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
MARCH 31, 1997 0-13611
SPARTAN MOTORS, INC.
(Exact Name of Registrant as Specified in Its Charter)
MICHIGAN 38-2078923
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1000 REYNOLDS ROAD
CHARLOTTE, MICHIGAN 48813
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (517) 543-6400
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes ___X___ No _______
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
OUTSTANDING AT
CLASS MAY 1, 1997
----- -----------
Common stock, $.01 par value 12,364,472 shares
===========================================================================
SPARTAN MOTORS, INC.
INDEX
====================================================
PART I. FINANCIAL INFORMATION
PAGE
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets - March 31, 1997
(Unaudited) and December 31, 1996 3
Condensed Consolidated Statements of Net Earnings -
Three Months Ended March 31, 1997 and 1996
(Unaudited) 5
Condensed Consolidated Statements of Cash Flows -
Three Months Ended March 31, 1997 and 1996
(Unaudited) 6
Notes to Condensed Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 13
SIGNATURES 14
-2-
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SPARTAN MOTORS, INC.
CONSOLIDATED BALANCE SHEETS
======================================
MARCH 31, 1997 DECEMBER 31, 1996
-------------- -----------------
(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 4,216,382 $ 4,912,001
Investment securities 5,615,557 8,955,809
Accounts receivable, less allowance
for doubtful accounts of $689,000
in 1997 and $629,000 in 1996 28,735,769 26,299,698
Inventories 24,791,680 24,283,517
Deferred tax benefit 1,455,000 1,471,700
Federal taxes receivable -- 925,000
Other current assets 1,497,796 1,063,601
----------- -----------
TOTAL CURRENT ASSETS 66,312,184 67,911,326
=========== ===========
PROPERTY, PLANT, AND EQUIPMENT,
net of accumulated depreciation
of $8,374,857 and $7,977,012 in
1997 and 1996, respectively 11,371,158 11,403,194
EQUITY INVESTMENT IN AFFILIATE 9,076,364 --
OTHER ASSETS 364,749 368,249
----------- -----------
TOTAL $87,124,455 $79,682,769
=========== ===========
See notes to consolidated financial statements.
-3-
SPARTAN MOTORS, INC.
CONSOLIDATED BALANCE SHEETS
======================================
MARCH 31, 1997 DECEMBER 31, 1996
-------------- -----------------
(Unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 8,283,155 $ 6,264,362
Other current liabilities and
accrued expenses 1,453,265 2,058,820
Accrued warranty expense 1,909,610 2,002,870
Accrued customer rebates 601,780 480,216
Taxes on income 83,200 --
Accrued compensation and related
taxes 1,357,160 1,034,496
Accrued vacation 668,754 644,754
Current portion of long-term debt 1,232,664 586,000
----------- -----------
TOTAL CURRENT LIABILITIES 15,589,589 13,071,518
LONG-TERM DEBT, less current portion 9,386,759 5,206,631
----------- -----------
TOTAL LIABILITIES 24,976,348 18,278,149
SHAREHOLDERS' EQUITY:
Preferred Stock, $1.00 par value: 2,000,000
shares authorized (none issued)
Common Stock, $.01 par value, 23,900,000
authorized, issued 12,364,472 shares
in 1997 and 12,354,072 shares in 1996 123,645 123,541
Additional Paid in Capital 21,136,041 21,065,942
Retained earnings 40,991,322 40,195,117
Valuation allowance (102,901) 20,020
----------- -----------
-4-
TOTAL SHAREHOLDERS' EQUITY 62,148,107 61,404,620
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $87,124,455 $79,682,769
=========== ===========
See notes to consolidated financial statements.
-5-
SPARTAN MOTORS, INC.
