The Shyft Group - 10-Q quarterly report FY

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

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.

Yes    X                 No _______

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes    X                 No _______

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

SPARTAN MOTORS, INC.

INDEX

PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements

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

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

See Notes to Condensed Consolidated Financial Statements.

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

See Notes to Condensed Consolidated Financial Statements.

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

See Notes to Condensed Consolidated Financial Statements.

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

See Notes to Condensed Consolidated Financial Statements.

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

See Notes to Condensed Consolidated Financial Statements.

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

Note 1

For a description of the accounting policies followed refer to the notes to the Spartan Motors, Inc. (the "Company") consolidated financial statements for the year ended December 31, 2002, included in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 14, 2003.

Note 2

The accompanying unaudited interim condensed consolidated financial statements reflect all normal and recurring adjustments that are necessary for the fair presentation of the Company's financial position as of June 30, 2003, the results of operations for the three-month and six-month periods ended June 30, 2003 and 2002 and cash flows for the six-month period ended June 30, 2003.

Note 3

The results of operations for the six-month period ended June 30, 2003 are not necessarily indicative of the results to be expected for the full year.

Note 4

Inventories consist of raw materials and purchased components, work in process and finished goods and are summarized as follows:

Note 5

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 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, labor and sometimes travel for any 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.

Note 5 (continued)

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 during the six months ended June 30, 2003 were as follows:

Note 6

The Company has repurchase agreements with certain third-party lending institutions that have provided floor plan financing to customers. These agreements provide for the repurchase of products from the lending institution in the event of the customer's default. The total contingent liability on June 30, 2003 was $1.2 million. Historically, losses under these agreements have not been significant and it is management's opinion that any future losses will not have a material effect on the Company's financial position or future operating results.

Note 7

The Company's effective income tax rate of 18.6% for the six months ended June 30, 2003 differs from the federal statutory rate of 34.0% primarily as a result of reductions in previously recorded estimates for accrued taxes on income based upon settlements of examinations with state and federal taxing authorities that reduced the provision for income taxes during the period.

Note 8

On September 28, 2000, the Company's Board of Directors passed a resolution to cease funding of the Company's majority-owned subsidiary, Carpenter Industries, Inc. Carpenter's Board of Directors then voted on September 29, 2000 to begin the orderly liquidation of Carpenter. Because Carpenter was a separate segment of the Company's business, the operating results and the disposition of Carpenter's net assets were accounted for as a discontinued operation. Accordingly, previously reported financial results for all periods presented were restated to reflect this business as a discontinued operation.

Note 8 (Continued)

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

Note 9

In May 2003, the Company announced the closure of its Road Rescue, Inc. plant in St. Paul, Minnesota and its plan to transfer related production to its plant in Marion, South Carolina. The costs associated with this exit activity are estimated to be $0.7 million and will be expensed as incurred through the third quarter of 2003. Severance benefits and other contractual obligations associated with the plant shutdown are not significant.

Note 10

The Company follows Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees, in accounting for its stock option plans. Under APB Opinion No. 25, no compensation expense is recognized because the exercise price of the Company's stock options equals the market price of the underlying stock on the date of grant. Had compensation cost for the Company's stock-based compensation plans been determined based on the fair value at the grant dates for awards under those plans consistent with the method of Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based Compensation, the Company's net earnings and net earnings per share for the three and six months ended June 30, 2003 and 2002 would have been the pro forma amounts indicated below.

