SHYFT GROUP, INC. - Quarter Report: 2010 March (Form 10-Q)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________

FORM 10-Q

Commission File Number 000-13611

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

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.

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).

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.

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

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

SPARTAN MOTORS, INC.

INDEX
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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,” “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:

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 Part I – Item A of our Annual Report on Form 10-K for the year ended December 31, 2009, 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.

SPARTAN MOTORS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS

See Accompanying Notes to Condensed Consolidated Financial Statements.

SPARTAN MOTORS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS

(Continued)

See Accompanying Notes to Condensed Consolidated Financial Statements.

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

See Accompanying Notes to Condensed Consolidated Financial Statements.

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

See Accompanying Notes to Condensed Consolidated Financial Statements.

SPARTAN MOTORS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(UNAUDITED)

See Accompanying Notes to Condensed Consolidated Financial Statements.

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

NOTE 1 - GENERAL AND SUMMARY OF ACCOUNTING POLICIES

For a description of key accounting policies followed refer to the notes to the Spartan Motors, Inc. (the “Company”) consolidated financial statements for the year ended December 31, 2009, included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 16, 2010.  There have been no changes in such accounting policies.

The accompanying unaudited interim condensed consolidated financial statements reflect all normal and recurring adjustments that are necessary for the fair presentation of the Company’s financial position as of March 31, 2010, the results of operations for the three-month periods ended March 31, 2010 and 2009, and the cash flows for three-month periods ended March 31, 2010 and 2009.  The financial results for the first quarter of 2010 include the financial results of Utilimaster which was acquired on November 30, 2009.  See Note 2, Acquisition Activities, for further detail.

The results of operations for the three-month period ended March 31, 2010 are not necessarily indicative of the results to be expected for the full year.

The Company is required to disclose the fair value of its financial instruments in accordance with Financial Accounting Standards Board (FASB) Codification relating to “Disclosures about Fair Values of Financial Instruments.”  The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and the Company’s fixed and variable rate debt instruments, approximate their fair value at March 31, 2010 and December 31, 2009. 

Certain immaterial amounts in the prior years’ financial statements have been reclassified to conform to the current year’s presentation.

NOTE 2 – ACQUISITION ACTIVITIES

On November 30, 2009, the Company completed the acquisition of Utilimaster Holdings, Inc. (“Holdings”), a Delaware corporation.  Pursuant to the November 18, 2009 Agreement and Plan of Merger (the “Merger Agreement”), SMI Sub, Inc., a direct wholly-owned subsidiary of the Company, merged with and into Holdings.  As a result of this merger, the Company became the sole shareholder of Holdings, the surviving corporation in the merger and the owner of 100% of the capital stock of Utilimaster Corporation, a Delaware corporation (“Utilimaster”), a wholly-owned  subsidiary of Holdings.

The Company expects the acquisition of Utilimaster will further diversify its revenue stream from new markets that offer growth potential and are not directly dependent on government funding or consumer spending.  The Company believes the acquisition also allows the Company to gain entry into the North American delivery and service market, add fabrication and vehicle body expertise, benefit from Utilimaster’s strong brand, market share position, and solid customer base, and create opportunities to leverage future growth in the Company’s chassis business. 

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

NOTE 2 – ACQUISITION ACTIVITIES (continued)

This acquisition was accounted for using the purchase method of accounting and the purchase price, estimated at $44.5 million, was allocated to the assets purchased and liabilities assumed based upon their estimated fair values at the date of acquisition. Identifiable intangible assets acquired included a trade-name, a project in development, customer relationships, backlog and certain non-compete agreements.  The excess of the purchase price over the estimated fair values of the net tangible and intangible assets acquired (which approximated $15.9 million) was recorded as goodwill. The Company has recorded an estimate for contingent consideration related to performance based earn-out payments per the Merger Agreement, valued in accordance with accounting guidance for business combinations and updated to its fair value at March 31, 2010 which approximates $1.5 million.

Included in the Company’s first quarter 2010 results are net sales of $23.7 million and loss from operations of $1.4 million from Utilimaster.  See Note 8, Business Segments, for further detail on Utilimaster’s first quarter 2010 results.