CONSOLIDATED STATEMENTS OF NET EARNINGS (UNAUDITED)
======================================
THREE MONTHS ENDED MARCH 31,
----------------------------
1997 1996
----------- -----------
SALES $45,787,583 $47,088,279
COST OF PRODUCTS SOLD 38,653,503 40,881,141
----------- -----------
GROSS PROFIT 7,134,080 6,207,138
OPERATING EXPENSES
Research and development 1,111,328 999,418
Selling, general and administrative 3,326,257 3,510,951
----------- -----------
OPERATING INCOME 2,696,495 1,696,769
OTHER INCOME EXPENSE
Interest Expense (254,568) (128,664)
Interest and Other Income 372,914 299,923
EARNINGS BEFORE TAXES AND EQUITY IN LOSS ----------- -----------
OF AFFILIATE 2,814,841 1,868,028
EQUITY IN LOSS OF AFFILIATE 923,636 --
EARNINGS BEFORE TAXES ON INCOME 1,891,205 1,868,028
----------- -----------
TAXES ON INCOME 1,095,000 656,000
----------- -----------
NET EARNINGS $ 796,205 $ 1,212,028
=========== ===========
NET EARNINGS PER SHARE $ 0.06 $ 0.10
=========== ===========
DIVIDENDS DECLARED PER SHARE $ 0.05
===========
-6-
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 12,411,435 12,639,000
=========== ===========
See notes to consolidated financial statements.
-7-
SPARTAN MOTORS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
======================================
THREE MONTHS ENDED MARCH 31,
------------------------------
1997 1996
------------ -----------
Net earnings
Adjustments to reconcile net earnings to net cash $ 796,205 $ 1,212,028
(used in) provided by operating activities:
Depreciation and amortization 452,654 436,563
Gain on sales of assets and
marketable securities (79,144) (3,079)
Equity in net loss of affiliate 923,636 --
Decrease (increase) in:
Accounts receivable (2,436,071) (5,768,256)
Inventories (508,163) (2,538,111)
Deferred tax benefit 16,309
Federal taxes receivable 925,000
Other assets (433,807) 26,328
Increase (decrease) in:
Accounts payable 2,018,794 4,969,866
Other current liabilities
and accrued expenses (605,555) 500,394
Accrued warranty expense (93,260) 16,418
Accrued customer rebate 121,564 36,443
Taxes on income 83,200 151,000
Accrued compensation and
related taxes 346,665 52,995
------------ -----------
TOTAL ADJUSTMENTS 731,822 (2,072,334)
NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES 1,528,027 (860,306)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment (405,133) (422,209)
Proceeds from sales of property,
plant and equipment 11,600
Purchases of investment securities (600,000) (1,590,552)
Proceeds from sales of investment securities 3,862,969 1,628,366
-8-
Investment in Affiliate (10,000,000)
Principal repayment on notes receivable -- 64,682
------------ -----------
NET CASH USED IN INVESTING ACTIVITIES (7,130,564) (319,713)
(Continued)
-9-
SPARTAN MOTORS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - CONTINUED
======================================
THREE MONTHS ENDED MARCH 31,
------------------------------
1997 1996
------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term debt $ 5,000,000
Proceeds from exercise of stock options 80,124 $ 85,360
Payments on long-term debt (173,206) (132,779)
Purchase of treasury stock -- (793,750)
------------ -----------
NET CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES 4,906,918 (841,169)
EFFECT OF EXCHANGE RATE CHANGES ON CASH -- 3,175
------------ -----------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (695,619) 2,018,013
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 4,912,001 5,202,595
============ ===========
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 4,216,382 $ 3,184,582
============ ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid for interest
was $256,677 and $128,664 for the three months ended March 31, 1997 and
1996, respectively. Cash paid for income taxes was $72,800 and $465,000
for the three months ended March 31, 1997 and 1996, respectively.
See notes to consolidated financial statements.
-10-
SPARTAN MOTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
=======================================
NOTE 1 For a description of the accounting policies followed refer to
the notes to the Company's annual consolidated financial
statements for the year ended December 31, 1996, included in Form
10-K filed with the Securities and Exchange Commission on March
28, 1997.
NOTE 2 The accompanying unaudited interim consolidated financial
statements reflect all normal and recurring adjustments that are
necessary for fair presentation of the financial position as of
March 31, 1997, and the results of operations for the three month
periods ended March 31, 1997 and 1996.
NOTE 3 The results of operations for the three month period ended March
31, 1997, are not necessarily indicative of the results to be
expected for the full year.
