<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended March 31, 1996 Commission File Number 0-13611
------------------- ---------
SPARTAN MOTORS, INC.
- - --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Michigan 38-2078923
- - --------------------------- ----------------------------
(State of incorporation) (I.R.S. Employer
Identification no.)
1000 Reynolds Road, Charlotte, Michigan 48813
- - -------------------------------------------------- ----------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (517) 543-6400
----------------------------
NONE
- - --------------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last
report.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common shares outstanding at May 1, 1996 12,533,572
<PAGE> 2
SPARTAN MOTORS, INC.
INDEX TO QUARTERLY REPORT ON FORM 10-Q
QUARTER ENDED MARCH 31, 1996
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Part I. Financial Information
Consolidated Balance Sheets - March 31, 1996
(Unaudited) and December 31, 1995 1
Consolidated Statements of Net Earnings -
Three Months Ended March 31, 1996 and 1995
(Unaudited) 3
Consolidated Statements of Cash Flows -
Three Months Ended March 31, 1996 and 1995
(Unaudited) 4
Notes to Consolidated Financial Statements 6
Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Part II. Other Information 13
Signatures 14
</TABLE>
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SPARTAN MOTORS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, 1996 December 31, 1995
-------------- -----------------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 3,184,582 $ 5,202,595
Investment securities 7,613,401 7,688,693
Accounts receivable, less allowance
for doubtful accounts of $584,000
in 1996 and $591,000 in 1995 25,972,615 20,202,534
Inventories 26,954,638 24,394,303
Deferred tax benefit 1,489,000 1,453,000
Other current assets 1,460,930 1,539,765
----------- -----------
TOTAL CURRENT ASSETS 66,675,166 60,480,890
PROPERTY, PLANT, AND EQUIPMENT,
net of accumulated depreciation
of $6,648,622 and $6,281,734 in
1996 and 1995, respectively 12,256,497 12,267,287
DEFERRED TAX BENEFIT 1,146,000 1,163,000
OTHER ASSETS 1,259,584 1,299,890
----------- -----------
TOTAL $81,337,247 $75,211,067
=========== ===========
</TABLE>
See notes to consolidated financial statements.
1
<PAGE> 4
SPARTAN MOTORS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, 1996 December 31, 1995
-------------- -----------------
(Unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 8,771,525 $ 3,801,135
Other current liabilities and
accrued expenses 1,746,431 619,279
Accrued warranty expense 1,638,372 1,621,954
Accrued customer rebates 1,067,101 1,030,658
Taxes on income 600,000 449,000
Accrued vacation 631,756 584,651
Accrued compensation and related
taxes 1,117,119 1,064,368
Current portion of long-term debt 420,000 420,000
----------- -----------
TOTAL CURRENT LIABILITIES 15,992,304 9,591,045
LONG-TERM DEBT, less current portion 5,658,949 5,791,728
COMMITMENTS AND CONTINGENT LIABILITIES
STOCKHOLDERS' EQUITY:
Common stock, no par value;
authorized 23,900,000 shares,
issued 12,533,572 shares in 1996
and 12,623,872 in 1995 21,397,538 21,482,878
Retained earnings 40,505,731 40,543,432
Valuation allowance 6,511 61,025
Cumulative translation adjustment (2,223,786) (2,259,041)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 59,685,994 59,828,294
----------- -----------
TOTAL $81,337,247 $75,211,067
=========== ===========
</TABLE>
See notes to consolidated financial statements.
2
<PAGE> 5
SPARTAN MOTORS, INC.
CONSOLIDATED STATEMENTS OF NET EARNINGS (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended March 31
---------------------------
1996 1995
-------- --------
<S> <C> <C>
REVENUES:
Net sales $47,088,279 $43,774,933
Other income 299,923 426,341
----------- -----------
TOTAL 47,388,202 44,201,274
COSTS AND EXPENSES:
Cost of products sold 40,881,141 36,809,765
Research and development 999,418 787,707
Selling, general and administrative 3,510,951 3,551,084
Interest 128,664 116,606
----------- -----------
TOTAL 45,520,174 41,265,162
EARNINGS BEFORE TAXES ON INCOME 1,868,028 2,936,112
TAXES ON INCOME 656,000 1,163,000
----------- -----------
NET EARNINGS $ 1,212,028 $ 1,773,112
=========== ===========
NET EARNINGS PER SHARE $ 0.10 $ 0.14
=========== ===========
DIVIDENDS DECLARED PER SHARE $ 0.05
===========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 12,639,000 13,082,000
=========== ===========
</TABLE>
See notes to consolidated financial statements.
