UNITED STATES SECURITIES AND EXCHANGE
COMMISSION WASHINGTON, D.C. 20549

# FORM 10-Q

|[X] | QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES           EXCHANGE ACT
OF 1934
|--- | -------------------------------------------------------------------------------------------------

| | For
the quarterly period ended September 30, 2009
| | -------------------------------------------------

|[__] | TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES           EXCHANGE ACT
OF 1934
|---- | --------------------------------------------------------------------------------------------------

| | For
the transition period from ___________________ to ____________________
| | --------------------------------------------------------------------------

| | Commission
File Number:  0-13611
| | --------------------------------

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

|Michigan
(State or Other Jurisdiction ofIncorporation or Organization)1000 Reynolds RoadCharlotte, Michigan
(Address of Principal Executive Offices) | 38-2078923(I.R.S. EmployerIdentification No.)48813(Zip Code)
|---------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------

Registrant's Telephone
Number, Including Area Code:   (517) 543-6400

Indicate by check mark whether the
registrant: (1) has filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.

Yes [X]    No [__]

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

Yes [__]    No [__]

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

|Large accelerated filer   [__]
Non-accelerated filer   [__] | Accelerated filer   [X]
Smaller Reporting Company   [__]
|----------------------------------------------------------- | --------------------------------------------------------

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

Yes [__]    No [X]

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

|ClassCommon stock, $.01 par value | Outstanding atOctober 30, 200932,881,156 shares
|--------------------------------- | -----------------------------------------------

---



# SPARTAN MOTORS, INC.

# INDEX __________________________________

|FORWARD-LOOKING
STATEMENTS | Page 3
|-------------------------- | ------

PART I.  FINANCIAL
INFORMATION

| | Item 1. | Financial
Statements:
| | ------- | ---------------------

| | Condensed
Consolidated Balance Sheets - September 30, 2009
| | ----------------------------------------------------------

| | and December
31, 2008 (Unaudited) | 4
| | --------------------------------- | -

| | Condensed
Consolidated Statements of Income -
| | ---------------------------------------------

| | Three Months Ended September 30, 2009 and 2008 (Unaudited) | 6
| | ---------------------------------------------------------- | -

| | Condensed Consolidated Statements of Income -
| | ---------------------------------------------

| | Nine Months Ended September 30, 2009 and 2008 (Unaudited) | 7
| | --------------------------------------------------------- | -

| | Condensed Consolidated Statements of Cash Flows -
| | -------------------------------------------------

| | Nine Months Ended September 30, 2009 and 2008 (Unaudited) | 8
| | --------------------------------------------------------- | -

| | Condensed Consolidated Statements of Shareholders'
| | --------------------------------------------------

| | Equity - Nine Months Ended September 30, 2009 (Unaudited) | 9
| | --------------------------------------------------------- | -

| | Notes to Condensed Consolidated Financial Statements | 10
| | ---------------------------------------------------- | --

| | Item 2. | Management's Discussion and Analysis of Financial
| | ------- | -------------------------------------------------

| | Condition and Results of Operations | 18
| | ----------------------------------- | --

| | Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 29
| | ------- | ---------------------------------------------------------- | --

| | Item 4. | Controls and Procedures | 29
| | ------- | ----------------------- | --

PART II.  OTHER
INFORMATION

| | Item 1A. | Risk Factors | 29
| | -------- | ------------ | --

| | Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 30
| | ------- | ----------------------------------------------------------- | --

| | Item 6. | Exhibits | 31
| | ------- | -------- | --

SIGNATURES

EXHIBIT INDEX

---



# FORWARD-LOOKING
STATEMENTS

There are certain statements within
this report that are not historical facts. These statements are called
forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These
statements involve important known and unknown risks, uncertainties and other factors and
can be identified by phrases using estimate, anticipate,
believe, project, expect, intend,
predict, potential, future, may,
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:

| | The recent global economic and financial market crisis has had and may continue to have
a negative effect on the Companys business and its operations.
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------

| | Changes in economic conditions, including changes in interest rates, credit
availability, financial market performance and the Companys industries, can
have adverse affects on its earnings and financial condition, as well as its
customers, dealers and suppliers. In particular, the Company could be adversely affected
by the economic impact to its supply base that supports the automobile industry.
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Changes in relationships with major customers and suppliers could significantly affect
the Companys revenues and profits.
|- | --------------------------------------------------------------------------------------------------------------------------

| | The Company depends in part on U.S. government contracts, which are subject to unique
risks, some of which are beyond its control.
|- | ----------------------------------------------------------------------------------------------------------------------------------

| | The Company may
incur post-delivery adjustments to the sale price of its products under the terms of certain
contracts and other customer arrangements.
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Companys businesses are cyclical and this can lead to fluctuations in its operating
results.
|- | -------------------------------------------------------------------------------------------------

| | Amendments of the regulations governing our businesses could have a material impact on
the Companys operations.
|- | ----------------------------------------------------------------------------------------------------------------

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; many other factors,
including the risk factors disclosed in Item 1A Risk Factors of Part II of
this Quarterly Report on Form 10-Q and of Part I of our Annual Report on Form 10-K for the
year ended December 31, 2008, could impact our business and it is impossible to
predict with any accuracy which factors could adversely affect the Company. Although we
believe that the forward-looking statements contained in this Report are reasonable, 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. 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.

-3-

---



# PART
I.  FINANCIAL INFORMATION

# Item
1.  Financial Statements.

SPARTAN MOTORS, INC.
AND SUBSIDIARIES CONDENSED CONSOLIDATED
BALANCE SHEETS

|                                        | September 30, 2009Unaudited | December 31, 2008Audited
|--------------------------------------- | --------------------------- | ------------------------
|ASSETS                                  |                             |                         
|                                        |                             |                         
|Current assets:                         |                             |                         
|Cash and cash equivalents               |                             |                         
|Accounts receivable, less allowance for |                             |                         
|doubtful accounts of $1,058,600 in 2009 |                             |                         
|and $146,600 in 2008                    |                             |                         
|Inventories                             |                             |                         
|Deferred income tax assets              |                             |                         
|Deposits on engines                     |                             |                         
|Taxes receivable                        |                             |                         
|Other current assets                    |                             |                         
|Total current assets                    |                             |                         
|                                        |                             |                         
|Property, plant, and equipment, net     |                             |                         
|Goodwill                                |                             |                         
|Deferred income tax assets              |                             |                         
|Other assets                            |                             |                         
|Total assets                            |                             |                         

See Accompanying Notes to Condensed
Consolidated Financial Statements.

-4-

---



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

|                                                    | September 30, 2009Unaudited | December 31, 2008Audited
|--------------------------------------------------- | --------------------------- | ------------------------
|LIABILITIES AND SHAREHOLDERS' EQUITY                |                             |                         
|                                                    |                             |                         
|Current liabilities:                                |                             |                         
|Accounts payable                                    |                             |                         
|Deposits from customers                             |                             |                         
|Accrued warranty                                    |                             |                         
|Accrued customer rebates                            |                             |                         
|Accrued compensation and related taxes              |                             |                         
|Accrued vacation                                    |                             |                         
|Other current liabilities and accrued expenses      |                             |                         
|Taxes on income                                     |                             |                         
|Current portion of long-term debt                   |                             |                         
|Total current liabilities                           |                             |                         
|                                                    |                             |                         
|Other non-current liabilities                       |                             |                         
|Long-term debt, less current portion                |                             |                         
|                                                    |                             |                         
|Shareholders' equity:                               |                             |                         
|Preferred stock, no par value: 2,000,000            |                             |                         
|shares authorized (none issued)                     |                             |                         
|Common stock, $0.01 par value; 40,000,000 shares    |                             |                         
|authorized; issued 32,881,156 and 32,572,289 shares |                             |                         
|in 2009 and 2008, respectively                      |                             |                         
|Additional paid in capital                          |                             |                         
|Retained earnings                                   |                             |                         
|Total shareholders' equity                          |                             |                         
|Total liabilities and shareholders' equity          |                             |                         

See Accompanying Notes to Condensed
Consolidated Financial Statements.

