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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
September 30, 2002

Commission File Number
0-13611


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

Michigan
(State or Other Jurisdiction of
Incorporation or Organization)

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

 

 

1165 Reynolds Road
Charlotte, Michigan

(Address of Principal Executive Offices)


48813
(Zip Code)


Registrant's Telephone Number, Including Area Code: (517) 543-6400

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes    X                 No _______

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.


Class

Outstanding at
November 7, 2002

 

 

Common stock, $.01 par value

12,015,892 shares








SPARTAN MOTORS, INC.

INDEX


PART I. FINANCIAL INFORMATION

 

 

 

 

Page

 

Item 1.

Financial Statements:

 

 

 

 

 

 

 

Condensed Consolidated Balance Sheets -- September 30, 2002
     (Unaudited) and December 31, 2001


3

 

 

 

 

 

 

Condensed Consolidated Statements of Operations -
     Three Months Ended September 30, 2002 and 2001 (Unaudited)


5

 

 

 

 

 

 

Condensed Consolidated Statements of Operations -
     Nine Months Ended September 30, 2002 and 2001 (Unaudited)


6

 

 

 

 

 

 

Condensed Consolidated Statements of Shareholders'
     Equity - Nine Months Ended September 30, 2002 (Unaudited)


7

 

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows -
     Nine Months Ended September 30, 2002 and 2001 (Unaudited)


8

 

 

 

 

 

 

Notes to Condensed Consolidated Financial Statements

10

 

 

 

 

 

Item 2.

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


14

 

 

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

20

 

 

 

 

 

Item 4.

Controls and Procedures

20

 

 

 

 

PART II. OTHER INFORMATION

 

 

 

 

 

 

Item 6.

Exhibits and Reports on Form 8-K

21

 

 

 

 

SIGNATURES

22

 

 

 

 

CERTIFICATIONS

23

 

 

 

 

EXHIBIT INDEX

27




- -2-


PART I. FINANCIAL INFORMATION

Item 1.  Financial Statements

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

 

September 30, 2002


 

December 31, 2001


 

 

(Unaudited)

 

 

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

   Cash and cash equivalents

$

10,375,272

 

$

4,192,785

   Accounts receivable, less allowance for

 

 

 

 

 

      doubtful accounts of $406,000 in 2002

 

 

 

 

 

      and $446,000 in 2001

 

28,565,484

 

 

25,774,877

   Inventories (Note 4)

 

23,960,677

 

 

23,587,813

   Deferred tax benefit

 

3,777,258

 

 

3,777,269

   Other current assets

 

1,007,850

 

 

1,619,503

   Current assets of discontinued operations

 


323,596


 

 


1,537,915


      Total current assets

 

68,010,137

 

 

60,490,162

 

 

 

 

 

 

Property, plant, and equipment, net

 

14,559,725

 

 

11,288,223

 

 

 

 

 

 

Deferred tax benefit

 

1,183,836

 

 

1,183,836

Goodwill, net of accumulated amortization

 

 

 

 

 

   of $1,712,000 in 2002 and 2001

 

4,543,422

 

 

4,543,422

Other assets

 


16,985


 

 


106,176


Total assets

$


88,314,105


 

$


77,611,819














- -3-


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

 

September 30, 2002


 

December 31, 2001


 

 

(Unaudited)

 

 

 

LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

   Accounts payable

$

16,447,849

 

$

13,850,182

   Other current liabilities and accrued expenses

 

2,734,697

 

 

1,851,199

   Accrued warranty

 

3,553,427

 

 

3,510,316

   Accrued customer rebates

 

635,886

 

 

380,171

   Accrued taxes on income

 

2,238,625

 

 

1,241,325

   Accrued compensation and related taxes

 

2,760,717

 

 

1,740,563

   Accrued vacation

 

1,085,128

 

 

1,118,200

   Deposits from customers

 

4,045,503

 

 

3,807,185

   Current portion of long-term debt

 

--

 

 

