Spartan Motors, Inc. Form 10-Q


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
June 30, 2003

Commission File Number
0-13611

SPARTAN MOTORS, INC.
(Exact Name of Registrant as Specified in Its Charter)

Michigan
(State or Other Jurisdiction of
Incorporation or Organization)

38-2078923
(I.R.S. Employer
Identification No.)

 

 

1165 Reynolds Road
Charlotte, Michigan

(Address of Principal Executive Offices)


48813

(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 by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

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.


Class

Outstanding at
August 12, 2003

 

 

Common stock, $.01 par value

12,123,312 shares








SPARTAN MOTORS, INC.

INDEX

                                                   

PART I.  FINANCIAL INFORMATION

Page

 

 

 

 

 

Item 1.

Financial Statements:

 

 

 

 

 

 

 

Condensed Consolidated Balance Sheets - June 30, 2003
     (Unaudited) and December 31, 2002

3

 

 

 

 

 

 

Condensed Consolidated Statements of Operations -
     Three Months Ended June 30, 2003 and 2002 (Unaudited)

5

 

 

 

 

 

 

Condensed Consolidated Statements of Operations -
     Six Months Ended June 30, 2003 and 2002 (Unaudited)

6

 

 

 

 

 

 

Condensed Consolidated Statements of Shareholders'
     Equity - Six Months Ended June 30, 2003 (Unaudited)

7

 

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows -
     Six Months Ended June 30, 2003 and 2002 (Unaudited)

8

 

 

 

 

 

 

Notes to Condensed Consolidated Financial Statements

9

 

 

 

 

 

Item 2.

Management's Discussion and Analysis of Financial
     Condition and Results of Operations

16

 

 

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

23

 

 

 

 

 

Item 4.

Controls and Procedures

23

 

 

 

 

PART II.  OTHER INFORMATION

 

 

 

 

 

 

Item 4.

Submission of Matters to a Vote of Security Holders

23

 

 

 

 

 

Item 6.

Exhibits and Reports on Form 8-K

25

 

 

 

 

SIGNATURES

26

 

 

 

 

EXHIBIT INDEX

27


- -2-


PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements

SPARTAN MOTORS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
____________________________________

 

June 30, 2003


 

December 31, 2002


 

ASSETS

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

   Cash and cash equivalents

$

9,557,496

 

$

8,081,639

 

   Accounts receivable, less allowance for

 

 

 

 

 

 

      doubtful accounts of $385,000 in 2003

 

 

 

 

 

 

      and $365,000 in 2002

 

25,165,932

 

 

28,823,185

 

   Inventories

 

29,723,923

 

 

25,205,450

 

   Deferred tax assets

 

3,463,765

 

 

3,463,765

 

   Taxes receivable

 

708,135

 

 

-

 

   Other current assets

 

1,463,932

 

 

1,286,564

 

   Current assets of discontinued operations

 


241,402


 

 


307,288


 

      Total current assets

 

70,324,585

 

 

67,167,891

 

 

 

 

 

 

 

 

Property, plant, and equipment, net

 

15,157,692

 

 

15,155,436

 

Goodwill

 

4,543,422

 

 

4,543,422

 

Deferred tax assets

 

1,301,560

 

 

1,301,560

 

Other assets

 


70,419


 

 


144,191


 

Total assets

$


91,397,678


 

$


88,312,500


 














- -3-


SPARTAN MOTORS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)
____________________________________

 

June 30, 2003


 

December 31, 2002


 

 

(Unaudited)

 

 

 

 

LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

   Accounts payable

$

17,956,015

 

$

15,939,864

 

   Accrued warranty

 

2,568,743

 

 

2,768,389

 

   Accrued taxes on income

 

-

 

 

1,412,210

 

   Accrued compensation and related taxes

 

2,006,810

 

 

4,232,013

 

   Accrued vacation

 

1,348,438

 

 

1,217,187

 

   Deposits from customers

 

5,473,477

 

 

4,098,211

 

   Other current liabilities and accrued expenses

 

2,430,218

 

 

2,201,473

 

   Current liabilities of discontinued operations

 


-


 

 


8,692


 

      Total current liabilities

 

31,783,701

 

 

31,878,039

 

 

 

 

 

 

 

 

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 12,098,912 and

 

 

 

 

 

 

    12,025,842 shares in 2003 and 2002, respectively

 

120,989

 

 

120,258

 

   Additional paid in capital

 

31,612,546

 

 

30,776,327

 

   Retained earnings

 


27,880,442


 

 


25,537,876


 

      Total shareholders' equity

 

59,613,977

 

 

56,434,461

 

 

 


 


 

 


 


 

Total liabilities and shareholders' equity

$


91,397,678


 

$


88,312,500


 



See Notes to Condensed Consolidated Financial Statements.











- -4-


SPARTAN MOTORS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
____________________________________

 

 


Three Months Ended June 30,


 

 

 


2003


 

 


2002


 

 

 

 

 

 

 

 

Sales

$

55,116,986

 

$

65,315,118

 

Cost of products sold

 


48,088,270


 

 


53,678,350


 

Gross profit

 

7,028,716

 

 

11,636,768

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

   Research and development

 

1,853,752

 

 

1,726,525

 

   Selling, general and administrative

 


5,536,469


 

 


5,406,543


 

Operating income (loss)

 

(361,505

)

 

4,503,700

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

   Interest expense

 

(117,024

)

 

(123,660

)

   Interest and other income

 


128,508


 

 


107,635


 

Earnings (loss) from continuing operations before taxes on income

 

(350,021

)

 

4,487,675

 

 

 

 

 

 

 

 

Taxes on income

 

(128,901

)

 

1,757,359

 

Net earnings (loss) from continuing operations

 

(221,120

)

 

2,730,316

 

 

 

 

 

 

 

 

Discontinued operations:

 

 

 

 

 

 

   Gain on disposal of Carpenter, including applicable income tax

 

 

 

 

 

 

      benefit of $914,000 in 2003 and $185,000 in 2002

 


955,178


 

 


301,998


 

Net earnings

$


734,058


 

$


3,032,314


 

 

 

 

 

 

 

 

