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 the Quarter Ended Commission File Number
SEPTEMBER 30, 1997 0-13611
SPARTAN MOTORS, INC.
(Exact Name of Registrant as Specified in Its Charter)
MICHIGAN 38-2078923
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) 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
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.
OUTSTANDING AT
CLASS NOVEMBER 1, 1997
----- ----------------
Common stock, $.01 par value 12,555,960 shares
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SPARTAN MOTORS, INC.
INDEX
========================================
PART I. FINANCIAL INFORMATION
PAGE
Item 1. Financial Statements:
Consolidated Balance Sheets - September 30, 1997
(Unaudited) and December 31, 1996 1-2
Consolidated Statements of Operations -
Three and Nine Months Ended September 30, 1997 and 1996
(Unaudited) 3-4
Consolidated Statements of Cash Flows -
Nine Months Ended September 30, 1997 and 1996
(Unaudited) 5-6
Notes to Unaudited Consolidated Financial Statements 7-9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10-13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 14
Item 2. Changes in Securities 14
Item 3. Defaults Upon Senior Securities 14
Item 4. Submission of Matters to a Vote of Security-Holders 14
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 14
SIGNATURES 16
-i-
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SPARTAN MOTORS, INC.
CONSOLIDATED BALANCE SHEETS
======================================
SEPTEMBER 30, 1997 DECEMBER 31, 1996
------------------ -----------------
(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 2,958,121 $ 4,912,001
Investment securities (Note 5) 4,713,298 8,955,809
Accounts receivable, less allowance
for doubtful accounts of $555,746
in 1997 and $629,000 in 1996 24,273,785 26,299,698
Inventories (note 4) 34,226,327 24,283,517
Deferred tax benefit 1,050,845 1,471,700
Federal taxes receivable 575,055 925,000
Other current assets 1,682,172 1,063,601
-------------- -------------
TOTAL CURRENT ASSETS 479,603 67,911,326
============== =============
PROPERTY, PLANT, AND EQUIPMENT,
net of accumulated depreciation
of $9,231,821 and $7,977,012 in
1997 and 1996, respectively 11,997,161 11,403,194
EQUITY INVESTMENT IN AFFILIATE 10,982,145 --
GOODWILL 3,207,442
OTHER ASSETS 412,264 368,249
-------------- -------------
TOTAL $ 96,078,615 $ 79,682,769
============== =============
See notes to unaudited consolidated financial statements.
-1-
SPARTAN MOTORS, INC.
CONSOLIDATED BALANCE SHEETS
======================================
SEPTEMBER 30, 1997 DECEMBER 31, 1996
------------------ -----------------
(Unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 10,060,345 $ 6,264,362
Notes Payable 1,945,001
Other current liabilities and
accrued expenses 1,682,846 2,058,820
Accrued warranty expense 2,570,263 2,002,870
Accrued customer rebates 589,892 480,216
Accrued taxes payable 1,949,518 --
Accrued compensation and related taxes 1,192,618 1,034,496
Accrued vacation 828,350 644,754
Deposits from customers 2,309,086 --
Current portion of long-term debt 1,232,664 586,000
-------------- -------------
TOTAL CURRENT LIABILITIES 24,360,583 13,071,518
LONG-TERM DEBT, less current portion 8,678,723 5,206,631
-------------- -------------
TOTAL LIABILITIES 33,039,306 18,278,149
SHAREHOLDERS' EQUITY:
Preferred Stock, no par value, 2,000,000
shares authorized (none issued)
Common Stock, $.01 par value, 23,900,000
authorized, issued 12,288,372 shares
in 1997 and 12,354,072 shares in 1996 125,640 123,541
Additional paid in capital 23,088,566 21,065,942
Retained earnings 39,829,010 40,195,117
Valuation allowance (3,907) 20,020
-------------- -------------
TOTAL SHAREHOLDERS' EQUITY 63,039,309 61,404,620
-------------- -------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 96,078,615 $ 79,682,769
============== ==============
See notes to unaudited consolidated financial statements.
