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 ~~June~~September 30, 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 ~~July 22,~~October 21, 2022
Common Stock	~~35,069,522~~35,070,921 shares

Table of Contents

This 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, as amended. These statements involve important known and unknown risks, uncertainties and other factors and generally can be identified by phrases using “estimate,” “anticipate,” “believe,” “project,” “expect,” “intend,” “predict,” “potential,” “future,” “may,” “will,” “should” or similar expressions or words. The Shyft Group, Inc.'s (the “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 Item 1A – Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the Securities and Exchange Commission on February 24, 2022, subject to any changes and updates disclosed in Part II, Item 1A – Risk Factors 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.

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.

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

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)

As used herein, the term “Company”, “we”, “us” or “our” refers to The Shyft Group, Inc. and 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 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 ~~June~~September 30, 2022, and our results of operations and cash flows for the three and ~~six~~nine months ended ~~June~~September 30, 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, 2021 filed with the Securities and Exchange Commission on February 24, 2022. The results of operations for the three and ~~six~~nine months ended ~~June~~ September 30,2022,are not necessarily indicative of the results expected for the full year.

For a description of key accounting policies followed, refer to the notes to The Shyft Group, Inc. consolidated financial statements for the year ended December 31, 2021, included in our Annual Report on Form 10-K.

Non-cash investing in the ~~six~~nine months ended ~~June~~ September 30,2022and ~~June~~ September 30,2021,included ~~$1,994~~$982 and ~~$1,051~~$394 of capital 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 4 – Debt" for further information about the chassis pool agreements.

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 results of the ERV business have been reclassified to Income from discontinued operations, net of tax in the Condensed Consolidated Statements of Operations for the three and ~~six~~nine months ended ~~June~~ September 30,2021.

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

There were no depreciation and amortization expenses or capital expenditures for the discontinued operations for the three and ~~six~~nine months ended ~~June~~ September 30,2022and 2021.

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 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. 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.

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

On 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, we may borrow up to $400,000 from the Lenders under a secured revolving credit facility which matures November 30, 2026. We may also request an increase in the facility of up to $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. 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 ~~2.78%~~4.14% (or one-month LIBOR plus 1.00%) at ~~June~~ September 30,2022.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 ~~June~~ September 30,2022and December 31, 2021, we had outstanding letters of credit totaling ~~$1,110~~$1,100 and $760, respectively, related to our workers’ compensation insurance.

Under the terms of our Credit Agreement, available borrowings (exclusive of outstanding borrowings) totaled ~~$199,357~~$165,441 and $376,776 at ~~June~~ September 30,2022and December 31, 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 ~~June~~ September 30,2022and December 31, 2021, we were in compliance with all covenants in our Credit Agreement.

Changes in our contract assets and liabilities for the ~~six~~nine months ended ~~June~~ September 30,2022and 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 ~~FVS~~Fleet Vehicles and SVServices ("FVS") and Specialty Vehicles ("SV") segments are ~~$1,000,021~~$915,135 and ~~$135,162,~~$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
(Dollar amounts in thousands, except per share data)

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

We recorded depreciation expense of ~~$2,626~~$2,404 and ~~$1,899~~$2,138 during the three months ended ~~June~~ September 30,2022and 2021, respectively, and ~~$4,751~~$7,155 and ~~$3,640~~$5,778 during the ~~six~~nine months ended ~~June~~ September 30,2022and 2021, respectively.

We have operating and finance leases for land, buildings and certain equipment. Our leases have remaining lease terms of one year to 18 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 4 – 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 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 ~~June~~ September 30,2022are as follows:

⁽¹⁾Excluding the ~~six~~nine months ended ~~June~~ September 30,2022.

At ~~June~~ September 30,2022,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.

As previously disclosed, in May 2020, the Company received an information request from the United States Environmental Protection Agency (“EPA”) requesting certain information regarding emissions labels on 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.

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 the potential fines or penalties that the Company may incur (if any) for this matter.

Our effective income tax rate was ~~21.7%~~17.9% and ~~24.7%~~24.8% for the three months ended ~~June~~September 30, 2022 and 2021, respectively, ~~compared to a tax benefit of (42.1%)~~ and ~~a tax expense of 24.1%~~15.2% and 24.4% for the ~~six~~nine months ended ~~June~~September 30, 2022 and 2021, respectively.

The effective tax ~~rates of~~ ~~21.7%~~ ~~and~~ ~~24.7%~~rate for the three months ended ~~June~~September 30, 2022 ~~and~~ ~~2021,~~ ~~respectively, are higher~~is lower than the U.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 2021 was higher than the U.S. statutory tax rate due to non-deductible executive ~~compensation.~~compensation and state income taxes.

Our effective income tax rate ~~was a tax benefit of (~~~~42.1%~~~~) in~~for the first ~~six~~nine months of 2022 at 15.2% was lower as compared to ~~a tax expense of~~ ~~24.1%~~24.4% in the first ~~six~~nine months of 2021 primarily because of ~~a discrete~~the tax benefit ~~related to the difference~~from increased research credits in ~~stock compensation expense recognized for book purposes and tax purposes upon vesting.~~

NOTE 10 – 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.

Our FVS segment manufactures commercial vehicles used in 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 June 30, 2022									Three Months Ended September 30, 2022
	Segment									Segment
	FVS		SV		Eliminations and Other			Consolidated		FVS		SV		Eliminations and Other			Consolidated

Fleet vehicle sales	$	126,181	$	0	$	0		$	126,181	$	173,673	$	-	$	-		$	173,673
Motor home chassis sales		0		42,710		0			42,710		-		50,399		-			50,399
Other specialty vehicle sales		0		47,044		0			47,044		-		48,570		(2,335	)		46,235
Aftermarket parts and accessories sales		10,716		5,544		0			16,260		10,821		4,947		-			15,768
Total sales	$	136,897	$	95,298	$	0		$	232,195	$	184,494	$	103,916	$	(2,335	)	$	286,075

Depreciation and amortization expense	$	1,182	$	1,953	$	592		$	3,727	$	1,144	$	1,692	$	523		$	3,359
Adjusted EBITDA		14,525		12,859		(13,695	)		13,689		24,361		15,550		(12,849	)		27,062
Segment assets		228,863		223,388		42,762			495,013		281,510		231,185		39,004			551,699
Capital expenditures		3,666		452		929			5,047		2,791		220		195			3,206

Table of Contents

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

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

Fleet vehicle sales	$	153,171	$	0	$	0		$	153,171	$	402,996	$	-	$	-		$	402,996
Motor home chassis sales		0		40,891		0			40,891		-		138,000		-			138,000
Other specialty vehicle sales		0		36,070		0			36,070		-		140,320		(2,335	)		137,985
Aftermarket parts and accessories sales		8,447		5,403		0			13,850		31,092		15,080		-			46,172
Total sales	$	161,618	$	82,364	$	0		$	243,982	$	434,088	$	293,400	$	(2,335	)	$	725,153

