Supreme’s Gross Profit Up 30% in 2Q

Aug. 10, 2011
Supreme Industries, Inc. (NYSE Amex: STS) announced that gross profit improved by approximately 30% to $8. million, or 8.5% of net sales, for its second quarter ending July 2.

Supreme Industries, Inc. (NYSE Amex: STS) announced that gross profit improved by approximately 30% to $8. million, or 8.5% of net sales, for its second quarter ending July 2.

The gross profit percentage was 1.9% lower than the second quarter of 2010 primarily due to the ramp up costs associated with such a significant increase in sales, the high mix of lower margin truck fleet business and the increasing cost of key raw materials. Selling, general and administrative expenses were $6.9 million for the second quarter of 2011. At 7.3% of net sales, these expenses were lower than the 9.4% of net sales for the same period in 2010. The company incurred approximately $500,000 in incremental costs to improve operations as well as other expenses related to its refinancing with another lender and severance costs. Interest expense was slightly higher, at $500,000 compared to $300,000 in second quarter 2010.

Second-quarter 2011 consolidated net sales were $94.1 million, an increase of approximately 60% over the $58.9 million in net sales in the same period a year ago. The sales order backlog remained solid at $99 million at quarter end compared with $92 million a year ago. During the quarter, as previously announced, the company settled a large litigation claim. Excluding this settlement and related costs and other expenses related to our refinancing and profit improvement initiatives, the company achieved second quarter operating income from continuing operations of approximately $1.5 million, versus $700,000 in the second quarter of 2010.

Inclusive of the above mentioned settlement and expenses, the company reported a net loss from continuing operations of $900,000 or $0.06 per share, in the second quarter of 2011, compared to income from continuing operations of $300,000 or $0.02 per share in the same quarter of 2010.

Supreme President and Chief Executive Officer Kim Korth said: "Given the continuing significant increase in sales compared to 2010, Supreme has remained focused on improving our execution and our ability to drive more of our performance to the bottom line. We have expanded our use of common operating standards for all key processes and we have established in-depth metrics at all of our facilities to better guide our decisions. While I am encouraged that, absent the legal settlement costs incurred in this quarter, Supreme did return to profitability, it still is not at an acceptable level. We need to continue to aggressively review all aspects of our business for profit improvement opportunities while simultaneously meeting or exceeding our customers' expectations."

Supreme was in compliance with its minimum EBITDA and its Tangible Net Worth financial covenants under its senior bank loan agreement. Borrowings under this current agreement were $24.2 million as of July 2, 2011 versus $25.5 million on December 25, 2010.

"The truck market has remained very robust although we are obviously being cautious given recent adverse developments in our economy. Our retail truck orders have remained strong and we are focused on deepening our position in a number of key market segments during the remainder of 2011. The bus market was soft for the first half of the year but we anticipate a modest recovery for the second half of 2011. We have taken appropriate steps to structure the bus business for the current economic market conditions while aggressively expanding into new niche sectors. While our armored/specialty vehicle business was negatively impacted by the lengthy budget negotiations in Washington during the first half of this year, its performance has remained relatively steady and we are beginning to see positive new growth opportunities in both our current and targeted customer segments. Supreme is committed to continuous improvement of our key performance measures and to translating these improvements into a sustainable competitive position going forward," Korth concluded.