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Previous: REPUBLIC SECURITY FINANCIAL CORP, 10-Q, 2000-05-15 |
Next: SPARTAN MOTORS INC, 10-Q, 2000-05-15 |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
|
For the Quarter Ended |
Commission File Number |
|
SPARTAN MOTORS, INC. Specified in Its Charter) |
|
|
Michigan |
38-2078923 |
|
1000 Reynolds Road |
|
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 |
|
|
|
|
Common stock, $.01 par value |
11,789,077 shares |
SPARTAN MOTORS, INC.
INDEX
|
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Page |
||
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PART I. FINANCIAL INFORMATION |
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|
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Item 1. Financial Statements: |
|
|
|
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Condensed Consolidated Balance Sheets - March 31, 2000 (Unaudited) |
|
3 |
|
|
Condensed Consolidated Statements of Operations - Three Months |
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5 |
|
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Condensed Consolidated Statements of Shareholders' Equity - Three |
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6 |
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Condensed Consolidated Statements of Cash Flows - Three Months |
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7 |
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|
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Notes to Condensed Consolidated Financial Statements |
|
9 |
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Item 2. Management's Discussion and Analysis of Financial Condition and |
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11 |
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Item 3. Quantitative and Qualitative Disclosures About Market Risk |
|
16 |
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PART II. OTHER INFORMATION |
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|
|
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Item 6. Exhibits and Reports on Form 8-K |
|
17 |
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SIGNATURES |
|
18 |
|
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
|
SPARTAN MOTORS, INC. |
||||||
|
|
|
|
March 31, |
|
December 31, |
|
|
|
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(Unaudited) |
|
|
|
ASSETS |
|
|
|
|
||
|
|
|
|
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|
|
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Current Assets |
|
|
|
|
||
|
Cash and cash equivalents |
$ |
812,508 |
$ |
35,797 |
|
|
Accounts receivable, less allowance for doubtful accounts |
|
|
|
|
|
|
|
of $2,612,000 in 2000 and $2,491,000 in 1999 |
|
44,156,032 |
|
37,765,807 |
|
Inventories (Note 4) |
|
44,400,609 |
|
47,111,727 |
|
|
Deferred tax benefit |
|
3,487,305 |
|
3,487,305 |
|
|
Federal taxes receivable |
|
-- |
|
1,427,945 |
|
|
Other current assets |
|
1,321,481 |
|
1,106,105 |
|
|
|
Total Current Assets |
|
94,177,935 |
|
90,934,686 |
|
|
|
|
|
|
|
|
Property, Plant, and Equipment, net |
|
22,288,938 |
|
22,568,177 |
||
|
|
|
|
|
|
|
|
Goodwill, net of accumulated amortization of $1,142,000 in |
|
|
|
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||
|
2000 and $1,001,000 in 1999, respectively |
|
7,321,884 |
|
7,462,995 |
|
|
Other Assets |
|
1,453,133 |
|
1,731,885 |
||
|
|
|
|
|
|
|
|
Total Assets |
$ |
125,241,890 |
$ |
122,697,743 |
||
|
|
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|
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||
|
SPARTAN MOTORS, INC. |
||||||
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|
March 31, |
|
December 31, |
|
|
|
|
(Unaudited) |
|
|
|
LIABILITIES AND SHAREHOLDERS' EQUITY |
|
|
|
|
||
|
|
|
|
|
|
|
|
Current Liabilities |
|
|
|
|
||
|