Depreciation and amortization expense	$	547	$	1,743	$	469		$	2,759	$	3,074	$	5,306	$	1,675		$	10,055
Adjusted EBITDA		28,116		8,808		(8,354	)		28,570		38,015		38,508		(36,415	)		40,108
Segment assets		176,921		218,434		23,722			419,077		281,510		231,185		39,004			551,699
Capital expenditures		3,866		320		311			4,497		10,590		906		2,202			13,698

Six Months Ended
June 30, 2022

Segment

FVS

SV

Eliminations
and Other

Consolidated

Fleet vehicle sales
$ 229,323 $ 0 $ 0 $ 229,323
Motor home chassis sales
0 87,601 0 87,601
Other specialty vehicle sales
0 91,750 0 91,750
Aftermarket parts and accessories sales
20,271 10,133 0 30,404
Total sales
$ 249,594 $ 189,484 $ 0 $ 439,078

Depreciation and amortization expense
$ 1,930 $ 3,614 $ 1,152 $ 6,696
Adjusted EBITDA
13,654 22,958 (23,566 ) 13,046
Segment assets
228,863 223,388 42,762 495,013
Capital expenditures
7,799 686 2,007 10,492

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

Fleet vehicle sales	$	270,197	$	0	$	0		$	270,197	$	452,635	$	-	$	-		$	452,635
Motor home chassis sales		0		76,159		0			76,159		-		118,666		-			118,666
Other specialty vehicle sales		0		70,798		0			70,798		-		104,571		-			104,571
Aftermarket parts and accessories sales		15,245		9,471		0			24,716		24,194		14,426		-			38,620
Total sales	$	285,442	$	156,428	$	0		$	441,870	$	476,829	$	237,663	$	-		$	714,492

Depreciation and amortization expense	$	1,061	$	3,457	$	812		$	5,330	$	1,805	$	5,142	$	1,365		$	8,312
Adjusted EBITDA		45,982		16,168		(14,409	)		47,741		82,375		22,415		(23,309	)		81,481
Segment assets		176,921		218,434		23,722			419,077		179,580		220,775		29,920			430,275
Capital expenditures		8,008		3,325		603			11,936		11,852		3,790		1,485			17,127

The Shyft Group, Inc. was organized as a Michigan corporation 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 as well as truck accessories.

Our vehicles, parts and services are sold to commercial users, original equipment manufacturers (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 growing opportunities that we have capitalized on in last mile delivery as a result of the rapidly changing e-commerce market is an excellent example of our ability to generate growth and profitability by quickly fulfilling customer needs.

We believe we can best carry out our long-term business plan and obtain optimal financial flexibility by using a combination of borrowings under our credit facilities, as well as internally or externally generated equity capital, as sources of 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 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):

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

For the quarter ended ~~June~~September 30, 2022, we reported consolidated sales of ~~$232.2~~$286.1 million, compared to ~~$244.0~~$272.6 million for the ~~second~~third quarter of 2021, ~~a decrease~~an increase of ~~$11.8~~$13.5 million or ~~(4.8%)~~4.9%. This ~~decrease~~increase reflects ~~lower sales volumes in our Fleet Vehicles and Services (“FVS”) segment due to supply chain constraints, partially offset by~~ strong demand in our Specialty Vehicles (“SV”) segment and favorable pricing implemented to offset material and labor ~~inflation.~~inflation, partially offset by lower sales volumes in our Fleet Vehicles and Services (“FVS”) segment primarily due to supply chain constraints.

Cost of products sold was ~~$190.1~~$232.0 million in the ~~second~~third quarter of 2022, compared to ~~$192.1~~$216.6 million for the ~~second~~third quarter of 2021, ~~a decrease~~an increase of ~~$2.0~~$15.4 million or ~~(1.0%)~~7.1%. Cost of products sold ~~decreased $24.6 million due to volume and mix, partially offset~~increased by ~~$16.5~~$15.7 million in higher material and labor costs and ~~$6.1~~$2.7 million due to ~~lower productivity~~inefficiencies and other costs in locations impacted by supply chain constraints. These increases were partially offset by $3.0 million due to volume and mix.

Gross profit was ~~$42.1~~$54.1 million for the ~~second~~third quarter of 2022, compared to ~~$51.9~~$56.1 million for the ~~second~~third quarter of 2021, a decrease of ~~$9.8~~$2.0 million or ~~(18.9%~~(3.5%). Gross profit decreased ~~$16.5~~$15.7 million due to higher material and labor costs, ~~$6.1~~$5.1 million due to ~~lower productivity~~inefficiencies in locations impacted by supply chain constraints and ~~$7.7~~$1.9 million in volume, ~~and other costs,~~ partially offset by price and mix increases of ~~$20.5~~$20.7 million.

Operating expenses were ~~$34.4~~$32.1 million for the ~~second~~third quarter of 2022, compared to ~~$29.7~~$28.0 million for the ~~second~~third quarter of 2021, an increase of ~~$4.7~~$4.1 million or ~~16.0%~~14.8%. Research and development expense for the ~~second~~third quarter of 2022 was ~~$7.6~~$7.1 million, compared to ~~$0.9~~$2.6 million in the ~~second~~third quarter of 2021, an increase of ~~$6.7~~$4.5 million primarily related to the electric vehicle development initiatives. Selling, general and administrative expense was ~~$26.9~~$25.0 million for the ~~second~~third quarter of 2022, compared to ~~$28.7~~$25.4 million for the ~~second~~third quarter of 2021, a decrease of ~~$1.8~~$0.4 million, primarily driven by cost reduction actions.

Interest expense was ~~$0.5~~$1.1 million for the ~~second~~third quarter of 2022, compared to $0.3 million for the ~~second~~third quarter of 2021, driven by higher borrowing costs. Other ~~expense~~income was ~~$0.5~~$0.2 million for the ~~second~~third quarter of 2022, compared to income of ~~$0.5~~$0.1 million for the ~~second~~third quarter of 2021.

Our effective income tax rate was ~~21.7%~~17.9% in the ~~second~~third quarter of 2022, compared to ~~24.7%~~24.8% in the ~~second~~third quarter 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, ~~and~~the impact of non-deductible executive compensation, ~~affected favorably by~~and a discrete tax benefit related to ~~vested~~the difference in stock ~~compensation.~~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 an increase in the tax benefit of research credits.

Income from continuing operations for the ~~second~~third quarter of 2022 decreased by ~~$11.7~~$3.7 million to ~~$5.3~~$17.3 million compared to ~~$17.0~~$21.0 million for the ~~second~~third quarter of 2021. On a diluted per share basis, Income from continuing operations decreased ~~$0.29~~$0.09 to ~~$0.15~~$0.49 for the ~~second~~third quarter of 2022 compared to earnings of ~~$0.44~~$0.58 per share for the ~~second~~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 ~~second~~third quarter of 2022 or 2021.

