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 June 30, 2001
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 C.R. 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 August 6, 2001
Class A 8,880,834
Class B 1,917,394
Page 1 of 13
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
Financial Condition and Results of Operations 9, 10
& 11
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security
Holders 12
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 13
Page 2 of 13
Part I. Financial Information
Item 1. Financial Statements
Supreme Industries, Inc. and Subsidiaries
Consolidated Balance Sheets
June 30, December 31,
2001 2000
--------------- ---------------
Assets (Unaudited)
Current assets:
Cash and cash equivalents ........ $199,346 $184,004
Accounts receivable, net.......... 23,735,574 25,566,117
Inventories....................... 29,338,046 31,815,470
Deferred income taxes............. 1,315,298 1,315,298
Other current assets.............. 477,261 670,524
--------------- ---------------
Total current assets......... 55,065,525 59,551,413
--------------- ---------------
Property, plant and equipment, at cost 67,564,224 66,836,744
Less, Accumulated
depreciation and
amortization. .. 27,561,420 25,442,612
--------------- ---------------
Property, plant and
equipment, net.......... 40,002,804 41,394,132
--------------- ---------------
Intangible assets, net................. 1,017,016 1,095,456
Other assets........................... 992,232 932,514
--------------- ---------------
Total assets................. $97,077,577 $102,973,515
=============== ===============
The accompanying notes are a part of the consolidated financial statements.
Page 3 of 13
Supreme Industries, Inc. and Subsidiaries
Consolidated Balance Sheets, Concluded
June 30, December 31,
2001 2000
--------------- ---------------
Liabilities and Stockholders' Equity (Unaudited)
Current liabilities:
Current maturities of long-term
debt..... .............. $4,610,599 $5,181,761
Trade accounts payable.............. 10,310,448 8,111,788
Accrued income taxes................ 597,949 1,148,415
Other accrued liabilities........... 7,867,701 9,874,302
--------------- ---------------
Total current liabilities...... 23,386,697 24,316,266
Long-term debt........................... 18,753,198 25,859,972
Deferred income taxes.................... 1,984,466 1,984,466
--------------- ---------------
Total liabilities.............. 44,124,361 52,160,704
--------------- ---------------
Stockholders' equity...................... 52,953,216 50,812,811
--------------- ---------------
Total liabilities and
stockholders' equity...... $97,077,577 $102,973,515
=============== ===============
The accompanying notes are a part of the consolidated financial statements.
Page 4 of 13
Supreme Industries, Inc. and Subsidiaries
Consolidated Statements of Income (Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
------------------------ ---------------------------
2001 2000 2001 2000
------------ ------------- ------------- -------------
Revenues......... . $59,323,744 $70,567,710 $115,210,555 $144,530,105
------------ ------------- ------------- -------------
Costs and expenses:
Cost of sales 49,640,730 59,778,157 96,896,905 121,162,021
Selling, general
and
administrative 6,277,124 6,365,189 12,272,622 13,368,121
Interest..... 628,199 782,435 1,371,125 1,661,927
------------- ------------- ------------ ------------
56,546,053 66,925,781 110,540,652 136,192,069
------------- ------------- ------------ ------------
Income
before
income
taxes. 2,777,691 3,641,929 4,669,903 8,338,036
Income taxes 1,177,000 1,466,000 1,895,000 3,353,000
------------- ------------- ------------ ------------
Net income $1,600,691 $2,175,929 $2,774,903 $4,985,036
============= ============= ============ ============
Earnings per share:
Basic $.15 $.20 $.26 $.44
Diluted .15 .20 .26 .44
Shares used in the computation of earnings per share:
Basic 10,798,796 11,156,888 10,820,063 11,228,730
Diluted 10,867,778 11,158,489 10,876,689 11,248,964
The accompanying notes are a part of the consolidated financial statements.
Page 5 of 13
Supreme Industries, Inc. and Subsidiaries
Consolidated Statements of Cash Flows (Unaudited)
Six Months Ended
June 30,
-------------------------------
2001 2000
--------------- ---------------
Cash flows from operating activities:
Net income........................ $2,774,903 $4,985,036
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and
Amortization 2,279,203 2,006,885
Gain on disposal of
Equipment (10,367) ---
Changes in operating
assets and liabilities 3,915,319 1,638,458
--------------- ---------------
Net cash provided by
operating activities 8,959,058 8,630,379
-------------- ---------------
Cash flows from investing activities:
Additions to property, plant
and equipment............. (826,264) (5,974,145)
Proceeds from disposal of equipment.. 27,196 ---
(Increase) decrease in other assets. (59,718) 39,160
--------------- ---------------
Net cash used in investing
activities........ ..... (858,786) (5,934,985)
--------------- ---------------
Cash flows from financing activities:
Proceeds from revolving line
of credit and other
long-term debt..... 35,863,174 51,799,015
Repayments of revolving line of
Credit and other long-term
debt......................... (43,541,110) (53,327,276)
Acquisition of treasury stock..... (406,994) (1,210,910)
--------------- ---------------
Net cash used in financing
activities..... (8,084,930) (2,739,171)
--------------- ---------------
Increase (decrease) in cash and cash
Equivalents 15,342 (43,777)
Cash and cash equivalents, beginning
of period 184,004 270,935
--------------- ---------------
Cash and cash equivalents, end
of period $199,346 $227,158
=============== ===============
The accompanying notes are a part of the consolidated
financial statements.
Page 6 of 13
SUPREME INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - BASIS OF PRESENTATION AND OPINION OF MANAGEMENT
The accompanying unaudited consolidated financial statements have
been prepared in accordance with the instructions to Form 10-Q and
therefore do not include all of the information and financial statement
disclosures necessary for a fair presentation of consolidated financial
position, results of operations and cash flows in conformity with generally
accepted accounting principles. In the opinion of management, the information
furnished herein includes all adjustments necessary to reflect a fair
statement of the interim periods reported. All adjustments are of a normal
and recurring nature. The December 31, 2000 consolidated balance sheet data
was derived from audited financial statements, but does not include all
disclosures required by generally accepted accounting principles.
NOTE B - INVENTORIES
Inventories, which are stated at the lower of cost or market with cost
determined on the first-in, first-out method, consist of the following:
June 30, December 31,
2001 2000
------------ -------------
Raw materials.................$ 18,027,495 $ 19,822,278
Work-in-progress.............. 3,448,179 5,384,975
Finished goods................ 7,862,372 6,608,217
------------ -------------
$ 29,338,046 $ 31,815,470
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 both favorable and unfavorable
quarterly adjustments resulting from periodic 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.
Page 7 of 13
NOTE C - INCOME TAXES
The effective income tax rate for the three months ended June 30, 2001 was 42.4%
compared to 40.3% for the three months ended June 30, 2000. For the six months
ended June 30, 2001 the effective income tax rate was 40.6% compared to 40.2%
for the six months ended June 30, 2000. The changes are primarily the result
of fluctuations in taxable income and varying tax rates in the states in which
the Company transacts business.
NOTE D - EARNINGS PER SHARE
The number of shares used in the computation of basic and diluted earnings per
share are as follows (in Thousands):
Three Six
Months Ended Months Ended
June 30, June 30,
----------------- ---------------
2001 2000 2001 2000
Weighted average number of shares
outstanding (used in computation
of basic earnings per share) 10,799 11,157 10,820 11,229
Effect of dilutive stock options 69 1 57 20
------ ------ ------ ------
Diluted shares outstanding (used
in computation of diluted
earnings per share) 10,868 11,158 10,877 11,249
====== ====== ====== ======
NOTE E - NEW ACCOUNTING PRONOUNCEMENTS
The Company adopted SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities," effective January 1, 2001. The Company's interest rate
swap agreements are derivative instruments and the changes in fair value of
these financial instruments, which are accounted for as cash flow hedges, are
reported in other comprehensive income. Based on the Company's derivative
positions at June 30, 2001, the Company recorded a net liability of $228,000
for the fair value of its derivative portfolio with a corresponding charge to
other comprehensive income.
Page 8 of 13
On July 20, 2001, the Financial Accounting Standards Board issued SFAS No, 142,
"Goodwill and Other Intangible Assets", which is effective for fiscal years
beginning after December 15, 2001. SFAS No. 142 primarily addresses the
accounting for goodwill and other intangible assets subsequent to their
acquisition. The most significant changes made by SFAS 142 are (1) goodwill
and indefinite lived intangible assets will no longer be amortized, (2)
goodwill will be tested for impairment at least annually at the reporting unit
level, (3) other intangible assets deemed to have an indefinite life will be
tested for impairment at least annually, and (4) the amortization period of
intangible assets with finite lives will no longer be limited to forty years.
Management is in the process of assessing the impact that the adoption of SFAS
No. 142 will have on the Company's results of operations and financial
position.
NOTE F - RECLASSIFICATIONS
Certain items in the accompanying June 30, 2000 consolidated financial
statements have been reclassified to conform to the 2001 presentation. The
reclassifications had no impact on stockholders' equity, net income or cash
flows as previously presented.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Results of Operations
Revenues for the quarter ended June 30, 2001 decreased $11.3 million to $59.3
million from $70.6 million for the quarter ended June 30, 2000. Revenues for
the six months ended June 30, 2001 decreased $29.3 million to $115.2 million
from $144.5 million for the six months ended June 30, 2000. Included in
revenues and cost of sales for the quarter and six months ended June 30, 2001
are purchased chassis. Comparable amounts for the quarter and six months
ended June 30, 2000 have been reclassified to conform with this presentation.
The Company's large national fleet customers accounted for approximately 56% of
the decreased second quarter revenues and approximately 70% of the year-to-date
decrease in revenues. Fleet orders are typically shipped during the first six
months of the calendar year with 2001 being no exception. Our expectations are
that overall revenues for the remainder of 2001 will be comparable to the
second six months of 2000.
Page 9 of 13
Gross profit as a percentage of revenues increased to 16.3% for the quarter
ended June 30, 2001 compared to 15.3% for the quarter ended June 30, 2000.
This improvement was a result of lower labor costs associated with outside
services. The Company typically contracts for temporary direct labor during
fleet production and the lower fleet sales volume resulted in the reduced labor
costs. Gross profit as a percentage of revenues was relatively unchanged for
the six months ended June 30, 2001 compared to the six months ended June 30
Improved labor costs were offset by increased overhead as a percentage
of revenues due to lower revenues and the fixed nature of certain
overhead expenses.
Selling, general and administrative expenses as a percentage of revenues
increased to 10.6% for the quarter ended June 30, 2001 from 9.0% for the
quarter ended June 30, 2000. For the six months ended June 30, 2001, selling,
general and administrative expenses were 10.7% of revenues compared to 9.2% for
the six months ended June 30, 2000. The reduced revenues adversely impacted
this area due to the fixed nature of certain selling, general and
administrative expenses.
Interest expense decreased $154,236 to $628,199 for the quarter ended June 30,
2001 from $782,435 for the prior year comparable quarter. For the six months
ended June 30, 2001, interest expense decreased $290,802 to $1,371,125 from
$1,661,927 for the six months ended June 30 2000. The interest expense
reduction reflects the debt reduction the Company has been able to achieve due
to improved days sales outstanding and inventory management.
Net income for the three months ended June 30, 2001 was $1,600,691 compared to
$2,175,929 for the quarter ended June 30, 2000 while for the six months ended
June 30, 2001 net income was $2,774,903 compared to $4,985,036 for the six
months ended June 30, 2000. Basic and diluted earnings per share were $.15 for
the three months ended June 30, 2001 compared to $.20 for the prior year
quarter while for the six months ended June 30, 2001 basic and diluted earnings
per share were $.26 compared to $.44 for the comparable prior year period.
Liquidity and Capital Resources
Cash flows from operating activities and proceeds from the Company's revolving
credit agreement were the major sources of funds for operations, capital
expenditures and debt servicing during the first six months of 2001. The
largest components of cash provided by operations were net income of $2.8
million, decreased inventories of $2.5 million and depreciation and
amortization of $2.3 million.
Page 10 of 13
The Company invested $.8 million in property, plant and equipment during the
first six months of 2001 compared to $6.0 million during the first six months
of 2000. This reduction reflects the Company's efforts to limit 2001 capital
expenditures to no more than the estimated 2001 annual depreciation and
amortization expenses of $4.0 million, assuming no plant purchases or
acquisitions.
The significant financing activity which used cash was a $7.7 million reduction
in long-term debt.
The Company believes that cash flows generated from operations and funds
available under the Company's revolving line of credit will be sufficient to
meet the Company's cash needs during 2001.
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 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 13
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,
2001. 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
7,129,714 to 564,254 with no abstentions:
Rick L. Horn
Rice M. Tilley, Jr.
H. Douglas Schrock
The following individuals were elected Directors by the
holders of the Company's Class B Common Stock by a vote
of 1,917,394 to 0 with no abstentions:
William J. Barrett
Robert J. Campbell
Thomas Cantwell
Herbert M. Gardner
Omer G. Kropf
Robert W. Wilson
b) The Company's 2001 Stock Option Plan was approved by a
vote of 7,200,428 to 2,384,101 with 26,833 abstaining.
c) PricewaterhouseCoopers LLP was ratified as the Company's
independent auditors by a vote of 8,786,398 to 809,937
with 15,027 abstaining.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
a) Exhibits: None
b) Reports on Form 8-K: None
Page 12 of 13
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, 2001 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 13