-2-
SPARTAN MOTORS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
======================================
THREE MONTHS ENDED SEPTEMBER 30,
--------------------------------
1997 1996
------------- -------------
SALES $ 38,327,198 $ 40,984,645
COST OF PRODUCTS SOLD 32,890,637 35,221,177
------------- -------------
GROSS PROFIT 5,436,561 5,763,468
OPERATING EXPENSES
Research and development 1,072,512 970,706
Selling, general, and administrative 3,437,951 3,172,460
------------- -------------
OPERATING INCOME 926,098 1,620,302
OTHER INCOME EXPENSE
Interest Expense (175,986) (117,571)
Interest and Other Income 152,008 336,765
------------- -------------
EARNINGS (LOSS) BEFORE TAXES ON INCOME AND 902,120 1,839,496
EQUITY IN LOSS OF AFFILIATE
EQUITY IN LOSS OF AFFILIATE 1,140,798 --
------------- -------------
EARNINGS (LOSS) BEFORE TAXES ON INCOME (238,678) 1,839,496
TAXES ON INCOME 226,124 637,000
------------- -------------
NET EARNINGS $ (464,802) $ 1,202,496
============= =============
NET EARNINGS (LOSS) PER SHARE $ (0.04) $ 0.10
============= =============
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 393,000 12,523,000
============= =============
See notes to unaudited consolidated financial statements.
-3-
SPARTAN MOTORS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
======================================
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------
1997 1996
------------- ------------
SALES $ 123,241,213 $ 132,467,697
COST OF PRODUCTS SOLD 104,867,797 113,712,245
-------------- --------------
GROSS PROFIT 18,373,416 18,755,452
OPERATING EXPENSES
Research and development 3,324,732 3,050,796
Selling, general, and administrative 10,681,546 10,565,404
-------------- --------------
OPERATING INCOME 4,367,138 5,139,252
OTHER INCOME EXPENSE
Interest Expense (623,439) (356,929)
Interest and Other Income 867,091 944,470
-------------- --------------
EARNINGS BEFORE TAXES ON INCOME AND
EQUITY IN LOSS OF AFFILIATE 4,610,790 5,726,793
EQUITY IN LOSS OF AFFILIATE 2,017,855 --
-------------- --------------
EARNINGS BEFORE TAXES ON INCOME 2,592,935 5,726,793
TAXES ON INCOME 1,674,524 2,169,000
-------------- --------------
NET EARNINGS $ 918,411 $ 3,557,793
============== ==============
NET EARNINGS PER SHARE $ 0.07 $ 0.28
============== ==============
DIVIDENDS DECLARED PER SHARE $ 0.07 $ 0.05
============== ==============
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 12,472,000 12,583,000
============== ==============
See notes to unaudited consolidated financial statements.
-4-
SPARTAN MOTORS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
======================================
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------
1997 1996
------------ -----------
NET EARNINGS $ 918,411 $ 3,557,793
------------ --------------
Adjustments to reconcile net earnings to net cash
provided by (used in) operating activities:
Depreciation and amortization 1,255,665 1,336,582
Gain on sales of marketable securities and
fixed assets (49,785) (4,383)
Equity in net loss of affiliate 2,017,855 --
Change in Assets and Liabilities net of effects of
Acquisition of Subsidiaries
Accounts receivable 5,043,583 (8,341,144)
Inventories (3,826,311) (2,950,232)
Deferred tax benefit 444,255 (92,000)
Federal taxes receivable 349,945 --
Other current assets (98,461) 281,014
Accounts payable 819,889 5,725,558
Other current liabilities and accrued expenses (739,526) 340,685
Accrued warranty expense 505,276 172,194
Accrued customer rebate 95,588 (343,471)
Accrued taxes payable 1,805,924 (142,000)
Accrued compensation and related taxes (62,860) 330,000
Other (169,891)
------------ --------------
TOTAL ADJUSTMENTS 7,391,146 (3,687,197)
------------ --------------
NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES 309,557 (129,404)
-5-
SPARTAN MOTORS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)-CONTINUED
======================================
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------
1997 1996
------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant, and equipment $ (1,182,951) $ (1,130,708)
Proceeds from sales of property, plant
and equipment 18,600
Purchases of investment securities (9,262,827) (3,616,662)
Proceeds from sales of investment securities 13,531,196 2,001,182
Investment in Affiliate (13,000,000)
Acquisition of Subsidiaries, net of cash rec'd (73,995,981)
Principal repayment on notes receivable -- 1,061,219
--------------- --------------
NET CASH USED IN INVESTING ACTIVITIES (891,963) (1,684,969)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes payable $ 1,795,000 $
Proceeds on notes payable (266,510)