-5-

---



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

|                                                   | Three Months Ended September 30,
|-------------------------------------------------- | --------------------------------
|                                                   |                                 
|                                                   |                                 
|Sales                                              |                                 
|Cost of products sold                              |                                 
|Restructuring charges                              |                                 
|Gross profit                                       |                                 
|                                                   |                                 
|Operating expenses:                                |                                 
|Research and development                           |                                 
|Selling, general and administrative                |                                 
|Restructuring charges                              |                                 
|Operating income                                   |                                 
|                                                   |                                 
|Other income (expense):                            |                                 
|Interest expense                                   |                                 
|Interest and other income                          |                                 
|Earnings before taxes on income                    |                                 
|                                                   |                                 
|Taxes on income                                    |                                 
|Net earnings                                       |                                 
|                                                   |                                 
|Basic net earnings per share                       |                                 
|                                                   |                                 
|Diluted net earnings per share                     |                                 
|                                                   |                                 
|Basic weighted average common shares outstanding   |                                 
|                                                   |                                 
|Diluted weighted average common shares outstanding |                                 
|                                                   |                                 
|Cash dividends per common share                    |                                 

See Accompanying Notes to Condensed
Consolidated Financial Statements.

-6-

---



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

|                                                   | Nine Months Ended September 30,
|-------------------------------------------------- | -------------------------------
|                                                   |                                
|                                                   |                                
|Sales                                              |                                
|Cost of products sold                              |                                
|Restructuring charges                              |                                
|Gross profit                                       |                                
|                                                   |                                
|Operating expenses:                                |                                
|Research and development                           |                                
|Selling, general and administrative                |                                
|Restructuring charges                              |                                
|Operating income                                   |                                
|                                                   |                                
|Other income (expense):                            |                                
|Interest expense                                   |                                
|Interest and other income                          |                                
|Earnings before taxes on income                    |                                
|                                                   |                                
|Taxes on income                                    |                                
|Net earnings                                       |                                
|                                                   |                                
|Basic net earnings per share                       |                                
|                                                   |                                
|Diluted net earnings per share                     |                                
|                                                   |                                
|Basic weighted average common shares outstanding   |                                
|                                                   |                                
|Diluted weighted average common shares outstanding |                                
|                                                   |                                
|Cash dividends per common share                    |                                

See Accompanying Notes to Condensed
Consolidated Financial Statements.

-7-

---



SPARTAN MOTORS, INC.
AND SUBSIDIARIESCONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS

|                                                         | Nine Months Ended September 30,
|-------------------------------------------------------- | -------------------------------
|                                                         |                                
|                                                         |                                
|Cash flows from operating activities:                    |                                
|Net earnings                                             |                                
|Adjustments to reconcile net earnings to net cash        |                                
|provided by (used in) operating activities:              |                                
|Depreciation                                             |                                
|Loss on disposal of assets                               |                                
|Tax expense (benefit) from stock incentive plan          |                                
|transactions                                             |                                
|Stock based compensation related to restricted stock     |                                
|Decrease (increase) in operating assets:                 |                                
|Accounts receivable                                      |                                
|Inventories                                              |                                
|Taxes receivable                                         |                                
|Other current assets                                     |                                
|Increase (decrease) in operating liabilities:            |                                
|Accounts payable                                         |                                
|Deposits from customers                                  |                                
|Accrued warranty                                         |                                
|Accrued customer rebates                                 |                                
|Accrued compensation and related taxes                   |                                
|Accrued vacation                                         |                                
|Other current liabilities and accrued expenses           |                                
|Taxes on income                                          |                                
|Total adjustments                                        |                                
|Net cash provided by (used in) operating activities      |                                
|Cash flows from investing activities:                    |                                
|Purchases of property, plant and equipment               |                                
|Proceeds from sale of property, plant and equipment      |                                
|Net cash used in investing activities                    |                                
|Cash flows from financing activities:                    |                                
|Proceeds from long-term debt                             |                                
|Payments on long-term debt                               |                                
|Purchase and retirement of common stock                  |                                
|Issuance of stock                                        |                                
|Net proceeds (use of cash) from the exercise, vesting or |                                
|cancelation of stock incentive awards                    |                                
|Cash retained (paid) related to tax impact of stock      |                                
|incentive plan transactions                              |                                
|Payment of dividends                                     |                                
|Net cash provided by (used in) financing activities      |                                
|Net increase (decrease) in cash and cash equivalents     |                                
|Cash and cash equivalents at beginning of period         |                                
|Cash and cash equivalents at end of period               |                                

See Accompanying Notes to Condensed
Consolidated Financial Statements.

-8-

---



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

---

|                                                   | Number of Shares | Common Stock | Additional Paid In Capital | Retained Earnings | Total Shareholders' Equity
|-------------------------------------------------- | ---------------- | ------------ | -------------------------- | ----------------- | --------------------------
|Balance at December 31, 2008                       |                  |              |                            | 32,572,289        |                           
|                                                   |                  |             
|Issuance of common stock and the tax benefit of    |                  |             
|stock incentive plan transactions                  |                  |              |                            | 128,957           |                           
|                                                   |                  |             
|Issuance of restricted stock, net of cancellations |                  |              |                            | 320,648           |                           
|                                                   |                  |             
|Stock based compensation related to restricted     |                  |             
|stock                                              |                  |              |                            | --                |                           
|                                                   |                  |             
|Purchase and retirement of common stock            |                  |              |                            | (140,738          | )                         
|                                                   |                  |             
|Payment of dividends                               |                  |              |                            | --                |                           
|                                                   |                  |             
|Net earnings                                       |                  |              |                            | --                |                           
|Balance at September 30, 2009                      |                  |              |                            | 32,881,156        |                           

See Accompanying Notes to Condensed
Consolidated Financial Statements.

-9-

---



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, 2008, included in the Companys Annual Report on Form 10-K filed
with the Securities and Exchange Commission on March 13, 2009. 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 September 30, 2009, the results of operations for the three- and nine-month
periods ended September 30, 2009 and 2008 and the cash flows for the nine-month
period ended September 30, 2009.

The results of operations for the
three- and nine-month periods ended September 30, 2009 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 variable rate debt instruments approximate their fair
value. The fair value of these financial instruments, as well as the Companys fixed
rate debt instruments, approximates their carrying value at September 30, 2009.

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

We evaluated subsequent events
through November 6, 2009, the date the financial statements were issued.

New Accounting Standards.In June 2009, the FASB issued the FASB Accounting Standards Codification
and the Hierarchy of Generally Accepted Accounting Principles. This establishes the
FASB Accounting StandardCodification (Codification) as the source of
authoritative accounting principles recognized by the FASB to be applied by
nongovernmental entities in the preparation of financial statements in conformity with
generally accepted accounting principles in the United States (U.S. GAAP). All guidance
contained in the Codification carries an equal level of authority. The Codification does
not change current U.S. GAAP, but is intended to simplify user access to all authoritative
U.S. GAAP by providing all the authoritative literature related to a particular topic in
one place. All existing accounting standard documents are superseded and all other
accounting literature not included in the Codification is considered nonauthoritative. The
Codification is effective for interim or annual periods ending after September 15, 2009.
Appropriate changes to U.S. GAAP references have been made in the financial statements.