Our consolidated Adjusted EBITDA for the ~~second~~third quarter of 2022 was ~~$13.7~~$27.1 million, compared to ~~$28.6~~$33.7 million for the ~~second~~third quarter of 2021, a decrease of ~~$14.9~~$6.6 million or ~~(52.1%~~(19.8%).

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

~~Six~~Nine Months Ended ~~June~~September 30, 2022 Compared to the ~~Six~~Nine Months Ended ~~June~~September 30, 2021

For the ~~six~~nine months ended ~~June~~September 30, 2022, we reported consolidated sales of ~~$439.1~~$725.2 million, compared to ~~$441.9~~$714.5 million for the ~~six~~nine months ended ~~June~~September 30, 2021, ~~a decrease~~an increase of ~~$2.8~~$10.7 million or ~~(0.6%)~~1.5%. This ~~decrease~~increase reflects ~~lower sales volumes in our FVS segment due to supply chain constraints, partially offset by~~ strong demand in our SV segment and favorable pricing implemented to offset material and labor ~~inflation.~~inflation, partially offset by lower sales volumes in our FVS segment primarily due to supply chain constraints.

Cost of products sold was ~~$371.0~~$603.0 million for the ~~six~~nine months ended ~~June~~September 30, 2022, compared to ~~$350.0~~$566.5 million for the ~~six~~nine months ended ~~June~~September 30, 2021, an increase of ~~$21.1~~$36.5 million or ~~6.0%~~6.4%. Cost of products sold increased ~~$32.1~~$47.8 million due to higher material and labor costs, ~~$14.3~~$17.0 million due to ~~lower productivity~~inefficiencies and other costs in locations impacted by supply chain constraints, partially offset by lower volume and mix of ~~$25.3~~$28.3 million.

Gross profit was ~~$68.1~~$122.1 million for the ~~six~~nine months ended ~~June~~September 30, 2022, compared to ~~$91.9~~$148.0 million for the ~~six~~nine months ended ~~June~~September 30, 2021, a decrease of ~~$23.8~~$25.9 million or ~~(25.9%~~(17.4%). Gross profit decreased ~~$32.1~~$47.8 million due to higher material and labor costs, ~~$14.3~~$19.5 million due to ~~lower productivity~~inefficiencies and other costs in locations impacted by supply chain constraints, and ~~$8.8~~$10.7 million in volume, ~~and other costs,~~ partially offset by price and mix increases of ~~$31.4~~$52.1 million.

Operating expenses were ~~$65.9~~$98.0 million for the ~~six~~nine months ended ~~June~~September 30, 2022, compared to ~~$55.0~~$82.9 million for the ~~six~~nine months ended ~~June~~September 30, 2021, an increase of ~~$10.9~~$15.1 million or ~~19.8%~~18.1%. Research and development expense for the ~~six~~nine months ended ~~June~~September 30, 2022 was ~~$12.5~~$19.5 million, compared to ~~$1.7~~$4.3 million for the ~~six~~nine months ended ~~June~~September 30, 2021, an increase of ~~$10.8~~$15.2 million primarily related to the electric vehicle development initiatives. Selling, general and administrative expense was ~~$53.4~~$78.4 million for the ~~six~~nine months ended ~~June~~September 30, 2022, compared to ~~$53.3~~$78.6 million for the ~~six~~nine months ended ~~June~~September 30, 2021, ~~an increase~~a decrease of ~~$0.1 million, primarily driven by an increase in compensation expense related to growth and expenses related to electric vehicle development initiatives.~~$0.2 million.

Interest expense was ~~$0.6~~$1.7 million for the ~~six~~nine months ended ~~June~~September 30, 2022, compared to ~~$0.1~~$0.3 million for the ~~six~~nine months ended ~~June~~September 30, 2021, driven by higher borrowing costs. Other expense was ~~$0.5~~$0.3 million for the ~~six~~nine months ended ~~June~~September 30, 2022, compared to income of $0.7 million for the ~~six~~nine months ended ~~June~~September 30, 2021.

Our effective income tax rate was ~~a tax benefit of (42.1%)~~15.2% in the first ~~six~~nine months of 2022, compared to ~~a tax expense of 24.1%~~24.4% in the first ~~six~~nine months of 2021. The effective tax ~~rate~~rates for 2022 ~~reflects the favorable impact of the excess of the discrete tax benefit related to vested stock compensation over~~and 2021 reflect the impact of current statutory income tax rates on our Income from continuing operations before ~~taxes. The effective tax rate for 2021 reflects~~taxes, the impact of ~~current statutory income tax rates on our Income before taxes partially offset by~~non-deductible executive compensation, and a discrete tax benefit ~~of $0.7 million~~ 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 ~~six~~nine months ended ~~June~~September 30, 2022 decreased by ~~$27.1~~$30.8 million to ~~$1.4~~$18.7 million compared to income of ~~$28.5~~$49.5 million for the ~~six~~nine months ended ~~June~~September 30, 2021. On a diluted per share basis, Income from continuing operations decreased ~~$0.72~~$0.81 to ~~$0.04~~$0.53 for the ~~six~~nine months ended ~~June~~September 30, 2022, compared to earnings of ~~$0.76~~$1.34 per share for the ~~six~~nine months ended ~~June~~September 30, 2021. Driving this ~~increase~~decrease were the factors noted above.

Income from discontinued operations, net of income taxes for the ~~six~~nine months ended ~~June~~September 30, 2022 decreased by $0.1 million to none compared to $0.1 million for the ~~six~~nine months ended ~~June~~September 30, 2021, primarily attributable to 2021 winddown activities subsequent to the ERV divestiture not repeated in 2022.

Our consolidated Adjusted EBITDA for the ~~six~~nine months ended ~~June~~September 30, 2022 was ~~$13.0~~$40.1 million, compared to ~~$47.7~~$81.5 million for the ~~six~~nine months ended ~~June~~September 30, 2021, a decrease of ~~$34.7~~$41.4 million or ~~(72.7%~~(50.8%).

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

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

The consolidated backlog at ~~June~~September 30, 2022, totaled ~~$1,135.2~~$1,043.9 million, up ~~51.1%~~22.4%, compared to ~~$751.4~~$852.6 million at ~~June~~September 30, 2021, which reflects strong demand for vehicles across the Company’s product portfolio.

Our Fleet Vehicles and Services backlog increased by ~~$347.4~~$165.4 million, or ~~53.2%~~22.1%, which reflects strong demand for vehicles across the segment’s walk in van, Velocity and Truck Body products. Our Specialty Vehicles segment backlog increased by ~~$36.4~~$25.9 million, or ~~36.8%~~25.2%, due to increased ~~motor home chassis and~~ service 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.

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.

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.