Basic net earnings per share:

 

 

 

 

 

 

   Net earnings (loss) from continuing operations

$

(0.02

)

$

0.24

 

   Gain from discontinued operations:

 

 

 

 

 

 

      Gain on disposal of Carpenter

 


0.08


 

 


0.03


 

Basic net earnings per share

$


0.06


 

$


0.27


 

 

 

 

 

 

 

 

Diluted net earnings per share:

 

 

 

 

 

 

   Net earnings (loss) from continuing operations

$

(0.02

)

$

0.23

 

   Gain from discontinued operations:

 

 

 

 

 

 

         Gain on disposal of Carpenter

 


0.08


 

 


0.02


 

Diluted net earnings per share

$


0.06


 

$


0.25


 

 

 

 

 

 

 

 

Basic weighted average common shares outstanding

 


12,122,000


 

 


11,438,000


 

 

 

 

 

 

 

 

Diluted weighted average common shares outstanding

 


12,122,000


 

 


12,070,000


 



See Notes to Condensed Consolidated Financial Statements.




- -5-


SPARTAN MOTORS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
____________________________________

 

 


Six Months Ended June 30,


 

 

 


2003


 

 


2002


 

 

 

 

 

 

 

 

Sales

$

115,534,426

 

$

132,033,664

 

Cost of products sold

 


98,922,081


 

 


108,171,846


 

Gross profit

 

16,612,345

 

 

23,861,818

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

   Research and development

 

3,602,351

 

 

3,654,434

 

   Selling, general and administrative

 


10,806,923


 

 


10,864,104


 

Operating income

 

2,203,071

 

 

9,343,280

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

   Interest expense

 

(168,802

)

 

(214,236

)

   Interest and other income

 


261,678


 

 


52,621


 

Earnings from continuing operations before taxes on income

 

2,295,947

 

 

9,181,665

 

 

 

 

 

 

 

 

Taxes on income

 


427,564


 

 


3,212,097


 

Net earnings from continuing operations

 

1,868,383

 

 

5,969,568

 

 

 

 

 

 

 

 

Discontinued operations:

 

 

 

 

 

 

   Gain on disposal of Carpenter, including applicable income tax

 

 

 

 

 

 

      benefit of $1,523,000 in 2003 and $185,000 in 2002

 


1,465,306


 

 


377,440


 

Net earnings

$


3,333,689


 

$


6,347,008


 

 

 

 

 

 

 

 

Basic net earnings per share:

 

 

 

 

 

 

   Net earnings from continuing operations

$

0.16

 

$

0.54

 

   Gain from discontinued operations:

 

 

 

 

 

 

      Gain on disposal of Carpenter

 


0.12


 

 


0.03


 

Basic net earnings per share

$


0.28


 

$


0.57


 

 

 

 

 

 

 

 

Diluted net earnings per share:

 

 

 

 

 

 

   Net earnings from continuing operations

$

0.15

 

$

0.51

 

   Gain from discontinued operations:

 

 

 

 

 

 

      Gain on disposal of Carpenter

 


0.12


 

 


0.03


 

Diluted net earnings per share

$


0.27


 

$


0.54


 

 

 

 

 

 

 

 

Basic weighted average common shares outstanding

 


12,090,000


 

 


11,199,000


 

 

 

 

 

 

 

 

Diluted weighted average common shares outstanding

 


12,445,000


 

 


11,685,000


 



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, 2003

12,025,842

 

$120,258

 

$30,776,327

 

$25,537,876

 

$56,434,461

 
                     

Net proceeds from exercise

                   

     of stock options, including

                   

     related income tax benefit

130,135

 

1,302

 

985,159

     

986,461

 

Purchase and retirement

                   

     of stock

(57,065

)

(571

)

(148,940

)

(348,635

)

(498,146

)

Dividends paid

           

(642,488

)

(642,488

)

Net earnings

 
   
   
 

3,333,689


 

3,333,689


 

Balance at June 30, 2003

12,098,912


 

$120,989


 

$31,612,546


 

$27,880,442


 

$59,613,977


 

See Notes to Condensed Consolidated Financial Statements.
























- -7-


SPARTAN MOTORS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
____________________________________

 

 


Six Months Ended June 30,


 

 

 


2003


 

 


2002


 

Cash flows from operating activities:

 

 

 

 

 

 

   Net earnings from continuing operations

$

1,868,383

 

$

5,969,568

 

   Adjustments to reconcile net earnings to net cash

 

 

 

 

 

 

     provided by operating activities:

 

 

 

 

 

 

      Depreciation

 

1,006,748

 

 

928,841

 

      Gain on sales of assets

 

(6,100

)

 

-

 

      Tax benefit from stock options exercised

 

232,000

 

 

2,111,000

 

      Decrease (increase) in operating assets:

 

 

 

 

 

 

         Accounts receivable

 

3,657,253

 

 

(5,664,544

)

         Inventories

 

(4,518,473

)

 

(995,156

)

         Taxes receivable

 

(708,135

)

 

-

 

         Other assets

 

(103,596

)

 

383,755

 

      Increase (decrease) in operating liabilities:

 

 

 

 

 

 

         Accounts payable

 

2,016,151

 

 

3,071,164

 

         Accrued warranty

 

(199,646

)

 

149,199

 

         Accrued taxes on income

 

(1,412,210

)

 

(381,442

)

         Accrued compensation and related taxes

 

(2,225,203

)

 

876,799

 

         Accrued vacation

 

131,251

 

 

(112,055

)

         Deposits from customers

 

1,375,266

 

 

102,853

 

         Other current liabilities and accrued expenses

 


228,745


 

 


655,933


 

      Total adjustments

 


(525,949


)

 


1,126,347


 

Net cash provided by continuing operating activities

 

1,342,434

 

 

7,095,915

 

Net cash provided by (used in) discontinued operating activities

 


1,522,500


 

 


(206,923


)

Net cash provided by operating activities

 

2,864,934

 

 

6,888,992

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

   Purchases of property, plant and equipment

 

(1,009,004

)

 

(4,334,954

)

   Proceeds from sales of property, plant and equipment

 


6,100


 

 


-


 

Net cash used in investing activities

 

(1,002,904

)

 

(4,334,954

)

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

   Payments on long-term debt

 

-

 

 

(11,405,079

)

   Dividends paid

 

(642,488

)

 

(1,130,161

)

   Purchase and retirement of stock

 

(498,146

)

 

-

 

   Proceeds from the exercise of stock options

 


754,461


 

 


6,121,667


 

Net cash used in financing activities

 


(386,173


)

 


(6,413,573


)

Net increase (decrease) in cash and cash equivalents

 

1,475,857

 

 

(3,859,535

)

Cash and cash equivalents at beginning of period

 


8,081,639


 

 


4,192,785


 

Cash and cash equivalents at end of period

$


9,557,496


 

$


333,250


 


See Notes to Condensed Consolidated Financial Statements.




