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

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, ~~2021.~~2022.
	OR
☐	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 001-33582

THE SHYFT GROUP, INC.
(Exact Name of Registrant as Specified in Its Charter)

Michigan (State or Other Jurisdiction of Incorporation or Organization)		38-2078923 (I.R.S. Employer Identification No.)
41280 Bridge Street Novi, Michigan (Address of Principal Executive Offices)		48375 (Zip Code)

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

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	SHYF	NASDAQ Global Select Market

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

☒

☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).

Yes

☒

☐

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

Large accelerated filer	☐☒	Accelerated filer	☒ ☐
Non-accelerated filer	☐	Smaller Reporting Company	☐
Emerging Growth Company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

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

Class	Outstanding at October ~~29, 2021~~21, 2022
Common Stock	~~35,345,005~~35,070,921 shares

Table of Contents

This ~~report may contain forward-looking~~Form 10-Q contains some statements that are not historical facts. These statements are called “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of ~~1934.~~1934, as amended. These ~~forward-looking~~ statements involve important known and unknown risks, uncertainties and other factors and generally can be identified by ~~the use of forward-looking words such as~~phrases using “estimate,” “anticipate,” “believe,” “project,” “expect,” “intend,”, “predict,” “potential,” “future,” “may,” “will,” ~~“should,”~~“should” or ~~other comparable words,~~similar expressions or ~~by discussions of strategy that may involve risks and uncertainties.~~words. The Shyft Group, Inc.’s's (the ~~“Company”, “we”,~~“Company,” “we,” “us”, or “our”) future results, performance or achievements may differ materially from the results, performance or achievements discussed in the forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions (“Risk Factors”) that are difficult to predict with regard to timing, extent, likelihood and degree of occurrence. Therefore, actual results and outcomes may materially differ from what may be expressed or forecasted in such forward-looking statements.

Risk Factors include the risk factors listed and more fully described in ~~Part I,~~ Item 1A – Risk Factors of our Annual Report on Form 10-K for the year ended December 31, ~~2020,~~2021, as filed with the Securities and Exchange Commission on ~~March 25, 2021,~~February 24, 2022, subject to any changes and updates disclosed in Part II, Item 1A – Risk Factors ~~below.~~below, “Risk Factors”, as well as risk factors that we have discussed in previous public reports and other documents filed with the Securities and Exchange Commission. Those risk factors include the primary risks our management believes could materially affect the potential results described by forward-looking statements contained in this Form 10-Q. However, these risks may not be the only risks we face. Our business, operations, and financial performance could also be affected by additional factors that are not presently known to us or that we currently consider to be immaterial to our operations. In addition, new Risk Factors may emerge from time to time that may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, although we believe that the forward-looking statements contained in this Form 10-Q are reasonable, we cannot provide you with any guarantee that the results described in those forward-looking statements will be achieved. All forward-looking statements in this Form 10-Q are expressly qualified in their entirety by the cautionary statements contained in this section, and investors should not place undue reliance on forward-looking statements as a prediction of actual results. The Company undertakes no obligation to update or revise any forward-looking statements to reflect developments or information obtained after the date this Form 10-Q is filed with the Securities and Exchange ~~Commission~~Commission.

Trademarks and Service Marks

We own or have rights to trademarks, service marks or trade names that we use in connection with the operation of our business. Solely for convenience, some of the copyrights, trademarks, service marks and trade names referred to in this Quarterly Report on Form 10-Q are listed without the ©, ® and ™ symbols, but we will assert, to the fullest extent under applicable law, our rights to our copyrights, trademarks, service marks, trade names and domain names. The trademarks, service marks and trade names of other companies appearing in this Quarterly Report on Form 10-Q are, to our knowledge, the property of their respective owners.

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1.

Financial Statements

THE SHYFT GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

(In thousands)

						September 30,		December 31,
	September 30, 2021		December 31, 2020			2022		2021
ASSETS
Current assets:
Cash and cash equivalents	$	14,549	$	20,995		$	2,862	$	37,158
Accounts receivable, less allowance of $145 and $116		67,607		64,695
Accounts receivable, less allowance of $176 and $187							87,673		87,262
Contract assets		42,459		9,414			87,099		21,483
Inventories, net		81,901		46,428
Inventories							111,213		67,184
Other receivables – chassis pool agreements		3,995		6,503			24,277		9,926
Other current assets		8,569		8,172			12,813		10,813
Total current assets		219,080		156,207			325,937		233,826
Property, plant and equipment, net		57,374		45,734			66,970		61,057
Right of use assets – operating leases		44,303		43,430			53,156		43,316
Goodwill		48,881		49,481			48,880		48,880
Intangible assets, net		53,832		56,386			50,054		52,981
Net deferred tax assets							4,816		4,880
Other assets		1,180		2,052			1,886		2,927
Net deferred tax asset		5,625		5,759
TOTAL ASSETS	$	430,275	$	359,049		$	551,699	$	447,867

LIABILITIES AND SHAREHOLDERS’ EQUITY
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	89,601	$	47,487		$	106,621	$	82,442
Accrued warranty		7,548		5,633			6,432		5,975
Accrued compensation and related taxes		18,045		17,134			15,559		19,064
Deposits from customers		2,148		756
Contract liabilities							10,601		988
Operating lease liability		7,632		7,508			10,060		7,934
Other current liabilities and accrued expenses		10,631		8,121			11,703		9,256
Short-term debt – chassis pool agreements		3,995		6,503			24,277		9,926
Current portion of long-term debt		238		221			190		252
Total current liabilities		139,838		93,363			185,443		135,837
Other non-current liabilities		5,095		5,447			6,576		8,108
Long-term operating lease liability		37,532		36,662			44,660		36,329
Long-term debt, less current portion		694		23,418			65,222		738
Total liabilities		183,159		158,890			301,901		181,012
Commitments and contingent liabilities
Shareholders’ equity:
Preferred stock; 2,000 shares authorized (none issued)		0		0
Common stock; 80,000 shares authorized; 35,342 and 35,344 outstanding		94,312		91,044
Shareholders' equity:
Preferred stock, no par value: 2,000 shares authorized (none issued)							-		-
Common stock, no par value: 80,000 shares authorized; 35,063 and 35,416 outstanding							90,160		95,375
Retained earnings		151,873		109,286			159,537		171,379
Total The Shyft Group, Inc. shareholders’ equity		246,185		200,330
Total Shyft Group, Inc. shareholders’ equity							249,697		266,754
Non-controlling interest		931		(171	)		101		101
Total shareholders’ equity		247,116		200,159
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	430,275	$	359,049
Total shareholders' equity							249,798		266,855
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY						$	551,699	$	447,867

THE SHYFT GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

THE SHYFT GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

Note: Consolidated Statements of Cash Flows include continuing operations and discontinued operations for all periods presented.

THE SHYFT GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share data)

~~For a description of key accounting policies followed, refer to~~As used herein, the ~~notes~~term “Company”, “we”, “us” or “our” refers to The Shyft Group, Inc. ~~consolidated financial statements for the year ended~~ ~~December 31, 2020,~~ ~~included in our Annual Report on Form~~ 10~~-K filed with the Securities~~ and ~~Exchange Commission on~~ ~~March 25, 2021.~~its subsidiaries unless designated or identified otherwise.

We are a niche market leader in specialty vehicle manufacturing and assembly for the commercial vehicle (including last-mile delivery, specialty service and vocation-specific upfit segments) and recreational vehicle industries. Our products include walk-in vans and truck bodies used in e-commerce/parcel delivery, upfit equipment used in the mobile retail and utility trades, service and vocational truck bodies, luxury Class A diesel motor home chassis and contract manufacturing and assembly services. We also supply replacement parts and offer repair, maintenance, field service and refurbishment services for the vehicles that we manufacture. Our operating activities are conducted through our wholly-owned operating subsidiary, The Shyft Group USA, Inc., with locations in Novi, Charlotte and Plymouth, Michigan; Bristol, Indiana; Waterville, Maine; Ephrata, Pennsylvania; North Charleston, South Carolina; Pompano Beach and West Palm Beach, Florida; Kansas City, Missouri; Montebello, Carson and McClellan Park, California; Mesa, Arizona; Dallas and Weatherford, Texas; and Saltillo, Mexico.manufacture as well as truck accessories.

The accompanying unaudited interim condensed consolidated financial statements reflect all normal and recurring adjustments that are necessary for the fair presentation of our financial position as of September 30, ~~2021,~~2022, and our results of operations and cash flows for the three and nine months ended September 30, ~~2021.~~2022. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and footnotes included in our Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021 filed with the Securities and Exchange Commission on February 24, 2022. The results of operations for the three and nine months ended September 30, ~~2021,~~ 2022,are not necessarily indicative of the results expected for the full year.

In ~~March 2020,~~ ~~the President~~For a description of ~~the United States declared the coronavirus (“COVID-~~~~19”~~~~) outbreak a national emergency, as the World Health Organization determined it was a pandemic. The pandemic has had a significant impact on macroeconomic conditions. To limit the spread of COVID-~~~~19,~~ governments have taken various actions including the issuance of stay-at-home orders and social distancing guidelines. While the Company’s plants continued to operate as essential businesses, starting ~~March 23, 2020,~~ ~~certain of our manufacturing facilities were temporarily suspended or cut back on operating levels and shifts as a result of government orders. Since the~~ ~~third~~ ~~quarter of~~ ~~2020,~~ ~~all of our facilities were at full or modified production levels. However, additional suspensions and cutbacks~~ ~~may~~ ~~occur as the impacts from COVID-~~19 and related responses continue to evolve within our global supply chain and customer base. The Company is taking a variety of measures to maintain operations with as minimal impact as possible to promote the safety and security of our associates, including increased frequency of cleaning and disinfecting of facilities, social distancing, remote working when possible, travel restrictions and limitations on visitor access to facilities.

~~The full impact of the COVID-~~19 ~~outbreak continues to evolve as of the date of this filing. As such, it is uncertain as~~key accounting policies followed, refer to the full magnitude that the pandemic will have on the Company’s financial condition, liquidity, and future results of operations. Management is actively monitoring the impact of the global situation on its financial condition, liquidity, operations, suppliers, industry, and workforce. Given the daily evolution of the COVID-19 ~~outbreak and the global responses~~notes to ~~curb its spread, the Company is~~ ~~not~~ ~~able to estimate the effects of the COVID-~~19 ~~outbreak on its results of operations, financial condition, or liquidity for future periods.~~

On ~~October 1, 2020,~~ ~~the Company acquired substantially all of the assets and certain liabilities of~~ F3 ~~MFG Inc. through the Company’s subsidiary,~~ The Shyft Group, DuraMag LLC (“DuraMag”). DuraMag is a leading aluminum truck body and accessory manufacturer, and DuraMag operations include aluminum manufacturing, finishing, assembly, and installation of DuraMag contractor, service, and van bodies, as well as Magnum branded truck accessories including headache racks (also known as cab protection racks or rear racks). DuraMag operates out of Waterville, Maine and that location is expected to continue to serve as the business’ primary manufacturing and assembly facility for both product lines. The addition of DuraMag aluminum bodies to the Company's product offerings follows the Company’s ~~2019~~ acquisition of Royal Truck Body ("Royal"), a West Coast and Southwestern U.S. steel truck body maker. Combined, these acquisitions elevate the Company to a leading position as a national service body manufacturer. DuraMag is part of our Specialty Vehicle segment and continues to go to market under the DuraMag and Magnum brands.

THE SHYFT GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share data)

~~Effective~~ ~~January 1, 2021,~~ ~~we adopted ASU~~ ~~2019~~-12 ~~and all related amendments, which simplifies the accounting for income taxes by removing certain exceptions to the general principles of Topic~~ ~~740~~ ~~and improving consistent application of Generally Accepted Accounting Principles ("GAAP") for other areas of Topic~~ ~~740~~ ~~by clarifying and amending existing guidance. The adoption of the provisions of ASU~~ ~~2019~~-12 ~~did~~ ~~not~~ ~~have a material impact on our~~Inc. consolidated financial ~~position, results of operations or cash flows.~~statements for the year ended December 31, 2021, included in our Annual Report on Form 10-K.

Non-cash investing in the nine months ended September 30,2022 and September 30,2021, included $982 and $394 of capital ~~expenditures.~~expenditures, respectively. The Company has chassis pool agreements, where it participates in chassis converter pools that are non-cash arrangements and they are offsetting between current assets and current liabilities on the Company’s Consolidated Balance Sheets. See "Note 54 – Debt" for further information about the chassis pool agreements.

