UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 2000
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.)
16441 CR 38, 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 November 7, 2000
----------------------------- -------------------------------
Class A 9,191,860
Class B 1,917,394
The index to Exhibits is at page 14 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 & 9
Item 2. Management's Discussion and Analysis of 9, 10
Financial Condition and Results of & 11
Operations
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on From 8-K 12
Signatures 13
Index to Exhibits 14
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,
2000 1999
------------- ------------
Assets (Unaudited)
Current assets:
Cash and cash equivalents................. $257,017 $270,935
Accounts receivable, net.................. 26,827,652 29,026,385
Refundable income taxes................... --- 1,385,000
Inventories............................... 29,564,046 38,552,339
Deferred income taxes..................... 1,268,284 1,268,284
Other current assets...................... 947,330 436,381
------------ ------------
Total current assets................... 58,864,329 70,939,324
------------ ------------
Property, plant and equipment, at cost......... 65,705,183 59,072,394
Less, Accumulated depreciation and
amortization......................... 24,328,414 21,608,302
------------ ------------
Property, plant and equipment, net..... 41,376,769 37,464,092
------------ ------------
Intangible assets, net......................... 1,146,284 1,298,766
Other assets................................... 823,916 880,246
------------ ------------
Total assets........................... $102,211,298 $110,582,428
============ ============
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,
2000 1999
------------- ------------
Liabilities and Stockholders' Equity (Unaudited)
Current liabilities:
Current maturities of long-term debt........ $5,471,849 $4,805,107
Trade accounts payable...................... 7,925,491 12,001,927
Accrued income taxes........................ 1,006,932 947,776
Other accrued liabilities................... 8,583,094 10,530,737
------------ ------------
Total current liabilities.............. 22,987,366 28,285,547
Long-term debt................................... 27,570,076 35,319,246
Deferred income taxes............................ 2,128,452 2,128,452
------------ ------------
Total liabilities...................... 52,685,894 65,733,245
------------ ------------
Stockholders' equity............................. 49,525,404 44,849,183
------------ ------------
Total liabilities and stockholders'
equity............................... $102,211,298 $110,582,428
============ ============
The accompanying notes are a part of the consolidated financial statements.
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Supreme Industries, Inc. and Subsidiaries
Consolidated Statements of Income (Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------------- ---------------------------
2000 1999 2000 1999
------------ ------------ ------------ ------------
Revenues............. $54,008,406 $67,013,683 $193,772,362 $189,875,331
------------ ------------ ----------- ------------
Costs and expenses:
Cost of sales...... 44,988,982 55,397,138 161,384,854 157,886,268
Selling, general
and
administrative... 6,319,055 5,895,528 19,687,176 16,613,680
Interest........... 752,483 769,230 2,414,410 1,707,852
------------ ------------ ------------ ------------
52,060,520 62,061,896 183,486,440 176,207,800
------------ ------------ ------------ ------------
Income before
income taxes.. 1,947,886 4,951,787 10,285,922 13,667,531
Income taxes......... 776,000 2,022,000 4,129,000 5,497,000
------------ ------------ ------------ ------------
Net income...... $1,171,886 $2,929,787 $6,156,922 $8,170,531
============ ============ ============ ============
Earnings per share:
Basic........... $.11 $.26 $.55 $.67
Diluted......... .11 .26 .55 .66
Shares used in the
computation of
earnings per share:
Basic............ 11,105,846 11,398,191 11,187,470 12,268,745
Diluted.......... 11,105,846 11,431,744 11,191,361 12,335,458
The accompanying notes are a part of the consolidated financial statements.
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Supreme Industries, Inc. and Subsidiaries
Consolidated Statements of Cash Flows (Unaudited)
Nine Months Ended
September 30,
----------------------------
2000 1999
------------ ------------
Cash flows from operating activities:
Net income................................... $6,156,922 $8,170,531
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization............ 3,122,785 2,322,502
Gain on disposal of equipment............ --- (10,750)
Changes in operating assets and
liabilities............................ 6,092,513 (2,409,675)
------------ ------------
Net cash provided by operating activities.. 15,372,220 8,072,608
------------ ------------
Cash flows from investing activities:
Additions to property, plant and equipment... (6,879,339) (6,619,260)
Proceeds from disposal of property, plant
and equipment.............................. --- 3,325
Decrease in other assets..................... 56,330 86,256
------------ ------------
Net cash used in investing activities...... (6,823,009) (6,529,679)
------------ ------------
Cash flows from financing activities:
Proceeds from revolving line of credit
and other long-term debt................... 79,533,511 91,079,810
Repayments of revolving line of credit
and other long-term debt................... (86,615,939) (75,671,533)
Proceeds from exercise of stock options...... --- 95,625
Acquisition of treasury stock................ (1,480,701) (16,994,859)
------------ ------------
Net cash used in financing activities...... (8,563,129) (1,490,957)
------------ ------------
Increase (decrease) in cash and cash
equivalents................................... (13,918) 51,972
Cash and cash equivalents, beginning of period.. 270,935 185,424
------------ ------------
Cash and cash equivalents, end of period........ $257,017 $237,396
============ ============
Noncash investing and financing activities:
Common stock dividends....................... $2,693,761 $4,843,391
The accompanying notes are a part of the consolidated financial statements.
