SPAR Spartan Motors Inc

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 quarterly period ended June 30, 2015.
	OR
□	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________________ to _____________________

 

Commission File Number 000-13611

 

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.)
1541 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 by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

 

Yes

X

No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer	☐		Accelerated filer	☒
Non-accelerated filer	☐		Smaller Reporting Company	☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2).

 

Yes

No

X

 

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 July 31, 2015
Common stock, $.01 par value	34,256,811 shares

 

 

  

SPARTAN MOTORS, INC.

 

INDEX
____________________________________

 

			Page
FORWARD-LOOKING STATEMENTS			1
PART I.  FINANCIAL INFORMATION
	Item 1.	Financial Statements:
		Condensed Consolidated Balance Sheets – June 30, 2015 (Unaudited) and December 31, 2014	2
		Condensed Consolidated Statements of Operations - Three and Six Months Ended June 30, 2015 and 2014 (Unaudited)	3
		Condensed Consolidated Statements of Cash Flows - Six Months Ended June 30, 2015 and 2014 (Unaudited)	4
		Condensed Consolidated Statement of Shareholders’ Equity – Six Months Ended June 30, 2015 (Unaudited)	5
		Notes to Condensed Consolidated Financial Statements	6
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	28
	Item 4.	Controls and Procedures	28
PART II.  OTHER INFORMATION
	Item 1A.	Risk Factors	29
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	29
	Item 6.	Exhibits	30
SIGNATURES			31
EXHIBIT INDEX

 

 

  

FORWARD-LOOKING STATEMENTS

 

There are certain statements within this Report 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,” “will”, “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, among others:

 

●	Changes in economic conditions, including changes in interest rates, credit availability, financial market performance and the Company’s industries can have adverse effects on its earnings and financial condition, as well as its customers, dealers and suppliers.
●	Changes in relationships with major customers and suppliers could significantly affect the Company’s revenues and profits.
●	Constrained government budgets may have a negative effect on the Company’s business and its operations.
●	The integration of businesses or assets we have acquired or may acquire in the future involves challenges that could disrupt our business and harm our financial condition.
●	When we introduce new products, we may incur expenses that we did not anticipate, such as start-up and recall expenses, resulting in reduced earnings.
●	Amendments of the laws and regulations governing our businesses, or the promulgation of new laws and regulations, could have a material impact on the Company’s operations.
●	We source components from a variety of domestic and global suppliers who may be subject to disruptions from natural or man-made causes. Disruptions in our supply of components could have a material and adverse impact on our results of operations or financial position.
●	Changes in the markets we serve may, from time to time, require us to re-configure our production lines or re-locate production of products between buildings or to new locations in order to maximize the efficient utilization of our production capacity. Costs incurred to effect these re-configurations may exceed our estimates and efficiencies gained may be less than anticipated.

 

This list provides examples of factors that could affect the results described by forward-looking statements contained in this Report. However, this list is not intended to be all inclusive. The risk factors disclosed in Item 1A “Risk Factors” of Part II of this Quarterly Report on Form 10-Q and in Part I – Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2014, include all known risks our management believes could materially affect the results described by forward-looking statements contained in this Report. However, those risks may not be the only risks we face. Our business, operations, and financial performance could also be affected by additional factors that are not presently known to us or that we currently consider to be immaterial to our operations. In addition, new risks may emerge from time to time that may cause actual results to differ materially from those contained in any forward-looking statements. We believe that the forward-looking statements contained in this Report are reasonable. However, given these risks and uncertainties, we cannot provide you with any guarantee that the anticipated results will be achieved. All forward-looking statements in this Report 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 Report as a prediction of actual results. We disclaim any obligation to update or revise information contained in any forward-looking statement to reflect developments or information obtained after the date this Report is filed with the Securities and Exchange Commission.

 

 

  

Item 1.

Financial Statements

 

SPARTAN MOTORS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except par value) 

 

 

See Accompanying Notes to Condensed Consolidated Financial Statements.

 

  

SPARTAN MOTORS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

  

 

See Accompanying Notes to Condensed Consolidated Financial Statements.

 

 

SPARTAN MOTORS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

See Accompanying Notes to Condensed Consolidated Financial Statements.

 

  

SPARTAN MOTORS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

(In thousands)

(Unaudited)

 

  

See Accompanying Notes to Condensed Consolidated Financial Statements.

 

 

SPARTAN MOTORS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except per share data)

  

 

 

 

SPARTAN MOTORS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except per share data)

    

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

Spartan Motors, Inc. was organized as a Michigan corporation on September 18, 1975, and is headquartered in Charlotte, Michigan. We began development of our first product that same year and shipped our first fire truck chassis in October 1975.

 

We are known as a leading, niche market engineer and manufacturer in the heavy-duty, custom vehicles marketplace. We have two wholly owned operating subsidiaries: Spartan Motors USA, Inc. (“Spartan USA”), with locations in Charlotte, Michigan, Brandon, South Dakota and Ephrata, Pennsylvania; and Utilimaster Corporation, located in Bristol and Wakarusa, Indiana (“Utilimaster”). On July 1, 2015 our Charlotte, Michigan location (formerly Spartan Motors Chassis, Inc.) and our Ephrata, Pennsylvania location (formerly Crimson Fire Aerials, Inc.) were merged into Spartan USA. At June 30, 2015, we were also a participant in a joint venture, Spartan-Gimaex Innovations, LLC (“Spartan-Gimaex”), with Gimaex Holding, Inc. In February 2015, Spartan USA and Gimaex Holding, Inc. mutually agreed to begin discussions regarding the dissolution of the joint venture. In June 2015, Spartan USA and Gimaex Holding, Inc. entered into court proceedings to determine the terms of the dissolution. Our brand names, Spartan Chassis™, Spartan ERV™, and Utilimaster™ are known for quality, value, service and innovation.

 

At our Charlotte, Michigan facilities we design, engineer and manufacture custom heavy-duty chassis and vehicles under the Spartan Chassis and Spartan ERV brand names. The chassis consist of a frame assembly, engine, transmission, electrical system, running gear (wheels, tires, axles, suspension and brakes) and, for fire trucks and some specialty chassis applications, a cab. Our customers for these products are original equipment manufacturers (“OEMs”) who complete their heavy-duty vehicle product by mounting the body or apparatus on our chassis. Complete vehicles are manufactured for the defense and emergency response markets. At our Brandon, South Dakota and Ephrata, Pennsylvania facilities we engineer and manufacture fire trucks and aerial ladder components under the Spartan ERV brand name, which are built on chassis platforms manufactured at our Charlotte, Michigan facility or purchased from outside sources. Utilimaster is a leading manufacturer of specialty vehicles made to customer specifications in the delivery and service market, including walk-in vans and hi-cube vans, as well as truck bodies.

 

Our business strategy is to further diversify product lines and develop innovative design, engineering and manufacturing expertise in order to be the best value producer of specialty vehicle products. We have an innovative team focused on building lasting relationships with our customers. This is accomplished by striving to deliver premium specialty chassis and vehicles, vehicle components, and services that inspire customer loyalty. Our diversification across several sectors creates numerous opportunities while minimizing overall risk. Additionally, our business model provides the agility to quickly respond to market needs, take advantage of strategic opportunities when they arise and correctly size operations to ensure stability and growth.

 

  

Executive Overview

●

Revenue of $144.8 million in the second quarter of 2015, an increase of 25.0% compared to $115.8 million in the second quarter of 2014.

●

Gross profit of $17.4 million in the second quarter of 2015, an increase of 38.1% compared to $12.6 million in the second quarter of 2014.

●

Gross Margin of 12.0% in the second quarter of 2015, compared to 10.9% in the second quarter of 2014, driven by favorable product mix in our Delivery and Service Vehicles segment.

●

Operating expense of $15.1 million, or 10.4% of sales in the second quarter of 2015, compared to $12.6 million or 10.9% of sales in the second quarter of 2014.

●

Operating income of $2.3 million in the second quarter of 2015, compared to break-even in the second quarter of 2014.

●

Income tax expense of $1.1 million in 2015, compared to benefit of $0.2 million in the second quarter of 2014.

●

Net income of $1.2 million in the second quarter of 2015, compared to net income of $0.2 million in the second quarter of 2014.

●

Earnings per share of $0.03 in the second quarter of 2015, compared to $0.01 in the second quarter of 2014.