- -8-


SPARTAN MOTORS, INC. AND SUBSIDIARIES
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") consolidated financial statements for the year ended December 31, 2002, included in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 14, 2003.

Note 2

The accompanying unaudited interim condensed 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, 2003, the results of operations for the three-month and six-month periods ended June 30, 2003 and 2002 and cash flows for the six-month period ended June 30, 2003.

Note 3

The results of operations for the six-month period ended June 30, 2003 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, 2003


 

December 31, 2002


               

Finished goods

$

7,243,812

   

$

5,329,518

 

Work in process

 

5,999,569

     

7,650,006

 

Raw materials and purchased components

 

18,790,941

     

14,138,499

 

Obsolescence reserve

 

(2,310,399


)

   

(1,912,573


)

 

$


29,723,923


   

$


25,205,450


 

Note 5

The Company's products generally carry limited warranties, based on terms that are generally accepted in the marketplace. Some components included in the Company's end products (such as engines, transmissions, tires, etc.) may include manufacturers' warranties. These manufacturers' warranties are generally passed on to the end customer of the Company's products.

The Company's policy is to record a provision for the estimated cost of warranty-related claims at the time of the sale and periodically adjust the provision to reflect actual experience. The amount of warranty liability accrued reflects management's best estimate of the expected future cost of honoring the Company's obligations under the warranty agreements. Historically, the cost of fulfilling the Company's warranty obligations has principally involved replacement parts, labor and sometimes travel for any field retrofit campaigns. The Company's estimates are based on historical experience, the number of units involved and the extent of features and components included in product models.




- -9-


Note 5 (continued)

Certain warranty and other related claims involve matters of dispute that ultimately are resolved by negotiation, arbitration or litigation. Infrequently, a material warranty issue can arise which is beyond the scope of the Company's historical experience. The Company provides for any such warranty issues as they become known and are estimable. It is reasonably possible that additional warranty and other related claims could arise from disputes or other matters beyond the scope of the Company's historical experience.

Changes in the Company's warranty liability during the six months ended June 30, 2003 were as follows:

Balance of accrued warranty at January 1, 2003

$  2,768,389

 
     

Warranties issued during the period

749,755

 
     

Cash settlements made during the period

(1,523,391

)

     

Changes in liability for pre-existing warranties during

   

     the period, including expirations

573,990


 
     

Balance of accrued warranty at June 30, 2003

$  2,568,743


 

Note 6

The Company has repurchase agreements with certain third-party lending institutions that have provided floor plan financing to customers. These agreements provide for the repurchase of products from the lending institution in the event of the customer's default. The total contingent liability on June 30, 2003 was $1.2 million. Historically, losses under these agreements have not been significant and it is management's opinion that any future losses will not have a material effect on the Company's financial position or future operating results.

Note 7

The Company's effective income tax rate of 18.6% for the six months ended June 30, 2003 differs from the federal statutory rate of 34.0% primarily as a result of reductions in previously recorded estimates for accrued taxes on income based upon settlements of examinations with state and federal taxing authorities that reduced the provision for income taxes during the period.

Note 8

On September 28, 2000, the Company's Board of Directors passed a resolution to cease funding of the Company's majority-owned subsidiary, Carpenter Industries, Inc. Carpenter's Board of Directors then voted on September 29, 2000 to begin the orderly liquidation of Carpenter. Because Carpenter was a separate segment of the Company's business, the operating results and the disposition of Carpenter's net assets were accounted for as a discontinued operation. Accordingly, previously reported financial results for all periods presented were restated to reflect this business as a discontinued operation.




- -10-


Note 8 (Continued)

The assets or liabilities of the discontinued operations have been segregated in the consolidated balance sheets. Details of such amounts are as follows:

 

June 30,
2003


 

December 31,
2002


 
             

Cash and cash equivalents

$

241,402

 

$

93,271

 

Accounts receivable

 

--

   

130,000

 

Other current assets

 

--


   

84,017


 

Current assets of discontinued operations

$


241,402


 

$


307,288


 
             

Other current liabilities

$


--


 

$


8,692


 

Current liabilities of discontinued operations

$


--


 

$


8,692


 

Note 9

In May 2003, the Company announced the closure of its Road Rescue, Inc. plant in St. Paul, Minnesota and its plan to transfer related production to its plant in Marion, South Carolina. The costs associated with this exit activity are estimated to be $0.7 million and will be expensed as incurred through the third quarter of 2003. Severance benefits and other contractual obligations associated with the plant shutdown are not significant.

Note 10

The Company follows Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees, in accounting for its stock option plans. Under APB Opinion No. 25, no compensation expense is recognized because the exercise price of the Company's stock options equals the market price of the underlying stock on the date of grant. Had compensation cost for the Company's stock-based compensation plans been determined based on the fair value at the grant dates for awards under those plans consistent with the method of Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based Compensation, the Company's net earnings and net earnings per share for the three and six months ended June 30, 2003 and 2002 would have been the pro forma amounts indicated below.











