Greg Salchow - Group Treasurer and Director, Investor Relations Daryl Adams - President and Chief Executive Officer Frederick Sohm - Chief Financial Officer.

Rhem Wood - BB&T Capital Markets Arthur Winston - Pilot Advisors.

Good morning and welcome to the Spartan Motors' Third Quarter 2015 Conference Call. All participants will be in listen-only mode until the question-and-answer session of the conference call. This call is being recorded at the request of Spartan Motors. If anyone has any objections, you may disconnect at this time.

I would now like to introduce Greg Salchow, Group Treasurer and Director of Investor Relations for Spartan Motors. Mr. Salchow, you may proceed..

Thank you. Good morning everyone and welcome to Spartan Motors' third quarter 2015 earnings call. I am Greg Salchow and I'm joined on the call today by Daryl Adams, our President and Chief Executive Officer, and Rick Sohm, the Chief Financial Officer.

For today's call, we are incorporating a presentation deck which is filed with the SEC and available on our website at www.spartanmotors.com. You may download the deck from the shareholder section of our website to follow our presentation during the call.

Before we start today’s call, please turn the Page 2 of the presentation for our Safe Harbor statement.

You should be aware that certain statements made during today's conference call, which may include management's current outlook, viewpoint, predictions and projections regarding Spartan Motors and its operations, may be considered forward-looking statements under the Private Securities Litigation Reform Act of 1995.

I caution you that as with any prediction or projection, there are a number of factors that could cause Spartan's actual results to differ materially from projections. All known risks our management believes could materially affect the results are identified in our Forms 10-K and 10-Q filed with the SEC.

However, there may be other risks that we cannot anticipate. Now, if you’ll turn to Page 3 you’ll see the agenda for today’s call. Daryl Adams will provide an operation review of the third quarter followed by our financial review and fourth quarter outlook provided by Rick Sohm.

Daryl Adams will then conclude the call with his comments on our future operational focus before we proceed to the question-and-answer portion of the call. Now, I am pleased to turn the call over to our CEO, Daryl Adams for his opening remarks..

Thank you, Greg. Good morning, everyone, and thank you for joining us on Spartan Motors' third quarter 2015 conference call. I like to take a moment to welcome Rick Sohm, who joined us approximately six weeks ago as Chief Financial Officer and he’s participating in his first quarterly conference call at Spartan Motors.

We are pleased to have Rick join our management team and look forward to his contributions to our success. Rick, will discuss Spartan’s financial results for the quarter and our outlook for the remainder of 2015 later in the call. Please turn to Slide 4. Let’s first discuss the ER business.

In this morning’s press release, we announced the leadership change. With John Slawson joining Spartan as President of Emergency Response, John brings to Spartan a great deal of experience in ER industry. He most recently served as President of Horton Ambulance and has held Senior Leadership positions at U.S.

Tanker as well as Pierce Manufacturing the Market Leader in Emergency Response business and at their parent company Oshkosh Corporation. John knows how to manage the complexity of this business, understands the sales process and a skilled dealer development.

I am pleased to welcome John to Spartan and look forward to working with him as we execute our ER turnaround plan and revitalize the business. Through the first half of the year, we dedicated considerable management resources affecting our ER business. And we saw positive impact on operating results.

At the end of the quarter we had made cultural and process changes that were expected to be maintained going forward. During the third quarter it became evident that turnaround efforts had loss momentum that we are missing the skills needed to keep the process moving forward.

We made the decision to replace several members of management including the announcement that we made earlier today reporting John Slawson as Head of the ER business. Our manufacturing leaders have returned to Brandon and are putting the turnaround plan back on track.

They will remain onsite as needed to ensure cultural and process changes become ingrained. We have the right plan in place and now we have the right people to move the business forward.

The other aspects are ER turnaround plan, are focused on fixing the front-end, including our pricing and ordering process, as well as upgrading product engineering, which will enable us to build the apparatus more efficiently, these efforts are on going and are separate from the operational challenges we just discussed.

Since I became CEO of Spartan Motors I have stated a Spartan turnaround plan as a multi-year effort. And then our progress was not always being smooth and linear, that said, we are still disappointed, that results are sort of our plan for the third quarter. And that we are rising our production forecast downward for the fourth quarter.

During the third quarter these turnaround activities also resulted in several non-recurring charges that Rick will detail in a moment, relating to deferred tax valuation allowances asset impairments and restructuring. Rick will now discuss third quarter segment results and provide our updated guidance for the fourth quarter. .