●

We used $3.4 million of cash in operations during the six months ended June 30, 2015, mainly to support increased accounts receivable balances, compared to $3.7 million of cash generated from operations in the six months ended June 30, 2014.

●

Order backlog of $262.7 million at June 30, 2015, an increase of $16.0 million, or 6.5% from our backlog of $246.7 million at June 30, 2014.

●

Reached settlement agreement in July, 2015 with the National Highway Traffic Safety Administration (“NHTSA”) pertaining to our early warning and defect reporting.

 

  

We believe we are well positioned to take advantage of long-term opportunities, and continue our efforts to bring product innovations to each of the markets that we serve. Some of our recent innovations and strategic developments include:

 

	●	Our diversified business model. We believe the major strength of our business model is market diversity and customization. Our Delivery and Service Vehicles and Specialty Chassis and Vehicles segments serve mainly business and consumer markets, effectively diversifying our company and complementing our Emergency Response Vehicles segment, which primarily serves governmental entities. Additionally, the delivery and service vehicle market is an early-cycle industry, complementary to the late-cycle emergency response vehicle industry. We intend to continue to pursue additional areas that build on our core competencies in order to further diversify our business.
	●	The introduction of the Velocity, a new delivery vehicle design that combines the productivity of a walk-in van for multi-stop deliveries with the superior fuel economy of the Ford Transit chassis.
	●	The move of our Utilimaster subsidiary’s walk-in van production to a new, single building facility has resulted in greater manufacturing flexibility and efficiency, higher product quality and lower operating costs. Operating in this new facility has eliminated a number of non-value added production steps and will continue to result in increasing profitability as we steadily improve our manufacturing operations.
	●	The recently announced restructuring of our Emergency Response Vehicles segment. This restructuring includes the upgrade of business processes and production capabilities along with consolidation of our fire truck manufacturing to three locations, Charlotte, Michigan, Brandon, South Dakota and Ephrata, Pennsylvania. These changes will reduce our manufacturing footprint and allow us to quote, design, engineer and manufacture products more effectively, profitably and in higher volume.
	●	Our new passive steer tag axle for the recreational vehicle industry. A completely new passive tag axle design that produces a 7% reduction in curb-to-curb turning radius for luxury motor coaches.
	●	A new fire truck cab interior configuration, which provides additional space and comfort in both the driver and officer positions, improved shoulder harness accessibility, increased interior volume and a 45% reduction in in-cab noise levels when traveling at 45 mph.
	●	The Spartan Advanced Climate Control heating, ventilation and air conditioning (HVAC) system that improves heating and cooling within our fire truck cabs. This new HVAC system boasts a dynamic air velocity that on average is over 300 percent higher than our current system and greatly reduces the time needed to warm up or cool down the cab.
	●	The strength of our balance sheet, which includes robust working capital, low debt and access to credit through our revolving line of credit and private shelf agreement.

  

The following section provides a narrative discussion about our financial condition and results of operations. The comments should be read in conjunction with our Condensed Consolidated Financial Statements and related Notes thereto included in Item 1 of this Form 10-Q and in conjunction with our Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 5, 2015.

 

  

RESULTS OF OPERATIONS

 

The following table sets forth, for the periods indicated, the components of the Company’s Condensed Consolidated Statements of Operations as a percentage of sales (percentages may not sum due to rounding):

  

		Three Months Ended June 30,								Six Months Ended June 30,
		2015				2014				2015				2014
Sales			100.0				100.0				100.0				100.0
Cost of products sold			87.9				89.1				89.2				90.3
Restructuring charge			0.1				0.0				0.2				0.0
Gross profit			12.0				10.9				10.6				9.7
Operating expenses:
Research and development			0.8				0.6				1.0				0.8
Selling, general and administrative			9.1				10.3				9.8				10.4
Restructuring charge			0.5				0.0				0.6				0.0
Operating income (loss)			1.6				0.0				(0.7	)			(1.4	)
Other income (expense), net			(0.1	)			0.0				0.0				0.0
Income (loss) before taxes			1.6				0.0				(0.8	)			(1.4	)
Taxes			0.8				(0.2	)			(0.1	)			(0.6	)
Net earnings (loss)			0.8				0.2				(0.6	)			(0.8	)

 

Quarter Ended June 30, 2015 Compared to the Quarter Ended June 30, 2014

 

Sales

For the second quarter of 2015, we reported consolidated sales of $144.8 million compared to $115.8 million for the same quarter in 2014, an increase of $29.0 million or 25.0%. These results reflect increased sales volumes across all of our segments, with higher unit volumes in our Emergency Response Vehicles and Specialty Chassis and Vehicles segments and higher parts and services sales in our Delivery and Service Vehicles segment. Please refer to our segment discussion below for more information about our segment sales.    

 

Cost of Products Sold

Cost of products sold was $127.4 million in the second quarter of 2015 compared to $103.2 million in the second quarter of 2014, an increase of $24.2 million or 23.4%, driven by the higher sales volumes in 2015. Certain engineering costs related to routine product changes, that were formerly classified within Research and development expense, have been classified within Cost of products sold for the three and six months ended June 30, 2015 in order to more consistently align the results of our individual business units. Expenses of $2.0 million and $3.7 million for the three and six months ended June 30, 2014 have been reclassified accordingly.

 

Gross Profit

Gross profit was $17.4 million for the second quarter of 2015 compared to $12.6 million for the second quarter of 2014, an increase of $4.8 million, or 38.1%. $3.3 million of this increase is due to a favorable product mix in 2015, while $2.7 million is due to the increased sales volume. These increases were partially offset by a $0.6 million accrual for performance obligations related to a NHTSA agreement in 2015, a $0.5 million decrease due to pricing concessions on certain specialty chassis enacted in 2015 and $0.1 million of restructuring charges incurred in 2015 which were not incurred in 2014.

 

Gross margin increased by 110 basis points to 12.0% in the second quarter of 2015 compared to 10.9% in the second quarter of 2014, mainly due to a favorable product mix experienced in 2015.

 

  

Operating Expenses

Operating expenses were $15.1 million for the second quarter of 2015, compared to $12.6 million for the second quarter of 2014, an increase of $2.5 million or 19.8%. Research and development expense in the second quarter of 2015 was $1.2 million compared to $0.7 million for the same period in 2014 an increase of $0.5 million, or 71.4%, driven by higher spending on development projects in our Delivery and Service Vehicles segment. Selling, general and administrative expense was $13.2 million in 2015, compared to $11.9 million in 2014, an increase of $1.3 million, or 10.9%, with $0.5 million of the increase due to an accrual for a NHTSA penalty and $0.2 million due to bank fees related to international sales. The remainder of the increase is due to higher salaries expense, mainly as a result of new positions added in 2015, and other miscellaneous items.

 

Taxes

Our effective income tax rate was 48.1% in the second quarter of 2015, compared to (349.3)% in the second quarter of 2014. Our effective tax rate in the second quarter of 2015 differs from the statutory rate mainly due to a non-deductible NHTSA penalty. Our effective tax rate in the second quarter of 2014 was impacted by an adjustment recorded in the quarter to our tax provision as a result of a change in our expectations for our full year financial performance.

 

Net Earnings

We recorded net earnings of $1.2 million, or $0.03 per share, for the second quarter of 2015, compared to net earnings of $0.2 million, or $0.01 per share for the same period in 2014. Driving the increase in net earnings compared with the prior year were the factors discussed above.

 

Order Backlog

At June 30, 2015, we had $262.7 million in backlog compared to $246.7 million at June 30, 2014, an increase of $16.0 million or 6.5%. This increase is mainly attributable to a $25.5 million increase in our delivery and service vehicles backlog, largely as a result of increased orders for walk-in vans. Also contributing was a $6.9 million increase in our specialty chassis and vehicles order backlog mainly due to strong motor home chassis order intake during the quarter. Partially offsetting these increases was a $16.4 million decrease in order backlog for our emergency response vehicles driven by the late 2014 fulfillment of an order for 70 fire trucks for Peru that was received in late 2013.

 

While orders in the backlog are subject to modification, cancellation or rescheduling by customers, this has not been a major factor 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.