Note 10 (continued)

Note 11

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

Three Months Ended June 30, 2003

Three Months Ended June 30, 2002

Note 11 (continued)

Six Months Ended June 30, 2003

Six Months Ended June 30, 2002

Note 12

In November 2002, the FASB issued Interpretation No. 45, Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others, which changes current practice in accounting for, and disclosure of, guarantees. Interpretation No. 45 will require certain guarantees to be recorded as liabilities at fair value on the Company's balance sheet. Current practice requires that liabilities related to guarantees be recorded only when a loss is probable and reasonably estimable, as those terms are defined in SFAS No. 5, Accounting for Contingencies. Interpretation No. 45 also requires a guarantor to make

Note 12 (continued)

significant new disclosures, even when the likelihood of making any payments under the guarantee is remote, which is another change from current practice. The initial recognition and measurement provisions are applicable on a prospective basis to guarantees issued or modified after December 31, 2002. The recognition and measurement provisions were adopted, prospectively, as of January 1, 2003 and did not have a significant impact on the Company's consolidated financial position or results of operations. Disclosure of significant guarantees is included in Note 6 of this Form 10-Q.

In November 2002, the Emerging Issues Task Force reached a consensus on Issue 00-21, which addresses how to account for arrangements that may involve the delivery or performance of multiple products, services and/or rights to use assets. Revenue arrangements with multiple deliverables should be divided into separate units of accounting if the deliverables in the arrangement meet the following criteria: (1) value to the customer on a stand alone basis, (2) there is objective and reliable evidence of the fair value of the undelivered items and (3) the arrangement includes a general right of return, where delivery or performance of the undelivered items is considered probable and substantially in the control of the vendor. Arrangement consideration should be allocated among the separate deliverables based on their relative fair values. The accounting for revenue arrangements under EITF 00-21 is applicable for all new agreements entered into in periods beginning after June 15, 2003. The Company does not expec t that the new recognition and measurement provisions will have any effect on the Company's future financial results.

In January 2003, the FASB issued Interpretation No. 46, Consolidation of Variable Interest Entities. This standard clarifies the application of Accounting Research Bulletin No. 5a, Consolidated Financial Statements, and addresses consolidation by business enterprises of variable interest entities (VIE). Interpretation No. 46 requires existing unconsolidated variable interest entities to be consolidated by their primary beneficiaries if the entities do not effectively disperse risk among the parties involved. Interpretation No. 46 also enhances the disclosure requirements related to variable interest entities. This statement is effective for variable interest entities created or in which an enterprise obtains an interest after January 31, 2003. Interpretation No. 46 will be effective for the Company beginning January 1, 2004 for all interest in variable interest entities acquired before February 1, 2003. The adoption of Interpretation No. 46 is not expected to have an effect on the Company's consolidated financial statements because the Company is not involved in any VIE arrangements.

The following is a discussion of the major elements impacting the Company's financial and operating results for the three- and six-month periods ended June 30, 2003 compared to the three-and six-month periods ended June 30, 2002. The comments that follow should be read in conjunction with the Company's condensed consolidated financial statements and related notes contained in this Form 10-Q.

RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, the components of the Company's consolidated statements of operations, on an actual basis, as a percentage of sales:

Quarter Ended June 30, 2003, Compared to the Quarter Ended June 30, 2002

For the three months ended June 30, 2003, consolidated sales decreased $10.2 million (15.6%) to $55.1 million, from $65.3 million in the second quarter of 2002. Chassis Group sales for this period decreased by $6.2 million (12.2%). The majority of this decrease was due to lower sales of motorhome chassis. During the second quarter of 2003, motorhome chassis sales were $8.2 million (23.3%) lower than the second quarter of 2002. This decrease was due to the fact that higher sales levels existed in 2002 as a result of significant pent up demand in the first half of 2002.

Fire truck chassis sales in the second quarter of 2003 were up $1.4 million (9.3%) over the same period of 2002. The fire truck market continues to be strong in 2003, as fire departments focus on making sure their equipment is sufficient to respond to the variety of emergencies that are on their growing list of responsibilities.

EVTeam sales decreased $4.2 million, or 24.3%, from the prior year's second quarter. The merger of Luverne Fire Apparatus and Quality Manufacturing slowed their production as they consolidated staff and aligned their production efforts. In addition, the Company's planned closure of Road Rescue's St. Paul, Minnesota facility and transfer and consolidation of its ambulance operations to its new Marion, South Carolina facility has had a transitional negative impact on EVTeam production. Road Rescue's production at the new plant has ramped up slowly in order to ensure high quality levels.