Accounts payable |
$ |
27,144,768 |
$ |
25,115,388 |
|
|
Notes payable |
|
9,081,745 |
|
6,290,131 |
|
|
Other current liabilities and accrued expenses |
|
4,041,237 |
|
4,881,179 |
|
|
Accrued warranty |
|
3,585,457 |
|
3,645,363 |
|
|
Accrued customer rebates |
|
626,615 |
|
629,311 |
|
|
Taxes on income |
|
116,431 |
|
-- |
|
|
Accrued compensation and related taxes |
|
1,600,378 |
|
1,809,332 |
|
|
Accrued vacation |
|
1,498,066 |
|
1,348,941 |
|
|
Deposits from customers |
|
4,593,620 |
|
3,761,249 |
|
|
Current portion of long-term debt |
|
1,247,389 |
|
1,587,201 |
|
|
|
Total Current Liabilities |
|
53,535,706 |
|
49,068,095 |
|
|
|
|
|
|
|
|
Accounts Payable, long-term |
|
1,637,478 |
|
1,631,904 |
||
|
Long-Term Debt |
|
24,572,571 |
|
27,476,993 |
||
|
Notes Payable to Related Parties |
|
1,342,310 |
|
1,342,310 |
||
|
|
|
|
|
|
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|
Shareholders' Equity: |
|
|
|
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||
|
Preferred Stock, no par value: 2,000,000 shares authorized |
|
|
|
|
|
|
|
(none issued) |
|
-- |
|
-- |
|
Common Stock, $.01 par value, 23,900,000 shares authorized, |
|
|
|
|
|
|
|
issued 12,039,077 shares in 2000 and 12,273,997 shares in 1999 |
|
120,391 |
|
122,740 |
|
Additional Paid in Capital |
|
23,191,794 |
|
23,645,151 |
|
|
Retained earnings, net of effect of minority interest in share- |
|
|
|
|
|
|
|
holders' deficit of subsidiary of ($4,828,324) in 2000 and 1999 |
|
20,841,640 |
|
19,410,550 |
|
|
|
|
|
|
|
|
|
Total Shareholders' Equity |
|
44,153,825 |
|
43,178,441 |
|
|
|
|
|
|
|
|
Total Liabilities and Shareholders' Equity |
$ |
125,241,890 |
$ |
122,697,743 |
||
|
|
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|
|
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|
See notes to condensed consolidated financial statements. |
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|
|
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|
SPARTAN MOTORS, INC. |
|||||||
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Three Months Ended |
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||
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2000 |
|
1999 |
|
|
|
|
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|
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Sales |
|
$ |
84,624,826 |
$ |
75,625,571 |
|
|
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Cost of Products Sold |
|
73,694,956 |
|
64,786,689 |
|
||
|
Gross Profit |
|
10,929,870 |
|
10,838,882 |
|
||
|
|
|
|
|
|
|
|
|
Operating Expenses |
|
|
|
|
|
||
|
Research and development |
|
1,755,021 |
|
1,743,464 |
|
|
|
Selling, general and administrative |
|
4,690,281 |
|
5,461,347 |
|
|
|
Operating Income |
|
4,484,568 |
|
3,634,071 |
|
||
|
|
|
|
|
|
|
|
|
Other Income / (Expense) |
|
|
|
|
|
||
|
Interest Expense |
|
(772,956 |
) |
(757,932 |
) |
|
|
Interest and Other Income |
|
(133,809 |
) |
116,320 |
|
|
|
Earnings Before Taxes on Income |
|
3,577,803 |
|
2,992,459 |
|
||
|
|
|
|
|
|
|
|
|
Taxes on Income |
|
1,609,265 |
|
1,547,406 |
|
||
|
Net Earnings |
$ |
1,968,538 |
$ |
1,445,053 |
|
||
|
|
|
|
|
|
|
|
|
Basic and Diluted Net Earnings Per Share |
$ |
0.16 |
$ |
0.12 |
|
||
|
|
|
|
|
|
|
|
|
Basic Weighted Average Common Shares Outstanding |
|
12,157,000 |
|
12,536,000 |
|
||
|
|
|
|
|
|
|
|
|
Diluted Weighted Average Common Shares |
|
|
|
|
|
||
|
Outstanding |
|
12,174,000 |
|
12,560,000 |
|
|
|
|
|
|
|
|
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|
See notes to condensed consolidated financial statements. |
|
|
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|
|
||
|
SPARTAN MOTORS, INC. AND SUBSIDIARIES |
|||||||||||
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|
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Additional |
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|
