<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 1996
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 No. 1-8183
SUPREME INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 75-1670945
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) No.)
65140 U.S. 33 East, P.O. Box 237, Goshen, Indiana 46526
(Address of principal executive offices)
Registrant's telephone number, including area code:(219) 642-3070
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that
the registrant was required to file such reports) and (2) has been subject
to such filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Common Stock ($.10 Par Value) Outstanding at November 11,1996
Class A 8,012,781
Class B 1,402,976
The index to Exhibits is at page 13 in the sequential numbering system.
Total number of pages: 14.
Page 1 of 14
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SUPREME INDUSTRIES, INC.
CONTENTS
Page No.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheets 3 & 4
Consolidated Statements of Income 5
Consolidated Statements of Cash Flows 6
Notes to Consolidated Financial Statements 7 & 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8 - 10
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 11
Signatures 12
Index to Exhibits 13
Page 2 of 14
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Part I. Financial Information
Item 1. Financial Statements
Supreme Industries, Inc. and Subsidiaries
Consolidated Balance Sheets
September 30, December 31,
1996 1995
------------- ------------
Assets (Unaudited)
Current assets:
Cash and cash equivalents.................. $110,789 $106,740
Accounts receivable, net................... 16,572,926 16,336,446
Inventories................................ 21,560,685 20,144,271
Deferred income taxes...................... 910,918 910,918
Other current assets....................... 386,769 448,665
------------ ------------
Total current assets.................. 39,542,087 37,947,040
------------ ------------
Property, plant and equipment:
Land and improvements...................... 2,872,521 2,123,848
Buildings and improvements................. 12,275,091 9,028,195
Leasehold improvements..................... 4,909,293 4,845,816
Machinery and equipment.................... 20,033,448 17,885,788
------------ ------------
40,090,353 33,883,647
Less, Accumulated depreciation and
amortization........................ 13,769,255 12,429,136
------------ ------------
Property, plant and equipment, net.. 26,321,098 21,454,511
Intangible assets, net....................... 1,959,522 2,112,004
Other assets................................. 1,388,174 913,107
------------ ------------
Total assets........................ $69,210,881 $62,426,662
============ ============
The accompanying notes are a part of the consolidated financial statements.
Page 3 of 14
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Supreme Industries, Inc. and Subsidiaries
Consolidated Balance Sheets, Concluded
September 30, December 31,
1996 1995
------------- ------------
Liabilities and Stockholders' Equity (Unaudited)
Current liabilities:
Current maturities of long-term debt....... $2,337,563 $2,609,815
Trade accounts payable..................... 5,768,321 6,343,766
Accrued income taxes....................... 1,140,486 138,682
Other accrued liabilities.................. 5,749,715 5,715,879
------------ ------------
Total current liabilities............. 14,996,085 14,808,142
Long-term debt............................... 18,295,688 18,031,553
Deferred income taxes........................ 784,086 784,086
------------ ------------
Total liabilities..................... 34,075,859 33,623,781
------------ ------------
Stockholders' equity:
Class A Common Stock, $.10 par value....... 801,276 673,861
Class B Common Stock, convertible into
Class A Common Stock on a one-for-one
basis, $.10 par value.................... 140,298 180,166
Additional paid-in capital................. 23,901,537 18,911,421
Retained earnings.......................... 10,448,397 9,193,919
Treasury stock, at cost, 13,757 shares
of Class A Common Stock.................. (156,486) (156,486)
------------ ------------
Total stockholders' equity............ 35,135,022 28,802,881
------------ ------------
Total liabilities and stockholders'
equity.............................. $69,210,881 $62,426,662
============ ============
The accompanying notes are a part of the consolidated financial statements.
Page 4 of 14
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Supreme Industries, Inc. and Subsidiaries
Consolidated Statements of Income (Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------- -------------------------
1996 1995 1996 1995
------------ ------------ ------------ ------------
Revenues.................. $38,813,812 $37,436,575 $121,364,162 $129,242,377
Costs and expenses:
Cost of sales........... 32,463,802 30,722,524 101,438,274 107,493,688
Selling, general and
administrative........ 3,852,095 3,463,637 11,388,268 10,610,986
Interest................ 367,429 497,953 1,148,212 1,437,570
------------ ------------ ------------ ------------
36,683,326 34,684,114 113,974,754 119,542,244
------------ ------------ ------------ ------------
Income before income
taxes.............. 2,130,486 2,752,461 7,389,408 9,700,133
Income taxes.............. 890,000 1,123,000 3,083,000 3,944,000
------------ ------------ ------------ ------------
Net income.......... $1,240,486 $1,629,461 $4,306,408 $5,756,133
============ ============ ============ ============
Earnings per share:
Primary............. $.13 $.18 $.46 $.67
Fully diluted....... .13 .18 .46 .63
Weighted average number of
shares of common stock
and common stock
equivalents:
Primary............... 9,452,486 8,756,419 9,265,717 8,560,280
Fully diluted......... 9,452,486 9,367,784 9,402,378 9,346,370
The accompanying notes are a part of the consolidated financial statements.