For certain financial information related to each segment, see "Note 10 – 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 ~~$136.9~~$184.5 million for the ~~second~~third quarter of 2022, compared to ~~$161.6~~$191.4 million for the ~~second~~third quarter of 2021, a decrease of ~~$24.7~~$6.9 million or ~~(15.3%~~(3.6%). This decrease was primarily attributable to a sales volume decrease due to supply chain constraints, partially offset by pricing actions.

Adjusted EBITDA in our FVS segment for the ~~second~~third quarter of 2022 was ~~$14.5~~$24.4 million compared to ~~$28.1~~$36.4 million for the ~~second~~third quarter of 2021, a decrease of ~~$13.6~~$12.0 million or ~~(48.3%~~(33.1%). This decrease was primarily attributable to ~~$14.7 million lower volume and productivity due to supply chain constraints and $8.4~~$12.0 million in material and labor ~~inflation.~~inflation and $9.4 million lower volume and inefficiencies due to supply chain constraints. These costs were partially offset by pricing and mix of ~~$8.5 million and lower manufacturing and other costs of $1.0~~$9.4 million.

Sales in our FVS segment were ~~$249.6~~$434.1 million for the ~~six~~nine months ended ~~June~~September 30, 2022, compared to ~~$285.4~~$476.8 million for ~~six~~nine months ended ~~June~~September 30, 2021, a decrease of ~~$35.8~~$42.7 million or ~~(12.6%~~(9.0%). This decrease was primarily attributable to a sales volume decrease due to supply chain constraints, partially offset by pricing actions.

Adjusted EBITDA in our FVS segment for the ~~six~~nine months ended ~~June~~September 30, 2022 was ~~$13.7~~$38.0 million compared to ~~$46.0~~$82.4 million for the ~~six~~nine months ended ~~June~~September 30, 2021, a decrease of ~~$32.3~~$44.4 million or ~~(70.3%~~(53.9%). This decrease was primarily attributable to ~~$21.8 million lower volume and productivity due to supply chain constraints, $16.5~~$27.5 million in material and labor inflation, $26.7 million lower volume and ~~$5.0~~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 ~~$11.0~~$20.5 million.

Sales in our SV segment were ~~$95.3~~$103.9 million in the ~~second~~third quarter of 2022, compared to ~~$82.4~~$81.2 million for the ~~second~~third quarter of 2021, an increase of ~~$12.9~~$22.7 million or ~~15.7%~~27.9%. This increase was due to strong sales volume growth coupled with pricing actions to offset material and labor inflation.

Adjusted EBITDA for our SV segment for the ~~second~~third quarter of 2022 was ~~$12.9~~$15.6 million, compared to ~~$8.8~~$6.2 million for the ~~second~~third quarter of 2021, an increase of ~~$4.1~~$9.4 million or ~~46.0%~~148.9%. This increase was primarily attributable to favorable pricing and mix of ~~$12.0~~$12.5 million, volume and productivity of ~~$0.4~~$3.9 million, offset by material and labor costs of ~~$8.1~~$4.7 million and increased operating and other expenses of ~~$0.2~~$2.4 million.

Sales in our SV segment were ~~$189.5~~$293.4 million for the ~~six~~nine months ended ~~June~~September 30, 2022, compared to ~~$156.4~~$237.7 million for the ~~six~~nine months ended ~~June~~September 30, 2021, an increase of ~~$33.1~~$55.7 million or ~~21.1%~~23.4%. This increase was due to strong sales volume growth coupled with pricing actions to offset material and labor inflation.

Adjusted EBITDA for our SV segment for the ~~six~~nine months ended ~~June~~September 30, 2022 was ~~$23.0~~$38.5 million, compared to ~~$16.2~~$22.4 million for the ~~six~~nine months ended ~~June~~September 30, 2021, an increase of ~~$6.8~~$16.1 million or ~~42.0%~~71.8%. This increase was primarily attributable to favorable pricing and mix of ~~$20.8~~$33.3 million, volume and productivity of ~~$3.0~~$6.9 million, offset by material and labor costs of ~~$15.6~~$20.3 million and increased operating and other expenses of ~~$1.4~~$3.9 million.

Cash and cash equivalents decreased by ~~$30.6~~$34.3 million from December 31, 2021, to a balance of ~~$6.6~~$2.9 million as of ~~June~~September 30, 2022. These funds, in addition to cash generated from future operations and availability under our existing credit facilities, are expected to be sufficient to finance our foreseeable liquidity and capital needs, including potential future acquisitions.

We used ~~$36.7~~$44.5 million of cash from operating activities during the ~~six~~nine months ended ~~June~~September 30, 2022, a decrease of ~~$39.9~~$86.8 million from ~~$3.2~~$42.3 million of positive cash flow during the ~~six~~nine months ended ~~June~~September 30, 2021. The decrease is primarily due to a ~~$26.5~~$30.2 million decrease in net income ~~(loss)~~ adjusted for non-cash charges to operations and a ~~$13.4~~$56.6 million decrease in the change in net working capital. The change in net working capital is primarily attributable to a ~~$12.8~~$30.2 million 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 ~~$20.4 decrease in the change in payables, a $6.8~~$4.4 million decrease in the change in accrued compensation, and a $1.2 million decrease in the change in accrued warranty, partially offset by a ~~$29.8~~$6.3 million increase in the change in ~~receivables~~other assets and ~~contract assets.~~liabilities.

As of ~~June~~September 30, 2022, ~~receivables decreased~~contract assets increased $65.6 million and contract liabilities increased by ~~$8.0~~$9.6 million ~~compared to the prior year end,~~ primarily due to ~~improved timing of cash receipts.~~increased work in process production resulting from industry wide supply chain constraints. Inventories increased by ~~$34.8~~$44.0 million primarily due to increased raw material inventories relative to finished goods due to industry wide supply chain interruptions. Payables increased by ~~$7.8~~$24.2 million primarily due to the Company’s continued focus on extending payment terms with suppliers. ~~Contract assets increased $20.9 million primarily due to increased work in process production resulting from industry wide supply chain constraints.~~

We used ~~$9.9~~$14.1 million in investing activities during the ~~six~~nine months ended ~~June~~September 30, 2022, a decrease in cash used of ~~$2.1~~$3.2 million from ~~$12.0~~$17.3 million used during the ~~six~~nine months ended ~~June~~September 30, 2021. The decrease in cash used in investing activities is primarily due to a ~~$2.4~~$4.0 million decrease in the purchases of property, plant and equipment.

We generated ~~$16.0~~$24.3 million of cash through financing activities during the ~~six~~nine months ended ~~June~~September 30, 2022, an increase in cash generated of ~~$24.1~~$55.7 million from ~~$8.1~~$31.5 million used during the ~~six~~nine months ended ~~June~~September 30, 2021. The increase in cash provided by financing activities is primarily attributable to ~~$70.0~~$95.0 million of increased proceeds from long-term debt, partially offset by ~~$15.0~~$7.6 million of increased payments on long-term debt, a $23.4 million increase in the purchase and retirement of common stock, ~~and~~ a ~~$5.6~~$5.5 million increase in issuance and vesting of stock ~~awards.~~awards, and a $2.7 million increase in the payment of dividends.