-10-

---



In September 2006, the FASB issued a
new standard regarding Fair Value Measurements which defines fair value,
establishes a framework for measuring fair value and expands disclosures about fair value
measurements. The Company has evaluated its assets and liabilities for material impact.
This standard clarifies the definition of fair value, establishes a framework for
measuring fair value and expands the disclosures on fair value measurements. Through
September 30, 2009, the standard had no effect on the Companys consolidated
results of operations or financial position with respect to its financial assets and
liabilities. Effective January 1, 2009, the Company applied the fair value measurement and
disclosure provisions to its nonfinancial assets and liabilities measured on a
nonrecurring basis. Such also had no effect on its consolidated results of operations or
financial position through September 30, 2009 and is also not expected to have a
material impact on the Companys future consolidated results of operations or
financial position.

In December 2007, the FASB issued a
new standard in regards to Business Combinations, to further enhance the
accounting and financial reporting related to business combinations. This
standard establishes principles and requirements for how the acquirer in a business
combination (1) recognizes and measures in its financial statements the identifiable
assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree,
(2) recognizes and measures the goodwill acquired in the business combination or a
gain from a bargain purchase, and (3) determines what information to disclose to
enable users of the financial statements to evaluate the nature and financial effects of
the business combination. The standard applies prospectively to business combinations for
which the acquisition date is on or after the beginning of the first annual reporting
period beginning on or after December 15, 2008. Therefore, the effects of the
Companys adoption will depend upon the extent and magnitude of acquisitions going
forward. The standard had no impact on the Companys consolidated results of
operation or financial position through September 30, 2009.

In June 2008, the FASB issued
new guidance which is regarding Determining Whether Instruments Granted in
Share-Based Payment Transactions are Participating Securities. This guidance
provides that unvested share-based payment awards, which contain nonforfeitable rights to
dividends or dividend equivalents, whether paid or unpaid, are participating securities
and are required to be included in the computation of earnings per share pursuant to the
two-class method described in the standard. The two-class method of computing earnings per
share includes an earnings allocation formula that determines earnings per share for
common stock and any participating securities according to dividends declared, whether
paid or unpaid, and participation rights in undistributed earnings. This is effective for
financial statements issued for fiscal years beginning after December 15, 2008, and
interim periods within those years. All prior period earnings per share data presented are
required to be adjusted retrospectively to conform to the provisions of this guidance.
Adoption of this guidance reduced basic earnings per share by $.03 for the nine month
period and $.01 for the three month period ended September 30, 2008. The adoption
reduced diluted earnings per share for the nine month period September 30, 2008 by $.01
and had no impact on diluted earnings per share for the three month period ending
September 30, 2008.

In May 2009, the FASB issued a new
standard regarding Subsequent Events, which establishes general standards of
accounting for and disclosures of events that occur after the balance sheet date but
before the financial statements are issued or are available to be issued. The standard
requires the disclosure of the date through which an entity has evaluated subsequent
events and the basis for that date. The standard is effective for interim or annual
financial periods ending after June 15, 2009. The adoption of this standard did not
have any impact on the Companys results of operations or financial position through
September 30, 2009.

-11-

---



# Note 2  INVENTORIES

Inventories are summarized as
follows:

|                                       | September 30, 2009 | December 31, 2008
|-------------------------------------- | ------------------ | -----------------
|                                       |                    |                  
|Finished goods                         |                    |                  
|Work in process                        |                    |                  
|Raw materials and purchased components |                    |                  
|Obsolescence reserve                   |                    |                  
|                                       |                    |                  

# Note 3  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 onto 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. The estimates for
military vehicles were adjusted during the second quarter of 2009 to reflect actual
experience specific to these vehicles, whereas prior estimates were based on the
Companys actual experience with commercial vehicles due to the limited availability
of vehicle specific data. This adjustment resulted in a net reduction of the warranty
liability of approximately $1.4 million and is included in changes in liability for
pre-existing warranties below.

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 nine months ended September 30:

-12-

---



|                                                 | 2009 | 2008
|------------------------------------------------ | ---- | ----
|                                                 |      |     
|Balance of accrued warranty at January 1         |      |     
|                                                 |      |     
|Warranties accrued during the period             |      |     
|                                                 |      |     
|Cash settlements made during the period          |      |     
|                                                 |      |     
|Changes in liability for pre-existing warranties |      |     
|during the period, including expirations         |      |     
|                                                 |      |     
|Balance of accrued warranty at September 30      |      |     

# Note 4 
COMMITMENTS AND CONTINGENT LIABILITIES

At September 30, 2009, 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.

In addition, there may be adjustments
to the sales price of products sold by the Company and its subsidiaries, as previously
reported in revenues, due to some non-definitized agreements. The Company is currently in
negotiations with a customer regarding certain supply contracts the Company has completed
but for which the customer is now claiming a post-delivery price adjustment. The
negotiations with this customer have not concluded and the extent, if any, of the
Companys liability with respect to this matter remains uncertain.

# Note 5  EARNINGS
PER SHARE (EPS)

Basic earnings per share is based on
the weighted average number of common shares, share equivalents of stock appreciation
rights (SARs) and participating securities outstanding during the period. Diluted
earnings per share include the dilutive effect of additional potential common shares
issuable from stock options and are determined using the treasury stock method. As
discussed in Note 1 under the caption, New Accounting Standards, new guidance
relating to determining whether instruments granted in share-based payment transactions
are participating securities was adopted effective January 1, 2009. The new guidance
requires that unvested stock awards which contain non-forfeitable rights to dividends or
dividend equivalents, whether paid or unpaid (referred to as participating
securities), be included in the number of shares outstanding for both basic and
diluted earnings per share calculations. The Companys unvested restricted stock is
considered a participating security and thus is fully included in the both earnings per
share computations.

All prior period earnings per share
data presented are required to be adjusted retrospectively to conform to the provisions of
the Codification. Previously reported basic EPS was adjusted down by $0.03 to $1.22 for
the nine month period ended September 30, 2008, and adjusted down by $0.01 to $0.45
for the three month period then ended. The change was the result of including unvested
restricted shares in the basic computation as required by this new accounting guidance.

-13-

---



The table below reconciles basic
weighted average common shares outstanding to diluted weighted average shares outstanding
for the respective three- and nine-month periods. The stock awards noted as antidilutive
were not included in the basic (SAR awards) and diluted (stock option
awards) weighted average common shares outstanding. Although these stock awards were
not included in the Companys calculation of basic or diluted EPS, they may have a
dilutive effect on the EPS calculation in future periods if the price of the common stock
increases.

For the period ended September 30:
(In thousands)

|                                       | Three Months Ended | Nine Months Ended
|-------------------------------------- | ------------------ | -----------------
|                                       |                    |                  
|Basic weighted average common shares   |                    |                  
|outstanding                            |                    |                  
|                                       |                    |                  
|Effect of dilutive stock options       |                    |                  
|Diluted weighted average common shares |                    |                  
|outstanding                            |                    |                  
|                                       |                    |                  
|Antidilutive stock awards              |                    |                  
|SARs                                   |                    |                  
|Stock Options                          |                    |                  
|Total                                  |                    |                  

Distributed and undistributed EPS
attributable to Spartan common stockholders were as follows:

For the period ended
September 30:

|                       | Three Months Ended | Nine Months Ended
|---------------------- | ------------------ | -----------------
|                       |                    |                  
|Basic EPS              |                    |                  
|Distributed earnings   |                    |                  
|Undistributed earnings |                    |                  
|Total                  |                    |                  
|                       |                    |                  
|Diluted EPS            |                    |                  
|Distributed earnings   |                    |                  
|Undistributed earnings |                    |                  
|Total                  |                    |                  

During the three- and nine-months
ended September 30, 2009 the Company undertook some restructuring activities and as a
result incurred additional charges against operating income which are included in the
above table. See Note 6 for further detail and impact on EPS.