Page 5 of 14
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Supreme Industries, Inc. and Subsidiaries
Consolidated Statements of Cash Flows (Unaudited)
Nine Months Ended
September 30,
-------------------------
1996 1995
------------ ------------
Cash flows from operating activities:
Net income................................. $4,306,408 $5,756,133
Depreciation and amortization.............. 1,607,995 1,459,900
(Increase) decrease in other assets........ (88,835) 100,000
Gain on disposal of equipment.............. (9,251) (17,807)
Changes in operating assets and liabilities (1,130,803) (2,600,933)
------------ ------------
Net cash provided by operating
activitities........................ 4,685,514 4,697,293
------------ ------------
Cash flows from investing activities:
Additions to property, plant and equipment. (6,320,438) (3,965,851)
Proceeds from disposal of property, plant
and equipment............................ 13,305 21,823
Increase in other assets................... (391,948) ---
------------ ------------
Net cash (used in) investing
activities.......................... (6,699,081) (3,944,028)
------------ ------------
Cash flows from financing activities:
Proceeds from revolving line of credit
and other long-term debt................. 54,390,596 51,526,425
Repayments of revolving line of credit and
other long-term debt..................... (53,264,285) (52,501,378)
Proceeds from exercise of stock options and
warrants................................. 891,305 62,288
------------ ------------
Net cash provided by (used in)
financing activities................ 2,017,616 (912,665)
------------ ------------
Increase (decrease) in cash and cash
equivalents................................ 4,049 (159,400)
Cash and cash equivalents, beginning of
period..................................... 106,740 273,720
------------ ------------
Cash and cash equivalents, end of period..... $110,789 $114,320
============ ============
Noncash investing and financing activities:
Conversion of convertible notes to shares
of Class A Common Stock.................. 1,134,428 ---
Conversion of Class B Common Stock to
Class A Common Stock..................... 39,868 7,727
Exchange of warrants for Class A Common
Stock.................................... 3,051,930 ---
The accompanying notes are a part of the consolidated financial statements.
Page 6 of 14
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SUPREME INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - BASIS OF PRESENTATION AND OPINION OF MANAGEMENT
The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q and therefore do
not include all of the information and financial statement disclosures
necessary for a fair presentation of consolidated financial position, results
of operations and cash flows in conformity with generally accepted accounting
principles. In the opinion of management, the information furnished herein
includes all adjustments necessary to reflect a fair statement of the
interim periods reported. All adjustments are of a normal and recurring
nature. The December 31, 1995 consolidated balance sheet data was derived
from audited financial statements, but does not include all disclosures
required by generally accepted accounting principles.
NOTE B - INVENTORIES
Inventories, which are stated at the lower of cost or market with cost
determined on the first-in-first-out method, consist of the following:
September 30, December 31,
1996 1995
------------- ------------
Raw materials................. $ 11,810,241 $11,599,585
Work-in-progress.............. 3,279,631 3,113,990
Finished goods................ 6,470,813 5,430,696
------------- ------------
$ 21,560,685 $ 20,144,271
============= ============
The valuation of raw materials, work-in-progress and finished goods
inventories at interim dates is based upon a gross profit percentage method
and bills of materials. Since 1989 the Company has had favorable
adjustments in the fourth quarter resulting from the annual physical
inventories. The Company is continuing to refine its costing procedures
for valuation of interim inventories in an effort to minimize the annual
book to physical inventory adjustments.
NOTE C - LONG TERM DEBT
On February 20, 1996, the Company amended its revolving credit agreement to
extend the expiration two years to April 30, 1999. In addition, the
revolving credit line was increased from $12.0 million to $20.0 million for
the period each year from February 1 through June 30, and the credit line
was increased from $12.0 million to $14.0 million for all other months of
the year.
