<PAGE>
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, 1999 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.
<TABLE>
<CAPTION>
OUTSTANDING AT
CLASS MAY 3, 1999
----- -----------
<S> <C> <C>
Common stock, $.01 par value 12,534,502 shares
</TABLE>
===========================================================================
<PAGE>
SPARTAN MOTORS, INC.
INDEX
====================================================
PART I. FINANCIAL INFORMATION
PAGE
Item 1. Financial Statements:
Consolidated Balance Sheets - March 31, 1999
(Unaudited) and December 31, 1998 1
Consolidated Statements of Operations -
Three Months Ended March 31, 1999 and 1998
(Unaudited) 3
Consolidated Statements of Shareholders' Equity -
Balance at March 31, 1999 (Unaudited) 4
Consolidated Statements of Cash Flows -
Three Months Ended March 31, 1999 and 1998
(Unaudited) 5
Notes to Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 14
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 14
SIGNATURE 16
-i-
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
SPARTAN MOTORS, INC.
CONSOLIDATED BALANCE SHEETS
______________________________________
<CAPTION>
MARCH 31, 1999 DECEMBER 31, 1998
-------------- -----------------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 20,076 $ 37,645
Investment securities -- 500,000
Accounts receivable, less allowance
for doubtful accounts of $2,806,000
in 1999 and $2,600,000 in 1998 44,770,116 43,110,400
Inventories (Note 4) 49,745,426 47,244,529
Deferred tax benefit 2,148,867 2,165,250
Other current assets 911,150 1,042,762
------------ ------------
TOTAL CURRENT ASSETS 97,595,635 94,100,586
Property, Plant and Equipment,
net of accumulated depreciation
of $14,697,000 in 1999 and $14,003,000
in 1998 22,942,855 23,420,603
Goodwill, net of accumulated amortization
of $608,000 in 1999 and $478,000 in
1998 7,229,909 7,315,035
Other Assets 885,912 1,080,253
------------ ------------
TOTAL ASSETS $128,654,311 $125,916,477
============ ============
</TABLE>
(Continued)
<PAGE>
<TABLE>
SPARTAN MOTORS, INC.
CONSOLIDATED BALANCE SHEETS (CONTINUED)
______________________________________
<CAPTION>
MARCH 31, 1999 DECEMBER 31, 1998
-------------- -----------------
(Unaudited)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 25,201,428 $ 23,969,302
Notes Payable 6,649,285 7,134,297
Other current liabilities and accrued expenses 4,982,217 5,184,466
Accrued warranty 4,038,905 3,888,364
Accrued customer rebates 570,451 563,152
Taxes on income 2,941,509 1,446,432
Accrued compensation and related taxes 1,541,477 1,327,923
Accrued vacation 1,461,286 1,253,460
Deposits from customers 3,430,396 3,133,676
Current portion of long-term debt 746,332 991,251
------------ ------------
TOTAL CURRENT LIABILITIES 51,563,286 48,892,323
ACCOUNTS PAYABLE, LONG-TERM 1,623,087 1,655,607
LONG-TERM DEBT, LESS CURRENT PORTION 25,988,515 27,641,888
NOTES PAYABLE TO RELATED PARTIES 2,128,096 2,593,874
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 12,534,502 shares
in 1999 and 12,536,891 shares in 1998 125,345 125,369
Additional Paid in Capital 24,147,835 24,152,744
Retained earnings, net of effect of minority
interest in shareholders' deficit of subsidiary of
($5,457,000) in 1999 and ($6,207,000) in 1998 23,078,147 20,883,094
Accumulated other comprehensive loss -- (28,422)
------------ ------------
TOTAL SHAREHOLDERS' EQUITY 47,351,327 45,132,785
------------ ------------
-2-
<PAGE>
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $128,654,311 $125,916,477
============ ============
</TABLE>
See notes to condensed consolidated financial statements.