 

NHTSA agreement

In July 2015, we entered into a settlement agreement with the NHTSA pertaining to our early warning and defect reporting. Under the terms of the agreement we will pay a fine of $1 million in equal installments over three years, and will complete performance obligations including compliance and regulatory practice improvements, industry outreach and recalls to remedy safety defects in certain of our chassis at a total estimated cost of $1.3 million. The following table presents the charges recorded in the Condensed Consolidated Statement of Operations as a result of this agreement (in thousands):

 

		Three Months Ended June 30, 2015				Six Months Ended June 30, 2015
Cost of products sold		$	556			$	1,269
Selling, general and administrative			500				1,000
		$	1,056			$	2,269

  

 

  

Six Months Ended June 30, 2015 Compared to the Six Months Ended June 30, 2014

 

Sales

For the six months ended June 30, 2015, we reported consolidated sales of $273.2 million compared to $243.8 million reported for the same period in 2014, an increase of $29.4 million or 12.1%. These results reflect higher unit sales volumes in our Emergency Response Vehicles and Specialty Chassis and Vehicles segments, which were partially offset by lower unit sales volumes in our Delivery and Service Vehicles segment. Please refer to our segment discussion below for more information about our segment sales.

 

Cost of Products Sold

Cost of products sold was $244.2 million in the six months ended June 30, 2015 compared to $220.1 million for the same period in 2014, an increase of $24.1 million or 10.9%, mainly due to the higher sales volumes recorded in 2015.

 

Gross Profit

Gross profit was $29.0 million for the six months ended June 30, 2015 compared to $23.7 million for the same period in 2014, an increase of $5.3 million, or 22.4%. $5.0 million of this increase was due to a favorable product mix experienced in 2015, while $2.9 million was due to higher unit volumes in 2015. These increases were partially offset by decreases of $1.3 million due to accruals for performance obligations required by the July 2015 NHTSA agreement, $0.8 million for pricing concessions made in 2015 on certain of our specialty chassis and $0.5 million of restructuring charges recorded in 2015 which were not incurred in 2014. Gross margin increased to 10.6% from 9.7% over the same time period, with a 180 basis point increase due to favorable product mix that included a higher proportion of parts and services sales in 2015. This increase was partially offset by decreases of 50 basis points due to the accruals for performance obligations in 2015 and 20 basis points due to the restructuring charges incurred in 2015, with the remainder of the decrease due to pricing concessions enacted in 2015 on certain specialty chassis.    

 

Operating Expenses

Operating expenses were $31.0 million for the six months ended June 30, 2015, compared to $27.2 million for the same period in 2014 an increase of $3.8 million or 14.0%. Research and development expense was $2.6 million in 2015 compared to $1.9 million in 2014, an increase of $0.7 million or 36.8% due to an increase in new product development, mainly in our Delivery and Service Vehicles segment. Selling, general and administrative expense was $26.8 million in 2015 compared to $25.3 million in 2014, an increase of $1.5 million or 5.9%. $1.0 million of this increase was due to an accrual for a NHTSA penalty imposed in 2015, with the remainder of the increase mainly due to higher salaries driven by increased sales commissions and new positions. In addition we incurred $1.5 million of restructuring charges related to our Emergency Response Vehicles segment in 2015.

 

Taxes

Our effective income tax rate was 16.4% for the six months ended June 30, 2015, compared to 44.7% for the same period of 2014. Our effective tax rate differed from the statutory rate in 2015 mainly due to a $1 million non-deductible NHTSA penalty incurred during the year. Our effective tax rate for 2014 differed from the statutory rate due to non-deductible expenses forecasted for the full year, which included the Utilimaster earnout contingency expense no longer incurred after 2014.

 

Net Earnings

We recorded a net loss of $1.7 million, or $0.05 per share, for the six months ended June 30, 2015, compared to a net loss of $1.9 million, or $0.06 per share for the same period in 2014. Driving the decrease in net loss for the six months ended June 30, 2015 compared with the prior year were the factors discussed above.

  

 

  

Our Segments

 

We identify our reportable segments based on our management structure and the financial data utilized by our chief operating decision makers to assess segment performance and allocate resources among our operating units. We have three reportable segments: Emergency Response Vehicles, Delivery and Service Vehicles, and Specialty Chassis and Vehicles. Our Emergency Response Vehicles segment manufactures chassis and complete vehicles for the emergency response market with operations in Charlotte, Michigan; Brandon, South Dakota; and Ephrata, Pennsylvania. Our Delivery and Service Vehicles segment manufactures walk-in vans and truck bodies at our Bristol and Wakarusa, Indiana facilities, and distributes related aftermarket parts for vehicles used in delivery and service businesses. Our Specialty Chassis and Vehicles segment is comprised of the Spartan USA operations located in Charlotte, Michigan that engineer and manufacture motor home chassis and defense and other specialty vehicles and distribute aftermarket parts and assemblies related to motor homes, defense vehicles and emergency response vehicles. For certain financial information related to each segment, see Note 7 - Business Segments, of the Notes to Condensed Consolidated Financial Statements appearing in Item 1 of this Form 10-Q.

  

Emergency Response Vehicles 

 

Financial Data
(Dollars in Thousands)		Three Months Ended June 30,
		2015								2014
		Amount				%				Amount				%
Sales		$	61,249				100.0	%		$	42,118				100.0	%
Operating (loss)			(1,221	)			(2.0	)%			(1,461	)			(3.5	)%

 

		Six Months Ended June 30,
		2015								2014
		Amount				%				Amount				%
Sales		$	104,455				100.0	%		$	78,060				100.0	%
Operating loss			(6,607	)			(6.3	)%			(5,125	)			(6.6	)%
Segment assets			78,845								87,811

  

Comparison of the Quarters Ended June 30, 2015 and 2014

 

Sales in our Emergency Response Vehicles segment were $61.2 million in the second quarter of 2015 compared to $42.1 million for the same period of 2014, an increase of $19.1 million, or 45.4%. This increase was mainly due to an increase in the overall unit volume in 2015. There were no changes in pricing of products sold by our Emergency Response Vehicles segment that had a significant impact on our financial statements when comparing these periods.

 

We reported an operating loss for our Emergency Response Vehicles segment of $1.2 million in the second quarter of 2015 compared to an operating loss of $1.5 million in the second quarter of 2014, a decrease of $0.3 million, or 20.0%. Higher unit volumes contributed an additional $1.6 million to operating income in 2015, which was partially offset by $0.8 million of restructuring charges and a $0.5 million increase in operating costs, mainly due to charges associated with a NHTSA penalty, recorded during the second quarter of 2015.

  

Comparison of the Six Month Periods Ended June 30, 2015 and 2014

 

Sales in our Emergency Response Vehicles segment were $104.5 million for the six months ended June 30, 2015 compared to $78.1 million for the same period of 2014, an increase of $26.4 million, or 33.8%. This increase was mainly due to higher overall unit volumes during the six months ended June 30, 2015. There were no changes in pricing of products sold by our Emergency Response Vehicles segment that had a significant impact on our financial statements when comparing these periods.

 

  

Operating loss for our Emergency Response Vehicles segment was $6.6 million for the six months ended June 30, 2015 compared to a loss of $5.1 million for the same period of 2014, an increase of $1.5 million, or 29.4%. $2.0 million of this increase was due to restructuring charges incurred in 2015, which were not incurred in 2014, with additional increases of $0.7 million due to charges related to a NHTSA penalty imposed in 2015 and $0.2 million due to higher salaries resulting from additional positions in 2015. Partially offsetting these increases was a $1.4 million decrease to operating loss due to higher unit sales volumes in 2015.

  

Delivery and Service Vehicles

 

Financial Data
(Dollars in thousands)
		Three Months Ended June 30,
		2015								2014
		Amount				%				Amount				%
Sales		$	52,840				100.0	%		$	49,533				100.0	%
Operating income			3,293				6.2	%			1,683				3.4	%

 

		Six Months Ended June 30,
		2015								2014
		Amount				%				Amount				%
Sales		$	107,731				100.0	%		$	114,709				100.0	%
Operating income			5,943				5.5	%			4,279				3.7	%
Segment assets			72,148								74,655

  

Comparison of the Quarters Ended June 30, 2015 and 2014

 

Sales for the second quarter of 2015 in our Delivery and Service Vehicles segment were $52.8 million compared to $49.5 million for the second quarter of 2014, an increase of $3.3 million or 6.7%, driven by higher parts and services sales in 2015. There were no changes in pricing of products sold by our Delivery and Service Vehicles segment that had a significant impact on our financial statements when comparing these periods.