-14-

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# Note 6 
RESTRUCTURING CHARGES

During the year 2009, the Company has
undergone restructuring activities to align expenses to coincide with current revenue
expectations. These restructuring activities included workforce reductions, plant and
operation consolidations and overall improved cost management. The activities that
generated restructuring charges are detailed by segment (see Note 7 for defining segments)
and period in the table below.

Restructuring charges for the periods
ended September 30, 2009:

|        | Three Months Ended | Nine Months Ended
|------- | ------------------ | -----------------
|        |                    |                  
|Chassis |                    |                  
|EVTeam  |                    |                  
|Other   |                    |                  
|Total   |                    |                  

The above charges are reflected in
the Income Statement as follows: cost of products sold, approximately $223,000 and
$264,000 for the three- and nine-month periods ended September 30, 2009, respectively; and
operating expenses, approximately $686,000 and $693,000 for the same periods. As most
restructuring charges incurred during the third quarter of 2009 were also paid during that
same quarter, there were no material related liabilities remaining at September 30, 2009.
Accordingly, a reconciliation of liability balances from period to period is not
warranted. At this point, there are no material restructuring activities, beyond those
implemented in the third quarter of 2009, that are expected to generate upfront costs.

Excluding all restructuring costs
incurred, adjusted operating income was 2.4 percent and 6.0 percent of sales while
adjusted earnings per share were $0.04 and $0.39 for the three- and nine-month periods
ended September 30, 2009, respectively. The restructuring charges adversely affected
earnings per share by $0.02 for the three- and nine-month periods ended September 30,
2009.

Adjusted Earnings Per Share and
Adjusted Operating Income are not measurements of financial performance under GAAP and
should not be considered as an alternative to Earnings Per Share or Operating Income under
GAAP. Adjusted Earnings Per Share and Adjusted Operating Income have limitations as
analytical tools, and should not be considered in isolation or as a substitute for
analysis of results as reported under GAAP. In addition, in evaluating Adjusted Earnings
Per Share and Adjusted Operating Income, in the future additional expenses may be incurred
similar to the adjustments in this presentation. This presentation of Adjusted Earnings
Per Share and Adjusted Operating Income should not be construed as an inference that
future results will be unaffected by unusual or infrequent items. These limitations are
compensated by providing equal prominence of GAAP results and using Adjusted Earnings Per
Share and Adjusted Operating Income only as a supplement.

The following two tables reconcile
Adjusted Earnings Per Share to Earnings Per Share and Adjusted Operating Income to
Operating Income for the periods indicated.

-15-

---



|                                                | Three Months Ended September 30, | Nine Months Ended September 30,
|----------------------------------------------- | -------------------------------- | -------------------------------
|                                                |                                  |                                
|                                                |                                  |                                
|Operating Income (000s)                         |                                  |                                
|Add back: restructuring charges                 |                                  |                                
|Adjusted Operating Income                       |                                  |                                
|Adjusted Operating Income as a percent of sales |                                  |                                
|                                                |                                  |                                
|                                                |                                  |                                
|Earnings per share - diluted                    |                                  |                                
|Add back: restructuring charges                 |                                  |                                
|Adjusted Earnings per Share - Diluted           |                                  |                                

# Note 7  BUSINESS
SEGMENTS

Sales and other financial information
by business segment are detailed below. The Company has four wholly owned subsidiaries:
Spartan Motors Chassis, Inc. (Chassis); Crimson Fire, Inc., (Crimson); Crimson Fire
Aerials, Inc., (Crimson Aerials); and Road Rescue, Inc. (Road Rescue). Crimson, Crimson
Aerials and Road Rescue make up the Companys emergency vehicle team (EVTeam). The
2008 EVTeam amounts were adjusted to conform to the current years presentation.
Other product sales include sales to all markets of specialty vehicles, garage and
service, and service parts and sub-assemblies (SPA).

Three Months Ended
September 30, 2009(amounts in thousands)

|                          | Business Segments
|------------------------- | -----------------
|                          |                  
|                          |                  
|Fire truck chassis sales  |                  
|Motorhome chassis sales   |                  
|EVTeam product sales      |                  
|Other product sales       |                  
|Total sales               |                  
|                          |                  
|Interest expense (income) |                  
|Depreciation expense      |                  
|Taxes (credit) on income  |                  
|Segment earnings (loss)   |                  
|Segment assets            |                  

-16-

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Three Months Ended September 30,
2008 (amounts in thousands)

|                          | Business Segments
|------------------------- | -----------------
|                          |                  
|                          |                  
|Fire truck chassis sales  |                  
|Motorhome chassis sales   |                  
|EVTeam product sales      |                  
|Other product sales       |                  
|Total sales               |                  
|                          |                  
|Interest expense (income) |                  
|Depreciation expense      |                  
|Taxes (credit) on income  |                  
|Segment earnings (loss)   |                  
|Segment assets            |                  

Nine Months Ended September 30, 2009
(amounts in thousands)

|                          | Business Segments
|------------------------- | -----------------
|                          |                  
|                          |                  
|Fire truck chassis sales  |                  
|Motorhome chassis sales   |                  
|EVTeam product sales      |                  
|Other product sales       |                  
|Total sales               |                  
|                          |                  
|Interest expense (income) |                  
|Depreciation expense      |                  
|Taxes (credit) on income  |                  
|Segment earnings (loss)   |                  
|Segment assets            |                  

-17-

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Nine Months Ended September 30,
2008 (amounts in thousands)

|                          | Business Segments
|------------------------- | -----------------
|                          |                  
|                          |                  
|Fire truck chassis sales  |                  
|Motorhome chassis sales   |                  
|EVTeam product sales      |                  
|Other product sales       |                  
|Total sales               |                  
|                          |                  
|Interest expense (income) |                  
|Depreciation expense      |                  
|Taxes (credit) on income  |                  
|Segment earnings (loss)   |                  
|Segment assets            |                  

|Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations.
|------- | --------------------------------------------------------------------------------------

OVERVIEW

Spartan Motors, Inc. (the
Company) is known as a leading niche market engineer and manufacturer in
the heavy-duty, custom vehicles marketplace. The Company has four wholly owned
subsidiaries: Spartan Motors Chassis, Inc., located at the corporate headquarters in
Charlotte, Michigan (Chassis); Crimson Fire, Inc., located in Brandon, South
Dakota (Crimson); Crimson Fire Aerials, Inc., located in Lancaster,
Pennsylvania (Crimson Aerials); and Road Rescue, Inc., located in Marion,
South Carolina (Road Rescue). Crimson, Crimson Aerials and Road Rescue make up
the Companys emergency vehicle team (EVTeam). The Companys brand names,
Spartan, Crimson Fireand Road Rescue, are known
for quality, value, service and innovation.

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. Chassis customers are original equipment manufacturers (OEMs) who
complete their heavy-duty vehicle product by either mounting the body or apparatus on the
Companys chassis or integrating the drive train with the armored body.

Crimson and Road Rescue engineer and
manufacture emergency vehicles built on chassis platforms purchased from either Chassis or
outside sources. Crimson Aerials engineers and manufactures aerial ladder components for
fire trucks.

-18-

---



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.
Chassis sells its custom chassis to three principal markets: fire truck, motorhome and
other product sales which include specialty vehicles and service parts and accessories.
Other product sales have grown in recent years reflecting increased sales of specialty
vehicles to the military and service, parts and assemblies (SPA) to all markets,
particularly the defense industry. 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.

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
internally or externally generated equity capital, as sources of expansion capital.