~~Immaterial Revision of Previously Issued Condensed Consolidated Financial Statements~~

~~During the~~ ~~fourth~~ ~~quarter of~~ ~~2020,~~ errors in the accounting for transactions associated with the divestiture of the Company’s ERV business were identified. These errors related to the quarterly condensed consolidated financial statements for the period ended ~~September 30, 2020~~ ~~resulting in the adjustment of certain balance sheet and statement of operations financial statement accounts, as disclosed in Note~~ 1 – ~~Nature of Operations and Basis of Presentation~~ ~~of our Annual Report on Form~~ 10~~-K for the year ended~~ ~~December 31, 2020.~~ ~~The Company assessed the materiality of these errors considering both qualitative and quantitative factors and determined that for the period ended~~ ~~September 30, 2020,~~ ~~the errors were~~ ~~not~~ ~~material.~~

~~The tables below present the impact of the revisions on the Company’s condensed consolidated financial statements:~~

THE SHYFT GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share data)

On February 1, 2020, we completed the sale of our emergency response vehicle ("ERV") business for $55,000 cash subject to certain post-closing adjustments. In September 2020, the Company finalized the post-close net working capital adjustment and subsequently paid $7,500 on October 1, 2020. The ~~Company recognized a loss on sale of $763 and $2,901 in the~~ ~~three~~ ~~and~~ ~~nine~~ ~~months ended~~ ~~September 30, 2020,~~ respectively, which are portions of the Loss from discontinued operations, net of tax in the Condensed Consolidated Statements of Operations. The ERV business included the emergency response chassis operations in Charlotte, Michigan, and operations in Brandon, South Dakota; Snyder and Neligh, Nebraska; and Ephrata, Pennsylvania. The results of the ERV business have been reclassified to Income ~~(loss)~~ from discontinued operations, net of tax in the Condensed Consolidated Statements of Operations for the three and nine months ended September 30, ~~2020.~~ ~~We continue to have an open Transition Services Agreement with the buyer for the provision of certain transition support services, which will continue for certain services into~~ ~~2022.~~2021.

The Income ~~(loss)~~ from discontinued operations presented in the Condensed Consolidated Statement of Operations are summarized below:

~~Total~~There were no depreciation and amortization ~~and~~expenses or capital expenditures for the discontinued operations ~~are summarized below:~~for the three and nine months ended September 30,2022 and 2021.

THE SHYFT GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share data)

On ~~October 1, 2020,~~ ~~the Company acquired substantially all of the assets and certain liabilities of~~ F3 MFG Inc. through the Company’s subsidiary, The Shyft Group DuraMag LLC (“DuraMag”). DuraMag is a leading, aluminum truck body and accessory manufacturer, and DuraMag operations include aluminum manufacturing, finishing, assembly, and installation of DuraMag contractor, service, and van bodies, as well as Magnum branded headache racks (also known as cab protection racks or rear racks). The Company paid $18,203 in cash, subject to a net working capital adjustment. The net working capital adjustment was finalized in ~~January 2021,~~ ~~resulting in a decrease to the purchase price of $404. In addition, certain indemnity claims made by the Company pursuant to the purchase agreement were settled in~~ ~~June 2021,~~ ~~resulting in a decrease to the purchase price of $500. The acquisition was partially financed by borrowing from our existing line of credit, as described in "Note~~ 5 – ~~Debt~~~~". DuraMag is part of our Specialty Vehicle segment.~~

The DuraMag acquisition was accounted for using the acquisition method of accounting with the purchase price allocated to the assets purchased and liabilities assumed based upon their estimated fair values at the date of acquisition. Identifiable intangible assets include customer relationships, DuraMag and Magnum trade names and trademarks, unpatented technology and non-competition agreements. The excess of the purchase price over the estimated fair values of the net tangible and intangible assets acquired of $5,401 was recorded as goodwill, which is expected to be deductible for tax purposes.

~~The fair values of the net assets acquired were based on a preliminary valuation and the estimates and assumptions were subject to change within the measurement period. In the~~ ~~third~~ ~~quarter of~~ ~~2021,~~ ~~the Company finalized the purchase price allocation for adjustments related to accrued warranty of $289. As of~~ ~~September 30, 2021,~~ ~~the valuation and the estimates and assumptions were finalized, as the measurement period has concluded.~~

~~As of~~ ~~September 30, 2021,~~ ~~the final allocation of purchase price to assets acquired and liabilities assumed is as follows:~~

THE SHYFT GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share data)

Intangible assets totaling $5,590 have provisionally been assigned to customer relationships, trade names and trademarks, unpatented technology and non-competition agreements as a result of the acquisition and consist of the following:

The Company amortizes the customer relationships utilizing an accelerated approach and unpatented technology and non-competition agreements assets utilizing a straight-line approach. Amortization expense, including the intangible assets, recorded from the DuraMag acquisition is $70 and $209 for the ~~three~~ ~~and~~ ~~nine~~ ~~months ended~~ ~~September 30, 2021.~~

Goodwill consists of operational synergies that are expected to be realized in both the short and long-term and the opportunity to enter into new markets which will enable us to increase value to our customers and shareholders. Key areas of expected cost savings include an expanded dealer network, complementary product portfolios and manufacturing and supply chain work process improvements.

~~Due to its insignificant size relative to the Company, supplemental pro forma financial information of the combined entity for the prior reporting period is~~ ~~not~~ ~~provided.~~

THE SHYFT GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share data)

The Company obtains certain vehicle chassis for its walk-in vans, truck bodies and specialty vehicles directly from the chassis manufacturers under converter pool agreements. Chassis are obtained from the manufacturers based on orders from customers ~~and in some cases, for unallocated orders.~~with receipt at our facilities dependent on manufacturer’s production schedules. The agreements generally state that the manufacturer will provide a supply of chassis to be maintained at the Company’s facilities with the condition that we will store such chassis and will not move, sell, or otherwise dispose of such chassis except under the terms of the agreement. In addition, the manufacturer typically retains the sole authority to authorize commencement of work on the chassis and to make certain other decisions with respect to the chassis including the terms and pricing of sales of the chassis to the manufacturer’s dealers. The manufacturer also does not transfer the certificate of origin to the Company nor permit the Company to sell or transfer the chassis to anyone other than the manufacturer (for ultimate resale to a dealer).

Although the Company is party to related finance agreements with manufacturers, the Company has not historically settled any related obligations in cash, nor does it expect to do so in the future. Instead, the obligation is settled by the manufacturer upon reassignment of the chassis to an accepted dealer, and the dealer is invoiced for the chassis by the manufacturer. ~~Accordingly, as of~~ ~~September 30, 2021~~ ~~and~~ ~~December 31, 2020,~~ ~~the Company’s outstanding chassis converter pool with manufacturers totaled $3,995 and $6,503, respectively and the~~The Company has included this financing agreement on the Company’s Condensed Consolidated Balance Sheets within Other receivables – chassis pool agreements and Short-term debt – chassis pool agreements. Typically, chassis are converted and delivered to customers within 90 days of the receipt of the chassis by the Company. The chassis converter pool is a non-cash arrangement and is offsetting between Current assets and Current liabilities on the Company’s Condensed Consolidated Balance Sheets.

On ~~August 8, 2018,~~ we entered into a Credit Agreement (the "Credit Agreement") by and among us and certain of our subsidiaries as borrowers, Wells Fargo Bank, National Association ("Wells Fargo"), as administrative agent, and the lenders party thereto consisting of Wells Fargo, JPMorgan Chase Bank, N.A. and PNC Bank National Association (the "Lenders"). Subsequently, the Credit Agreement was amended on ~~May 14, 2019,~~ ~~September 9, 2019~~ ~~and~~ ~~September 25, 2019~~ ~~and certain of our other subsidiaries executed guaranties guarantying the borrowers’ obligations under the Credit Agreement. Concurrent with the close of the sale of the ERV business and effective~~ ~~January 31, 2020,~~ ~~the Credit Agreement was further amended by a~~ ~~fourth~~ ~~amendment, which released certain of our subsidiaries that were sold as part of the ERV business. The Credit Agreement was subsequently amended further on~~ ~~April 20, 2021~~ ~~and~~ ~~July 16, 2021~~ ~~pursuant to a~~ ~~fifth~~ ~~amendment and~~ ~~sixth~~ ~~amendment, respectively, to make certain changes to the subfacility limits pursuant to the Credit Agreement. The substantive business terms of the Credit Agreement remain in place and were~~ ~~not~~ ~~changed by any of the amendments noted above.~~

THE SHYFT GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share data)

~~As a result, at~~On ~~September~~November 30, 2021, we entered into an Amended and Restated Credit Agreement (the "Credit Agreement") by and among us and certain of our subsidiaries as borrowers, Wells Fargo Bank, N.A. ("Wells Fargo"), as administrative agent, and the lenders party thereto consisting of Wells Fargo, JPMorgan Chase Bank, N.A., PNC Bank, National Association and Bank of America, N.A. (the "Lenders"). Certain of our other subsidiaries have executed guaranties guarantying the borrowers' obligations under the Credit Agreement.

Under the Credit Agreement, ~~as amended,~~ we may borrow up to ~~$175,000~~$400,000 from the Lenders under a secured revolving credit facility which matures ~~August 8, 2023.~~November 30, 2026. We may also request an increase in the facility of up to ~~$50,000~~$200,000 in the aggregate, subject to customary conditions. The credit facility is also available for the issuance of letters of credit of up to $20,000 and swing line loans of up to $10,000, subject to certain limitations and ~~restrictions as of~~ ~~September 30, 2021.~~ restrictions. This revolving credit facility carries an interest rate of either (i) the highest of prime rate, the federal funds effective rate from time to time plus 0.5%, or the one month adjusted LIBOR plus 1.0%; or (ii) adjusted LIBOR, in each case plus a margin based upon our ratio of debt to earnings from time to time. The applicable borrowing rate including the margin was ~~1.34%~~4.14% (or one-month LIBOR plus ~~1.25%~~1.00%) at September 30, ~~2021.~~ 2022.The credit facility is secured by security interests in, and liens on, all assets of the borrowers and guarantors, other than real property and certain other excluded assets. At September ~~30,~~ ~~2021~~30,2022 and December 31, ~~2020,~~2021, we had outstanding letters of credit totaling ~~$760~~$1,100 and ~~$525,~~$760, respectively, related to our workers’ compensation insurance.

Under the terms of our Credit Agreement, available borrowings (exclusive of outstanding borrowings) totaled ~~$169,240~~$165,441 and ~~$125,836~~$376,776 at September 30, ~~2021~~ 2022and December 31, ~~2020,~~2021, respectively. The Credit Agreement requires us to maintain certain financial ratios and other financial covenants; prohibits us from incurring additional indebtedness; limits certain acquisitions, investments, advances or loans; limits our ability to pay dividends in certain circumstances; and restricts substantial asset sales, all subject to certain exceptions and baskets. At September 30, ~~2021~~ 2022and December 31, ~~2020,~~2021, we were in compliance with all covenants in our Credit Agreement.

Changes in our contract assets and liabilities for the nine months ended September 30, ~~2021~~ 2022and ~~2020~~2021 are summarized below:

The aggregate amount of the transaction price allocated to remaining performance obligations in existing contracts that are yet to be completed in the Fleet Vehicles and Services ~~(“FVS”~~("FVS") and Specialty Vehicles ~~(“SV”~~("SV") segments are ~~$758,518~~$915,135 and ~~$94,042 respectively, with substantially all revenue expected to be recognized within~~ ~~one~~ ~~year as of~~ ~~September 30, 2021.~~$128,769, respectively.

THE SHYFT GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In the following tables, revenue is disaggregated by primary geographical market and timing of revenue recognition. The tables also include a reconciliation of the disaggregated revenue with the reportable segments.

THE SHYFT GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Property, plant and equipment are summarized by major classifications as follows:

THE SHYFT GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share data)

We recorded depreciation expense of ~~$2,138~~$2,404 and ~~$2,179~~$2,138 during the three months ended September 30, ~~2021~~ 2022and ~~2020,~~2021, respectively, and ~~$5,778~~$7,155 and ~~$8,440~~$5,778 during the nine months ended September 30, ~~2021~~ ~~and~~ ~~2020,~~ ~~respectively. In the~~ ~~second~~ ~~quarter of~~ ~~2020,~~ we committed to a plan to phase out the use of an ERP system at certain locations and determined that the estimated useful lives for the related assets had shortened. As a result, we recorded depreciation expense of $2,330 attributable to accelerated depreciation and loss of $2,430 from write-off of related construction in process. The total impact on Income (loss) from continuing operations was an expense of $274 and $3,873 for the ~~three~~2022 and ~~nine~~2021, ~~months ended~~ ~~September 30, 2020,~~ respectively.

We have operating and finance leases for land, buildings and certain equipment. Our leases have remaining lease terms of one year to 1918 years, some of which include options to extend the leases for up to 15 years. Our leases do not contain residual value guarantees. Assets recorded under finance leases were immaterial (See "Note 54 – Debt").

