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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 March 31, 1998
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 May 7, 1998
Class A 8,862,772
Class B 1,546,773
The index to Exhibits is at page 13 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 9 & 10
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 11
Signatures 12
Index to Exhibits 13
Page 2 of 13
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Part I. Financial Information
Item 1. Financial Statements
Supreme Industries, Inc. and Subsidiaries
Consolidated Balance Sheets
March 31, December 31,
1998 1997
--------------- ---------------
Assets (Unaudited)
Current assets:
Cash and cash equivalents............. $136,217 $159,044
Accounts receivable, net.............. 26,398,781 23,188,066
Inventories........................... 32,871,072 28,404,786
Deferred income taxes................. 973,657 973,657
Other current assets.................. 725,719 803,442
--------------- ---------------
Total current assets............. 61,105,446 53,528,995
--------------- ---------------
Property, plant and equipment, at cost.. 47,791,974 46,083,344
Less, Accumulated depreciation
and amortization............... 17,037,526 16,522,903
--------------- ---------------
Property, plant and equipment,
net............................ 30,754,448 29,560,441
Intangible assets, net.................. 1,654,558 1,705,385
Other assets............................ 1,056,446 1,079,491
--------------- ---------------
Total assets..................... $94,570,898 $85,874,312
=============== ===============
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
March 31, December 31,
1998 1997
--------------- ---------------
Liabilities and Stockholders' Equity (Unaudited)
Current liabilities:
Current maturities of long-term debt... $2,232,633 $2,119,692
Trade accounts payable................. 11,753,599 10,433,051
Accrued income taxes................... 2,634,275 1,098,111
Other accrued liabilities.............. 6,708,318 9,514,186
--------------- ---------------
Total current liabilities......... 23,328,825 23,165,040
Long-term debt........................... 23,406,122 17,359,703
Deferred income taxes.................... 898,825 898,825
--------------- ---------------
Total liabilities................. 47,633,772 41,423,568
--------------- ---------------
Stockholders' equity:
Class A Common Stock, $.10 par value... 888,746 885,599
Class B Common Stock, convertible into
Class A Common Stock on a one-for-one
basis, $.10 par value................ 154,677 154,677
Additional paid-in capital............. 31,838,751 31,743,249
Retained earnings...................... 14,305,488 11,917,755
Treasury stock, at cost................ (250,536) (250,536)
--------------- ---------------
Total stockholders' equity........ 46,937,126 44,450,744
--------------- ---------------
Total liabilities and
stockholders' equity............ $94,570,898 $85,874,312
=============== ===============
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 End
March 31,
---------------- ---------------
1998 1997
---------------- ---------------
Revenues................................. $55,493,345 $44,173,303
Costs and expenses:
Cost of sales.......................... 46,120,374 37,036,681
Selling, general and administrative.... 4,946,225 3,949,378
Interest............................... 417,013 349,845
---------------- ---------------
51,483,612 41,335,904
---------------- ---------------
Income before income taxes........ 4,009,733 2,837,399
Income taxes............................. 1,622,000 1,152,000
---------------- ---------------
Net income........................ $2,387,733 $1,685,399
================ ===============
Earnings per share:
Basic............................. $.23 $.16
Diluted........................... .23 .16
Shares used in the computation of
earnings per share:
Basic............................. 10,383,073 10,348,553
Diluted........................... 10,476,055 10,467,754
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)
Three Months End
March 31,
--------------- ---------------
1998 1997
--------------- ---------------
Cash flows from operating activities:
Net income................................ $2,387,733 $1,685,399
Adjustments to reconcile net income to net
cash used in operating activities:
Depreciation and amortization......... 732,620 706,649
Loss on disposal of equipment......... 84,087 7,518
Changes in operating assets and
liabilities......................... (7,548,434) (5,251,184)
--------------- ---------------
Net cash (used in) operating activities. (4,343,994) (2,851,618)
--------------- ---------------
Cash flows from investing activities:
Additions to property, plant and
equipment............................... (2,068,787) (1,027,814)
Proceeds from disposal of property, plant
and equipment........................... 108,900 36,950
(Increase) decrease in other assets....... 23,045 (10,762)
--------------- ---------------
Net cash (used in) investing activities. (1,936,842) (1,001,626)
--------------- ---------------
Cash flows from financing activities:
Proceeds from revolving line of credit
and other long-term debt................ 25,405,232 17,221,848
Repayments of revolving line of credit and
other long-term debt.................... (19,245,872) (13,615,655)
Proceeds from exercise of stock options
and warrants............................ 98,649 31,144
--------------- ---------------
Net cash provided by financing
activities............................ 6,258,009 3,637,337
--------------- ---------------
Decrease in cash and cash equivalents....... (22,827) (215,907)
Cash and cash equivalents, beginning of
period.................................... 159,044 220,678
--------------- ---------------
Cash and cash equivalents, end of period.... $136,217 $4,771
=============== ===============
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, 1997 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:
March 31, December 31,
1998 1997
--------------- --------------
Raw materials............... $ 18,878,339 $ 16,896,669
Work-in-progress............ 4,553,082 4,553,082
Finished goods.............. 9,439,651 6,955,035
--------------- --------------
$ 32,871,072 $ 28,404,786
=============== ==============
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 historically 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 rate for the three months ended March 31, 1998 was
40.5% compared to 40.6% for the three months ended March 31, 1997.
Page 7 of 13
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NOTE D - EARNINGS PER SHARE
The Company has adopted the provisions of Statement of Financial Accounting
Standards ("SFAS") No. 128, "Earnings Per Share," retroactively for all
periods presented. SFAS No. 128 requires the Company to present "basic" and
"diluted" earnings per share. Basic earnings per share is computed by
dividing net income by the weighted average number of shares of common stock
outstanding during the period. Diluted earnings per share gives effect to
all potentially dilutive securities that were outstanding during the period.
The Company's diluted earnings per share is computed as follows:
Three Months Ended March 31,
1998 1997
---- ----
Net Income $2,388 $1,685
------ ------
Weighted average number of shares
outstanding (used in computation
of basic earnings per share) 10,383 10,349
Effect of dilutive securities:
Options and warrants 93 119
------ ------
Diluted shares outstanding (used
in computation of diluted
earnings per share) 10,476 10,468
====== ======
The computations of the number of common shares used in the determination of
1997 basic and diluted earnings per share give retroactive recognition to the
two (2) 5% common stock dividends declared and paid in 1997.
Page 8 of 13
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
Results of Operations
Revenues for the quarter ended March 31, 1998 increased $11,320,042 to
$55,493,345 from $44,173,303 for the quarter ended March 31, 1997. Net
income increased $702,334 to $2,387,733 for the quarter ended March 31, 1998
from $1,685,399 for the quarter ended March 31, 1997. Both basic and diluted
earnings per share advanced $.07 to $.23 for the quarter ended March 31, 1998
when compared to the quarter ended March 31, 1997. Basic and diluted
earnings per share for 1997 have been adjusted for the two (2) 5% common
stock dividends declared and paid in 1997.
The Company experienced growth in all of its product lines. The most
significant increases were in the Company's dry freight, refrigerated and bus
product lines. The Company's new product lines, armored trucks, trolley cars
and mid size buses and Spartan Service Vans accounted for 7.9% of the Company's
revenue growth in the first quarter. The Company also experienced considerable
growth in each of the geographical areas it serves.
The Company's gross profit percentage increased .7% to 16.9% for the quarter
ended March 31, 1998 from 16.2% for the quarter ended March 31, 1997. Both
direct labor and overhead expenses as a percentage of revenues declined
slightly when compared to the comparable amounts a year ago while material
cost rose slightly.
Selling, general and administrative expenses were 8.9% of revenues for both
the quarter ended March 31, 1998 and March 31, 1997. The actual dollar
increase of $996,847 is attributed to the increase in revenues.
Interest expense increased $67,168 for the quarter ended March 31, 1998 to
$417,013 from $349,845 for the quarter ended March 31, 1997. The increase is
attributable to higher borrowings under the Company's revolving line of credit
to finance the increased levels of accounts receivable and inventories
resulting from the increase in revenues.
Liquidity and Capital Resources
Funds available under the Company's revolving credit agreement were adequate
to finance operations and provide for capital expenditures during the quarter
ended March 31, 1998. Net income was the most significant component of
operating cash flow followed by depreciation and amortization. Increases in
both accounts receivable and inventories were the most significant uses of
operating cash flows during the period. The significant increase in revenues
was responsible for the increase in both receivables and inventory.
Page 9 of 13
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The major investing activities during the quarter were the capacity
expansions at the Company's Goshen, Indiana; Jonestown, Pennsylvania; and
Griffin, Georgia facilities. They are all complete and in operation and add
15 to 20% additional capacity above what was available in 1997.
The principal financing activity during the quarter was the use of the
Company's revolving credit agreement to finance operations and capital
expenditures. The Company had $3.3 million available under its revolving
credit agreement at March 31, 1998.
The Company anticipates the cash flow from operations and amounts available
under its revolving line of credit will be sufficient to meet the Company's
cash needs during 1998.
The Company is in the process of implementing new computer software that will
allow it to process transactions in the year 2000 and beyond as well as
provide better operating information timely once completely installed. The
Company has established an implementation team and provided them with the
training and resources necessary to have all Company facilities year 2000
compliant well in advance of December 31, 1999.
This report contains forward-looking statements, other than historical facts,
which reflect the view of the Company's management with respect to future
events. Although management believes that the expectations reflected in such
forward-looking statements are reasonable, it can give no assurance that the
expectations reflected in such forward-looking statements are reasonable, it
can give no assurance that such expectations will prove to have been correct.
Important factors that could cause actual results to differ materially from
such expectations include, without limitation, limitations on the
availability of chassis on which the Company's product is dependent,
availability of raw materials and severe interest rate increases. The
Company assumes no obligation to update the forward-looking statements or to
update the reasons actual results could differ from those contemplated by
such forward-looking statements.
Page 10 of 13
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PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
a) Exhibits:
Exhibit 27 - Financial Data Schedule
b) Reports on Form 8-K: None
Page 11 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: May 11, 1998 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 13
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SUPREME INDUSTRIES, INC.
FORM 10-Q
INDEX TO EXHIBITS
Sequential
Number Assigned Numbering System
in Regulation S-K Page Number
Item 601 Description of Exhibit of Exhibit
- ----------------- ---------------------- ----------------
(2) No exhibit.
(3) No exhibit.
(4) No exhibit.
(10) No exhibit.
(15) No exhibit.
(18) No exhibit.
(19) No exhibit.
(22) No exhibit.
(23) No exhibit.
(24) No exhibit.
(27) Financial data schedule.
(99) No exhibit.
Page 13 of 13
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<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 136,217
<SECURITIES> 0
<RECEIVABLES> 26,828,781
<ALLOWANCES> 430,000
<INVENTORY> 32,871,072
<CURRENT-ASSETS> 61,105,446
<PP&E> 47,791,974
<DEPRECIATION> 17,037,526
<TOTAL-ASSETS> 94,570,898
<CURRENT-LIABILITIES> 23,328,825
<BONDS> 23,406,122
0
0
<COMMON> 1,043,423
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 94,570,898
<SALES> 55,493,345
<TOTAL-REVENUES> 55,493,345
<CGS> 46,120,374
<TOTAL-COSTS> 46,120,374
<OTHER-EXPENSES> 4,946,225
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 417,013
<INCOME-PRETAX> 4,009,733
<INCOME-TAX> 1,622,000
<INCOME-CONTINUING> 2,387,733
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,387,733
<EPS-PRIMARY> 0.23
<EPS-DILUTED> 0.23
</TABLE>
