Supreme Industries reported third-quarter net income from continuing operations of $1.5 million, or $0.10 per diluted share, compared with income from continuing operations of $300,000, or $0.02 per diluted share, in the prior year.
Including the impact from discontinued operations, net income improved to $0.10 per diluted share, reversing the year-ago net loss of $0.01 per share.
Consolidated net sales increased 19% to $72.8 million in the third quarter, up from $61.5 million in last year's comparable period.
"We are pleased to report a positive quarter for Supreme,” said Supreme President and Chief Executive Officer Kim Korth. “We have been working aggressively on multiple fronts to improve our performance, and it is gratifying to see these efforts begin to show up on the bottom line. The strategy of deploying robust and integrated metrics for managing all aspects of the business has resulted in much tighter organizational alignment which, in turn, enables us to further lever Supreme's national presence and scale. In addition to new practices and procedures, we are making strategic investments in our facilities designed to yield added enhancements to future productivity and flexibility."
Gross profit rose 55% to $9.3 million from last year's $6 million. Gross margin, as a percentage of sales, expanded 303 basis points to 12.79%, compared with 9.76% in the third quarter of 2010, primarily due to improved product mix, better management of labor and overhead, and increased sales. The company said order levels remained strong during the quarter. The sales order backlog at quarter end was $90 million, compared with $89 million a year ago.
Selling, general and administrative expenses were $6.7 million in the third quarter of 2011, compared with $5.2 million in 2010. The increase was due to higher commissions associated with increased sales volume and marketing programs, as well as approximately $0.2 million of non-recurring general and administrative expenses from investments aimed at improving operations and severance costs.
Operating income surged to $2.8 million, up 387%, from the $0.6 million reported in last year's third quarter.
To support future growth, Supreme entered into a new four-year credit agreement during the quarter with Wells Fargo Capital Finance, LLC, which includes a revolving line of credit of up to $45 million. Interest expense during the quarter included approximately $0.8 million from accelerated amortization of capitalized bank refinancing fees related to the company's previous credit agreement. As a result, reported interest expense was $1.2 million during the third quarter, compared with $0.3 million last year.
Excluding non-recurring charges and the above-mentioned bank refinancing fees, the company would have achieved third-quarter net income from continuing operations of approximately $2.5 million, or $0.17 per diluted share, versus $700,000, or $0.05 per diluted share, in the third quarter of 2010. Last year's results from continuing operations were negatively impacted by approximately $400,000 of non-recurring legal settlement and related costs.
"Our internal efforts have positioned Supreme to capitalize on the recovering core truck market and will also support our growth strategies in the bus and armored divisions," Korth added. "With the recent closing of our new credit agreement with Wells Fargo, we now have the foundation in place to make on going improvements in our business and to continue our efforts to enhance shareholder value."