1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended March 31, 1995 Commission File Number 0-13611
SPARTAN MOTORS, INC.
---------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Michigan 38-2078923
- ----------------------------------------- -------------------
(State of incorporation) (I.R.S. Employer
Identification no.)
1000 Reynolds Road, Charlotte, Michigan 48813
- ---------------------------------------- --------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (517) 543-6400
NONE
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Former name, former address and former fiscal year, if changed since
last report.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES X NO ___
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common shares outstanding at May 8, 1995 13,060,872
2
SPARTAN MOTORS, INC.
INDEX TO QUARTERLY REPORT ON FORM 10-Q
QUARTER ENDED MARCH 31, 1995
Page No.
--------
Part I. Financial Information
Consolidated Balance Sheets - March 31, 1995
(Unaudited) and December 31, 1994 1
Consolidated Statements of Net Earnings -
Three Months Ended March 31, 1995 and 1994
(Unaudited) 3
Consolidated Statements of Cash Flows -
Three Months Ended March 31, 1995 and 1994
(Unaudited) 4
Notes to Consolidated Financial Statements 6
Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Part II. Other Information 12
Signatures 13
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SPARTAN MOTORS, INC.
CONSOLIDATED BALANCE SHEETS
March 31, 1995 December 31, 1994
-------------- -----------------
(Unaudited)
ASSETS
------
CURRENT ASSETS:
Cash and cash equivalents $ 5,349,872 $ 2,930,270
Investment securities 11,789,592 11,294,216
Accounts receivable, less allowance
for doubtful accounts of $580,000
in 1995 and $540,000 in 1994 25,538,015 23,316,271
Inventories 25,447,455 23,444,234
Deferred tax benefit 1,260,000 1,450,000
Federal taxes receivable 336,781 1,446,781
Other current assets 1,711,490 1,661,639
---------- -----------
TOTAL CURRENT ASSETS 71,433,205 65,543,411
PROPERTY, PLANT, AND EQUIPMENT,
net of accumulated depreciation
of $4,956,648 and $4,732,590 in
1995 and 1994, respectively 12,838,665 12,886,838
DEFERRED TAX BENEFIT 1,046,000 751,000
OTHER ASSETS 1,785,940 1,885,720
----------- -----------
TOTAL $87,103,810 $81,066,969
=========== ===========
See notes to consolidated financial statements.
1
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SPARTAN MOTORS, INC.
CONSOLIDATED BALANCE SHEETS - CONTINUED
March 31, 1995 December 31,1994
-------------- ----------------
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES:
Accounts payable $11,815,386 $ 7,143,728
Other current liabilities and
accrued expenses 698,570 1,164,794
Accrued warranty expense 1,617,605 1,856,358
Accrued customer rebates 1,064,388 952,742
Accrued compensation and related
taxes 2,228,102 1,689,966
Current portion of long-term debt 420,000 420,000
----------- -----------
TOTAL CURRENT LIABILITIES 17,844,051 13,227,588
LONG-TERM DEBT, less current portion 6,079,487 6,211,357
COMMITMENTS AND CONTINGENT LIABILITIES
STOCKHOLDERS' EQUITY:
Common stock, no par value;
authorized 23,900,000 shares,
issued 13,060,872 shares in 1995
and 1994 22,131,928 22,131,928
Retained earnings 43,098,028 41,324,916
Valuation Allowance (for unrealized
losses on investments) (155,917) (370,715)
Cumulative translation adjustment (1,893,767) (1,458,105)
----------- ------------
TOTAL STOCKHOLDERS' EQUITY 63,180,272 61,628,024
----------- -----------
TOTAL $87,103,810 $81,066,969
=========== ===========
See notes to consolidated financial statements.
2
5
SPARTAN MOTORS, INC.