3
<PAGE> 6
SPARTAN MOTORS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended March 31
---------------------------
1996 1995
-------- --------
<S> <C> <C>
Net earnings $ 1,212,028 $ 1,773,112
Adjustments to reconcile net earnings to
net cash (used in) provided by
operating activities:
Depreciation and amortization 436,563 409,806
Gain on sales of assets and
marketable securities (3,079) (99,544)
Decrease (increase) in:
Accounts receivable (5,768,256) (2,325,881)
Inventories (2,538,111) (2,367,779)
Deferred tax benefit 41,956
Federal taxes receivable 1,110,000
Other assets 26,328 35,815
Increase (decrease) in:
Accounts payable 4,969,866 4,853,261
Other current liabilities
and accrued expenses 500,394 (457,387)
Accrued warranty expense 16,418 (238,753)
Accrued customer rebate 36,443 111,646
Taxes on income 151,000
Accrued compensation and
related taxes 52,995 537,743
Accrued vacation 47,105
---------- ----------
TOTAL ADJUSTMENTS (2,072,334) 1,610,883
NET CASH(USED IN)PROVIDED BY
OPERATING ACTIVITIES (860,306) 3,383,995
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and
equipment (422,209) (613,943)
Proceeds from sales of property,
plant and equipment 150,000
Purchases of investment securities (1,590,552) (4,556,487)
Proceeds from sales of investment
securities 1,628,366 4,382,574
Advance of notes receivable (678,275)
Principal repayment on notes receivable 64,682 464,836
---------- ----------
NET CASH USED IN INVESTING ACTIVITIES (319,713) (851,295)
</TABLE>
(Continued)
4
<PAGE> 7
SPARTAN MOTORS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended March 31
---------------------------
1996 1995
-------- --------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options $ 85,360
Payments on long-term debt (132,779) $ (131,870)
Purchase of treasury stock (793,750)
---------- ----------
NET CASH USED IN FINANCING ACTIVITIES (841,169) (131,870)
EFFECT OF EXCHANGE RATE CHANGES ON CASH 3,175 18,772
---------- ----------
NET (DECREASE) INCREASE IN CASH AND
CASH EQUIVALENTS (2,018,013) 2,419,602
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 5,202,595 2,930,270
---------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $3,184,582 $5,349,872
========== ==========
</TABLE>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid for interest was
$128,664 and $116,606 for the three months ended March 31, 1996 and 1995,
respectively. Cash paid for income taxes was $465,000 and $11,000 for the
three months ended March 31, 1996 and 1995, respectively.
See notes to consolidated financial statements. (Concluded)
5
<PAGE> 8
SPARTAN MOTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) For a description of the accounting policies followed refer to the notes
to the Company's annual consolidated financial statements for the year
ended December 31, 1995, included in Form 10-K filed with the Securities
and Exchange Commission March 29, 1996.
(2) The consolidated financial statements include the accounts of Spartan
Motors, Inc. and its two wholly owned subsidiaries, Spartan Motors Foreign
Sales Corporation, Inc. and Spartan de Mexico, S.A. de C.V.("Spartan de
Mexico"). All material intercompany transactions have been eliminated.
The two joint ventures with Societe D' Equipment de Transport et de
Carosserie S.A. ("Setcar") are not included in the consolidated financial
statements as the Company has not made any expenditures for investment
purposes nor have the ventures commenced operations as of March 31, 1996.
(3) 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, 1996, and the
results of operations for the three month periods ended March 31, 1996 and
1995.
(4) The results of operations for the three month period ended March 31,
1996, are not necessarily indicative of the results to be expected for the
full year.
(5) Inventories consist of raw materials and purchased components, work in
process, and finished goods and are summarized as follows:
<TABLE>
<CAPTION>
March 31, 1996 December 31, 1995
-------------- -----------------
<S> <C> <C>
Finished goods $ 1,965,635 $ 1,779,551
Raw materials and
purchased components 20,846,095 19,844,049
Work in process 4,682,908 3,270,703
Obsolescence reserve (500,000) (500,000)
LIFO reserve (40,000)
----------- -----------
$26,954,638 $24,394,303
=========== ===========
</TABLE>
6
<PAGE> 9
SPARTAN MOTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(6) During March 1996, the Company repurchased 100,000 shares of its stock at
an average market price of approximately $7.94 per share. The treasury
stock was constructively retired in accordance with the Michigan Business
Corporations Act applicable to all Michigan corporations.
(7) During the three months ended March 31, 1996, stockholders' equity
changed as follows:
<TABLE>
<S> <C>
Balance at December 31, 1995 $59,828,294
Net earnings 1,212,028
Exercise of stock options 85,360
Purchase of treasury stock (793,750)
Dividends declared (626,679)
Valuation allowance - investment
securities (54,514)
Cumulative translation adjustment
change 35,255
-----------
Balance at March 31, 1996 $59,685,994
===========
</TABLE>
(8) A cash dividend of $0.05 per share was declared on February 27, 1996 for
shareholders of record on March 27, 1996. The dividend of $626,679 was
paid April 29, 1996.