-3-
<PAGE>
<TABLE>
SPARTAN MOTORS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
______________________________________
<CAPTION>
THREE MONTHS ENDED MARCH 31,
-----------------------------
1999 1998
----------- -----------
<S> <C> <C>
SALES $75,625,571 $59,156,255
Cost of products sold 64,786,689 50,470,479
----------- -----------
GROSS PROFIT 10,838,882 8,685,776
OPERATING EXPENSES
Research and development 1,743,464 1,317,300
Selling, general and administrative 5,461,347 4,219,683
----------- -----------
OPERATING INCOME 3,634,071 3,148,793
OTHER INCOME (EXPENSE)
Interest expense (757,932) (217,627)
Interest and other income 116,320 293,950
----------- -----------
EARNINGS BEFORE EQUITY IN LOSS OF AFFILIATE AND
TAXES ON INCOME 2,992,459 3,225,116
EQUITY IN LOSS OF AFFILIATE -- 1,250,000
----------- -----------
EARNINGS BEFORE TAXES ON INCOME 2,992,459 1,975,116
TAXES ON INCOME 1,547,406 1,036,879
----------- -----------
NET EARNINGS $ 1,445,053 $ 938,237
=========== ===========
BASIC AND DILUTED NET EARNINGS PER SHARE $ 0.12 $ 0.07
=========== ===========
BASIC WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 12,536,000 12,528,000
=========== ===========
-4-
<PAGE>
DILUTED WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 12,560,000 12,565,000
=========== ===========
</TABLE>
See notes to condensed consolidated financial statements.
-5-
<PAGE>
<TABLE>
SPARTAN MOTORS, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED)
<CAPTION>
ACCUMULATED
OTHER
COMPREHENSIVE
INCOME (LOSS)
-------------
NUMBER ADDITIONAL
OF COMMON PAID IN RETAINED VALUATION
SHARES STOCK CAPITAL EARNINGS ALLOWANCE TOTAL
---------- -------- ----------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1999 12,536,891 $125,369 $24,152,744 $20,883,094 (28,422) $45,132,785
Stock options exercised 1,125 11 1,931 1,942
Shares issued in purchase price adjustment
related to acquisition of subsidiary 39,149 392 248,711 249,103
Assets sold in exchange for stock (42,663) (427) (255,551) (255,978)
Minority interest funding of shareholders'
deficit of subsidiary 750,000 750,000
Comprehensive income:
Net earnings 1,445,053 1,445,053
Other comprehensive items, net of tax:
Change in valuation allowance (net of
tax liability of $16,400) 28,442 28,422
-----------
Total comprehensive income 1,473,475
---------- -------- ----------- ----------- ------- -----------
Balance at March 31, 1999 12,534,502 $125,345 $24,147,835 $23,078,147 $ 0 47,351,327
========== ======== =========== =========== ======= ===========
</TABLE>
See notes to condensed consolidated financial statements.
-6-
<PAGE>
<TABLE>
SPARTAN MOTORS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
______________________________________
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
1999 1998
---------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 1,445,053 $ 938,237
Adjustments to reconcile net earnings to net cash
provided by (used in) operating activities:
Depreciation and amortization 995,088 582,628
Gain on disposal of assets and investment securities (73,180) --
Equity in net loss of affiliate -- 1,250,000
Decrease (increase) in assets:
Accounts receivable (1,659,716) 359,159
Inventories (2,664,774) (8,027,682)
Federal taxes receivable -- 457,650
Other assets 325,953 100,134
Increase (decrease) in liabilities:
Accounts payable 1,199,606 (388,554)
Other current liabilities and accrued expenses 295,957 418,438
Accrued warranty 150,541 80,033
Accrued customer rebates 7,299 (172,002)
Taxes on income 1,495,077 439,347
Accrued vacation 207,826 (12,482)
Accrued compensation and related taxes 213,554 (544,938)
Other 251,720 (845,934)
---------- -----------
TOTAL ADJUSTMENTS 744,951 (6,304,203)
---------- -----------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 2,190,004 (5,365,966)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment (381,351) (231,125)
Proceeds from sales of property, plant and equipment 20,021 27,704
Purchases of investment securities -- (338,658)
Proceeds from sales of investment securities 500,000 400,000
Investment in Affiliate -- (1,250,000)
Purchase price adjustment related to acquisition of
subsidiary (249,103) --
Minority interest funding of shareholders' deficit
of subsidiary 750,000 --
-7-
<PAGE>
Acquisition of subsidiaries, net of cash received -- (1,661,787)
---------- -----------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 639,567 (3,053,866)
</TABLE>
(Continued)
-8-
<PAGE>
<TABLE>
SPARTAN MOTORS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (CONTINUED)
______________________________________
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
1999 1998
---------- -----------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on notes payable $ (950,790) $ (236,177)
Proceeds from long-term debt -- 6,000,000
Payments on long-term debt (1,898,292) (676,092)
Net proceeds from exercise of stock options 1,942 24,140
Purchase of treasury stock -- (137,225)
---------- -----------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (2,847,140) 4,974,646
---------- -----------
NET DECREASE IN CASH AND CASH EQUIVALENTS (17,569) (3,445,186)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 37,645 4,812,438
---------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 20,076 $ 1,367,252
========== ===========
</TABLE>
See notes to condensed consolidated financial statements.