The Company remains financially solid
with a strong cash balance, little debt and an open line of credit. The current macro
economic environment will make the remaining quarter of 2009 challenging, for both sales
and net earnings, although the Company is well positioned to create long-term
opportunities as a result of:

| |  | 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. 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.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 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 ramp up on defense initiatives.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Continued operational improvements to realign the Companys cost structure to match
the current demand environment.
| | - | -------------------------------------------------------------------------------------------------------------------

| |  | The addition of a newly created Chief Operating Officer (COO) position and a new
Chief Financial Officer (CFO). The new COO is focusing on key strategic initiatives,
including lean manufacturing, while the new CFO brings a strong background in economic
value add financial management to drive improved fiscal discipline.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Increased SPA capabilities for all the Companys markets, including the defense
industry. The Company continues to receive service part orders for units produced under
various programs, including the Mine Resistant Ambush Protected (MRAP) program and
the Iraqi Light Armored Vehicle (ILAV) program.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 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 military
on a smaller scale, such as the ILAV, Italian Cougar Explosive Ordinance Disposal, and
Special Operations Command (SOCOM) Independent Suspension vehicles.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Market potential for increased sales from the EVTeam, and related chassis sales, due to
increased demand in response to the engine emissions change in 2010 and the introduction
of new products. The expected increase is already being reflected in increased fire truck
sales and backlog for the current quarter compared to the same quarter of 2008.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

-19-

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| |  | Strategic fabrication at Chassis. The Company believes that it can improve operating
margins and throughput, and reduce supply chain issues by implementing limited strategic
fabrication activities at its Charlotte facilities.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Introduction of the Legend Series fire truck. In April 2009, the Company unveiled the
Legend, 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.
| | - | -------------------------------------------

The following Section provides a
narrative discussion about the Companys financial condition and results of
operations. The comments that follow 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 13, 2009. The
following is a discussion of the major elements impacting the Companys financial and
operating results for the three- and nine-month periods ended September 30, 2009
compared to the three- and nine-month periods ended September 30, 2008.

# RESULTS OF OPERATIONS

The following tables set forth, for
the periods indicated, the components of the Companys business segment statements of
operations, on an actual basis, as a percentage of sales. The amounts detailed below for
2008 EVTeam results were adjusted to conform to the current years presentation.

Three months ended:

|                                     | September 30, 2009 | September 30, 2008
|------------------------------------ | ------------------ | ------------------
|                                     |                   
|                                     |                    |                   
|                                     |                    |                   
|Sales                                |                    |                   
|Cost of product sold                 |                    |                   
|Restructuring charges                |                    |                   
|Gross profit                         |                    |                   
|Operating expenses:                  |                    |                   
|Research and development             |                    |                   
|Selling, general, and administrative |                    |                   
|Restructuring charges                |                    |                   
|Operating income                     |                    |                   
|Other income (expense)               |                    |                   
|Earnings before taxes on income      |                    |                   
|Taxes on income                      |                    |                   
|Net earnings                         |                    |                   

-20-

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Nine months ended:

|                                     | September 30, 2009 | September 30, 2008
|------------------------------------ | ------------------ | ------------------
|                                     |                   
|                                     |                    |                   
|                                     |                    |                   
|Sales                                |                    |                   
|Cost of product sold                 |                    |                   
|Restructuring charges                |                    |                   
|Gross profit                         |                    |                   
|Operating expenses:                  |                    |                   
|Research and development             |                    |                   
|Selling, general, and administrative |                    |                   
|Restructuring charges                |                    |                   
|Operating income                     |                    |                   
|Other income (expense)               |                    |                   
|Earnings before taxes on income      |                    |                   
|Taxes on income                      |                    |                   
|Net earnings                         |                    |                   

Quarter Ended
September 30, 2009, Compared to the Quarter Ended September 30, 2008

For the three months ended
September 30, 2009, consolidated sales decreased $147.8 million (62.2%) to $89.7
million, from $237.5 million in the third quarter of 2008. The decrease was primarily due
to a $146.3 million (65.3%) decrease in Chassis sales.

Other product sales, which include
specialty chassis as well as service, parts and assemblies (SPA) sales, drove the decrease
in Chassis sales with a decline of $148.3 million (84.9%) from the same period in
2008. The decrease was driven by lower vehicle sales to the defense industry due to the
completion of several large military orders in 2008, particularly under the MRAP program.
This reduction was due to the timing and nature of the related military contracts. See
Part I of the Companys Annual Report on Form 10-K for the year ended
December 31, 2008 relating to governmental contracts for more details. The continued
weakness in the RV market, given the current economic climate, resulted in a sales
decrease of $4.7 million (29.9%) compared to the same quarter last year. The other
product and motorhome sales decrease was partially offset by fire truck chassis sales that
increased $6.7 million (19.9%) compared to the same quarter last year. Changes to the 2010
engine emission standards resulted in increased demand and thus sales for fire truck
chassis.

Increased EVTeam sales helped in
offsetting the overall decrease in sales. Compared to the same quarter in 2008, sales
increased $1.1 million (5.4%) primarily due to an increase in fire truck shipments which
were a result of the 2010 emissions change. In addition, the results were favorably
impacted by approximately $0.8 million of price increases implemented to cover increasing
costs. Intercompany eliminations account for the remaining consolidated sales change
differential quarter over quarter.

Gross profit decreased from $43.0
million for the quarter ended September 30, 2008 to $15.8 million for the quarter
September 30, 2009. This was primarily driven by the lower sales volume in the
specialty vehicle business in 2009. Gross margin decreased to 17.6% for the quarter ended
September 30, 2009 from 18.1% for the same period in 2008. The reduction in gross
margin was a result of lower absorption due to the lower sale volumes, along with
restructuring charges affecting the current quarter.

-21-

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Operating expenses as a percentage of
sales increased from 8.8% in the third quarter of 2008 to 16.3% in the third quarter of
2009. The increased percentage year-over-year was driven primarily by the 62.2% decrease
in sales from the same period last year. In terms of actual dollars, operating expenses
decreased by $6.4 million or 30.4% from the same quarter in 2008. The primary drivers for
the reduction year-over-year were a reduction in legal fees and a decrease in incentive
based compensation.

The Company has also initiated a
restructuring plan which resulted in a charge of $0.7 million in the current quarter which
added 0.8%, as a percent of sales, to operating expenses for the quarter. The
restructuring plan did produce some cost savings in the current quarter; however, the
major impact of these savings will be realized in future periods. While restructuring
charges are substantially complete, the Company is continuing efforts to improve cost
management through initiatives that have or will be implemented. The Company expects these
combined activities could generate between $7 and $8 million of annualized savings. See
Note 6 to the Condensed Consolidated Financial Statements for additional information. The
majority of these initiatives, all of which are not expected to incur material additional
upfront costs, are expected to be completed by the second quarter of 2010.

Interest expense decreased by $0.3
million (48.7%) for the three months ended September 30, 2009 compared to the
three months ended September 30, 2008. Lower working capital needs contributed to the
lower borrowing levels in 2009.

The effective income tax rate was
34.1% in the third quarter of 2009 and 32.6% for the same quarter of 2008. The
Companys effective tax rate fluctuates based upon the states where sales occur and
with the level of export sales. The tax rate for 2009 was impacted by adjustments to state
tax reserves. The effective tax rates for 2009 and 2008 are consistent with the applicable
federal and state statutory tax rates.

Net earnings decreased $13.9 million
($0.43 per diluted share) from $14.7 million ($0.45 per diluted share) in 2008
to $0.8 million ($0.02 per diluted share) in 2009 as a result of the factors
discussed above. Excluding restructuring charges taken in the quarter, adjusted earnings
were $0.04 per diluted share.