On 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, we may borrow up to $400.0 million from the Lenders under a secured revolving credit facility which matures November 30, 2026. We may also request an increase in the facility of up to $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 ~~$20.0million~~$20.0 million and swing line loans of up to $10.0 million, subject to certain limitations and 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 ~~2.78%~~4.14% (or one-month LIBOR plus 1.00%) at ~~June~~September 30, 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 ~~June~~September 30, 2022 and December 31, 2021, we had outstanding letters of credit totaling $1.1 million and $0.8 million, respectively, related to our workers’ compensation insurance.

Under the terms of our Credit Agreement, available borrowings (exclusive of outstanding borrowings) totaled ~~$199.4~~$165.4 million and $376.8 million at ~~June~~September 30, 2022 and December 31, 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 ~~June~~September 30, 2022 and December 31, 2021, we were in compliance with all covenants in our Credit Agreement.

On February 17, 2022, our Board of Directors authorized the repurchase of up to $250.0 million of our common stock in open market transactions. In the first quarter of 2022, we repurchased 607,306 shares for $26.8 million and made no repurchases in the second ~~quarter~~and third quarters of 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. We declared dividends on our outstanding common shares in 2022 and 2021 as shown in the table below.

Inflation affects us in two principal ways. First, our revolving credit agreement is generally tied to the prime and LIBOR interest rates so that increases in those interest rates would be translated into additional interest expense. Second, general inflation impacts prices paid for labor, parts and supplies. Whenever possible, we attempt to cover increased costs of production and capital by adjusting the prices of our products. However, we generally do not attempt to negotiate inflation-based price adjustment provisions into our contracts. We have limited ability to pass on cost increases to our customers on a short-term basis. In addition, the markets we serve are competitive in nature, and competition limits our ability to pass through cost increases in many cases. We strive to minimize the effect of inflation through cost reductions and improved productivity. Refer to the Commodities Risk section in Item 3 of this Form 10-Q for further information regarding commodity cost fluctuations.

We are exposed to market risks related to changes in interest rates and the effect of such a change on outstanding variable rate short-term and long-term debt. At ~~June~~September 30, 2022, we had ~~$55.0~~$65.0 million debt outstanding under our revolving line of credit agreement. An increase of 100 basis points in interest rates would result in ~~$0.6~~$0.7 million of incremental interest expense on an annualized basis. We believe that we have sufficient financial resources to accommodate this hypothetical increase in interest rates. We do not enter into market-risk-sensitive instruments for trading or other purposes.

The interest rate charged on our outstanding borrowings pursuant to our credit facility is currently based on LIBOR, as described in Part 1, Item 1, "Note 4 – Debt" of this Form 10-Q. On July 27, 2017, the Financial Conduct Authority in the U.K. announced that it would phase out LIBOR by the end of 2021. On November 30, 2020, the ICE Benchmark Administration Limited (ICE) announced plans to delay the phase out of LIBOR to June 30, 2023. The U.S. Federal Reserve is considering replacing U.S. dollar LIBOR with a newly created index called the Secured Overnight Funding Rate (SOFR), a broad measure of the cost of borrowing cash overnight collateralized by U.S. Treasury securities. Our credit facility provides for the transition to a replacement for LIBOR, and it also provides for an alternative to LIBOR. When LIBOR ceases to exist, our interest expense is not expected to increase materially. It is also possible that the overall financing market may be disrupted as a result of the phase-out or replacement of LIBOR with SOFR or any other reference rate. Increased interest expense and/or disruption in the financial market could have a material adverse effect on our business, financial condition, or results of operations.

We are also exposed to changes in the prices of raw materials, primarily steel and aluminum, along with components that are made from these raw materials. We generally do not enter into derivative instruments for the purpose of managing exposures associated with fluctuations in steel and aluminum prices. We do, from time to time, engage in pre-buys of components that are impacted by changes in steel, aluminum and other commodity prices in order to mitigate our exposure to such price increases and align our costs with prices quoted in specific customer orders. We also actively manage our material supply sourcing and may employ various methods to limit risk associated with commodity cost fluctuations due to normal market conditions and other factors including tariffs. See Management’s Discussion and Analysis of Financial Condition and Results of Operations included in Part 1, Item 2 of this Form 10-Q for information on the impacts of changes in input costs during the three and ~~six~~nine months ended ~~June~~September 30, 2022.

We do not believe that there has been a material change in the nature or categories of the primary market risk exposures or in the particular markets that present our primary risk of loss. As of the date of this report, we do not know of or expect any material changes in the general nature of our primary market risk exposure in the near term. In this discussion, “near term” means a period of one year following the date of the most recent balance sheet contained in this report.

Prevailing interest rates, interest rate relationships and commodity costs are primarily determined by market factors that are beyond our control. All information provided in response to this item consists of forward-looking statements. Reference is made to the section captioned “Forward-Looking Statements” before Part I of this Quarterly Report on Form 10-Q for a discussion of the limitations on our responsibility for such statements.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended), as of the end of the period covered by this Quarterly Report. Based on the evaluation of our disclosure controls and procedures as of ~~June~~September 30, 2022, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective.

~~There have been~~In August 2022, Shyft implemented a new enterprise resource planning system at the Corporate location. In connection with this implementation, Shyft replaced multiple internal controls with new or modified controls.

Except as described above, there were no changes ~~during the quarter ended June 30, 2022,~~ in our internal control over financial reporting during the quarter ended September 30, 2022, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

An effective internal control system, no matter how well designed, has inherent limitations, including the possibility of human error or overriding of controls, and therefore can provide only reasonable assurance with respect to reliable financial reporting. Because of its inherent limitations, our internal control over financial reporting may not prevent or detect all misstatements, including the possibility of human error, the circumvention or overriding of controls, or fraud. Effective internal controls can provide only reasonable assurance with respect to the preparation and fair presentation of financial statements.

See “Note 8 – Commitments and Contingent Obligations,” included in Part I, Item 1, “Notes to Unaudited Consolidated Financial Statements,” within this quarterly report on Form 10-Q.

We have included in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2021, a description of certain risks and uncertainties that could affect our business, future performance or financial condition (the “Risk Factors”). There have been no material changes from the disclosure provided in the Form 10-K for the year ended December 31, 2021 with respect to the Risk Factors. Investors should consider the Risk Factors prior to making an investment decision with respect to our stock.

On February 17, 2022, our Board of Directors authorized the repurchase of up to $250.0 million of our common stock in open market transactions. In the first quarter of 2022, we repurchased 607,306 shares for $26.8 million. During the second ~~quarter~~and third quarters of 2022, no shares were repurchased under this authorization. We believe that we have sufficient resources to fund any potential stock buyback in which we may engage.

