Spartan Motors, Inc. Q2 2010 Earnings Call Transcript

Spartan Motors, Inc. Q2 2010 Earnings Call Transcript
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Spartan Motors, Inc.


Q2 2010 Earnings Call

July 23, 2010; 10:00 am ET


John Sztykiel - President and Chief Executive Officer

Joe Nowicki - Chief Financial Officer

Jeff Lambert - Investor Relations, Lambert, Edwards & Associates


Ned Borland - Hudson Securities

Walt Liptak - Barrington Research

Joe Maxa - Dougherty & Company



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Good morning, and welcome to the Spartan Motors second quarter 2010 earnings conference call. All participants will be in 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.

I’d now like to introduce Mr. Jeff Lambert on behalf of Spartan Motors. Mr. Lambert, you may now proceed.

Jeff Lambert

Thank you and good morning everyone. Welcome to Spartan Motors second quarter 2010 conference call. I’m Jeff Lambert with Lambert, Edwards and I have with me today a couple of members of Spartan’s management team, including John Sztykiel, President and CEO, and Joe Nowicki, Chief Financial Officer.

I assume all of you saw this morning’s earnings release on news wire and Internet; management would take a few minutes to discuss the results for the quarter. However, before we do it, it’s 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. These risk factors are identified in our Form 10-K filed with the SEC.

A quick word about the format of today’s call, John Sztykiel will begin the call with a brief overview of the quarter to discuss the major initiatives undertaken during the quarter and then Joe Nowicki will then talk about financial and operating results for the period. That would then conclude the outlook for the future, and John and Joe both will be available for questions at the end.

With that, I’ll turn it over to John Sztykiel. John.

John Sztykiel

All right, Jeff. Thank you and good morning to all of you listening on today’s call and on the Internet as well. First, we’ll briefly discuss our progress in Q2 providing detail on the quarterly results, our markets, our operations and then followed by a Q-&-A session shortly thereafter.

In the second quarter, we focused our efforts on three key areas; exiting the Road Rescue business to focus on more profitable markets, ones with greater growth; aligning our cost structure with current and near-term sales volumes; and third, investing in promising and profitable growth opportunities.

While we have a lot of complexity in our financial reports this quarter, when you peel back the results, you will see that we made solid progress in key financial matrix and also continue to invest in our strategic growth initiatives. The foundation of our strategic and operating plans remain simple and straightforward, compelling products and services, growth and profitable market share, cost structure management and balance sheet management.

Now, let me address our core strategic initiatives from a Spartan wide perspective. First the balance sheet, once again we made great progress in the quarter in managing our balance sheet as we focused efforts to reduce our investments in receivables, inventory resulting in improved cash flow, reduction in debt.

At a cost structure perspective, we took a number of other action in the restructuring we announced a few weeks ago, which further reduced our cost structure to better match current levels of revenues and profit. The results are starting to become apparent as we saw sizeable improvements in our operating expenses down $4.2 million or 26%, compared to the same quarter in 2009, when one excludes restructuring charges and operating cost of Utilimaster, which were not present in the prior year.

Our third focus, compelling products and services represents our vision for growth and perhaps is best illustrated by the investment in our new 2010 emission compliance chassis and the new Next Generation Commercial Van or NGCV as we call it that we are developing with Isuzu. Combine, we invested $1.2 million in R&D on those two projects in the second quarter on top of the $1.8 million we invested in the first quarter. So, this year, we’ve invested over $3 million in some very, very major projects and all of us would like to see the growth happen overnight.

Now that’s both in the top line and the bottom line etc…, but that’s not reality. Sometimes no different than a farmer, you have to plant the seeds in order to harvest the fruit a little bit later on. We are excited by these new products and are looking forward to the market entry and the growth in profitable market share we expect to gain with them.

Perhaps most notably with long-range product planning is a new discipline for Spartan. I’ve been here since 1985 and it is a new discipline, and requires a level of strategic market insight, which we have today, but also the patience to see these programs’ yield return.

We are confident we are on the right path and we also encourage shareholders to join us in this long-term view. We’re on schedule with the NGCV. As this week or this past week the first two prototypes were produced. Consumer or fleet line rise will begin to take place in early October.

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