Total order intake for the third
quarter 2009 was $86.3 million, which was $7.3 million (9.2%) greater than the same period
in 2008. Total chassis orders received during the third quarter of 2009 increased by 5.9%
(excluding SPA) compared to the same period in 2008. Excluding all specialty products,
chassis order intake was up quarter-over-quarter by 25.2% due to both an increase in fire
truck and motorhome orders received. Compared to the second quarter of 2009, total orders
in the third quarter increased $18.9 million (28.0%).

At September 30, 2009, the
Company had $157.5 million in backlog, including SPA backlog, compared with a
September 30, 2008 backlog of $183.8 million, which did not include SPA backlog. The
decrease in backlog is mainly attributed to Chassis which saw backlog decrease $21.0
million, primarily as a result of the previously described government contracts included
in specialty vehicle sales that ended in 2008. Excluding the change in specialty vehicles
and SPA, the Chassis backlog increased $13.7 million year-over-year. The EVTeam backlog
had a slight decrease of $.4 million. Intercompany eliminations in the backlog increased
$4.9 million related to chassis sales to the EVTeam for the same time period. The Company
anticipates filling its current backlog orders by May 2010.

-22-

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

Nine Months Ended
September 30, 2009, Compared to the Nine Months Ended September 30, 2008

For the nine months ended
September 30, 2009, consolidated sales decreased $368.6 million (52.8%) to
$329.5 million, from $698.1 million in the first nine months of 2008. This decrease in
sales is mainly due to a decrease in sales of $369.9 million (56.9%) at Chassis. The
decrease in sales at Chassis was primarily due to the reduction of other product sales of
$325.5 million (68.2%), coupled with a decrease in motorhome sales of $67.6 million
(80.3%), for the nine months ended September 30, 2009 compared to nine months
ended September 30, 2008. The decline in sales was partially offset by an increase in
fire truck chassis sales of $23.2 million (26.0%) over the nine months ended September
2008. Changes to the 2010 engine emission standards resulted in increased demand and thus
sales for fire truck chassis.

The decrease in other product sales
was due to the completion of shipments under the MRAP program. See Part I of the
Companys Annual Report on Form 10-K for the year ended December 31, 2008
relating to governmental contracts for more details. The decrease in motorhome chassis
sales was due to lower order volume over the same period, as a result of weakened economic
conditions impacting the motorhome market as a whole. Increased sales in the fire truck
sales were a result of increased sales volume for the reason discussed above.

Increased EVTeam sales helped offset
the overall decline in sales with an increase of $6.6 million (10.3%) to $70.4
million during the first nine months of 2009 compared with the prior years first
nine months. The majority of this increase is due to higher fire truck sales volumes,
which were up $9.4 million (21.2%) over the prior year, in light of the 2010
emissions change and the implemented price increases of $2.4 million. This increase was
partially offset by ambulance sales, which decreased $2.8 million (14.5%), from the same
period in 2008. Intercompany eliminations account for the remaining sales difference.

Gross margin increased from 16.8% to
20.4% for the nine months ended September 30, 2009 compared to the nine months ended
September 30, 2008. This increase is due primarily to a change in the product sales
mix as a result of higher service parts sales and fire truck chassis sales which yield a
higher gross margin. In addition, margins increased period-over-period due to a change in
warranty estimate for military vehicles, and material cost savings due to improved
commodity pricing. See Note 3 to the Condensed Consolidated Financial Statements for more
details on warranties. The EVTeam increased its portion of the sales mix by over ten
percentage points in 2009 with improved margins by five percentage points. The improved
margin results for the EVTeam were driven by an increased focus on lean manufacturing and
reduced material costs, of approximately $1.6 million, as a result of improved commodity
pricing.

Operating expenses increased as a
percentage of sales to 14.7% for the nine-month period ended September 30, 2009
compared to 8.0% for the same period of 2008. This is primarily a result of the large
decrease in sales volumes as noted above. Operating expense dollars actually decreased
$7.4 million (13.3%) year-over-year due to a reduction in legal fees and compensation
accruals for incentive plans.

-23-

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The Company has initiated a
restructuring plan which resulted in a charge to operating expenses of $0.7 million in the
nine month period ended September 30, 2009. The restructuring plan did produce some cost
savings in the current quarter; however, the major impact of these savings will be
realized in future periods. While restructuring charges are substantially complete, the
Company is continuing efforts to improve cost management through initiatives that have or
will be implemented. The Company expects these combined activities could generate between
$7 and $8 million of annualized savings. See Note 6 to the Condensed Consolidated
Financial Statements for additional information. The majority of these initiatives, all of
which are not expected to incur material additional upfront costs, are expected to be
completed by the second quarter of 2010.

The effective income tax rate was
34.0% in the first nine months of both years 2009 and 2008.  The Companys
effective tax rate fluctuates based upon the states where sales occur and with the level
of export sales. The effective tax rates for 2009 and 2008 are consistent with the
applicable federal and state statutory tax rates.

Net earnings decreased by $27.7
million ($0.84 per diluted share) to $12.2 million ($0.37 per diluted share) in
the first nine months of 2009 from $39.9 million ($1.21 per diluted share) for the
same period of 2008 as a result of the factors discussed above. Excluding restructuring
charges taken in the first nine months of 2009, adjusted earnings were $0.39 per diluted
share.

Total orders, excluding service
parts, received during the first nine months of 2009 decreased 62.5% compared to the same
period in 2008. This reflects a decrease of 62.3% from the chassis segment and 41.1% from
the EVTeam segment consistent with prior explanations. Remaining differences are due to
intercompany eliminations.

# FINANCIAL CONDITION

Balance Sheet at
September 30, 2009 compared to December 31, 2008

Accounts receivable at September 30,
2009 compared to December 31, 2008 reflects a reduction of $27.8 million (36.6%). This
change was attributed to the reduction in sales volume in the third quarter of 2009 from
those experienced in the fourth quarter of 2008, along with a concerted effort to improve
collections.

Inventory decreased $2.7 million
(-3.2%) from December 31, 2008 to September 30, 2009. This change is primarily due to
fewer purchases of purchased components ($7.3 million) primarily as a result of decreased
sales volume in service parts and assemblies. This was partially offset by an increase in
finished goods ($2.4 million), as there was increased production of stock and demo units
within the EVTeam segment. Additionally, work in process increased ($1.9 million) due to
increased fire truck order intake and backlog.

Accounts payable, as of
September 30, 2009, decreased $4.5 million (20.4%) compared to December 31,
2008. The reduced purchases of inventory to support sales in the third quarter 2009,
compared to those in the fourth quarter 2008, have driven the change in accounts payable.

-24-

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Deposits from customers decreased
$3.2 million (31.8%) from the year end December 31, 2008 balance of $9.9 million. The
decrease was a result of the large balance that existed at year end 2008, due to a large
amount of orders that were received with customer deposits at that time. Since December
31, 2008, these orders were completed without replacement by similar order volumes and
participation in the deposit program.

Accrued warranties decreased $3.5
million (41.5%) at September 30, 2009 from December 31, 2008 due to three
factors. First, there was a reduction in new policies generated as a result of lower
related sales volume. Second, existing warranty policies expired driving down the accrual.
Third, there was a reduction in the warranty estimate for military units based on
historical experience. See Note 3 of the Condensed Consolidated Financial Statements for
further detail.

Accrued compensation and related
taxes decreased $7.0 million (57.6%) from $12.1 million at December 31, 2008 to
$5.1 million at September 30, 2009, as a result of higher incentive compensation
expense for incentive plans in 2008.

# LIQUIDITY AND CAPITAL
RESOURCES

The Company generated an estimated
annualized return on invested capital (ROIC) of 9.1% through the nine months ending
September 30, 2009, compared to the estimated annualized ROIC of 32.3% for the same period
in 2008. The Company uses ROIC for internal performance benchmarking, and defines ROIC as
operating income, less taxes, on an annualized basis, divided by total shareholders
equity.