 

Operating income in our Delivery and Service Vehicles segment for the second quarter of 2015 was $3.3 million, compared to operating income of $1.7 million for the same period of 2014, an increase of $1.6 million or 94.1%, primarily due to a favorable product mix in 2015, which included a higher proportion of parts and services sales.

  

Comparison of the Six Month Periods Ended June 30, 2015 and 2014

 

Sales for the six months ended June 30, 2015 were $107.7 million compared to $114.7 million for the same period of 2014, a decrease of $7.0 million or 6.1%. This decrease was driven by a $10.5 million decrease in unit shipments in the first six months of 2015, particularly for our Reach commercial van, which was partially offset by a $3.5 million increase in parts and services sales in 2015. Sales for first six months of 2014 included approximately $7.0 million for shipments of Reach units that were delayed from the fourth quarter of 2013 due to a supplier component shortage. There were no changes in pricing of products sold by our Delivery and Service Vehicles segment that had a significant impact on our financial statements when comparing these periods.

 

Operating income in our Delivery and Service Vehicles segment for the six months ended June 30, 2015 was $5.9 million, compared to $4.3 million for the same period of 2014, an increase of $1.6 million or 37.2%. The increase is mainly due to favorable product mix in 2015, which included a higher proportion of parts and service sales.

 

  

Specialty Chassis and Vehicles

 

Financial Data
(Dollars in thousands)
		Three Months Ended June 30,
		2015								2014
		Amount				%				Amount				%
Sales		$	30,735				100.0	%		$	24,144				100.0	%
Operating Income			1,991				6.5	%			1,426				5.9	%

 

		Six Months Ended June 30,
		2015								2014
		Amount				%				Amount				%
Sales		$	61,010				100.0	%		$	50,985				100.0	%
Operating Income			2,957				4.8	%			2,059				4.0	%
Segment assets			15,838								21,843

  

Comparison of the Quarters Ended June 30, 2015 and 2014

 

Sales for the second quarter of 2015 in our Specialty Chassis and Vehicles segment were $30.7 million compared to $24.1 million for the same period of 2014, an increase of $6.6 million or 27.4%. This increase was due to a $3.7 million increase in unit sales of defense related and other specialty vehicles, a $2.5 million increase in motor home chassis due to higher unit volume and a $0.9 million increase in aftermarket parts sales. These increases were partially offset by a $0.5 million decrease due to the impact of pricing concessions on certain specialty chassis enacted in 2015.

 

Operating income for our Specialty Chassis and Vehicles segment for the second quarter of 2015 was $2.0 million compared to $1.4 million for the same period of 2014, an increase of $0.6 million, or 42.9%. $1.6 million of the increase was due to higher sales volumes in 2015, which was partially offset by decreases of $0.5 million due to the pricing concessions described above and $0.5 million due to accruals for a NHTSA penalty recorded in the second quarter of 2015.

  

Comparison of the Six Month Periods Ended June 30, 2015 and 2014

 

Sales for the six months ended June 30, 2015 in our Specialty Chassis and Vehicles segment were $61.0 million compared to $51.0 million for the same period of 2014, an increase of $10.0 million or 19.6%. This increase was due to a $4.3 million increase in sales of motor home chassis due to higher unit volume, along with a $4.2 million increase in defense and other specialty chassis driven by an order for defense related vehicles that was fulfilled in the second quarter of 2015 and a $2.3 million increase in sales of aftermarket parts and assemblies. These increases were partially offset by a decrease of $0.8 million due to pricing concessions on certain specialty chassis enacted in 2015.

 

Operating income for our Specialty Chassis and Vehicles segment for the six months ended June 30, 2015 was $3.0 million, compared to $2.1 million for the same period of 2014, an increase of $0.9 million, or 42.9%. Increased sales volume drove $3.1 million of the increase, and was partially offset by decreases of $1.4 million due to accruals for costs related to the NHTSA fine imposed in 2015 and $0.8 million due to the pricing concessions described above.

 

 

  

Financial Condition

 

Balance Sheet at June 30, 2015 compared to December 31, 2014

 

Cash decreased by $8.0 million, or 27.9%, to $20.6 million at June 30, 2015 from $28.6 million at December 31, 2014. Please see the discussion of cash flow activity below for more information on our uses of cash in the first six months of 2015.

 

Accounts receivable increased by $15.2 million, or 31.4%, to $63.6 million at June 30, 2015, compared to $48.4 million at December 31, 2014, as a result of open receivables related to higher sales volumes in the latter half of the second quarter of 2015 compared to sales in the latter half of the fourth quarter of 2014. Days sales outstanding decreased to 42 days during the second quarter of 2015 compared to 43 days for the fourth quarter of 2014, mainly as a function of the higher sales volume in the second quarter of 2015 compared to the fourth quarter of 2014.

 

Inventory decreased by $1.2 million or 1.7% to $69.9 million at June 30, 2015 compared to $71.1 million at December 31, 2014, as a result of a draw-down of inventory as orders were filled. Days inventory outstanding decreased to 56 days in the second quarter of 2015, compared to 65 days in the fourth quarter of 2014, mainly due to the impact of the higher sales during the second quarter of 2015 compared to the fourth quarter of 2014.

 

Deposits from customers decreased by $1.5 million or 13.2% to $10.0 million at June 30, 2015 compared to $11.5 million at December 31, 2014 due to the timing of shipments that included customer deposits.

 

Accounts payable increased by $7.8 million or 34.1% to $30.5 million at June 30, 2015 compared to $22.8 million at December 31, 2014 as a result of a ramp up in production following our traditional year-end shut down in December.

 

Other current liabilities and accrued expenses decreased by $1.2 million or 18.8% to $5.4 million at June 30, 2015 compared to $6.6 million at December 31, 2014, mainly due to the $1.5 million earn-out payment made in the first quarter of 2015 related to the Utilimaster purchase.

  

LIQUIDITY AND CAPITAL RESOURCES

 

Cash Flows

 

Through June 30, 2015, cash and cash equivalents decreased by $8.0 million to a balance of $20.6 million compared to $28.6 million at December 31, 2014. These funds, in addition to cash generated from future operations and available credit facilities, are expected to be sufficient to finance the Company’s foreseeable liquidity and capital needs.

 

Cash Flow from Operating Activities

For the six months ended June 30, 2015, we utilized $3.4 million of cash in operating activities, which represents a $7.1 million increase from the $3.7 million of cash that was generated by operations for the six months ended June 30, 2014. The decrease in cash generated in 2015 was driven by changes in working capital requirements, particularly accounts receivable, inventory and accounts payable.

 

See the Financial Condition section contained in Item 2 of this Form 10-Q for further information regarding balance sheet line items that drove cash flows for the six month period ended June 30, 2015. Also see the Condensed Consolidated Statements of Cash Flows contained in Item 1 of this Form 10-Q for the other various factors that represented the remaining fluctuation of cash from operations between the periods.

 

Cash Flow from Investing Activities

We utilized $2.3 million in investing activities during the first six months of 2015, a $0.7 million increase compared to the $1.6 million utilized in the first six months of 2014. This increase is mainly the result of increased investment in our Brandon, South Dakota and Ephrata, Pennsylvania facilities as part of our Emergency Response Vehicles segment restructuring initiative.

 

During the remainder of 2015 we expect to make total cash capital investments of $3 million to $4 million, including capital spending for our Emergency Response Vehicles segment restructuring initiative and replacement and upgrades of machinery and equipment used in operations.

 

  

Cash Flow from Financing Activities

For the six months ended June 30, 2015 we utilized $2.3 million of cash in financing activities, a decrease of $0.8 million compared to $3.1 million utilized in financing activities in the first six months of 2014. This change is mainly due to a $1.0 million repurchase of common stock completed in the second quarter of 2014.

  

Working Capital

 

Our working capital was as follows (in thousands):

  

		June 30, 2015				December 31, 2014				Change
Current assets		$	166,458			$	161,251			$	5,207
Current liabilities			67,632				60,620				7,012
Working capital		$	98,826			$	100,631			$	(1,805	)

  

The decrease in our working capital at June 30, 2015 from December 31, 2014, was driven by the changes in cash, accounts receivable, inventory, accounts payable and deposits from customers, along with small changes in other balance sheet line items within current assets and current liabilities. Refer to the balance sheet discussion appearing above in Management’s Discussion and Analysis of Financial Condition and Results of Operations for an explanation of the causes of the material changes in working capital line items.