Gross margin decreased from 17.8% for the quarter ended June 30, 2002 to 12.8% for the same period of 2003. This decrease is primarily due to a negative physical inventory and other costing adjustments totaling $1.3 million made at an EVTeam location. In addition, the lower sales volumes noted above, as well as the new Gladiator "Evolution" chassis launch, contributed to a lower gross margin. Lastly, higher costs of certain components, including engines meeting higher emissions standards, were a factor in the decrease in margins.

Operating expenses as a percentage of sales rose from 10.9% for the second quarter of 2002 to 13.5% for the second quarter of 2003. This increase is partially due to the decrease in sales volume. Operating expenses in dollars increased $0.3 million, or 3.6%, primarily due to higher operating expenses encountered by the EVTeam as merger-related and plant closure efforts continued.

The effective tax rate in the second quarter of 2003 was 36.8% versus 39.1% for the second quarter of 2002. The Company's effective tax rate fluctuates based upon the states where sales occur and with the level of export sales.

On September 28, 2000, the Company's Board of Directors passed a resolution to cease funding of the Company's majority-owned subsidiary, Carpenter Industries, Inc. Carpenter's Board of Directors then voted on September 29, 2000 to begin the orderly liquidation of Carpenter. Because Carpenter was a separate segment of the Company's business, the disposition of Carpenter's net assets is being accounted for as a discontinued operation. The $1.0 million and $0.3 million gains on disposal of Carpenter in the second quarters of 2003 and 2002, respectively, are a result of the Company's revision of its estimated loss to dispose of the business, based upon resolution of certain accrued items related to the disposal. Details of Carpenter's assets and liabilities at June 30, 2003 and December 31, 2002 are set forth in Note 8 to the condensed consolidated financial statements included in Item 1 of this Form 10-Q.

Total chassis orders received during the second quarter of 2003 decreased 24.9% compared to the same period in 2002. This is due to a 26.6% decrease in motorhome chassis orders coupled with a 24.1% decrease in fire truck chassis orders. Based on average order lead-time, the Company estimates that approximately one-half of the motorhome, one-third of the specialty and none of the fire truck chassis orders received during the three-month period ended June 30, 2003 were produced and delivered by June 30, 2003.

At June 30, 2003, the Company had $76.4 million in backlog compared with a backlog of $82.7 million at June 30, 2002. This was due to decrease in Chassis Group backlog of $8.1 million, or 15.2%, and an increase in EVTeam backlog of $1.8 million, or 5.9%.

While orders in the backlog are subject to modification, cancellation or rescheduling by customers, the Company has not experienced significant modification, cancellation or rescheduling of orders in the past. Although the backlog of unfilled orders is one of many indicators of market demand, several factors, such as changes in production rates, available capacity, new product introductions and competitive pricing actions, may affect actual sales. Accordingly, a comparison of backlog from period to period is not necessarily indicative of eventual actual shipments.

Six-Month Period Ended June 30, 2003, Compared to the Six-Month Period Ended June 30, 2002

For the six months ended June 30, 2003, consolidated sales decreased $16.5 million (12.5%) to $115.5 million, from $132.0 million in the first six months of 2002. Chassis Group sales decreased by $8.6 million (8.4%). The majority of this decrease is due to lower sales of motorhome chassis. During the first half of 2003, motorhome chassis sales were $14.8 million (20.4%) lower than the first half of 2002. This decrease was due to the fact that higher sales levels existed in 2002 as a result of significant pent up demand in the first half of 2002.

Fire truck chassis sales in the first six months of 2003 were up $5.1 million (17.8%) over the same period of 2002. The fire truck market continues to be strong in 2003, as fire departments focus on making sure their equipment is sufficient to respond to the variety of emergencies that are on their growing list of responsibilities.