Proceeds from long-term debt 5,000,000
Proceeds from exercise of stock options 229,783 85,360
Payments on long-term debt (1,708,498) (341,943)
Purchase of treasury stock (556,037) (1,516,925)
Dividends paid (865,212) (626,679)
--------------- --------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 3,628,526 (2,400,187)
EFFECT OF EXCHANGE RATE CHANGES ON CASH -- 176,842
--------------- --------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (1,953,880) (4,037,718)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 4,912,001 5,202,595
=============== ==============
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 2,958,121 $ 1,164,877
=============== ==============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid for interest
was $623,014 and $357,729 for the nine months ended September 30, 1997 and
1996, respectively. Cash paid for income taxes was $633,508 and $1,871,000
for the nine months ended September 30, 1997 and 1996 respectively.
See notes to unaudited consolidated financial statements.
-6-
SPARTAN MOTORS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
______________________________________
NOTE 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, 1996, included in the
Company's Annual Report on Form 10-K filed with the Securities
and Exchange Commission on March 28, 1997.
NOTE 2 The accompanying unaudited interim consolidated financial
statements reflect all normal and recurring adjustments that are
necessary for fair presentation of the financial position as of
September 30, 1997, and the results of operations for the three
and nine month periods ended September 30, 1997 and 1996.
NOTE 3 The results of operations for the nine month period ended
September 30, 1997, are not necessarily indicative of the results
to be expected for the full year.
NOTE 4 Inventories consist of raw materials and purchased components,
work in process, and finished goods and are summarized as
follows:
SEPTEMBER 30, 1997 DECEMBER 31, 1996
------------------ -----------------
Finished goods $ 3,088,045 $ 2,449,406
Raw materials and
purchased components 28,332,154 22,057,444
Work in process 3,834,437 528,667
Obsolescence reserve (1,028,309) (752,000)
------------ ------------
$ 34,226,327 $ 24,283,517
============ ============
NOTE 5 In January 1997 the Company acquired a 33% interest in Carpenter
Industries, Inc. ("Carpenter") for approximately $10 million. In
the third quarter of 1997, Spartan Motors increased its
investment in Carpenter by $3 million, in conjunction with equal
contributions by the other Shareholders of Carpenter Industries.
Carpenter is a manufacturer of school bus bodies and chassis.
The Company accounts for its investment in Carpenter using the
equity method of accounting. A summary of Carpenter's balance
sheet as of September 30, 1997 and the results of its operations
for the nine-month period ended September 30, 1997 are as
follows:
-7-
SPARTAN MOTORS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
______________________________________
SEPTEMBER 30, 1997
------------------
(Unaudited)
Balance Sheet
Total Assets $ 69,075,675
=============
Total Liabilities 46,628,838
Stockholders' Equity 22,446,837
Total Liabilities and Equity $ 69,075,675
=============
Income Statement
Revenues $ 57,383,327
Loss before interest and taxes (3,395,221)
Net Loss $ (6,053,564)
=============
NOTE 6 During the six months ended September 30, 1997, shareholders'
equity changed as follows:
Balance at December 31, 1996 $ 61,404,620
Net earnings 918,411
Exercise of stock options 229,783
Dividends paid (865,212)
Purchase and constructive
retirement of stock (556,037)
Stock Issued In Purchase of
Subsidiary 1,931,671
Valuation allowance - investment
securities (23,927)
-------------
Balance at September 30, 1997 $ 63,039,309
=============
NOTE 7 During the third quarter of 1997, the Company completed
acquisitions of two fire truck apparatus manufacturers. On
August 21, 1997, the Company purchased all of the stock of
-8-
Luverne Fire Truck Apparatus Co., Ltd. On August 31, 1997, the
Company entered into an Agreement and Plan of Merger with CTS
Holding Company, Inc (CTS) in connection with the acquisition of
Quality Manufacturing, Inc. The purchase price paid for the two
companies was $6,077,896 including cash consideration of
$4,146,315 with the balance funded through the issuance of
253,338 shares of the Company's Common Stock. The fair market
value of the Company's common stock on the effective date of the
transaction was $7-5/8 per share. Funds for the payment of the
purchase price were primarily provided through cash from
operations.