NOTE 4 Inventories consist of raw materials and purchased components,
work in process, and finished goods and are summarized as
follows:
MARCH 31, 1997 DECEMBER 31, 1996
-------------- -----------------
Finished goods $ 2,322,379 $ 2,449,406
Raw materials and
purchased components 23,076,840 22,057,444
Work in process 384,461 528,667
Obsolescence reserve (992,000) (752,000)
----------- -----------
$24,791,680 $24,283,517
=========== ===========
NOTE 5 In January 1997 the Company acquired a 33% interest in
Carpenter Industries, Inc. ("Carpenter") for approximately $10
million. Carpenter is a manufacturer of school bus bodies and
chassis. The Company will account for its investment in
Carpenter using the equity method of accounting. A summary of
Carpenter's balance sheet as of March 31, 1997 and the results of
its operations for the three month period ended March 31, 1997
are as follows:
-11-
MARCH 31, 1997
--------------
(Unaudited)
Balance Sheet
Total Assets $70,515,503
===========
Total Liabilities 53,737,837
Stockholders' Equity 16,777,666
Total Liabilities and Equity 70,515,503
===========
Income Statement
Revenues 18,652,968
Loss from Operations (1,918,627)
Net Loss (2,770,909)
NOTE 6 During the three months ended March 31, 1997, shareholders'
equity changed as follows:
Balance at December 31, 1996 $61,404,620
Net earnings 796,205
Exercise of stock options 70,203
Valuation allowance - investment
securities (122,921)
Balance at March 31, 1997 $62,148,107
===========
NOTE 7 At March 31, 1997 the Company has a $5 million note payable which
matures on April 4, 1997. On April 4, 1997, the Company
refinanced this note with another lender. The new debt matures
on April 3, 2002 and bears interest at .75% above the LIBOR rate.
In accordance with Statement of Financial Accounting Standards
(SFAS) No. 6 the Company has classified such debt as long-term at
March 31, 1997.
-12-
NOTE 8 The Financial Accounting Standards Board has issued SFAS No. 128,
"Earnings Per Share." This statement is effective for financial
statements issued after December 15, 1997. The statement
requires companies to present earnings per share on the face of
the income statement in two categories called "Basic" and
"Diluted" and requires restatement of all periods presented. The
Company will adopt SFAS No. 128 during the fourth quarter of
1997.
-13-
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 period ended March 31,
1997 compared to the period ended March 31, 1996. The comments that follow
should be read in conjunction with the Company's consolidated financial
statements and related notes contained in this Form 10-Q.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the components
of the Company's consolidated statements of net earnings, on an actual
basis, as a percentage of revenues:
THREE MONTHS ENDED MARCH 31,
----------------------------
1997 1996
-------------- -----------
Revenues 100.0% 100.0%
Cost of Product Sold 84.4 86.8
----- -----
Gross Profit 15.6 13.2
Operating Expenses 2.4 2.1
Research and development 7.3 7.4
----- -----
Selling, general, and administrative 5.9 4.2
Income from operations
Interest Expense (.6) (.3)
Other income (expense) .8 .7
----- -----
Earnings before taxes and equity in loss
of affiliate 6.1 4.6
Equity in loss of affiliate 2.0 --
Taxes on income 2.4 1.6
----- -----
Net earnings 1.7% 3.0%
-14-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
THREE MONTH PERIOD ENDED MARCH 31, 1997, COMPARED TO THE THREE MONTH PERIOD
ENDED MARCH 31, 1996
Revenues for the three months ended March 31, 1997, were $45.8 million
compared to $47.1 million in 1996, a decrease of 2.8%. The decrease in
revenues is primarily attributable to a 42% decline in bus revenues and a
25.1% decline in fire truck revenues. Motorhome revenues, however,
increased 18.1%. This change in product mix in combination with continued
efforts to reduce production costs led to the 14.9% increase in gross
profit. Gross margin as a percent of sales increased 2.4% from 13.2% for
the three months ended March 31, 1996 to 15.6% compared to the same period
in 1997.
Operating expenses decreased 1.6% in total dollars and as a percentage
of sales from 11.6% for the three months ended March 31, 1996 to 9.7% for
the same period in 1997. The decrease came primarily from a 12.9% decline
in general and administrative expenses offset by a 11.2% increase in
research and development costs and a 3.2% increase in selling expenses.
Interest and other income increased 40.2% compared to the same period
in 1996 due to realized gains on investments sold to generate cash for the
investment in Carpenter Industries, Inc. ("Carpenter"). Interest expense
increased 97.9% due to borrowings necessary to complete the financing of
the investment in Carpenter. The $10 million investment in Carpenter was
financed 50% in cash generated from the sale of marketable securities and
50% long-term debt.
The equity in loss of affiliate represents the Company's 33% share of
the $2.7 million recorded by Carpenter for the three months ended March 31,
1997.
