-----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, Gxok3c9LDFUV4lmIEPFVYVSh07EdKzIqopYsrgOZzPuiMSoW5cRQULP3lv7k9KX/ WxXXf2bWWMHeSGZS2OOAnQ== 0000350846-99-000007.txt : 19990514 0000350846-99-000007.hdr.sgml : 19990514 ACCESSION NUMBER: 0000350846-99-000007 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990513 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: 99620018 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 March 31, 1999 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, 1999 Class A 9,819,305 Class B 1,682,328 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 9, 10, Financial Condition and Results of Operations 11 & 12 PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders 13 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 March 31, December 31, 1999 1998 -------------- ------------ Assets (Unaudited) Current assets: Cash and cash equivalents.................. $65,344 $185,424 Accounts receivable, net................... 26,911,791 28,709,559 Inventories................................ 36,123,983 28,792,650 Deferred income taxes...................... 1,081,839 1,081,839 Other current assets....................... 1,381,165 1,465,237 ------------- ------------- Total current assets.................... 65,564,122 60,234,709 ------------- ------------- Property, plant and equipment, at cost....... 51,320,369 50,030,906 Less, Accumulated depreciation and amortization.......................... 19,378,273 18,688,584 ------------- ------------- Property, plant and equipment, net...... 31,942,096 31,342,322 Intangible assets, net....................... 1,451,248 1,502,076 Other assets................................. 977,434 991,947 ------------- ------------- Total assets............................ $99,934,900 $94,071,054 ============= ============= The accompanying notes are a part of the consolidated financial statements. Page 3 of 15 Supreme Industries, Inc. and Subsidiaries Consolidated Balance Sheets, Concluded March 31, December 31, 1999 1998 ------------- ------------ Liabilities and Stockholders' Equity (Unaudited) Current liabilities: Current maturities of long-term debt....... $1,764,973 $2,014,975 Trade accounts payable..................... 11,465,586 10,235,964 Accrued income taxes....................... 2,450,284 961,628 Other accrued liabilities.................. 7,390,493 7,736,198 ------------- ------------- Total current liabilities............... 23,071,336 20,948,765 Long-term debt............................... 19,649,592 18,303,207 Deferred income taxes........................ 1,333,007 1,333,007 ------------- ------------- Total liabilities....................... 44,053,935 40,584,979 Stockholders' equity......................... 55,880,965 53,486,075 ------------- ------------- Total liabilities and stockholders' equity................................ $99,934,900 $94,071,054 ============= ============= 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 March 31, ------------- -------------- 1999 1998 ------------- -------------- Revenues.................................... $56,376,042 $55,493,345 Costs and expenses: Cost of sales............................. 46,834,398 46,120,374 Selling, general and administrative....... 5,154,775 4,946,225 Interest.................................. 339,004 417,013 ------------- ------------- 52,328,177 51,483,612 ------------- ------------- Income before income taxes............. 4,047,865 4,009,733 Income taxes................................ 1,650,000 1,622,000 ------------- ------------- Net income............................. $2,397,865 $2,387,733 ============= ============= Earnings per share: Basic.................................. $.21 $.21 Diluted................................ .21 .21 Shares used in the computation of earnings per share: Basic.................................. 11,427,113 11,447,338 Diluted................................ 11,509,333 11,549,796 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) Three Months Ended March 31, ------------- ------------ 1999 1998 ------------- ------------ Cash flows from operating activities: Net income................................. $2,397,865 $2,387,733 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization.......... 771,076 732,620 (Gain) loss on disposal of equipment... (2,317) 84,087 Changes in operating assets and liabilities.......................... (3,076,920) (7,548,434) ------------- ------------ Net cash provided by (used in) operating activities............................ 89,704 (4,343,994) ------------- ------------ Cash flows from investing activities: Additions to property, plant and equipment. (1,321,030) (2,068,787) Proceeds from disposal of property, plant and equipment............................ 3,325 108,900 Decrease in other assets................... 14,513 23,045 ------------- ------------ Net cash (used in) investing activities. (1,303,192) (1,936,842) ------------- ------------ Cash flows from financing activities: Proceeds from revolving line of credit and other long-term debt................. 22,569,011 25,405,232 Repayments of revolving line of credit and other long-term debt................. (21,472,628) (19,245,872) Proceeds from exercise of stock options.... --- 98,649 Acquisition of treasury stock.............. (2,975) --- ------------- ------------ Net cash provided by financing activities............................ 