Thank you, Daryl. Please turn to slide 5, as we reported this morning, Spartan posted third quarter 2015 revenue of $136.6 million, a 5.3% decline from the prior year. DSV and SCV both reported revenue growth and DSV doubled operating profit compared to last year's third quarter.

However, fewer trucks shipped and an unfavorable mix in ER more than offset these improvements and cause consolidated revenue to fall short of our expectations. Growth margin for the third quarter was 9.4% of sales compared to 12.5% of sales in the prior year.

The decrease in gross margin was caused by a number of factors that include lower volume, unfavorable mix, warranty accruals and a portion of the asset impairment charges that are included in the cost of goods sold.

We also approved $1.4 million in the ER segment and $0.7 million in the SCV segment for warranty and service campaigns in the third quarter. Please note that these approvals are from products that were engineered a number of years ago, many of which are no longer in production.

We reported an operating loss of $0.5 million in the third quarter down from $4.3 million a year ago. The reported operating loss included items such as the remainder of the non-cash asset impairment charge that was included in SG&A as well as $0.5 million of restructuring expense.

Please now turn to Slide six, on an adjusted basis excluding the $2.2 million asset impairment charge and the $0.5 million of restructuring expenses operating income was $2.2 million versus an adjusted $4.5 million in the third quarter of 2014. We also recorded a non-cash valuation allowance on our deferred tax assets of $3.2 million in the quarter.

This valuation allowance is reflected in our income tax provision of $5.2 million, which results in a reported loss of $5.8 million or $0.17 per share in the third quarter of 2015.

On an adjusted basis excluding the deferred tax valuation allowance impairment and restructuring charges Spartan has a net loss of $0.1 million, which is less than a penny a share compared to adjusted net income of $3.4 million or $0.10 per share a year ago. Now we’ll take a look at our segment results starting on page 7.

Our DSV business, which reported significantly better operating results compared to the prior year. Operating more than doubled to $4.1 million from $1.8 million in the third quarter of 2014.

Operating income increased our higher revenue and a more favorable product mix, higher margin aftermarket parts sales, better materials utilization and a reduction in operating expenses.

At the same time we did experience some delays in our production schedule that constrain vehicle shipments and was a significant factor behind increased inventory levels at quarter end. We have since worked through will approve most of these issues and are now converting the inventory to cash Turning to Page 8, overview our ER business.

Revenue in the third quarter declined to $42 million from $60.7 million last year. Most of the revenue declined approximately $14 million was due to the 46 trucks shipped to Peru in last years third quarter. The remainder of the shortfall was due to lower production primarily at the Brandon facility.

The ER business reported an operating loss of $6 million compared to operating income of $1.7 million last year, primarily reflecting lower unit shipped and the absence of the Peru units in the product mix. These two factors accounted for $4.6 million of the decrease in operating earnings.

Restructuring one-time charges and accruals accounted for the remainder of the decrease in operating income from the third quarter of last year. Please turn to Slide 9 in our SCV segment. SCV reported revenue growth of 29.5% with revenue of $40.3 million up from $31.1 million a year ago.

While the motor home chassis business saw a substantial revenue increase. Product mix was less favorable and skewed for lower margin chassis. Our APA operations experienced favorable trends in the third quarter, but was offset by lower contract manufacturing activity compared to the third quarter of last year.

Operating income for the business was essentially flat with the prior year at $2.8 million. Although, third quarter 2015 results did include a service campaign accrual of $0.7 million. This accrual is to repair steering gear brackets on legacy motor home chassis that are no longer in production.

Adjusting for this accrual operating income was $3.5 million in the third quarter up 20.7 versus the prior year. Now please turn to Page 10 and we will review our outlook for the fourth quarter. Our fourth quarter revenue outlook is currently in a range of $130 million to $135 million.

The DSV and SCV segments are both projected to be profitable in the fourth quarter, but will show a sequential decline from the third quarter due to seasonal factors and a mix shift for lower margin products. We have already taken corrective action at the Brandon facility to return to a more disciplined production process.

But we think it is unlikely that we can return to normal operating levels until late in the fourth quarter. As a result, we expect to report an operating loss in the fourth quarter and for 2015 as a whole. We expect the fourth quarter operating loss for 2015 to be similar to the loss of the $1.9 million we reported in the fourth quarter last year.