Total chassis orders received increased 26.7% during the three months
ended March 31, 1997 compared to the same period in 1996. The increase in
orders is primarily attributed to the Company's motorhome and bus/specialty
product lines. 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 orders received during the three
month period ended March 31, 1997 were produced and delivered by March 31,
1997.
At March 31, 1997, the Company had approximately $56.1 million in
backlog chassis orders compared with a backlog of approximately $52.9
million for the same period in 1996. While orders in backlog are subject
to modification, cancellation or rescheduling by customers, the Company has
not experienced significant modification, cancellation or rescheduling of
-15-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
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
Over the years, the Company has financed its growth through a
combination of funds provided from equity offerings, operations and long-
and short-term debt financing. During the three months ended March 31,
1997, cash provided by operating activities was approximately $1.5 million.
On March 31, 1997, the Company had working capital of $50.7 million
compared to $54.8 million at December 31, 1996. The current ratio on March
31, 1996 decreased to 4.3 compared with 5.2 on December 31, 1996. The
change in working capital was the result of increases in accounts
receivable and accounts payable and a decrease in investment securities.
Accounts receivable increased approximately $2.4 million. The increase in
accounts payable of approximately $2 million is primarily temporary timing
difference for payments due to the conversion to new software at the end of
the quarter.
The Company anticipates that cash generated from operations, the
liquidity of short-term investment securities, and its existing credit line
will be sufficient to satisfy working capital and capital expenditure
requirements for the foreseeable future. This will provide the Company
with financial flexibility to respond quickly to business opportunities as
they arise, including opportunities for growth either through internal
development or through strategic joint ventures or acquisitions.
Shareholders' equity increased to approximately $62.1 million as of
March 31, 1997. This change is primarily due to the result of net earnings
of $.8 million. The Company's debt to equity ratio increased to 15.1 on
March 31, 1997, compared with 8.5 at December 31, 1996 due to the $5 million
of term debt used to finance the investment in Carpenter.
The Company's unsecured line of credit with a bank provides for
maximum borrowings of $15 million at 2% above the 30-day LIBOR, which was
5.45% at March 31, 1997. As of March 31, 1997, there were no borrowings
against this line. In addition, under the terms of its credit agreement
with its bank, the Company has the ability to issue letters of credit
totaling $400,000. At March 31, 1997, the Company had outstanding letters
of credit totaling $200,000.
-16-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995
Except for the historical information contained herein, the matters
discussed in this Form 10-Q are forward-looking statements which involve
risks and uncertainties, including but not limited to economic,
competitive, governmental and technological factors affecting the Company's
operations, markets, products, services and prices, and other factors
discussed in the Company's filings with the Securities and Exchange
Commission.
-17-
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS. The following documents are filed as exhibits to this
report on Form 10-Q:
EXHIBIT NO. DOCUMENT
3.1 Spartan Motors, Inc. Restated Articles of Incorporation.
Previously filed as an exhibit to the Company's Annual
Report on Form 10-K for the period ended December 31, 1995,
and incorporated herein by reference.
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.
(b) REPORTS ON FORM 8-K. The Company filed a Form 8-K on January 6,
1997, and filed Amendment No. 1 to Form 8-K on March 31, 1997, regarding
the Company's investment in Carpenter Industries, Inc.
-18-
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
SPARTAN MOTORS, INC.
Date: May 15, 1997 By /S/ RICHARD J. SCHALTER
Richard J. Schalter
Secretary/Treasurer
(Principal Accounting and Financial
Officer)
-19-
EXHIBIT INDEX
EXHIBIT NO. DOCUMENT
3.1 Spartan Motors, Inc. Restated Articles of Incorporation.
Previously filed as an exhibit to the Company's Annual
Report on Form 10-K for the period ended December 31, 1995,
and incorporated herein by reference.
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.
5
1,000
3-MOS
DEC-31-1997
JAN-01-1997
MAR-31-1997
4,216,382
5,615,557
28,735,769
689,000
24,791,680
66,312,184
11,371,158
8,374,857
87,124,455
24,976,348
9,386,759
123,645
0
0
62,024,462
87,124,455
45,787,583
46,160,497
38,653,503
4,437,585
0
60,000
254,568
1,891,205
1,095,000
796,205
0
0
0
796,205
.06
.06