  

Contingent Obligations

  

In connection with our acquisition of Utilimaster in November, 2009, we incurred contingent obligations in the form of certain performance-based earn-out payments, up to an aggregate maximum amount of $7.0 million. Through March 31, 2015, we made earn-out payments totaling $6.6 million. No further payments are due under this contingent obligation.

 

In February 2015, Spartan USA and Gimaex Holding, Inc. mutually agreed to begin discussions regarding the dissolution of the Spartan-Gimaex joint venture. In June 2015, Spartan USA and Gimaex Holding, Inc. entered into court proceedings to determine the terms of the dissolution. Costs associated with the wind-down will be impacted by the final dissolution agreement. Accordingly, we are unable to estimate the cost of the wind-down at this time. Spartan USA and Gimaex Holding, Inc. are expected to share any costs associated with the wind-down on a 50/50 basis.

 

In July 2015, we entered into a settlement agreement with the NHTSA pertaining to our early warning and defect reporting. Under the terms of the agreement we will pay a fine of $1 million in equal installments over three years, and will complete performance obligations including compliance and regulatory practice improvements, industry outreach and recalls to remedy safety defects in certain of our chassis. During the six months ended June 30, 2015 we accrued $2.3 million for payment of the fine and the estimated cost of completing the various performance obligations.

  

 

  

Debt

 

Effective December 31, 2014, we amended and restated our Credit Agreement dated as of November 30, 2009 (the "Credit Agreement") by and among us, certain of our subsidiaries, Wells Fargo Bank, National Association, as administrative agent ("Wells Fargo"), and the lenders party thereto consisting of Wells Fargo and JPMorgan Chase Bank, N.A. (the "Lenders"). As amended and restated, we may borrow up to $70 million from the Lenders under a three-year unsecured revolving credit facility. Under the terms of the amended and restated Credit Agreement, we may request an increase in the facility of up to $35 million in the aggregate, subject to customary conditions. The credit facility is available for the issuance of letters of credit of up to $20 million, swing line loans of up to $15 million and revolving loans, subject to certain limitations and restrictions. Interest rates on borrowings under the credit facility are based on either (i) the highest of the prime rate, the federal funds effective rate from time to time plus 0.5%, or the one month adjusted London interbank market rate ("LIBOR") plus 1.0%; or (ii) adjusted LIBOR plus a margin based upon our ratio of debt to earnings from time to time. The amended and restated Credit Agreement contains certain customary representations and covenants, including performance-based financial covenants on our part. As amended and restated, the credit facility matures December 31, 2017, following which we have the option to renew the credit facility, subject to lender approval, for two successive one-year periods with an ultimate maturity date of December 31, 2019. In addition, commitment fees range from 20 to 35 basis points on the unused portion of the line. We had no drawings against this credit line as of June 30, 2015 or December 31, 2014. During the quarter ended June 30, 2015, our revolving credit facility was utilized, and will continue to be utilized in future quarters, to finance commercial chassis received by our Utilimaster subsidiary under chassis bailment inventory agreements with General Motors Company (“GM”) and Chrysler Group, LLC (“Chrysler”). This funding is reflected as a reduction of the revolving credit facility available to us equal to the amount drawn by GM and Chrysler. See Note 4, Commitments and Contingent Liabilities, in the Notes to Condensed Consolidated Financial Statements appearing in Item 1 of this Form 10-Q for further details about Utilimaster’s chassis bailment inventory agreement.

 

On November 30, 2012, we entered into an amendment to our existing amended and restated private shelf agreement with Prudential Investment Management, Inc. Under the original private shelf agreement, we issued $5.0 million of 5.46% Series B Senior Notes, due December 1, 2016. The amended agreement extended the period during which we may issue private notes by three years to November 30, 2015 and increased the limit of the uncommitted shelf facility up to $50.0 million.  We plan to extend this agreement or replace it with a smiliar agreement prior to its expiration on November 30, 2015.  The interest rate is determined based on applicable rates at time of issuance. The total outstanding debt under this agreement was $5.0 million at June 30, 2015 and December 31, 2014.

 

Under the terms of our credit agreement with our banks, we have the ability to issue letters of credit totaling $20.0 million. At June 30, 2015 and December 31, 2014, we had outstanding letters of credit totaling $1.4 million and $4.7 million related to certain emergency response vehicle contracts and our workers compensation insurance. The decrease in the outstanding letters of credit since December 31, 2014 is due to the expiration of performance bonds issued for orders that were fulfilled in the first quarter of 2015.

 

Under the terms of the line of credit and the term notes detailed above, we are required to maintain certain financial ratios and other financial conditions, which limited our available borrowings under our line of credit to a total of approximately $35.8 million at June 30, 2015 and $38.6 million at December 31, 2014. The agreements prohibit us from incurring additional indebtedness; limit certain acquisitions, investments, advances or loans; and restrict substantial asset sales. At June 30, 2015, we were in compliance with all debt covenants, and, based on our current outlook for 2015, we expect to be able to meet these financial covenants over the next twelve months.

 

We had capital lease obligations outstanding of $0.2 million as of June 30, 2015 due and payable over the next five years.

  

Equity Securities

 

On October 19, 2011, our Board of Directors authorized the repurchase of up to a total of 1.0 million shares of our common stock in open market transactions, contingent upon market conditions. Through June 30, 2015, we repurchased 382,000 shares of our common stock for an aggregate purchase price of $2.0 million, leaving 618,000 shares remaining under this repurchase authorization. If we were to repurchase the full 618,000 shares of stock under the repurchase program, it would cost $2.7 million based on the closing price of our stock on July 31, 2015. We believe that we have sufficient resources to fund this potential stock buyback.

 

 

  

Dividends

 

The amounts or timing of any dividend distribution are subject to current and expected future earnings, financial condition, liquidity, capital requirements and such other factors as our Board of Directors deems relevant.

 

On May 8, 2015 our Board of Directors declared a cash dividend of $0.05 per share of common stock, which was paid on June 25, 2015 to shareholders of record on May 21, 2015.

 

On October 23, 2014 our Board of Directors declared a cash dividend of $0.05 per share of common stock, which was paid on December 18, 2014 to shareholders of record on November 13, 2014.

 

On May 1, 2014 our Board of Directors declared a cash dividend of $0.05 per share of common stock, payable on June 19, 2014 to shareholders of record on May 15, 2014.

 

The aggregate amount of dividends paid in 2014 was $3.4 million.

  

CRITICAL ACCOUNTING POLICIES

 

The following discussion of critical accounting policies is intended to supplement Note 1 - General and Summary of Accounting Policies, of the Notes to Consolidated Financial Statements contained in Item 8 in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 5, 2015. These policies were selected because they are broadly applicable within our operating units, and they involve additional management judgment due to the sensitivity of the methods, assumptions and estimates necessary in determining the related income statement, asset and/or liability amounts.

 

Revenue Recognition - We recognize revenue in accordance with authoritative guidelines, including those of the SEC. Accordingly, revenue is recognized when title to the product and risk of ownership passes to the buyer. On certain customer requested bill and hold transactions, revenue recognition occurs after the customer has been notified that the products have been completed according to the customer specifications, have passed all of our quality control inspections, and are ready for delivery. All sales are shown net of returns, discounts and sales incentive programs, which historically have not been significant. The collectability of any related receivable is reasonably assured before revenue is recognized.

 

In May 2014 the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”). ASU 2014-09 is based on the principle that revenue should be recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The new standard also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. ASU 2014-09 is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period, and may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of initial application. Early adoption for annual reporting periods beginning after December 15, 2016 is permitted. We are currently evaluating the adoption method and the impact of the adoption of the new revenue recognition standard on our consolidated financial statements.