EVTeam sales decreased $9.2 million, or 25.9%, from their sales level in the prior year's first half. The merger of Luverne Fire Apparatus and Quality Manufacturing slowed their production as they consolidated staff and aligned their production efforts. In addition, the Company's planned closure of Road Rescue's St. Paul, Minnesota facility and transfer and consolidation of its ambulance operations to its new Marion, South Carolina facility has had a transitional negative impact on EVTeam production. Road Rescue's production at the new plant has ramped up slowly in order to ensure high quality levels.

Gross margin decreased from 18.1% for the six months ended June 30, 2002 to 14.4% for the same period of 2003. This decrease is primarily due to a negative physical inventory and other costing adjustments totaling $1.3 million made at an EVTeam location. In addition, the lower sales volumes noted above, as well as the new Gladiator "Evolution" chassis launch, contributed to a lower gross margin. Lastly, higher costs of certain components, including engines meeting the higher emissions standards, were a factor in the decrease in margins.

Operating expenses as a percentage of sales increased to 12.5% for the six months ended June 30, 2003 versus 11.0% for the same period in 2002. Operating expenses in dollars dropped $0.1 million, or 0.8%, as the Company is focused on lowering operating expenses in light of lower sales volumes.

Other income (expense) improved from (0.1)% of sales in the six months ended June 30, 2002 to 0.1% of sales in the same period in 2003. The Company paid off its interest bearing debt during April of 2002, resulting in lower interest expense in 2003 than in 2002.

The effective tax rate in the first half of 2003 was 18.6% versus 35.0% for the first half of 2002. The Company's effective tax rate decreased in the first half of 2003 as a result of reductions in previously recorded estimates for accrued taxes on income based on settlements of examinations with state and federal taxing authorities that reduced the provision for income taxes during the period.

On September 28, 2000, the Company's Board of Directors passed a resolution to cease funding of the Company's majority-owned subsidiary, Carpenter Industries, Inc. Carpenter's Board of Directors then voted on September 29, 2000 to begin the orderly liquidation of Carpenter. The disposition of Carpenter's assets is being accounted for as a discontinued operation. The $1.5 million and $0.4 million gains on disposal of Carpenter in the first half of 2003 and the first half of 2002, respectively, are a result of the Company's revision of its estimated loss to dispose of the business, based upon resolution of certain accrued items related to the disposal. Details of Carpenter's assets and liabilities at June 30, 2003 and December 31, 2002 are set forth in Note 8 to the condensed consolidated financial statements included in Item 1 of this Form 10-Q.

Total chassis orders received during the first six months of 2003 decreased 17.8% compared to the same period in 2002. This is due to a 17.7% decrease in motorhome chassis orders coupled with a 19.4% decrease in fire truck chassis orders. Based on average order lead-time, the Company estimates that approximately one-half of the motorhome, one-third of the specialty, and one-sixth of the fire truck chassis orders received during the six-month period ended June 30, 2003 were produced and delivered by June 30, 2003.

At June 30, 2003, the Company had $76.4 million in backlog compared with a backlog of $82.7 million at June 30, 2002. This was due to decrease in Chassis Group backlog of $8.1 million, or 15.2% and an increase in EVTeam backlog of $1.8 million, or 5.9%.

While orders in the backlog are subject to modification, cancellation or rescheduling by customers, the Company has not experienced significant modification, cancellation or rescheduling of orders in the past. Although the backlog of unfilled orders is one of many indicators of market demand, several factors, such as changes in production rates, available capacity, new product introductions and competitive pricing actions, may affect actual sales. Accordingly, a comparison of backlog from period to period is not necessarily indicative of eventual actual shipments.