Operating lease expenses are classified as Cost of products sold and Operating expenses on the Condensed Consolidated Statements of Operations. The components of lease expense were as follows:

⁽¹⁾Includes expenses for month-to-month equipment leases, which are classified as short-term as the Company is not reasonably certain to renew the lease term beyond one month.

~~The weighted average remaining lease term and weighted average discount rate were as follows:~~

THE SHYFT GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share data)

The weighted average remaining lease term and weighted average discount rate were as follows:

Maturities of operating lease liabilities as of September 30, ~~2021~~ 2022are as follows:

At September 30, ~~2021,~~ 2022,we and our subsidiaries were parties, both as plaintiff and defendant, to a number of lawsuits and claims arising out of the normal course of our businesses. In the opinion of management, our financial position, future operating results or cash flows will not be materially affected by the final outcome of these legal proceedings.

We provide limited warranties against assembly/construction defects. These warranties generally provide for the replacement or repair of defective parts or workmanship for a specified period following the date of sale. The end users also may receive limited warranties from suppliers of components that are incorporated into our chassis and vehicles.

THE SHYFT GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share data)

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 our historical experience. We provide 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 our historical experience. An estimate of possible penalty or loss, if any, cannot be made at this time.

THE SHYFT GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share data)

~~Spartan-Gimaex Joint Venture~~Legal Proceedings Relating to Environmental Matters

In ~~February 2015,~~ the Company and Gimaex Holding, Inc. initiated discussions to dissolve the Spartan-Gimaex joint venture. Further to legal proceedings initiated by the Company to dissolve and liquidate the joint venture, the court appointed the Company as liquidating trustee of the joint venture. As of ~~September 2021,~~ ~~the liquidation is substantially complete, and the Company does~~ ~~not~~ ~~expect any material impact to our future operating results.~~

Inpreviously disclosed, in May 2020, the Company received ~~a letter~~an information request from the United States Environmental Protection Agency (“EPA”) requesting certain information ~~as part of an EPA investigation~~ regarding ~~a potential failure to affix~~ emissions labels on ~~vehicles to determine the Company’s compliance with applicable laws and regulations. This information request pertains to~~ chassis, vocational vehicles, and vehicles that the Company manufactured or imported into the U.S. between January 1, 2017 to the date the Company received the request in May 2020. The Company responded to the EPA’s request and furnished the requested materials in the third quarter of 2020. An

On April 6, 2022, the Company received a Notice of Violation from the EPA alleging a failure to secure certain certifications on manufactured chassis and a failure to comply with recordkeeping and reporting requirements related to supplier-provided chassis. The Company continues to investigate this matter, including potential defenses, and will continue discussions with the EPA regarding the allegations. At this time, it is not possible to estimate ~~of possible~~the potential fines or penalties ~~or loss, if any, cannot be made at~~that the Company may incur (if any) for this ~~time.~~

Our effective income tax rate was ~~24.8%~~17.9% and ~~27.2%~~24.8% for the three months ended September 30, ~~2021~~2022 and ~~2020,~~2021, respectively, ~~compared to~~and 15.2% and 24.4% ~~and 19.1%~~ for the nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, respectively.

The effective tax rate ~~of 24.8% and 24.4% for the~~ ~~three~~ ~~and~~ ~~nine~~ ~~months ended~~ ~~September 30, 2021,~~ ~~respectively, is higher than the U.S. statutory tax rate of 21% primarily because of state income taxes at their statutory rates.~~

~~The effective tax rate of 27.2%~~ for the three months ended September 30, ~~2020~~2022 is ~~higher~~lower than the USU.S. statutory tax rate of 21.0% primarily due an increase in the tax benefit of research credits, whereas the rate for the same period in ~~21%~~2021 ~~primarily because of~~ was higher than the U.S. statutory tax rate due to non-deductible executive compensation and state income ~~taxes and the unfavorable impact of certain non-deductible compensation expense on our effective tax rate.~~taxes.

~~The~~Our effective income tax rate for the firstnine months ~~ended~~ ~~September 30, 2020~~ reflects the favorable impact of certain provisions of the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act upon the income tax expense as computed based on current statutory income tax rates. Enacted on ~~March 27, 2020,~~ ~~the CARES Act amended certain provisions of the tax code to allow the~~ ~~five~~~~-year carryback of tax basis net operating losses (“NOL”) incurred in the years~~ ~~2018~~ ~~through~~ ~~2020.~~ ~~The closing of the sale of the ERV business during the~~ ~~first~~ ~~quarter~~ of ~~2020~~2022 ~~put the Company into a tax basis NOL position for the year as a result of the reversal of deferred tax assets that were recorded in~~at ~~2019.~~15.2% ~~Under the CARES Act, the Company has carried the NOL back to offset taxable income incurred in years prior to~~ ~~2018~~ ~~when the federal corporate income tax rate~~ was ~~35%,~~lower as compared to ~~the~~ ~~21%~~24.4% ~~tax rate at which the deferred tax assets were originally recorded. The Company recorded a $2,610 current period tax benefit resulting from the rate difference as a component of Income tax benefit~~ in the first ~~quarter~~nine months of ~~2020.~~2021

NOTE 1110 – BUSINESS SEGMENTS

We identify our reportable segments based on our management structure and the financial data utilized by our chief operating decision maker to assess segment performance and allocate resources among our operating units. We have 2two reportable segments: Fleet Vehicles and Services and Specialty Vehicles.

Table of Contents

THE SHYFT GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share data)

We evaluate the performance of our reportable segments based on Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) and it is calculated by excluding items that we believe to be infrequent or not indicative of our underlying operating performance, as well as certain non-cash expenses. We define Adjusted EBITDA as income from continuing operations before interest, income taxes, depreciation and amortization, as adjusted to eliminate the impact of restructuring charges, acquisition related expenses and adjustments, non-cash stock-based compensation expenses, and other gains and losses not reflective of our ongoing operations.

~~Table of Contents~~

THE SHYFT GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amountsOur FVS segment manufactures commercial vehicles used in ~~thousands, except per share data)~~the e-commerce/last mile/parcel delivery, beverage and grocery delivery, laundry and linen, mobile retail, and trades industries. Our commercial vehicles are marketed under the Utilimaster brand name, which serves a diverse customer base and sells aftermarket parts and accessories for walk-in vans and other delivery vehicles. We also provide vocation-specific equipment upfit services.

Our Specialty Vehicles segment includes our Spartan RV chassis operations, Builtmore Contract Manufacturing operations, service body operations, vocation-specific equipment upfit services marketed under the Strobes-R-Us brand, and distribution of related aftermarket parts and accessories.

The accounting policies of the segments are the same as those described, or referred to, in "Note 1 – Nature of Operations and Basis of Presentation.". Assets and related depreciation expense in the column labeled “Eliminations and Other” pertain to capital assets maintained at the corporate level. Eliminations for inter-segment sales are shown in the column labeled “Eliminations and ~~Other”.~~Other.” Adjusted EBITDA in the “Eliminations and Other” column contains corporate related expenses not allocable to the operating segments. Interest expense and Income tax expense ~~(benefit)~~ are not included in the information utilized by the chief operating decision maker to assess segment performance and allocate resources, and accordingly, are excluded from the segment results presented below.

	Three Months Ended September 30, 2021									Three Months Ended September 30, 2022
	Segment									Segment
	FVS		SV		Eliminations and Other			Consolidated		FVS		SV		Eliminations and Other			Consolidated

Fleet vehicle sales	$	189,591	$	0	$	0		$	189,591	$	173,673	$	-	$	-		$	173,673
Motor home chassis sales		0		42,507		0			42,507		-		50,399		-			50,399
Other specialty vehicle sales		0		26,620		0			26,620		-		48,570		(2,335	)		46,235
Aftermarket parts and accessories sales		8,949		4,955		0			13,904		10,821		4,947		-			15,768
Total sales	$	198,540	$	74,082	$	0		$	272,622	$	184,494	$	103,916	$	(2,335	)	$	286,075

Depreciation and amortization expense	$	924	$	1,505	$	553		$	2,982	$	1,144	$	1,692	$	523		$	3,359
Adjusted EBITDA		36,813		5,827		(8,900	)		33,740		24,361		15,550		(12,849	)		27,062
Segment assets		200,358		199,997		29,920			430,275		281,510		231,185		39,004			551,699
Capital expenditures		3,844		465		882			5,191		2,791		220		195			3,206

Three Months Ended
September 30, 2020

Segment

FVS

SV

Eliminations
and Other

Consolidated

Fleet vehicle sales
$ 136,382 $ 0 $ 0 $ 136,382
Motor home chassis sales
0 38,190 0 38,190
Other specialty vehicle sales
0 17,601 0 17,601
Aftermarket parts and accessories sales
8,808 2,492 0 11,300
Total sales
$ 145,190 $ 58,283 $ 0 $ 203,473

Depreciation and amortization expense
$ 934 $ 1,412 $ 632 $ 2,978
Adjusted EBITDA
33,237 7,183 (7,827 ) 32,593
Segment assets
165,216 149,103 74,474 388,793
Capital expenditures
1,482 371 505 2,358

2015

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THE SHYFT GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share data)

Nine Months Ended
September 30, 2021

Segment

FVS

SV

Eliminations
and Other

Consolidated

Fleet vehicle sales
$ 474,292 $ 0 $ 0 $ 474,292
Motor home chassis sales
0 118,666 0 118,666
Other specialty vehicle sales
0 82,914 0 82,914
Aftermarket parts and accessories sales
24,194 14,426 0 38,620
Total sales
$ 498,486 $ 216,006 $ 0 $ 714,492

Depreciation and amortization expense
$ 2,302 $ 4,645 $ 1,365 $ 8,312
Adjusted EBITDA
83,310 21,480 (23,309 ) 81,481
Segment assets
200,358 199,997 29,920 430,275
Capital expenditures
12,489 3,153 1,485 17,127

Nine Months Ended
September 30, 2020

Segment

FVS

SV

Eliminations
and Other

Consolidated

Fleet vehicle sales
$ 351,117 $ 0 $ 0 $ 351,117
Motor home chassis sales
0 74,840 0 74,840
Other specialty vehicle sales
0 45,316 0 45,316
Aftermarket parts and accessories sales
26,999 6,119 0 33,118
Total sales
$ 378,116 $ 126,275 $ 0 $ 504,391

Depreciation and amortization expense
$ 2,591 $ 4,313 $ 3,934 $ 10,838
Adjusted EBITDA
68,625 12,123 (20,429 ) 60,319
Segment assets
165,216 149,103 74,474 388,793
Capital expenditures
5,306 2,060 875 8,241

~~Table of Contents~~

THE SHYFT GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share data)

~~The table below presents the reconciliation of our income from continuing operations to Adjusted EBITDA. Adjusted EBITDA is~~ ~~not~~ ~~a measurement of our financial performance under GAAP and should~~ ~~not~~ ~~be considered as an alternative to net income. Adjusted EBITDA~~ ~~may~~ ~~have limitations as an analytical tool and should~~ ~~not~~ ~~be considered in isolation or as a substitute for analysis of our results as reported under GAAP. In addition, although we have excluded certain charges in calculating Adjusted EBITDA, we~~ ~~may~~ ~~in the future incur expenses similar to these adjustments, despite our assessment that such expenses are infrequent and/or~~ ~~not~~ ~~indicative of our regular, ongoing operating performance. Our presentation of Adjusted EBITDA should~~ ~~not~~ ~~be construed as an inference that our future results will be unaffected by unusual or infrequent items.~~

	Three Months Ended September 30, 2021
	Segment
	FVS		SV		Eliminations and Other			Consolidated

Fleet vehicle sales	$	182,438	$	-	$	-		$	182,438
Motor home chassis sales		-		42,507		-			42,507
Other specialty vehicle sales		-		33,773		-			33,773
Aftermarket parts and accessories sales		8,949		4,955		-			13,904
Total sales	$	191,387	$	81,235	$	-		$	272,622

Depreciation and amortization expense	$	744	$	1,685	$	553		$	2,982
Adjusted EBITDA		36,393		6,247		(8,900	)		33,740
Segment assets		179,580		220,775		29,920			430,275
Capital expenditures		3,844		465		882			5,191

Three Months Ended

Nine Months Ended

September 30,

September 30,

2021

2020

2021

2020

Income from continuing operations
$ 20,999 $ 19,375 $ 49,482 $ 29,983
Net (income) attributable to non-controlling interest
(77 ) (41 ) (1,102 ) (178 )
Add (subtract):

Interest expense
253 11 310 1,202
Depreciation and amortization expense
2,982 2,978 8,312 10,838
Income tax expense
6,910 7,253 15,952 7,084
Restructuring and other related charges
0 303 505 1,857
Acquisition related expenses and adjustments
594 650 808 922
Non-cash stock based compensation expense
2,079 2,064 6,571 6,181
Loss from liquidation of JV 0 0 643 0
Loss from write-off of construction in process 0 0 0 2,430
Adjusted EBITDA
$ 33,740 $ 32,593 $ 81,481 $ 60,319

