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Supreme Industries Reports Third-Quarter and Nine-Month 2006 Financial Results

Posted on: Tuesday, 14 November 2006, 09:00 CST

Supreme Industries, Inc. (AMEX:STS), a leading manufacturer of specialized transportation products, including truck bodies and shuttle buses, today announced financial results for the third-quarter and nine-month periods ended September 30, 2006.

The Company generated net sales of $79.7 million for the third quarter of 2006, increasing 3.4 percent from the prior-year third-quarter high of $77.1 million. Net income for the 2006 third quarter of $1.2 million compared with $1.3 million in last year's third quarter, with diluted earnings per share remaining unchanged at $.10.

Net sales for the first nine months advanced to $264.3 million in 2006 from 2005's $262.6 million. Net income was $4.2 million, or $.32 per diluted share, versus $7.3 million, or $.57 per diluted share, for the 2005 nine-month period.

The 2006 revenue improvement reflected increased sales of the Company's core dry freight product line where sales were up for the third quarter and the nine months, versus the respective prior-year periods. This was supported by an increase in sales from the Company's StarTrans® Bus Division during the most recent nine months, partially offsetting a decrease in fleet sales from levels achieved last year. Sales backlog was $75.4 million at September 30, 2006, versus $69.1 million at 2005's third-quarter end, an increase of more than nine percent.

Gross profit for the third quarter of 2006 increased 15.7 percent to $9.6 million, or 12.0 percent of net sales, compared with $8.3 million, or 10.7 percent of net sales, for the same quarter last year. For the first nine months of 2006, gross profit decreased 7.5 percent to $29.7 million, versus $32.1 million for the 2005 nine-month period. Gross margin was 11.2 percent of net sales in the current year's nine-month period, versus 12.2 percent of net sales in last year's nine months. The gross profit increase for the quarter was primarily due to favorable annual physical inventory adjustments. These adjustments historically have been recorded in the third quarter and resulted in a $1.9 million favorable adjustment this year compared with a $1.1 million unfavorable adjustment last year. Additionally, the Company continued to experience higher raw material costs and increases in its workers compensation costs, repairs and maintenance and utilities, which impacted the financial results.

Selling, general and administrative (SG&A) expenses were $7.2 million, or 9.0 percent of net sales, in the 2006 third quarter, compared with $6.0 million, or 7.8 percent of net sales, for the same period last year. For the 2006 nine-month period, SG&A expenses were $21.4 million, or 8.1 percent of net sales, compared with $19.7 million, or 7.5 percent of net sales, for the same prior-year period. The increases reflected a reduction in cooperative marketing funds the Company receives from chassis manufacturers, expenses as a result of the February 2006 acquisition of Pony Xpress and the addition of new sales positions to promote the Company's expanding product line.

Interest expense in the third quarter increased to $.8 million, up from $.5 million for the same period in 2005. For the nine months, interest expense increased to $2.3 million, compared with $1.6 million for same period a year ago. The increases were a result of higher short-term interest rates, finance charges incurred on consigned chassis inventory and, to a lesser extent, additional borrowings.

Stockholders' equity improved to $75.8 million, or $5.97 per share, at September 30, 2006. At quarter-end, working capital totaled $62.2 million, compared with $60.8 million at last year-end. The working capital ratio at September 30, 2006, was 3.2 to 1, while long-term debt as a percentage of the Company's total assets was 23.9 percent.

Commenting on the financial results, President Robert W. Wilson said, "We are pleased with the quarter's strong sales performance; however, when we exclude the positive impact from the physical inventory adjustment, the effect of our previous price increases has yet to be fully realized.

"We have started to see some of the anticipated benefits from pricing adjustments implemented earlier this year, and we expect that margins will improve as we continue to work through the backlog of lower-margin orders. Strategies to mitigate the adverse impact of volatility in raw material costs continue, and we remain committed to reducing their impact as market conditions allow.

"On the volume side of the business, we are optimistic about market-expanding possibilities inherent in our new product offerings. Among the product expansions and improvements currently being developed is our new high-end StarTrans shuttle bus, which debuted last month to favorable reviews; and our Astro Body, which is Supreme's joint product-development and marketing project with General Motors."