The acquisitions were accounted for using the purchase method
and, accordingly, the assets and liabilities of the acquired
entities have been recorded at their estimated fair value at the
date of acquisition. The excess of purchase price over the
estimated fair value of the net assets acquired, $2,961,127, has
been recorded as goodwill, which will be amortized over 15 years.
The fair values of the assets acquired and the liabilities
assumed were as follows: current assets of $9,695,376; property
plant and equipment of $685,281; other assets of $26,318; current
liabilities of $6,859,511; and long-term liabilities of $827,254.
The following pro forma results of the operations for the nine
months ended September 30, 1997 and 1996, assume the acquisition
occurred at the beginning of the respective periods. These
unaudited pro forma results have been prepared for comparative
purposes only and do not purport to be indicative of what would
have occurred had the acquisition been in effect on the dates
indicated, or of the results which may occur in the future.
FOR THE NINE MONTHS ENDED
SEPTEMBER 30,
------------------------------
1997 1996
-------------- -----------
Net Sales $ 143,640,484 151,435,548
Net Earnings 1,539,891 4,470,836
Earnings per Share 0.12 0.36
NOTE 8 The Financial Accounting Standards Board has issued three new
accounting standards, which apply, to the Company. Statement of
Financial Accounting Standards (SFAS) No. 128, "Earnings per
Share," which is effective for financial statements issued after
December 31, 1997, requires companies to present earnings per
share on the face of the income statement in two categories
-9-
SPARTAN MOTORS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
______________________________________
called "Basic and Diluted" and requires restatement of all
periods presented. The Company will adopt SFAS No. 128 during
the fourth quarter of 1997. The Company anticipates that the
adoption of SFAS No. 128 will not have a material impact on
earnings per share.
SFAS No. 130, "Reporting Comprehensive Income," requires
companies to classify items of other comprehensive income by
their nature in a financial statement and to display the
accumulated balance of other comprehensive income separately from
retained earnings and additional paid-in-capital in the equity
section of a statement of financial position. This statement is
effective for fiscal years beginning after December 15, 1997.
The Company will adopt SFAS No. 130 in 1998.
SFAS No. 131 "Disclosures about Segments of an Enterprise and
Related Information" which is affective for fiscal years
beginning after December 31, 1997, requires that a public
business enterprise report financial and descriptive information
about its reportable operating segments. The Company will adopt
SFAS No. 131 in 1998.
NOTE 9 The Company has entered into a letter of intent to acquire a
third fire truck manufacturer and it is expected that the
transaction will close by the end of the fourth quarter of 1997.
NOTE 10 Additional Information. The Company has entered into a letter to
acquire a third fire truck manufacturer and it is expected that
the transaction will close by the end of the fourth quarter of
1997.
-10-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following is a discussion of the major elements impacting the
Company's financial and operating results for the three month and nine
month periods ended September 30, 1997 compared to the same periods ended
September 30, 1996. The comments that follow should be read in conjunction
with the Company's consolidated financial statements and related notes
contained in this Form 10-Q.
