Supreme’s Gross Profit Up in 1Q

Despite lower net sales volume, Supreme Industries, Inc. (NYSE MKT: STS) reported that first-quarter gross profit rose to $11.4 million, up from $10.8 million, in the same period of 2012. The improvement reflected a favorable product mix, pricing disciplines and efficiency improvements at the company's manufacturing facilities.

Consolidated net sales of $65.9 million for the first quarter declined 8.7% from $72.2 million in last year's comparable period. The truck division, which represented 76% of total net sales, recorded higher sales in the quarter compared with the prior year as the company increased its retail sales offsetting the industry-wide decline in rental fleet orders during the first quarter of 2013. Bus sales declined $7.4 million during the first quarter of 2013 due to persisting competitive pressure and discounting incentives, particularly on state and municipal orders.

Gross margin as a percentage of sales increased to 17.3%, compared with 15.0% in last year's comparable period.

Supreme reported that pre-tax income increased 37.2% to $3.4 million compared with $2.5 million in 2012's first quarter. For the first quarter of 2013, the company recorded income tax expense at an effective tax rate of 32.3%. Supreme reported no tax provision in the first quarter of 2012 resulting from the utilization of previously unrecognized net operating loss carry forwards.

Net income for the first quarter of 2013 was $2.3 million, or $0.15 per diluted share, compared with net income of $2.5 million, or $0.16 per diluted share, last year. Applying the 2013 effective tax rate to results in the first quarter of 2012, would have resulted in net income of $1.7 million, or $0.11 per diluted share.

Supreme's Chief Financial Officer and Interim Chief Executive Officer Matthew Long said: "The truck division's strong performance was a significant highlight during the year's opening quarter. By responding to softer demand from fleet operators and increasing retail sales, we not only achieved higher year-over-year sales of trucks, but also substantial margin improvement. In addition to the 230 basis points of margin expansion versus last year's first quarter, margins widened more than 400 basis points sequentially since the fourth quarter of 2012."

Working capital was $41.7 million at March 30, 2013, up from $38.6 million at Dec. 29, 2012. The working capital ratio was 2.4 to 1 versus 2.7 to 1 for the respective dates. During the quarter, Supreme invested $1.7 million in facilities and equipment primarily to complete capital projects initiated in 2012. Total debt increased to $14.8 million at quarter end, compared with $14.1 million at Dec. 29, 2012. Stockholders' equity increased 3.6% to $69.6 million, or book value of $4.55 per share, at March 30, 2013, compared with $67.2 million, or book value of $4.41 per share, at Dec. 29, 2012. Net cash used by operating activities for the first quarter of 2013 totaled $0.3 million, compared with $2.6 million in the first quarter of 2012.

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