2,005,079

   Current liabilities of discontinued operations

 


25,000


 

 


1,795,556


      Total current liabilities

 

33,526,832

 

 

31,299,776

 

 

 

 

 

 

Long-term debt

 

--

 

 

9,400,000

 

 

 

 

 

 

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 12,000,632 and

 

 

 

 

 

      10,722,142 shares in 2002 and 2001, respectively

 

120,006

 

 

107,221

   Additional paid in capital

 

30,642,796

 

 

21,133,937

   Retained earnings

 


24,024,471


 

 


15,670,885


      Total shareholders' equity

 


54,787,273


 

 


36,912,043


 

 

 

 

 

 

Total liabilities and shareholders' equity

$


88,314,105


 

$


77,611,819



See Notes to Condensed Consolidated Financial Statements.








- -4-


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

 

Three Months Ended September 30,


 

 

2002


 

2001


 

 

 

 

 

 

 

 

Sales

$

64,065,349

 

$

55,803,468

 

Cost of products sold

 


52,657,754


 

 


46,442,232


 

Gross profit

 

11,407,595

 

 

9,361,236

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

   Research and development

 

1,750,013

 

 

1,555,112

 

   Selling, general and administrative

 


4,869,064


 

 


4,818,681


 

Operating income

 

4,788,518

 

 

2,987,443

 

 

 

 

 

 

 

 

Other income / (expense):

 

 

 

 

 

 

   Interest expense

 

(86,234

)

 

(328,389

)

   Interest and other income (expense)

 


287,200


 

 


(17,026


)

Earnings before taxes on income

 

4,989,484

 

 

2,642,028

 

 

 

 

 

 

 

 

Taxes on income

 


1,744,619


 

 


1,087,273


 

Net earnings from continuing operations

 

3,244,865

 

 

1,554,755

 

 

 

 

 

 

 

 

Discontinued operations:

 

 

 

 

 

 

   Gain (loss) on disposal of Carpenter

 


(108,126


)

 


--


 

Net earnings

$


3,136,739


 

$


1,554,755


 

 

 

 

 

 

 

 

Basic net earnings per share:

 

 

 

 

 

 

   Net earnings from continuing operations

$

0.27

 

$

0.15

 

   Gain (loss) from discontinued operations:

 

 

 

 

 

 

      Gain (loss) on disposal of Carpenter

 


(0.01


)

 


--


 

Basic net earnings per share

$


0.26


 

$


0.15


 

 

 

 

 

 

 

 

Diluted net earnings per share:

 

 

 

 

 

 

   Net earnings from continuing operations

$

0.26

 

$

0.15

 

   Gain (loss) from discontinued operations:

 

 

 

 

 

 

      Gain (loss) on disposal of Carpenter

 


(0.01


)

 


--


 

Diluted net earnings per share

$


0.25


 

$


0.15


 

 

 

 

 

 

 

 

Basic weighted average common shares outstanding

 


11,918,000


 

 


10,522,000


 

 

 

 

 

 

 

 

Diluted weighted average common shares outstanding

 


12,563,000


 

 


10,560,000


 


See Notes to Condensed Consolidated Financial Statements.



- -5-


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

 

Nine Months Ended September 30,


 

 

2002


 

2001


 

 

 

 

 

 

 

 

Sales

$

196,099,013

 

$

172,981,443

 

Cost of products sold

 


160,829,600


 

 


145,473,598


 

Gross profit

 

35,269,413

 

 

27,507,845

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

   Research and development

 

5,404,447

 

 

4,675,690

 

   Selling, general and administrative

 


15,733,168


 

 


14,110,443


 

Operating income

 

14,131,798

 

 

8,721,712

 

 

 

 

 

 

 

 

Other income / (expense):

 

 

 

 

 

 

   Interest expense

 

(300,470

)

 

(1,202,626

)

   Interest and other income (expense)

 


339,821


 

 


165,165


 

Earnings before taxes on income

 

14,171,149

 

 