	Nine Months Ended September 30, 2022
	Segment
	FVS		SV		Eliminations and Other			Consolidated

Fleet vehicle sales	$	402,996	$	-	$	-		$	402,996
Motor home chassis sales		-		138,000		-			138,000
Other specialty vehicle sales		-		140,320		(2,335	)		137,985
Aftermarket parts and accessories sales		31,092		15,080		-			46,172
Total sales	$	434,088	$	293,400	$	(2,335	)	$	725,153

Depreciation and amortization expense	$	3,074	$	5,306	$	1,675		$	10,055
Adjusted EBITDA		38,015		38,508		(36,415	)		40,108
Segment assets		281,510		231,185		39,004			551,699
Capital expenditures		10,590		906		2,202			13,698

	Nine Months Ended September 30, 2021
	Segment
	FVS		SV		Eliminations and Other			Consolidated

Fleet vehicle sales	$	452,635	$	-	$	-		$	452,635
Motor home chassis sales		-		118,666		-			118,666
Other specialty vehicle sales		-		104,571		-			104,571
Aftermarket parts and accessories sales		24,194		14,426		-			38,620
Total sales	$	476,829	$	237,663	$	-		$	714,492

Depreciation and amortization expense	$	1,805	$	5,142	$	1,365		$	8,312
Adjusted EBITDA		82,375		22,415		(23,309	)		81,481
Segment assets		179,580		220,775		29,920			430,275
Capital expenditures		11,852		3,790		1,485			17,127

The Shyft Group, Inc. was organized as a Michigan corporation ~~on September 18, 1975,~~ and is headquartered in Novi, Michigan. We are a niche market leader in specialty vehicle manufacturing and assembly for the commercial vehicle (including last-mile delivery, specialty service and vocation-specific upfit segments) and recreational vehicle industries. Our products include walk-in vans and truck bodies used in e-commerce/parcel delivery, upfit equipment used in the mobile retail and utility trades, service and vocational truck bodies, luxury Class A diesel motor home chassis and contract manufacturing and assembly services. We also supply replacement parts and offer repair, maintenance, field service and refurbishment services for the vehicles that we manufacture. Our operating activities are conducted through our wholly-owned operating subsidiary, The Shyft Group USA, Inc., with locations in Novi, Charlotte and Plymouth, Michigan; Bristol, Indiana; Waterville, Maine; Ephrata, Pennsylvania; North Charleston, South Carolina; Pompano Beach and West Palm Beach, Florida; Kansas City, Missouri; Montebello, Carson and McClellan Park, California; Mesa, Arizona; Dallas and Weatherford, Texas; and Saltillo, Mexico.manufacture as well as truck accessories.

Our vehicles, parts and services are sold to commercial users, original equipment manufacturers ~~("OEMs")~~(OEMs), dealers, individual end users, and municipalities and other governmental entities. Our diversification across several sectors provides numerous opportunities while reducing overall risk as the various markets we serve tend to have different cyclicality. We have an innovative team focused on building lasting relationships with our customers by designing and delivering market leading specialty vehicles, vehicle components, and services. Additionally, our business structure is agile and able to quickly respond to market needs, take advantage of strategic opportunities when they arise and correctly size and scale operations to ensure stability and growth. Our ~~expansion of equipment upfit services in our Fleet Vehicles and Services segment, and the~~ growing opportunities that we have capitalized on in last mile delivery as a result of the rapidly changing e-commerce market ~~are~~is an excellent ~~examples~~example of our ability to generate growth and profitability by quickly fulfilling customer ~~needs and operating efficiently.~~needs.

~~In March 2020, the President~~We believe we can best carry out our long-term business plan and obtain optimal financial flexibility by using a combination of the United States declared the COVID-19 outbreak a national emergency, as the World Health Organization determined it was a pandemic. The pandemic has had a significant impact on macroeconomic conditions. To limit the spread of COVID-19, governments have taken various actions including the issuance of stay-at-home orders and social distancing guidelines. While the Company’s plants continued to operate as essential businesses, starting March 23, 2020 certain ofborrowings under our ~~manufacturing~~credit facilities, were temporarily suspended or cut back on operating levels and shifts as a result of government orders. Since the third quarter of 2020, all of our facilities were at full or modified production levels. However, additional suspensions and cutbacks may occur as the impacts from COVID-19 and related responses continue to evolve within our global supply chain and customer base. The Company is taking a variety of measures to maintain operations with as minimal impact as possible to promote the safety and security of our associates, including increased frequency of cleaning and disinfecting of facilities, social distancing, remote working when possible, travel restrictions and limitations on visitor access to facilities.

The full impact of the COVID-19 outbreak continues to evolve as of the date of this filing. As such, it is uncertain as to the full magnitude that the pandemic will have on the Company’s financial condition, liquidity, and future results of operations. Management is actively monitoring the impact of the global situation on its financial condition, liquidity, operations, suppliers, industry, and workforce. Given the nature of the COVID-19 outbreak and the global responses to curb its spread, the Company is not able to estimate the effects of the COVID-19 outbreak on its results of operations, financial condition, or liquidity for future periods.

On October 1, 2020, the Company acquired substantially all of the assets and certain liabilities of F3 MFG Inc. through the Company’s subsidiary, The Shyft Group DuraMag LLC (“DuraMag”). DuraMag is a leading aluminum truck body and accessory manufacturer, and DuraMag operations include aluminum manufacturing, finishing, assembly, and installation of DuraMag contractor, service, and van bodies, as well as ~~Magnum branded truck accessories including headache racks (also known~~internally or externally generated equity capital, as ~~cab protection racks or rear racks). DuraMag operates out~~sources of Waterville, Maine and that location is expected to continue to serve as the business’ primary manufacturing and assembly facility for both product lines. The addition of DuraMag aluminum bodies to the Company's product offerings follows the Company’s 2019 acquisition of Royal Truck Body ("Royal"), a West Coast and Southwestern U.S. steel truck body maker. Combined, these acquisitions elevate the Company to a leading position as a national service body manufacturer. DuraMag is part of our Specialty Vehicle segment and continues to go to market under the DuraMag and Magnum brands.expansion capital.

We believe we are well positioned to take advantage of long-term opportunities and continue our efforts to bring product innovations to each of the markets that we serve. Some of our recent innovations, strategic developments and strengths include:

The following section provides a narrative discussion about our financial condition and results of operations. Certain amounts in the narrative may not sum due to rounding. The comments should be read in conjunction with our Condensed Consolidated Financial Statements and related Notes thereto included in Item 1 of this Form 10-Q and in conjunction with our Annual Report on Form 10-K filed with the Securities and Exchange Commission on ~~March 25, 2021.~~February 24, 2022.

The following table sets forth, for the periods indicated, the components of the Company’s Condensed Consolidated Statements of Operations as a percentage of sales (percentages may not sum due to rounding):

~~Quarter~~Three Months September 30, 2022 Compared to the Three Months Ended September 30, 2021 ~~Compared to the Quarter Ended September 30, 2020~~

For the quarter ended September 30, ~~2021,~~2022, we reported consolidated sales of ~~$272.6~~$286.1 million, compared to ~~$203.5~~$272.6 million for the third quarter of ~~2020,~~2021, an increase of ~~$69.1~~$13.5 million or ~~34.0%~~4.9%. ~~The~~This increase reflects ~~favorable sales volume driven by~~ strong demand ~~acquired business~~in our Specialty Vehicles (“SV”) segment and favorable pricing ~~versus~~implemented to offset material and labor inflation, partially offset by lower sales volumes in ~~the COVID-19 impacted prior period.~~our Fleet Vehicles and Services (“FVS”) segment primarily due to supply chain constraints.

Cost of products sold was ~~$216.6~~$232.0 million in the third quarter of ~~2021,~~2022, compared to ~~$152.7~~$216.6 million infor the third quarter of ~~2020,~~2021, an increase of ~~$63.9~~$15.4 million or ~~41.8%~~7.1%. Cost of products sold increased ~~$57.6~~by $15.7 million in higher material and labor costs and $2.7 million due to ~~higher sales volumes including acquired business~~inefficiencies and ~~$10.6~~other costs in locations impacted by supply chain constraints. These increases were partially offset by $3.0 million due to ~~higher material, labor~~volume and ~~other costs, partially offset by productivity and other cost reductions of $4.3 million.~~mix.

Gross profit was $54.1 million for the third quarter of 2022, compared to $56.1 million for the third quarter of 2021, ~~compared to $50.8 million for the third quarter~~a decrease of ~~2020, an increase of $5.3~~$2.0 million or ~~10.5%~~(3.5%). Gross profit ~~increased $17.7~~decreased $15.7 million due to higher ~~sales~~material and labor costs, $5.1 million due to inefficiencies in locations impacted by supply chain constraints and $1.9 million in volume, ~~including acquired business and productivity and other cost reductions of $4.3 million,~~ partially offset by ~~higher material, labor~~price and ~~other costs~~mix increases of ~~$10.6 million and unfavorable product mix that more than offset pricing increases for a negative impact of $6.1~~$20.7 million.

Operating expenses were $32.1 million for the third quarter of 2022, compared to $28.0 million for the third quarter of 2021, ~~compared to $24.3 million for the third quarter of 2020,~~ an increase of ~~$3.7~~$4.1 million or 14.8%. Research and development expense for the third quarter of 2022 was $7.1 million, compared to $2.6 million in the third quarter of 2021, ~~was $2.6 million, compared to $0.8 million in the third quarter of 2020,~~ an increase of ~~$1.8~~$4.5 million primarily related to the electric vehicle development initiatives. Selling, general and administrative expense was ~~$25.4 million in the third quarter of 2021, compared to $23.5~~$25.0 million for the third quarter of ~~2020, an increase~~2022, compared to $25.4 million for the third quarter of ~~$1.9~~2021, a decrease of $0.4 million, primarily driven by ~~an increase in compensation expense related to growth and acquisition of $1.3 million versus~~ cost reduction ~~actions taken in the third quarter of 2020 and higher professional services of $0.5 million.~~actions.

Interest expense was $1.1 million for the third quarter of 2022, compared to $0.3 million for the third quarter of 2021, ~~compared to an insignificant amount for the third quarter of 2020,~~ driven by higher ~~finance lease~~borrowing costs. Other income was ~~$0.1 million in the third quarter of 2021, compared to~~ $0.2 million for the third quarter of ~~2020.~~ 2022, compared to income of $0.1 million for the third quarter of 2021.

Our effective income tax rate was 17.9% in the third quarter of 2022, compared to 24.8% in the third quarter of ~~2021, compared to 27.2% in the third quarter of 2020.~~2021. The effective tax rates for ~~2021~~2022 and ~~2020~~2021 reflect the impact of current statutory income tax rates on our Income from continuing operations before ~~taxes. The 2021 effective~~taxes, the impact of non-deductible executive compensation, and a discrete tax ~~rate compared favorably~~benefit related to the ~~comparable period~~difference in ~~2020~~stock compensation expense recognized for book purposes and tax purposes upon vesting. The rate in 2022 is lower as compared to the 2021 rate primarily due to ~~a favorable change~~an increase in the ~~effect on the rate from estimated R&D credits and certain non-deductible executive compensation.~~tax benefit of research credits.

Income from continuing operations for the third quarter ~~ended September 30, 2021 increased~~of 2022 decreased by ~~$1.6~~$3.7 million to $17.3 million compared to $21.0 million ~~compared to $19.4 million~~ for the third quarter ~~ended September 30, 2020.~~of 2021. On a diluted per share basis, ~~income~~Income from continuing operations ~~increased $0.04~~decreased $0.09 to $0.49 for the third quarter of 2022 compared to earnings of $0.58 inper share for the third quarter of 2021. Driving this decrease were the factors noted above.

There was no Income from discontinued operations, net of income taxes for the third quarter of 2022 or 2021.

Our consolidated Adjusted EBITDA for the third quarter of 2022 was $27.1 million, compared to $33.7 million for the third quarter of 2021, a decrease of $6.6 million or (19.8%).

The table below describes the changes in Adjusted EBITDA for the three months ended September 30, 2022 compared to ~~$0.54~~the same period for 2021 (in millions):

Nine Months Ended September 30, 2022 Compared to the Nine Months Ended September 30, 2021

For the nine months ended September 30, 2022, we reported consolidated sales of $725.2 million, compared to $714.5 million for the nine months ended September 30, 2021, an increase of $10.7 million or 1.5%. This increase reflects strong demand in our SV segment and favorable pricing implemented to offset material and labor inflation, partially offset by lower sales volumes in our FVS segment primarily due to supply chain constraints.

