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Spartan Motors Form 10-Q - 2nd Quarter 2000

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

June 30, 2000

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

August 8, 2000

 

 

Common stock, $.01 par value

11,288,077 shares






SPARTAN MOTORS, INC.

INDEX


PART I.  FINANCIAL INFORMATION

Page

 

 

 

 

 

 

 

 

 

Item 1.  Financial Statements:

 

 

 

 

 

 

 

Condensed Consolidated Balance Sheets - June 30, 2000

 

 

 

          (Unaudited) and December 31, 1999

3

 

 

 

 

 

 

Condensed Consolidated Statements of Operations -

 

 

 

          Three Months Ended June 30, 2000 and 1999 (Unaudited)

5

 

 

 

 

 

 

Condensed Consolidated Statements of Operations -

 

 

 

          Six Months Ended June 30, 2000 and 1999 (Unaudited)

6

 

 

 

 

 

 

Condensed Consolidated Statements of Shareholders'

 

 

 

          Equity - Six Months Ended June 30, 2000 (Unaudited)

7

 

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows -

 

 

 

          Six Months Ended June 30, 2000 and 1999 (Unaudited)

8

 

 

 

 

 

 

Notes to Condensed Consolidated Financial Statements

10

 

 

 

 

 

Item 2.  Management's Discussion and Analysis of Financial

 

 

 

          Condition and Results of Operations

12

 

 

 

 

 

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

18

 

 

 

 

PART II. OTHER INFORMATION

 

 

 

 

 

 

Item 4. Submission of Matters to a Vote of Security Holders

19

 

 

 

 

Item 6. Exhibits and Reports on Form 8-K

19

 

 

 

 

SIGNATURES

21

 

 

 

 

EXHIBIT INDEX

22



- -2-

PART I. FINANCIAL INFORMATION

Item 1.   Financial Statements

SPARTAN MOTORS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS
__________________________________________

June 30, 2000

December 31, 1999

(Unaudited)

ASSETS

Current assets:

Cash and cash equivalents

$

2,103,384

$

35,797

Accounts receivable, less allowance

for doubtful accounts of $2,719,000

in 2000 and $2,491,000 in 1999

43,765,763

37,765,807

Inventories (Note 4)

44,843,396

47,111,727

Deferred tax benefit

3,487,305

3,487,305

Taxes receivable

178,145

1,427,945

Other current assets

1,279,058

1,106,105

Total current assets

95,657,051

90,934,686

Property, plant, and equipment, net

21,858,697

22,568,177

Goodwill, net of accumulated amortization

of $1,286,000 in 2000 and $1,001,000

in 1999, respectively

7,180,773

7,462,995

Other assets

1,841,958

1,731,885

Total assets

$

126,538,479

$

122,697,743









- -3-

SPARTAN MOTORS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)
__________________________________________

June 30, 2000

December 31, 1999

(Unaudited)

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Accounts payable

$

21,063,080

$

25,115,388

Notes payable

7,274,302

6,290,131

Other current liabilities and accrued expenses

4,438,499

4,881,179

Accrued warranty

4,065,842

3,645,363

Accrued customer rebates

557,031

629,311

Accrued compensation and related taxes

1,752,420

1,809,332

Accrued vacation

1,503,229

1,348,941

Deposits from customers

4,185,735

3,761,249

Current portion of long-term debt

1,068,495

1,587,201

Total current liabilities

45,908,633

49,068,095

Accounts payable, long-term

1,482,403

1,631,904

Long-term debt

35,557,684

27,476,993

Notes payable to related parties

1,342,310

1,342,310

Shareholders' equity:

Preferred stock, no par value: 2,000,000

shares authorized (none issued)

-

-

Common stock, $.01 par value, 23,900,000

shares authorized, issued 11,348,077 shares

in 2000 and 12,273,977 shares in 1999

113,481

122,740

Additional paid in capital

21,858,164

23,645,151

Retained earnings, net of effect of minority

interest in shareholders' deficit of subsidiary

of ($4,828,324) in 2000 and 1999

20,275,804

19,410,550

Total shareholders' equity

42,247,449

43,178,441

Total liabilities and shareholders' equity

$

126,538,479

$

122,697,743

See notes to condensed consolidated financial statements.