- -11-


Note 10 (continued)

 

Three Months Ended June 30,


 

 

2003


 

2002


 

Net earnings

 

 

 

 

 

 

 

 

     As reported

$

734,058

 

 

$

3,032,314

 

 

     Deduct: Compensation expense -- fair value method

 


(75,039


)

 

 


(12,495


)


 

     Pro forma

 


659,019


 

 

 


3,019,819


 


 

 

 

 

 

 

 

 

 

 

Basic net earnings per share

 

 

 

 

 

 

 

 

     As reported

$

0.06

 

 

$

0.27

 

 

     Pro forma

 

0.05

 

 

 

0.26

 

 

 

 

 

 

 

 

 

 

 

Diluted net earnings per share

 

 

 

 

 

 

 

 

     As reported

$

0.06

 

 

$

0.25

 

 

     Pro forma

 

0.05

 

 

 

0.25

 

 



 

Six Months Ended June 30,


 

 

2003


 

2002


 

Net earnings

 

 

 

 

 

 

 

 

     As reported

$

3,333,689

 

 

$

6,347,008

 

 

     Deduct: Compensation expense -- fair value method

 


(93,359


)

 

 


(18,379


)


 

     Pro forma

 


3,240,330


 

 

 


6,328,629


 


 

 

 

 

 

 

 

 

 

 

Basic net earnings per share

 

 

 

 

 

 

 

 

     As reported

$

0.28

 

 

$

0.57

 

 

     Pro forma

 

0.27

 

 

 

0.57

 

 

 

 

 

 

 

 

 

 

 

Diluted net earnings per share

 

 

 

 

 

 

 

 

     As reported

$

0.27

 

 

$

0.54

 

 

     Pro forma

 

0.26

 

 

 

0.54

 

 











- -12-


Note 11

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

Three Months Ended June 30, 2003

 

Business Segments


 

 

 

 

 

 

 

 

Chassis


 

EVTeam


 

Other


 

Consolidated


 

Motorhome chassis sales

$

27,131

 

 

 

 

 

 

 

$

27,131

 

Fire truck chassis sales

 

16,090

 

 

 

 

$

(3,207

)

 

12,883

 

EVTeam product sales

 

--

 

$

13,200

 

 

--

 

 

13,200

 

Other sales

 


1,903


 

 


--


 

 


--


 

 


1,903


 

Total Net Sales

$


45,124


 

$


13,200


 

$


(3,207


)

$


55,117


 

Interest expense

 

33

 

 

192

 

 

(108

)

 

117

 

Depreciation expense

 

221

 

 

166

 

 

108

 

 

495

 

Income tax expense

 

839

 

 

(968

)

 

-

 

 

(129

)

Segment earnings (loss) from

 

 

 

 

 

 

 

 

 

 

 

 

   continuing operations

 

1,443

 

 

(1,434

)

 

(230

)

 

(221

)

Discontinued operations

 

-

 

 

-

 

 

955

 

 

955

 

Segment earnings (loss)

 

1,443

 

 

(1,434

)

 

725

 

 

734

 

Segment assets

 

33,155

 

 

36,598

 

 

21,645

 

 

91,398

 

Three Months Ended June 30, 2002

 

Business Segments


 

 

 

 

 

 

 

 

Chassis


 

EVTeam


 

Other


 

Consolidated


 

 

 

 

 

 

 

 

 

 

 

 

 

 

Motorhome chassis sales

$

35,365

 

 

 

 

 

 

 

$

35,365

 

Fire truck chassis sales

 

14,720

 

 

 

 

$

(3,485

)

 

11,235

 

EVTeam product sales

 

--

 

$

17,434

 

 

--

 

 

17,434

 

Other sales

 


1,281


 

 


--


 

 


--


 

 


1,281


 

Net sales

$


51,366


 

$


17,434


 

$


(3,485


)

$


65,315


 

Interest expense

 

41

 

 

145

 

 

(62

)

 

124

 

Depreciation expense

 

228

 

 

144

 

 

118

 

 

490

 

Taxes on income

 

1,559

 

 

198

 

 

--

 

 

1,757

 

Segment earnings (loss) from

 

 

 

 

 

 

 

 

 

 

 

 

   continuing operations

 

2,799

 

 

262

 

 

(331

)

 

2,730

 

Discontinued operations

 

--

 

 

--

 

 

302

 

 

302

 

Segment earnings

 

2,799

 

 

262

 

 

(29

)

 

3,032

 

Segment assets

 

46,693

 

 

33,833

 

 

5,707

 

 

82,233

 





- -13-


Note 11 (continued)

Six Months Ended June 30, 2003

 

Business Segments


 

 

 

 

 

 

 

 

Chassis


 

EVTeam


 

Other


 

Consolidated


 

 

 

 

 

 

 

 

 

 

 

 

 

 

Motorhome chassis sales

$

57,931

 

 

 

 

 

 

 

$

57,931

 

Fire truck chassis sales

 

33,611

 

 

 

 

$

(5,652

)

 

27,959

 

EVTeam product sales

 

--

 

$

26,319

 

 

--

 

 

26,319

 

Other sales

 


3,326


 

 


--


 

 


--


 

 


3,326


 

Total Net Sales

$


94,868


 

$


26,319


 

$


(5,652


)

$


115,535


 

Interest expense

 

81

 

 

318

 

 

(230

)

 

169

 

Depreciation expense

 

418

 

 

371

 

 

218

 

 

1,007

 

Income tax expense

 

2,061

 

 

(1,270

)

 

(364

)

 

427

 

Segment earnings (loss) from

 

 

 

 

 

 

 

 

 

 

 

 

   continuing operations

 

3,639

 

 

(1,914

)

 

144

 

 

1,869

 

Discontinued operations

 

-

 

 

-

 

 

1,465

 

 

1,465

 

Segment earnings (loss)

 

3,639

 

 

(1,914

)

 

1,609

 

 

3,334

 

Segment assets

 

33,155

 

 

36,598

 

 

21,645

 

 

91,398

 

Six Months Ended June 30, 2002

 

Business Segments


 

 

 

 

 

 

Chassis


 

EVTeam


 

Other


 

Consolidated


 

 

 

 

 

 

 

 

 

 

 

 

 

 

Motorhome chassis sales

$

72,769

 

 

 

 

 

 

 

$

72,769

 

Fire truck chassis sales

 

28,538

 

 

 

 

$

(7,014

)

 

21,524

 

EVTeam product sales

 

--

 

$

35,536

 

 