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SUPREME INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - BASIS OF PRESENTATION AND OPINION OF MANAGEMENT
--------------------------------------------------------
The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q and therefore do
not include all of the information and financial statement disclosures
necessary for a fair presentation of consolidated financial position, results
of operations and cash flows in conformity with generally accepted accounting
principles. In the opinion of management, the information furnished herein
includes all adjustments necessary to reflect a fair statement of the
interim periods reported. All adjustments are of a normal and recurring
nature. The December 31, 1999 consolidated balance sheet data was derived
from audited financial statements, but does not include all disclosures
required by generally accepted accounting principles.
NOTE B - INVENTORIES
--------------------
Inventories, which are stated at the lower of cost or market with cost
determined on the first-in, first-out method, consist of the following:
September 30, December 31,
2000 1999
------------- ------------
Raw materials.................$ 17,275,524 $ 23,687,824
Work-in-progress.............. 5,347,804 5,175,269
Finished goods................ 6,940,718 9,689,246
------------ ------------
$ 29,564,046 $ 38,552,339
============ ============
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 quarterly 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 book to physical inventory adjustments.
NOTE C - INCOME TAXES
---------------------
The effective income tax rate for the three months ended September 30, 2000
was 39.8% compared to 40.8% for the three months ended September 30, 1999.
The effective income tax rate for the nine months ended September 30, 2000
was 40.1% compared to 40.2% for the nine months ended September 30, 1999.
Page 7 of 14
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NOTE D - EARNINGS PER SHARE
---------------------------
The number of common shares used in the computation of basic and diluted
earnings per share are as follows:
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
2000 1999 2000 1999
-------- -------- -------- ------
(In Thousands)
Weighted average number of common
shares outstanding (used in
computation of basic
earnings per share) 11,106 11/398 11,187 12,269
Effect of dilutive stock
options --- 34 4 66
------- ------- ------- -------
Diluted shares outstanding
(used in computation of
diluted earnings per share) 11,106 11,432 11,191 12,335
======= ======= ======= =======
The computations of the number of common shares used in the determination of
basic and diluted earnings per share give retroactive recognition to the 5%
common stock dividend paid on May 22, 2000 (see Note F).
NOTE E - DEBT
-------------
On May 31, 2000, the Company signed an amendment extending its credit
agreement to April 30, 2003. In addition, the amount available under its
revolving credit agreement was increased to $20,000,000 from July 1 to
January 31 and increasing to $27,000,000 during the period each year from
February 1 through June 30. The limits had previously been $18,000,000 and
$25,000,000, respectively. The larger facility is to accommodate the
Company's large fleet orders that normally occur during the first and second
quarters.
NOTE F - COMMON STOCK DIVIDEND
------------------------------
On May 1, 2000, the Company's Board of Directors declared a 5% common stock
dividend payable on May 22, 2000 to stockholders of record on May 15, 2000.
Page 8 of 14
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NOTE G - RECENTLY ISSUED ACCOUNTING STANDARDS
---------------------------------------------
In December 1999, the staff of the Securities and Exchange Commission issued
Staff Accounting Bulletin (SAB) 101, "Revenue Recognition in Financial
Statements"; SAB 101 outlines the basic criteria that must be met to
recognize revenue, and provides guidelines for disclosure related to revenue
recognition policies. This guidance is required to be implemented in the
fourth quarter of 2000. The Company is currently reviewing this guidance in
order to determine the impact, if any, on its consolidated financial
statements.
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities," which
establishes accounting and reporting standards for derivative instruments and
hedging activities. It requires the Company to recognize all derivatives as
either assets or liabilities in the balance sheet and measure those
instruments at fair value. It further provides criteria for derivative
instruments to be designated as fair value, cash flow, or foreign currency
hedges, and establishes accounting standards for reporting changes in the
fair value of the derivative instruments. Upon adoption, the Company will be
required to adjust hedging instruments to fair value in the balance sheet and
recognize the offsetting gains or losses as adjustments to be reported in net
income or other comprehensive income, as appropriate. The Company will
adopt SFAS No. 133 in the first quarter of 2001. Management does not
believe the adoption of SFAS No. 133 will have a material effect on the
Company's results of operations or financial position.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
Results of Operations
---------------------
Revenues for the quarter ended September 30, 2000 declined $13.0 million to
$54.0 million from $67.0 million for the quarter ended September 30, 1999.
