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Spartan Motors, Inc. (the &#8220;Company&#8221;)&#160;is a custom engineer and manufacturer of specialized motor vehicle chassis and bodies. The Company&#8217;s principal chassis markets are emergency response vehicles, motor homes and other specialty vehicles. The Company also has various subsidiaries that are manufacturers of bodies for various markets including emergency response vehicles and delivery and service vehicles.</font> </div><br/><div style="LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> <font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Principles of Consolidation</font>. The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries: Spartan Chassis, Inc. (&#8220;Spartan Chassis&#8221;), Crimson Fire, Inc. (&#8220;Crimson&#8221;), Crimson Fire Aerials, Inc. (&#8220;Crimson Aerials&#8221;), Utilimaster Corporation (which was acquired on November 30, 2009) (&#8220;Utilimaster&#8221;), Classic Fire, LLC (which was acquired on April 1, 2011) (&#8220;Classic Fire&#8221;), and Road Rescue, Inc. (&#8220;Road Rescue&#8221;) through its date of sale on September 20, 2010.&#160;&#160;As the result of our sale of substantially all of the assets and related liabilities of Road Rescue, the financial results related to this operation are presented as discontinued operations in the Company&#8217;s Consolidated Financial Statements for 2010 and 2009. See Note 3, <font style="FONT-STYLE: italic; DISPLAY: inline">Discontinued Operations</font> for further details.&#160;&#160;All intercompany transactions have been eliminated.</font> </div><br/><div style="LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> <font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Use of Estimates</font>. The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States (&#8220;GAAP&#8221;) requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.</font> </div><br/><div style="LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> <font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Revenue Recognition</font>. The Company recognizes revenue in accordance with Accounting Standards Codification Topic (&#8220;ASC&#8221;)&#160;605. Accordingly, revenue is recognized when title to the product and risk of ownership passes to the buyer.&#160;&#160;In certain instances, risk of ownership and title passes when the product has been completed in accordance with purchase order specifications and has been tendered for delivery to the customer.&#160;&#160;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 the Company&#8217;s quality control inspections, and are ready for delivery.&#160;&#160;All sales are shown net of returns, discounts and sales incentive programs, which historically have not been significant. Rebates for certain product sales, which are known and accrued at time of sale, are reflected as a reduction of revenue.&#160;&#160;Service revenue is immaterial at less than one percent of total sales.&#160;&#160;The collectability of any related receivable is reasonably assured before revenue is recognized.</font> </div><br/><div style="LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> <font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Shipping and Handling of Products</font>. Costs incurred related to the shipment and handling of products are classified in cost of products sold.&#160;&#160;Amounts billed to customers for shipping and handling of products are included in sales.</font> </div><br/><div style="LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> <font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Cash and Cash Equivalents</font> include cash on hand, cash on deposit, treasuries and money market funds. The Company considers all investments purchased with an original maturity of three months or less to be cash equivalents. Cash that will be required for operations within 90 days or less will be invested in money market funds or treasuries.</font> </div><br/><div style="LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> <font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Accounts Receivable</font>. The Company&#8217;s receivables are subject to credit risk, and the Company does not typically require collateral on its accounts receivable.&#160;&#160;The Company performs periodic credit evaluations of its customers&#8217; financial condition and generally requires a security interest in the products sold. Receivables generally are due within 30 to 60 days.&#160;&#160;The Company maintains an allowance for customer accounts that reduces receivables to amounts that are expected to be collected.&#160;&#160;In estimating the allowance for doubtful accounts, management makes certain assumptions regarding the risk of uncollectable open receivable accounts.&#160;&#160;This risk factor is applied to the balance on accounts that are aged over 60 days: generally this reserve has an estimated range from 10-25%.&#160;&#160;The risk percentage applied to the aged accounts may change based on conditions such as:&#160;&#160;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.&#160;&#160;However, generally the Company&#8217;s assumptions are consistent year-over-year and there has been little adjustment made to the percentages used.&#160;&#160;In addition, in the event there are certain known risk factors with an open account, the Company may increase the allowance to include estimated losses on such &#8220;specific&#8221; account balances.&#160;&#160;The &#8220;specific&#8221; reserves are identified by a periodic review of the aged accounts receivable.&#160;&#160;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.&#160;&#160;The inclusion of the &#8220;specific&#8221; reserve has caused the greatest fluctuation in the allowance for doubtful accounts balance historically.&#160;&#160;Past due accounts are written off when collectability is determined to be no longer assured.</font> </div><br/><div style="LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> <font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Inventories</font> are stated at the lower of first-in, first-out cost or market. Estimated inventory allowances for slow-moving inventory are based upon current assessments about future demands, market conditions and related management initiatives.&#160;&#160;If market conditions are less favorable than those projected by management, additional inventory allowances may be required.</font> </div><br/><div style="LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> <font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Property, Plant and Equipment</font> is stated at cost and the related assets are depreciated over their estimated useful lives on a straight line basis for financial statement purposes and an accelerated method for income tax purposes.&#160;&#160;Cost includes an amount of interest associated with significant capital projects.