 

 

  

Accounts Receivable - We maintain an allowance for customer accounts that reduces receivables to amounts that are expected to be collected. In estimating the allowance for doubtful accounts, we make certain assumptions regarding the risk of uncollectable open receivable accounts. This risk factor is applied to the balance on accounts that are aged over 90 days: generally this reserve has an estimated range from 10-25%. The risk percentage applied to the aged accounts may change based on conditions such as: general economic conditions, industry-specific economic conditions, historical and anticipated customer performance, historical experience with write-offs and the level of past-due amounts from year to year. However, generally our assumptions are consistent year-over-year and there has been little adjustment made to the percentages used. In addition, in the event there are certain known risk factors with an open account, we may increase the allowance to include estimated losses on such “specific” account balances. The “specific” reserves are identified by a periodic review of the aged accounts receivable. If there is an account in question, credit checks are made and there is communication with the customer, along with other means to try to assess if a specific reserve is required. The inclusion of the “specific” reserve has caused the greatest fluctuation in the allowance for doubtful accounts balance historically. Please see Note 1 - General and Summary of Accounting Policies, in the Notes to Consolidated Financial Statements contained in Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2014 for further details.

 

Goodwill and Other Indefinite-Lived Intangible Assets – We perform our annual impairment testing for goodwill and indefinite-lived intangible assets as of October 1 of each year, or more frequently if an event occurs or conditions change that would more likely than not reduce the fair value of the asset below its carrying value. At June 30, 2015 and December 31, 2014, we had goodwill recorded on the financial statements of our Utilimaster subsidiary. Utilimaster comprises the Delivery and Service Vehicles reportable segment, which was also determined to be a reporting unit for goodwill impairment testing.

 

The date of our most recently completed annual impairment testing was October 1, 2014. We performed a two-step impairment test, whereby the first step was comparing the fair value of the reporting unit with its carrying amount, including goodwill. The fair value of the reporting unit was determined by estimating the future cash flows of the reporting unit to which the goodwill relates, and then discounting the future cash flows at a market-participant-derived weighted-average cost of capital. Based on the results of the first step of our two-step impairment test we determined that the fair value of our Delivery and Service Vehicles reporting unit exceeded its carrying costs, and accordingly, there was no impairment of goodwill at the annual testing date.

 

We completed our most recent annual impairment testing for our indefinite-lived intangible assets, which consist of our Utilimaster and Classic Fire trade names, as of October 1, 2014 by comparing the estimated fair value of the trade name with its carrying value. We estimate the fair value of our trade names based on estimates of future royalty payments that are avoided through our ownership of the trade names, discounted to their present value. Based on the results of our impairment testing, we determined that the fair value of our indefinite-lived intangible assets exceeded their carrying cost at October 1, 2014, and accordingly, there was no impairment at the annual testing date.

 

Since October 1, 2014, there have been no events or changes in circumstances that would more likely than not reduce the fair value of our Delivery and Service Vehicles reporting unit or our indefinite-lived intangible assets below their respective carrying costs.

 

We cannot predict the occurrence of certain events or changes in circumstances that might adversely affect the carrying value of goodwill and indefinite-lived intangible assets. Such events may include, but are not limited to, the impact of the general economic environment; a material negative change in relationships with significant customers; strategic decisions made in response to economic and competitive conditions; and other risk factors as detailed in Part I, Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2014.

 

See Note 1, General and Summary of Accounting Policies and Note 4, Goodwill and Intangible Assets, in the Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2014 for further details on our accounting policies and other information regarding goodwill and indefinite-lived intangible assets.

 

 

  

Warranties - Our policy is to record a provision for the estimated cost of warranty-related claims at the time of the sale, and periodically adjust the warranty liability to reflect actual experience. The amount of warranty liability accrued reflects actual historical warranty cost, which is accumulated on specific identifiable units. From that point, there is a projection of the expected future cost of honoring our obligations under the warranty agreements. Historically, the cost of fulfilling our warranty obligations has principally involved replacement parts and labor for field retrofit campaigns and recalls, which increase the reserve. Our estimates are based on historical experience, the number of units involved and the extent of features and components included in product models. Over time, this method has been consistently applied and has proven to be an appropriate approach to estimating future costs to be incurred. See also Note 4 – Commitments and Contingent Liabilities, of the Notes to Condensed Consolidated Financial Statements contained in Item 1 of this Form 10-Q, for further information regarding warranties.

  

EFFECT OF INFLATION

 

Inflation affects us in two principal ways. First, our revolving note payable is generally tied to the prime and LIBOR interest rates so that increases in those interest rates would result in additional interest expense. Second, general inflation impacts prices paid for labor, parts and supplies. Whenever possible, we attempt to cover increased costs of production and capital by adjusting the prices of our products. However, we generally do not attempt to negotiate inflation-based price adjustment provisions into our contracts. Since order lead times can be as much as ten months, we have limited ability to pass on cost increases to our customers on a short-term basis. In addition, the markets we serve are competitive in nature, and competition limits our ability to pass through cost increases in many cases. We strive to minimize the effect of inflation through cost reductions and improved productivity.

 

 

  

Item 3.

Quantitative and Qualitative Disclosures About Market Risk.

 

Our primary market risk exposure is a change in interest rates and the effect of such a change on outstanding variable rate short-term and long-term debt. At June 30, 2015, we had no debt outstanding under our variable rate short-term and long-term debt agreements. Therefore, an increase of 1% in interest rates would not have a material adverse effect on our financial position or results of operations. We do not enter into market-risk-sensitive instruments for trading or other purposes.

 

We do not believe that there has been a material change in the nature or categories of the primary market risk exposures or the particular markets that present the primary risk of loss to us. As of the date of this report, we do not know of or expect any material changes in the general nature of our primary market risk exposure in the near term. In this discussion, “near term” means a period of one year following the date of the most recent balance sheet contained in this report.

 

Prevailing interest rates and interest rate relationships are primarily determined by market factors that are beyond our control. All information provided in response to this item consists of forward-looking statements. Reference is made to the section captioned “Forward-Looking Statements” before Part I of this Quarterly Report on Form 10-Q for a discussion of the limitations on such statements.

  

Item 4.

Controls and Procedures.

 

An evaluation was performed under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) as of June 30, 2015. Based on and as of the time of such evaluation, our management, including the Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report to ensure that information required to be disclosed by us in the reports that we file or submit is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

 

There have been no changes in our internal control over financial reporting during the quarter ended June 30, 2015 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

 

  

PART II.  OTHER INFORMATION

 

Item 1A.

Risk Factors

 

We have included in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2014, a description of certain risks and uncertainties that could affect our business, future performance or financial condition (the “Risk Factors”). There have been no material changes from the disclosure provided in the Form 10-K for the year ended December 31, 2014 with respect to the Risk Factors. Investors should consider the Risk Factors prior to making an investment decision with respect to our stock.

  

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

Issuer Purchases of Equity Securities

 

On October 19, 2011, our Board of Directors authorized the repurchase of up to a total of 1.0 million shares of our common stock in open market transactions, contingent upon market conditions. At December 31, 2014 there were 618,000 shares remaining in this repurchase authorization. During the six months ended June 30, 2015 no shares were repurchased under this authorization.

 

During the quarter ended June 30, 2015 there were 14,574 shares delivered by associates in satisfaction of tax withholding obligations that occurred upon the vesting of restricted shares. These shares are not repurchased pursuant to the Board of Directors authorization disclosed above.

  

Period		Total Number of Shares Purchased				Average Price Paid per Share				Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs				Number of Shares that May Yet Be Purchased Under the Plans or Programs
April 1 to April 30			14,032			$	5.02				--				618,000
May 1 to May 31			241				4.62				--				618,000
June 1 to June 30			301				4.58				--				618,000
Total			14,574			$	5.01				--				618,000

 

 

 

Item 6.

Exhibits.

 

      (a)      Exhibits.  The following documents are filed as exhibits to this report on Form 10-Q:

 

Exhibit No.	Document
10.1	Spartan Motors, Inc. Leadership Team Compensation Plan. *
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act.
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act.
32	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. § 1350.
101.INS	XBRL Instance Document
101.SCH	XBRL Schema Document
101.CAL	XBRL Calculation Linkbase Document
101.DEF	XBRL Definition Linkbase Document
101.LAB	XBRL Label Linkbase Document
101.PRE	XBRL Presentation Linkbase Document
* Management contract or compensatory plan.

 

 

  

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.

