Spartan Motors ( SPAR)

Q3 2010 Earnings Call

October 28, 2010 10:00 am ET

Executives

Paula Droste - Director of IR and Treasury

John Sztykiel - President and CEO

Joe Nowicki - CFO

Analysts

Joe Maxa - Dougherty & Company

Ned Borland - Hudson Securities

Mike Ruggirello - Barrington Research

Presentation

Operator

Good morning, and welcome to the Spartan Motors third quarter 2010 earnings conference call. All participants will be in the 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 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 third quarter 2010 conference call. I'm Paula Droste, Director of Investor Relations and Treasury for Spartan Motors with Lambert. And Spartan's executives with me today are John Sztykiel, President and CEO; and Joe Nowicki, Chief Financial Officer.

I assume all of you saw 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, 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. These risk factors are identified in our Form 10-K filed with the SEC.

With that, I would like the call over to our CEO, John Sztykiel.

John Sztykiel

Paula, thank you very much, and good morning to all of those listening on today's call and those on the internet as well. Today, we'll share our results for Q3 providing detail on the quarterly and the financials and will also provide an overview on our market's operations and strategic direction followed by a Q-&-A session.

I'll quickly cover some quick financials and then go over the markets, and then Joe Nowicki will get more into detail on the financials, and then we'll ramp it up from there leave time for questions and answers afterwards.

In the third quarter, we continued to focus our efforts on the four key areas; compelling products, growth and profitable market share, cost management and balance sheet management. Each day we have the responsibility to strategically, i.e. position the organization for the future, and operationally focus the organization on short-term results.

The good news is, we made solid progress on all fronts in the third quarter. Our financial metrics reflect our efforts to re-align costs as we continue to invest in strategic growth initiatives. However, we remain guarded in our near-term outlook given the macro economic uncertainty in some of our markets.

Now, a quick recap of this quarters financial result. Sales in the quarter increased 39.7% from last year's level driven primarily by the addition of Utilimaster in December of 2009 along with increases in Motorhome and defense sales. Excluding Utilimaster, sales in the quarter increased approximately 8% versus the same quarter of 2009.

Net income form continuing operations is up 112% form the same quarter versus a year ago at $3.5 million or $0.11 per share. As I stated in prior calls, and stated a few moments ago, the foundation of our strategic and operating initiatives remain straightforward, fairly simple, but very, very focused.

First, develop compelling products and services; second, growth in profitable market share; third, cost structure management; and fourth, balance sheet management. As you look at compelling products for market initiatives, we have three great brands in Spartan Chassis, Crimson Fire, Utilimaster and now the alliance with Isuzu.

We are committed to leveraging those strengths to compelling products and growth in profitable market share and if time goes on, we will have more good days than that. We are committed to the emergency marketplace, a marketplace of tremendous opportunity.

As illustrated at first by a completely redesigned Cab and Chassis which confirms or develops or provides new product offerings under more common architectures, i.e. increased common bill of material sets. This redesigned effort while challenging but extremely well, but also provided the 2010 emissions complying engines in the marketplace, more streamlined look, and what is nice is leaner from a manufacturing perspective for both Spartan and our respective OEM partners.

In addition, as we look at Spartan Chassis in the emergency-response marketplace, not just this year, but last year as well and even in 2008, significant engineering resources have been committed to the develop and testing, and introduction of 2010 compliant emission engines.

The offerings cover engines ranging from 340 horsepower to 600 horsepower. What's amazing is when people say, why do you have to add so many different engine offerings? There's over 35,000 fire departments in North America and each department is very, very unique as to how they look at their service. Very hilly, very flat, big city; very, very spread out and it is this customization that's focused on being very customer centric that has one of our foundations in the past and will be one of our foundations in the future as well.

In addition, there will be future or increased engine offerings as we look into the future. Not in 2010, but as we go into 2011, offering's that will be driving us to be the number one spec as we look at emergency-response chassis in the future. It is imperative that we continue to support Spartan Chassis which we will and ensure that all that we do ensures that every riding on it is a Spartan Chassis or desired to be a Spartan Chassis.

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