1,093,408 6,258,009 ------------- ------------ Decrease in cash and cash equivalents........ (120,080) (22,827) Cash and cash equivalents, beginning of period..................................... 185,424 159,044 ------------- ------------ Cash and cash equivalents, end of period..... $65,344 $136,217 ============= ============ 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, 1998 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, 1999 1998 ------------ ------------ Raw materials.............. $ 24,453,828 $ 18,419,217 Work-in-progress........... 5,032,365 4,154,914 Finished goods............. 6,637,790 6,218,519 ------------ ------------ $ 36,123,983 $ 28,792,650 ============ ============ 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, 1999 was 40.8% compared to 40.5% for the three months ended March 31, 1998. Page 7 of 15 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, ---------------------------- 1999 1998 ------------ ------------- Net Income $2,398 $2,388 ------ ------ Weighted average number of shares outstanding (used in computation of basic earnings per share) 11,427 11,447 Effect of dilutive securities: Options and warrants 82 103 Diluted shares outstanding (used in computation of diluted earnings per share) 11,509 11,550 ====== ====== The computations of the number of common shares used in the determination of 1998 basic and diluted earnings per share give retroactive recognition to the two (2) 5% common stock dividends declared and paid in 1998. NOTE E - SUBSEQUENT EVENTS AND COMMITMENTS On April 12, 1999, the Company announced an offer to its stockholders to acquire up to 2,000,000 shares of its Class A and Class B Common Stock at a cash purchase price not greater than $10.00 per share nor less than $8.75 per share. The offer to purchase shares expired May 10, 1999. The transfer agent reports that 1,689,423 shares were tendered, and, pursuant to the terms of the offer, the Company will purchase all of such shares at $10.00 per share. In connection with the stock repurchase program, the Company obtained a financing commitment for a five-year unsecured $20,000,000 term loan. The term loan requires quarterly principal and interest payments over the term of the loan, with interest at certain basis points above LIBOR depending on the Company's leverage ration, as defined. Page 8 of 15 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. Results of Operations Revenues for the quarter ended March 31, 1999 increased $882,697 to $56,376,042 from $55,493,345 for the quarter ended March 31, 1998. Revenues were somewhat restrained during the quarter due to delays in chassis arrivals as well as lack of specifications for certain large fleet orders. Gross profit as a percentage of revenues for both the quarter ended March 31, 1999 and 1998 was 16.9% as a percentage of revenues. A slight decrease in material cost as a percentage of revenues was offset by increases in both direct labor and overhead. Selling, general and administrative expenses as a percentage of revenues increased slightly to 9.1% for the quarter ended March 31, 1999 from 8.9% for the quarter ended March 31, 1998. Interest expense for the quarter ended March 31, 1999 was .6% of revenues or $339,000, compared to .8% or $417,000 for the quarter ended March 31, 1998. More favorable interest rates as well as a decline in interest on pool chassis were responsible for the decline. Net income for the quarter ended March 31, 1999 was $2,397,865 compared to $2,387,733 for the quarter ended March 31, 1998. Both basic and diluted earnings per share were $.21 for the quarters ended March 31, 1999 and March 31, 1998. Liquidity and Capital Resources Net income and funds available under the Company's revolving credit agreement were adequate to finance operations during the quarter ended March 31, 1999. Net income and depreciation and amortization were the significant components of cash flow. The inventory increase of $7.3 million was the most significant use of operating cash flow during the period. The inventory increase is related to both higher levels of fleet orders as well as delivery delays due to chassis delays and product specifications not being finalized timely. Accounts receivable declined $1.8 million in the period. The Company spent $1.3 million on capital expenditures during the quarter ended March 31, 1999. Major projects under way are the construction of a corporate office facility in Goshen, Indiana, an addition to our Ligonier facility and expansions at our Pennsylvania and California operations. Page 9 of 15 The principal financing activity during the quarter was the use of the Company's revolving credit agreement to finance operations and capital expenditures. On April 12, 1999, the Company announced an offer to its stockholders to acquire up to 2,000,000 shares of its Class A and Class B Common Stock at a cash purchase price not greater than $10.00 per share nor less than $8.75 per share. The offer to purchase shares expired May 10, 1999. The transfer agent reports that 1,689,423 shares were tendered, and, pursuant to the terms of the offer, the Company will purchase all of such shares at $10.00 per share. In connection with the stock repurchase program, the