Cost of products sold was $603.0 million for the nine months ended September 30, 2022, compared to $566.5 million for the nine months ended September 30, 2021, an increase of $36.5 million or 6.4%. Cost of products sold increased $47.8 million due to higher material and labor costs, $17.0 million due to inefficiencies and other costs in locations impacted by supply chain constraints, partially offset by lower volume and mix of $28.3 million.

Gross profit was $122.1 million for the nine months ended September 30, 2022, compared to $148.0 million for the nine months ended September 30, 2021, a decrease of $25.9 million or (17.4%). Gross profit decreased $47.8 million due to higher material and labor costs, $19.5 million due to inefficiencies and other costs in locations impacted by supply chain constraints, and $10.7 million in volume, partially offset by price and mix increases of $52.1 million.

Operating expenses were $98.0 million for the nine months ended September 30, 2022, compared to $82.9 million for the nine months ended September 30, 2021, an increase of $15.1 million or 18.1%. Research and development expense for the nine months ended September 30, 2022 was $19.5 million, compared to $4.3 million for the nine months ended September 30, 2021, an increase of $15.2 million primarily related to the electric vehicle development initiatives. Selling, general and administrative expense was $78.4 million for the nine months ended September 30, 2022, compared to $78.6 million for the nine months ended September 30, 2021, a decrease of $0.2 million.

Interest expense was $1.7 million for the nine months ended September 30, 2022, compared to $0.3 million for the nine months ended September 30, 2021, driven by higher borrowing costs. Other expense was $0.3 million for the nine months ended September 30, 2022, compared to income of $0.7 million for the nine months ended September 30, 2021.

Our effective income tax rate was 15.2% in the first nine months of 2022, compared to 24.4% in the first nine months of 2021. The effective tax rates for 2022 and 2021 reflect the impact of current statutory income tax rates on our Income from continuing operations before taxes, the impact of non-deductible executive compensation, and a discrete tax benefit related to the difference in stock compensation expense recognized for book purposes and tax purposes upon vesting. The lower effective tax rate for 2022 reflects the favorable impact of an increase in the tax benefit of research credits.

Income from continuing operations for the nine months ended September 30, 2022 decreased by $30.8 million to $18.7 million compared to income of $49.5 million for the nine months ended September 30, 2021. On a diluted per share inbasis, Income from continuing operations decreased $0.81 to $0.53 for the ~~third quarter~~nine months ended September 30, 2022, compared to earnings of ~~2020.~~$1.34 per share for the nine months ended September 30, 2021. Driving this ~~increase~~decrease were the factors noted above.

Income from discontinued operations, net of income taxes for the ~~quarter~~nine months ended September 30, 2022 decreased by $0.1 million to none compared to $0.1 million for the nine months ended September 30, 2021, ~~increased by $0.9 million compared~~primarily attributable to ~~Loss from discontinued operations of $0.9 million for the quarter ended September 30, 2020 due~~2021 winddown activities subsequent to the ~~completion of the sale of the~~ ERV ~~business~~divestiture not repeated in ~~February 2020.~~2022.

Our consolidated Adjusted EBITDA infor the ~~third quarter of 2021~~nine months ended September 30, 2022 was ~~$33.7~~$40.1 million, compared to ~~$32.6~~$81.5 million for the ~~third quarter~~nine months ended September 30, 2021, a decrease of ~~2020, an increase of $1.1~~$41.4 million or ~~3.5%~~(50.8%).

The table below describes the changes in Adjusted EBITDA for the ~~three~~nine months ended September 30, ~~2021~~2022 compared to the same period ~~of 2020~~for 2021 (in millions):

Our order backlog by reportable segment is summarized in the following table (in thousands):

The consolidated backlog at September 30, ~~2021,~~2022, totaled ~~$852.6~~$1,043.9 million, up ~~203.8%~~22.4%, compared to ~~$280.6~~$852.6 million at September 30, ~~2020,~~2021, which reflects strong demand for vehicles across the Company’s product portfolio.

Our Fleet Vehicles and Services backlog increased by ~~$529.6~~$165.4 million, or ~~231.4%~~22.1%, which reflects strong demand for vehicles across the ~~Company’s product portfolio.~~segment’s walk in van, Velocity and Truck Body products. Our Specialty Vehicles segment backlog increased by ~~$42.3~~$25.9 million, or ~~81.7%~~25.2%, due to increased ~~motor home chassis and~~ service ~~truck~~ body orders.

Orders in the backlog are subject to modification, cancellation or rescheduling by customers. 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, supply of chassis, 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, 2021 Compared to the Nine Months Ended September 30, 2020~~

For the nine months ended September 30, 2021, we reported consolidated sales of $714.5 million, compared to $504.4 million for the first nine months of 2020, an increase of $210.1 million or 41.7%. The increase reflects favorable sales volume driven by strong demand and acquired business versus lower sales in the COVID-19 impacted prior period.

Cost of products sold was $566.5 million in the first nine months of 2021, compared to $393.3 million in the first nine months of 2020, an increase of $173.2 million or 44.0%. Cost of products sold increased $174.5 million due to higher sales volumes including acquired business, $2.3 million of pre-production costs and $10.7 million of higher material and labor costs. These increases were partially offset by productivity and cost reductions of $14.3 million.

Gross profit was $148.0 million for the first nine months of 2021, compared to $111.1 million for the first nine months of 2020, an increase of $36.9 million, or 33.2%. Gross profit increased $46.2 million due to higher sales volume including acquired business and $14.3 million of productivity and other cost reductions. These increases were partially offset by higher material, labor and other costs of $10.6 million, pre-production costs of $2.3 million, and unfavorable product mix and pricing of $10.7 million.

Operating expenses were $82.9 million for the first nine months of 2021, compared to $73.0 million for the first nine months of 2020, an increase of $9.9 million or 13.6%. Research and development expense in the first nine months of 2021 was $4.3 million, compared to $3.5 million in the first nine months of 2020, an increase of $0.8 million primarily related to the electric vehicle development initiatives. Selling, general and administrative expense was $78.6 million in the first nine months of 2021, compared to $69.5 million for the first nine months of 2020, an increase of $9.1 million, primarily driven by an increase in compensation expense related to growth and acquisition of $9.4 million versus cost reduction actions taken in the first nine months of 2020 and higher professional services of $4.2 million. These increases were partially offset by the accelerated depreciation of the ERP system and write-off of related construction in process of $4.5 million in the second quarter of 2020 that did not recur in 2021.

Interest expense was $0.3 million for the first nine months of 2021, compared to $1.2 million for the first nine months of 2020, driven by lower borrowings and interest support more than offsetting periodic expense. Other income was $0.7 million in the first nine months of 2021 compared to $0.2 million for the first nine months of 2020.

Our effective income tax rate was 24.4% in the first nine months of 2021, compared to 19.1% in the first nine months of 2020. The effective tax rate for 2021 reflects the impact of current statutory income tax rates on our Income before taxes partially offset by a discrete tax benefit related to the difference in stock compensation expense recognized for book purposes and tax purposes upon vesting.

The effective tax rate for the nine months ended September 30, 2021 compares unfavorably to the comparable period in 2020 due to a favorable adjustment recorded in 2020 because of provisions of the CARES Act allowing the carryback of tax net operating losses (“NOL”) incurred in the years 2018 through 2020 for five years. The sale of our ERV business in 2020 placed the Company into a tax NOL position because of the reversal of certain deferred tax assets recorded in 2019. As a result, this NOL has been carried back to offset taxable income in years when the federal corporate income tax rate was 35%, as opposed to the 21% rate in effect at the time the deferred tax assets were recorded. The resultant favorable tax rate differential allowed us to record a $2.6 million current year tax benefit as a discrete item.

Income from continuing operations for the nine months ended September 30, 2021, increased by $19.5 million, or 65.0%, to $49.5 million compared to $30.0 million for the nine months ended September 30, 2020. On a diluted per share basis, income from continuing operations increased $0.51 to $1.34 in the first nine months of 2021 compared to $0.83 per share in the first nine months of 2020. Driving this increase were the factors noted above.

Income from discontinued operations, net of income taxes for the nine months ended September 30, 2021 increased by $5.0 million to $0.1 million compared to Loss from discontinued operations of $4.9 million for the nine months ended September 30, 2020 due to the completion of the sale of the ERV business in February 2020.

Our consolidated Adjusted EBITDA for the nine months ended September 30, 2021 was $81.5 million, compared to $60.3 million for the nine months ended September 30, 2020, an increase of $21.2 million or 35.1%.

~~The table below describes the changes in Adjusted EBITDA for the nine months ended September 30, 2021 compared to the same period of 2020 (in millions):~~

This report presents Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization), which is a non-GAAP financial measure. This non-GAAP measure is calculated by excluding items that we believe to be infrequent or not indicative of our underlying operating performance, as well as certain non-cash expenses. We define Adjusted EBITDA as income from continuing operations before interest, income taxes, depreciation and amortization, as adjusted to eliminate the impact of restructuring charges, acquisition related expenses and adjustments, non-cash stock-based compensation expenses, and other gains and losses not reflective of our ongoing operations. ~~Adjusted EBITDA for all prior periods presented has been recast to conform to the current presentation.~~

We present the non-GAAP measure Adjusted EBITDA because we consider it to be an important supplemental measure of our performance. The presentation of Adjusted EBITDA enables investors to better understand our operations by removing items that we believe are not representative of our continuing operations and may distort our longer-term operating trends. We believe this measure to be useful to improve the comparability of our results from period to period and with our competitors, as well as to show ongoing results from operations distinct from items that are infrequent or not indicative of our continuing operating performance. We believe that presenting this non-GAAP measure is useful to investors because it permits investors to view performance using the same tools that management uses to budget, make operating and strategic decisions, and evaluate our historical performance. We believe that the presentation of this non-GAAP measure, when considered together with the corresponding GAAP financial measures and the reconciliations to that measure, provides investors with additional understanding of the factors and trends affecting our business than could be obtained in the absence of this disclosure.

We use Adjusted EBITDA to evaluate the performance of and allocate resources to our segments. Adjusted EBITDA is also used, along with other financial and non-financial measures, for purposes of determining annual incentive compensation for our management team and long-term incentive compensation for certain members of our management team.

The following table reconciles Income from continuing operations to Adjusted EBITDA for the periods indicated.

We identify our reportable segments based on our management structure and the financial data utilized by our chief operating decision maker to assess segment performance and allocate resources among our operating units. We have two reportable segments: ~~Fleet Vehicles~~FVS and ~~Services ("FVS") and Specialty Vehicles ("SV").~~SV.

For certain financial information related to each segment, see "Note 1110 – Business Segments," of the Notes to Condensed Consolidated Financial Statements appearing in Item 1 of this Form 10-Q.

Sales in our FVS segment were ~~$198.5~~$184.5 million for the third quarter of 2022, compared to $191.4 million for the third quarter of 2021, ~~compared to $145.2 million for the third quarter~~a decrease of ~~2020, an increase of $53.3~~$6.9 million or ~~36.7%~~(3.6%). This ~~increase~~decrease was ~~due~~primarily attributable to a sales volume ~~increase and favorable pricing.~~decrease due to supply chain constraints, partially offset by pricing actions.

Adjusted EBITDA in our FVS segment for the third quarter of ~~2021~~2022 was ~~$36.8~~$24.4 million compared to ~~$33.2~~$36.4 million infor the third quarter of ~~2020, an increase~~2021, a decrease of ~~$3.6~~$12.0 million or ~~10.8%~~(33.1%). This ~~increase~~decrease was ~~due~~primarily attributable to ~~$15.2~~$12.0 million in ~~higher sales volumes and productivity and other cost reductions of $4.3 million, partially offset by higher~~ material and labor inflation and $9.4 million lower volume and inefficiencies due to supply chain constraints. These costs ~~of $7.5 million, unfavorable~~were partially offset by pricing and mix of ~~$6.6 million and $1.8 million of higher operating expense.~~$9.4 million.

Sales in our FVS segment were ~~$498.5~~$434.1 million for the nine months ended September 30, ~~2021,~~2022, compared to ~~$378.1~~$476.8 million for ~~the~~ nine months ended September 30, ~~2020, an increase~~2021, a decrease of ~~$120.4~~$42.7 million or ~~31.8%~~(9.0%). This ~~increase~~decrease was ~~due~~primarily attributable to a sales volume ~~increase,~~decrease due to supply chain constraints, partially offset by ~~pricing.~~pricing actions.

Adjusted EBITDA in our FVS segment for the nine months ended September 30, ~~2021,~~2022 was ~~$83.3~~$38.0 million compared to ~~$68.6~~$82.4 million for the nine months ended September 30, ~~2020,~~2021, a decrease of $44.4 million or (53.9%). This decrease was primarily attributable to $27.5 million in material and labor inflation, $26.7 million lower volume and inefficiencies due to supply chain constraints, and $10.7 million in manufacturing and other costs. These decreases were partially offset by pricing and mix of $20.5 million.

