Supreme Industries, Inc. said second-quarter net sales declined 14.6 percent to $75.3 million, compared with $88.2 million in last year's second quarter.
Gross profit margin, as a percentage of net sales, was 9.8 percent for the quarter, versus 12.6 percent for the same period last year. The decline reflected lower sales volume and product pricing pressures, which resulted in increases for all components of cost of sales. Net income in the quarter declined to $216,579, or $0.02 per diluted share, versus $2.0 million, or $0.16 per diluted share, reported in the 2007 second quarter.
"In addition to the widespread malaise persisting throughout the retail truck market, a major fleet customer cancelled orders for $2.6 million,” President Robert W. Wilson said. “This was due to a significant reduction in OEM chassis availability caused by two labor strikes that have since been resolved. While chassis availability has improved, the concern remains as OEM chassis production schedules are subject to change."
Net sales for the first six months of 2008 totaled $151.2 million, a 12.1 percent decrease from the $172.1 million reported in the comparable year-ago period. The sales decline in both the quarterly and six-month periods was primarily related to reduced sales in the company's largest product group—core dry freight trucks—which declined 22.6 percent year over year.
This was partially offset by strong sales growth in Supreme's bus division. Gross profit margin declined to 9.9 percent of sales in the first half of 2008, compared with 11.7 percent of net sales in the first six months of 2007. Net income was down during the six-month period to $443,093 from the $3 million generated last year. Earnings per diluted share were $0.03 for the first six months of 2008, compared with $0.23 for the same period in 2007.
Selling, general and administrative (SG&A) expenses for the second quarter and first half of 2008 decreased 7.4 percent to $7.0 million, and 3.7 percent to $14 million, respectively. The decrease in SG&A is primarily attributable to increased cooperative marketing credits the company received from chassis manufacturers, as well as reduced incentive compensation. Interest expense declined slightly as a result of lower interest rates and working capital requirements related to the decreased sales volume.
Sales backlog at the end of the 2008 second quarter stood at $73.6 million, up from $72.2 million at the end of the 2007 second quarter. Not included in the backlog was an order received subsequent to quarter-end for armored vehicles, valued at $4.2 million, as part of the company's long-term contract with the U.S. Department of State to provide armor-plated Suburbans for U.S. embassies around the world.
Wilson added: "Although the truck market conditions continue to be extremely weak, Supreme's strategy of diversifying and expanding product lines has helped to abate the downturn. For example, as a result of higher fuel costs and other economic factors, our StarTrans bus division has benefited from greater usage of mass transit and recorded a 20.6 percent increase in sales for the quarter and a 16.5 percent increase for the half.
"Supreme has weathered a number of downturns throughout its history and, when the current cycle inevitably rebounds, the Company expects to emerge stronger than ever. Furthermore, the dramatic decrease in business activity is likely creating pent-up demand.