 

Date:  August 5, 2015	SPARTAN MOTORS, INC.
	By	/s/ Lori L. Wade
		Lori L. Wade Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer)

 

 

  

EXHIBIT INDEX

 

Exhibit No.	Document
10.1	Spartan Motors, Inc. Leadership Team Compensation Plan. *
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act.
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act.
32	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. § 1350.
101.INS	XBRL Instance Document
101.SCH	XBRL Schema Document
101.CAL	XBRL Calculation Linkbase Document
101.DEF	XBRL Definition Linkbase Document
101.LAB	XBRL Label Linkbase Document
101.PRE	XBRL Presentation Linkbase Document
* Management contract or compensatory plan.

 

32

Exhibit 10.1

 

 

Spartan Motors, Inc. (SMI)

LEADERSHIP TEAM COMPENSATION Plan

   

A.

OVERALL

 

Philosophy

 

Spartan Motors’ Leadership Team compensation plan aims to provide competitive levels of compensation and incentives to drive strong long-term financial performance, maximize Company’s market valuation, and provide for the long-term interests of its stakeholders.

 

Objectives of the Plan

 

The plan is designed to achieve the following objectives:

 

1.

Attract and retain qualified management

2.

Align the interests of management with those of shareholders to encourage achievement of continuing sustainable increases in shareholder value

3.

Align management’s compensation with the achievement of Spartan Motors’ annual and long-term performance goals

4.

Reward excellent corporate performance

5.

Recognize individual and team initiatives and achievements

 

Compensation

 

Compensation is comprised of three components: base salary, annual cash-based incentive (AIC), and long-term equity-based incentive (LTIC). Base salary is a fundamental component of the Company's compensation system, and competitive salary levels are necessary to attract and retain well-qualified executives. Base salaries are determined by evaluating the responsibilities of the position, the experience of the individual, the performance of the individual, and the competitive marketplace for similar management talent. The review process includes a comparison of base salaries for comparable positions at companies of similar type, size, and financial performance. Base salaries are established at levels comparable to market-median ranges. Performance reviews and base salary reviews are both done on an annual basis

 

In addition, there are equity holding guidelines for the Leadership Team members. The compensation plan is established by the full Board after consideration of input from external sources and is reviewed annually.

  

Approach

 

Spartan Motors believes that leadership team financial compensation should track with the company’s overall financial performance. Compensation should be structured to be proportionately generous in periods when leadership’s performance is deemed to be superior. Since Spartan Motors’ shareholders have historically viewed Spartan as a “value” stock, it is essential that the financial interest of the Leadership Team be based on a comparable view.

 

 

 

Leadership Team Tiers

  

Unclassified	CEO
Tier 1	CFO, COO, BU Presidents, Corp. Vice Presidents, General Counsel
Tier 2	Vice-Presidents
Tier 3	Directors or other key high level positions
Tier 4	Key manager positions

 

Eligibility

 

The following positions are eligible for participation in the Plan:

 

Leadership Team (“LT”) includes the CEO and Tiers 1 - 4

 

Participation in one year does not guarantee participation in subsequent years. Due to the varying nature of certain positions between business units, inclusion of a position at one organization will not necessarily mean a similarly titled position at another unit would be included in the Plan.

 

All proposed changes in eligibility and structure for the CEO and LT tier 1 must be approved by the Compensation Committee of the Spartan Board of Directors (“Comp Committee”). All proposed changes in eligibility and structure for the LT tiers 2 - 4 will be made and approved by the CEO, with oversight by the Comp Committee.

 

Effective Date

 

This Plan is effective upon approval of the Board of Directors of Spartan (“Board”) and will continue indefinitely at the discretion of the Board.

 

Plan Administration

 

The CEO is responsible for the ongoing administration of the Plan. The Comp Committee shall annually review both the provisions of the Plan and review payouts hereunder to confirm that the payments are in compliance with the plan document.

  

B.

AIC PLAN

 

Overview of AIC Plan Structure

 

The Plan rewards Participants based upon achievement of the top priorities for business performance which can include key metrics. Each year the CEO will revise the metrics and weightings based upon current business conditions and attain approval from the Comp Committee around the framework. Tier 1 participants will have additional criteria based upon results of top priorities. Annually the Compensation Committee will approve the metrics and determine the appropriate weightings between these two elements.

 

 

The Participant’s annual incentive earned is calculated by multiplying the Participant’s current Annual Salary by their bonus percentage (see 2 below) then multiplied by the X- Multiple (see 3 below).

  

1.

Annual Salary. The current annual salary is calculated as the weekly salary in effect on January 1st of the performance year times 52 weeks. If the Participant has changed roles during the performance year, the salary will be pro-rated.

 

2.

Bonus Percentage. Each Participant is assigned a “Bonus Percentage” based on his or her level within the Plan.

  

 

CEO	80%
Tier 1	55%
Tier 2	40%
Tier 3	30%
Tier 4	20%

 

A Participant is included in one of the levels above upon the recommendation of both the CEO and the approval of Comp Committee. The Comp Committee will annually approve the final bonus percentage for the CEO and Tier 1.

 

3.

Target Bonus. Annual salary * Bonus Percentage = Target Bonus or 1x

 

4.

X-Multiple. Annually the CEO will present to the Board the Annual Plan for the next year. This Plan and other market factors will be the basis for determining“1x”. In theory, payment of “2X” would occur when plan was demonstrably exceeded. The Target Bonus can be increased or decreased based upon achieving varying levels of performance over the Plan. The “Threshold”, “Target” and “Exceeding Target” levels (as measured against plan) are as follows:

 

0x =	50% payout of Target Bonus
1x =	100% payout of Target Bonus
2x =	200% payout of Target Bonus

 

Annually the CEO will propose and Compensation Committee will evaluate and establish, based upon the current key metric, the incremental improvements required to attain an incremental X-Multiple (i.e. going from “0x” to “1x to “2x”). The “0x”, “1x”, and “2x”, targets for each metric within a target matrix will be published by the CEO.

 

The X-Factor Multiple can be a fractional value based upon pro-rating results within the target matrix. The X-Factor multiple is computed to one decimal.

   

There will be no AIC award for SET participants in the event that Spartan loses money. The Comp Committee will have oversight of the plan and can make adjustments they deem appropriate.

 

AIC Payout

 

Should Annual Incentive Bonuses be earned, they will become vested and will be paid to all Participants employed by the Company at the time of payment subject to the section below Death, Disability, Retirement, and Changes in Control. Payment shall be made no later than March 10^th of the year following the end of the performance year. Although the Plan is designed to be cash based, the Comp Committee retains the discretion to pay the annual payout in an equivalent amount of Company stock based on the closing value of the Company stock on the payout date, if business conditions warrant. The amount of the annual payout is one-hundred percent (100%) of the Annual Incentive Bonus earned for the current performance year.

 

Treatment of New Associates

 

An eligible associate who joins the Company during a performance period may be included in the Plan as a Participant by the decision of the CEO and approval of the Comp Committee.

 

The new Participant will be entitled to a pro-rated share of an annual bonus. The pro-rated bonus will be calculated as the Participant’s Bonus Percentage (2 above) times the X-Multiple (4 above) times the Participant’s current pro-rated salary. The current pro-rated salary is calculated as the weekly salary in effect on the date of hire of the performance year times the number of weeks the Participant was a member of the Plan. If a Participant is hired mid-week, a full week will be credited for the partial week.

 

  

Acquisitions/Disposals

 

If during the Plan year an acquisition or disposal of a business unit occurs, the Compensation Committee will determine and remove the effect from the consolidated results in determining the X-Factor Multiple.

 

Terminations and Vesting of Deferred Balances

 

In the event a Participant has a termination of employment (either voluntarily or involuntarily) which meets the requirements of a “Separation From Service,” as that term is defined under Section 409A of the Internal Revenue Code, with SMI during any performance year, for reason other than death, disability, retirement, or a change in control (as described in “Death, Disability, Retirement, and Changes in Control below), the Participant will not earn an Annual Incentive Bonus for that year or any portion of an Annual Incentive Bonus.