--

 

 

35,536

 

Other sales

 


2,205


 

 


--


 

 


--


 

 


2,205


 

Net sales

$


103,512


 

$


35,536


 

$


(7,014


)

$


132,034


 

Interest expense

 

86

 

 

253

 

 

(124

)

 

215

 

Depreciation expense

 

444

 

 

250

 

 

235

 

 

929

 

Income tax expense

 

3,222

 

 

456

 

 

(466

)

 

3,212

 

Segment earnings (loss) from
     continuing operations

 


5,662

 

 


660

 

 


(353


)

 


5,969

 

Discontinued operations

 

--

 

 

--

 

 

378

 

 

378

 

Segment earnings

 

5,662

 

 

660

 

 

25

 

 

6,347

 

Segment assets

 

42,693

 

 

33,833

 

 

5,707

 

 

82,233

 

Note 12

In November 2002, the FASB issued Interpretation No. 45, Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others, which changes current practice in accounting for, and disclosure of, guarantees. Interpretation No. 45 will require certain guarantees to be recorded as liabilities at fair value on the Company's balance sheet. Current practice requires that liabilities related to guarantees be recorded only when a loss is probable and reasonably estimable, as those terms are defined in SFAS No. 5, Accounting for Contingencies. Interpretation No. 45 also requires a guarantor to make



- -14-


Note 12 (continued)

significant new disclosures, even when the likelihood of making any payments under the guarantee is remote, which is another change from current practice. The initial recognition and measurement provisions are applicable on a prospective basis to guarantees issued or modified after December 31, 2002. The recognition and measurement provisions were adopted, prospectively, as of January 1, 2003 and did not have a significant impact on the Company's consolidated financial position or results of operations. Disclosure of significant guarantees is included in Note 6 of this Form 10-Q.

In November 2002, the Emerging Issues Task Force reached a consensus on Issue 00-21, which addresses how to account for arrangements that may involve the delivery or performance of multiple products, services and/or rights to use assets. Revenue arrangements with multiple deliverables should be divided into separate units of accounting if the deliverables in the arrangement meet the following criteria: (1) value to the customer on a stand alone basis, (2) there is objective and reliable evidence of the fair value of the undelivered items and (3) the arrangement includes a general right of return, where delivery or performance of the undelivered items is considered probable and substantially in the control of the vendor. Arrangement consideration should be allocated among the separate deliverables based on their relative fair values. The accounting for revenue arrangements under EITF 00-21 is applicable for all new agreements entered into in periods beginning after June 15, 2003. The Company does not expec t that the new recognition and measurement provisions will have any effect on the Company's future financial results.

In January 2003, the FASB issued Interpretation No. 46, Consolidation of Variable Interest Entities. This standard clarifies the application of Accounting Research Bulletin No. 5a, Consolidated Financial Statements, and addresses consolidation by business enterprises of variable interest entities (VIE). Interpretation No. 46 requires existing unconsolidated variable interest entities to be consolidated by their primary beneficiaries if the entities do not effectively disperse risk among the parties involved. Interpretation No. 46 also enhances the disclosure requirements related to variable interest entities. This statement is effective for variable interest entities created or in which an enterprise obtains an interest after January 31, 2003. Interpretation No. 46 will be effective for the Company beginning January 1, 2004 for all interest in variable interest entities acquired before February 1, 2003. The adoption of Interpretation No. 46 is not expected to have an effect on the Company's consolidated financial statements because the Company is not involved in any VIE arrangements.















- -15-


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, 2003 compared to the three-and six-month periods ended June 30, 2002. The comments that follow should be read in conjunction with the Company's condensed 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,


 

2003


 

2002


 
 

2003


 

2002


 
                   

Sales

100.0%

 

100.0%

   

100.0%

 

100.0%

 

Cost of product sold

87.2%


 

82.2%


   

85.6%


 

81.9%


 

Gross profit

12.8%

 

17.8%

   

14.4%

 

18.1%

 

Operating expenses:

                 

   Research and development

3.4%

 

2.6%

   

3.1%

 

2.8%

 

   Selling, general, and administrative

10.1%


 

8.3%


   

9.4%


 

8.2%


 

Operating income (loss)

(0.7%

)

6.9%

   

1.9%

 

7.1%

 

Other income (expense)

0.1%


 

0.0%


   

0.1%


 

(0.1%


)

Earnings (loss) from continuing
   operations before taxes on income


(0.6%


)


6.9%

   


2.0%

 


7.0%

 

Taxes on income

(0.2%


)

2.7%


   

0.4%


 

2.5%


 

Net earnings (loss) from continuing operations

(0.4%

)

4.2%

   

1.6%

 

4.5%

 

Discontinued operations:

                 

   Gain on disposal of Carpenter

1.7%


 

0.4%


   

1.3%


 

0.3%


 

Net earnings

1.3%


 

4.6%


   

2.9%


 

4.8%


 

Quarter Ended June 30, 2003, Compared to the Quarter Ended June 30, 2002

For the three months ended June 30, 2003, consolidated sales decreased $10.2 million (15.6%) to $55.1 million, from $65.3 million in the second quarter of 2002. Chassis Group sales for this period decreased by $6.2 million (12.2%). The majority of this decrease was due to lower sales of motorhome chassis. During the second quarter of 2003, motorhome chassis sales were $8.2 million (23.3%) lower than the second quarter of 2002. This decrease was due to the fact that higher sales levels existed in 2002 as a result of significant pent up demand in the first half of 2002.

Fire truck chassis sales in the second quarter of 2003 were up $1.4 million (9.3%) over the same period of 2002. The fire truck market continues to be strong in 2003, as fire departments focus on making sure their equipment is sufficient to respond to the variety of emergencies that are on their growing list of responsibilities.


- -16-


Item 2.

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

EVTeam sales decreased $4.2 million, or 24.3%, from the prior year's second quarter. The merger of Luverne Fire Apparatus and Quality Manufacturing slowed their production as they consolidated staff and aligned their production efforts. In addition, the Company's planned closure of Road Rescue's St. Paul, Minnesota facility and transfer and consolidation of its ambulance operations to its new Marion, South Carolina facility has had a transitional negative impact on EVTeam production. Road Rescue's production at the new plant has ramped up slowly in order to ensure high quality levels.