7,684,251

 

 

 

 

 

 

 

 

Taxes on income

 


4,956,716


 

 


3,363,449


 

Net earnings from continuing operations

 

9,214,433

 

 

4,320,802

 

 

 

 

 

 

 

 

Discontinued operations:

 

 

 

 

 

 

   Gain on disposal of Carpenter

 


269,314


 

 


--


 

Net earnings

$


9,483,747


 

$


4,320,802


 

 

 

 

 

 

 

 

Basic net earnings per share:

 

 

 

 

 

 

   Net earnings from continuing operations

$

0.81

 

$

0.41

 

   Gain from discontinued operations:

 

 

 

 

 

 

      Gain on disposal of Carpenter

 


0.02


 

 


--


 

Basic net earnings per share

$


0.83


 

$


0.41


 

 

 

 

 

 

 

 

Diluted net earnings per share:

 

 

 

 

 

 

   Net earnings from continuing operations

$

0.78

 

$

0.41

 

   Gain from discontinued operations:

 

 

 

 

 

 

      Gain on disposal of Carpenter

 


0.02


 

 


--


 

Diluted net earnings per share

$


0.80


 

$


0.41


 

 

 

 

 

 

 

 

Basic weighted average common shares outstanding

 


11,400,000


 

 


10,520,000


 

 

 

 

 

 

 

 

Diluted weighted average common shares outstanding

 


11,899,000


 

 


10,541,000


 


See Notes to Condensed Consolidated Financial Statements.



- -6-


SPARTAN MOTORS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(UNAUDITED)
____________________________________

 

Number of
Shares


 

Common
Stock


 

Additional Paid
In Capital


 

Retained
Earnings


 


Total


 

 

 

 

 

 

 

 

 

 

 

 

Balance at January 1, 2002

10,722,142

 

$107,221

 

$21,133,937

 

$15,670,885

 

$36,912,043

 

 

 

 

 

 

 

 

 

 

 

 

Net proceeds from exercise

 

 

 

 

 

 

 

 

 

 

     of stock options including

 

 

 

 

 

 

 

 

 

 

     tax benefit of $2,413,000

1,278,490

 

12,785

 

9,455,859

 

 

 

9,468,644

 

Dividends paid

 

 

 

 

 

 

(1,130,161

)

(1,130,161

)

Other

 

 

 

 

53,000

 

 

 

53,000

 

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

     Net earnings

 


 

 


 

 


 

9,483,747


 

9,483,747


 

Balance at September 30, 2002

12,000,632


 

$120,006


 

$30,642,796


 

$24,024,471


 

$54,787,273


 


See Notes to Condensed Consolidated Financial Statements.















- -7-


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

 

Nine Months Ended September 30,


 

 

2002


 

2001


 

Cash flows from operating activities:

 

 

 

 

 

 

   Net earnings from continuing operations

$

9,214,433

 

$

4,320,802

 

   Adjustments to reconcile net earnings to net cash

 

 

 

 

 

 

     provided by operating activities:

 

 

 

 

 

 

      Depreciation

 

1,427,740

 

 

1,280,985

 

      Amortization

 

--

 

 

312,749

 

      Loss (gain) on sales of assets

 

(2,083

)

 

4,535

 

      Decrease (increase) in assets:

 

 

 

 

 

 

         Accounts receivable

 

(2,790,607

)

 

(758,403

)

         Inventories

 

(372,864

)

 

2,100,110

 

         Federal taxes receivable

 

--

 

 

5,697,352

 

         Other assets

 

700,855

 

 

365,084

 

      Increase (decrease) in liabilities:

 

 

 

 

 

 

         Accounts payable

 

2,597,667

 

 

1,401,397

 

         Other current liabilities and accrued expenses

 

883,498

 

 

(1,082,884

)

         Accrued warranty

 

43,111

 

 

(216,366

)

         Accrued customer rebates

 

255,715

 

 

14,050

 

         Accrued taxes on income

 

997,300

 

 