LIQUIDITY AND CAPITAL RESOURCES

For the six months ended June 30, 2003, cash provided by continuing operating activities was $1.3 million, which was $5.8 million, or 81.7%, lower than the $7.1 million of cash provided by continuing operating activities for the six months ended June 30, 2002. See the Condensed Consolidated Statements of Cash Flows contained in Item 1 of this Form 10-Q for the various factors that led to this decrease. The cash on hand at December 31, 2002, cash provided by operations of $2.9 million and cash provided from the exercise of stock options of $0.8 million allowed the Company to pay $0.5 million to repurchase and retire stock, pay $0.6 million in dividends and make $1.0 million of property, plant and equipment purchases. The Company's working capital increased $3.2 million, from $35.3 million at December 31, 2002 to $38.5 million at June 30, 2003. Cash and cash equivalents increased $1.5 million, from $8.1 million at December 31, 2002 to $9.6 million at June 30, 2003.

Inventories increased $4.5 million from $25.2 million at December 31, 2002 to $29.7 million at June 30, 2003. This increase was due in part to more favorable pricing offered on certain chassis components purchased from third-party suppliers. Additionally, the questionable availability of ambulance chassis due to plant closures for model change over resulted in higher chassis purchases in the second quarter.

Shareholders' equity increased $3.2 million in the six months ended June 30, 2003 to $59.6 million from $56.4 million at December 31, 2002. This change resulted from the $3.3 million in net earnings of the Company and the receipt of $1.0 million from the exercise of stock options net of the $0.5 million to repurchase and retire Company stock and pay $0.6 million in dividends.

On April 24, 2003, the Board of Directors authorized management to repurchase up to a total of 500,000 shares of the Company's common stock in open market transactions. Management repurchased 57,065 shares through June 30, 2003. Repurchases of common stock are contingent upon market conditions. The Company has not set an expiration date for the completion of the repurchase program. If the Company were to repurchase the remaining 442,935 shares of stock at current prices, this would cost the Company approximately $3.8 million. The Company believes that it has sufficient cash reserves to fund this stock buyback.

The Company's primary line of credit is a $20.0 million revolving note payable to a bank that expires on October 15, 2003. The Company expects to extend or refinance this line of credit in 2003. Under the terms of the line of credit agreement, the Company is required to maintain certain financial ratios and other financial conditions. The agreement also prohibits the Company from incurring additional indebtedness, limits certain acquisitions, investments, advances or loans, and restricts substantial asset sales. At June 30, 2003, the Company was in compliance with all debt covenants and there were no borrowings on this line of credit.

The Company also has a secured line of credit for $0.2 million and an unsecured line of credit for $1.0 million. The $0.2 million line carries an interest rate of 2% above the bank's prime rate (prime rate at June 30, 2003 was 4.00%) and has an expiration date of June 1, 2004. This line of credit is secured by accounts receivable, inventory and equipment. The $1.0 million line carries an interest rate of 1% above the bank's prime rate and expires only if there is a change in management. There were no borrowings on either of these lines at June 30, 2003.

The Company believes that its cash on hand, as well as its anticipated cash flows from operating activities, will be sufficient to fund operating activities and other anticipated cash needs for the next year and the foreseeable future.  Should additional funds be required, the Company had $21.2 million of borrowing capacity available under its existing lines of credit at June 30, 2003.

CRITICAL ACCOUNTING POLICIES

The following discussion of accounting policies is intended to supplement Note 1, General and Summary of Accounting Policies, of the Notes to Consolidated Financial Statements included in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 14, 2003. These policies were selected because they are broadly applicable within the Company's 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 - The Company recognizes revenue in accordance with SEC Staff Accounting Bulletin (SAB) No. 101, Revenue Recognition in Financial Statements, as amended by SAB 101A and SAB 101B. Accordingly, revenue is recognized when title to the product and risk of ownership passes to the buyer. This occurs when the unit has been completed in accordance with purchase order specifications and has been tendered for delivery to the customer. Sales are shown net of returns, discounts and sales incentives, which historically have not been significant. The collectibility of any related receivable is reasonably assured before revenue is recognized.

Inventory - Estimated inventory allowances for slow-moving and obsolete inventory are based upon current assessments about future demands, market conditions and related management initiatives. If market conditions are less favorable than those projected by management, additional inventory allowances may be required.