Gross margin decreased from 17.8% for the quarter ended June 30, 2002 to 12.8% for the same period of 2003. This decrease is primarily due to a negative physical inventory and other costing adjustments totaling $1.3 million made at an EVTeam location. In addition, the lower sales volumes noted above, as well as the new Gladiator "Evolution" chassis launch, contributed to a lower gross margin. Lastly, higher costs of certain components, including engines meeting higher emissions standards, were a factor in the decrease in margins.

Operating expenses as a percentage of sales rose from 10.9% for the second quarter of 2002 to 13.5% for the second quarter of 2003. This increase is partially due to the decrease in sales volume. Operating expenses in dollars increased $0.3 million, or 3.6%, primarily due to higher operating expenses encountered by the EVTeam as merger-related and plant closure efforts continued.

The effective tax rate in the second quarter of 2003 was 36.8% versus 39.1% for the second quarter of 2002. The Company's effective tax rate fluctuates based upon the states where sales occur and with the level of export sales.

On September 28, 2000, the Company's Board of Directors passed a resolution to cease funding of the Company's majority-owned subsidiary, Carpenter Industries, Inc. Carpenter's Board of Directors then voted on September 29, 2000 to begin the orderly liquidation of Carpenter. Because Carpenter was a separate segment of the Company's business, the disposition of Carpenter's net assets is being accounted for as a discontinued operation. The $1.0 million and $0.3 million gains on disposal of Carpenter in the second quarters of 2003 and 2002, respectively, are a result of the Company's revision of its estimated loss to dispose of the business, based upon resolution of certain accrued items related to the disposal. Details of Carpenter's assets and liabilities at June 30, 2003 and December 31, 2002 are set forth in Note 8 to the condensed consolidated financial statements included in Item 1 of this Form 10-Q.

Total chassis orders received during the second quarter of 2003 decreased 24.9% compared to the same period in 2002. This is due to a 26.6% decrease in motorhome chassis orders coupled with a 24.1% decrease in fire truck chassis orders. Based on average order lead-time, the Company estimates that approximately one-half of the motorhome, one-third of the specialty and none of the fire truck chassis orders received during the three-month period ended June 30, 2003 were produced and delivered by June 30, 2003.


- -17-


Item 2.

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

At June 30, 2003, the Company had $76.4 million in backlog compared with a backlog of $82.7 million at June 30, 2002. This was due to decrease in Chassis Group backlog of $8.1 million, or 15.2%, and an increase in EVTeam backlog of $1.8 million, or 5.9%.

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.

Six-Month Period Ended June 30, 2003, Compared to the Six-Month Period Ended June 30, 2002

For the six months ended June 30, 2003, consolidated sales decreased $16.5 million (12.5%) to $115.5 million, from $132.0 million in the first six months of 2002. Chassis Group sales decreased by $8.6 million (8.4%). The majority of this decrease is due to lower sales of motorhome chassis. During the first half of 2003, motorhome chassis sales were $14.8 million (20.4%) lower than the first half of 2002. This decrease was due to the fact that higher sales levels existed in 2002 as a result of significant pent up demand in the first half of 2002.

Fire truck chassis sales in the first six months of 2003 were up $5.1 million (17.8%) over the same period of 2002. The fire truck market continues to be strong in 2003, as fire departments focus on making sure their equipment is sufficient to respond to the variety of emergencies that are on their growing list of responsibilities.

EVTeam sales decreased $9.2 million, or 25.9%, from their sales level in the prior year's first half. The merger of Luverne Fire Apparatus and Quality Manufacturing slowed their production as they consolidated staff and aligned their production efforts. In addition, the Company's planned closure of Road Rescue's St. Paul, Minnesota facility and transfer and consolidation of its ambulance operations to its new Marion, South Carolina facility has had a transitional negative impact on EVTeam production. Road Rescue's production at the new plant has ramped up slowly in order to ensure high quality levels.

Gross margin decreased from 18.1% for the six months ended June 30, 2002 to 14.4% for the same period of 2003. This decrease is primarily due to a negative physical inventory and other costing adjustments totaling $1.3 million made at an EVTeam location. In addition, the lower sales volumes noted above, as well as the new Gladiator "Evolution" chassis launch, contributed to a lower gross margin. Lastly, higher costs of certain components, including engines meeting the higher emissions standards, were a factor in the decrease in margins.

Operating expenses as a percentage of sales increased to 12.5% for the six months ended June 30, 2003 versus 11.0% for the same period in 2002. Operating expenses in dollars dropped $0.1 million, or 0.8%, as the Company is focused on lowering operating expenses in light of lower sales volumes.


- -18-


Item 2.

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

Other income (expense) improved from (0.1)% of sales in the six months ended June 30, 2002 to 0.1% of sales in the same period in 2003. The Company paid off its interest bearing debt during April of 2002, resulting in lower interest expense in 2003 than in 2002.

The effective tax rate in the first half of 2003 was 18.6% versus 35.0% for the first half of 2002. The Company's effective tax rate decreased in the first half of 2003 as a result of reductions in previously recorded estimates for accrued taxes on income based on settlements of examinations with state and federal taxing authorities that reduced the provision for income taxes during the period.

On September 28, 2000, the Company's Board of Directors passed a resolution to cease funding of the Company's majority-owned subsidiary, Carpenter Industries, Inc. Carpenter's Board of Directors then voted on September 29, 2000 to begin the orderly liquidation of Carpenter. The disposition of Carpenter's assets is being accounted for as a discontinued operation. The $1.5 million and $0.4 million gains on disposal of Carpenter in the first half of 2003 and the first half of 2002, respectively, are a result of the Company's revision of its estimated loss to dispose of the business, based upon resolution of certain accrued items related to the disposal. Details of Carpenter's assets and liabilities at June 30, 2003 and December 31, 2002 are set forth in Note 8 to the condensed consolidated financial statements included in Item 1 of this Form 10-Q.