On April 10, 1996, the Company closed on a $3.2 million Industrial Revenue
Bond with the California Statewide Communities Development Authority. The
proceeds were used to purchase the Company's California manufacturing
facility. The variable interest rate bonds are amortized over 15 years.
The interest rate (3.8% at the end of September) is determined by the
remarketing agent based on comparable tax-exempt obligations.
Page 7 of 14
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NOTE D - STOCK DIVIDEND
On November 29, 1995, the Board of Directors declared a 10% common stock
dividend payable on December 22, 1995, to stockholders of record on
December 15, 1995. Earnings per share and weighted average shares
outstanding for all periods in 1995 have been restated to reflect the 10%
stock dividend.
NOTE E - INCOME TAXES
For the three-month and nine-month periods ended September 30, 1996, the
Company's wholly-owned subsidiary in Honduras reported a net loss which for
tax purposes is a net operating loss carryforward. The Company has
established a valuation allowance for the deferred tax asset attributable to
the net operating loss carryforward of the Honduran subsidiary. The
valuation allowance has increased the Company's effective tax rate by
approximately 1% for the three-months and nine-month periods ended
September 30, 1996 versus same periods in 1995.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Results of Operations
Revenues for the nine months ended September 30, 1996 decreased $7,878,215
to $121,364,162 while revenues for the three months ended September 30, 1996
increased $1,377,237 to $38,813,812 compared to the corresponding periods
in 1995. Net income for the nine months ended September 30, 1996 decreased
$1,449,725 to $4,306,408 while net income for the three months ended
September 30, 1996 decreased $388,975 to $1,240,486 compared to the
corresponding periods in 1995. The decrease in revenues for the nine months
ended September 30, 1996 can be attributed to the following areas.
Regionally, the Company's large Northeastern and Midwestern markets were not
nearly as strong as in 1995. Additionally, sales were restricted by the
lack of availability of smaller chassis used in the Company's
Iner-City (trademark) product line. Revenues were also negatively impacted
by a decline in overall fleet business and the absence of a significant
Government Service Administration contract that did not repeat in 1996.
The Company's shuttle bus business for 1996 is also less than 1995 because
of delays in the awarding of municipal contracts and decreases in the number
of municipal contracts let for bid. The Company's business has begun to
strengthen as evidenced by the increase in sales in the third quarter over
the comparable prior year period.
Page 8 of 14
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The Company's gross profit percentage declined .4% for the nine months ended
September 30, 1996 to 16.4% and declined 1.5% to 16.4% for the three months
ended September 30, 1996. The Company has experienced decreases in material
costs in both the nine months and quarter ended September 30, 1996. These
decreases have been offset by increases in both direct labor and overhead
costs. While the decline in overall volume has caused the overhead expenses
to increase as a percentage of revenues due to fixed expenses that do not
vary with volume, other factors have contributed to the increase. The
Company is incurring start-up expenses at its new production facilities to
produce fiberglass reinforced plywood and hardwood flooring. While some
benefit may be realized in the fourth quarter from the hardwood flooring
facility, the major benefits from both facilities will not be realized until
1997. The Company has also incurred costs in connection with the start-up
of three new distribution facilities as well as the development of two new
major product lines. The Freedom One product line serves the transportation
needs of those in wheelchairs while Pro Fleet Conversions meets the needs
of a wide variety of users needing customized van or pickup trucks for
commercial use.
Selling, general and administrative expenses as a percentage of revenues
increased 1.2% to 9.4% for the nine months ended September 30, 1996 and
increased .6% to 9.9% for the three months ended September 30, 1996 compared
to the corresponding periods in 1995. The increase can be principally
attributed to the expenses of the Company's sales force at its new
distribution facilities and its two new product lines. The Company has also
increased its trade show and advertising presence, updated its literature
on existing product lines and developed literature for its new product lines.
The effective tax rate (income taxes as a percent of pretax income) is
approximately 1% greater for the 1996 periods compared to the 1995 periods.
This increase is attributed to the valuation allowance established for the
deferred tax asset which arises from the current year's tax loss carryforward
of the Honduran subsidiary.
The decline in net income for the quarter ended and nine months ended
September 30, 1996 was caused by the factors discussed above.
Liquidity and Capital Resources
Cash flows from operating activities were $4.7 million for both the nine
months ended September 30, 1996 and 1995. Inventories increased $1.4
million reflecting the slightly higher revenues experienced in the quarter
as well as the need to carry additional chassis in inventory to support the
sales of mid-sized buses and handicap vans.