&#160;&#160;Estimated useful lives range from 20 to 31.5 years for buildings and improvements, 3 to 15 years for plant machinery and equipment, 3 to 7 years for furniture and fixtures and 3 to 5 years for vehicles.&#160;&#160;Maintenance and repair costs are charged to earnings, while expenditures that increase asset lives are capitalized.&#160;&#160;The Company reviews its property, plant and equipment, along with all other long-lived assets that have finite lives, including finite-lived intangible assets, and that are not held for sale for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable.</font> </div><br/><div style="LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> <font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Goodwill and Other Intangible Assets</font>. Goodwill represents the excess of the cost of a business combination over the fair value of the net assets acquired.&#160;&#160;Goodwill and intangible assets deemed to have indefinite lives are not amortized, but are subject to impairment tests on an annual basis, or whenever events or changes in circumstances indicate that the carrying value may not be recoverable.&#160;&#160;Goodwill is allocated to the reporting unit from which it was created. A reporting unit is an operating segment or sub-segment to which goodwill is assigned when initially recorded.&#160;&#160;The Company annually reviews indefinite lived intangible assets for impairment by comparing the carrying value of those assets to their fair value.</font> </div><br/><div style="LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> <font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Other intangible assets with finite lives are amortized over their estimated useful lives and are tested for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable.</font> </div><br/><div style="LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> <font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">The Company performs its annual goodwill and indefinite lived intangible assets impairment test as of October&#160;1 and monitors for interim triggering events on an ongoing basis.&#160;&#160;The Company early adopted Accounting Standards Update 2011-08 &#8220;<font style="FONT-STYLE: italic; DISPLAY: inline">Intangibles &#8211; Goodwill and Other (Topic 350):&#160;&#160;Testing Goodwill for Impairment</font>&#8221; (&#8220;ASU 2011-08&#8221;) in the fourth quarter of 2011.&#160;&#160;ASU 2011-08 permits an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount.&#160;&#160;Under the amendments in ASU 2011-08, the Company is not required to calculate the fair value of a reporting unit unless it determines that it is more likely than not that the fair value of the reporting unit is less than its carrying amount by assessing a range of qualitative factors including, but not limited to, macroeconomic conditions, industry conditions, the competitive environment, changes in the market for its products and current and forecasted financial performance.&#160;&#160;Under the guidance of ASU 2011-08, the Company has an unconditional option to bypass the qualitative assessment and proceed to the first step of the two-step impairment test.</font> </div><br/><div style="LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> <font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">If the Company elects to bypass the qualitative assessment permitted by ASU 2011-08 for a reporting unit, or if, after completing the assessment, it is determined to be more likely than not that the fair value of a reporting unit is less than its carrying value, the Company performs a two-step impairment test, whereby the first step is comparing the fair value of a reporting unit with its carrying amount, including goodwill.&#160;&#160;The fair value of the reporting unit is 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 (&#8220;WACC&#8221;).&#160;&#160;In determining the estimated future cash flows, management considers current and projected future levels of income based on its plans for that business; business trends, prospects and market and economic conditions; and market-participant considerations.&#160;&#160;&#160;If the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered to not be impaired and the second step of the test is not performed.&#160;&#160;The second step of the impairment test is performed when the carrying amount of the reporting unit exceeds the fair value, in which case the implied fair value of the reporting unit goodwill is compared with the carrying amount of that goodwill based on a hypothetical allocation of the reporting unit&#8217;s fair value to all of its underlying assets and liabilities.&#160;&#160;If the carrying amount of the reporting unit goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to the excess.</font> </div><br/><div style="LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> <font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">The Company evaluates the recoverability of its indefinite lived intangible assets, which consist of its Utilimaster and Classic Fire trade names, based on estimates of future royalty payments that are avoided through its ownership of the trade names, discounted to their present value.&#160;&#160;In determining the estimated fair value of the trade name, management considers current and projected future levels of revenue based on its plans for Utilimaster and Classic Fire, business trends, prospects and market and economic conditions.</font> </div><br/><div style="LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> <font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Significant judgments inherent in these assessments and analyses include assumptions about macroeconomic and industry conditions, appropriate sales growth rates, WACC and the amount of expected future net cash flows. The judgments and assumptions used in the estimate of fair value are generally consistent with the projections and assumptions that are used in current operating plans. Such assumptions are subject to change as a result of changing economic and competitive conditions. The determination of fair value is highly sensitive to differences between estimated and actual cash flows and changes in the related discount rate used to evaluate the fair value of the reporting units and trade name.</font><br /> </div><br/><div style="LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> <font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">See Note 7, <font style="FONT-STYLE: italic; DISPLAY: inline">Goodwill and Intangible Assets,</font> for further details on the Company&#8217;s goodwill and other intangible assets.