"We have been able to pass some of our material cost increases on to customers and have worked successfully with several of our suppliers during the fourth quarter to reduce the steel price impact," said Chief Financial Officer Jim Knapp. "Based on our model year pricing in the RV chassis business as well as our long lead times in fire trucks and emergency vehicles, we expect to recapture more of the steel price surcharges during the first quarter in emergency vehicles and in the third quarter of 2005 in RVs."
Total operating expenses increased on a dollar basis, but declined as a percentage of sales from 11.9 percent in 2003 to 10.8 percent in the 2004 fourth quarter. SG&A (selling, general and administrative) expense as a percentage of sales declined to 8.1 percent in the period versus 9.2 percent last year.
Spartan Chassis Sales at Spartan Chassis grew by 36.1 percent in the fourth quarter, driven by a 56.0 percent increase in RV chassis sales. Spartan said market share gains, coupled with overall growth in Class A diesel-powered RVs as a percentage of total motorhome sales, helped it far outpace moderate growth in the market segment during the fourth quarter. Spartan posted its best-ever year of RV chassis sales, recording a 52.2 percent increase in 2004 over the prior year.
"We had a banner fourth quarter and full year in RV chassis sales, as our combination of innovation and quality helped us toward our goal of becoming the most desired brand among OEMs and RV consumers," said Sztykiel. "Looking ahead, we expect continued, though less aggressive, growth buoyed by a solid RV market and our ability to win market share with new and existing customers.
Fire truck chassis sales declined modestly in the fourth quarter reflecting a slower bid season in the summer of 2004, the time when Spartan secures orders for fourth quarter production. Despite the decline, Spartan's fire truck chassis business grew 15.5 percent for the year on the strength of new products such as its Gladiator Evolution and Big Easy and growing brand preference among end-user fire departments.
"We saw the slow summer bid season of 2004 result in lower fourth quarter sales, but we are pleased by our better-than-market growth for the year," said Sztykiel. "In 2005, we expect more growth in our fire truck business, particularly in the second half of the year based on current bid activity and our best-ever quarter of orders in the fourth quarter."
Emergency Vehicle Team (EVTeam) Spartan said its EVTeam segment reported a loss for the quarter despite a 20.0 percent increase in net sales, due to continuing operational and transition issues. Crimson Fire reported flat sales compared with the prior year quarter as production transitioned from its Alabama facility into its main South Dakota plant and the start-up of its new facility resulted in fewer trucks produced during the fourth quarter. Crimson Fire Aerials, which was launched in 2003, continued to increase sales in the fourth quarter 2004 and remains on track for growth in 2005 based on current orders and bid activity.
Road Rescue's sales increased over last year's fourth quarter. Margins during the fourth quarter of 2004 were negatively impacted by lower than planned production volume, and a temporary increase in costs driven by the need to meet customer delivery dates. During the fourth quarter, Spartan also named Randy Knors as president of Road Rescue, Inc. Knors was previously vice president of operations at Spartan Chassis, the largest and most profitable subsidiary of Spartan Motors, and is working closely with the operations team at Road Rescue to return this subsidiary to profitability.
"Steel surcharges and the continuing production challenges at Road Rescue were complicated by our facility moves at Crimson Fire and contributed to a dismal fourth quarter for the EVTeam," said Sztykiel. "Crimson Fire's poor performance in the first half of 2004 necessitated changes which increased costs to meet second half deliveries. However, our new production facility went into operation during the fourth quarter as planned, and we are seeing signs of an improvement in the first quarter.