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|
|
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|
|
|
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|
|
Balance at January 1, 2000 |
12,273,977 |
$ |
122,740 |
$ |
23,645,151 |
$ |
19,410,550 |
$ |
43,178,441 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase and constructive |
|
|
|
|
|
|
|
|
|
|
|
|
retirement of stock |
(234,900 |
) |
(2,349 |
) |
(453,357 |
) |
(537,448 |
) |
(993,154 |
) |
|
Comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings |
|
|
|
|
|
|
1,968,538 |
|
1,968,538 |
|
|
Balance at March 31, 2000 |
12,039,077 |
$ |
120,391 |
$ |
23,191,794 |
$ |
20,841,640 |
$ |
44,153,825 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to condensed consolidated financial statements. |
|||||||||||
|
SPARTAN MOTORS, INC. |
||||||||
|
|
|
|
Three Months Ended |
|
|||
|
|
|
|
2000 |
|
1999 |
|
|
|
Cash Flows From Operating Activities: |
|
|
|
|||||
|
Net earnings |
$ |
1,968,538 |
$ |
1,445,053 |
|
||
|
Adjustments to reconcile net earnings to net cash |
|
|
|
|
|
||
|
provided by operating activities: |
|
|
|
|
|
||
|
|
Depreciation and amortization |
|
856,773 |
|
995,088 |
|
|
|
|
Loss / (Gain) on sales of assets |
|
1,435 |
|
(73,180 |
) |
|
|
|
Decrease (increase) in assets: |
|
|
|
|
|
|
|
|
|
Accounts receivable |
|
(6,390,225 |
) |
(1,659,716 |
) |
|
|
|
Inventories |
|
2,763,358 |
|
(2,664,774 |
) |
|
|
|
Federal taxes receivable |
|
1,427,945 |
|
-- |
|
|
|
|
Other assets |
|
63,376 |
|
325,953 |
|
|
|
Increase (decrease) in liabilities: |
|
|
|
|
|
|
|
|
|
Accounts payable |
|
2,034,954 |
|
1,199,606 |
|
|
|
|
Other current liabilities and accrued expenses |
|
(839,942 |
) |
295,957 |
|
|
|
|
Accrued warranty |
|
(59,906 |
) |
150,541 |
|
|
|
|
Accrued customer rebates |
|
(2,696 |
) |
7,299 |
|
|
|
|
Taxes on income |
|
116,431 |
|
1,495,077 |
|
|
|
|
Accrued vacation |
|
149,125 |
|
207,826 |
|
|
|
|
Accrued compensation and related taxes |
|
(208,954 |
) |
213,554 |
|
|
|
|
Deposits from customers |
|
832,371 |
|
251,720 |
|
|
Total Adjustments |
|
744,045 |
|
744,951 |
|
||
|
Net Cash Provided By Operating Activities |
|
2,712,583 |
|
2,190,004 |
|
|||
|
Cash Flows From Investing Activities: |
|
|
|
|
|
|||
|
Purchases of property, plant and equipment |
|
(495,148 |
) |
(381,351 |
) |
||
|
Proceeds from sales of property, plant and equipment |
|
5,050 |
|
20,021 |
|
||
|
Proceeds from sales of investment securities |
|
-- |
|
500,000 |
|
||
|
Purchase price adjustment related to acquisition of subsidiary |
|
-- |
|
(249,103 |
) |
||
|
Minority interest contributions |
|
-- |
|
750,000 |
|
||
|
Net Cash Provided By (Used In) Investing Activities |
|
(490,098 |
) |
639,567 |
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Continued) |
|
|
SPARTAN MOTORS, INC. |
||||||||
|
|
|
|
Three Months Ended |
|
|||
|
|
|
|
2000 |
|
1999 |
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Financing Activities: |
|
|
|
|
|
|||
|
Payments on notes payable |
|
|
$ |
(950,790 |
) |
||
|
Proceeds from notes payable |
$ |
2,791,614 |
|
-- |
|
||
|
Payments on long-term debt |
|
(3,244,234 |
) |
(1,898,292 |
) |
||
|
Net proceeds from exercise of stock options |
|
-- |
|
1,942 |
|
||
|
Purchase of treasury stock |
|
(993,154 |
) |
-- |
|
||
|
Net Cash Used in Financing Activities: |
|
(1,445,774 |
) |
(2,847,140 |
) |
|||
|
|
|
|
|
|
|
|
|
|
Net Increase (Decrease) in Cash and Cash Equivalents |
|
776,711 |
|
(17,569 |
) |
|||
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents at Beginning of Period |
|
35,797 |
|
37,645 |
|
|||
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents at End of Period |
$ |
812,508 |
$ |
20,076 |
|
|||
|
|
|
|
|
|
|
|
|
|
See notes to condensed consolidated financial statements. |
|
|
|
|
|
|||