(1) This column reflects the number of shares that may yet be purchased pursuant to the February 17, 2022 Board of Directors authorization described above.

During the quarter ended ~~June~~September 30, 2022, ~~12,193~~2,294 shares were delivered by associates in satisfaction of tax withholding obligations that occurred upon the vesting of restricted shares.

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

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

			Page

FORWARD-LOOKING STATEMENTS			3

PART I. FINANCIAL INFORMATION

	Item 1.	Financial Statements:

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

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

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

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

		Notes to Condensed Consolidated Financial Statements	8

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	27

	Item 4.	Controls and Procedures	28

PART II. OTHER INFORMATION

	Item 1.	Legal Proceedings	29

	Item 1A.	Risk Factors	29

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	29

	Item 6.	Exhibits	30

SIGNATURES			31

	June 30,		December 31,		September 30,		December 31,
	2022		2021		2022		2021
ASSETS
Current assets:
Cash and cash equivalents	$	6,607	$	37,158	$	2,862	$	37,158
Accounts receivable, less allowance of $162 and $187		79,241		87,262
Accounts receivable, less allowance of $176 and $187						87,673		87,262
Contract assets		42,368		21,483		87,099		21,483
Inventories		102,010		67,184		111,213		67,184
Other receivables – chassis pool agreements		23,636		9,926		24,277		9,926
Other current assets		13,698		10,813		12,813		10,813
Total current assets		267,560		233,826		325,937		233,826
Property, plant and equipment, net		66,169		61,057		66,970		61,057
Right of use assets – operating leases		54,426		43,316		53,156		43,316
Goodwill		48,880		48,880		48,880		48,880
Intangible assets, net		51,029		52,981		50,054		52,981
Net deferred tax assets		5,312		4,880		4,816		4,880
Other assets		1,637		2,927		1,886		2,927
TOTAL ASSETS	$	495,013	$	447,867	$	551,699	$	447,867

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	90,259	$	82,442	$	106,621	$	82,442
Accrued warranty		5,596		5,975		6,432		5,975
Accrued compensation and related taxes		12,918		19,064		15,559		19,064
Contract liabilities		1,359		988		10,601		988
Operating lease liability		9,706		7,934		10,060		7,934
Other current liabilities and accrued expenses		9,856		9,256		11,703		9,256
Short-term debt – chassis pool agreements		23,636		9,926		24,277		9,926
Current portion of long-term debt		192		252		190		252
Total current liabilities		153,522		135,837		185,443		135,837
Other non-current liabilities		7,004		8,108		6,576		8,108
Long-term operating lease liability		46,188		36,329		44,660		36,329
Long-term debt, less current portion		55,263		738		65,222		738
Total liabilities		261,977		181,012		301,901		181,012
Commitments and contingent liabilities
Shareholders' equity:
Preferred stock, no par value: 2,000 shares authorized (none issued)		-		0		-		-
Common stock, no par value: 80,000 shares authorized; 35,063 and 35,416 outstanding		88,894		95,375		90,160		95,375
Retained earnings		144,041		171,379		159,537		171,379
Total Shyft Group, Inc. shareholders’ equity		232,935		266,754		249,697		266,754
Non-controlling interest		101		101		101		101
Total shareholders' equity		233,036		266,855		249,798		266,855
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	495,013	$	447,867	$	551,699	$	447,867

	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021			2022			2021			2022			2021

Sales	$	232,195		$	243,982		$	439,078		$	441,870		$	286,075		$	272,622		$	725,153		$	714,492
Cost of products sold		190,077			192,076			371,029			349,978			231,979			216,564			603,008			566,542
Gross profit		42,118			51,906			68,049			91,892			54,096			56,058			122,145			147,950

Operating expenses:
Research and development		7,563			940			12,490			1,722			7,051			2,582			19,541			4,304
Selling, general and administrative		26,860			28,740			53,412			53,277			25,033			25,368			78,445			78,645
Total operating expenses		34,423			29,680			65,902			54,999			32,084			27,950			97,986			82,949

Operating income		7,695			22,226			2,147			36,893			22,012			28,108			24,159			65,001

Other income (expense)
Interest expense		(463	)		(227	)		(617	)		(57	)		(1,137	)		(253	)		(1,754	)		(310	)
Other income (expense)		(488	)		506			(523	)		689			181			54			(342	)		743
Total other income (expense)		(951	)		279			(1,140	)		632			(956	)		(199	)		(2,096	)		433

Income from continuing operations before income taxes		6,744			22,505			1,007			37,525			21,056			27,909			22,063			65,434
Income tax expense (benefit)		1,461			5,552			(424	)		9,042
Income tax expense														3,770			6,910			3,346			15,952
Income from continuing operations		5,283			16,953			1,431			28,483			17,286			20,999			18,717			49,482
Income from discontinued operations, net of income taxes		0			0			0			81			-			-			-			81
Net income		5,283			16,953			1,431			28,564			17,286			20,999			18,717			49,563
Less: net income attributable to non-controlling interest		0			990			0			1,025			-			77			-			1,102

Net income attributable to The Shyft Group Inc.	$	5,283		$	15,963		$	1,431		$	27,539		$	17,286		$	20,922		$	18,717		$	48,461

Basic earnings per share
Continuing operations	$	0.15		$	0.45		$	0.04		$	0.78		$	0.49		$	0.59		$	0.53		$	1.37
Discontinued operations		0			0			0			0			-			-			-			-
Basic earnings per share	$	0.15		$	0.45		$	0.04		$	0.78		$	0.49		$	0.59		$	0.53		$	1.37

Diluted earnings per share
Continuing operations	$	0.15		$	0.44		$	0.04		$	0.76		$	0.49		$	0.58		$	0.53		$	1.34
Discontinued operations		0			0			0			0			-			-			-			-
Diluted earnings per share	$	0.15		$	0.44		$	0.04		$	0.76		$	0.49		$	0.58		$	0.53		$	1.34

Basic weighted average common shares outstanding		35,049			35,333			35,078			35,322			35,056			35,346			35,071			35,330
Diluted weighted average common shares outstanding		35,243			36,190			35,437			36,191			35,365			36,074			35,481			36,024

	Six Months Ended June 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
Cash flows from operating activities:
Net income	$	1,431		$	28,564		$	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		6,696			5,330			10,055			8,312
Non-cash stock based compensation expense		3,708			4,492			4,922			6,571
Deferred income taxes		(432	)		134			64			134
Loss (Gain) on disposal of assets		481			(105	)
Loss (gain) on disposal of assets								481			(104	)
Changes in accounts receivable and contract assets		(12,863	)		(42,639	)		(66,026	)		(35,842	)
Changes in inventories		(34,826	)		(21,992	)		(44,029	)		(35,473	)
Changes in accounts payable		7,333			27,721			24,708			43,230
Changes in accrued compensation and related taxes		(6,146	)		665			(3,505	)		910
Changes in accrued warranty		(379	)		989			457			1,626
Change in other assets and liabilities		(1,672	)		69			9,663			3,396
Net cash provided by (used in) operating activities		(36,669	)		3,228			(44,493	)		42,323