CONSOLIDATED STATEMENTS OF NET EARNINGS (UNAUDITED)
Three Months Ended March 31
-----------------------------
1995 1994
---- ----
REVENUES:
Net sales $43,774,933 $54,129,557
Other income 426,341 628,786
----------- -----------
TOTAL 44,201,274 54,758,343
COSTS AND EXPENSES:
Costs of products sold 36,809,765 45,674,623
Research and development 787,707 625,929
Selling, general and administrative 3,551,084 3,132,868
Interest 116,606 82,945
----------- -----------
TOTAL 41,265,162 49,516,365
EARNINGS BEFORE TAXES ON INCOME AND
MINORITY INTEREST 2,936,112 5,241,978
TAXES ON INCOME 1,163,000 1,712,000
----------- -----------
EARNINGS BEFORE MINORITY INTEREST 1,773,112 3,529,978
MINORITY INTEREST IN LOSS OF
CONSOLIDATED SUBSIDIARY 89,829
----------- ----------
NET EARNINGS $ 1,773,112 $ 3,619,807
=========== ===========
NET EARNINGS PER SHARE $ 0.14 $ 0.27
=========== ===========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 13,082,000 13,229,000
=========== ===========
See notes to consolidated financial statements.
3
6
SPARTAN MOTORS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Three Months Ended March 31
---------------------------
1995 1994
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 1,773,112 $ 3,619,807
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 409,806 349,571
Minority interest in loss of
consolidated subsidiary (89,829)
Gain on sales of assets and
investment securities (99,544) (64,179)
Decrease (increase) in:
Accounts receivable (2,325,881) (4,035,848)
Inventories (2,367,779) (5,267,234)
Deferred tax benefit 41,956 (288,000)
Federal taxes receivable 1,110,000
Restricted assets 347,647
Other assets 35,815 (220,032)
Increase (decrease) in:
Accounts payable 4,853,261 12,490,490
Other current liabilities
and accrued expenses (457,387) 330,752
Accrued warranty expense (238,753) 540,975
Accrued customer rebate 111,646 (121,228)
Taxes on income 1,965,446
Accrued compensation and
related taxes 537,743 571,065
----------- ------------
TOTAL ADJUSTMENTS 1,610,883 6,509,596
----------- -------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 3,383,995 10,129,403
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and
equipment (613,943) (2,227,209)
Proceeds from sales of property,
plant and equipment 150,000 23,000
Purchases of investment securities (4,556,487) (1,651,744)
Proceeds from sales of investment
securities 4,382,574 2,752,857
Advance of note receivable (678,275)
Principal repayment on note receivable 464,836 43,927
---------- ------------
NET CASH USED IN INVESTING ACTIVITIES (851,295) (1,059,169)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt 2,000,000
Proceeds from exercise of stock options 132,634
Payments on long-term debt (131,870) (84,753)
---------- ------------
NET CASH (USED IN) PROVIDED BY
FINANCING ACTIVITIES $ (131,870) $ 2,047,881
(Continued)
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SPARTAN MOTORS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED (UNAUDITED)
Three Months Ended March 31
----------------------------------
1995 1994
---- ----
EFFECT OF EXCHANGE RATE CHANGES ON CASH $ 18,772 $ (4,475)
---------- -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 2,419,602 11,113,640
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 2,930,270 1,139,121
---------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $5,349,872 $12,252,761
========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest was $116,606 and $98,879 for the three months
ended March 31, 1995 and 1994, respectively. Cash paid for income taxes was
$11,000 and $3,500 for the three months ended March 31, 1995 and 1994,
respectively.
See notes to consolidated financial statements. (Concluded)
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SPARTAN MOTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) For a description of the accounting policies followed refer to the
notes to the Company's annual consolidated financial statements for the
year ended December 31, 1994, included in Form 10-K filed with the
Securities and Exchange Commission March 25, 1995.
(2) The consolidated financial statements include the accounts of Spartan
Motors, Inc., its wholly owned subsidiary, Spartan Motors Foreign Sales
Corporation, Inc., and its 80% owned subsidiary Spartan de Mexico, S.A.
de C.V.("Spartan de Mexico"). Spartan de Mexico was incorporated in
the first quarter of 1993. All material intercompany transactions have
been eliminated. The two joint ventures with Societe D' Equipment de
Transport et de Carosserie S.A. ("Setcar") are not included in the
consolidated financial statements as the Company has not made any
expenditures for investment purposes nor have the ventures commenced
operations as of March 31, 1995.
(3) In the opinion of the Company, the accompanying unaudited consolidated
financial statements contain all adjustments (consisting of only normal
recurring accruals) necessary to present fairly the financial position
as of March 31, 1995, and the results of operations for the three month
periods ended March 31, 1995 and 1994.
(4) The results of operations for the three month period ended March 31,
1995, are not necessarily indicative of the results to be expected for
the full year.