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, 1999, included in the Form 10-K of Spartan Motors, Inc. (the "Company") filed with the Securities and Exchange Commission on March 7, 2000. |
|
|
|
|
Note 2 |
The accompanying unaudited interim consolidated financial statements reflect all normal and recurring adjustments that are necessary for the fair presentation of the Company's financial position as of March 31, 2000, and the results of operations and cash flows for the periods presented. |
|
|
|
|
Note 3 |
The results of operations for the three-month period ended March 31, 2000 are not necessarily indicative of the results to be expected for the full year. |
|
|
|
|
Note 4 |
Inventories consist of raw materials and purchased components, work in process, and finished goods and are summarized as follows: |
|
|
|
March 31, |
|
December 31, |
|
|
|
|
|
|
|
|
|
Finished goods |
$ |
7,239,147 |
$ |
9,148,018 |
|
|
Raw materials and purchased components |
|
35,438,720 |
|
36,026,149 |
|
|
Work in process |
|
5,628,927 |
|
6,479,813 |
|
|
Obsolescence reserve |
|
(3,906,185 |
) |
(4,542,253 |
) |
|
|
$ |
44,400,609 |
$ |
47,111,727 |
|
|
Note 5 |
Sales and other financial information by business segment are as follows (amounts in thousands): |
|
Three Months Ended March 31, 2000 |
||||||||||||||
|
|
Business Segments |
|
|
|
|
|
|
|
|||||
|
|
Chassis |
|
EVTeam |
|
Carpenter |
|
Intangibles |
|
Other |
|
Consolidated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales |
$ |
63,392 |
$ |
16,479 |
$ |
7,230 |
$ |
-- |
$ |
(2,476 |
) |
$ 84,625 |
|
|
|
Interest expense |
|
129 |
|
160 |
|
429 |
|
-- |
|
55 |
|
773 |
|
|
|
Depreciation and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
amortization expense |
|
225 |
|
106 |
|
333 |
|
193 |
|
|
|
857 |
|
|
Income tax expense |
|
1,552 |
|
207 |
|
-- |
|
|
|
(150 |
) |
1,609 |
|
|
|
Segment earnings |
|
2,705 |
|
378 |
|
(981 |
) |
(193 |
) |
60 |
|
1,969 |
|
|
|
Segment assets |
|
73,922 |
|
23,482 |
|
23,598 |
|
7,322 |
|
(3,082 |
) |
125,242 |
|
|
|
Three Months Ended March 31, 1999 |
||||||||||||||
|
|
|
Business Segments |
|
|
|
|
|
|
|
||||
|
|
|
Chassis |
|
EVTeam |
|
Carpenter |
|
Intangibles |
|
Other |
|
Consolidated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales |
$ |
60,455 |
$ |
12,905 |
$ |
4,672 |
$ |
-- |
$ |
(2,406 |
) |
$ 75,626 |
|
|
|
Interest expense |
|
301 |
|
134 |
|
350 |
|
-- |
|
(27 |
) |
758 |
|
|
|
Depreciation and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
amortization expense |
|
339 |
|
79 |
|
395 |
182 |
|
|
|
995 |
|
|
|
Income tax expense |
|
1,473 |
|
214 |
|
-- |
|
|
|
(140 |
) |
1,547 |
|
|
|
Segment earnings |
|
2,808 |
|
342 |
|
(1,410 |
) |
(182 |
) |
(113 |
) |
1,445 |
|
|
|
Segment assets |
|
79,996 |
|
20,889 |
|
25,014 |
|
7,230 |
|
(4,475 |
) |
128,654 |
|
|
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, 2000 compared to the period ended March 31, 1999. The comments that follow should be read in conjunction with the Company's consolidated financial statements and related notes contained in this Form 10-Q.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the components of the Company's consolidated statements of operations, on an actual basis, as a percentage of sales:
|
|
|
|
Three Months Ended |
|
|||
|
|
|
|
2000 |
|
1999 |
|
|
|
|
|
|
|
|
|
|
|
|
Sales |
|
100.0 |
% |
100.0 |
% |
|
|
|
Cost of Product Sold |
|
87.1 |
% |
85.7 |
% |
|
|
|
Gross Profit |
|
12.9 |
% |
14.3 |
% |
|
|
|
Operating Expenses: |
|
|
|
|
|
|
|
|
|
Research and development |
|
2.1 |
% |
2.3 |
% |
|
|
|
Selling, general, and administrative |
|
5.5 |
% |
7.2 |
% |
|
|
Operating Income |
|
5.3 |
% |
4.8 |
% |
|
|
|
Other |
|
(1.1 |
%) |
(0.8 |
%) |
|
|
|
Earnings before taxes on income |
|
4.2 |
% |
4.0 |
% |
|
|
|
Taxes on income |
|
1.9 |
% |
2.0 |
% |
|
|
|
Net earnings |
|
2.3 |
% |
2.0 |
% |
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|