But it is worth noting that the fourth quarter of 2014 included operating profit of approximately $0.9 million from 14 fire trucks shipped to Peru. We are currently completing our 2016 forecast and our plans for operational improvement especially in the ER segment.

We expect to provide you with an update of our projections for 2016 when we report fourth quarter and full-year 2015 results. Now let me turn things back over to Daryl and Page 11..

Thanks Rick. 2015 is proving to be a year of change and adjustments at Spartan especially in the ER business, but we have adopted quickly we’ve demonstrated our commitment to the ER business and have taken decisive steps to ensure that we have the right people with the right skills to execute our strategic business plan.

I am confident that we have the right team in place to move Spartan forward and complete our successful turnaround. Our first priority remains to fixed ER business. I shared with you early on the turnaround process will not always be linear or smooth. They are proved to be the case in the third quarter of this year.

We put our corrective actions are already having positive effect. We have the operation leadership in place to move production efficiently and output. With John Slawson joining us ER now has the leadership with industry-specific experience and knowledge.

We also have a Corporate Director of Engineering who has the experience in the Emerging Response industry including time at peers. These two new additions we believe we have the skills needed to upgrade the sales or in product engineering processes and improved ER financial performance over time.

As we are execute our ER turnaround plan we will also support the growth of our two profitable segments DSV and SCV as well as the ER chassis business. We will continue to develop these businesses and provide them with the resources they need to grow the revenues and profitability.

All of our business units have opportunities for improvement but we want to emphasize that while we have a sizable passed in the ER business but also have more than 65% of our revenue base that is growing and doing so profitably.

We continue to implement a discipline data dividend approach to managing all of our business we have made operational challenges head-on and we will continue to do so, now our task to ensure that we are moving in a positive direction as we approached 2016. As always thank you for your time and interest in Spartan Motors.

Operator we are now ready to take questions..

[Operator Instructions] The first question comes from Michael Shlisky of Seaport Global Securities. Please go ahead..

Good morning guys. This is actually [indiscernible] for Mike Shlisky.

I just had two questions for you guys, first is regarding DSV you guys have some really great numbers in the quarter and pretty strong backlog, how confident would you feel about continued revenue and margin growth going into 2016?.

Li, this is Greg. We haven’t put together our 2016 forecast yet; we are not ready to give you specifics.

But as you notice the backlog in DSV has increased pretty dramatically you know we have good growth there and we think that the trends that you see in terms of operating income growth and margin improvement, we are looking to improve that going forward, so that’s going to be our expectation for that business unit..

Okay got it.

Moving on to my next question, can you guys provide any more detail on the GM and Isuzu JV may be more precise start time or volume expectation?.

If you referring to the press release that Isuzu and – I think Isuzu put out a few months ago no at this time we really don’t have much that we’ve heard back from either one of them. So it’s still pretty matured for us to give you any updated guidance there unfortunately..

Okay got it. I’ll leave it there. Thanks guys..

Okay. Thank you, Li..

[Operator Instructions] The next question comes from Rhem Wood of BB&T Capital Markets. Please go ahead..

Hey, good morning guys and welcome Rick..

Good morning, Rhem. Thank you..

Good morning..

Okay so first just may be a little bit more color on the restructuring at ER I mean things seem to be getting a bit worse there. Can you talk about at – may how long this restructuring will take why volumes are decelerating I know some of it’s Peru but you can with the host of kind of new product launches over the last year.

How long will it really take to at least to get to breakeven or profitable again?.

Hi, Rhem this is Daryl. I think we go back its fix in the ER business is a multiyear plan. The business is cyclical depending on the budgets that each those cities and municipalities will have. So we believe that our backlog is still strong and we think we will see some improvement going forward in the backlog.

We don’t see it currently but there is some things that we’re working on that will help that..

Okay.

Can you give us a sense of when you can get that operating profit - did you - I mean any color there?.

Right now, I don’t think were one position to give that, we had, we saw some success in Q2, Brandon, like I mentioned in the call, we saw deteriorate early on in Q3.

So we jumped all over it, took action swiftly, so we are still bullish on the ER business, because what we saw in Q2, the team that’s out there is already making progress, and when I came on Board we thought it was operational issues, while it is but we’re showing some progress there.

And we had set back in Q3, but John Slawson is going to bring us the sales side of it, the dealer development and the front end piece that the industry is using that we’re behind and so we’re really excited about that as well..