Cash flows from investing activities:
Purchases of property, plant and equipment		(10,010	)		(12,373	)		(14,228	)		(18,238	)
Proceeds from sale of property, plant and equipment		148			15			148			16
Acquisition of business, net of cash acquired		0			404			-			904
Net cash used in investing activities		(9,862	)		(11,954	)		(14,080	)		(17,318	)

Cash flows from financing activities:
Proceeds from long-term debt		85,000			15,000			120,000			25,000
Payments on long-term debt		(30,000	)		(15,000	)		(55,000	)		(47,400	)
Payment of dividends		(3,640	)		(1,776	)		(5,395	)		(2,660	)
Purchase and retirement of common stock		(26,789	)		(3,348	)		(26,789	)		(3,348	)
Issuance and vesting of stock incentive awards		(8,591	)		(2,967	)		(8,539	)		(3,043	)
Net cash provided by (used in) financing activities		15,980			(8,091	)		24,277			(31,451	)

Net decrease in cash and cash equivalents		(30,551	)		(16,817	)		(34,296	)		(6,446	)
Cash and cash equivalents at beginning of period		37,158			20,995			37,158			20,995
Cash and cash equivalents at end of period	$	6,607		$	4,178		$	2,862		$	14,549

	Number of Shares			Common Stock			Retained Earnings			Non- Controlling Interest		Total Shareholders’ Equity			Number of Shares			Common Stock			Retained Earnings			Non- Controlling Interest		Total Shareholders’ Equity
Balance at December 31, 2021		35,416		$	95,375		$	171,379		$	101	$	266,855			35,416		$	95,375		$	171,379		$	101	$	266,855
Issuance of common stock and tax impact of stock incentive plan		3			(8,372	)		0			0		(8,372	)		3			(8,372	)		-			-		(8,372	)
Dividends declared ($0.05 per share)		-			0			(1,794	)		0		(1,794	)		-			-			(1,794	)		-		(1,794	)
Purchase and retirement of common stock		(607	)		(1,598	)		(25,191	)		0		(26,789	)		(607	)		(1,598	)		(25,191	)		-		(26,789	)
Issuance of restricted stock, net of cancellation		215			0			0			0		0			215			-			-			-		-
Non-cash stock based compensation expense		-			1,648			0			0		1,648			-			1,648			-			-		1,648
Net loss		-			0			(3,852	)		0		(3,852	)		-			-			(3,852	)		-		(3,852	)
Balance at March 31, 2022		35,027		$	87,053		$	140,542		$	101	$	227,696			35,027		$	87,053		$	140,542		$	101	$	227,696
Issuance of common stock and tax impact of stock incentive plan		3			(219	)		0			0		(219	)		3			(219	)		-			-		(219	)
Dividends declared ($0.05 per share)		-			0			(1,784	)		0		(1,784	)		-			-			(1,784	)		-		(1,784	)
Issuance of restricted stock, net of cancellation		33			0			0			0		0			33			-			-			-		-
Non-cash stock based compensation expense		-			2,060			0			0		2,060			-			2,060			-			-		2,060
Net income		-			0			5,283			0		5,283			-			-			5,283			-		5,283
Balance at June 30, 2022		35,063			88,894			144,041			101		233,036			35,063			88,894			144,041			101		233,036
Issuance of common stock and tax impact of stock incentive plan																6			52			-			-		52
Dividends declared ($0.05 per share)																			-			(1,790	)		-		(1,790	)
Issuance of restricted stock, net of cancellation																(6	)		-			-			-		-
Non-cash stock based compensation expense																			1,214			-			-		1,214
Net income																			-			17,286			-		17,286
Balance at September 30, 2022																35,063			90,160			159,537			101		249,798

	June 30, 2022		December 31, 2021
Finished goods	$	3,729	$	2,990
Work in process		7,169		2,471
Raw materials and purchased components		91,112		61,723
Total inventories	$	102,010	$	67,184

	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

	June 30, 2022			June 30, 2021			September 30, 2022			September 30, 2021
Contract Assets
Contract assets, beginning of period	$	21,483		$	9,414		$	21,483		$	9,414
Reclassification of the beginning contract assets to receivables, as the result of rights to consideration becoming unconditional		(20,777	)		(9,401	)		(21,482	)		(9,414	)
Contract assets recognized, net of reclassification to receivables		41,662			15,357			87,098			42,459
Contract assets, end of period	$	42,368		$	15,370		$	87,099		$	42,459

Contract Liabilities
Contract liabilities, beginning of period	$	988		$	756		$	988		$	756
Reclassification of the beginning contract liabilities to revenue, as the result of performance obligations satisfied		(988	)		(740	)		(988	)		(743	)
Cash received in advance and not recognized as revenue		1,359			361			10,601			2,135
Contract liabilities, end of period	$	1,359		$	377		$	10,601		$	2,148

	Three Months Ended June 30, 2022						Three Months Ended September 30, 2022
	FVS		SV		Total		FVS		SV		Eliminations and Other			Total
Primary geographical markets
United States	$	133,861	$	95,273	$	229,134	$	183,409	$	103,869	$	(2,335	)	$	284,943
Other		3,036		25		3,061		1,085		47		-			1,132
Total sales	$	136,897	$	95,298	$	232,195	$	184,494	$	103,916	$	(2,335	)	$	286,075

Timing of revenue recognition
Products transferred at a point in time	$	10,716	$	51,488	$	62,204	$	10,821	$	58,729	$	-		$	69,550
Products and services transferred over time		126,181		43,810		169,991		173,673		45,187		(2,335	)		216,525
Total sales	$	136,897	$	95,298	$	232,195	$	184,494	$	103,916	$	(2,335	)	$	286,075

	Three Months Ended June 30, 2021						Three Months Ended September 30, 2021
	FVS		SV		Total		FVS		SV		Eliminations and Other		Total
Primary geographical markets
United States	$	160,581	$	82,333	$	242,914	$	186,914	$	81,230	$	-	$	268,144
Other		1,037		31		1,068		4,473		5		-		4,478
Total sales	$	161,618	$	82,364	$	243,982	$	191,387	$	81,235	$	-	$	272,622

Timing of revenue recognition
Products transferred at a point in time	$	8,447	$	49,158	$	57,605	$	8,949	$	50,286	$	-	$	59,235
Products and services transferred over time		153,171		33,206		186,377		182,438		30,949		-		213,387
Total sales	$	161,618	$	82,364	$	243,982	$	191,387	$	81,235	$	-	$	272,622

	Six Months Ended June 30, 2022
	FVS		SV		Total
Primary geographical markets
United States	$	245,197	$	189,456	$	434,653
Other		4,397		28		4,425
Total sales	$	249,594	$	189,484	$	439,078