Three-Month Period Ended March 31, 2000, Compared to the Three-Month Period Ended March 31, 1999
For the three months ended March 31, 2000, consolidated sales increased $9.0 million (11.9%) over the amount reported for the same period in the previous year. Chassis Group sales for the first quarter of 2000 increased by $2.9 million (4.9%) compared to the sales reported for the same period of 1999. The majority of this increase is due to increased sales of motorhome chassis. For the first quarter of 2000, motorhome chassis sales increased 5.3% over the quarter ended March 31, 1999. The Company's Summit product line is primarily responsible for this increase and has generated significant interest in the market as a low-end alternative for a custom chassis. The Chassis Group will be competitive with this rear diesel engine product in a price range that had otherwise been dominated by front engine gas chassis.
Fire truck chassis sales in the first quarter of 2000 were consistent with sales for the same period in 1999. The fire truck market continues to be strong in 2000, maintaining sales levels in the current year. Transit bus sales increased 26.1% for the first quarter of 2000 compared to the sales reported for the same period in 1999. This is primarily attributable to increased sales to the Company's primary transit bus customer due to a large order placed by that customer.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued)
The Company's other business segments also showed sales increases over the prior year's first quarter. EVTeam sales and Carpenter sales were up $3.6 million (27.7%) and $2.6 million (54.8%), respectively, for the first quarter of 2000 compared to the first quarter of 1999. The EVTeam's increase is primarily due to a large fire department order that was completed in the first quarter of 2000. Carpenter's growth in sales is due to increased order intake and, consequently, an increased level of produced units over the same period in the prior year. The school bus market continues to increase their confidence in the Carpenter bus product.
Gross margin decreased from 14.3% for the first quarter of 1999 to 12.9% for the first quarter of 2000. The EVTeam and Carpenter operate at lower margins than the Chassis Group since the value added is only in the body rather than the complete vehicle. Thus, the gross margin on the body is diluted by the pass-through nature of the chassis cost. Since the majority of the increase in sales over the same period in the prior year is attributable to increases for the EVTeam and Carpenter, this caused the gross margin for the Company as a whole to be lower in the first quarter of 2000.
Operating expenses decreased from 9.5% of sales for the first quarter of 1999 to 7.6% for the first quarter of 2000. One reason for this decrease is that the Company has been focused on finding ways to decrease operating expenses. A reversal of previously accrued management fees at Carpenter is the other reason that operating expenses as percentage of sales were lower in the first quarter of 2000 than in the first quarter of 1999. The primary minority shareholder of Carpenter, Recovery Equity Investors, Inc., restructured the management fees it charges Carpenter to reflect more accurately the actual expenses that it incurs. This resulted in lower selling, general and administrative expenses of approximately $425,000 for the first quarter of 2000 .
Total chassis orders received increased 6.8% during the first quarter of 2000 compared to the same period in 1999. Based on average order lead-time, the Company estimates that approximately one-half of the motorhome, one-third of the bus/specialty, and none of the fire truck orders received during the three-month period ended March 31, 2000 were produced and delivered by March 31, 2000.
At March 31, 2000, the Company had $99.1 million in backlog, compared with a backlog of $124.2 million at March 31, 1999. The majority of the decrease is due to transit bus chassis backlog, which has decreased 97.4% when comparing the first quarter of 2000 to the amount of backlog reported for the same period in 1999. This decrease is due to the fourth quarter 1999 bankruptcy filing by the Company's primary transit bus chassis customer, Metrotrans. This company made up the majority of the backlog number for transit bus chassis at March 31, 1999.
While orders in the backlog are subject to modification, cancellation or rescheduling by customers, the Company has not experienced significant modification, cancellation or rescheduling of orders in the past. Although the backlog of unfilled orders is one of many indicators of market demand, several factors, such as changes in production rates, available capacity, new product introductions and competitive pricing actions, may affect actual sales. Accordingly, a comparison of backlog from period to period is not necessarily indicative of eventual actual shipments.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued)
LIQUIDITY AND CAPITAL RESOURCES
For the three months ended March 31, 2000, cash provided by operating activities was $2.7 million, which was approximately a $0.5 million improvement over the $2.2 million of cash provided by operating activities for the three months ended March 31, 1999. The Company's working capital decreased by $1.3 million from $41.9 million at December 31, 1999 to $40.6 million at March 31, 2000. See the "Consolidated Statement of Cash Flows" contained in this Form 10-Q for further information regarding the increase in cash and cash equivalents, from $35,797 at December 31, 1999 to $812,508 at March 31, 2000.
Shareholders' equity increased $1.0 million in the three months ended March 31, 2000 to approximately $44.1 million. This change primarily is due to net earnings of $2.0 million and the repurchase of Company stock of $1.0 million. The Company's debt to equity ratio decreased to 62.4% on March 31, 2000 compared with 70.5% at December 31, 1999 due to the decrease in borrowings resulting from the positive cash flow from operations.
The Company's primary line of credit is a $30.0 million revolving note payable to a bank. The Company also has a $5.0 million term note under the same debt agreement. Under the terms of the line of credit and term note agreement, the Company is required to maintain certain financial ratios and other financial conditions. The agreement also prohibits the Company from incurring additional indebtedness, limits certain acquisitions, investments, advances or loans and restricts substantial asset sales. At March 31, 2000 the Company was in compliance with all debt covenants.
The Company also has an unsecured line of credit for $1.0 million and secured lines of credit for $0.2 million and $4.3 million. The $4.3 million line carries an interest rate of 0.5% above the bank's prime rate (the prime rate at March 31, 2000, was 9.0%) and has an expiration date of June 30, 2000. This line of credit is secured by accounts receivable and inventory. Borrowings under this line totaled $4.0 million at March 31, 2000. The $0.2 million line carries an interest rate of 2% above the bank's prime rate and has an expiration date of June 1, 2000. This line of credit is secured by accounts receivable, inventory and equipment. There were no borrowings on this line at March 31, 2000. The $1.0 million line carries an interest rate of 1% above the bank's prime rate and expires only if there is a change in management. There were no borrowings on the $1.0 million line at March 31, 2000. The Company believes it has sufficient resources from cash flows from operating activities and, if necessary, from additional borrowings under its lines of credit to satisfy ongoing cash requirements for the next 12 months.
Effect of Inflation
Inflation affects the Company in two principal ways. First, the Company's debt is tied to the prime and LIBOR rates so that increases affecting interest rates may be translated into additional interest expense. Second, general inflation impacts prices
paid for labor, parts and supplies. Whenever possible, the Company attempts to cover increased costs of production and capital by adjusting the prices of its products. However, the Company generally does not attempt to negotiate inflation-based price
adjustment provisions into its contracts. Since order lead times can be as much as six months, the Company has limited ability to pass on cost increases to its customers on a short-term basis. In addition, the markets served by the Company are competitive
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued)
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
As of the date of this Form 10-Q, the Company has not experienced any Year 2000 issues arising from its systems or those of its material vendors and suppliers. If there are ongoing Year 2000 issues that might arise at a later date, the Company has contingency plans in place to address these issues. The Company continues to maintain contact with third parties with whom it has material relationships, such as vendors, suppliers and financial institutions, with respect to the third parties' Year 2000 compliance and any ongoing Year 2000 issues that might arise at a later date.
The Company has 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 have consisted primarily of personnel expense for employees who have had a portion of their time dedicated to the Year 2000 remediation effort. It has been the Company's policy to expense these costs as incurred. These costs have been funded through operating cash flows.
In light of the Company's efforts, the Year 2000 issue has had no material adverse effect to date on the business or results of operations of the Company, and is not expected to have a material impact on the Company's financial condition. However, there can be no assurance that the Company or any third parties will not have ongoing Year 2000 issues that may have a material adverse effect on the Company's business, operating results and financial condition in the future.
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:
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• |
Changes in existing products liability, tort or warranty laws or the introduction of new laws, regulations or policies that could affect our business practices: these laws, regulations or policies could impact our industry as a whole, or could impact only those portions in which we are currently active, for example, laws regulating the design or manufacture of emergency vehicles or regulations issued by the National Fire Protection Association; in either case, our profitability could be injured due to a industry-wide market decline or due to our inability to compete with other companies that are unaffected by these laws, regulations or policies. |
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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued)
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• |
Changes in environmental regulations: these regulations could have a negative impact on our earnings; for example, laws mandating greater fuel efficiency could increase our research and development costs. |
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• |
Changes in economic conditions, including changes in interest rates, financial market performance and the industry: these types of changes can impact the economy in general, resulting in a downward trend that impacts not only our business, but all companies with which we compete; or, the changes can impact only those parts of the economy upon which we rely in a unique fashion, including, by way of example: |
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• |
Factors that impact our attempts to expand internationally, such as the introduction of trade barriers in the United States or abroad. |
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• |
Factors that we have discussed in previous public reports and other documents filed with the Securities and Exchange Commission. |
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This list provides examples of factors that could affect the results described by forward-looking statements contained in this Form 10-Q. However, this list is not intended to be exhaustive; many other factors could impact our business and it is impossible to predict with any accuracy which factors could result in which negative impacts. Although we believe that the forward-looking statements contained in this Form 10-Q are reasonable, we cannot provide you with any guarantee that the anticipated results will be achieved. All forward-looking statements in this Form 10-Q are expressly qualified in their entirety by the cautionary statements contained in this section and you are cautioned not to place undue reliance on the forward-looking statements contained in this Form 10-Q. In addition to the risks listed above, other risks may arise in the future, and we disclaim any obligation to update information contained in any forward-looking statement.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
The Company's primary market risk exposure is a change in interest rates in connection with its outstanding variable rate short-term and long-term debt. Due to variable interest rates on the Company's short-term and long-term debt, an increase in interest rates of 1% could result in the Company incurring approximately $0.3 million in additional annual interest expense. Conversely, a decrease in interest rates of 1% could result in the Company saving approximately $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.
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:
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Exhibit No. |
Document |
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|
|
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. |
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3.2 |
Spartan Motors, Inc. Bylaws (restated to reflect all amendments). Previously filed as an exhibit to the Company's Annual Report on Form 10-K for the period ended December 31, 1995, and incorporated herein by reference. |
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10.1 |
The Spartan Motors, Inc. 1996 Stock Option and Restricted Stock Plan for Outside Market Advisors, as amended May 2, 2000. |
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27 |
Financial Data Schedule. |
(b) Reports on Form 8-K. During the quarter ended March 31, 2000, the Company did not file a current report on Form 8-K.
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.
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SPARTAN MOTORS, INC. Richard J. Schalter Secretary/Treasurer (Principal Accounting and Financial Officer) |
EXHIBIT INDEX
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Exhibit No. |
Document |
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|
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. |
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3.2 |
Spartan Motors, Inc. Bylaws (restated to reflect all amendments). Previously filed as an exhibit to the Company's Annual Report on Form 10-K for the period ended December 31, 1995, and incorporated herein by reference. |
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10.1 |
The Spartan Motors, Inc. 1996 Stock Option and Restricted Stock Plan for Outside Market Advisors, as amended May 2, 2000. |
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27 |
Financial Data Schedule. |
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