<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 June 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 July 29,1996
Class A 8,012,735
Class B 1,402,976
The index to Exhibits is at page 12 in the sequential numbering system.
Total number of pages: 13.
Page 1 of 13
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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 & 9
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security
Holders 10
Signatures 11
Index to Exhibits 12
Page 2 of 13
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Part I. Financial Information
Item 1. Financial Statements
Supreme Industries, Inc. and Subsidiaries
Consolidated Balance Sheets
June 30, December 31,
1996 1995
----------- -----------
Assets (Unaudited)
Current assets:
Cash and cash equivalents.................. $95,034 $106,740
Accounts receivable, net................... 19,562,995 16,336,446
Inventories................................ 22,342,978 20,144,271
Deferred income taxes...................... 910,918 910,918
Other current assets....................... 487,674 448,665
------------ ------------
Total current assets.................. 43,399,599 37,947,040
------------ ------------
Property, plant and equipment:
Land and improvements...................... 2,158,760 2,123,848
Buildings and improvements................. 9,768,478 9,028,195
Leasehold improvements..................... 4,883,152 4,845,816
Machinery and equipment.................... 22,937,311 17,885,788
------------ ------------
39,747,701 33,883,647
Less, Accumulated depreciation and
amortization 13,358,616 12,429,136
------------ ------------
Property, plant and equipment, net.... 26,389,085 21,454,511
Intangible assets, net....................... 2,010,350 2,112,004
Other assets................................. 1,329,214 913,107
------------ ------------
Total assets.......................... $73,128,248 $62,426,662
============ ============
The accompanying notes are a part of the consolidated financial statements.
Page 3 of 13
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Supreme Industries, Inc. and Subsidiaries
Consolidated Balance Sheets, Concluded
June 30, December 31,
1996 1995
------------ -----------
Liabilities and Stockholders' Equity (Unaudited)
Current liabilities:
Current maturities of long-term debt....... $1,614,758 $2,609,815
Trade accounts payable..................... 6,649,916 6,343,766
Accrued income taxes....................... 1,090,593 138,682
Other accrued liabilities.................. 5,187,775 5,715,879
------------ ------------
Total current liabilities............. 14,543,042 14,808,142
Long-term debt............................... 23,906,584 18,031,553
Deferred income taxes........................ 784,086 784,086
------------ ------------
Total liabilities..................... 39,233,712 33,623,781
------------ ------------
Stockholders' equity:
Class A Common Stock, $.10 par value....... 801,274 673,861
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................. 20,849,609 18,911,421
Retained earnings.......................... 12,259,841 9,193,919
Treasury stock, at cost, 13,757 shares of
Class A Common Stock.................... (156,486) (156,486)
------------ ------------
Total stockholders' equity............ 33,894,536 28,802,881
------------ ------------
Total liabilities and stockholders'
equity.............................. $73,128,248 $62,426,662
============ ============
The accompanying notes are a part of the consolidated financial statements.
Page 4 of 13
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Supreme Industries, Inc. and Subsidiaries
Consolidated Statements of Income (Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
----------- ----------- ----------- -----------
1996 1995 1996 1995
----------- ----------- ----------- -----------
Revenues..................... $44,057,242 $48,136,419 $82,550,350 $91,805,802
Costs and expenses:
Cost of sales.............. 36,314,957 39,365,804 68,974,472 76,771,164
Selling, general and
administration........... 3,952,121 3,879,878 7,536,173 7,147,349
Interest................... 247,591 456,332 780,783 939,617
----------- ----------- ----------- -----------
40,514,669 43,702,014 77,291,428 84,858,130
----------- ----------- ----------- -----------
Income before income taxes 3,542,573 4,434,405 5,258,922 6,947,672
Income taxes............... 1,463,000 1,798,000 2,193,000 2,821,000
----------- ----------- ----------- -----------
Net income............... $2,079,573 $2,636,405 $3,065,922 $4,126,672
=========== =========== =========== ===========
Earnings per share:
Primary.................. $.23 $.31 $.33 $.49
Fully diluted............ .22 .29 .33 .45
Weighted average number of
shares of common stock and
common stock equivalents:
Primary................... 9,244,531 8,558,960 9,169,649 8,446,920
Fully diluted............. 9,394,936 9,303,600 9,375,591 9,301,657
The accompanying notes are a part of the consolidated financial statements.
Page 5 of 13
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Supreme Industries, Inc. and Subsidiaries
Consolidated Statements of Cash Flows (Unaudited)
Six Months Ended
June 30,
------------ ------------
1996 1995
------------ ------------
Cash flows from operating activities:
Net income.............................. $3,065,922 $4,126,672
Depreciation and amortization........... 949,593 916,122
Amortization of intangibles and other
assets................................ 105,464 101,655
(Gain) loss on disposal of equipment.... 51 (9,250)
Changes in operating assets and
liabilities........................... (4,734,308) (5,352,118)
------------ -------------
Net cash used in operating activities. (613,278) (216,919)
------------ -------------
Cash flows from investing activities:
Additions to property, plant and
equipment............................. (5,884,718) (2,573,323)
Proceeds from sale of property, plant
and equipment......................... 500 9,250
Increase in intangible and other assets. (419,917) ---
------------- ------------
Net cash used in investing
activities......................... (6,304,135) (2,564,073)
------------- ------------
Cash flows from financing activities:
Proceeds from revolving line of credit
and other long-term debt.............. 38,837,849 36,136,666
Repayments of revolving line of credit
and other long-term debt.............. (32,823,447) (33,587,542)
Proceeds from exercise of stock options
and warrants.......................... 891,305 62,289
------------ ------------
Net cash provided by financing
activities.......................... 6,905,707 2,611,413
------------ ------------
Decrease in cash and cash equivalents..... (11,706) (169,579)
Cash and cash equivalents, beginning of
period.................................. 106,740 273,720
------------ ------------
Cash and cash equivalents, end of period.. $95,034 $104,141
============ ============
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 7,227
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 13
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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:
June 30, December 31,
1996 1995
------------- -------------
Raw materials................. $ 13,098,256 $ 11,599,585
Work-in-progress.............. 3,157,782 3,113,990
Finished goods................ 6,086,940 5,430,696
------------- -------------
$ 22,342,978 $ 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 June) is determined by the remarketing
agent based on comparable tax-exempt obligations.
Page 7 of 13
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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.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
Results of Operations
Revenues for the six months ended June 30, 1996 decreased $9,255,452 to
$82,550,350 while revenues for the three months ended June 30, 1996
decreased $4,079,177 to $44,057,242 compared to the corresponding periods in
1995. Net income for the six months ended June 30, 1996 decreased
$1,060,750 to $3,065,922 while net income for the three months ended
June 30, 1996 decreased $556,832 to $2,079,573.
The decrease in revenues was caused by softness in the Company's large
Northeastern and Midwestern truck equipment markets as well as a delay in
the awarding of a large municipal bus contract normally delivered during
this time frame. While there is no assurance the Company will be successful
in winning this contract, it is actively pursuing such contract. Revenues
were also negatively affected by a decline in fleet orders to large end-users
as well as the absence of a significant Government Services Administration
contract that did not repeat in 1996.
The Company's gross profit percentage declined .6% for the quarter ended
June 30, 1996 to 17.6% while gross profit for the six months ended
June 30, 1996 was unchanged at 16.4% when compared to the prior year's
comparable period. The Company's material cost declined in both the quarter
and six months ended June 30, 1996 when compared to the comparable prior year
periods. Direct labor and overhead costs increased in both periods
completely offsetting the decrease in material cost for the six months ended
June 30, 1996 and more than offsetting the decline in material costs for the
quarter ended June 30, 1996. Gross profit margins were also affected by
expenses relating to the development of the Company's new patented fiberglass
reinforced panel ("FRP") facility, and its new Honduras hardwood flooring
plant. The Company also incurred costs associated with the start-up of
three new distribution centers, the investment in two new major product
lines and the move to a new manufacturing plant in California.
Page 8 of 13
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Selling, general and administrative expenses increased 1.3% to 9.1% from
7.8% for the six months ended June 30, 1996 and increased .9% to 9.0% from
8.1% for the three months ended June 30, 1996. In addition to lower
revenues, the increase in the percentage was caused by expansion of the
Company's sales force associated with its expanded distribution as well as
the development of new literature and the revision of existing literature
for the Company's existing and new product lines. The Company's trade show
and advertising expenses have also increased in connection with its new
literature and expanded product line.
The decline in net income for the quarter and six months ended June 30, 1996
was caused by the factors discussed above.