Total chassis orders received during the first six months of 2003 decreased 17.8% compared to the same period in 2002. This is due to a 17.7% decrease in motorhome chassis orders coupled with a 19.4% decrease in fire truck chassis orders. Based on average order lead-time, the Company estimates that approximately one-half of the motorhome, one-third of the specialty, and one-sixth of the fire truck chassis orders received during the six-month period ended June 30, 2003 were produced and delivered by June 30, 2003.

At June 30, 2003, the Company had $76.4 million in backlog compared with a backlog of $82.7 million at June 30, 2002. This was due to decrease in Chassis Group backlog of $8.1 million, or 15.2% and an increase in EVTeam backlog of $1.8 million, or 5.9%.

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, 2003, cash provided by continuing operating activities was $1.3 million, which was $5.8 million, or 81.7%, lower than the $7.1 million of cash provided by continuing operating activities for the six months ended June 30, 2002. See the Condensed Consolidated Statements of Cash Flows contained in Item 1 of this Form 10-Q for the various factors that led to this decrease. The cash on hand at December 31, 2002, cash provided by operations of $2.9 million and cash provided from the exercise of stock options of $0.8 million allowed the Company to pay $0.5 million to repurchase and retire stock, pay $0.6 million in dividends and make $1.0 million of property, plant and equipment purchases. The Company's working capital increased $3.2 million, from $35.3 million at December 31, 2002 to $38.5 million at June 30, 2003. Cash and cash equivalents increased $1.5 million, from $8.1 million at December 31, 2002 to $9.6 million at June 30, 2003.


- -19-


Item 2.

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

Inventories increased $4.5 million from $25.2 million at December 31, 2002 to $29.7 million at June 30, 2003. This increase was due in part to more favorable pricing offered on certain chassis components purchased from third-party suppliers. Additionally, the questionable availability of ambulance chassis due to plant closures for model change over resulted in higher chassis purchases in the second quarter.

Shareholders' equity increased $3.2 million in the six months ended June 30, 2003 to $59.6 million from $56.4 million at December 31, 2002. This change resulted from the $3.3 million in net earnings of the Company and the receipt of $1.0 million from the exercise of stock options net of the $0.5 million to repurchase and retire Company stock and pay $0.6 million in dividends.

On April 24, 2003, the Board of Directors authorized management to repurchase up to a total of 500,000 shares of the Company's common stock in open market transactions. Management repurchased 57,065 shares through June 30, 2003. Repurchases of common stock are contingent upon market conditions. The Company has not set an expiration date for the completion of the repurchase program. If the Company were to repurchase the remaining 442,935 shares of stock at current prices, this would cost the Company approximately $3.8 million. The Company believes that it has sufficient cash reserves to fund this stock buyback.

The Company's primary line of credit is a $20.0 million revolving note payable to a bank that expires on October 15, 2003. The Company expects to extend or refinance this line of credit in 2003. Under the terms of the line of credit 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, 2003, the Company was in compliance with all debt covenants and there were no borrowings on this line of credit.

The Company also has a secured line of credit for $0.2 million and an unsecured line of credit for $1.0 million. The $0.2 million line carries an interest rate of 2% above the bank's prime rate (prime rate at June 30, 2003 was 4.00%) and has an expiration date of June 1, 2004. This line of credit is secured by accounts receivable, inventory and equipment. 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 either of these lines at June 30, 2003.

The Company believes that its cash on hand, as well as its anticipated cash flows from operating activities, will be sufficient to fund operating activities and other anticipated cash needs for the next year and the foreseeable future.  Should additional funds be required, the Company had $21.2 million of borrowing capacity available under its existing lines of credit at June 30, 2003.

CRITICAL ACCOUNTING POLICIES

The following discussion of accounting policies is intended to supplement Note 1, General and Summary of Accounting Policies, of the Notes to Consolidated Financial Statements included in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 14, 2003. These policies were selected because they are broadly applicable within the Company's operating units and they involve additional management judgment due to the sensitivity of the methods, assumptions and estimates necessary in determining the related income statement, asset and/or liability amounts.


- -20-


Item 2.

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

Revenue Recognition - The Company recognizes revenue in accordance with SEC Staff Accounting Bulletin (SAB) No. 101, Revenue Recognition in Financial Statements, as amended by SAB 101A and SAB 101B. Accordingly, revenue is recognized when title to the product and risk of ownership passes to the buyer. This occurs when the unit has been completed in accordance with purchase order specifications and has been tendered for delivery to the customer. Sales are shown net of returns, discounts and sales incentives, which historically have not been significant. The collectibility of any related receivable is reasonably assured before revenue is recognized.

Inventory - Estimated inventory allowances for slow-moving and obsolete inventory are based upon current assessments about future demands, market conditions and related management initiatives. If market conditions are less favorable than those projected by management, additional inventory allowances may be required.

Warranties - The Company's policy is to record a provision for the estimated cost of warranty-related claims at the time of the sale, and periodically adjust the provision to reflect actual experience. The amount of warranty liability accrued reflects management's best estimate of the expected future cost of honoring the Company's obligations under the warranty agreements. The Company's estimates are based on historical experience, the number of units involved and the extent of features and components included in product models. See also Note 5 to the condensed consolidated financial statements included in Item 1 of this Form 10-Q.

PENDING ACCOUNTING POLICIES

See Note 12 to the condensed consolidated financial statements included in Item 1 of this Form 10-Q.

EFFECT OF INFLATION

Inflation affects the Company in two principal ways. First, the Company's debt, if any, is tied to the prime and LIBOR interest rates so that interest rate increases would 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 the Company serves are competitive in nature, and competition limits the Company's ability to pass through cost increases in many cases. The Company strives to minimize the effects 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:


- -21-


Item 2.

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


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 an industry-wide market decline or due to our inability to compete with other companies that are unaffected by these laws, regulations or policies.

 

 

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 and lead to the temporary unavailability of engines.

 

 

Changes in economic conditions, including changes in interest rates, financial market performance and our 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.

 

 

Changes in relationships with major customers: an adverse change in our relationships with major customers would have a negative impact on our earnings and financial position.

 

Armed conflicts and other military actions: the considerable political and economic uncertainties resulting from these events could adversely affect our order intake and sales, particularly in the motorhome market.