(5) Inventories consist of raw materials and purchased components, work in
process, and finished goods and are summarized as follows:
March 31, 1995 December 31, 1994
-------------- -----------------
Finished Goods $ 1,441,702 $ 1,071,424
Raw Materials and
purchased components 19,334,583 17,969,217
Work in Process:
Materials 4,257,911 3,827,738
Direct Labor 307,567 371,285
Manufacturing expenses 255,692 204,570
LIFO Reserve (150,000)
----------- -----------
$25,447,455 $23,444,234
=========== ===========
(6) A summary of the Company's investment securities portfolio is
presented in the table below. During the three months ended March 31,
1995, the Company recognized investment income of approximately
$164,500 from such securities.
(see following page)
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9
SPARTAN MOTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
March 31, 1995
------------------------------------------------------------------
Unrealized
Amortized Estimated ----------
Cost Market Value Gain (Loss)
--------- ------------ ---- ------
United States government
agencies (principally
mortgage backed) $ 2,576,539 $ 2,419,987 $(158,241)
Municipal bonds 7,653,740 7,604,684 $ 1,689 (67,877)
Corporate bonds 754,735 720,470 18,821 (34,265)
Money market funds 1,044,451 1,044,451
----------- ----------- ------- --------
TOTAL $12,029,465 $11,789,592 $20,510 $(260,383)
=========== =========== ======= =========
December 31, 1994
------------------------------------------------------------------------
Unrealized
Amortized Estimated ----------
Cost Market Value Gain (Loss)
--------- ------------ ---- ------
United States government
agencies (principally
mortgage backed) $ 2,327,827 $ 2,107,392 $292 $(220,727)
Municipal bonds 7,820,349 7,526,473 (293,876)
Corporate bonds 1,602,827 1,554,423 (48,404)
Money market funds 105,928 105,928
----------- ----------- ---- --------
TOTAL $11,856,931 $11,294,216 $292 $(563,007)
=========== =========== ==== =========
The maturity distribution of investments at March 31, 1995 is shown
below. The distribution of mortgage-backed securities is based on
average expected maturities. Actual maturities may differ because
issuers may have the right to call or prepay obligations.
Amortized Estimated
Cost Market Value
------------ ------------
Under 1 Year $ 1,441,596 $ 1,438,741
1 Year - 5 Years 2,823,690 2,801,645
5 Years - 10 Years 4,052,243 4,027,349
Over 10 Years 3,711,936 3,521,857
----------- -----------
TOTAL $12,029,465 $11,789,592
=========== ===========
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10
SPARTAN MOTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(7) On March 8, 1995 the Board of Directors authorized management to
repurchase an additional 150,000 shares of its common stock in the open
market. At March 31, 1995, management had authorization to repurchase
up to 250,000 shares of its common stock. Repurchase of common stock
is contingent upon market conditions. No expiration date was set for
the completion of the repurchase program (see Note 9).
(8) During the three months ended March 31, 1995, stockholders' equity
changed as follows:
Balance at December 31, 1994 $61,628,024
Net Earnings 1,773,112
Valuation Allowance - Investment
Securities 214,798
Cumulative Translation Adjustment
Change (435,662)
-----------
Balance at March 31, 1995 $63,180,272
===========
(9) SUBSEQUENT EVENTS:
During April 1995, the Company repurchased 147,900 shares at an average
market price of approximately $10.45 per share. The treasury stock
will be constructively retired in accordance with the Michigan Business
Corporations Act applicable to all Michigan corporations.
A cash dividend of $0.05 per outstanding share was declared May 8, 1995
for shareholders of record on June 8, 1995. The dividend of $653,044
will be paid July 8, 1995.
8
11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following is a discussion of the major elements impacting Spartan Motors,
Inc. financial and operating results for the period ended March 31, 1995
compared to the period ended March 31, 1994. The comments that follow should
be read in conjunction with the Company's consolidated financial statements and
related notes.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the components of
the Company's consolidated statements of net earnings, on an actual basis, as a
percentage of revenues:
Three Months
Ended March 31
-----------------------
1995 1994
---- ----
Revenues 100% 100%
Costs and expenses:
Cost of products sold . . . . . . . . . . . . . . . . . . . . . . . . . . 83.3% 83.4%
Research and development . . . . . . . . . . . . . . . . . . . . . . . . 1.8% 1.1%
Selling, general, and administrative . . . . . . . . . . . . . . . . . . 8.0% 5.7%
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3% .2%
----- -----
Total costs and expenses . . . . . . . . . . . . . . . . . . . . . . . . . 93.4% 90.4%
----- -----
Earnings before taxes on income and
minority interest . . . . . . . . . . . . . . . . . . . . . . . 6.6% 9.6%
Taxes on income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.6% 3.1%
----- -----
Earnings before minority interest . . . . . . . . . . . . . . . . . . . . . 4.0% 6.5%
Minority interest in loss of
consolidated subsidiary . . . . . . . . . . . . . . . . . . . . . .1%
----- ----
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.0% 6.6%
===== ====
THREE MONTH PERIOD ENDED MARCH 31, 1995, COMPARED TO THE THREE MONTH PERIOD
ENDED MARCH 31, 1994
Revenues for the three months ended March 31, 1995, were $44.2
million compared to $54.8 million in 1994, a decrease of 19%. Net income was
$1.8 million for the three months ended March 31, 1995 ($0.14 per share),
compared to $3.6 million in 1994 ($0.27 per share), a decrease of 50%. The
decrease in revenues and earnings is primarily due to soft retail market
conditions in recreational vehicles during 1995 resulting in a decrease of OEM
orders. The decrease in revenues is further magnified by the fact that the
first quarter of 1994 was one of record revenues for the Company. Total
chassis production for the three months ended March 31, 1995 consisted of 776
units as compared to 1,314 chassis for the same period in 1994. Sales of fire
truck chassis units actually increased by 73% due to the continued shift from
commercial to custom chassis, and the Company's ability to compete with the
commercial fire truck market with its Diamond, Metro Star and GT-ONE series
chassis. Sales of motorhome chassis units decreased overall by 47%, while unit
sales of the
9
12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - CONTINUED
premium line Mountain Master chassis, which includes the newly designed M-11
chassis, increased 29% during the first quarter of 1995. The chassis
contributing to the overall decrease were the lower priced, lower margin
chassis offered by the Company. Bus/specialty chassis unit sales declined as a
result of the slow progress in the stabilization of the Mexican economy and the
fact that domestic sales of bus/specialty chassis are sporadic.
Total costs and expenses as a percentage of revenues increased to
93.4% for the 1995 period as compared to 90.4% for 1994. Cost of products sold
remained consistent at 83.3% of revenues as compared to 83.4% for the same
period in 1994. Selling, general and administrative expenses increased to 8.0%
of revenues for the 1995 period compared with 5.7% for 1994. The increase is
the result of additional expenditures relating to advertising, sales travel and
trade shows, and the expansion of the customer service department. In
addition, the increase in selling, general and administrative expenses is due
to a proportionately larger increase in these costs relative to the level of
revenues. Research and development costs for the 1995 period increased to 1.8%
of revenues compared with 1.1% for the same period of 1994. The increase in
research and development costs is due to the Company continuing its efforts to
expand the applications of rear engine diesel technology to additional market
segments in the industry. Examples of this are the development of school bus
chassis and the low floor transit bus chassis. Interest expense as a
percentage of revenues remained consistent at .3% for the 1995 period compared
with .2% for the same period in 1994.
Total chassis orders received decreased 23.7% during the three months
ended March 31, 1995, to 764 units from 1,001 units for the same period of
1994. This decrease is primarily the result of a softening in the lower end
motorhome market, however orders for the premium motorhome chassis remain
strong. Based on average order lead time, the Company estimates that
approximately one-half of the motorhome and none of the fire truck orders
received during the three month period ended March 31, 1995 were produced and
delivered by March 31, 1995.
At March 31, 1995, the Company had approximately $56.3 million in
backlog chassis orders. The Company had increased production levels of fire
truck chassis in an effort to reduce the backlog and respond more promptly to
customer delivery requirements.
LIQUIDITY AND CAPITAL RESOURCES
Over the years, the Company has financed its growth through a
combination of funds provided from equity offerings, operations and long and
short-term debt financing. During the three months ended March 31, 1995, cash
provided by the operating activities amounted to approximately $3.4 million.
On March 31, 1995, the Company had working capital of $53.6 million compared to
$52.3 million at December 31, 1994, an increase of 2.5%. The current ratio on
March 31, 1995 decreased to 4.0 compared with 5.0 on December 31, 1994 despite
the overall increase in working capital. The increase in working capital was
the result of increases in accounts receivable, inventories, and accounts
payable. Accounts receivable increased approximately $2.3 million primarily
due to strong sales in the last month of the quarter. Inventories increased
approximately $2.4 million primarily to
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - CONTINUED
support the increase in production of fire truck and premium motorhome chassis.
The increase in accounts payable of approximately $4.9 million is the direct
result of the increase in inventories needed to support the 1995 production
requirements and the timing on vendor payments.
The Company anticipates that cash generated from operations, the
liquidity of short-term investment securities and the existing credit line will
be sufficient to satisfy all working capital and capital expenditure
requirements for the foreseeable future. This will provide the Company with
financial flexibility to respond quickly to business opportunities as they
arise, including opportunities for growth either through internal development
or through strategic joint ventures or acquisitions.
Spartan de Mexico S.A. de C.V., the Company's foreign subsidiary in
Queretaro, Mexico, is working to generate orders from the Mexican and South
American bus markets. Spartan de Mexico posted a 2 cent per share loss in
earnings during the three months ended March 31, 1995, consistent with the
same period in 1994. Spartan de Mexico was unable to produce bus chassis
during the three months ended March 31, 1995 due to the slow progress of the
Mexican economy stabilization.
Stockholders' equity increased by approximately $1.6 million for the
three months ended March 31, 1995, an increase of 2.5%. This increase is net
of the investment securities valuation allowance of $156,000, established to
comply with the requirements of SFAS No. 115. The Company's debt to equity
ratio decreased to 10.3% on March 31, 1995 compared with 10.8% at December 31,
1994.
The Company's unsecured line of credit with a bank provides for
maximum borrowings of $10,000,000 at 2 1/4% above the LIBOR rate (LIBOR rate at
March 31, 1995 was 6 1/8%). As of March 31, 1995, there were no borrowings
against this line. In addition, under the terms of its credit agreement with
its bank, the Company has the ability to issue letters of credit totaling
$400,000. At March 31, 1995, the Company had outstanding letters of credit
totaling $200,000.
EFFECT OF INFLATION
Inflation affects the Company in two principal ways. First, the
Company's debt is tied to the prime and LIBOR rates so that increases affecting
interest rates may be translated into additional interest expense. Second,
general inflation impacts prices paid for labor, parts and supplies. Whenever
possible, the Company attempts to cover increased costs of production and
capital by adjusting the selling prices of its products. However, the Company
normally does not attempt to negotiate inflation-based price adjustment
provisions into its contracts. Since order lead times can be as much as six
months, Spartan has limited ability to pass on cost increases to its customers
on a short-term basis. In addition, markets served by the Company are
competitive in nature, and competition limits the pass through of cost
increases in many cases. Internally, the Company strives to improve profits by
implementing cost effective methods of production.
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14
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company is party, both as plaintiff and defendant, to a number of
lawsuits and claims arising out of the normal course of business. It
is the best judgment of management that the financial position of the
Company will not be materially affected by the final outcome of these
legal proceedings.
Item 2. Changes in Securities
NONE
Item 3. Defaults Upon Senior Securities
NONE
Item 4. Submission of Matters to a Vote of Security Holders
NONE
Item 5. Other Information
NONE
Item 6. Exhibits and Reports on Form 8-K
(a) NOT APPLICABLE
(b) There were no reports on Form 8-K for the three months ended
March 31, 1995.
12
15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, Spartan
Motors, Inc., has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Spartan Motors, Inc.
By /s/ James R. Jenks
-------------------------
James R. Jenks, CPA
Secretary/Treasurer
Date: May 8, 1995
13
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EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
27 Financial Data Schedule
5
1
U.S. DOLLARS
3-MOS
DEC-31-1995
JAN-01-1995
MAR-31-1995
1
5,349,872
11,789,592
25,538,015
580,000
25,447,455
71,433,205
12,838,665
4,956,648
87,103,810
17,844,051
6,499,487
22,131,928
0
0
41,048,344
87,103,810
43,774,933
44,201,274
36,809,765
36,809,765
4,455,397
91,683
116,606
2,936,112
1,163,000
1,773,112
0
0
0
1,773,112
.14
.14
