic plan. Four; managing our balance sheet with a strong focus on working capital in our liquidity.

Now I will get in to a little bit of detail of each one. Growth and profitable market share. SMIs blended three-point strategic plan is disciplined and has been in place for over the past two years. The tenants per growth are as follows: alliances, acquisition in organic development. This growth strategy is integral to our plan for long-term profitability, top line growth and shareholder value maximization.

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