Warranties - 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 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. 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. See also Note 5 to the condensed consolidated financial statements included in Item 1 of this Form 10-Q.

PENDING ACCOUNTING POLICIES

See Note 12 to the condensed consolidated financial statements included in Item 1 of this Form 10-Q.

EFFECT OF INFLATION

Inflation affects the Company in two principal ways. First, the Company's debt, if any, is tied to the prime and LIBOR interest rates so that interest rate increases would be translated into additional interest expense. Second, general inflation impacts prices paid for labor, parts and supplies. Whenever possible, the Company attempts to cover increased costs of production and capital by adjusting the prices of its products. However, the Company generally does not attempt to negotiate inflation-based price adjustment provisions into its contracts. Since order lead times can be as much as six months, the Company has limited ability to pass on cost increases to its customers on a short-term basis. In addition, the markets the Company serves are competitive in nature, and competition limits the Company's ability to pass through cost increases in many cases. The Company strives to minimize the effects of inflation through cost reductions and improved productivity.

FORWARD-LOOKING STATEMENTS

This Form 10-Q contains statements that are not historical facts. These statements are called "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements involve important known and unknown risks, uncertainties and other factors and can be identified by phrases using "estimate," "anticipate," "believe," "project," "expect," "intend," "predict," "potential," "future," "may," "should" and similar expressions or words. Our future results, performance or achievements may differ materially from the results, performance or achievements discussed in the forward-looking statements. There are numerous factors that could cause actual results to differ materially from the results discussed in forward-looking statements, including:

This list provides examples of factors that could affect the results described by forward-looking statements contained in this Form 10-Q. However, this list is not intended to be exhaustive; many other factors could impact our business and it is impossible to predict with any accuracy which factors could result in which negative impacts. Although we believe that the forward-looking statements contained in this Form 10-Q are reasonable, we cannot provide you with any guarantee that the anticipated results will be achieved. All forward-looking statements in this Form 10-Q are expressly qualified in their entirety by the cautionary statements contained in this section and you are cautioned not to place undue reliance on the forward-looking statements contained in this Form 10-Q. In addition to the risks listed above, other risks may arise in the future, and we disclaim any obligation to update information contained in any forward-looking statement.

The Company's primary market risk exposure is a change in interest rates in connection with its outstanding variable rate short-term and long-term debt. However, at June 30, 2003, the Company had no debt outstanding under its variable rate short-term and long-term debt. The Company does not enter into market risk sensitive instruments for trading purposes.

As of June 30, 2003, an evaluation was performed under the supervision and with the participation of the Company's management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934). Based on that evaluation, the Company's management, including the CEO and CFO, concluded that the Company's disclosure controls and procedures were effective as of June 30, 2003 in timely alerting them to material information relating to the Company (including its consolidated subsidiaries) required to be included in the Company's periodic filings with the Securities and Exchange Commission. There have been no significant changes in the Company's internal controls or in other factors that could significantly affect internal controls subsequent to June 30, 2003.

PART II.  OTHER INFORMATION

The annual meeting of shareholders of Spartan Motors, Inc. was held on May 28, 2003. The purpose of the meeting was to elect directors, to approve the Stock Option and Restricted Stock Plan of 2003, ratify the appointment of Ernst & Young LLP as independent auditors for the current fiscal year and transact any other business that properly came before the meeting. The name of each director elected to a term expiring in 2006 (along with the number of votes cast for or authority withheld) is as follows:

The following persons continue to serve as directors: William F. Foster, Richard J. Schalter, George Tesseris and David R. Wilson.

The following proposals were acted on:

There were no broker non-votes with respect to matters voted on by the Company's shareholders at the meeting.

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

          (b)     Reports on Form 8-K. The Company filed the following Current Report on Form 8-K during the quarter ended June 30, 2003. This Form 8-K was furnished pursuant to Regulation FD and is considered to have been "furnished" but not "filed" with the Securities and Exchange Commission.

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.

EXHIBIT INDEX