 

 

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.


- -22-


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. However, at June 30, 2003, the Company had no debt outstanding under its variable rate short-term and long-term debt. The Company does not enter into market risk sensitive instruments for trading purposes.

Item 4.

Controls and Procedures.

As of June 30, 2003, an evaluation was performed under the supervision and with the participation of the Company's management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934). Based on that evaluation, the Company's management, including the CEO and CFO, concluded that the Company's disclosure controls and procedures were effective as of June 30, 2003 in timely alerting them to material information relating to the Company (including its consolidated subsidiaries) required to be included in the Company's periodic filings with the Securities and Exchange Commission. There have been no significant changes in the Company's internal controls or in other factors that could significantly affect internal controls subsequent to June 30, 2003.

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 May 28, 2003. The purpose of the meeting was to elect directors, to approve the Stock Option and Restricted Stock Plan of 2003, 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 to a term expiring in 2006 (along with the number of votes cast for or authority withheld) is as follows:


Elected Directors


For

Authority
Withheld/Against

 

 

 

 

 

John E. Sztykiel

8,603,157

2,372,131

 

Charles E. Nihart

8,654,357

2,320,932

 

Kenneth Kaczmarek

8,654,357

2,320,932

 

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








- -23-


Item 4.

Submission of Matters to a Vote of Security Holders (Continued).

The following proposals were acted on:

Proposal

For

Against

Abstain

 

 

 

 

Proposal to approve the Spartan Motors, Inc. Stock Option and Restricted Stock Plan of 2003



8,691,994



1,589,440



693,855

 

 

 

 

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



5,709,047



3,036,901



28,127

There were no broker non-votes with respect to matters voted on by the Company's shareholders at the meeting.




















- -24-


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, as amended to date. Previously filed as an exhibit to the Company's Annual Report on Form 10-K for the period ended December 31, 2000, and incorporated herein by reference.

 

 

 

 

 

3.2

 

Spartan Motors, Inc. Bylaws, as amended to date. Previously filed as an exhibit to the Company's Form 10-Q Quarterly Report for the period ended March 31, 2003, and incorporated herein by reference.

 

 

 

 

 

31.1

 

Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

 

 

 

 

31.2

 

Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

 

 

 

 

32.1

 

Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

          (b)     Reports on Form 8-K. The Company filed the following Current Report on Form 8-K during the quarter ended June 30, 2003. This Form 8-K was furnished pursuant to Regulation FD and is considered to have been "furnished" but not "filed" with the Securities and Exchange Commission.

Date of Report


 

Filing Date


 

Item(s) Reported


 

 

 

 

 

April 24, 2003

 

April 24, 2003

 

Under Item 9, this Form 8-K included a press release that announced the Company's financial results for the quarter ended March 31, 2003 and included condensed income statements for the three-month periods ended March 31, 2003 and 2002, and condensed consolidated balance sheets as of March 31, 2003 and December 31, 2002. The Form 8-K also included a press release concerning the Company's intent to repurchase up to 500,000 shares of its outstanding common stock.









- -25-


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.

 

Date:  August 14, 2003

SPARTAN MOTORS, INC.

 

 

 

 

 

 

 

By

/s/ James W. Knapp


 

 

James W. Knapp
Chief Financial Officer
(Principal Accounting and Financial Officer)























- -26-


EXHIBIT INDEX

 

Exhibit No.

 

Document

 

 

 

 

 

3.1

 

Spartan Motors, Inc. Restated Articles of Incorporation, as amended to date. Previously filed as an exhibit to the Company's Annual Report on Form 10-K for the period ended December 31, 2000, and incorporated herein by reference.

 

 

 

 

 

3.2

 

Spartan Motors, Inc. Bylaws, as amended to date. Previously filed as an exhibit to the Company's Form 10-Q Quarterly Report for the period ended March 31, 2003, and incorporated herein by reference.

 

 

 

 

 

31.1

 

Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

 

 

 

 

31.2

 

Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

 

 

 

 

32.1

 

Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

































- -27-


Spartan Motors, Inc. Exhibit 31.1

EXHIBIT 31.1

CERTIFICATION

          I, John E. Sztykiel, certify that:

          1.     I have reviewed this quarterly report on Form 10-Q of Spartan Motors, Inc.;

          2.     Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

          3.     Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

          4.     The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) for the registrant and have:

               a)     Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

               b)     Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

               c)     Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

          5.     The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):




               a)     All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

               b)     Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: August 14, 2003

 

/s/ John E. Sztykiel


 

 

President and Chief Executive Officer

























- -2-


Spartan Motors, Inc. Exhibit 31.2

EXHIBIT 31.2

CERTIFICATION

          I, James W. Knapp, certify that:

          1.     I have reviewed this quarterly report on Form 10-Q of Spartan Motors, Inc.;

          2.     Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

          3.     Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

          4.     The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) for the registrant and have:

               a)     Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

               b)     Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

               c)     Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

               5.     The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):




               a)     All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

               b)     Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

 

Date: August 14, 2003

 

/s/ James W. Knapp


 

 

Chief Financial Officer




















- -2-


Spartan Motors, Inc. Exhibit 32.1

EXHIBIT 32.1

CERTIFICATION

          Pursuant to 18 U.S.C. § 1350, each of the undersigned hereby certifies in his capacity as an officer of Spartan Motors, Inc. (the "Company") that the Quarterly Report of the Company on Form 10-Q for the accounting period ended June 30, 2003 fully complies with the requirements of Section 13(a) and 15(d) of the Securities Exchange Act of 1934 and that information contained in such report fairly presents, in all material respects, the financial condition of the Company at the end of such period and the results of operations of the Company for such period.

          This Certificate is given pursuant to 18 U.S.C. § 1350 and for no other purpose.

 

Dated: August 14, 2003

/s/ John E. Sztykiel


 

John E. Sztykiel
Chief Executive Officer

 

 

 

 

 

 

Dated: August 14, 2003

/s/ James W. Knapp


 

James W. Knapp
Chief Financial Officer

 

 

          A signed original of this written statement has been provided to Spartan Motors, Inc. and will be retained by Spartan Motors, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.