NOTE 3 – INVENTORIES

Included in the “Raw materials and purchased components” line item above are transitional engines purchased in preparation for the 2010 engine emissions regulatory change.  These engines amounted to approximately $19.5 million and $22.4 million at March 31, 2010 and December 31, 2009, respectively.  As of March 31, 2010, customer deposits received related to these engines approximate $3.7 million.

The Company also has a number of demonstration units as part of its sales and training program.  These demonstration units are included in the “Finished goods” line item above, and amounted to approximately $12.9 million and $12.8 million at March 31, 2010 and December 31, 2009, respectively.

NOTE 4 - GOODWILL AND INTANGIBLE ASSETS

The Company acquired Utilimaster on November 30, 2009.  See Note 2, Acquisition Activities, for further details related to this acquisition.  The difference between the consideration paid and the acquisition-date value of the identifiable assets acquired and liabilities assumed was recognized as goodwill, as disclosed in the table below. Due to the short period of time that has elapsed since the acquisition of Utilimaster, it is the Company’s assessment that the goodwill at

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

NOTE 4 - GOODWILL AND INTANGIBLE ASSETS (continued)

Utilimaster is not impaired.  The goodwill at Utilimaster will be evaluated as part of the next annual assessment which will occur as of October 1, 2010, unless there is a triggering event that would necessitate an earlier evaluation. During the first quarter of 2010, the Company recorded an immaterial goodwill adjustment related to agreed-upon net working capital pursuant to the Merger Agreement. 

In conjunction with the acquisition of Utilimaster, the Company acquired other intangible assets.  Prior to this acquisition, the only other recorded intangible was the goodwill related to the Crimson Fire, Inc. reportable unit.  Accordingly, the Company recorded $196,057 of intangible asset amortization expense in the three months ended March 31, 2010.  The amortizable intangible assets are being amortized over their remaining lives consistent with the pattern of economic benefits estimated to be received.  The product development project intangible acquired with Utilimaster will be amortized on a similar basis once it has been completed, which is estimated to be in late 2011.   The intangible asset related to non-compete agreements is being amortized on a straight-line basis, while the other intangible assets, except for the trade name which has an indefinite life, are being amortized based on the pattern of estimated after-tax operating income generated. 

The following table provides information regarding the Company’s other intangible assets, all of which were acquired as part of the Utilimaster acquisition:

The estimated remaining amortization associated with finite-lived intangible assets is expected to be expensed as follows:

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

NOTE 5 - WARRANTIES

The Company’s products generally carry limited warranties based on terms that are generally accepted in the marketplace.  Some components included in the Company’s end products (such as engines, transmissions, tires, etc.) may include manufacturers’ warranties.  These manufacturers’ warranties are generally passed on to the end customer of the Company’s products.

The Company’s policy is to record a provision for the estimated cost of warranty-related claims at the time of the sale and periodically adjust the provision and liability to reflect actual experience.  The amount of warranty liability accrued reflects management’s best estimate of the expected future cost of honoring the Company’s obligations under the warranty agreements. Historically, the cost of fulfilling the Company’s warranty obligations has principally involved replacement parts and labor for field retrofit campaigns.  The Company’s estimates are based on historical experience, the number of units involved and the extent of features and components included in product models.

Certain warranty and other related claims involve matters of dispute that ultimately are resolved by negotiation, arbitration or litigation.  Infrequently, a material warranty issue can arise which is beyond the scope of the Company’s historical experience.  The Company provides for any such warranty issues as they become known and are estimable.  It is reasonably possible that additional warranty and other related claims could arise from disputes or other matters beyond the scope of the Company’s historical experience. 

Changes in the Company’s warranty liability were as follows for the three months ended March 31:

Warranty accrued as of March 31, 2010 includes approximately $1.4 million related to the Utilimaster segment, which was acquired on November 30, 2009.  Utilimaster experienced approximately $643,000 in cash settlements during the period and approximately $317,000 related to pre-existing warranties.  Exclusive of the Utilimaster segment, warranties accrued during the period were driven up compared to the respective period of 2009 primarily due to the volume of motorhome unit sales.  The product sales mix shifted for the quarter from aftermarket part and assemblies and defense vehicles, which both experience fewer warranty claims, toward motorhome and fire truck units, which experience higher warranty claims.