 

Death, Disability, Retirement, and Changes in Control

 

Upon the first to occur of the following events:

 

1.	a Participant dies,

2.

a Participant becomes disabled (meaning the Participant is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months: (i) unable to engage in any substantial gainful activity; or (ii) receiving income replacement benefits for a period of not less than 3 months under an accident and health plan covering associates of the Company),

3.	a Participant retires, (meaning the Participant’s voluntary Separation From Service after either age 62 or age 60 with 10 years of service, as determined under the Company’s Retirement Plan), or

 

The Participant will receive the following payments:

 

A pro-rated Annual Incentive Bonus for the year in which the event occurs. The pro-rated bonus will be calculated as the Participant’s Target Bonus percentage (2 above) times the X-Factor Multiple (3 above) times the Participant’s current prorated salary. The current pro-rated salary is calculated as the weekly salary in effect on the date of the event times the number of weeks the Participant was a member of the Plan at the Company prior to the event. If event occurs mid-week, a full week will be credited for the partial week; and

 

Payment of the pro-rated Annual Incentive Bonus will be made at the next regularly scheduled date for the payment of incentive bonuses.

 

Changes in Control

 

1.

a change in control of the Company (defined as acquisition by a purchaser of more than 50 percent of the Company’s stock or substantially all the assets of the Company);

2.

upon a change in control, the CEO will receive a severance of 3X multiple of their annual base salary + bonus to be paid in biweekly installment, with the first payment to be made on the first Friday after the event

3.

upon a change in control, Section 16 and Named Executive Officers (NEO’s) will receive a severance of 18 months (1.5x multiple) of their base salary + bonus to be paid in biweekly installment, with the first payment to be made on the first Friday after the event

4.

upon a change in control, the CEO will receive benefits continuation for a period of 24 months (company paid COBRA premiums under the Company health plan).

5.

upon a change in control, the Section 16 Officers and NEO’s will receive benefits continuation for a period of 18 months (company paid COBRA premiums under the Company health plan.

6.

upon a change of control the CEO and Sec. 16 Officers and NEO’s will be subject to double-trigger vesting whereby the executive must be terminated* following the change-in-control for vesting of equity under the LTIC portion of the Plan, and severance to be paid.

 

*Termination to include the following: involuntary separation; more than 5% change in pay (“demotion”); change in title or lessened responsibilities (“demotion”); or transferring job location by a distance greater than 50 miles.

 

 

  

Delay in Payment to Specified Employee

 

For any payment due under this Plan to a “Specified Employee” as defined by Section 409A of the Internal Revenue Code, where such payment is not permitted to be made by Section 409A on the payment date, then no payment under this Plan may be paid before the date that is six months after the Participant’s Separation from Service. The payment to which the Participant would otherwise have been entitled during that six months will be paid on the first regular Friday payroll date after six months following the Participant’s Separation from Service. Any payments that are not permitted to be paid under this section shall be paid in a lump sum included with the first payment after the six month time period.

 

Time of Payment

 

Funding

 

The Plan is an unfunded, nonqualified deferred compensation plan. Monies that become due to Participants are unsecured obligations of the Company.

 

Withholding

 

The Company has the right to withhold and deduct from a Participant’s payments, including payments made in the form of Company stock, or make arrangements for the collection of, all amounts deemed necessary to satisfy federal, state and local withholding and employment-related tax requirements attributable to a Participant’s payments pursuant to this plan.

 

Amendment and Termination of the Plan

 

The Plan may be amended or terminated at any time and without prior notice at the sole discretion of the Board of Directors of Spartan Motors, Inc. as permitted by IRS Section 409A.

   

C.

LTIC PLAN

 

Overview of LTIC Plan Structure

 

2015 and 2016	–	100% time vesting restricted stock units (RSU’s)
Effective 2017	–	60% time vested RSU’s
		40% performance based (PSU’s)

 

The Plan rewards participants based upon achievement of long-term financial performance. Financial performance is measured by three metrics:

 

●

TSR (Total Shareholder Return)

●

SMI results (EPS and cash conversion cycle)

●

Established strategic objectives (MBOs)

 

The combined performance of these three metrics will used to calculate the LTIC multiple.

 

  

The Participant’s annual LTIC earned is calculated by multiplying the Participant’s current Annual Salary by their Target Bonus (see 2 below) then multiplied by the LTIC multiple (see 3 below).

  

1.

Annual Salary. The current annual salary is calculated as the weekly salary in effect on January 1st of the performance year times 52 weeks. If the Participant has changed roles during the performance year, the salary will be pro-rated.

 

2.

Target Bonus. Each Participant is assigned a “Target Bonus” based on his or her level within the Plan. The Target Bonus is determined each year by multiplying the Participant’s current annual salary (as calculated above) by the following guideline percentages. The Comp Committee will annually approve the final 1X target percentage for Tier 1 that is expected to fall within the below range.

   

CEO	75%
Tier 1	60%
Tier 2	30%
Tier 3	15%
Tier 4	N/A

 

A Participant is included in one of the levels above upon the recommendation of both the CEO, and in the case of Tier 1 must also seek the approval of Comp Committee.

 

3.

LTIC Multiple. The LTIC Multiple can range from 0% thru 100% (referred to as “0X” thru “1.0X”).

 

TSR Metric: Up to one half of the annual incentive is based on performance relative to a TSR metric. The TSR metric is a comparison of Spartan Motors’ TSR to a peer group of companies in similar industries for the previous 12 months. The CEO will provide the data, the appropriate analysis and make a recommendation as to the Company’s performance relative to the peer group. The Comp Committee will make the final determination as to the appropriate score. The proposal for 2015 is as follows (measured in relative ranking in utilizing an index):

    

>20% within peer group	=	50% target shares
>30% within peer group	=	75% target shares
>40% within peer group	=	100% target shares

 

The data is computed by Zacks Investment Research on a quarterly basis. The TSR is calculated using the change in share price since the start of the measurement period, along with dividends paid. The calculation assumes that dividends are reinvested and also adjusts for stock splits.

 

Strategic Objectives Metric: Up to one-half of the long-term incentive is based on achievement of established strategic objectives. On an annual basis the CEO will propose to the Comp Committee the strategic objectives (and measurement metrics) based upon priorities discussed and derived during the Annual Plan process. Unless specifically weighted differently by the Board, each of the objectives will be equally weighted.

 

SMI Financial Results: Up to one half of the long-term incentive is based on achievement of established financial metrics (e.g. EPS, operating income, cash conversion cycle, etc.). On an annual basis the CEO will propose to the Comp Committee the financial metrics (and measurement metrics) based upon priorities discussed and derived during the Annual Plan process. Unless specifically weighted differently by the Board, each of the objectives will be equally weighted. The proposal for 2015 is as follows:

 

40% SMI Financial Results – comprised of 75% EPS and 25% Cash Conversion

 

   

All grants will be made under the guidance of the Company’s stock plan. Vesting of all grants will be determined by the Human Resources and Compensation Committee at the time of the grant. Distribution of the LTIC awards shall be in accordance with the Company’s stock plan.

  

D.

General

 

The Human Resources and Compensation Committee determines appropriate compensation and this plan does not represent a contractual obligation. The Board reserves discretionary authority to change this framework as is appropriate.

 

Awards will retracted to the extent there is a material misrepresentation and should not have been granted.

 

Exhibit 31.1

 

CERTIFICATION

 

I, Daryl M. Adams, certify that:

 

1.	I have reviewed this quarterly report on Form 10-Q of Spartan Motors, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
	a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
	a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
	b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date:  August 5, 2015	/s/ Daryl M. Adams
	Daryl M. Adams President and Chief Executive Officer Spartan Motors, Inc.

 

Exhibit 31.2

  

CERTIFICATION

 

I, Lori L. Wade, certify that:

 

1.	I have reviewed this quarterly report on Form 10-Q of Spartan Motors, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
	a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
	a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
	b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date:  August 5, 2015	/s/ Lori L. Wade
	Lori L. Wade Chief Financial Officer and Treasurer Spartan Motors, Inc.

 

Exhibit 32

 

CERTIFICATION

 

Each of the undersigned hereby certifies in his capacity as an officer of Spartan Motors, Inc. (the “Company”), pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350 that:

 

1.	The Quarterly Report on Form 10-Q of the Company for the period ended June 30, 2015 (the “Report”) fully complies with the requirements of Section 13(a) of the Securities and Exchange Act of 1934 (15 U.S.C. 78m); and
2.	The information contained in the Report fairly presents, in all material respects, the financial condition at the end of such period and results of operations of the Company for such period.

 

 

Dated:  August 5, 2015	/s/ Daryl M. Adams
	Daryl M. Adams President and Chief Executive Officer
Dated:  August 5, 2015	/s/ Lori L. Wade
	Lori L. Wade Chief Financial Officer and Treasurer