Sales in our SV segment were $103.9 million in the third quarter of 2022, compared to $81.2 million for the third quarter of 2021, an increase of ~~$14.7~~$22.7 million or ~~21.4%~~27.9%. This increase was due to ~~$29.5 million in higher~~strong sales ~~volumes, and other productivity and cost reductions of $9.4 million, partially~~volume growth coupled with pricing actions to offset ~~by higher~~ material and labor ~~costs of $7.5 million, unfavorable pricing and mix of $10.7 million, $2.3 million of pre-production costs, and $3.7 million of increased operating expense.~~inflation.

Sales in our SV segment were $74.1 million in the third quarter of 2021, compared to $58.3 million in the third quarter of 2020, an increase of $15.8 million or 27.1%. This increase was due to a sales volume increase including acquired business and favorable pricing.

Adjusted EBITDA for our SV segment for the third quarter of ~~2021~~2022 was ~~$5.8~~$15.6 million, compared to ~~$7.2~~$6.2 million infor the third quarter of ~~2020, a decrease~~2021, an increase of ~~$1.4~~$9.4 million or ~~18.9%~~148.9%. This ~~decrease~~increase was ~~due~~primarily attributable to $3.1 million in higher material and labor costs and $1.3 million of higher operating expenses due to acquisition. These higher costs were partially offset by $2.5 million in higher sales volumes including acquired business and favorable pricing and mix of ~~$0.5~~$12.5 million, volume and productivity of $3.9 million, offset by material and labor costs of $4.7 million and increased operating and other expenses of $2.4 million.

Sales in our SV segment were ~~$216.0~~$293.4 million for the nine months ended September 30, 2022, compared to $237.7 million for the nine months ended September 30, 2021, ~~compared to $126.3 million for the nine months ended September 30, 2020,~~ an increase of ~~$89.7~~$55.7 million or ~~71.1%~~23.4%. This increase was due to astrong sales volume ~~increase including acquired business~~growth coupled with pricing actions to offset material and ~~favorable pricing.~~labor inflation.

Adjusted EBITDA for our SV segment for the nine months ended September 30, ~~2021,~~2022 was ~~$21.5~~$38.5 million, compared to ~~$12.1~~$22.4 million for the nine months ended September 30, ~~2020,~~2021, an increase of ~~$9.4~~$16.1 million or ~~77.2%~~71.8%. This increase was ~~due~~primarily attributable to ~~$13.3 million in higher sales volumes including acquired business and~~ favorable pricing and mix of ~~$0.3 million. These increases were partially~~$33.3 million, volume and productivity of $6.9 million, offset by ~~higher~~ material and labor costs of ~~$3.1~~$20.3 million and ~~$1.1 million~~increased operating and other expenses of ~~higher operating expenses due to acquisition.~~

Cash and cash equivalents decreased by ~~$6.5~~$34.3 million from December 31, 2021, to ~~$14.5~~a balance of $2.9 million atas of September 30, ~~2021, compared to $21.0 million at December 31, 2020.~~2022. These funds, in addition to cash generated from future operations and ~~available~~availability under our existing credit facilities, are expected to be sufficient to finance our foreseeable liquidity and capital needs, including potential future acquisitions.

We ~~generated $42.3~~used $44.5 million of cash from operating activities during the nine months ended September 30, ~~2021, an increase in cash provided~~2022, a decrease of ~~$21.3~~$86.8 million from ~~$21.0~~$42.3 million of positive cash ~~provided by operating activities~~flow during the nine months ended September 30, ~~2020. Cash flow from operating activities increased~~2021. The decrease is primarily due to a ~~$1.2~~$30.2 million decrease in net income adjusted for non-cash charges to operations and a ~~$22.5~~$56.6 million ~~increase~~decrease in the change in net working capital. The change in net working capital is primarily attributable to a ~~$50.5~~$30.2 million ~~increase~~decrease in the change in receivables and contract assets, an $18.5 million decrease in the change in payables, an $8.6 million decrease in the change in inventories, a $4.4 million decrease in the change in accrued compensation, and a ~~$19.4~~$1.2 million decrease in the change in accrued warranty, partially offset by a $6.3 million increase in the change in other ~~liabilities partially offset by a $48.0 million decrease in the change in inventories.~~assets and liabilities.

These changes were primarily driven by increased sales of $210.1 million, or 41.7% in the nine months ended September 30, 2021, compared to the same period in 2020, driven by strong demand in the current period and the comparatively lower sales resulting from the impact of the COVID-19 pandemic in the comparative period. Corresponding increases in the change in receivables, inventories, and payables resulted from the need to fulfill increased sales in the current period and production in the third quarter of 2021 related to the ramp up of production of new Velocity vehicles. As of September 30, ~~2021,~~2022, contract assets increased ~~$33.1~~$65.6 million ~~to $42.5~~and contract liabilities increased by $9.6 million ~~compared to $9.4 million as of December 31, 2020,~~ primarily due to increased work in process production ~~and~~resulting from industry wide supply chain constraints. Inventories increased by $44.0 million primarily due to increased raw material inventories relative to finished goods due to industry wide supply chain interruptions. Payables increased by $24.2 million primarily due to the Company’s continued focus on extending payment terms with suppliers.

We used ~~$17.3~~$14.1 million ~~of cash for~~in investing activities during the nine months ended September 30, ~~2021,~~2022, a decrease ofin cash used of ~~$64.1~~$3.2 million from ~~$46.8~~$17.3 million ~~of cash provided by investing activities~~used during the nine months ended September 30, ~~2020. Cash flow from~~2021. The decrease in cash used in investing activities ~~decreased~~is primarily due to a ~~$9.9~~$4.0 million ~~increase~~decrease in the purchases of property, plant and ~~equipment and $55.0 million~~equipment.

We ~~used $31.5~~generated $24.3 million of cash ~~for~~through financing activities during the nine months ended September 30, ~~2021, a decrease~~2022, an increase in cash generated of ~~cash used of $12.3~~$55.7 million from ~~$43.8~~$31.5 million ~~of cash~~ used ~~by financing activities~~ during the nine months ended September 30, ~~2020. Cash flow used~~2021. The increase in cash provided by financing activities ~~decreased~~is primarily ~~due~~attributable to ~~a net $17.6~~$95.0 million ~~decrease in payments on~~of increased proceeds from long-term debt, partially offset by $7.6 million of increased payments on long-term debt, a ~~$3.3~~$23.4 million increase in the purchase and retirement of common stock, ~~and $1.9~~a $5.5 million increase in ~~exercise~~issuance and vesting of stock ~~awards.~~awards, and a $2.7 million increase in the payment of dividends.

On ~~August 8, 2018,~~November 30, 2021, we entered into aan Amended and Restated Credit Agreement (the "Credit Agreement") by and among us and certain of our subsidiaries as borrowers, Wells Fargo Bank, ~~National Association~~N.A. ("Wells Fargo"), as administrative agent, and the lenders party thereto consisting of Wells Fargo, JPMorgan Chase Bank, N.A. ~~and~~, PNC Bank, National Association and Bank of America, N.A. (the "Lenders"). ~~Subsequently, the Credit Agreement was amended on May 14, 2019, September 9, 2019 and September 25, 2019 and certain~~Certain of our other subsidiaries have executed guaranties guarantying the ~~borrowers’~~borrowers' obligations under the Credit Agreement. ~~Concurrent with the close of the sale of the ERV business and effective January 31, 2020,~~

Under the Credit Agreement, was further amended by a fourth amendment, which released certain of our subsidiaries that were sold as part of the ERV business. The Credit Agreement was subsequently amended further on April 20, 2021 and July 16, 2021 pursuant to a fifth amendment and sixth amendment, respectively, to make certain changes to the subfacility limits pursuant to the Credit Agreement. The substantive business terms of the Credit Agreement remain in place and were not changed by any of the amendments noted above.

~~As a result, at September 30, 2021, under the Credit Agreement, as amended,~~ we may borrow up to ~~$175.0~~$400.0 million from the Lenders under a secured revolving credit facility which matures ~~August 8, 2023.~~November 30, 2026. We may also request an increase in the facility of up to ~~$50.0~~$200.0 million in the aggregate, subject to customary conditions. The credit facility is also available for the issuance of letters of credit of up to $20.0 million and swing line loans of up to $10.0 million, subject to certain limitations and ~~restrictions as of September 30, 2021.~~restrictions. This revolving credit facility carries an interest rate of either (i) the highest of prime rate, the federal funds effective rate from time to time plus 0.5%, or the one month adjusted LIBOR plus 1.0%; or (ii) adjusted LIBOR, in each case plus a margin based upon our ratio of debt to earnings from time to time. The applicable borrowing rate including the margin was ~~1.34%~~4.14% (or one-month LIBOR plus ~~1.25%~~1.00%) at September 30, ~~2021.~~2022. The credit facility is secured by security interests in, and liens on, all assets of the borrowers and guarantors, other than real property and certain other excluded assets. At September 30, ~~2021,~~2022 and December 31, ~~2020,~~2021, we had outstanding letters of credit totaling ~~$0.8~~$1.1 million and ~~$0.5~~$0.8 million, respectively, related to our workers’ compensation insurance.

Under the terms of our Credit Agreement, available borrowings (exclusive of outstanding borrowings) totaled ~~$169.2~~$165.4 million and ~~$125.8~~$376.8 million at September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively. The Credit Agreement requires us to maintain certain financial ratios and other financial covenants; prohibits us from incurring additional indebtedness; limits certain acquisitions, investments, advances or loans; limits our ability to pay dividends in certain circumstances; and restricts substantial asset sales, all subject to certain exceptions and baskets. At September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, we were in compliance with all covenants in our Credit Agreement.

On ~~April 28, 2016,~~February 17, 2022, our Board of Directors authorized the repurchase of up to ~~1.0~~$250.0 million ~~shares~~ of our common stock in open market transactions. ~~At September 30, 2021 there were 0.4~~In the first quarter of 2022, we repurchased 607,306 shares for $26.8 million ~~shares remaining under this repurchase authorization. If we were to repurchase~~and made no repurchases in the ~~remaining 0.4 million shares~~second and third quarters of ~~stock under the repurchase program, it would cost us approximately $16.9 million based on the closing price of our stock on October 29, 2021.~~2022. We believe that we have sufficient resources to fund any potential stock buyback in which we may engage.

The amounts or timing of any dividends are subject to earnings, financial condition, liquidity, capital requirements and such other factors as our Board of Directors deems relevant. ~~In August 2020, the Board of Directors approved the change of the frequency of dividend payments from semi-annual to quarterly.~~ We declared dividends on our outstanding common shares in ~~2020~~2022 and 2021 as shown in the table below.

			Page

FORWARD-LOOKING STATEMENTS			3

PART I. FINANCIAL INFORMATION

	Item 1.	Financial Statements:

		Condensed Consolidated Balance Sheets – September 30, ~~2021~~2022 and December 31, ~~2020~~2021 (Unaudited)	4

		Condensed Consolidated Statements of Operations – Three and Nine Months Ended September 30, ~~2021~~2022 and ~~2020~~2021 (Unaudited)	5

		Condensed Consolidated Statements of Cash Flows – Nine Months Ended September 30, ~~2021~~2022 and ~~2020~~2021 (Unaudited)	6

		Condensed Consolidated Statement of Shareholders’ Equity – Three and Nine Months Ended September 30, ~~2021~~2022 and ~~2020~~2021 (Unaudited)	7

		Notes to Condensed Consolidated Financial Statements	8

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2317

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3427

	Item 4.	Controls and Procedures	3428

PART II. OTHER INFORMATION

	Item 1.	Legal Proceedings	3629

	Item 1A.	Risk Factors	3629

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3629

	Item 6.	Exhibits	3730

SIGNATURES			3831

	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020			2022			2021			2022			2021

Sales	$	272,622		$	203,473		$	714,492		$	504,391		$	286,075		$	272,622		$	725,153		$	714,492
Cost of products sold		216,564			152,723			566,542			393,335			231,979			216,564			603,008			566,542
Gross profit		56,058			50,750			147,950			111,056			54,096			56,058			122,145			147,950

Operating expenses:
Research and development		2,582			824			4,304			3,496			7,051			2,582			19,541			4,304
Selling, general and administrative		25,368			23,525			78,645			69,534			25,033			25,368			78,445			78,645
Total operating expenses		27,950			24,349			82,949			73,030			32,084			27,950			97,986			82,949

Operating income		28,108			26,401			65,001			38,026			22,012			28,108			24,159			65,001

Other income (expense):
Other income (expense)
Interest expense		(253	)		(11	)		(310	)		(1,202	)		(1,137	)		(253	)		(1,754	)		(310	)
Interest and other income		54			238			743			243
Other income (expense)														181			54			(342	)		743
Total other income (expense)		(199	)		227			433			(959	)		(956	)		(199	)		(2,096	)		433