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

NOTE 6 – DEBT

Long-term debt consists of the following:

The long-term debt due is as follows: $76,480 in 2011; $46,218 in 2012; $7,050,359 in 2013; $25,611 in 2014; $5,000,000 in 2015 and thereafter.

(1)   The Company’s primary line of credit is a $70.0 million unsecured revolving line with JPMorgan Chase Bank and Wells Fargo Bank, expiring on November 30, 2012. Both lending institutions equally share this commitment. This line carries an interest rate equal to the Eurodollar rate plus an applicable margin.  Borrowings on this line amounted to $7.0 million, with net available borrowings of $63.0 million, at March 31, 2010.  The applicable LIBOR rate including margin was 2.56% at March 31, 2010.

(2)   The Company leases certain office equipment, computer hardware and material handling equipment classified as capital leases.  Future minimum lease payments required under these leases having initial or remaining non cancelable lease terms in excess of one year amount to:  $112,491 in 2010, $76,307 in 2011, $46,218 in 2012, $50,359 in 2013 and $25,611 in years thereafter.

As of November 30, 2009, the Company entered into a private shelf agreement with Prudential Investment Management, Inc.  This agreement allowed the Company to borrow up to $45.0 million to be issued in $5.0 million minimum increments.  The interest rate for any draws will be determined based on applicable rates at the time of issuance.  The Company had $15.0 million of private placement notes outstanding as of March 31, 2010 and December 31, 2009 with Prudential Investment Management, Inc.

Under the terms of the primary line of credit agreement and the private shelf agreement, the Company is required to maintain certain financial ratios and other financial conditions. The agreements also prohibit the Company from incurring additional indebtedness; limit certain acquisitions, investments, advances and loans; and restrict substantial asset sales.  At March 31, 2010 and December 31, 2009, the Company was in compliance with all debt covenants.

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

NOTE 7 – COMMITMENTS AND CONTINGENT LIABILITIES

Under the terms of its credit agreement with its bank, the Company has the ability to issue letters of credit totaling $2.5 million. Both at March 31, 2010 and December 31, 2009, the Company had outstanding letters of credit totaling $997,500.

Spartan Chassis, Inc. (“Spartan Chassis”) is currently in negotiations with a customer regarding certain supply contracts Spartan Chassis has completed but for which the customer is now claiming a post-delivery price adjustment.  Throughout the course of Spartan Chassis's relationship with this customer (dating back to 2006), Spartan Chassis always sold products to the customer on what Spartan Chassis believed to be a “fixed price” basis.  This price was then used in the customer's purchase order and was paid to Spartan Chassis in the ordinary course of business by the customer following delivery of the product by Spartan Chassis.  In the spring of 2009, for the first time, the customer notified Spartan Chassis of the customer's claim that the pricing for certain orders made by the customer, filled by Spartan Chassis, and paid for by the customer, had not been “definitized” and was yet to be agreed upon by the parties.  Spartan Chassis believes the pricing for all of the contested orders was, in fact, agreed-upon by the parties and is vigorously disputing this claim by the customer. Spartan Chassis and the customer are engaged in negotiations in an attempt to resolve the dispute.  To date, no resolution has been reached and the Company's liability, if any, with respect to this matter remains uncertain. 

Utilimaster assembles van and truck bodies onto original equipment manufacturer (“OEM”) chassis. The majority of such OEM chassis are purchased directly by Utilimaster’s customers from the OEM and drop‑shipped to Utilimaster’s premises.  Utilimaster’s arrangements for pooled chassis remain unchanged whereby the majority of chassis in Utilimaster’s possession are accounted for under these arrangements as bailed property belonging to the OEM or customer.

At March 31, 2010, the Company and its subsidiaries were parties, both as plaintiff and defendant, to a number of lawsuits and claims arising out of the normal course of their businesses.  In the opinion of management, the financial position, future operating results or cash flows of the Company will not be materially affected by the final outcome of these legal proceedings.