The primary reason was the timing of the large fleet deliveries that are
normally delivered in the first and second quarter. During 1999, $10.0
million of fleet business normally delivered in the first six months was
delivered in the third quarter. Additionally, revenues in the three months
ended September 30, 2000 were adversely effected by rising fuel costs and
interest rates.
Revenues for the nine months ended September 30, 2000 increased $3.9 million
to $193.8 million from $189.9 million for the nine months ended September 30,
1999. While revenues for the nine months ended September 30, 2000 and
September 30, 1999 are relatively unchanged, the Company has experienced a
slowing in order intake related to
Page 9 of 14
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higher fuel costs and interest rates that could affect fourth quarter
revenues. The Company's backlog at September 30, 2000 was $61.9 million.
Nearly one-third of the backlog was in the Company's bus division. The
Company has plans to increase capacity and production in this division,
however, these plans will not be implemented soon enough to benefit revenues
in the fourth quarter of 2000.
Gross profit as a percentage of revenues for the three months ended September
30, 2000 was 16.7% as compared to 17.3% for the three months ended September
30, 1999. The decline of 0.6% is primarily attributed to the $13.0 million
or 19.4% decline in revenues for the quarter ended September 30, 2000. For
the nine months ended September 30, 2000 gross profit as a percentage of
revenues was relatively unchanged at 16.7% as compared to 16.8% for the nine
months ended September 30, 1999.
Selling, general and administrative expenses were $6.3 million for the three
months ended September 30, 2000 compared to $5.9 million for the three
months ended September 30, 1999. For the nine months ended September 30,
2000, selling, general and administrative expenses were $19.7 million
compared to $16.6 million for the comparable prior year period. Depreciation
expenses relating to the Company's new operating software represented the
largest dollar increase in both the quarter and nine months ended September
30, 2000. The investment in software is being depreciated over three years.
The other significant factors causing the increases were professional fees
relating to the implementation and increased salaries and wages in
engineering, inventory control and bill of materials in connection with the
Company's goal to obtain more accurate and timely information to improve
overall operations of the Company.
Interest expense was $0.8 million for both the quarters ended September 30,
2000 and September 30, 1999, respectively. Interest expense for the nine
months ended September 30, 2000 was $2.4 million compared to $1.7 million for
the comparable prior year period. The increase for the nine months ended
September 30, 2000 relates to the $17.1 million term loan used in 1999 for
the purchase of 1.7 million shares of the Company's Class A Common stock and,
to a lesser extent, increased interest on chassis which the Company uses for
the manufacture of its products.
Net income for the three months ended September 30, 2000 was $1.2 million or
$0.11 cents per diluted share compared to $2.9 million or $0.26 per diluted
share for the three months ended September 30, 1999. The primary reason for
the decrease was the $13.0 million revenue decline and the factors discussed
above. For the nine months ended September 30, 2000, net income was $6.2
million or $0.55 per diluted share compared to $8.2 million or $0.66 per
diluted share for the nine months ended September 30, 1999.
Page 10 of 14
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Liquidity and Capital Resources
-------------------------------
Cash flow from operations was adequate to fund the Company's operations,
provide for capital expenditures and fund the stock repurchase program for
the nine months ended September 30, 2000. Net income combined with
depreciation and amortization was the major source of cash flow. The decline
in inventory of $9.0 million and accounts receivable of $2.2 million relates
to the lower revenues experienced in the third quarter as well as new systems
and procedures put in place to better manage inventory. Offsetting the
decreases in inventory and accounts receivable were reductions of accounts
payable of $4.1 million and $1.9 million in accrued liabilities relating to
the lower revenues experienced in the third quarter of 2000.
Capital expenditures during the nine months ended September 30, 2000 totaled
$6.9 million. Major expenditures during the period were for the acquisition
of and improvements to the Company's manufacturing facility in North Carolina
for $2.5 million, $0.6 million for a distribution facility in the Cleveland,
Ohio area, $0.4 million for a distribution facility in St. Louis, Missouri
and $0.2 million for property to construct a distribution facility in the
Columbus, Ohio area. The balance of the expenditures were for manufacturing
equipment and facility improvements at the Company's manufacturing
facilities.
The major financing activity during the nine months ended September 30, 2000
was the acquisition of $1.5 million of the Company's Class A Common Stock in
open market transactions. The Company was also able to reduce its long-term
debt by $7.1 million during the period.
The Company anticipates that cash flow from operations and funds available
under the Company's revolving credit agreement will be sufficient to fund
operations during the balance of 2000.
Forward-Looking Statements
--------------------------
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, and
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 fuel cost or 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 11 of 14
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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 12 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 9, 2000 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 13 of 14
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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 14 of 14
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