Liquidity and Capital Resources
Net income and funds available under the Company's revolving credit
agreement were sufficient to finance operations and service debt obligations
for the six months ended June 30, 1996. Funds available under the Company's
revolving credit agreement and a $3.2 million California Industrial Revenue
Bond were sufficient to finance capital expenditures for the period ended
June 30, 1996. Availability under the Company's revolving credit agreement
was $1.4 million at June 30, 1996 (based upon the reduced revolver amount of
$14.0 million which became effective July 1, 1996).
Proceeds from the exercise of Warrants and stock options were $.9 million
during the six months ended June 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 ratio of current assets to current liabilities was 3.0 to 1.0 at
June 30, 1996.
Capital expenditures for the six months ended June 30, 1996 were $5.9
million. The largest expenditure in the period was the $3.5 million
acquisition and renovation of a manufacturing facility in Moreno Valley,
California. Other major expenditures during the period 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 Company believes cash flow from operations and funds available under the
Company's revolving credit agreement will be sufficient to finance the
balance of 1996 operations and planned capital expenditures.
Page 9 of 13
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PART II. OTHER INFORMATION
ITEM 4. Submission of Matters to a Vote of Security Holders
Supreme Industries, Inc.'s annual meeting of stockholders was held on
May 2, 1996. Below is a summary of matters voted upon at that meeting.
a) The following individuals were elected Directors by the holders of the
Company's Class A Common Stock by a vote of 4,986,378 to 171,548 with no
abstentions:
H. Douglas Schrock
Rice M. Tilley, Jr.
Mr. Rick L. Horn was elected director by the holders of the Company's
Class A Common Stock by a vote of 4,982,651 to 175,275 with no abstentions.
The following individuals were elected Directors by the holders of the
Company's Class B Common Stock by a vote of 1,621,848 to 0 with no
abstentions:
William J. Barrett
Robert J. Campbell
Thomas Cantwell
Herbert M. Gardner
Omer G. Kropf
Robert W. Wilson
b) Coopers & Lybrand L.L.P. was ratified as the Company's independent
auditors by a vote of 6,156,679 to 11,564 with 7,401 abstaining.
c) The amendment to the Company's Certificate of Incorporation to increase
the number of authorized shares of the Company's Class A Common Stock
from 15,000,000 to 20,000,000 passed with 4,930,957 voting for, 210,512
voting against and 16,457 abstaining.
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 10 of 13
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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: August 14, 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 11 of 13
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INDEX TO EXHIBITS
Exhibit No. Description Page
11 Statement Regarding Computation of Per Share
Earnings 13
Page 12 of 13
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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)
Six Months Ended June 30,
-------------------------
1996 1995
---- ----
PRIMARY
Average shares outstanding 8,638 8,159
Net effect of dilutive stock options
and warrants - based on the treasury
stock method using average market price 474 288
Net effect of subordinated - convertible
notes 58 --
------- -------
TOTAL 9,170 8,447
======= =======
Net income $ 3,066 $ 4,127
======= =======
Net income per share $ .33 $ .49
======= =======
FULLY DILUTED
Average shares outstanding 8,638 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 475 531
Net effect of subordinated convertible
notes 263 612
------- -------
TOTAL 9,376 9,302
======= =======
Net income $ 3,066 $ 4,127
Interest expense reduction due to
assumed conversion of subordinated
convertible notes - net of tax 23 67
------- -------
Net income as adjusted $ 3,089 $ 4,194
======= =======
Net income per share $ .33 $ .45
======= =======
Note: Share and per share data for 1995 have been restated for the 10%
stock dividend declared on November 29, 1995.
Page 13 of 13
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<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 95,034
<SECURITIES> 0
<RECEIVABLES> 19,992,995
<ALLOWANCES> 430,000
<INVENTORY> 22,342,978
<CURRENT-ASSETS> 43,399,599
<PP&E> 39,747,701
<DEPRECIATION> 13,358,616
<TOTAL-ASSETS> 73,128,248
<CURRENT-LIABILITIES> 14,543,042
<BONDS> 23,906,584
<COMMON> 941,572
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 73,128,248
<SALES> 82,550,350
<TOTAL-REVENUES> 82,550,350
<CGS> 68,974,472
<TOTAL-COSTS> 68,974,472
<OTHER-EXPENSES> 7,536,173
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 780,783
<INCOME-PRETAX> 5,258,922
<INCOME-TAX> 2,193,000
<INCOME-CONTINUING> 3,065,922
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,065,922
<EPS-PRIMARY> 0.33
<EPS-DILUTED> 0.33
</TABLE>