-9-
<PAGE>
SPARTAN MOTORS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
______________________________________
NOTE 1 For a description of the accounting policies followed refer to
the notes to the Company's annual consolidated financial
statements for the year ended December 31, 1998, included in
the Form 10-K filed with the Securities and Exchange
Commission on March 19, 1999.
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, 1999, and the results of operations and cash
flows for the three month periods ended March 31, 1999 and
1998.
NOTE 3 The results of operations for the three month period ended
March 31, 1999 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:
<TABLE>
<CAPTION>
MARCH 31, 1999 DECEMBER 31, 1998
-------------- -----------------
<S> <C> <C> <C>
Finished goods $ 5,497,759 $ 4,688,880
Raw materials and purchased components 38,378,392 38,477,149
Work in process 8,045,590 5,698,500
Obsolescence reserve (2,176,315) (1,620,000)
----------- -----------
$49,745,426 $47,244,529
=========== ===========
</TABLE>
NOTE 5 Sales and other financial information by business segment are
as follows (amounts in thousands):
-10-
<PAGE>
SPARTAN MOTORS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
______________________________________
<TABLE>
<CAPTION>
Three months ended March 31, 1999
MANUFACTURING OF OTHER/
------------------------- CONSOLIDATION
CHASSIS BODIES ENTRIES CONSOLIDATED
--------- --------- ------------- ------------
<S> <C> <C> <C> <C>
Net Sales $60,455 $17,577 $(2,406) $75,626
Interest expense 301 484 (27) 758
Depreciation and amortization expense 339 578 78 995
Income tax expense 1,473 214 (140) 1,547
Segment earnings 2,808 (1,171) (192) 1,445
Segment assets 71,251 51,593 5,810 128,654
</TABLE>
<TABLE>
<CAPTION>
Three months ended March 31, 1998
MANUFACTURING OF OTHER/
------------------------- CONSOLIDATION
CHASSIS BODIES ENTRIES CONSOLIDATED
--------- --------- ------------- ------------
<S> <C> <C> <C> <C>
Net Sales $48,490 $12,511 $(1,845) $59,156
Interest expense 180 38 -- 218
Depreciation and amortization expense 407 176 -- 583
Equity in the loss of affiliate -- -- 1,250 1,250
Income tax expense 960 77 -- 1,037
Segment earnings 731 97 110 938
Segment assets 85,202 21,420 (15,486) 91,136
</TABLE>
-11-
<PAGE>
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,
1999 compared to the period ended March 31, 1998. 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 operations, on
an actual basis, as a percentage of revenues:
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
1999 1998
----- -----
<S> <C> <C> <C>
Sales 100.0% 100.0%
Cost of product sold 85.7% 85.3%
----- -----
Gross profit 14.3% 14.7%
Operating expenses:
Research and development 2.3% 2.2%
Selling, general and administrative 7.2% 7.2%
----- -----
Operating income 4.8% 5.3%
Other (0.8%) 0.1%
----- -----
Earnings before loss on equity investment
and taxes on income 4.0% 5.4%
Equity in loss of affiliate 0.0% 2.1%
Taxes on income 2.0% 1.7%
----- -----
Net earnings 2.0% 1.6%
===== =====
</TABLE>
THREE MONTH PERIOD ENDED MARCH 31, 1999, COMPARED TO THE THREE MONTH PERIOD
ENDED MARCH 31, 1998
For the three months ended March 31, 1999 consolidated sales
increased by $16.5 million (27.8%) over the amount reported for the same
-12-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
period in the previous year. Chassis Group sales for the three months
ending March 31, 1999 increased by $12.0 million (24.7%) compared to the
sales reported for the same period in 1998. The two product lines
responsible for this increase are motorhome chassis and fire truck chassis.