- -4-

SPARTAN MOTORS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
________________________________________

Three Months Ended June 30,

2000

1999

Sales

$

73,226,363

$

75,262,770

Cost of products sold

63,339,390

65,470,269

Gross profit

9,886,973

9,792,501

Operating expenses

Research and development

1,822,545

1,678,560

Selling, general and administrative

5,781,399

5,518,807

Operating income

2,283,029

2,595,134

Other income / (expense)

Interest expense

(759,141

)

(561,172

)

Interest and other income

496,808

111,429

Earnings before taxes on income

2,020,696

2,145,391

Taxes on income

1,006,404

1,142,834

Net earnings

$

1,014,292

$

1,002,557

Basic and diluted net earnings per share

$

0.09

$

0.08

Basic weighted average common shares outstanding

11,694,000

12,535,000

Diluted weighted average common shares

outstanding

11,700,000

12,547,000

See notes to condensed consolidated financial statements.







- -5-

SPARTAN MOTORS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
________________________________________

Six Months Ended June 30,

2000

1999

Sales

$

157,851,189

$

150,888,341

Cost of products sold

137,034,346

130,256,957

Gross profit

20,816,843

20,631,384

Operating expenses

Research and development

3,577,566

3,422,024

Selling, general and administrative

10,471,680

10,980,155

Operating income

6,767,597

6,229,205

Other income / (expense)

Interest expense

(1,532,097

)

(1,319,104

)

Interest and other income

362,999

227,749

Earnings before taxes on income

5,598,499

5,137,850

Taxes on income

2,615,669

2,690,240

Net earnings

$

2,982,830

$

2,447,610

Basic and diluted net earnings per share

$

0.25

$

0.20

Basic weighted average common shares outstanding

11,887,000

12,535,000

Diluted weighted average common shares

outstanding

11,901,000

12,543,000

See notes to condensed consolidated financial statements.






- -6-

SPARTAN MOTORS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(UNAUDITED)


Number of
Shares


Common
Stock

Additional
Paid In
Capital


Retained
Earnings



Total

Balance at January 1,
  2000



12,273,977


 


$   122,740


 


$ 23,645,151


 


$ 19,410,550



$ 43,178,441

Purchase and constructive

  retirement of stock

(925,900

)

(9,259

)

(1,786,987

)

(2,117,576

)

(3,913,822

)

Comprehensive income:

  Net earnings

 

 

 

2,982,830

2,982,830

Balance at June 30, 2000

11,348,077

 

$   113,481

 

$ 21,858,164

 

$ 20,275,804

 

$ 42,247,449


See notes to condensed consolidated financial statements.













- -7-

SPARTAN MOTORS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

___________________________________

Six Months Ended June 30,

2000

1999

Cash flows from operating activities:

Net earnings

$   2,982,830

$   2,447,610

Adjustments to reconcile net earnings to net cash

provided by operating activities:

Depreciation and amortization

1,832,800

2,052,054

Loss (gain) on sales of assets

2,439

(68,180

)

Decrease (increase) in assets:

Accounts receivable

(5,999,956

)

(4,412,514

)

Inventories

2,320,571

(1,256,515

)

Federal taxes receivable

1,249,800

-

Other assets

(283,026

)

(954,478

)

Increase (decrease) in liabilities:

Accounts payable

(4,201,809

)

(583,420

)

Other current liabilities and accrued expenses

(442,680

)

166,342

Accrued warranty

420,479

(107,147

)

Accrued customer rebates

(72,280

)

(73,832

)

Taxes on income

-

(745,405

)