(9) NEW ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board has issued Statement of
Financial Accounting Standards (SFAS) No. 121 " Accounting for the
Impairment of Long-Lived Assets To Be Disposed Of." This standard requires
that long-lived assets held by and used by an entity may be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. SFAS No. 121 also
requires that long-lived assets to be disposed of be reported at the lower
of carrying amount or fair value less costs to sell. The Company has
adopted this standard during the first quarter of 1996. Adoption of this
statement did not have a material effect on the Company's results of
operations or financial position.
The Financial Accounting Standards Board has issued SFAS No. 123,
"Accounting for Stock-Based Compensation" which was effective for the
Company beginning January 1, 1996. SFAS No. 123 requires expanded
disclosures of stock-based compensation arrangements with employees and
encourages (but does not require) compensation cost to be measured
7
<PAGE> 10
SPARTAN MOTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
based on the fair value of the equity instrument awarded. Companies are
permitted, however, to continue to apply APB Opinion No. 25, which
recognizes compensation cost based on the intrinsic value of the equity
instrument awarded. The Company will continue to apply APB Opinion No. 25
to its stock based compensation awards to employees and will disclose the
required pro forma effect on net income and earnings per share in the
financial statements for the year ending December 31, 1996.
8
<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following is a discussion of the major elements impacting Spartan Motors,
Inc. financial and operating results for the period ended March 31, 1996
compared to the period ended March 31, 1995. The comments that follow should
be read in conjunction with the Company's consolidated financial statements and
related notes.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the components of
the Company's consolidated statements of net earnings, on an actual basis, as a
percentage of revenues:
<TABLE>
<CAPTION>
Three Months
Ended March 31
--------------
1996 1995
---- ----
<S> <C> <C>
Revenues 100% 100%
Costs and expenses:
Cost of products sold .................. 86.3% 83.3%
Research and development ............... 2.1% 1.8%
Selling, general, and administrative ... 7.4% 8.0%
Interest ............................... .3% .3%
----- -----
Total costs and expenses ................ 96.1% 93.4%
----- -----
Earnings before taxes on income ......... 3.9% 6.6%
Taxes on income ......................... 1.4% 2.6%
----- -----
Net earnings ............................ 2.5% 4.0%
===== =====
</TABLE>
THREE MONTH PERIOD ENDED MARCH 31, 1996, COMPARED TO THE THREE MONTH PERIOD
ENDED MARCH 31, 1995
Revenues for the three months ended March 31, 1996, were $47.4 million
compared to $44.2 million in 1995, an increase of 7%. Net income was $1.2
million for the three months ended March 31, 1996 ($0.10 per share), compared
to $1.8 million in 1995 ($0.14 per share), a decrease of 33%. The increase in
revenues is primarily due to increased production of the transit and school bus
chassis and to a lesser extent fire truck chassis. Total chassis production
for the three months ended March 31, 1996 consisted of 860 units as compared to
776 chassis for the same period in 1995. Sales of fire truck chassis units
increased by 4%, while overall sales of motorhome chassis decreased by 8%. Bus
and specialty chassis unit sales improved to 140 units compared with 6 units
during the same period in 1995 as the Company continues to penetrate the
transit/shuttle and school bus markets.
9
<PAGE> 12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - CONTINUED
Total costs and expenses as a percentage of revenues increased to 96.1%
for the 1996 period as compared to 93.4% in 1995. Cost of products sold
increased to 86.3% for the 1996 period as compared to 83.3% of revenues for the
same period in 1995. This increase is attributed to the mix of chassis models
produced, which included a large percentage of transit bus and school bus
chassis. Extreme weather conditions also slowed production in January, adding
abnormal overtime costs. Selling, general and administrative expenses
decreased to 7.4% as compared to 8.0% for the same period in 1995, reflecting
the Company's emphasis on cost control and efficiency improvements. Research
and development costs for the 1996 period increased to 2.1% as compared to 1.8%
for the same period in 1995. The increase is the result of the Company's
ongoing developments in transit/shuttle bus, school bus and specialty chassis,
and its continued efforts to expand the market for rear engine diesel
technology.
Total chassis orders received increased 24.9% during the three months
ended March 31, 1996, to 954 units from 764 units for the same period of 1995.
The increase in orders is primarily attributed to the Company's transit and
school bus 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, 1996 were produced and delivered by March 31, 1996.
At March 31, 1996, the Company had approximately $52.9 million in backlog
chassis orders compared with a backlog of approximately $56.3 million for the
same period in 1995. While orders in backlog are subject to modification,
cancellation or rescheduling by customers, the Company has not experienced
significant modification, cancellation or rescheduling of orders in the past.