Supreme Industries also recently announced a cash dividend on its outstanding Class A and Class B Common Stock. Stockholders of record as of November 13, 2006, will receive $.095 for each share owned on that date, payable on November 20, 2006. This cash dividend is the 13th consecutive quarterly cash dividend since the Company commenced payments of regular cash dividends in October of 2003.

A live webcast of Supreme Industries' earnings conference call can be heard today, Tuesday, November 14, 2006, at 5:00 p.m. Eastern Time at www.supremeind.com.

About Supreme

Supreme Industries, Inc. (STS) is a nationwide manufacturer of specialized truck bodies produced to the specifications of its customers. Supreme also manufactures the StarTrans® line of special-purpose "shuttle-type" buses. The Company's transportation equipment products are used by a wide variety of industrial, commercial, law enforcement and Homeland Security customers.

This report contains forward-looking statements (within the meaning of the Private Securities Litigation Reform Act of 1995), other than historical facts, which reflect the view of the Company's management with respect to future events. When used in this report, words such as "believe,""expect,""anticipate,""estimate,""intend," and similar expressions, as they relate to the Company or its plans or operations, identify forward-looking statements. Such forward-looking statements are based on assumptions made by and information currently available to the Company's management. Although management believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations 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, raw material cost increases, and severe interest rate increases. Furthermore, the Company can provide no assurance that such raw material cost increases can be passed on to its customers through implementation of price increases for the Company's products. The forward-looking statements contained herein reflect the current views of the Company's management with respect to future events and are subject to those factors and other risks, uncertainties and assumptions relating to the operations, results of operations, cash flows and financial position of the Company. 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.

Supreme Industries, Inc. and Subsidiaries

Consolidated Statements of Income (Unaudited)

Three Months Ended

Nine Months Ended

Sept. 30, 2006

Sept. 24, 2005

 Sept. 30, 2006

 Sept. 24, 2005

Revenue:

Net sales

$79,678,398 

$77,055,374 

$264,289,048 

$262,594,085 

Cost of sales

70,122,112 

68,797,402 

234,596,119 

230,464,233 

Gross profit

9,556,286 

8,257,972 

29,692,929 

32,129,852 

Selling, general and administrative exp.

7,171,292 

5,984,152 

21,372,025 

19,736,568 

Other exp. (income)

(202,475)

(231,583)

(406,566)

(531,801)

Operating income

2,587,469 

2,505,403 

8,727,470 

12,925,085 

Interest expense

760,108 

510,595 

2,295,693 

1,567,628 

Income before income taxes

1,827,361 

1,994,808 

6,431,777 

11,357,457 

Income taxes

585,000 

709,000 

2,251,000 

4,077,000 

Net income

$1,242,361 

$1,285,808 

$4,180,777 

$7,280,457 

Earnings per share:

Basic

$.10 

$.10 

$.33 

$.59 

Diluted

.10 

.10 

.32 

.57 

Shares used in the

computation of EPS:

Basic

12,702,632 

12,561,453 

12,701,639 

12,379,668 

Diluted

12,835,523 

12,948,791 

12,888,703 

12,792,411 

Cash dividends per share

$.095 

$.095 

$.285 

$.165 

Supreme Industries, Inc. and Subsidiaries

Consolidated Balance Sheets

Sept. 30, 2006

Dec. 31, 2005

(Unaudited)

Assets

Current assets

$89,886,986 

$88,609,777 

Property, plant and equipment, net

48,149,186 

47,457,713 

Intangible assets, net

1,460,569 

735,014 

Other assets

621,003 

549,350 

Total assets

$140,117,744 

$137,351,854 

Liabilities

Current liabilities

$27,684,683 

$27,819,756 

Long-term debt

33,538,950 

31,378,367 

Deferred income taxes

3,053,275 

2,988,275 

Total liabilities

64,276,908 

62,186,398 

Total stockholders' equity

75,840,836 

75,165,456 

Total liabilities and stockholders' equity

$140,117,744 

$137,351,854 

Source: Business Wire

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