Accrued vacation

154,288

218,784

Accrued compensation and related taxes

(56,912

)

597,550

Deposits from customers

424,486

642,327

Total adjustments

(4,651,800

)

(4,524,434

)

Net cash used in operating activities

(1,668,970

)

(2,076,824

)

Cash flows from investing activities:

Purchases of property, plant and equipment

(900,827

)

(865,222

)

Proceeds from sales of property, plant and equipment

5,050

35,348

Proceeds from sales of investment securities

-

500,000

Purchase price adjustment related to acquisition of subsidiary

-

(249,103

)

Minority interest contributions

-

750,000

Net cash provided by (used in) investing activities

(895,777

)

171,023

(Continued

)









- -8-

SPARTAN MOTORS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Continued)

_____________________________________

Six Months Ended June 30,

2000

1999

Cash flows from financing activities:

Proceeds from notes payable

$   2,791,614

$      34,136

Payments on notes payable

(1,807,443

)

-

Proceeds from long-term debt

8,100,000

3,985,713

Payments on long-term debt

(538,015

)

(729,841

)

Net proceeds from exercise of stock options

-

3,180

Dividends paid

-

(877,430

)

Purchase of previously-issued stock

(3,913,822

)

-

Net cash provided by financing activities

4,632,334

2,415,758

Net increase in cash and cash equivalents

2,067,587

509,957

Cash and cash equivalents at beginning of period

35,797

37,645

Cash and cash equivalents at end of period

$  2,103,384

$    547,602













See notes to condensed consolidated financial statements.








- -9-

SPARTAN MOTORS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

______________________________________

Note 1

For a description of the accounting policies followed refer to the notes to the Spartan Motors, Inc. (the "Company") annual consolidated financial statements for the year ended December 31, 1999, included in the Company's Form 10-K filed with the Securities and Exchange Commission on March 7, 2000.

 

 

Note 2

The accompanying unaudited interim consolidated financial statements reflect all normal and recurring adjustments that are necessary for the fair presentation of the Company's financial position as of June 30, 2000, and the results of operations and cash flows for the periods presented.

 

 

Note 3

The results of operations for the three and six month periods ended June 30, 2000, 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:

June 30, 2000

December 31, 1999

Finished goods

$      4,682,967

$      9,148,018

Raw materials and purchased components

34,800,140

36,026,149

Work in process

8,672,009

6,479,813

Obsolescence reserve

(3,311,720

)

(4,542,253

)

$    44,843,396

$    47,111,727


Note 5

Sales and other financial information by business segment are as follows (amounts in thousands):

Three Months Ended June 30, 2000

Business Segments

Chassis

EVTeam

Carpenter

Intangibles

Other

Consolidated

Net Sales

$           52,945

 

$         13,974

 

$       9,564

 

$       (3,257

)

$             73,226

Interest expense

7

174

575

3

 

759

Depreciation and

amortization expense

249

107

337

 

$             141

142

976

Income tax expense

1,156

124

-

(273

)

1,007

Segment earnings

1,861

210

(771

)

(141

)

(145

)

1,014

Segment assets

71,183

24,531

27,667

7,181

(4,024

)

126,538



- -10-

Note 5  (continued)

Three Months Ended June 30, 1999

Business Segments

Chassis

EVTeam

Carpenter

Intangibles

Other

Consolidated

Net Sales

$           55,571

 

$         14,197

 

$       7,866

 

$       (2,372

)

$             75,262

Interest expense

267

100

197

(3

)

561

Depreciation and

amortization expense

269

87

385

 

$             235

81

1,057

Income tax expense

1,090

101

-

(48

)

1,143

Segment earnings

2,111

174

(994

)

(235

)

(55

)

1,001

Segment assets

81,066

22,492

26,147

7,100

(5,592

)

131,213

Six Months Ended June 30, 2000

Business Segments

Chassis

EVTeam

Carpenter

Intangibles

Other

Consolidated

Net Sales

$           116,337

 

