So the news is out, and the question is: Should you buy Spartan Motors (Nasdaq: SPAR)? Three days ago, I suggested the following: "At a minimum, I'd want to see much-improved free cash flow in Thursday's report, before buying into this story."

Well, Spartan delivered that improvement. I think.

Or maybe not.

Quit dithering -- explain!
The fact is, we don't know precisely what kind of free cash flow Spartan generated last quarter, or last year. The company hasn't filed its 10-K statement just yet, and it didn't bother to provide investors a cash flow statement in its earnings release. Apparently, management decided we should be satisfied with a vague allusion to "operating cash flow improvement in the fourth quarter of 2007 of $9.1 million."

How much those capital expenditures cost Spartan, and, accordingly, how much cash the company burned last quarter, we won't know until management coughs up the cash flow statement. For what it's worth, the balance sheet shows that cash levels didn't change much in comparison to end-of-year 2006. But long-term debt ballooned by $37.5 million.

What we do know
Judging from the GAAP numbers Spartan did provide, fiscal 2007's results were mixed. Bolstered by sales to military contractors like Force Protection (Nasdaq: FRPT), Spartan's revenue exploded upward last year, rising 53% year over year. Profits rose less swiftly -- up 46% -- as "investment in flexible manufacturing capacity... volume pricing pressure, increased bill of materials costs and product mix" combined to depress profit margins. Margins were also down last quarter at rival Oshkosh (NYSE: OSK).

The good news here is that it could have been worse. The pricing pressure Spartan referred to shaved 230 basis points off the company's gross margin last year. However, by keeping a tight rein on operating costs, Spartan managed to hold operating margin loss to just 30 basis points -- ending the year with a respectable 5.8% operating margin.

What to expect
Things could get worse in 2008. Management foresees a "tough market for recreational vehicles" this year. That should be bad news for customers Fleetwood (NYSE: FLE) and Thor (NYSE: THO), but also for Spartan, because the bulk of its non-military chassis sales go to the RV market. As for the remainder, firetruck-chassis sales also face "economic uncertainties" as "municipalities continue to manage ever-tightening budgets."

So although I've already said this before, I'll say it again: Seems like a funny time for Spartan to be buying back shares with cash it doesn't have.

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