NOTE 8 - BUSINESS SEGMENTS

The Company segregates its operations into three reportable business segments: Spartan Chassis, the EVTeam, and Utilimaster, which the Company acquired on November 30, 2009. Spartan Chassis is an engineer and manufacturer of custom motor vehicle chassis. This segment’s principal markets are fire truck, motorhome and specialty vehicle chassis. The Company’s EVTeam consists of three subsidiaries that are manufacturers of emergency vehicle bodies and apparatus. The Utilimaster segment focuses on designing and manufacturing walk-in vans for the delivery and service market and the production of commercial truck bodies.  Sales in the column labeled “Other” represent sales from the Spartan Chassis segment to the EVTeam segment, which are eliminated from the consolidated sales totals.  Assets and related depreciation expense, along with interest expense, in the column labeled “Other” pertain to capital assets and debt maintained at the corporate level.  Appropriate expense amounts are allocated to the three

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

NOTE 8 - BUSINESS SEGMENTS (continued)

reportable segments and are included in their reported earnings or loss from operations.  Segment loss from operations in the “Other” column contains the related eliminations for the allocation, as well as corporate related expenses not allocable to the operating segments.

The accounting policies of the segments are the same as those described, or referred to, in Note 1, General and Summary of Accounting Policies. Sales and other financial information by business segment are as follows:

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

The Company is known as a leading niche market engineer and manufacturer in the heavy-duty, custom vehicles marketplace. The Company has five wholly owned operating subsidiaries: Spartan Motors Chassis, Inc., located at the corporate headquarters in Charlotte, Michigan (“Spartan Chassis”); Crimson Fire, Inc., located in Brandon, South Dakota (“Crimson”); Crimson Fire Aerials, Inc., located in Lancaster, Pennsylvania (“Crimson Aerials”); Road Rescue, Inc., located in Marion, South Carolina (“Road Rescue”); and Utilimaster Holdings, Inc. located in Wakarusa, Indiana (“Utilimaster”).  Crimson, Crimson Aerials and Road Rescue make up the Company’s EVTeam. The Company’s brand names, Spartan™, Crimson Fire™, Road Rescue™, and Utilimaster™ are known for quality, value, service and innovation.

Spartan Chassis is a leading designer, engineer and manufacturer of custom heavy-duty chassis. 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. Spartan Chassis customers are original equipment manufacturers (“OEMs”) who manufacture the body or apparatus of the vehicle which is mounted on the Company’s chassis. Crimson and Road Rescue engineer and manufacture emergency vehicles built on chassis platforms purchased from either Spartan Chassis or outside sources. Crimson Aerials engineers and manufactures aerial ladder components for fire trucks.

The Company’s 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 custom vehicle products.  Spartan Chassis sells its custom chassis to three principal markets: fire truck, motorhome and other product sales which include specialty vehicles, and aftermarket part and assemblies (“APA”).  The Company’s diversification across several sectors creates numerous opportunities while minimizing overall risk.  Additionally, the Company’s 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.

Consistent with the Company’s strategy to further diversify its business operations, the Company acquired Utilimaster on November 30, 2009, as more fully described in Note 2, Acquisition Activities, of the Notes to Condensed Consolidated Financial Statements in this Form 10-Q and more so in the Company’s Form 10-K filed for the year ended December 31, 2009.  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.  The Company expects the acquisition of Utilimaster will further diversify its revenue stream into new markets that offer growth potential and are not directly dependent on government funding or consumer spending.  The Company believes the acquisition also allows the Company to gain entry into the North American delivery and service market; add fabrication and vehicle body expertise; benefit from Utilimaster’s strong brand, market share position, and solid customer base; and create opportunities to leverage future growth in the Company’s chassis business. 

The Company has an innovative team focused on building lasting relationships with its customers. This is accomplished by striving to deliver premium custom vehicles, vehicle components, and services that inspire customer loyalty.

In addition to the Company’s breakeven financial results for the three months ended March 31, 2010, there were several significant accomplishments within the quarter.  The Company was able to pay down all incremental debt incurred from the Utilimaster acquisition during this quarter.  This achievement was a result of management’s continued focus on working capital, driving the needed operational cash flow to pay down the debt and reduce interest expense.  Additionally, the EVTeam made a net profit of $190,000 during the quarter as fire truck sales remained strong and Road Rescue continued to make improvements showing positive earnings for March.  This quarter’s results also reflect Spartan’s continued investment in strategic long-term growth, as one time research and development charges of $1.8 million were invested in two significant new product introductions; the next generation commercial van, and the new cab and chassis design to support the 2010 emissions standards.  This had a negative impact on our quarterly results but is expected to lead to significant opportunities in the future.