$         30,453

 

$      16,794

 

$       (5,733

)

$            157,851

Interest expense

136

334

1,004

58

1,532

Depreciation and

amortization expense

474

213

670

 

$             229

247

1,833

Income tax expense

2,708

331

-

(423

)

2,616

Segment earnings

4,566

587

(1,752

)

(229

)

(189

)

2,983

Segment assets

71,183

24,531

27,667

7,181

(4,024

)

126,538

Six Months Ended June 30, 1999

Business Segments

Chassis

EVTeam

Carpenter

Intangibles

Other

Consolidated

Net Sales

$           116,026

 

$         27,102

 

$      12,538

 

$       (4,778

)

$            150,888

Interest expense

568

234

547

(30

)

1,319

Depreciation and

amortization expense

526

166

780

 

$             417

163

2,052

Income tax expense

2,563

315

-

(188

)

2,690

Segment earnings

4,919

517

(2,404

)

(417

)

(168

)

2,447

Segment assets

81,066

22,492

26,147

7,100

(5,592

)

131,213











- -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 the Company's financial and operating results for the three and six month periods ended June 30, 2000 compared to the same periods ended June 30, 1999. 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 operations, on an actual basis, as a percentage of sales:

Three Months Ended
June 30,

Six Months Ended
June 30,

2000

1999

2000

1999

Sales

100.0%

100.0%

100.0%

100.0%

Cost of product sold

86.5%

87.0%

86.8%

86.3%

Gross profit

13.5%

13.0%

13.2%

13.7%

Operating expenses:

Research and development

2.5%

2.2%

2.3%

2.3%

Selling, general, and administrative

7.9%

7.3%

6.6%

7.3%

Operating income

3.1%

3.5%

4.3%

4.1%

Other

-0.3%

-0.6%

-0.8%

-0.7%

Earnings before taxes on income

2.8%

2.9%

3.5%

3.4%

Taxes on income

1.4%

1.5%

1.6%

1.8%

Net earnings

1.4%

1.4%

1.9%

1.6%

Three-Month Period Ended June 30, 2000, Compared to the Three-Month Period Ended June 30, 1999

For the three months ended June 30, 2000, consolidated sales decreased $2.0 million (2.7%) over the amount reported for the same period in the previous year. Chassis Group sales for the second quarter of 2000 decreased by $2.6 million (4.7%) compared to the sales reported for the same period of 1999. The majority of this decrease is due to decreased sales of motorhome chassis. For the second quarter of 2000, motorhome chassis sales decreased 15.7% compared to the quarter ended June 30, 1999. Rising interest rates coupled with higher gasoline prices have contributed to the slower demand in the motorhome market.











- -12-

Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Fire truck chassis sales in the second quarter of 2000 were 14.2% higher than sales for the same period of 1999. The fire truck market continues to be strong in 2000, as it is not typically impacted by interest rate fluctuations. Transit bus sales increased 595.0% for the second quarter of 2000 compared to the sales reported for the same period in 1999. This is primarily attributable to increased sales to the Company's primary transit bus customer that resulted from a large order placed by that customer.

EVTeam sales dropped slightly ($0.2 million or 1.6%) from their sales level in the prior year's second quarter while Carpenter sales were up $1.7 million (21.6%). Carpenter's growth in sales is due to increased order intake and, consequently, an increased level of produced units over the prior year. The school bus market continues to increase their confidence in the Carpenter bus product.

Gross margin increased from 13.0% for the quarter ended June 30, 1999 to 13.5% for the same period of 2000. This increase is primarily due to operating efficiencies realized by both Carpenter and the EVTeam.

Operating expenses increased from 9.5% of sales for the second quarter of 1999 to 10.4% for the second quarter of 2000. The Chassis Group is primarily responsible for this increase. While their operating expenses in dollars dropped slightly (1.8%), their sales volume dropped 4.7%, resulting in an increase in operating expenses as a percentage of sales. The decrease in the Company's income taxes as a percentage of sales is primarily due to the loss of Carpenter that is not included in the consolidated tax return.