For the first quarter of 1999, motorhome chassis sales increased 28.9%
compared to the first quarter of 1998, primarily due to the increase in
market demand for recreational vehicles. Fire truck chassis sales
increased 28.5% during the first quarter of 1999 compared to the same
period of 1998. The success of the Company's Advantage product line,
coupled with a strong market, resulted in the increase. This is further
evidenced by an increase in the backlog for fire trucks, which has
increased 41.6% from the level at March 31, 1998.
Gross profit increased $2.2 million for the first quarter of 1999
compared to the first quarter of 1998. This increase is due to increased
sales of the Company. Gross profit as a percentage of sales decreased from
14.7% for the first quarter of 1998 to 14.3% for the first quarter of 1999.
This decrease is due to the Bodies Group making up a greater percentage of
total sales at lower margins. The Bodies Group operates at lower margins
than the Chassis Group since their value added is only in the body rather
than the complete vehicle.
Operating expenses increased $1.7 million in the first quarter of
1999 over the same period in 1998, but remained consistent as a percentage
of sales. An increase in the Company's interest-bearing debt resulted in
increased interest expense in 1999 when compared to 1998. This increase is
related to the consolidation of Carpenter Industries, Inc. in the current
period versus the entity being accounted for on the equity method for the
quarter ended March 31, 1998. The increase in interest expense is the
primary reason for the fluctuation in other income/expense on the
Consolidated Statements of Operations.
Total chassis orders received increased 9.1% during the three months
ended March 31, 1999 compared to the same period in 1998. The increase in
orders primarily is attributed to the Company's fire truck and motorhome
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, 1999 were produced and delivered by March 31,
1999.
At March 31, 1999, the Company had approximately $124.2 million in
backlog orders compared with a backlog of approximately $109.8 million for
the same period in 1998. While orders in backlog are subject to
-13-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
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 three months ended March 31, 1999 cash provided by operating
activities was $2.2 million compared to cash used in operating activities
of $5.4 million for the three months ended March 31, 1998. The increase in
cash primarily relates to an increase in accounts payable that corresponds
with beneficial payment terms put into effect for the Chassis Group.
Working capital increased $0.8 million, from $45.2 million to $46.0
million, during the three months ended March 31, 1999. See the Consolidated
Statement of Cash Flows contained in this Form 10-Q for further information
regarding the slight decrease in cash and cash equivalents from $37,645 at
December 31, 1998 to $20,076 at March 31, 1999.
Shareholders' equity increased $2.2 million for the three months
ended March 31, 1999 to approximately $47.3 million. This change primarily
is due to net earnings of $1.4 million and the minority interest funding of
shareholders' deficit of subsidiary of $0.8 million. The Company's debt to
equity ratio decreased to 64.3% on March 31, 1999 compared with 72.9% at
December 31, 1998 due to the decrease in borrowing resulting from the
positive cash flow from operations.
The Company's primary line of credit is a $25.0 million revolving
note payable to a bank. 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
March 31, 1999 the Company was in compliance with all debt covenants. The
Company also has unsecured lines of credit at its subsidiary locations for
$0.2 million and $1.0 million and a secured line of credit for $4.3
million. The $4.3 million line carries an interest rate of 1/2% above the
bank's prime rate (prime rate at March 31, 1999, was 7.75%) and has an
expiration date of June 1999. This line of credit is secured by accounts
receivable and inventory. Borrowings under this line totaled approximately
$4.0 million at March 31, 1999. The other two lines carry an interest
-14-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
rate of 1% above the bank's prime rate. The $0.2 million line has an
expiration date of June 1, 1999. The $1.0 million line expires only if
there is a change in management. There were no borrowings on either of
these lines at March 31, 1999. The Company believes it has sufficient
resources from cash flows from operating activities and, if necessary, from
additional borrowings under its lines of credit to satisfy ongoing cash
requirements for the next 12 months.
The Company's primary market risk exposure is a change in interest
rates in connection with its outstanding variable rate short-term and long-
term debt. Due to variable interest rates on the Company's short-term and
long-term debt, an increase in interest rates of 1% could result in the
Company incurring an additional $0.3 million in annual interest expense.
Conversely, a decrease in interest rates of 1% could result in the Company
saving $0.3 million in annual interest expense. The Company does not
expect such market risk exposure to have a material adverse effect on the
Company. The Company does not enter into market risk sensitive instruments
for trading purposes.