Although the backlog of unfilled orders is one of many indicators of market
demand, several factors, such as changes in production rates, available
capacity, new product introductions 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, 1996, cash used in
operating activities was approximately $0.9 million. On March 31, 1996, the
Company had working capital of $50.7 million compared to $50.9 million at
December 31, 1995. The current ratio on March 31, 1996 decreased to 4.2
compared with 6.3 on December 31, 1995. The change in
10
<PAGE> 13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - CONTINUED
working capital was the result of increases in accounts receivable, inventories
and accounts payable. Accounts receivable increased approximately $5.8 million
primarily due to the sales growth during the quarter. Inventories increased
approximately $2.5 million primarily to support the increase in production of
fire truck, transit bus and school bus chassis. The increase in accounts
payable of approximately $5.0 million is the direct result of the increase in
inventories needed to support the 1996 production requirements and the timing
on vendor payments.
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.
Due to the effects of the peso devaluation, the ongoing financial crisis
in Mexico and the lack of order activity, the Company did not produce chassis
at its Mexican facility during the first quarter of 1996. The current staff
continues to perform service and warranty repairs on products sold, maintain
customer contacts, and promote the Company's custom chassis products. Spartan
de Mexico recorded revenues of $2,000 and incurred losses of $157,000 ($.01 per
share) during the period. This compares to revenues of $9,600 and losses of
approximately $247,000 ($.02 per share) for the same period in 1995. The
effect on earnings related to the devaluation of the peso was immaterial to the
consolidated financial statements of the Company. Spartan remains committed to
supporting the operations of Spartan de Mexico.
Stockholders' equity decreased to approximately $59.7 million as of March
31, 1996. This change is the result of net earnings of $1.2 million, dividends
declared of approximately $0.6 million and $0.8 million used to acquire 100,000
shares of the Company's common stock. The Company's debt to equity ratio
decreased to 10.2% on March 31, 1996, compared with 10.4% at December 31, 1995.
The Company's unsecured line of credit with a bank provides for maximum
borrowings of $15 million at 2% above the 30-day London Inter Bank Offered Rate
("LIBOR"), which was 5.45% at March 31, 1996. As of March 31, 1996, 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, 1996, the Company had outstanding letters of
credit totaling $200,000.
11
<PAGE> 14
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 10Q 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.
12
<PAGE> 15
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
-----------------------------------------------------------------------
The Company is party, both as plaintiff and defendant, to a number of
lawsuits and claims arising out of the normal course of business. It is
the best judgment of management that the financial position of the
Company will not be materially affected by the final outcome of these
legal proceedings.
Item 2. Changes in Securities
-----------------------------------------------------------------------
NONE
Item 3. Defaults Upon Senior Securities
-----------------------------------------------------------------------
NONE
Item 4. Submission of Matters to a Vote of Security Holders
-----------------------------------------------------------------------
NONE
Item 5. Other Information
-----------------------------------------------------------------------
NONE
Item 6. Exhibits and Reports on Form 8-K
-----------------------------------------------------------------------
(a) NOT APPLICABLE
(b) There were no reports on Form 8-K for the three months ended
March 31, 1996.
13
<PAGE> 16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, Spartan
Motors, Inc. has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Spartan Motors, Inc.
By /s/ James R. Jenks
----------------------------
James R. Jenks, CPA
Secretary/Treasurer
Date: May 6, 1996
---------------------
14
<PAGE> 17
Exhibit Index
Exhibit Number Description
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000743238
<NAME> SPARTAN MOTORS, INC.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 3,184,582
<SECURITIES> 7,613,401
<RECEIVABLES> 25,972,615
<ALLOWANCES> 584,000
<INVENTORY> 26,954,638
<CURRENT-ASSETS> 66,675,166
<PP&E> 12,256,497
<DEPRECIATION> 6,648,622
<TOTAL-ASSETS> 81,337,247
<CURRENT-LIABILITIES> 15,992,304
<BONDS> 6,078,949
0
0
<COMMON> 21,397,538
<OTHER-SE> 38,288,456
<TOTAL-LIABILITY-AND-EQUITY> 81,337,247
<SALES> 47,088,279
<TOTAL-REVENUES> 47,388,202
<CGS> 40,881,141
<TOTAL-COSTS> 40,881,141
<OTHER-EXPENSES> 4,510,369
<LOSS-PROVISION> 30,000
<INTEREST-EXPENSE> 128,664
<INCOME-PRETAX> 1,868,028
<INCOME-TAX> 656,000
<INCOME-CONTINUING> 1,212,028
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,212,028
<EPS-PRIMARY> .10
<EPS-DILUTED> .10
</TABLE>