Total chassis orders received decreased 17.9% during the second quarter of 2000 compared to the same period in 1999. Based on average order lead-time, the Company estimates that approximately one-half of the motorhome, one-third of the bus/specialty, and none of the fire truck chassis orders received during the three-month period ended June 30, 2000 were produced and delivered by June 30, 2000.

At June 30, 2000, the Company had $95.7 million in backlog compared with a backlog of $111.9 million at June 30, 1999. The majority of the decrease is due to transit bus chassis backlog, which has decreased 90.4% due to the fourth quarter 1999 bankruptcy filing by the Company's primary transit bus chassis customer, Metrotrans. This company made up the majority of the backlog number for transit bus chassis at June 30, 1999.

While orders in the 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 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.



- -13-

Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Six-Month Period Ended June 30, 2000, Compared to the Six-Month Period Ended June 30, 1999

For the six months ended June 30, 2000, consolidated sales increased $7.0 million (4.6%) over the amount reported for the same period in the previous year. Chassis Group 2000 sales for this period were consistent with the same period of 1999, with only a slight increase of $0.3 million (0.3%). This is primarily due to offsetting swings within motorhome and firetruck chassis sales. Motorhome chassis sales decreased slightly (4.3%) while fire truck chassis sales increased slightly (7.1%). For the first six months of 2000, transit bus sales increased 81.0% over the same period in 1999. As mentioned earlier, this is due to increased sales to the Company's primary transit bus customer that are a result of a large order placed by that customer.

The Company's other business segments all recorded sales increases over the prior year's first six months. EVTeam sales and Carpenter sales were up $3.4 million (12.4%) and $4.3 million (33.9%), respectively, in the current period over the prior year's period. The EVTeam's increase is primarily due to a large fire department order that was completed in the first six months of 2000. Carpenter has experienced an increase in order intake which has generated an increase in the sales volume so far in 2000 when compared to 1999. Confidence in Carpenter continues to grow within the school bus market.

Gross margin decreased from 13.7% for the six months ended June 30, 1999 to 13.2% for the same period of 2000. The EVTeam and Carpenter operate at lower margins than the Chassis Group since the value added is only in the body rather than the complete vehicle. Thus, the gross margin on the body is diluted by the pass-through nature of the chassis cost. Even though the EVTeam and Carpenter experienced higher operating efficiencies in the second quarter of 2000, the majority of the increase in consolidated sales over the prior year is attributable to increases for the EVTeam and Carpenter. Therefore, the sales growth over the six-month period has diluted the increase in efficiency realized in the second quarter of 2000 and caused the gross margin for the Company as a whole to be lower in 2000 than the same period of 1999.

Operating expenses decreased from 9.6% of sales for the first six months of 1999 to 8.9% for the same time frame in 2000. One reason for this decrease is that the Company has been focused on finding ways to decrease operating expenses. A reversal of previously accrued management fees at Carpenter is the other reason that operating expenses as a percentage of sales are lower in the first six months of 2000 than in the comparable six months of 1999. The primary minority shareholder of Carpenter, Recovery Equity Investors, Inc., restructured the management fees it charges Carpenter to more accurately reflect the actual expenses that it incurs. This resulted in lower selling, general and administrative expenses of approximately $425,000 for the first six months of 2000. The decrease in the Company's income taxes as a percentage of sales is primarily due to the loss of Carpenter that is not included in the consolidated tax return.






- -14-

Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Total chassis orders received decreased 30.7% during the six months period ended June 30, 2000 compared to the same period in 1999. Based on average order lead-time, the Company estimates that approximately one-half of the motorhome, one-third of the bus/specialty, and one-sixth of the fire truck chassis orders received during the three-month period ended June 30, 2000 were produced and delivered by June 30, 2000.

At June 30, 2000, the Company had $95.7 million in backlog compared with a backlog of $111.9 million at June 30, 1999. The majority of the decrease is due to transit bus chassis backlog, which has decreased 90.4% due to the fourth quarter 1999 bankruptcy filing by the Company's primary transit bus chassis customer, Metrotrans. This company made up the majority of the backlog number for transit bus chassis at June 30, 1999.

While orders in the 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 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

For the six months ended June 30, 2000, cash used in operating activities was approximately $1.7 million which was a $0.4 million improvement over the $2.1 million of cash used in operating activities for the six months ended June 30, 1999. The Company's working capital increased by $7.8 million from $41.9 million at December 31, 1999 to $49.7 million at June 30, 2000. See the "Condensed Consolidated Statements of Cash Flows" contained in this Form 10-Q for further information regarding the increase in cash and cash equivalents, from $35,797 at December 31, 1999 to $2,103,384 at June 30, 2000.

Shareholders' equity decreased approximately $0.9 million in the six months ended June 30, 2000 to approximately $42.2 million. This change primarily is due to net earnings of $3.0 million and the repurchase of Company stock of $3.9 million. The Company's debt to equity ratio increased to 90.9% on June 30, 2000 compared with 70.5% at December 31, 1999 due to the increase in borrowings resulting from the cash used to fund operations and the repurchase of the Company's common stock.

The Company's primary line of credit is a $30.0 million revolving note payable to a bank. The Company also has a $5.0 million term note under the same debt agreement. Under the terms of the line of credit and term note agreement, the Company is required to maintain certain financial ratios and other financial conditions. The agreement also prohibits the Company from incurring additional indebtedness, limits certain acquisitions, investments, advances or loans and restricts substantial asset sales. At June 30, 2000 the Company was in compliance with all debt covenants.




- -15-

The Company also has an unsecured line of credit for $1.0 million and secured lines of credit for $0.2 million and $4.3 million. The $4.3 million line carries an interest rate of 1/2% above the bank's prime rate (prime rate at June 30, 2000, was 9.5%) and has an expiration date of June 2001. This line of credit is secured by accounts receivable and inventory. Borrowings under this line totaled $4.0 million at June 30, 2000. The $0.2 million line carries an interest rate of 2% above the bank's prime rate and has an expiration date of June 1, 2001. This line of credit is secured by accounts receivable, inventory and equipment. There were no borrowings on this line at June 30, 2000. The $1.0 million line carries an interest rate of 1% above the bank's prime rate and expires only if there is a change in management. There were no borrowings on the $1.0 million line at June 30, 2000. The Company believes it has sufficient resources from cash flows from operating activities and, if necessary, from additional borrowings under its lines of credit to satisfy ongoing cash requirements for the next 12 months.

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 prices of its products. However, the Company generally does not attempt to negotiate inflation-based price adjustment provisions into its contracts. Since order lead times can be as much as six months, the Company has limited ability to pass on cost increases to its customers on a short-term basis. In addition, the markets served by the Company are competitive in nature, and competition limits the pass through of cost increases in many cases. The Company strives to minimize the effect of inflation through cost reductions and improved productivity.

FORWARD-LOOKING STATEMENTS

This Form 10-Q contains statements that are not historical facts. These statements are called "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements involve important known and unknown risks, uncertainties and other factors and can be identified by phrases using "estimate," "anticipate," "believe," "project," "expect," "intend," "predict," "potential," "future," "may," "should" and similar expressions or words. Our future results, performance or achievements may differ materially from the results, performance or achievements discussed in the forward-looking statements. There are numerous factors that could cause actual results to differ materially from the results discussed in forward-looking statements, including:

•

Changes in existing products liability, tort or warranty laws or the introduction of new laws, regulations or policies that could affect our business practices: these laws, regulations or policies could impact our industry as a whole, or could impact only those portions in which we are currently active, for example, laws regulating the design or manufacture of emergency vehicles or regulations issued by the National Fire Protection Association; in either case, our profitability could be injured due to a industry-wide market decline or due to our inability to compete with other companies that are unaffected by these laws, regulations or policies.




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•

Changes in environmental regulations: these regulations could have a negative impact on our earnings; for example, laws mandating greater fuel efficiency could increase our research and development costs.

 

 

•

Changes in economic conditions, including changes in interest rates, financial market performance and the industry: these types of changes can impact the economy in general, resulting in a downward trend that impacts not only our business, but all companies with which we compete; or, the changes can impact only those parts of the economy upon which we rely in a unique fashion, including, by way of example:

 

 

 

•

Factors that impact our attempts to expand internationally, such as the introduction of trade barriers in the United States or abroad.

 

 

•

Factors that we have discussed in previous public reports and other documents filed with the Securities and Exchange Commission.

This list provides examples of factors that could affect the results described by forward-looking statements contained in this Form 10-Q. However, this list is not intended to be exhaustive; many other factors could impact our business and it is impossible to predict with any accuracy which factors could result in which negative impacts. Although we believe that the forward-looking statements contained in this Form 10-Q are reasonable, we cannot provide you with any guarantee that the anticipated results will be achieved. All forward-looking statements in this Form 10-Q are expressly qualified in their entirety by the cautionary statements contained in this section and you are cautioned not to place undue reliance on the forward-looking statements contained in this Form 10-Q. In addition to the risks listed above, other risks may arise in the future, and we disclaim any obligation to update information contained in any forward-looking statement.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk.

The Company's primary market risk exposure is a change in interest rates in connection with its outstanding variable rate short-term and long-term debt. Due to variable interest rates on the Company's short-term and long-term debt, an increase in interest rates of 1% could result in the Company incurring an additional $0.4 million in annual interest expense. Conversely, a decrease in interest rates of 1% could result in the Company saving $0.4 million in annual interest expense. The Company does not expect such market risk exposure to have a material adverse effect on the Company. The Company does not enter into market risk sensitive instruments for trading purposes.










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PART II. OTHER INFORMATION

Item 4.  Submission of Matters to a Vote of Security Holders.

          The annual meeting of shareholders of Spartan Motors, Inc. was held on June 13, 2000. The purpose of the meeting was to elect directors, ratify the appointment of Ernst & Young LLP as independent auditors for the current fiscal year and transact any other business that properly came before the meeting.

          The name of each director elected (along with the number of votes cast for or authority withheld) is as follows:

   

Votes Cast

  
       

Authority

  

Elected Directors

  

For

  

Withheld/Against

  

John E. Sztykiel

  

9,632,577

  

958,579

  

Charles E. Nihart

  

10,383,460

  

207,696

  

James C. Penman

  

10,383,572

  

207,584

  

          The following persons continue to serve as directors: William F. Foster, Richard J. Schalter, Anthony G. Sommer, George W. Sztykiel, George Tesseris and David R. Wilson.

          The following proposal was acted on:

Proposal

For

Against

Abstain

  

Proposal to ratify the appointment of
Ernst & Young LLP as independent
auditors for the current fiscal year



10,518,047



52,460



20,649

  


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 Quarterly Report on Form 10-Q for the period ended June 30, 1996, 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.





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27

Financial Data Schedule.

 

(b)

Reports on Form 8-K. During the second quarter ended June 30, 2000, the Company did not file a current report on Form 8-K.


















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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.

 

 

Date: August 14, 2000

By/s/Richard J. Schalter

     Richard J. Schalter
     Secretary/Treasurer
     (Principal Accounting and Financial Officer)

















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EXHIBIT INDEX


 

Exhibit No.

Document

 

 

 

 

3.1

Spartan Motors, Inc. Restated Articles of Incorporation. Previously filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the period ended June 30, 1996, 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.

 

 

 

 

27

Financial Data Schedule.

















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