For the nine months ended
September 30, 2009, cash provided by operating activities was $30.7 million, which
was a $33.2 million increase from the negative ($2.5) million of cash used in operating
activities for the nine months ended September 30, 2008. Despite a $27.7 million
decrease in net earnings for the same period, there was less cash needed for working
capital for the nine months ended September 30, 2009 to support lower sales volumes.

The net impact of changes in accounts
receivable, inventory and accounts payable, which are the largest drivers of working
capital changes, represented the largest source of cash at $81.9 million. For the
nine-month period ended September 30, 2008, accounts receivable used $19.4 million of
cash compared to generation of $27.8 million for the same period in 2009. Record 2008
third quarter sales drove the use of cash in 2008, while a strong collection effort drove
the source of cash for the nine months ended in 2009. These total a $47.2 million change
in cash generation between the periods for accounts receivable. Inventory balances
provided an increased $1.8 million in cash for these same periods.

Accounts payable provided $32.9
million in added cash primarily a result of high accounts payable balances in
December of 2007, which drove the $37.4 million use in cash during 2008. The
cumulative decrease in accounts payable in 2009 was $4.5 million, consistent with that
years production volumes. These accounts payable changes between 2008 and 2009 drove
a change in cash generation of $32.9 million. See the Financial Condition Section in
Item 2 of this Form 10-Q for further discussion regarding the accounts receivable,
inventory and accounts payable balances at September 30, 2009.

Additionally, accrued compensation
and related taxes accounted for $12.4 million use in cash for the nine-month period ended
September 30, 2009 over the same period of 2008. This variance is largely a result of
greater wage and benefit accruals in 2008, related to higher staffing levels and higher
compensation accruals for that period, which were paid in 2009. Also contributing to the
use of cash was the reduction of customer deposit liability, which for the current period
saw a use of cash of $3.2 million and a use of cash period-over-period of $4.5 million.
See the Condensed Consolidated Statements of Cash Flows contained in Item 1 of this Form
10-Q for the other various factors that represented the remaining fluctuation of cash used
in operations of $4.1 during the nine-month period ended September 30, 2009.

-25-

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Uses of cash for investing activities
for the nine-months ended September 30, 2009 consisted of $5.0 million related to
purchases of property, plant and equipment (PP&E), net of proceeds from sales of
PP&E, while the use of $3.2 million for financing activities was primarily for
dividends paid of $2.6 million. See the Condensed Consolidated Statements of Cash Flows
contained in Item 1 of this Form 10-Q for further information regarding the increase in
cash and cash equivalents from $13.7 million at December 31, 2008 to $36.3 million at
September 30, 2009.

Shareholders equity increased
$11.3 million, from $170.6 million as of December 31, 2008 to $181.9 million as of
September 30, 2009. The increase was driven by $12.2 million in net income and $2.1
million from compensation related to restricted stock and direct stock grants. These were
partially offset by $2.6 million paid in dividends and $0.4 million used to repurchase
stock.

On July 21, 2009, the Board of
Directors authorized management to repurchase, over the course of the subsequent 12-month
period, up to a total of 1,000,000 shares of its common stock in open market transactions.
That authorization will expire on July 20, 2010. Repurchase of common stock is based upon
market conditions and other investment opportunities.

In October 2008, the Board of
Directors approved a restructuring of its revolving note payable with JP Morgan Chase
Bank. The Company renegotiated the line to obtain a locked interest rate of 75 basis
points over LIBOR for draws and a 20 basis point commitment fee on the facility. The
interest rates will be in effect until the $50.0 million line matures in September 2010.
As of September 30, 2009, the Company had no borrowings under this debt agreement in
the form of a line of credit.

Listed below are other debt
arrangements with the Company.

| |  | $10.0 million unsecured term note outstanding, which carried an interest rate of 4.70%, as
of September 30, 2009 under the same debt agreement as above which terminates
effective November 30, 2009. The Company expects to refinance the note before it expires.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Private shelf agreement with Prudential Investment Management, Inc. This agreement allows
the Company to borrow up to an additional $40.0 million to be issued in $5.0 million
minimum increments. The interest rate is determined based on applicable rates at time of
issuance. The Company had a $10.0 million term note issued under this shelf agreement as
of September 30, 2009, which carried an interest rate of 4.93%.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Unsecured fixed rate long term note which bears interest at 4.99%. The loan is repayable
in equal monthly installments and matures in October 2011. At September 30,
2009, the total outstanding amount on this note was $5.6 million of which $116,667 is
payable in 2009.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | There is a $1.0 million secured mortgage note as of September 30, 2009. The mortgage
note carries a fixed rate of 3.00% payable in monthly installments (for principal and
interest) of $6,933, with the balance due on July 1, 2010. The mortgage note is
secured by real estate and buildings.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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Under the terms of the line of credit
and the term notes detailed above, the Company is required to maintain certain financial
ratios and other financial conditions. The agreements prohibit the Company from incurring
additional indebtedness, limit certain acquisitions, investments, advances or loans and
restrict substantial asset sales. At September 30, 2009, the Company was in
compliance with all debt covenants.

On February 17, 2009, the Board of
Directors approved a special dividend of $0.03 per common share to shareholders of record
on April 15, 2009 in recognition of the Companys 2008 financial performance.
Additionally, in recognition of the Companys financial strength and future
prospects, the Board of Directors has continued to approve the payment of regular
dividends to its shareholders. At this same meeting, regular dividends of $0.10 per share
payable in the amount of $0.05 per share on May 15, 2009 and $0.05 per share on
December 16, 2009 to shareholders of record on April 15, 2009 and November 16, 2009,
respectively, were declared.

The Company believes it has
sufficient resources from cash on hand, future cash flows from operating activities and
borrowing capacity to fund ongoing cash requirements for the next 12 months.

# 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 13, 2009. 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.
104, Revenue Recognition. Accordingly, revenue is recognized when title to the
product and risk of ownership passes to the buyer. In certain instances, risk of ownership
and title passes 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
collectability of any related receivable is reasonably assured before revenue is
recognized.

Accounts Receivable  The
Company maintains an allowance for customer accounts that reduces receivables to amounts
that are expected to be collected. In estimating the allowance, management considers
factors such as current overall economic conditions, industry-specific economic
conditions, historical and anticipated customer performance, historical experience with
write-offs and the level of past-due amounts. Changes in these conditions may result in
additional allowances.

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.

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Impairment of Goodwill 
Goodwill represents the difference between the purchase price and the related underlying
tangible and identifiable intangible net asset values resulting from business
acquisitions. Annually, or if conditions indicate an earlier review is necessary, the
carrying value of the reporting unit is compared to an estimate of its fair value. If the
estimated fair value is less than the carrying value, goodwill is impaired and will be
written down to its estimated fair value. Goodwill is allocated to the reporting unit from
which it was created.

Based upon the estimated fair value
of the Companys reporting unit using a discounted cash flow valuation, the goodwill
at its Crimson Fire subsidiary which is included in the Companys EVTeam reportable
segment was not impaired as of October 1, 2008, the most recent annual impairment test.
Results of the next impairment test will be reported in the Companys Annual Report
on Form 10-K for the year ended December 31, 2009.

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 3 to the Condensed Consolidated Financial Statements included
in Item 1 of this Form 10-Q.

Equity Compensation 
Current accounting guidance requires that share options and stock appreciation rights
(SARs) awarded to employees be recognized as compensation expense based on their fair
value at grant date. The fair market value of options and SARs granted under the
Companys stock compensation plans was estimated on the date of grant using the
Black-Scholes option-pricing model using assumptions for inputs such as interest rates,
expected dividends, volatility measures and specific employee exercise behavior patterns
based on historical statistical data. Some of the inputs we use are not market-observable
and have to be estimated or derived from available data. Use of different estimates would
produce different values, which in turn would result in higher or lower compensation
expense recognized. The Company has not run the model with alternative inputs to quantify
their effects on the fair value of the options or SARs.