Income from continuing operations before income taxes		27,909			26,628			65,434			37,067			21,056			27,909			22,063			65,434
Income tax expense		6,910			7,253			15,952			7,084			3,770			6,910			3,346			15,952
Income from continuing operations		20,999			19,375			49,482			29,983			17,286			20,999			18,717			49,482
Income (loss) from discontinued operations, net of income taxes		0			(926	)		81			(4,947	)
Income from discontinued operations, net of income taxes														-			-			-			81
Net income		20,999			18,449			49,563			25,036			17,286			20,999			18,717			49,563
Less: net income attributable to non-controlling interest		77			41			1,102			178			-			77			-			1,102

Net income attributable to The Shyft Group Inc.	$	20,922		$	18,408		$	48,461		$	24,858		$	17,286		$	20,922		$	18,717		$	48,461

Basic earnings (loss) per share
Basic earnings per share
Continuing operations	$	0.59		$	0.55		$	1.37		$	0.84		$	0.49		$	0.59		$	0.53		$	1.37
Discontinued operations		0			(0.03	)		0			(0.14	)		-			-			-			-
Basic earnings per share	$	0.59		$	0.52		$	1.37		$	0.70		$	0.49		$	0.59		$	0.53		$	1.37

Diluted earnings (loss) per share
Diluted earnings per share
Continuing operations	$	0.58		$	0.54		$	1.34		$	0.83		$	0.49		$	0.58		$	0.53		$	1.34
Discontinued operations		0			(0.03	)		0			(0.14	)		-			-			-			-
Diluted earnings per share	$	0.58		$	0.51		$	1.34		$	0.69		$	0.49		$	0.58		$	0.53		$	1.34

Basic weighted average common shares outstanding		35,346			35,559			35,330			35,491			35,056			35,346			35,071			35,330
Diluted weighted average common shares outstanding		36,074			35,989			36,024			35,794			35,365			36,074			35,481			36,024

	Nine Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2022			2021
Cash flows from operating activities:
Net income	$	49,563		$	25,036		$	18,717		$	49,563
Adjustments to reconcile net income to net cash used in operating activities:
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization		8,312			11,122			10,055			8,312
Non-cash stock based compensation expense		6,571			6,322			4,922			6,571
Deferred income taxes		134			17,859			64			134
Loss on sale of business		0			2,901
(Gain) on disposal of assets		(104	)		0
Loss from write-off of construction in process		0			2,430
Loss (gain) on disposal of assets								481			(104	)
Changes in accounts receivable and contract assets		(35,842	)		(33,355	)		(66,026	)		(35,842	)
Changes in inventories		(35,473	)		12,527			(44,029	)		(35,473	)
Changes in accounts payable		43,230			(7,263	)		24,708			43,230
Changes in accrued compensation and related taxes		910			(423	)		(3,505	)		910
Changes in accrued warranty		1,626			(130	)		457			1,626
Change in other assets and liabilities		3,396			(16,033	)		9,663			3,396
Net cash provided by operating activities		42,323			20,993
Net cash provided by (used in) operating activities								(44,493	)		42,323

Cash flows from investing activities:
Purchases of property, plant and equipment		(18,238	)		(8,325	)		(14,228	)		(18,238	)
Proceeds from sale of property, plant and equipment		16			0			148			16
Acquisition of business, net of cash acquired		904			152			-			904
Proceeds from sale of business		0			55,000
Net cash provided by (used in) investing activities		(17,318	)		46,827
Net cash used in investing activities								(14,080	)		(17,318	)

Cash flows from financing activities:
Proceeds from long-term debt		25,000			16,000			120,000			25,000
Payments on long-term debt		(47,400	)		(56,000	)		(55,000	)		(47,400	)
Payment of dividends		(2,660	)		(2,662	)		(5,395	)		(2,660	)
Purchase and retirement of common stock		(3,348	)		0			(26,789	)		(3,348	)
Exercise and vesting of stock incentive awards		(3,043	)		(1,106	)
Net cash used in financing activities		(31,451	)		(43,768	)
Issuance and vesting of stock incentive awards								(8,539	)		(3,043	)
Net cash provided by (used in) financing activities								24,277			(31,451	)

Net increase (decrease) in cash and cash equivalents		(6,446	)		24,052
Net decrease in cash and cash equivalents								(34,296	)		(6,446	)
Cash and cash equivalents at beginning of period		20,995			19,349			37,158			20,995
Cash and cash equivalents at end of period	$	14,549		$	43,401		$	2,862		$	14,549

	Number of Shares			Common Stock			Additional Paid In Capital		Retained Earnings			Non- Controlling Interest			Total Shareholders’ Equity			Number of Shares			Common Stock			Retained Earnings			Non- Controlling Interest		Total Shareholders’ Equity
Balance at January 1, 2021		35,344		$	91,044		$	-	$	109,286		$	(171	)	$	200,159
Balance at December 31, 2021																			35,416		$	95,375		$	171,379		$	101	$	266,855
Issuance of common stock and tax impact of stock incentive plan		3			(2,255	)		-		-			-			(2,255	)		3			(8,372	)		-			-		(8,372	)
Dividends declared ($0.025 per share)		-			-			-		(983	)		-			(983	)
Dividends declared ($0.05 per share)																			-			-			(1,794	)		-		(1,794	)
Purchase and retirement of common stock		(100	)		(260	)		-		(3,088	)		-			(3,348	)		(607	)		(1,598	)		(25,191	)		-		(26,789	)
Issuance of restricted stock, net of cancellation		61			-			-		-			-			-			215			-			-			-		-
Non-cash stock based compensation expense		-			1,642			-		-			-			1,642			-			1,648			-			-		1,648
Net income		-			-			-		11,576			35			11,611
Balance at March 31, 2021		35,308		$	90,171		$	-	$	116,791		$	(136	)	$	206,826
Net loss																			-			-			(3,852	)		-		(3,852	)
Balance at March 31, 2022																			35,027		$	87,053		$	140,542		$	101	$	227,696
Issuance of common stock and tax impact of stock incentive plan		2			(712	)		-		-			-			(712	)		3			(219	)		-			-		(219	)
Dividends declared ($0.025 per share)		-			-			-		(901	)		-			(901	)
Dividends declared ($0.05 per share)																			-			-			(1,784	)		-		(1,784	)
Issuance of restricted stock, net of cancellation		36			-			-		-			-			-			33			-			-			-		-
Non-cash stock based compensation expense		-			2,850			-		-			-			2,850			-			2,060			-			-		2,060
Net income		-			-			-		15,963			990			16,953			-			-			5,283			-		5,283
Balance at June 30, 2021		35,346		$	92,309		$	-	$	131,853		$	854		$	225,016
Balance at June 30, 2022																			35,063			88,894			144,041			101		233,036
Issuance of common stock and tax impact of stock incentive plan		3			(76	)		-		-			-			(76	)		6			52			-			-		52
Dividends declared ($0.025 per share)		-			-			-		(902	)		-			(902	)
Dividends declared ($0.05 per share)																						-			(1,790	)		-		(1,790	)
Issuance of restricted stock, net of cancellation		(7	)		-			-		-			-			-			(6	)		-			-			-		-
Non-cash stock based compensation expense		-			2,079			-		-			-			2,079						1,214			-			-		1,214
Net income		-			-			-		20,922			77			20,999						-			17,286			-		17,286
Balance at September 30, 2021		35,342		$	94,312		$	-	$	151,873		$	931		$	247,116
Balance at September 30, 2022																			35,063			90,160			159,537			101		249,798

	Number of Shares			Common Stock		Additional Paid In Capital			Retained Earnings			Non- Controlling Interest			Total Shareholders' Equity			Number of Shares			Common Stock			Retained Earnings			Non- Controlling Interest			Total Shareholders’ Equity
Balance at January 1, 2020		35,344		$	353	$	85,148		$	86,764		$	(518	)	$	171,747
Balance at December 31, 2020																			35,344		$	91,044		$	109,286		$	(171	)	$	200,159
Issuance of common stock and tax impact of stock incentive plan		4			-		55			-			-			55			3			(2,255	)		-			-			(2,255	)
Dividends declared ($0.025 per share)																			-			-			(983	)		-			(983	)
Purchase and retirement of common stock																			(100	)		(260	)		(3,088	)		-			(3,348	)
Issuance of restricted stock, net of cancellation		127			1		-			-			-			1			61			-			-			-			-
Non-cash stock based compensation expense		-			-		2,132			-			-			2,132			-			1,642			-			-			1,642
Net income		-			-		-			7,811			67			7,878			-			-			11,576			35			11,611
Balance at March 31, 2020		35,475		$	354	$	87,335		$	94,575		$	(451	)	$	181,813
Balance at March 31, 2021																			35,308		$	90,171		$	116,791		$	(136	)	$	206,826
Issuance of common stock and tax impact of stock incentive plan		4			-		(1,209	)		-			-			(1,209	)		2			(712	)		-			-			(712	)
Dividends declared ($0.05 per share)		-			-		-			(1,775	)		-			(1,775	)
Issuance of restricted stock, net of cancellation		80			1		(2	)		-			-			(1	)
Non-cash stock based compensation expense		-			-		2,126			-			-			2,126
Net income (loss)		-			-		-			(1,361	)		70			(1,291	)
Balance at June 30, 2020		35,559		$	355	$	88,250		$	91,439		$	(381	)	$	179,663
Issuance of common stock and tax impact of stock incentive plan		3			-		48			-			-			48
Dividends declared ($0.025 per share)		-			-		-			(887	)		-			(887	)
Dividends declared ($0.025 per share)																			-			-			(901	)		-			(901	)
Issuance of restricted stock, net of cancellation		(12	)		-		-			-			-			-			36			-			-			-			-
Non-cash stock based compensation expense		-			-		2,064			-			-			2,064			-			2,850			-			-			2,850
Net income		-			-		-			18,408			41			18,449			-			-			15,963			990			16,953
Balance at September 30, 2020		35,550		$	355	$	90,362		$	108,960		$	(340	)	$	199,337
Balance at June 30, 2021																			35,346			92,309			131,853			854			255,016
Issuance of common stock and tax impact of stock incentive plan																			3			(76	)		-			-			(76	)
Dividends declared ($0.025 per share)																			-			-			(902	)		-			(902	)
Issuance of restricted stock, net of cancellation																			(7	)		-			-			-			-
Non-cash stock based compensation expense																			-			2,079			-			-			2,079
Net income																			-			-			20,922			77			20,999
Balance at September 30, 2021																			35,342			94,312			151,873			931			247,116

	Three Months Ended September 30, 2020
	As Previously Reported			Adjustment			As Revised
Loss from discontinued operations, net of income taxes	$	(598	)	$	(328	)	$	(926	)
Net income		18,777			(328	)		18,449
Net income attributable to The Shyft Group, Inc.		18,736			(328	)		18,408

Basic earnings (loss) per share
Continuing operations	$	0.55		$	0		$	0.55
Discontinued operations		(0.02	)		(0.01	)		(0.03	)
Basic earnings per share	$	0.53		$	(0.01	)	$	0.52

Diluted earnings (loss) per share
Continuing operations	$	0.54		$	0		$	0.54
Discontinued operations		(0.02	)		(0.01	)		(0.03	)
Basic earnings per share	$	0.52		$	(0.01	)	$	0.51

	Nine Months Ended September 30, 2020
	As Previously Reported			Adjustment			As Revised
Loss from discontinued operations, net of income taxes	$	(4,619	)	$	(328	)	$	(4,947	)
Net income		25,364			(328	)		25,036
Net income attributable to The Shyft Group, Inc.		25,186			(328	)		24,858

Basic earnings (loss) per share
Continuing operations	$	0.84		$	0		$	0.84
Discontinued operations		(0.13	)		(0.01	)		(0.14	)
Basic earnings per share	$	0.71		$	(0.01	)	$	0.70

Accounts receivable	$	2,315
Inventories		3,659
Other current assets		15
Property, plant and equipment		2,949
Right of use assets-operating leases		8,469
Intangible assets		5,590
Goodwill		5,401
Total assets acquired		28,398

Accounts payable		(1,662	)
Accrued warranty		(289	)
Accrued compensation and related taxes		(434	)
Current operating lease liabilities		(644	)
Other current liabilities and accrued expenses		(241	)
Long-term operating lease liability		(7,825	)
Long-term debt		(4	)
Total liabilities assumed		(11,099	)

Total purchase price	$	17,299

	Amount		Useful Life
Customer relationships	$	2,200	15 Years
Trade names and trademarks		2,420	Indefinite
Unpatented technology		540	9 Years
Non-competition agreements		430	6 Years
	$	5,590

	September 30, 2021			December 31, 2020
Finished goods	$	5,119		$	4,200
Work in process		7,078			1,908
Raw materials and purchased components		72,176			46,576
Reserve		(2,472	)		(6,256	)
Total inventories, net	$	81,901		$	46,428

	September 30, 2022		December 31, 2021
Finished goods	$	4,685	$	2,990
Work in process		8,176		2,471
Raw materials and purchased components		98,352		61,723
Total inventories	$	111,213	$	67,184

	September 30, 2021		December 31, 2020
Chassis pool agreements	$	3,995	$	6,503
Total short-term debt	$	3,995	$	6,503

	September 30, 2021			September 30, 2020			September 30, 2022			September 30, 2021
Contract Assets
Contract assets, beginning of period	$	9,414		$	10,898		$	21,483		$	9,414
Reclassification of the beginning contract assets to receivables, as the result of rights to consideration becoming unconditional		(9,414	)		(10,777	)		(21,482	)		(9,414	)
Contract assets recognized, net of reclassification to receivables		42,459			9,546			87,098			42,459
Contract assets, end of period	$	42,459		$	9,667		$	87,099		$	42,459

Contract Liabilities
Contract liabilities, beginning of period	$	756		$	2,640		$	988		$	756
Reclassification of the beginning contract liabilities to revenue, as the result of performance obligations satisfied		(743	)		(2,370	)		(988	)		(743	)
Cash received in advance and not recognized as revenue		2,135			380			10,601			2,135
Contract liabilities, end of period	$	2,148		$	650		$	10,601		$	2,148

	Three Months Ended September 30, 2021										Three Months Ended September 30, 2022
	FVS		SV		Total Reportable Segments		Other		Total		FVS		SV		Eliminations and Other			Total
Primary geographical markets
United States	$	194,067	$	74,077	$	268,144	$	0	$	268,144	$	183,409	$	103,869	$	(2,335	)	$	284,943
Other		4,473		5		4,478		0		4,478		1,085		47		-			1,132
Total sales	$	198,540	$	74,082	$	272,622	$	0	$	272,622	$	184,494	$	103,916	$	(2,335	)	$	286,075

Timing of revenue recognition
Products transferred at a point in time	$	11,773	$	47,462	$	59,235	$	0	$	59,235	$	10,821	$	58,729	$	-		$	69,550
Products and services transferred over time		186,767		26,620		213,387		0		213,387		173,673		45,187		(2,335	)		216,525
Total sales	$	198,540	$	74,082	$	272,622	$	0	$	272,622	$	184,494	$	103,916	$	(2,335	)	$	286,075

	Nine Months Ended September 30, 2022
	FVS		SV		Eliminations and Other			Total
Primary geographical markets
United States	$	428,606	$	293,325	$	(2,335	)	$	719,596
Other		5,482		75		-			5,557
Total sales	$	434,088	$	293,400	$	(2,335	)	$	725,153

Timing of revenue recognition
Products transferred at a point in time	$	31,092	$	163,068	$	-		$	194,160
Products and services transferred over time		402,996		130,332		(2,335	)		530,993
Total sales	$	434,088	$	293,400	$	(2,335	)	$	725,153

	September 30, 2021			December 31, 2020			September 30, 2022			December 31, 2021
Land and improvements	$	8,721		$	8,721		$	12,554		$	9,810
Buildings and improvements		44,810			40,077			43,557			45,724
Plant machinery and equipment		49,076			41,054			52,872			49,305
Furniture and fixtures		18,588			16,259			15,441			20,421
Vehicles		2,590			2,404			2,057			2,607
Construction in process		10,986			8,724			10,396			12,700
Subtotal		134,771			117,239			136,877			140,567
Less accumulated depreciation		(77,397	)		(71,505	)		(69,907	)		(79,510	)
Total property, plant and equipment, net	$	57,374		$	45,734		$	66,970		$	61,057

	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020		2022		2021		2022		2021
Operating leases	$	2,048	$	1,551	$	5,984	$	4,657	$	2,683	$	2,048	$	7,492	$	5,984
Short-term leases⁽¹⁾		135		75		301		159		87		135		144		301
Total lease expense	$	2,183	$	1,626	$	6,285	$	4,816	$	2,770	$	2,183	$	7,636	$	6,285

	September 30,
	2022			2021
Weighted average remaining lease term of operating leases (in years)		8.2			9.2
Weighted average discount rate of operating leases		2.7	%		3.0	%

Years ending December 31:
2021⁽¹⁾	$	2,022
2022		7,607
2022⁽¹⁾				$	5,128
2023		7,342			10,214
2024		7,014			9,472
2025		6,247			8,328
2026					6,672
Thereafter		21,636			24,056
Total lease payments		51,868			63,870
Less: imputed interest		(6,704	)		(9,150)	)
Total lease liabilities	$	45,164		$	54,720

	Three Months Ended September 30, 2020
	Segment
	FVS		SV		Eliminations and Other			Consolidated

Fleet vehicle sales	$	136,382	$	0	$	0		$	136,382
Motor home chassis sales		0		38,190		0			38,190
Other specialty vehicle sales		0		17,601		0			17,601
Aftermarket parts and accessories sales		8,808		2,492		0			11,300
Total sales	$	145,190	$	58,283	$	0		$	203,473

Depreciation and amortization expense	$	934	$	1,412	$	632		$	2,978
Adjusted EBITDA		33,237		7,183		(7,827	)		32,593
Segment assets		165,216		149,103		74,474			388,793
Capital expenditures		1,482		371		505			2,358

	Nine Months Ended September 30, 2021
	Segment
	FVS		SV		Eliminations and Other			Consolidated

Fleet vehicle sales	$	474,292	$	0	$	0		$	474,292
Motor home chassis sales		0		118,666		0			118,666
Other specialty vehicle sales		0		82,914		0			82,914
Aftermarket parts and accessories sales		24,194		14,426		0			38,620
Total sales	$	498,486	$	216,006	$	0		$	714,492

Depreciation and amortization expense	$	2,302	$	4,645	$	1,365		$	8,312
Adjusted EBITDA		83,310		21,480		(23,309	)		81,481
Segment assets		200,358		199,997		29,920			430,275
Capital expenditures		12,489		3,153		1,485			17,127

	Nine Months Ended September 30, 2020
	Segment
	FVS		SV		Eliminations and Other			Consolidated

Fleet vehicle sales	$	351,117	$	0	$	0		$	351,117
Motor home chassis sales		0		74,840		0			74,840
Other specialty vehicle sales		0		45,316		0			45,316
Aftermarket parts and accessories sales		26,999		6,119		0			33,118
Total sales	$	378,116	$	126,275	$	0		$	504,391

Depreciation and amortization expense	$	2,591	$	4,313	$	3,934		$	10,838
Adjusted EBITDA		68,625		12,123		(20,429	)		60,319
Segment assets		165,216		149,103		74,474			388,793
Capital expenditures		5,306		2,060		875			8,241

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2021			2020			2021			2020
Income from continuing operations	$	20,999		$	19,375		$	49,482		$	29,983
Net (income) attributable to non-controlling interest		(77	)		(41	)		(1,102	)		(178	)
Add (subtract):
Interest expense		253			11			310			1,202
Depreciation and amortization expense		2,982			2,978			8,312			10,838
Income tax expense		6,910			7,253			15,952			7,084
Restructuring and other related charges		0			303			505			1,857
Acquisition related expenses and adjustments		594			650			808			922
Non-cash stock based compensation expense		2,079			2,064			6,571			6,181
Loss from liquidation of JV		0			0			643			0
Loss from write-off of construction in process		0			0			0			2,430
Adjusted EBITDA	$	33,740		$	32,593		$	81,481		$	60,319

	●	Income from continuing operations of ~~$21.0~~$17.3 million infor the third quarter of ~~2021,~~2022, compared to ~~$19.4~~$21.0 million infor the third quarter of ~~2020.~~2021.
	●	Diluted earnings per share from continuing operations of ~~$0.58 in~~$0.49 for the third quarter of ~~2021,~~2022, compared to ~~$0.54 in~~$0.58 for the third quarter of ~~2020.~~2021.

Adjusted EBITDA three months ended September 30, 2021	$	33.7
Product pricing and mix		20.7
Material and labor costs		(19.0	)
EV development costs		(5.6	)
Sales volume and other		(3.7	)
General and administrative costs and other		1.0
Adjusted EBITDA three months ended September 30, 2022	$	27.1

Adjusted EBITDA three months ended September 30, 2020	$	32.6
Sales volume including acquired business		17.7
Product pricing and mix		(6.1	)
Productivity net of material, labor and other costs		(6.3	)
General and administrative costs and other		(4.2	)
Adjusted EBITDA three months ended September 30, 2021	$	33.7

Adjusted EBITDA nine months ended September 30, 2021	$	81.5
Product pricing and mix		52.1
Material and labor costs		(58.9	)
EV development costs		(17.0	)
Sales volume and other		(19.1	)
General and administrative costs and other		1.5
Adjusted EBITDA nine months ended September 30, 2022	$	40.1

Adjusted EBITDA nine months ended September 30, 2020	$	60.3
Sales volume including acquired business		46.2
Product pricing and mix		(10.7	)
Productivity net of material, labor and other costs		3.7
Pre-production costs		(2.3	)
General and administrative costs and other		(15.7	)
Adjusted EBITDA nine months ended September 30, 2021	$	81.5

	Three Months Ended						Nine Months Ended						Three Months Ended					Nine Months Ended
	September 30,						September 30,						September 30,					September 30,
	2021			2020			2021			2020			2022		2021			2022		2021
Income from continuing operations	$	20,999		$	19,375		$	49,482		$	29,983		$	17,286	$	20,999		$	18,717	$	49,482
Net (income) attributable to non-controlling interest		(77	)		(41	)		(1,102	)		(178	)		-		(77	)		-		(1,102	)
Add (subtract):
Interest expense		253			11			310			1,202			1,137		253			1,754		310
Depreciation and amortization expense		2,982			2,978			8,312			10,838			3,359		2,982			10,055		8,312
Income tax expense		6,910			7,253			15,952			7,084			3,770		6,910			3,346		15,952
Restructuring and other related charges		-			303			505			1,857			53		-			514		505
Acquisition related expenses and adjustments		594			650			808			922			243		594			800		808
Non-cash stock based compensation expense		2,079			2,064			6,571			6,181			1,214		2,079			4,922		6,571
Loss from liquidation of JV		-			-			643			-			-		-			-		643
Loss from write-off of construction in process		-			-			-			2,430
Adjusted EBITDA	$	33,740		$	32,593		$	81,481		$	60,319		$	27,062	$	33,740		$	40,108	$	81,481

	Financial Data										Financial Data
	(Dollars in Thousands)										(Dollars in Thousands)
	Three Months Ended September 30,										Three Months Ended September 30,
	2021					2020					2022					2021
	Amount		Percentage			Amount		Percentage			Amount		Percentage			Amount		Percentage

Sales	$	198,540		100.0	%	$	145,190		100.0	%	$	184,494		100.0	%	$	191,387		100.0	%
Adjusted EBITDA		36,813		18.5	%		33,237		22.9	%		24,361		13.2	%		36,393		19.0	%

Date dividend declared	Record date	Payment date	Dividend per share ($)
Aug. 6, 2020	Aug. 18, 2021	Sep. 15, 2021	$	0.025
May 7, 2021	May 18, 2021	June 18, 2021	$	0.025
Feb. 15, 2021	Feb. 25, 2021	Mar. 25, 2021	$	0.025
Nov. 6, 2020	Nov. 18, 2020	Dec. 18, 2020	$	0.025
Aug. 6, 2020	Aug. 18, 2020	Sep. 18, 2020	$	0.025
May 8, 2020	May 18, 2020	Jun. 18, 2020	$	0.050

Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Number of Shares that May Yet Be Purchased Under the Plans or Programs⁽¹⁾		Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Approximate Dollar Value of Shares That May Yet be Purchased Under Announced Plans or Programs⁽¹⁾ (In millions)
July 1 to July 31		257	$	38.26		-		408,994		442	$	22.40		-	$	242.1
August 1 to August 31		-		-		-		408,994		-		-		-		242.1
September 1 to September 30		1,765		42.87		-		408,994		1,852		24.15		-		242.1
Total		2,022				-		408,994		2,294				-

Exhibit No.		Document

3		Second Amended and Restated Bylaws (incorporated by reference to Exhibit 3 of the Current Report on Form 8-K filed October 21, 2022).

10*		Executive Severance Policy (incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K filed August 10, 2022).

31.1		Certification of President and 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.

101.INS		Inline XBRL Instance Document (the Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)

101.SCH		Inline XBRL Taxonomy Extension Schema Document

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document

104		Cover Page Interactive Data File (Embedded within the Inline XBRL document and included in Exhibit 101)

Date: ~~November 4, 2021~~October 27, 2022	THE SHYFT GROUP, INC.



	By	/s/ Jonathan C. Douyard
		Jonathan C. Douyard Chief Financial Officer