2,885,525

 

         Accrued vacation

 

(33,072

)

 

87,422

 

         Accrued compensation and related taxes

 

1,020,154

 

 

(424,009

)

         Tax benefit from options exercised

 

2,413,000

 

 

--

 

         Deposits from customers

 


238,318


 

 


1,461,960


 

   Total adjustments

 


7,378,732


 

 


13,129,507


 

Net cash provided by continuing operating activities

 

16,593,165

 

 

17,450,309

 

 

 

 

 

 

 

 

Net cash used in discontinued operating activities

 


(286,923


)

 


(2,746,773


)

Net cash provided by operating activities

 

16,306,242

 

 

14,703,536

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

   Purchases of property, plant and equipment

 

(4,699,242

)

 

(1,507,812

)

   Proceeds from sales of property, plant and equipment

 


2,083


 

 


30,915


 

Net cash used in investing activities

 

(4,697,159

)

 

(1,476,897

)

 

 

 

 

 

 

 

 

 

 

 

 

(Continued)

 







- -8-


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

 

Nine Months Ended September 30,


 

 

2002


 

2001


 

Cash flows from financing activities:

 

 

 

 

 

 

   Payments on notes payable

 

 

 

$

(30,000

)

   Payments on long-term debt

$

(11,405,079

)

 

(13,011,428

)

   Dividends paid

 

(1,130,161

)

 

(736,265

)

   Net proceeds from the exercise of stock options

 

7,055,644

 

 

33,923

 

   Other

 


53,000


 

 


--


 

Net cash used in financing activities

 

(5,426,596

)

 

(13,743,770

)

 

 


 


 

 


 


 

Net increase (decrease) in cash and cash equivalents

 

6,182,487

 

 

(517,131

)

 

 

 

 

 

 

 

Cash and cash equivalents at beginning of period

 

4,192,785

 

 

535,030

 

 

 


 


 

 


 


 

Cash and cash equivalents at end of period

$


10,375,272


 

$


17,899


 










See Notes to Condensed Consolidated Financial Statements.











- -9-


SPARTAN MOTORS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


Note 1

For a description of the accounting policies followed refer to the notes to the Spartan Motors, Inc. (the "Company") annual consolidated financial statements for the year ended December 31, 2001, included in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 22, 2002.

Note 2

The accompanying unaudited interim condensed consolidated financial statements reflect all normal and recurring adjustments that are necessary for the fair presentation of the Company's financial position as of September 30, 2002 and the results of operations and cash flows for the periods presented.

Note 3

The results of operations for the nine-month period ended September 30, 2002 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:

 

September 30, 2002


 

December 31, 2001


 

 

 

 

 

 

 

 

Finished goods

$

5,390,193

 

$

6,466,152

 

Raw materials and purchased components

 

13,383,924

 

 

11,234,222

 

Work in process

 

7,176,010

 

 

7,399,713

 

Obsolescence reserve

 


(1,989,450


)

 


(1,512,274


)

 

$


23,960,677


 

$


23,587,813


 


Note 5

Since October 23, 1998, the Company has consolidated its majority-owned subsidiary, Carpenter Industries, Inc. ("Carpenter"), and recognized 100% of Carpenter's operating results. On September 28, 2000, the Company's Board of Directors passed a resolution to cease funding of Carpenter. Carpenter's Board of Directors then voted on September 29, 2000 to begin the orderly liquidation of Carpenter. Since Carpenter was a separate segment of the Company's business, the operating results and the disposition of Carpenter's net assets were accounted for as a discontinued operation.