The major capital expenditure during the nine months ended September 30, 1996
was $3.5 million for the purchase and renovation of a California
manufacturing plant consisting of 19 acres and a 94,000 square feet facility.
The facility was financed with a $3.2 million floating rate industrial
revenue bond.
Page 9 of 14
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Other major expenditures during the nine months were for the Company's
patented fiberglass reinforced panel ("FRP") machine, the Honduran hardwood
flooring plant and the purchase of land and construction of a new
distribution facility to service the Louisville - Cincinnati area. The
distribution facility and the hardwood flooring facility are complete and
the "FRP" machine is scheduled to be complete in the first quarter of 1997.
Proceeds from the exercise of warrants and stock options were $.9 million
during the nine months ended September 30, 1996. Prior to the expiration
date of the Company's 1993 Callable Warrants on June 9, 1996, 278,687 of
such warrants were exercised for cash, 2,141,705 were exchanged for Class A
Common Stock (on a 5 Warrants for 1 Class A Common Share basis) and 60,370
warrants expired.
The Company believes cash flow from operating activities and funds available
under the Company's revolving credit agreement will continue to be
sufficient to finance the balance of 1996 operations and planned capital
expenditures. The Company had $5 million available under its revolving
credit agreement at September 30, 1996.
The ratio of current assets to current liabilities was 2.6 to 1.0 at
September 30, 1996.
Page 10 of 14
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PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
a) Exhibits:
Exhibit 11-Statement Regarding Computation of Per
Share Earnings
b) Reports on Form 8-K: None
Page 11 of 14
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SUPREME INDUSTRIES, INC.
DATE: November 12, 1996 BY: /s/ROBERT W. WILSON
Robert W. Wilson
Executive Vice President,
Treasurer, Chief Financial Officer
and Director (Principal Financial
and Accounting Officer)
(Signing on behalf of the
Registrant and as Principal
Financial Officer.)
Page 12 of 14
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INDEX TO EXHIBITS
Exhibit No. Description Page
11 Statement Regarding Computation of Per Share
Earnings 14
Page 13 of 14
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EXHIBIT 11
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
SUPREME INDUSTRIES, INC. AND SUBSIDIARIES
(Amounts in thousands, except per share data)
Nine Months
Ended September 30,
-------------------
1996 1995
------ ------
PRIMARY
Weighted average shares outstanding 8,806 8,159
Net effect of dilutive stock options
and warrants - based on the treasury
stock method using average market
price 333 401
Dilutive effect of subordinated
convertible notes 127 --
------ ------
TOTAL 9,266 8,560
====== ======
Net income $4,306 $5,756
====== ======
Net income per share $ .46 $ .67
====== ======
FULLY DILUTED
Weighted average shares outstanding 8,806 8,159
Net effect of dilutive stock options
and warrants - based on the treasury
stock method using the period-end
market price, if higher than the
average market price 333 575
Dilutive effect of subordinated
convertible notes 263 612
------ ------
TOTAL 9,402 9,346
====== ======
Net income $4,306 $5,756
Interest expense reduction due to
assumed conversion of subordinated
convertible notes - net of tax 23 100
------ ------
Net income as adjusted $4,329 $5,856
====== ======
Net income per share $ .46 $ .63
====== ======
Note: Share and per share data for 1995 have been restated for the 10%
stock dividend declared on November 29, 1995.
Page 14 of 14
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9 MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 110,789
<SECURITIES> 0
<RECEIVABLES> 17,002,926
<ALLOWANCES> 430,000
<INVENTORY> 21,560,685
<CURRENT-ASSETS> 39,542,087
<PP&E> 40,090,353
<DEPRECIATION> 13,769,255
<TOTAL-ASSETS> 69,210,881
<CURRENT-LIABILITIES> 14,996,085
<BONDS> 18,295,688
<COMMON> 841,574
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 69,210,881
<SALES> 121,364,162
<TOTAL-REVENUES> 121,364,162
<CGS> 101,438,274
<TOTAL-COSTS> 101,438,274
<OTHER-EXPENSES> 11,388,268
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,148,212
<INCOME-PRETAX> 7,389,408
<INCOME-TAX> 3,083,000
<INCOME-CONTINUING> 4,306,408
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,306,408
<EPS-PRIMARY> 0.46
<EPS-DILUTED> 0.46
</TABLE>