Timing of revenue recognition
Products transferred at a point in time	$	20,271	$	104,339	$	124,610
Products and services transferred over time		229,323		85,145		314,468
Total sales	$	249,594	$	189,484	$	439,078

	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

	Six Months Ended June 30, 2021						Nine Months Ended September 30, 2021
	FVS		SV		Total		FVS		SV		Eliminations and Other		Total
Primary geographical markets
United States	$	281,811	$	156,378	$	438,189	$	468,725	$	237,608	$	-	$	706,333
Other		3,631		50		3,681		8,104		55		-		8,159
Total sales	$	285,442	$	156,428	$	441,870	$	476,829	$	237,663	$	-	$	714,492

Timing of revenue recognition
Products transferred at a point in time	$	15,248	$	91,451	$	106,699	$	24,197	$	141,737	$	-	$	165,934
Products and services transferred over time		270,194		64,977		335,171		452,632		95,926		-		548,558
Total sales	$	285,442	$	156,428	$	441,870	$	476,829	$	237,663	$	-	$	714,492

	June 30, 2022			December 31, 2021			September 30, 2022			December 31, 2021
Land and improvements	$	12,554		$	9,810		$	12,554		$	9,810
Buildings and improvements		42,833			45,724			43,557			45,724
Plant machinery and equipment		52,647			49,305			52,872			49,305
Furniture and fixtures		15,705			20,421			15,441			20,421
Vehicles		2,093			2,607			2,057			2,607
Construction in process		7,897			12,700			10,396			12,700
Subtotal		133,729			140,567			136,877			140,567
Less accumulated depreciation		(67,560	)		(79,510	)		(69,907	)		(79,510	)
Total property, plant and equipment, net	$	66,169		$	61,057		$	66,970		$	61,057

	Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021		2022		2021		2022		2021
Operating leases	$	2,571	$	1,982	$	4,809	$	3,936	$	2,683	$	2,048	$	7,492	$	5,984
Short-term leases⁽¹⁾		19		128		57		166		87		135		144		301
Total lease expense	$	2,590	$	2,110	$	4,866	$	4,102	$	2,770	$	2,183	$	7,636	$	6,285

Years ending December 31:
2022⁽¹⁾	$	7,440		$	5,128
2023		9,693			10,214
2024		9,191			9,472
2025		8,286			8,328
2026		6,630			6,672
Thereafter		24,008			24,056
Total lease payments		65,248			63,870
Less: imputed interest		(9,354	)		(9,150)	)
Total lease liabilities	$	55,894		$	54,720

	June 30,						September 30,
	2022			2021			2022			2021
Weighted average remaining lease term of operating leases (in years)		8.4			9.1			8.2			9.2
Weighted average discount rate of operating leases		2.7	%		3.1	%		2.7	%		3.0	%

	Six Months Ended June 30, 2022
	Segment
	FVS		SV		Eliminations and Other			Consolidated

Fleet vehicle sales	$	229,323	$	0	$	0		$	229,323
Motor home chassis sales		0		87,601		0			87,601
Other specialty vehicle sales		0		91,750		0			91,750
Aftermarket parts and accessories sales		20,271		10,133		0			30,404
Total sales	$	249,594	$	189,484	$	0		$	439,078

Depreciation and amortization expense	$	1,930	$	3,614	$	1,152		$	6,696
Adjusted EBITDA		13,654		22,958		(23,566	)		13,046
Segment assets		228,863		223,388		42,762			495,013
Capital expenditures		7,799		686		2,007			10,492

	●	Income from continuing operations of ~~$5.3~~$17.3 million for the ~~second~~third quarter of 2022, compared to ~~$17.0~~$21.0 million for the ~~second~~third quarter of 2021.
	●	Diluted earnings per share from continuing operations of ~~$0.15~~$0.49 for the ~~second~~third quarter of 2022, compared to ~~$0.44~~$0.58 for the ~~second~~third quarter of 2021.

Adjusted EBITDA three months ended June 30, 2021	$	28.6
Adjusted EBITDA three months ended September 30, 2021				$	33.7
Product pricing and mix		20.5			20.7
Material and labor costs		(18.1	)		(19.0	)
EV development costs		(7.0	)		(5.6	)
Sales volume and other		(12.2	)		(3.7	)
General and administrative costs and other		1.9			1.0
Adjusted EBITDA three months ended June 30, 2022	$	13.7
Adjusted EBITDA three months ended September 30, 2022				$	27.1

Adjusted EBITDA six months ended June 30, 2021	$	47.7
Adjusted EBITDA nine months ended September 30, 2021				$	81.5
Product pricing and mix		31.4			52.1
Material and labor costs		(39.9	)		(58.9	)
EV development costs		(11.4	)		(17.0	)
Sales volume and other		(15.4	)		(19.1	)
General and administrative costs and other		0.6			1.5
Adjusted EBITDA six months ended June 30, 2022	$	13.0
Adjusted EBITDA nine months ended September 30, 2022				$	40.1

	Three Months Ended					Six Months Ended						Three Months Ended					Nine Months Ended
	June 30,					June 30,						September 30,					September 30,
	2022		2021			2022			2021			2022		2021			2022		2021
Income from continuing operations	$	5,283	$	16,953		$	$ 1,431		$	28,483		$	17,286	$	20,999		$	18,717	$	49,482
Net (income) attributable to non-controlling interest		-		(990	)		-			(1,025	)		-		(77	)		-		(1,102	)
Add (subtract):
Interest expense		463		227			617			57			1,137		253			1,754		310
Depreciation and amortization expense		3,727		2,759			6,696			5,330			3,359		2,982			10,055		8,312
Income tax expense (benefit)		1,461		5,552			(424	)		9,042
Income tax expense													3,770		6,910			3,346		15,952
Restructuring and other related charges		354		505			461			505			53		-			514		505
Acquisition related expenses and adjustments		341		71			557			214			243		594			800		808
Non-cash stock based compensation expense		2,060		2,850			3,708			4,492			1,214		2,079			4,922		6,571
Loss from liquidation of JV		-		643			-			643			-		-			-		643
Adjusted EBITDA	$	13,689	$	28,570		$	13,046		$	47,741		$	27,062	$	33,740		$	40,108	$	81,481

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

Sales	$	136,897		100.0	%	$	161,618		100.0	%	$	184,494		100.0	%	$	191,387		100.0	%
Adjusted EBITDA		14,525		10.6	%		28,116		17.4	%		24,361		13.2	%		36,393		19.0	%

Period	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)
April 1 to April 30		9,183	$	29.41		-	$	242.1
May 1 to May 31		3,010		20.77		-		242.1
June 1 to June 30		-		-		-		242.1
Total		12,193				-

Exhibit No.		Document

~~10.9.1~~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 Restricted Stock Unit Agreement (2022 LTI)*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: ~~July 28,~~October 27, 2022	THE SHYFT GROUP, INC.



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