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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, 1997
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 46528
(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 August 6, 1997
Class A 8,428,226
Class B 1,473,124
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, 9 & 10
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security
Holders 11
Item 6. Exhibits and Reports on Form 8 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
June 30, December 31,
1997 1996
------------ ------------
Assets (Unaudited)
Current assets:
Cash and cash equivalents................ $208,526 $220,678
Accounts receivable, net................. 21,936,889 16,556,258
Inventories.............................. 22,289,972 21,208,707
Deferred income taxes.................... 1,043,066 1,043,066
Other current assets..................... 445,345 423,237
------------ ------------
Total current assets.................. 45,923,798 39,451,946
------------ ------------
Property, plant and equipment, at cost..... 42,431,671 40,675,873
Less, Accumulated depreciation and
amortization........................ 15,399,305 14,246,236
------------ ------------
Property, plant and equipment, net.... 27,032,366 26,429,637
Intangible assets, net..................... 1,807,040 1,908,694
Other assets............................... 1,047,604 1,038,747
------------ ------------
Total assets.......................... $75,810,808 $68,829,024
============ ============
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
June 30, December 31,
1997 1996
------------ ------------
Liabilities and Stockholders' Equity (Unaudited)
Current liabilities:
Current maturities of long-term debt...... $2,376,864 $2,355,955
Trade accounts payable.................... 8,246,609 6,778,942
Accrued income taxes...................... 884,240 959,240
Other accrued liabilities................. 6,179,291 5,914,315
------------ ------------
Total current liabilities.............. 17,687,004 16,008,452
Long-term debt.............................. 16,344,766 16,108,780
Deferred income taxes....................... 890,234 890,234
------------ ------------
Total liabilities...................... 34,922,004 33,007,466
------------ ------------
Stockholders' equity:
Class A Common Stock, $.10 par value...... 842,823 801,277
Class B Common Stock, convertible into
Class A Common Stock on a one-for-one
basis, $.10 par value................... 147,312 140,297
Additional paid-in capital................ 27,289,356 23,901,587
Retained earnings......................... 12,859,849 11,228,933
Treasury stock, at cost................... (250,536) (250,536)
------------ ------------
Total stockholders' equity............. 40,888,804 35,821,558
------------ ------------
Total liabilities and stockholders'
equity............................... $75,810,808 $68,829,024
============ ============
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 Six Months Ended
June 30, June 30,
------------ ------------- ------------ -------------
1997 1996 1997 1996
------------ ------------- ------------ -------------
Revenues............... $56,275,903 $44,057,242 $100,449,206 $82,550,350
Costs and expenses:
Cost of sales........ 45,879,498 36,314,957 82,916,179 68,974,472
Selling, general and
administrative..... 4,469,788 3,952,121 8,419,166 7,536,173
Interest............. 413,380 247,591 763,225 780,783
------------ ------------ ------------ ------------
50,762,666 40,514,669 92,098,570 77,291,428
------------ ------------ ------------ ------------
Income before
income taxes.... 5,513,237 3,542,573 8,350,636 5,258,922
Income taxes........... 2,182,000 1,463,000 3,334,000 2,193,000
------------ ------------ ------------ ------------
Net income........ $3,331,237 $2,079,573 $5,016,636 $3,065,922
============ ============ ============ ============
Earnings per share:
Primary........... $.34 $.21 $.51 $.32
Fully diluted..... .33 .21 .50 .31
Weighted average number
of shares of common
stock and common
stock equivalents:
Primary.......... 9,933,359 9,706,758 9,925,472 9,628,131
Fully diluted.... 9,948,567 9,864,683 9,946,993 9,844,371
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)
Six Months Ended
June 30,
------------ ------------
1997 1996
------------ ------------
Cash flows from operating activities:
Net income...................................... $5,016,636 $3,065,922
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization............... 1,298,040 949,593
Amortization of intangibles and other
assets.................................... 101,654 105,464
Loss on disposal of equipment............... 11,094 51
Changes in operating assets and liabilities. (4,826,361) (4,734,308)
------------ -----------
Net cash provided by (used in) operating
activities.................................. 1,601,063 (613,278)
------------ -----------
Cash flows from investing activities:
Additions to property, plant and equipment...... (1,965,013) (5,884,718)
Proceeds from disposal of property, plant and
equipment..................................... 53,150 500
Increase in other assets........................ (8,857) (419,917)
------------ -----------
Net cash (used in) investing activities....... (1,920,720) (6,304,135)
------------ -----------
Cash flows from financing activities:
Proceeds from revolving line of credit and
other long-term debt.......................... 40,163,003 38,837,849
Repayments of revolving line of credit and
other long-term debt.......................... (39,906,108) (32,823,447)
Proceeds from exercise of stock options and
warrants...................................... 50,610 891,305
------------ ------------
Net cash provided by financing activities..... 307,505 6,905,707
------------ ------------
Decrease in cash and cash equivalents............. (12,152) (11,706)
Cash and cash equivalents, beginning of period.... 220,678 106,740
------------ ------------
Cash and cash equivalents, end of period.......... $208,526 $95,034
============ ============
Noncash investing and financing activities:
5% Common Stock Dividend........................ $3,385,720 $ ----
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
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, 1996 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,
1997 1996
------------ ------------
Raw materials.............. $ 12,400,031 $ 12,076,089
Work-in-progress........... 3,138,669 3,138,668
Finished goods............. 6,751,272 5,993,950
------------ ------------
$ 22,289,972 $ 21,208,707
============ ============
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. The Company has had favorable and unfavorable
adjustments in the third and fourth quarters 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 - INCOME TAXES
- ---------------------
The effective income tax rates for the three and six months ended June 30,
1997 were 39.6% and 39.9%, respectively, compared to 41.3% and 41.7% for the
three and six months ended June 30, 1996. The decreases are attributable to
the Company's higher levels of income decreasing the impact of items treated
differently for financial statement purposes and income tax return purposes
and improved operations of the Company's Honduran subsidiary, which is
operating in a government tax free zone.
Page 7 of 14
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NOTE D - STOCK DIVIDEND
- -----------------------
On May 1, 1997, the Board of Directors declared a 5% common stock dividend
payable on May 19, 1997, to shareholders of record on May 12, 1997. Earnings
per share and weighted average shares outstanding have been restated to
reflect the 5% stock dividend for all periods presented.
NOTE E - RECENT ACCOUNTING PRONOUNCEMENTS
- -----------------------------------------
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per
Share." The Company is required to initially adopt this pronouncement
during its quarter ending December 31, 1997, and will be required to then
restate all prior periods presented to conform with the new standard. SFAS
No. 128 will require the Company to make a dual presentation of basic and
diluted earnings per share on the face of its consolidated statement of income
instead of primary and fully diluted earnings per share. The Company has
not determined the impact SFAS No. 128 will have on historically reported
earnings per share.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income"
and SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information" both of which the Company will be required to adopt in its
financial statements for the year ending December 31, 1999. SFAS No. 130
will require the Company to report comprehensive income in its financial
statements. Comprehensive income includes net income and certain
transactions that are reported as a separate component of stockholder's
equity. SFAS No. 131 specifies revised guidelines for determining
operating segments and the type and level of information to be disclosed.
The Company has not yet determined what changes in its disclosures, if any,
will be required by SFAS No. 131.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- -----------------------------------------------------------------------
RESULTS OF OPERATIONS.
- ----------------------
Results of Operations
- ---------------------
Revenues for the three months ended June 30, 1997 increased $12.2 million to
$56.3 million from $44.1 million for the three months ended June 30, 1996.
Revenues for the six months ended June 30, 1997 increased $17.9 million to
$100.4 million from $82.6 million for the six months ended June 30, 1996.
Page 8 of 14
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Net income for the three months ended June 30, 1997 increased to $3.3 million
from $2.1 million for the three months ended June 30, 1996, while net income
for the six months ended June 30, 1997 increased to $5.0 million from $3.1
million for the six months ended June 30, 1996. Fully diluted earnings per
share for the three months ended June 30, 1997 was $.33, while fully diluted
earnings per share was $.50 for the six months ended June 30, 1997. The
comparable prior year results were $.21 for the three months ended June 30,
1996 and $.31 for the six months ended June 30, 1996 an increase of $.12 and
$.19, respectively. Earnings per share for all periods presented have been
restated to reflect the 5% stock dividend paid to shareholders of record
on May 12, 1997.
Revenue increases for both the three months and six months ended June 30,
1997 were largely concentrated in the Company's dry freight product lines
which increased 25.2% and 21.4% for the three months and six months,
respectively. The Company's StarTrans (trademark) bus products increased
47.1% and 31% for the three months and six months ended June 30, 1997 over
the comparable prior year periods. The Company's Indiana and Pennsylvania
facilities were responsible for the largest regional revenue increases. The
Company's other regions also shared increases over the comparable prior year
periods.
The Company's gross profit increased to 18.5% and 17.5% for the three months
and six months ended June 30, 1997, respectively, from 17.6% and 16.4% for
the comparable prior year periods. The Company's raw material cost as a
percentage of revenues increased slightly (less than 1%) for both the three
months and six months ended June 30, 1997 from the comparable prior year
periods. The Company's direct labor cost as a percentage of revenues was
unchanged in the three months ended June 30, 1997 and only slightly down for
the six months ended June 30, 1997. The Company's overhead expenses declined
1.6% and 1.4% as a percentage of revenues for the three months and six months
ended June 30, 1997, respectively. Contributing to the decline in overhead
in both periods were those expenses that either do not fluctuate or do not
fluctuate proportionately with increases in revenues.
Selling, general and administrative expenses as a percentage of revenues
declined to 7.9% and 8.4% for the three months and six months ended
June 30, 1997, respectively, from 9.0% and 9.1% for the comparable prior year
periods. The actual dollar comparisons show an increase of $.5 million and
$.9 million for the three months and six months ended June 30, 1997,
respectively. Contributing to the dollar increase were the Company's
additional distribution facilities that were in operation for the full period
in 1997 and only for a portion of the six months ended June 30, 1996. Also
contributing to the dollar increase were those items that fluctuate
proportionately with revenues.
Interest expense for the three months and six months ended June 30, 1997 was
$.4 million or .7% of revenues and $.8 million or .8% of revenues,
respectively. The comparable prior year amounts were $.2 million or .6% of
revenues and $.8 million or .9% of revenues for the three months and six
months periods ended June 30, 1996, respectively. Interest expense in the
1996 periods was reduced by $.2 million of interest that was capitalized in
accordance with Statement of Financial Accounting Standards No. 34.
Page 9 of 14
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The Company recently completed a computer hardware and software selection
process which was necessitated by the inability of the present system to
handle the year 2000, the need for improved technology to process the
continuing increased volume of transactions and the need for improved
information reporting. The Company has selected a vendor and has begun the
initial planning for the conversion and implementation of new operating
software. The Company believes the new operating software will be
implemented successfully in advance of the year 2000 requirements.
Liquidity and Capital Resources
- -------------------------------
Cash flows from operations and funds available under the Company's revolving
credit agreement were adequate to finance operations and provide for capital
expenditures during the six months ended June 30, 1997. Net income of $5.0
million combined with depreciation and amortization of $1.4 million were the
significant factors contributing to cash flows. Cash flow provided by
operating activities was $1.6 million for the six months ended June 30, 1997
while $.6 million was used in operating activities for the six months
ended June 30, 1996. In both periods operating cash was used to finance
increasees in accounts receivable and inventories relative to the increased
volume the Company normally experiences in its second quarter.
The major investing activities during the six months ended June 30, 1997
were the construction of and equipment for a new paint facility in Goshen,
Indiana; production tooling for proprietary parts and improved laminating
capabilities; and improved production and paint capabilities in Jonestown,
Pennsylvania.
The only significant financing activity during the quarter was the use of
the Company's revolving credit facility. Net cash provided by financing
activities was $.3 million for the six months ended June 30, 1997 compared
to $6.9 million in the prior year period which included $3.2 million for the
purchase of the California manufacturing facility.
The Company anticipates that cash flows from operations and amounts
available under its revolving line of credit will be sufficient to meet the
Company's cash needs during 1997.
Page 10 of 14
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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
April 29, 1997. 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 6,010,562 to 19,273 with no
abstentions:
H. Douglas Schrock
Rice M. Tilley, Jr.
Rick L. Horn
The following individuals were elected Directors by the holders of the
Company's Class B Common Stock by a vote of 1,402,975 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 7,401,060 to 32,266 with 17,757 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 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: August 6, 1997 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)
Six Months
Ended June 30,
----------------------
1997 1996
------ ------
PRIMARY
Weighted average shares outstanding 9,863 9,070
Net effect of dilutive stock options
and warrants - based on the treasury
stock method using average market
price 62 497
Net effect of subordinated convertible
notes -- 61
------- -------
TOTAL 9,925 9,628
======= =======
Net income $ 5,017 $ 3,066
======= =======
Net income per share $ .51 $ .32
======= =======
FULLY DILUTED
Weighted average shares outstanding 9,863 9,070
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 84 497
Dilutive effect of subordinated
convertible notes -- 277
------- -------
TOTAL 9,947 9,844
======= =======
Net income $ 5,017 $ 3,066
Interest expense reduction due to
assumed conversion of subordinated
convertible notes - net of tax -- 23
------- -------
Net income as adjusted $ 5,017 $ 3,089
======= =======
Net income per share $ .50 $ .31
======= =======
Note: The above share and per share data have been restated for the
5% stock dividend declared on May 1, 1997.
Page 14 of 14
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<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 208,526
<SECURITIES> 0
<RECEIVABLES> 22,366,889
<ALLOWANCES> 430,000
<INVENTORY> 22,289,972
<CURRENT-ASSETS> 45,923,798
<PP&E> 42,431,671
<DEPRECIATION> 15,399,305
<TOTAL-ASSETS> 75,810,808
<CURRENT-LIABILITIES> 17,687,004
<BONDS> 16,344,766
<COMMON> 990,135
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 75,810,808
<SALES> 100,449,206
<TOTAL-REVENUES> 100,449,206
<CGS> 82,916,179
<TOTAL-COSTS> 82,916,179
<OTHER-EXPENSES> 8,419,166
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 763,225
<INCOME-PRETAX> 8,350,636
<INCOME-TAX> 3,334,000
<INCOME-CONTINUING> 5,016,636
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,016,636
<EPS-PRIMARY> 0.51
<EPS-DILUTED> 0.50
</TABLE>
