Spartan Motors, Inc. (NASDAQ: SPAR) today announced a 31.5 percent increase in fourth quarter net sales, but lower net earnings due to higher material costs and strategic investments at its emergency vehicle subsidiaries.
The Charlotte, Mich.-based manufacturer of custom motorhome chassis, fire truck chassis and emergency-rescue vehicles reported net earnings of $395,000, or $0.03 per diluted share, on net sales of $80.3 million for the fourth quarter of 2004, versus net earnings of $1.3 million, or $0.10 per diluted share, on net sales of $61.1 million for the same quarter of last year.
Spartan said its quarterly sales were driven by market share gains at its Spartan Chassis subsidiary, which makes motorhome and fire truck chassis. However, higher sales in the quarter were offset by increased material costs at Spartan Chassis and continued production inefficiencies at its Emergency Vehicle Team (EVTeam) companies - Crimson Fire and Road Rescue. Spartan said its transition of production at Crimson Fire from its Alabama facility to its South Dakota headquarters, coupled with a move into a new building, as well as increased production costs at Road Rescue due to the need to outsource some manufacturing to meet customer delivery schedules, led to the net earnings decline in the fourth quarter.
For the year ended December 31, 2004, Spartan reported earnings from continuing operations grew 32.5 percent to $5.9 million, or $0.46 per diluted share, on net sales of $312.3 million, versus earnings from continuing operations of $4.4 million, or $0.36 per diluted share, on net sales of $237.4 million in 2003. Including the one-time gain in 2003 from its discontinued Carpenter school bus unit, Spartan posted net earnings of $6.0 million, or $0.49 per diluted share, in 2003.
"Looking at last year, we are pleased with our top-line growth, but clearly disappointed in our earnings performance as our strategic investments, while critical to our future, were more costly than expected," said John Sztykiel, president and CEO of Spartan Motors. "I am, though, pleased with the platform we've created, as shown by our record backlog of $117.6 million. We now have a full-line fire truck company with the addition of Crimson Fire Aerials, and the capacity for growth thanks to our new Crimson Fire facility. We have Road Rescue moving in the right direction from both a leadership and operations perspective, and we see the true potential of Spartan in our most mature business, Spartan Chassis, where our product development efforts led to strong sales growth and market share gains."
Sztykiel added: "While our fourth quarter mirrored our year in terms of production challenges overshadowing our positive sales momentum, we were intent on completing all the transition moves and related one-time costs in the quarter with a look toward 2005 as our breakout year."
Fourth Quarter 2004 Results Spartan reported that consolidated gross margin declined from the prior year period, driven by the continued higher cost of steel as well as production constraints at Crimson Fire and Road Rescue. Gross margin was 11.9 percent in the 2004 fourth quarter, compared to 14.9 percent for the same period in 2003 and 12.2 percent in the third quarter of 2004. Spartan said steel surcharges accounted for a reduction in pre-tax earnings of more than $900,000, or $0.07 pre-tax per share, during the 2004 fourth quarter and $2.8 million, or $0.22 per share, of pre-tax earnings for 2004.