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 NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
------------------- ------------------
1997 1996 1997 1996
---- ---- ---- ----
Revenues 100.0% 100.0% 100.0% 100.0%
Cost of Product Sold 85.8 85.9 85.1 85.8
Gross Profit 14.2% 14.1% 14.9% 14.2%
Operating Expenses
Research and development 2.8% 2.4% 2.7% 2.3%
Selling, general, and administrative 9.0 7.7 8.7 8.0
Total Operating Expenses 11.8% 10.1% 11.4% 10.3%
Income from operations 2.4% 4.0% 3.5% 3.9%
Interest Expense (.4) (.3) (.5) (.3)
Other income (expense) .4 .8 .7 .7
Earnings before taxes on income and equity
in income (loss) of affiliate 2.4% 4.5% 4.2% 4.3%
Equity in loss of affiliate 3.0 -- 1.6 --
Taxes on income .6 1.6 1.4% 1.6
Net earnings (loss) (1.2)% 2.9% .7% 2.7%
-11-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
THREE-MONTH PERIOD ENDED SEPTEMBER 30, 1997, COMPARED TO THE THREE MONTH
PERIOD ENDED SEPTEMBER 30, 1996
The Company reported lower sales and earnings for the third quarter of
1997 compared to the same period in 1996. Revenues declined $2.7 million
from $41.0 million for the third quarter of 1996 to $38.3 million for the
third quarter of 1997 which is a 6.5% reduction. A decline in school bus
revenues of 88.3% and a decline in bus and specialty chassis revenues of
21.0% accounted for the majority of this reduction in revenues. The
decline in school bus revenues is caused by reduced sales to Carpenter
Industries, which had a slow third quarter. However, during the third quarter
of 1997, Carpenter did secure two significant orders from the states of
Florida and Kentucky which gives Carpenter a solid backlog going into 1998.
Gross profit declined 5.7% from $5.8 million in 1996 to $5.4 million
in 1997. Gross margins increased slightly for the third quarter of 1997
in relation to the third quarter of 1996. Notably, the gross margin on the
Chassis business increased nearly 6% during this quarter, however the
recently acquired apparatus subsidiaries operate at smaller gross margins
than the Company has been earning historically. This increase in gross
margin in the chassis product line reflects the results of the Company's
efforts to reduce costs and increase efficiencies.
Net income declined from $1.2 million in the third quarter of 1996
to a loss of $.5 million for the third quarter of 1997. This loss is
largely attributable to the equity in loss of Carpenter Industries, which
was $1.1 for the third quarter of 1997. Operating expenses increased
$367,000 for the third quarter of 1997 primarily due to the consolidation
of the newly acquired subsidiaries. Interest expense increased $58,000 and
other income decreased $50,000 primarily because of the $13 million dollar
investment in Carpenter over the last nine months, which was funded by $5
million dollars of debt, $5 million dollars of liquidated marketable
securities, and 3 million dollars of cash.
The equity in loss of affiliate represents the Company's one-third
share of the $3.4 million dollar loss recorded by Carpenter for the three
months ended September 30, 1997.
Total chassis order intake decreased 57% in the third quarter of 1997
compared to the third quarter of 1996. This increase primarily is in the
bus and motor home product lines with the majority of the increase coming
from both transit and school bus orders.
-12-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
NINE MONTH PERIOD ENDED SEPTEMBER 30, 1997, COMPARED TO THE NINE MONTH
PERIOD ENDED SEPTEMBER 30, 1996
Revenues for the nine months ended September 30, 1997 were $123.2
million compared with $132.5 million for the same period in 1996, a
decrease of 7.0%. Net income for the nine months ended September 30, 1997
was $918,411 compared with $3.6 million for the nine months ended September
30, 1996, a decrease of 74.2%. This reduction in net income is primarily
due to the $2.0 million equity in loss in Carpenter Industries. The
decline in revenues is primarily due to a $7.8 million dollar decline in
fire truck chassis sales and a $4.4 million dollar decline in bus sales.
Total chassis production declined 10.5% with fire truck production down
19.3% and bus production down 32.3%.
Gross profit declined 2.0% or $382,036 during the nine months ended
September 30, 1997 compared to the nine months ended September 30, 1996.
However, gross margins increased a full percentage point from 14.2% in 1996
to 14.9%, which is a 7% increase during the same period. This increase in
margins reflects the Company's continued emphasis on reducing costs and
increasing efficiencies. Also, profit margins for the nine months ended
September 30, 1997 in the specialty market have improved from the same
period in 1996 as the Company continues to focus on diversification into
other product lines to reduce the Company's dependence on any single
product line.
Operating expenses for the nine months ended September 30, 1997
remained consistent with 1996. However, net interest expense increased
$266,510 and interest income declined $37,000 largely due to the $13
million investment in Carpenter Industries in January of 1997, which was
partially financed with a five year term loan and $5.0 million dollar
liquidation of marketable securities.
Total chassis orders increased 4.7% during the nine-month period of
1997 versus the same period in 1996. This increase primarily is
attributable to a 10.5% increase in motor home orders and a 15.6% increase
in bus and specialty orders while fire truck chassis orders declined 34.7%.
At September 30, 1997, the Company had approximately $66.2 million in
chassis backlog compared with a backlog of approximately $44.8 million for
the same period in 1996. This increase primarily is attributable to an
increase in orders for bus chassis. While orders in backlog are subject to
modification, cancellation or rescheduling by customers, the Company has
not experienced significant modification, cancellation or rescheduling of
orders in the past. Although the backlog of unfilled orders is one of many
indicators of market demand, several factors, such as changes in production
rates, available capacity, new product introductions, major component
-13-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
availability and competitive pricing actions, may affect actual sales.
Accordingly, a comparison of backlog from period to period is not
necessarily indicative of eventual actual shipments.
LIQUIDITY AND CAPITAL RESOURCES
The Company historically has financed its growth through a combination
of funds provided from equity offerings, operations and long-term and
short-term debt financing. During the nine months ended September 30,
1997, cash provided by operating activities was approximately $8.1 million.
On September 30, 1997, the Company had working capital of $45.1
million compared to $54.8 million at December 31, 1996. The current ratio
on September 30, 1997 decreased to 2.9 compared with 5.2 on December 31,
1996. The change in working capital was primarily the result of increases
in the current portion of long-term debt incurred in the Carpenter
Industries investment and the impact of the consolidation of the two
subsidiaries purchased in August of 1997. The two subsidiaries account for
the deposits from customers and an increase in receivable and inventories.
The Company currently anticipates that cash generated from operations,
the liquidity of short-term investment securities, and its existing credit
line will be sufficient to satisfy working capital and capital expenditure
requirements for the foreseeable future. Such factors should 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.
Shareholders equity decreased slightly to approximately $63.0 million
as of September 30, 1997. This change primarily is due to the $.9 million
of net earnings offset by the payment of a $.07 per share dividend, the
repurchase of 80,100 shares of the Company's common stock and the issuance
of 253,338 shares of common stock for the purchase of Quality
Manufacturing. The Company's debt to equity ratio increased to 13.8% on
September 30, 1997, compared with 8.5% on December 31, 1996 due to the $5
million of term debt used to partially finance the investment in Carpenter.
The Company's unsecured line of credit with a bank provides for
maximum borrowings of $15 million at 2% above the 30-day LIBOR, which was
5.75% at June 30, 1997. As of September 30, 1997, 1.0 million was
outstanding 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 June 30, 1997, the Company had outstanding
letters of credit totaling $200,000.
-14-
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995
Except for the historical information contained herein, the matters
discussed in this Form 10-Q are forward-looking statements which involve
risks and uncertainties, including but not limited to economic,
competitive, governmental and technological factors affecting the Company's
operations, markets, products, services and prices, and other factors
discussed in the Company's filings with the Securities and Exchange Commission.
-15-
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 judgement 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
The Board of Directors of the Company approved a Series A Preferred
Stock Purchase Rights Plan ("Plan"). Under the plan, one Series A
Preferred Stock Purchase Right is attached to each outstanding share of
common stock, $.01 par value ("the Common Stock"), of the Company. Each
Right entitles the registered holder to purchase from the Company one
one-hundredth of a share of Series A Preferred Stock, no par value, at a
price of $50 per share, subject to adjustment, upon a certain specified
events. The description and terms of the Rights agreement are set forth in
a Rights Agreement ("Rights Agreement") between the Company and American
Stock Transfer & Trust Company, as Rights Agent. The Company filed a form
8-A Registration Statement covering the Plan with the Securities and
Exchange Commission on June 25, 1997. The Rights Agreement appears as
Exhibit 99(a) to that Form 8-K.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
NOT APPLICABLE
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
NOT APPLICABLE
ITEM 5. OTHER INFORMATION
NOT APPLICABLE
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS. The following documents are filed as exhibits to
this report on Form 10-Q:
EXHIBIT NO. DOCUMENT
----------- --------
3.1 Spartan Motors, Inc. Restated Articles of Incorporation.
Previously filed as an exhibit to the Company's Annual Report
on Form 10-K for the period ended December 31, 1995, and
incorporated herein by reference.
-16-
3.2 Spartan Motors, Inc. Bylaws (restated to reflect all
amendments). Previously filed as an exhibit to the Company's
Annual Report on Form 10-K for the period ended December 31,
1995, and incorporated herein by reference.
4.1 Spartan Motors, Inc. Restated Articles of Incorporation. See
Exhibit 3.1 above.
4.2 Spartan Motors, Inc. Bylaws. See Exhibit 3.2 above.
4.3 Rights Agreement dated June 4, 1997 between Spartan Motors,
Inc. and American Stock Transfer and Trust Company. Previously
filed as an exhibit to the Company's Form 8-A filed on June 25,
1997, and incorporated herein by reference.
27 Financial Data Schedule.
(b) REPORTS ON FORM 8-K. The Company filed a Form 8-K on August 8,
1997 regarding a merger with CTS Holding Company, Inc. in connection with
the Company's acquisition of Quality Manufacturing, Inc. of Talledaga,
Alabama. The Company filed a Form 8-K on August 11, 1997 regarding the
Company's stock purchase of Luverne Fire Apparatus Co., Ltd. of Brandon,
South Dakota.
-17-
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
SPARTAN MOTORS, INC.
Date: November 14, 1997 By /S/RICHARD J. SCHALTER
Richard J. Schalter
Secretary and Treasurer
(Principal Accounting and Financial
Officer)
-18-
EXHIBIT INDEX
EXHIBIT NUMBER DOCUMENT
- -------------- --------
3.1 Spartan Motors, Inc. Restated Articles of Incorporation.
Previously filed as an exhibit to the Company's Annual Report on
Form 10-K for the period ended December 31, 1995, and
incorporated herein by reference.
3.2 Spartan Motors, Inc. Bylaws (restated to reflect all amendments).
Previously filed as an exhibit to the Company's Annual Report on
Form 10-K for the period ended December 31, 1995, and
incorporated herein by reference.
4.1 Spartan Motors, Inc. Restated Articles of Incorporation. See
Exhibit 3.1 above.
4.2 Spartan Motors, Inc, Bylaws. See Exhibit 3.2 above.
4.3 Rights Agreement dated June 4, 1997 between Spartan Motors, Inc.
and American Stock Transfer and Trust Company. Previously filed
as an exhibit to the Company's Form 8-A filed on June 25, 1997,
and incorporated herein by reference.
27 Financial Data Schedule.
5
1,000
9-MOS
DEC-31-1996
JAN-01-1996
SEP-30-1997
2,958,121
4,713,298
24,273,785
555,746
24,273,785
69,479,603
11,997,161
9,231,821
96,078,615
24,360,583
8,678,723
125,640
0
0
62,913,669
63,039,309
123,241,213
123,241,213
104,867,797
104,867,797
14,006,278
918,411
623,439
2,592,935
1,674,524
918,411
0
0
0
918,411
0.07
0.07