To value options and SARs, several
recognized valuation models exist. None of these models can be singled out as being the
best or most correct one. The model we apply is able to handle some of the specific
features included in the awards we grant, which is the reason for its use. If we were to
use a different model, the values would differ despite using the same inputs. Accordingly,
using different assumptions coupled with using a different valuation model could have a
significant impact on the fair value of employee stock options and SARs. Fair value could
be either higher or lower than the ones produced by the model we apply and the inputs we
used.

# NEW AND PENDING
ACCOUNTING POLICIES

See Note 1 to the Condensed
Consolidated Financial Statements included in Item 1 of this Form 10-Q.

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# EFFECT OF INFLATION

Inflation affects the Company in two
principal ways. First, the Companys revolving notes payable are generally tied to
the prime and LIBOR interest rates so that increases in those interest rates would result
in additional interest expense. Second, general inflation impacts prices paid for labor,
parts and supplies. Whenever possible, 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 ten months, the Company has
limited ability to pass on cost increases to its customers on a short-term basis. In
addition, the markets served by the Company 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 effect of inflation through cost reductions and improved
productivity.

# Item 3. Quantitative and
Qualitative Disclosures About Market Risk.

There have been no material changes
to our exposures to market risk since December 31, 2008. 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. At September 30, 2009, the Company had no
debt outstanding under its variable rate short-term and long term debt agreements. The
Company does not enter into market risk sensitive instruments for trading purposes.

# Item 4. Controls and
Procedures.

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) as of September 30,
2009. Based on and as of the time of such evaluation, the Companys management,
including the Chief Executive Officer and Chief Financial Officer, concluded that the
Companys disclosure controls and procedures were effective as of the end of the
period covered by this report to ensure that information required to be disclosed by us in
the reports that we file or submit is recorded, processed, summarized and reported within
the time periods specified in the Securities and Exchange Commissions rules and
forms. Disclosure controls and procedures include, without limitation, controls and
procedures designed to ensure that information required to be disclosed by us in the
reports that we file or submit under the Securities Exchange Act of 1934 is accumulated
and communicated to our management, including our Chief Executive Officer and Chief
Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
In addition, there has been no change in the Companys internal controls over
financial reporting during the quarter ended September 30, 2009 that have materially
affected, or are reasonably likely to materially affect, its internal control over
financial reporting.

# PART
II.  OTHER INFORMATION

# Item 1A. Risk Factors.

The Company may incur
adjustments to the sale price of its products under the terms of limited contracts and in
certain arrangements.The Company sells certain of its products to
customers who, in turn, sell to the U.S. government. Under the terms of certain contracts
for the sale of these goods by the Company, the Company ships its products to the customer
subject to purchase orders, under which the final price of the product is subject to
potential adjustment. Historically, the Company has incurred only minor adjustments to the
price of its products subsequent to the date the product is shipped. The circumstances
under which a customer may seek an adjustment to the purchase price are limited to various
conditions, many of which would require the consent of the Company. While the Company is
limiting the number and scope of contracts under which it is exposed to these
post-delivery price adjustments, any such adjustments, once incurred, could have a
material adverse impact on the Companys results of operations.

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The Companys suppliers
may be affected by adverse conditions in the automotive industry. The
Company depends on many third party suppliers for numerous parts and components. Many of
these suppliers sell products to automotive manufacturers and their lower-tier suppliers.
The automotive industry continues to experience significant economic distress due to the
sudden and substantial drop in industry sales volumes affecting all manufacturers and
suppliers. Dramatically lower industry sales volume has made existing debt obligations and
fixed cost levels difficult for many suppliers to manage, especially with the tight credit
markets. In addition, General Motors Corporation (GM) and Chrysler LLC
(Chrysler) have recently emerged from Chapter 11 bankruptcy protection and continue
to restructure their organizations. These events have idled and may continue to idle many
of GMs and Chryslers respective manufacturing plants during 2009. These
factors may cause suppliers to cut production, cease operations, or seek bankruptcy
protection. Disruptions to our supplier base could adversely affect our ability to obtain
certain parts and components in a timely manner, may increase the prices we pay for parts
and components, and may cause us to incur additional costs associated with the transition
to new suppliers or in-house production.

# Item 2. Unregistered
Sales of Equity Securities and Use of Proceeds.

# Issuer Purchases of
Equity Securities

A summary of the Companys
purchases of its common stock during the third quarter of fiscal year 2009 is as follows:

|Period                      | Total Number ofSharesPurchased | AveragePrice Paidper Share | Total Number ofShares Purchased
as Part of PubliclyAnnounced Plansor Programs | Maximum Numberof Shares
that May Yet Be Purchased Under the Plans or Programs(2)
|--------------------------- | ------------------------------ | -------------------------- | ----------------------------------------------------------------------------- | --------------------------------------------------------------------------------
|July 1 to July 31           |                                |                            |                                                                               | 3,191                                                                           
|August 1 to August 31       |                                |                            |                                                                               | --                                                                              
|September 1 to September 30 |                                |                            |                                                                               | --                                                                              
|Total                       |                                |                            |                                                                               | 3,191                                                                           

|(1) | These
shares were delivered by associates in satisfaction of tax withholding
                    obligations that occur upon the vesting of restricted shares. These
shares are                     not repurchased pursuant to the Board authorization
disclosed in footnote two                     below.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | On
July 21, 2009, the Board of Directors authorized management to repurchase,
                    over the course of the subsequent 12-month period, up to a total of
1,000,000                     shares of its common stock in open market transactions.
Repurchase of common                     stock is contingent upon market conditions. If
the Company was to repurchase the                     full 1,000,000 shares of stock
under the current repurchase program, it would                     cost the Company
approximately $5.0 million based on the closing price of                     the
Companys stock on October 30, 2009. The Company believes that it has
                    sufficient resources to fund any potential stock buyback in which it
may engage.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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# Item 6. Exhibits.

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

|Exhibit No. | Document
|----------- | --------

|31.1 | Certification
of Chief Executive  Officer  pursuant to Section 302 of the  Sarbanes-Oxley
                         Act.
|---- | -----------------------------------------------------------------------------------------------------------------------

|31.2 | Certification
of Chief Financial  Officer  pursuant to Section 302 of the  Sarbanes-Oxley
                         Act.
|---- | -----------------------------------------------------------------------------------------------------------------------

|32 | Certification
 of Chief  Executive  Officer and Chief  Financial  Officer  pursuant to 18
                         U.S.C. § 1350.
|-- | ---------------------------------------------------------------------------------------------------------------------------------

-31-

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# SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

|Date:  November 6, 2009 |  | SPARTAN MOTORS, INC.By /s/ Joseph M. Nowicki      
      Joseph M. Nowicki
      Chief Financial Officer and Treasurer
      (Principal Accounting and Financial Officer and
      duly authorized signatory for the registrant)
|----------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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# EXHIBIT INDEX

|Exhibit No. | Document
|----------- | --------

|31.1 | Certification
of Chief Executive  Officer  pursuant to Section 302 of the  Sarbanes-Oxley
                         Act.
|---- | -----------------------------------------------------------------------------------------------------------------------

|31.2 | Certification
of Chief Financial  Officer  pursuant to Section 302 of the  Sarbanes-Oxley
                         Act.
|---- | -----------------------------------------------------------------------------------------------------------------------

|32 | Certification
 of Chief  Executive  Officer and Chief  Financial  Officer  pursuant to 18
                         U.S.C. § 1350.
|-- | ---------------------------------------------------------------------------------------------------------------------------------

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