Company obtained a financing commitment for a five-year unsecured $20,000,000 term loan. The term loan requires quarterly principal and interest payments over the term of the loan, with interest at certain basis points above LIBOR depending on the Company's leverage ration, as defined. The Company anticipates that cash flows from operations and funds available under the Company's revolving credit agreement will be sufficient to meet the Company's cash needs during 1999. Year 2000 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. The software purchased is Year 2000 compliant. The total cost of the operating software and consulting fees is approximately $1,000,000. In addition the Company has spent $200,000 on hardware upgrades. The expenditures were funded from operating activities combined with funds available under the Company's revolving credit agreement. The majority of the costs were incurred during 1998 and the Company does not anticipate significant additional expenditures. The Company's goal is not only to be able to process transactions in the Year 2000, but also to significantly improve its overall information systems. When fully implemented the Company will have more detailed operating and financial information by facility, product line and customer. For this purpose the project was divided into two phases. Phase I provides Year 2000 compliance and Phase II develops the system and procedures necessary to provide the more meaningful operating and financial information. Phase II will be an ongoing project. Page 10 of 15 The Company has completed the assessment and testing phase of its Year 2000 project and is currently in the implementation phase. Based on the results of the successful implementation of the Company's Year 2000 compliant software at three of its operations the Company believes that all of its operating locations will be fully Year 2000 compliant by October 1, 1999. The Company has a contingency plan that would enable it to use its existing software after December 31, 1999, but as indicated earlier based on the results of successful implementations the Company believes it will be fully Year 2000 compliant by October 1, 1999. The Company's major suppliers of raw materials used in the Company's products have indicated that they are year 2000 compliant. The raw materials used in the Company's products are commodity in nature and are readily available across the country from a large number of suppliers. The Company does not believe it will have difficulty obtaining raw materials because of established relations with multiple sources for its raw materials and the fact that they are readily available from a large number of sources. The Company also believes there is not significant risk from the failure of its customers to become year 2000 compliant because of the large number of active accounts and the fact that no single account is more than 6% of revenues. The Company's products are sold direct to large users; there are approximately 85 truck distributors and 37 bus distributors as well as approximately 500 truck dealers throughout the country. The Company believes the worst case scenario relating to Year 2000 issues would be the disruption or unavailability of utility services. The Company also believes that the possibility is remote. Additionally, the Company's seven manufacturing plants and eight distribution facilities are all served by different utility companies and it is unlikely that all would suffer from a Year 2000 problem. As noted in the next section, "Forward Looking Statements", a major risk factor for the Company is the availability of chassis. The Company's major sources of chassis have indicated that they are Year 2000 compliant and that their chassis are also Year 2000 compliant. Page 11 of 15 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, and 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, severe interest rate increases and the Company's ability to make its operating and financial systems Year 2000 compliant. 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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Supreme Industries, Inc.'s annual meeting of stockholders was held on April 29, 1999. 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 8,375,758 to 15,913 with no abstentions: Rice M. Tilley, Jr. Rick L. Horn H. Douglas Schrock The following individuals were elected Directors by the holders of the Company's Class B Common Stock by a vote of 1,682,328 to 0 with no abstentions: William J. Barrett Robert J. Campbell Thomas Cantwell Herbert M. Gardner Omer G. Kropf Robert W. Wilson b) PricewaterhouseCoopers LLP was ratified as the Company's independent auditors by a vote of 8,355,866 to 23,472 with 12,333 abstaining. c) The Company's 1998 Stock Option Plan was approved by a vote of 7,278,157 to 436,862 against with 32,328 abstentions. 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: May 13, 1999 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 3-MOS DEC-31-1999 MAR-31-1999 65,344 0 27,442,791 531,000 36,123,983 65,564,122 51,320,369 19,378,273 99,934,900 23,071,336 19,649,592 0 0 1,157,898 0 99,934,900 56,376,042 56,376,042 46,834,398 46,834,398 5,154,775 0 339,004 4,047,865 1,650,000 2,397,865 0 0 0 2,397,865 0.21 0.21
-----END PRIVACY-ENHANCED MESSAGE-----