EFFECT OF INFLATION
Inflation affects the Company in two principal ways. First, the
Company's debt is tied to the prime and LIBOR rates so that increases
affecting interest rates may be translated into additional interest
expense. Second, general inflation impacts prices paid for labor, parts
and supplies. Whenever possible, the Company attempts to cover increased
costs of production and capital by adjusting the prices of its products.
However, the Company generally does not attempt to negotiate inflation-
based price adjustment provisions into its contracts. Since order lead
times can be as much as six months, the Company has limited ability to pass
on cost increases to its customers on a short-term basis. In addition, the
markets served by the Company are competitive in nature, and competition
limits the pass through of cost increases in many cases. The Company
strives to minimize the effect of inflation through cost reductions and
improved productivity.
YEAR 2000 READINESS DISCLOSURE
This Year 2000 Readiness Disclosure is based upon and partially
repeats information provided by the Company's outside consultants and
others regarding the Year 2000 readiness of the Company and its customers,
suppliers, financial institutions and other parties. Although the Company
believes this information to be accurate, it has not independently verified
such information.
-15-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
The Company is currently in the process of addressing a potential
problem that is facing all users of automated information systems. The
problem is that many computer systems that process transactions based on
two digits representing the year of transaction may recognize a date using
"00" as the year 1900 rather than the year 2000. The problem could affect
a wide variety of automated information systems, in the form of software
failure, errors or miscalculations.
The Company established a Year 2000 task force and developed a plan
to prepare for the Year 2000 in 1998. This plan began with the performance
of an inventory of software applications and equipment with embedded chips
and communications with third party vendors and suppliers. The plan
regularly is updated and monitored by the Company's technical personnel and
management. The Company's plan to address the Year 2000 issue involves the
following four phases: assessment, remediation, testing and implementation.
The status of these phases is summarized in the chart below.
<TABLE>
<CAPTION>
ASSESSMENT REMEDIATION TESTING IMPLEMENTATION
---------- ----------- ------- --------------
<S> <C> <C> <C> <C>
Information Technology 100% Complete 100% Complete 95% Complete 95% Complete
Expected Expected
completion date completion date
is June 1999. is June 1999.
Operating Equipment 100% Complete 100% Complete 100% Complete 100% Complete
with Embedded Chips
or Software
Products 100% Complete 100% Complete 100% Complete 100% Complete
Third Parties 100% Complete 100% Complete 100% Complete 75% Complete
Implement
contingency plans
or other
alternatives
as necessary by
June 1999.
</TABLE>
-16-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
As referenced in the previous chart, management has reviewed its
Year 2000 exposure to third party customers, distributors, suppliers and
financial institutions. Lack of readiness by these third parties could
expose the Company to the potential for loss and impairment of business
processes and activities. The Company is assessing these risks and is
considering the need for contingency plans intended to address perceived
risks. The Company cannot predict what effect the failure of such a third
party to address, in a timely manner, the Year 2000 problem would have on
the Company.
As of March 31, 1999, the Company had not incurred any material
costs in connection with identifying, assessing, remediating and testing
Year 2000 issues and does not expect to incur material costs in the future.
The immaterial costs consist primarily of personnel expense for employees
who have only a portion of their time dedicated to the Year 2000
remediation effort. It is the Company's policy to expense such costs as
incurred. These costs will be funded through operating cash flows. The
Company has not replaced, nor does it anticipate replacing, any systems due
to Year 2000 issues. In addition, the Company has not accelerated any
system replacement due to Year 2000 issues. Any system replacement that
the Company has undertaken was due to regular, scheduled maintenance.
Based on currently available information, management does not presently
anticipate that the costs to address the Year 2000 issues will have an
adverse impact on the Company's financial condition, results of operation
or liquidity. However, the extent to which the computer operations and
other systems of the Company's important third parties are adversely
affected could, in turn, affect the Company's ability to communicate with
third parties and could have a material adverse effect on the operations of
the Company.
Management of the Company believes that it has an effective program
in place to resolve the Year 2000 issue in a timely manner. As noted
above, the Company has not yet completed all necessary phases of its Year
2000 plan. If the Company does not complete any additional phases, the
Company will be unable to access its voice mail and may have some employees
with personal computers that will malfunction. In addition, disruptions in
the economy generally resulting from Year 2000 issues could also materially
adversely affect the Company. The amount of potential liability and lost
revenue cannot be reasonably estimated at this time. The Company has
developed contingency plans for certain critical applications and is
working on developing such plans for other applications. These contingency
plans involve, among other actions, manual workarounds, increasing
inventories and adjusting staffing strategies.
-17-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
The costs of the project and the date on which the Company believes
it will complete the Year 2000 modifications are based on management's best
estimates. There can be no guarantee that these estimates will be achieved
and actual results could differ from those anticipated. Specific factors
that might cause differences include, but are not limited to, the ability
of other companies on which the Company's systems rely to modify or convert
their systems to be Year 2000 compliant, the ability to locate and correct
all relevant computer code, the ability of all third parties who have
business relationships with the Company to continue their businesses
without interruption and similar circumstances.
FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements that are based on
management's beliefs, assumptions, current expectations, estimates and
projections about the Company's markets, the economy and about Spartan
itself. Words such as "anticipates," "believes," "estimates," "expects,"
"forecasts," "intends," "is likely," "plans," "projects," variations of
such words and similar expressions are intended to identify such forward-
looking statements. These statements are not guarantees of future
performance and involve certain risks, uncertainties and assumptions
("Future Factors") that are difficult to predict with regard to timing,
extent, likelihood and degree of occurrence. Therefore, actual results and
outcomes may differ materially from what may be expressed or forecasted in
such forward-looking statements. Spartan undertakes no obligation to
update, amend or clarify forward-looking statements, as a result of new
information, future events or otherwise.
Future Factors that could cause a difference between an ultimate
actual outcome and a preceding forward-looking statement include, but are
not limited to, changes in interest rates; demand for products and
services; the effects of the Year 2000 issues on the Company's business;
the degree of competition by competitors; changes in laws or regulations,
including changes related to safety standards adopted by NFPA; changes in
prices, levies and assessments; the impact of technological advances;
government and regulatory policy changes; trends in customer behaviors;
dependence on key personnel; and the vicissitudes of the world and national
economy.
-18-
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources," which is
incorporated by reference in this Item 3, for discussion of market risk
related to variable interest rates on short-term and long-term debt.
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 Quarterly
Report on Form 10-Q for the period ended June 30, 1996, and
incorporated herein by reference.
3.2 Spartan Motors, Inc. Bylaws (restated to reflect all
amendments). Previously filed as an exhibit to the
Company's Annual Report on Form 10-K for the period ended
December 31, 1995, and incorporated herein by reference.
4.1 Restated Articles of Incorporation. See Exhibit 3.1 above.
4.2 Bylaws. See Exhibit 3.2 above.
4.3 Form of Stock Certificate. Previously filed as an exhibit
to the Registration Statement on Form S-18 (Registration
No. 2-90021-C) filed on March 19, 1984, and incorporated
herein by reference.
4.4 Rights Agreement dated June 4, 1997, between Spartan
Motors, Inc. and American Stock Transfer and Trust Company.
Previously filed as an Exhibit to the Company's Form 8-A
filed on June 25, 1997, and incorporated herein by
reference.
10.1 Restated Spartan Motors, Inc. 1988 Non-Qualified Stock
Option Plan.<F*> Previously filed as an Exhibit to the
Company's Quarterly Report on Form 10-Q for the period
ended June 30, 1996, and incorporated herein by reference.
-19-
<PAGE>
10.2 Restated Spartan Motors, Inc. 1994 Incentive Stock Option
Plan.<F*> Previously filed as an Exhibit to the Company's
Quarterly Report on Form 10-Q for the period ended June 30,
1996, and incorporated herein by reference.
10.3 The Spartan Motors, Inc. 1996 Stock Option and Restricted
Stock Plan for Outside Market Advisors. Previously filed
as an Exhibit to the Company's Quarterly Report on Form 10-
Q for the period ended June 30, 1996, and incorporated
herein by reference.
10.4 Carpenter Industries, Inc. Stockholders' Agreement.
Previously filed as an Exhibit to the Company's Form 8-K
Current Report filed on January 21, 1997, and incorporated
herein by reference.
10.5 Contribution Agreement between Carpenter Industries LLC and
Carpenter Industries, Inc. Previously filed as an Exhibit
to the Company's Form 8-K Current Report filed on January
21, 1997, and incorporated herein by reference.
