October 25, 2007 / 9:47 PM / in 11 years

UPDATE 2-Spartan Motors Q3 misses Wall Street view; shares fall

(Recasts, adds analysts’ comments, details)

BANGALORE, Oct 25 (Reuters) - Automotive chassis maker Spartan Motors Inc (SPAR.O) posted lower quarterly results that missed analysts’ estimates, as it spent more to ramp up capacity to meet increased orders for armored military trucks, sending its shares down about 17 percent.

The company has been expanding capacity to handle an anticipated increase in orders from the U.S. military’s Mine Resistant Ambush Protected (MRAP) vehicle program, aimed at protecting troops in Iraq from roadside bombs.

Spartan is a sub-contractor to original equipment manufacturers including General Dynamics Corp (GD.N), BAE Systems Plc (BAES.L) and Force Protection Inc (FRPT.O), which supply military vehicles.

Third-quarter earnings dropped to $2.6 million, or 8 cents per share, from $4.1 million, or 13 cents per share a year ago. Analysts on average had expected 23 cents a share, before special items, according to Reuters Estimates.

Sales rose 37 percent to $148.9 million, but were significantly below market expectations of $178.8 million.

There was general disappointment as the company’s revenue growth fell significantly short of analysts’ expectations, The Robins Group analyst Frank Magdlen said by phone.

However, Magdlen said the capacity expansion — Spartan expanded production capacity by about 170 percent — would help the company get more of the MRAP orders going forward.

The U.S. Department of Defence has given out orders for only about half of the 15,000 vehicles sought under the program and significant orders are expected to be rolled out in the next three months, Magdlen added.


Gross margin during the latest quarter fell to 11.8 percent from 15.8 percent last year, hurt by pricing pressures at Spartan Chassis, its largest operating unit, and at the Specialty Vehicle Chassis unit, the company said.

Margins were also squeezed at its Emergency Vehicle Team unit, while scheduling changes and parts shortages hurt gross margins for the fire truck chassis business.

The parts shortages related to the upgradation of Spartan’s exhaust and other technologies to comply with stricter government emission norms enforced in 2007.

Chief Executive John Sztykiel, in a conference call with analysts, also forecast income growth of at least 36 percent in the next 12 to 18 months.

Spartan shares closed down $2.87 at $14.25 on the Nasdaq. (Reporting by Anant Vijay Kala in Bangalore)

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