- -10-


Note 5 (continued)

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

 

September 30,
2002


 

December 31,
2001


 

 

 

 

 

 

 

 

Cash and cash equivalents

$

109,579

 

$

1,453,198

 

Other current assets

 

214,017

 

 

84,717

 

 

 


 


 

 


 


 

Current assets of discontinued operations

$


323,596


 

$


1,537,915


 

 

 

 

 

 

 

 

Notes payable

 

 

 

$

1,135,556

 

Other current liabilities

$

25,000

 

 

660,000

 

 

 


 


 

 


 


 

Current liabilities of discontinued operations

$


25,000


 

$


1,795,556


 


Note 6

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

Three Months Ended September 30, 2002

 

 

Business Segments


 

 

 

 

 

 

 

 

Chassis


 

EVTeam


 

Intangibles


 

Other


 

Consolidated


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

$

50,873

 

$

16,032

 

 

 

 

$

(2,840

)

$

64,065

 

Interest expense

 

57

 

 

145

 

 

 

 

 

(116

)

 

86

 

Depreciation expense

 

176

 

 

206

 

 

 

 

 

117

 

 

499

 

Income tax expense

 

1,570

 

 

153

 

 

 

 

 

22

 

 

1,745

 

Segment earnings from
     continuing operations

 


2,688

 

 


301

 

 

 

 

 


256

 

 


3,245

 

Discontinued operations

 

--

 

 

--

 

 

 

 

 

(108

)

 

(108

)

Segment earnings

 

2,688

 

 

301

 

 

 

 

 

148

 

 

3,137

 

Segment assets

 

38,053

 

 

28,628

 

$

4,543

 

 

17,090

 

 

88,314

 






- -11-


Note 6 (continued)

Three Months Ended September 30, 2001

 

 

Business Segments


 

 

 

 

 

 

 

 

Chassis


 

EVTeam


 

Intangibles


 

Other


 

Consolidated


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

$

43,889

 

$

18,332

 

 

 

 

$

(6,418

)

$

55,803

 

Interest expense

 

49

 

 

208

 

 

 

 

 

71

 

 

328

 

Depreciation and
     amortization expense

 


195

 

 


103

 


$


104

 

 


127

 

 


529

 

Income tax expense (benefit)

 

961

 

 

176

 

 

--

 

 

(50

)

 

1,087

 

Segment earnings (loss) from
     continuing operations

 


1,582

 

 


328

 

 


(104


)

 


(251


)

 


1,555

 

Discontinued operations

 

--

 

 

--

 

 

--

 

 

--

 

 

--

 

Segment earnings (loss)

 

1,582

 

 

328

 

 

(104

)

 

(251

)

 

1,555

 

Segment assets

 

52,195

 

 

29,823

 

 

4,648

 

 

(1,600

)

 

85,066

 


Nine Months Ended September 30, 2002

 

 

Business Segments


 

 

 

 

 

 

 

 

Chassis


 

EVTeam


 

Intangibles


 

Other


 

Consolidated


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

$

154,385

 

$

51,568

 

 

 

 

$

(9,854

)

$

196,099

 

Interest expense

 

142

 

 

398

 

 

 

 

 

(240

)

 

300

 

Depreciation expense

 

620

 

 

456

 

 

 

 

 

352

 

 

1,428

 

Income tax expense

 

4,791

 

 

609

 

 

 

 

 

(443

)

 

4,957

 

Segment earnings (loss) from
     continuing operations

 


8,350

 

 


961

 

 

 

 

 


(97


)

 


9,214

 

Discontinued operations

 

--

 

 

--

 

 

 

 

 

270

 

 

270

 

Segment earnings

 

8,350

 

 

961

 

 

 

 

 

173

 

 

9,484

 

Segment assets

 

38,053

 

 

28,628

 

$

4,543

 

 

17,090

 

 

88,314

 


Nine Months Ended September 30, 2001

 

 

Business Segments


 

 

 

 

 

 

 

 

Chassis


 

EVTeam


 

Intangibles


 

Other


 

Consolidated


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

$

132,768

 

$

52,682

 

 

 

 

$

(12,469

)

$

172,981

 

Interest expense

 

276

 

 

625

 

 

 

 

 

302

 

 

1,203

 

Depreciation and
     amortization expense

 


637

 

 


309

 


$


313

 

 


335

 

 


1,594

 

Income tax expense

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