Okay. And then with DSV I mean that seems to be going well.

Can you just talk about the van market in general how that's going and can you talk about velocity in particular how reception van, how many units, we sell this year and next, just any color there?.

We’re still seeing and as you can talk about the backlog that the van market is increasing as long as people are buying on the Internet, we believe that’s going to continue with all the packages that need to be delivered, as far as velocity the four transits is little bit behind on their chassis coming to the market.

So we do have some orders in but they’re – chassis won’t be ready until late in the quarter, so we’re going to see that come to the bottom line in 2016..

Okay, and then just to be clear on the guidance, you expect an operating loss in the fourth quarter, I mean is this for GAAP and for operating EPS because I know fourth quarter is seasonally down?.

And we expect fourth quarter to be seasonally down the numbers we were talking about are on a GAAP basis..

Okay, so from an operating basis you expect to be breakeven and make money..

No, I think on an operating basis we will record a loss for the quarter and for the full-year..

Okay. And then last one, just on R&D looks like you cut that, what’s the plan there and then just little help with SG&A for the fourth quarter? Thanks.

I think and I'll let Daryl speak to the R&D items.

But in terms of SG&A I would expect that as we go into the fourth quarter, we would see a number that is approximately $1 million north of where we were in Q3?.

Rhem on your question about R&D, are you taking into account that some of that was transferred back into cost of goods sold. I think it was couple of quarters ago we started to transfer the engineering for our current products, back into cost of goods sold. But I think that was about $2 million in the third quarter..

[Indiscernible] Rhem..

Yes, now I understand it just sequentially was down as well right?.

I can take that one offline..

You are correct..

Okay, thanks for the time..

The next question comes from Arthur Winston of Pilot Advisors. Please go ahead..

Thank you for taking my call. I am having trouble understanding Daryl what the improvement the words you use in the restructuring at ERs, because now we didn’t know that the front end wasn't so good that the dealer relations, the marketing et cetera was not up to what it should be and on top of that it looks like the manufacturing is gotten worse.

So it seems like where were in shape we were last year so could you explain where in fact the improvement is that you are talking about..

Sure, and thanks for the call. I think if you go back and look at previous earnings calls the front end is called SBP, Scale of Business Process. We talked about that for a number of quarters going into 2014 I believe so that’s always, that’s the front-end ordering as the dealers, that’s the sales piece of the whole front end.

So we have talked about that, we are making progress there. John has the leadership in that side of the business where previous leadership did not understand the ER part of the business. And as far from the shop floor, we did see improvement in Q2 from units produced and the efficiencies on the floor.

So our efficiency increased and the Q3 the leadership could not sustain the culture and the process that we put in place. So we decided to make a change..

I guess two more questions I guess is the fact the matter is that every word we’ve taken in this year comes in at loss, because we won’t be able to produce these things to make a profit is that what really going on?.

We are still – so November of 2015 these orders were taken probably late in 2014 maybe even Q3 in 2014 so we are working through some of the orders, 360 plus day delivery schedule so like we said before it takes that time to cycle through the change that we are making to pricing, the efficiencies we are making on the floor are significantly – our efficiency on the shop floor is better than it has been in 2014, better than it has been in Q1 higher actually than it has been in the Q2 performance that we saw the progress..

Do you think - whether it’s taken in the last six to nine months will come out at a process as far as you know?.

Absolutely..

Okay. I have one other question. Given that every shareholder now today’s prices are less, nobody has made any money in the stock I don’t think.

Do you know or could you tell the Board of Directors could they explore the spinout of the DSV business, because that business is well in excess of what the company started selling for and it has growth prospects, its perhaps even under earnings and the shareholders that are owning that and then keeping having two companies rather than one.

Do you know if they looked at it or could you tell them to look to do this?.

Well Art, Rick shown here I don’t know that will speculate for the Board of Directors. What I would say is that the Board is supportive of making ER profitable business, they’ve support us with the capital and the management resources now to make them successful going forward and that's what the management team here is focused on..

Okay, well thank you very much and good luck to all the new guys. I hope they do well..

Thanks Art..

Thanks Art. End of Q&A.

Thank you. At this time we have no further questions. I would now like to turn the conference over to Mr. Salchow for closing comments..

Okay, well thank you everyone. We appreciate your time and interest in Spartan. On behalf of the management team, we are all dedicated to improving the performance here and we will get back to work on that. Thanks and have a good day..

The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect..