-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JWIvHUOu+HZbfaZCdtwnM5H87irj9quZrVfJ5npiAw35sY+e/q4+0iitNyil/3yT FUU0cjVfLDCXfVFnjPUhFw== 0000350846-98-000011.txt : 19981118 0000350846-98-000011.hdr.sgml : 19981118 ACCESSION NUMBER: 0000350846-98-000011 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981116 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SUPREME INDUSTRIES INC CENTRAL INDEX KEY: 0000350846 STANDARD INDUSTRIAL CLASSIFICATION: TRUCK & BUS BODIES [3713] IRS NUMBER: 751670945 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-08183 FILM NUMBER: 98751329 BUSINESS ADDRESS: STREET 1: 65140 US 33 E STREET 2: PO BOX 237 CITY: GOSHEN STATE: IN ZIP: 46526 BUSINESS PHONE: 2196423070 MAIL ADDRESS: STREET 1: P O BOX 237 STREET 2: 65140 U S 33 EAST CITY: GOSHEN STATE: IN ZIP: 46526 FORMER COMPANY: FORMER CONFORMED NAME: EXPLORATION SURVEYS INC DATE OF NAME CHANGE: 19850813 10-Q 1 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 September 30, 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 November 9, 1998 Class A 9,351,018 Class B 1,607,937 The index to Exhibits is at page 15 in the sequential numbering system. Total number of pages: 15. Page 1 of 15 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 9, 10, Operations 11 & 12 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 13 Signatures 14 Index to Exhibits 15 Page 2 of 15 Part I. Financial Information Item 1. Financial Statements Supreme Industries, Inc. and Subsidiaries Consolidated Balance Sheets September 30, December 31, 1998 1997 ------------- ------------ Assets (Unaudited) Current assets: Cash and cash equivalents.............. $158,941 $159,044 Accounts receivable, net............... 24,516,717 23,188,066 Inventories............................ 28,605,095 28,404,786 Deferred income taxes.................. 973,657 973,657 Other current assets................... 642,233 803,442 ------------ ------------ Total current assets................ 54,896,643 53,528,995 ------------ ------------ Property, plant and equipment, at cost.... 50,245,561 46,083,344 Less, Accumulated depreciation and amortization...................... 18,380,847 16,522,903 ------------ ------------ Property, plant and equipment, net.. 31,864,714 29,560,441 Intangible assets, net.................... 1,552,903 1,705,385 Other assets.............................. 1,023,608 1,079,491 ------------ ------------ Total assets........................ $89,337,868 $85,874,312 ============ ============ The accompanying notes are a part of the consolidated financial statements. Page 3 of 15 Supreme Industries, Inc. and Subsidiaries Consolidated Balance Sheets, Concluded September 30, December 31, 1998 1997 ------------- ------------ Liabilities and Stockholders' Equity (Unaudited) Current liabilities: Current maturities of long-term debt.... $2,509,508 $2,119,692 Trade accounts payable.................. 7,542,513 10,433,051 Accrued income taxes.................... 743,162 1,098,111 Other accrued liabilities............... 7,943,499 9,514,186 ------------ ------------ Total current liabilities............ 18,738,682 23,165,040 Long-term debt............................. 17,557,769 17,359,703 Deferred income taxes...................... 898,825 898,825 ------------ ------------ Total liabilities.................... 37,195,276 41,423,568 Stockholders' equity....................... 52,142,592 44,450,744 ------------ ------------ Total liabilities and stockholders' equity............................. $89,337,868 $85,874,312 ============ ============ The accompanying notes are a part of the consolidated financial statements. Page 4 of 15 Supreme Industries, Inc. and Subsidiaries Consolidated Statements of Income (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, ------------------------- -------------------------- 1998 1997 1998 1997 ------------ ------------ ------------ ------------ Revenues................. $51,406,038 $45,691,254 $168,221,575 $146,140,460 Costs and expenses: Cost of sales......... 43,165,665 38,648,059 138,891,672 121,564,238 Selling, general and administrative.. 4,907,523 3,909,345 15,142,831 12,328,511 Interest.............. 397,766 299,194 1,304,205 1,062,419 ------------ ------------ ------------ ------------ 48,470,954 42,856,598 155,338,708 134,955,168 ------------ ------------ ------------ ------------ Income before income taxes..... 2,935,084 2,834,656 12,882,867 11,185,292 Income taxes............. 1,222,000 1,134,000 5,291,000 4,468,000 ------------ ------------ ------------ ------------ Net income......... $1,713,084 $1,700,656 $7,591,867 $6,717,292 ============ ============ ============ ============ Earnings per share: Basic.............. $.15 $.14 $.66 $.58 Diluted............ .15 .14 .66 .58 Shares used in the computation of earnings per share: Basic.............. 11,511,629 11,526,128 11,478,217 11,511,598 Diluted............ 11,562,073 11,528,040 11,556,819 11,525,165 The accompanying notes are a part of the consolidated financial statements. Page 5 of 15 Supreme Industries, Inc. and Subsidiaries Consolidated Statements of Cash Flows (Unaudited) Nine Months Ended September 30, ------------------------------- 1998 1997 --------------- --------------- Cash flows from operating activities: Net income........................... $7,591,867 $6,717,292 Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization... 2,225,910 2,092,984 Loss on disposal of equipment... 86,998 11,679 Changes in operating assets and liabilities................... (6,183,925) (2,402,057) --------------- --------------- Net cash provided by operating activities...................... 3,720,850 6,419,898 --------------- --------------- Cash flows from investing activities: Additions to property, plant and equipment.......................... (4,574,599) (3,268,554) Proceeds from disposal of property, plant and equipment................ 109,900 53,150 (Increase) decrease in other assets.. 55,883 (6,952) --------------- --------------- Net cash (used in) investing activities...................... (4,408,816) (3,222,356) --------------- --------------- Cash flows from financing activities: Proceeds from revolving line of credit and other long-term debt.... 77,312,374 58,559,938 Repayments of revolving line of credit and other long-term debt.... (76,724,492) (61,802,447) Proceeds from exercise of stock options............................ 114,101 50,609 Acquisition of treasury stock........ (14,120) --- --------------- --------------- Net cash provided by (used in) financing activities............ 687,863 (3,191,900) --------------- --------------- Increase (decrease) in cash and cash equivalents........................... (103) 5,642 Cash and cash equivalents, beginning of period................................ 159,044 220,678 --------------- --------------- Cash and cash equivalents, end of period................................ $158,941 $226,320 =============== =============== Noncash investing and financing activities: Common Stock dividends............. $11,947,665 $7,866,397 Class A Common Stock exchanged in exercise of stock options (12,843 shares).................. 185,950 --- The accompanying notes are a part of the consolidated financial statements. Page 6 of 15 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: September 30, December 31, 1998 1997 ------------- ------------ Raw materials.............. $ 16,743,214 $ 16,896,669 Work-in-progress........... 4,656,134 4,553,082 Finished goods............. 7,205,747 6,955,035 ------------- ------------ $ 28,605,095 $ 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 - DEBT On June 23, 1998 the Company signed an amendment to it's revolving credit agreement that increased it's borrowing availability to $18,000,000 from $14,000,000 for the period July 1 through January 31 and to $25,000,000 from $20,000,000 for the period February 1 through June 30. The amendment also provides for the Company to reduce it's interest rate and commitment fee based on it's leverage ratio, as defined by the bank. The amendment requires that working capital not fall below $10,000,000 ($36.2 million at September 30, 1998) and tangible capital funds not be less than $30,000,000 plus an amount equal to 50% of cumulative net income ($50.6 million at September 30, 1998). The amendment also deleted the covenants restricting dividend payments and limiting capital expenditures. The term of the credit agreement has been extended through April 30, 2001. The Company had $11.5 million available under its revolving credit agreement on September 30, 1998. Page 7 of 15 On September 30, 1998 the Company borrowed $7,000,000 repayable in equal monthly principal payments of $116,667 through September 30, 2003. The terms and conditions of the loan are subject to the Credit Agreement dated April 25, 1994, and as amended by the fourth amendment to the Credit Agreement dated September 30, 1998. The Company also entered into an interest rate swap agreement that fixes the interest rate at 6.705% over the term of the loan. NOTE D - STOCK DIVIDEND On May 12, 1998, the Board of Directors declared a 5% common stock dividend payable on June 1, 1998, to shareholders of record on May 25, 1998. On November 3, 1998, the Board of Directors declared a 5% common stock dividend to shareholders of record as of November 13, 1998 payable on November 20, 1998. All share and per share data have been adjusted to reflect these stock dividends on a retroactive basis. NOTE E - STOCK REPURCHASE PROGRAM On September 2, 1998 the Board of Directors authorized the Company to repurchase up to 500,000 shares of Class A Common Stock in open market purchases or privately negotiated transactions through the close of business on February 26, 1999. Page 8 of 15 NOTE F - 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 is computed by reflecting potential dilution from the exercise of outstanding stock options. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. Results of Operations Revenues for the quarter ended September 30, 1998 increased $5.7 million to $51.4 million while revenues for the nine months ended September 30, 1998 increased $22.1 million to $168.2 million. This compares to $45.7 million for the quarter and $146.1 million for the nine months ended September 30, 1997. Both basic and diluted earnings per share were $.15 for the quarter ended September 30, 1998 compared to $.14 for the quarter ended September 30, 1997 while for the nine months ended September 30, 1998 both basic and diluted earnings per share were $.66 compared to $.58 for the comparable prior year period. Basic and diluted earnings per share for all periods presented have been adjusted for the common stock dividends declared and paid in 1998 and 1997. Each of the Company's product lines contributed to the increased revenues for both the quarter and nine months ended September 30, 1998. In addition each of the Company's manufacturing facilities experienced revenue growth for both the quarter and nine months ended September 30, 1998. The Company's new product lines, trolley cars, armored trucks and Spartan service van were responsible for approximately 6% of the Company's revenue growth for the nine months ended September 30, 1998. The Company's gross profit percentage improved .6% for both the quarter and nine months ended September 30, 1998 to 16.0% from 15.4% for the quarter and to 17.4% from 16.8% for the nine months ended September 30, 1998. Slight decreases in material costs, labor and overhead were responsible for the improvement in gross profit. Page 9 of 15 Selling, general and administrative expenses as a percentage of revenues were 9.5% for the quarter ended September 30, 1998 and 9.0% for the nine months ended September 30, 1998. The comparable prior year percentages were 8.6% for the quarter and 8.4% for the nine months ended September 30, 1997. Contributing to the increase were advertising and promotional costs in connection with the Company's new product lines as well as increased commissions related to the higher revenues. Additionally, the Company is incurring expenses in connection with the implementation of a completely new operating information system that will enable the Company to process transactions in the year 2000 as well as provide better and more detailed analysis of the Company's product lines and operating facilities. Interest expense as a percentage of revenues for the quarter and nine months ended September 30, 1998 increased .1% to .8% compared to the comparable prior year periods. The increase of $98,572 in the quarter and $241,786 for the nine months ended September 30, 1998 is a combination of pool chassis interest and borrowings under the Company's revolving credit line to finance higher levels of inventory and accounts receivable resulting from the increased revenues in 1998. The effective income tax rate for the three and nine months ended September 30, 1998 was 41.6% and 41.1%, respectively, compared to 40.0% and 39.9% for the three and nine months ended September 30, 1997. The lower effective tax rate in 1997 was principally attributable to research and experimentation tax credits. Liquidity and Capital Resources Cash flows from operating activities combined with funds available under the Company's revolving credit agreement were adequate to finance operations and provide for capital expenditures during the nine months ended September 30, 1998. Net income of $7.6 million and depreciation and amortization of $2.1 million were the primary sources of cash flow. Higher levels of inventory and accounts receivable, as a result of the Company's increased revenues, were the most significant uses of cash flow during the nine months ended September 30, 1998. The Company has invested $4.6 million in capacity expansions and equipment during the nine months ended September 30, 1998. The largest expenditures were made at the Company's Goshen, Indiana; Jonestown, Pennsylvania and Griffin, Georgia manufacturing plants. These additions were necessary to provide capacity for the increased demand for the Company's existing product lines as well as provide manufacturing space for the Company's new product lines, trolley cars, armored trucks and Spartan service vans. Page 10 of 15 The Company amended it's banking agreement on June 23, 1998 to increase the amount available under it's revolving credit facility and to provide for covenants more favorable to the Company. The Company further amended it's bank agreement on September 30, 1998 to take advantage of the current low interest rates. The amendment and a interest rate swap agreement provides for a $7 million dollar fixed rate loan at 6.7%. These amendments are discussed further in Note C of the Notes To Consolidated Financial Statements. The Company anticipates that cash flows from operations and amounts available under it's revolving line of credit will be sufficient to meet the Company's cash needs during the remaining part of 1998 and for the next twelve months. The Company began preparation for the year 2000 issues during 1996. An independent consulting group was engaged to conduct a complete analysis of the Company's system and operating requirements. After review and approval by management, this analysis formed the basis for a request for quotation that was sent to several major software providers. The final decision was made on the strength of the manufacturing software combined with the quality and level of expertise the software provider could furnish. In late 1997 and continuing, the Company began devoting substantial time and resources to install a new information system. Total cost of the operating software and consulting fees is approximately $600,000. In addition, the Company has dedicated certain of it's personnel to the project. An implementation team was formed of key employees from every major operating and support area of the Company. The Company has an implementation schedule that has all of its operating systems year 2000 compliant by July 1, 1999. The Company has successfully implemented the new operating software at it's fiberglass manufacturing facility. Due to the uncertainty of the year 2000 readiness of third-party suppliers and customers, the Company is currently unable to determine whether the consequences of year 2000 failures by third-parties could have a material impact on the Company's operations. The failure of third-parties to correct a material year 2000 problem could result in an interruption in, or failure of, certain normal business activities or operations of the Company. Page 11 of 15 The Company's hardwood flooring plant is located in La Ceiba, Honduras, which suffered major damage as a result of hurricane Mitch. Though communication with the plant have been sporadic we have been in contact with our Honduran management. At this time though it is difficult to estimate when the plant will resume supplying flooring to our domestic operations. Electric power is still out. Bridges and roads around the area have been destroyed. Until repaired the Company will not be able to receive wood from the rain forest nor will it be able to move flooring from the plant to the port for shipment. The Honduran plant had been supplying between 40 to 50% of the Company's flooring requirements. Alternative supply arrangements have been made that will provide flooring on a timely basis to the Company under favorable terms. The Company will closely monitor development and information coming out of Honduras. Due to the extensive damage and devastation to the Honduran infrastructure the Company can not reasonably predict when the plant will resume supplying hardwood flooring. Even if the decision is made to close down this operation management believes there will not be a material adverse effect to it's operations. 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 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 12 of 15 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 13 of 15 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 16, 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 14 of 15 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 15 of 15 EX-27 2
5 9-MOS DEC-31-1998 SEP-30-1998 158,941 0 24,996,717 480,000 28,605,095 54,896,643 50,245,561 18,380,847 89,337,868 18,738,682 17,557,769 0 0 1,101,000 0 89,337,868 168,221,575 168,221,575 138,891,672 138,891,672 15,142,831 0 1,304,205 12,882,867 5,291,000 7,591,867 0 0 0 7,591,867 0.66 0.66
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