</font> </div><br/><div style="LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> <font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Warranties</font>. The Company&#8217;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 warranty liability to reflect actual experience. The amount of warranty liability accrued reflects management&#8217;s best estimate of the expected future cost of honoring the Company&#8217;s obligations under the warranty agreements. The Company&#8217;s estimates are based on historical experience, the number of units involved and the extent of features and components included in product models. See Note&#160;13, <font style="FONT-STYLE: italic; DISPLAY: inline">Commitments and Contingent Liabilities</font>, for further information regarding warranties.</font> </div><br/><div style="LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> <font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Deposits from Customers</font>. The Company receives advance payments from customers for future product orders and records these amounts as liabilities. Such deposits are accepted by the Company when presented by customers seeking improved pricing in connection with orders that are placed for products to be manufactured and sold at a future date.&#160;&#160;Revenue associated with these deposits is deferred and recognized upon shipment of the related product to the customer.</font> </div><br/><div style="LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> <font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Research and Development</font>. The Company&#8217;s research and development costs, which consist of compensation costs, travel and entertainment, administrative expenses and new product development among other items, are expensed as incurred.</font> </div><br/><div style="LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> <font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Taxes on Income</font>.&#160;&#160;The Company accounts for income taxes under a method that requires deferred income tax assets and liabilities to be recognized using enacted tax rates for the effect of temporary differences between the book and tax bases of recorded assets and liabilities. Authoritative guidance also requires deferred income tax assets be reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred income tax assets will not be realized.</font> </div><br/><div style="LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> <font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">The Company evaluates the likelihood of realizing its deferred income tax assets by assessing its valuation allowance and by adjusting the amount of such allowance, if necessary.&#160;&#160;The factors used to assess the likelihood of realization are the Company&#8217;s forecast of future taxable income, the projected reversal of temporary differences and available tax planning strategies that could be implemented to realize the net deferred income tax assets.</font><br /> </div><br/><div style="LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> <font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities. The determination is based on the technical merits of the position and presumes that each uncertain tax position will be examined by the relevant taxing authority that has full knowledge of all relevant information. Although management believes the estimates are reasonable, no assurance can be given that the final outcome of these matters will not be different than what is reflected in the historical income tax provisions and accruals.</font> </div><br/><div style="LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> <font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Interest and penalties attributable to income taxes are recorded as a component of income taxes.</font> </div><br/><div style="LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> <font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Earnings Per Share</font>. Basic earnings per share is based on the weighted average number of common shares, share equivalents of stock appreciation rights (&#8220;SAR&#8221;s)&#160;and participating securities outstanding during the period.&#160;&#160;Diluted earnings per share also include the dilutive effect of additional potential common shares issuable from stock options and are determined using the treasury stock method. Basic earnings per share represents net earnings divided by basic weighted average number of common shares outstanding during the period, including the average dilutive effect of the Company&#8217;s SARs&#160;outstanding during the period determined using the treasury stock method. Diluted earnings per share represents net earnings divided by diluted weighted average number of common shares outstanding, which includes the average dilutive effect of the Company&#8217;s stock options outstanding during the period. The Company&#8217;s unvested stock awards are included in the number of shares outstanding for both basic and diluted earnings per share calculations.&#160;&#160;See Note 15, <font style="FONT-STYLE: italic; DISPLAY: inline">Earnings Per Share,</font> for further details.</font> </div><br/><div style="LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> <font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Stock Incentive Plans</font>. Share based payment compensation costs for equity-based awards is measured on the grant date based on the fair value of the award at that date, and is recognized over the requisite service period, net of estimated forfeitures. Fair value of stock option and stock appreciation rights awards are estimated using a closed option valuation (Black-Scholes)&#160;model. Fair value of restricted stock awards is based upon the quoted market price of the common stock on the date of grant. 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FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">NOTE 18 &#8211; SUBSEQUENT EVENTS</font> </div><br/><div style="LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> <font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">On February 10, 2012 the Company&#8217;s Board of Directors approved the sale of the Company&#8217;s facility in Wakarusa, Indiana.</font> </div><br/><div style="LINE-HEIGHT: 1.25; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> <font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">On February 13, 2012, the Company entered into a lease with Fruit Hills Investments, LLC (the &#8220;Lease&#8221;), whereby commencing March 1, 2012, the Company will lease an existing building, as well as certain machinery and equipment within the building.&#160;&#160;The Company&#8217;s aggregate contractual lease payment obligation under the lease is $7,150, payable in equal monthly payments over the ten year term of the lease.&#160;&#160;&#160;Under the terms of the lease, the Company has an option to purchase the leased land and building at its then-current appraised fair market value, along with an option to renew the lease, at the same base rental rate, for an additional term of five years following the initial ten year lease term.&#160;&#160;</font> </div><br/><div style="LINE-HEIGHT: 1.25; 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