10.6 Carpenter Industries, Inc. Registration Rights Agreement.
Previously filed as an Exhibit to the Company's Form 8-K
Current Report filed on January 21, 1997, and incorporated
herein by reference.
27 Financial Data Schedule.
(b) REPORTS ON FORM 8-K. During the first quarter ended March 31,
1999, the Company filed no current reports on Form 8-K.
-20-
<PAGE>
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 __, 1999 By /S/ RICHARD J. SCHALTER
Richard J. Schalter
Secretary, Treasurer and Chief Financial
Officer
-21-
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DOCUMENT
3.1 Spartan Motors, Inc. Restated Articles of Incorporation.
Previously filed as an exhibit to the Company's Quarterly
Report on Form 10-Q for the period ended June 30, 1996, and
incorporated herein by reference.
3.2 Spartan Motors, Inc. Bylaws (restated to reflect all
amendments). Previously filed as an exhibit to the
Company's Annual Report on Form 10-K for the period ended
December 31, 1995, and incorporated herein by reference.
4.1 Restated Articles of Incorporation. See Exhibit 3.1 above.
4.2 Bylaws. See Exhibit 3.2 above.
4.3 Form of Stock Certificate. Previously filed as an exhibit
to the Registration Statement on Form S-18 (Registration
No. 2-90021-C) filed on March 19, 1984, and incorporated
herein by reference.
4.4 Rights Agreement dated June 4, 1997, between Spartan
Motors, Inc. and American Stock Transfer and Trust Company.
Previously filed as an Exhibit to the Company's Form 8-A
filed on June 25, 1997, and incorporated herein by
reference.
10.1 Restated Spartan Motors, Inc. 1988 Non-Qualified Stock
Option Plan.<F*> Previously filed as an Exhibit to the
Company's Quarterly Report on Form 10-Q for the period
ended June 30, 1996, and incorporated herein by reference.
10.2 Restated Spartan Motors, Inc. 1994 Incentive Stock Option
Plan.<F*> Previously filed as an Exhibit to the Company's
Quarterly Report on Form 10-Q for the period ended June 30,
1996, and incorporated herein by reference.
10.3 The Spartan Motors, Inc. 1996 Stock Option and Restricted
Stock Plan for Outside Market Advisors. Previously filed
as an Exhibit to the Company's Quarterly Report on Form 10-
Q for the period ended June 30, 1996, and incorporated
herein by reference.
<PAGE>
10.4 Carpenter Industries, Inc. Stockholders' Agreement.
Previously filed as an Exhibit to the Company's Form 8-K
Current Report filed on January 21, 1997, and incorporated
herein by reference.
10.5 Contribution Agreement between Carpenter Industries LLC and
Carpenter Industries, Inc. Previously filed as an Exhibit
to the Company's Form 8-K Current Report filed on January
21, 1997, and incorporated herein by reference.
10.6 Carpenter Industries, Inc. Registration Rights Agreement.
Previously filed as an Exhibit to the Company's Form 8-K
Current Report filed on January 21, 1997, and incorporated
herein by reference.
27 Financial Data Schedule.
-ii-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS OF SPARTAN
MOTORS, INC. AND SUBSIDIARIES FOR THE PERIOD ENDED MARCH 31,
1999, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 20,076
<SECURITIES> 0
<RECEIVABLES> 44,770,116
<ALLOWANCES> 2,806,000
<INVENTORY> 49,745,426
<CURRENT-ASSETS> 97,595,635
<PP&E> 22,942,855
<DEPRECIATION> 14,697,000
<TOTAL-ASSETS> 128,654,311
<CURRENT-LIABILITIES> 51,563,286
<BONDS> 0
<COMMON> 125,345
0
0
<OTHER-SE> 47,225,982
<TOTAL-LIABILITY-AND-EQUITY> 128,654,311
<SALES> 75,625,571
<TOTAL-REVENUES> 75,741,891
<CGS> 64,786,689
<TOTAL-COSTS> 64,786,689
<OTHER-EXPENSES> 7,962,743
<LOSS-PROVISION> 231,000
<INTEREST-EXPENSE> 757,932
<INCOME-PRETAX> 2,992,459
<INCOME-TAX> 1,547,406
<INCOME-CONTINUING> 1,445,053
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,445,053
<EPS-PRIMARY> 0.12
<EPS-DILUTED> 0.12
</TABLE>