The Company remains financially strong with a moderate cash balance, low debt relative to our recent acquisition and an open line of credit.  The Company believes that it can best carry out its long-term business plan and obtain optimal financial flexibility by using a combination of borrowings under the Company’s credit facilities, as well as equity capital, as sources of expansion capital.

The current macro economic environment will make 2010 challenging, for both sales and net earnings, although the Company is well positioned to take advantage of long-term opportunities as a result of:

• Development of the next-generation commercial van in tandem with the recently announced alliance with Isuzu.  This is a big part of the Company’s investment for growth as significant levels of research and development spend on this project continues.  The new van will offer quality and durability with improved functionality and fuel economy resulting in a product that is expected to have acceptance in the market. 

• Broadened reach into new market niches as demonstrated by the assembly alliance with Isuzu for the N-Gas chassis.  Spartan continues to explore opportunities to leverage its existing assembly capacity and expertise in order to increase volumes and utilize capacity.

• Design and development for a new cab and chassis to support the 2010 emissions compliant engine.  Spartan continues to invest in its future to ensure market needs and demands are met with the end customer in mind.

• The Company’s ability to react swiftly when challenges arise, as demonstrated by its recent aggressive cost realignment.  The Company also is able to respond nimbly when opportunities arise, as demonstrated with its past ramp up on defense initiatives.  Management remains focused on keeping costs aligned with sales levels and is continuing efforts to identify cost reduction opportunities.

• Strategic fabrication at Spartan Motors.  The Company believes that it can continue to improve operating margins and throughput, and reduce supply chain delays by implementing limited strategic fabrication activities at its facilities.  Phase one of this process is now complete, offering capacity and synergies for many of Spartan’s operations.

• Increased APA capabilities for all the Company’s markets, including the defense industry.  The Company continues to receive aftermarket part orders for units produced under various programs, including the Mine Resistant Ambush Protected (“MRAP”) program and the Iraqi Light Armored Vehicle (ILAV) program.

• The realization of synergies in connection with the acquisition of Utilimaster on November 30, 2009, including the achievement of purchasing leverage for raw materials and other supplies and enhanced joint research and development efforts. 

• The Company’s diversified business model.  The Company believes the major strength of its business model is market diversity and customization, with a growing foundation in emergency rescue as well as service and delivery vehicles.  The emergency rescue market is relatively less affected by geo-political events compared to the recreational vehicle and the military markets.  The Company intends to continue to pursue additional areas that build on its core competencies in order to further diversify its business.

• Continued demand in specialty vehicles and micro-niche markets.  The Company continues to produce specialized mine-resistant variants for the U.S. and other nations’ militaries on a smaller scale, such as the ILAV, Italian Cougar Explosive Ordinance Disposal, and Special Operations Command (“SOCOM”) Independent Suspension vehicles.

• Crimson Fire’s introduction of the “Transformer” as displayed in April 2010 at the Fire Department Instructors Conference (FDIC), the largest emergency response show in North America.  The Transformer is a revolutionary new product that allows for an added 130 square feet of compartment storage space with the relocation of the pump house, a new integrated pump control system that increases flexibility for pump discharges. The “Transformer also provides new vehicle packaging solutions needed for 2010 emission engines, while improving maneuverability with its shorter wheelbase

• The Legend Series fire truck continues to generate interest and profitability for Crimson Fire and is expected to generate long-term market opportunities.  The Company unveiled the “Legend” in 2009, which is an entry-level fire truck and the first in this new series in the Crimson Fire product line.

• The growing strength of the Spartan brands, including Spartan Chassis, Crimson Fire, Road Rescue, and Utilimaster.

The following section provides a narrative discussion about the Company’s financial condition and results of operations. The comments should be read in conjunction with the Company’s Condensed Consolidated Financial Statements and related Notes thereto included elsewhere within this Form 10-Q and in conjunction with the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 16, 2010. 

RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, the components of the Company’s actual business segment statements of operations as a percentage of sales:

For the three months ended: