Supreme Industries, Inc. (NYSE MKT: STS) announced that net income for 2012 improved to $11.8 million, or $0.77 per diluted share, compared with net income of $800,000, or $0.05 per diluted share in 2011, which included the impact from discontinued operations.
Full-year income from continuing operations was $11.8 million, or $0.77 per diluted share, compared with last year's income from continuing operations of $1.7 million, or $0.11 per diluted share.
Gross profit increased 33.9%, to $43.5 million, from 2011's $32.5 million. Gross profit, as a percentage of sales, improved dramatically to 15.2%, compared with 10.8% in 2011. The 4.4% increase in gross margin percentage is the result of refined pricing methodologies, improved labor efficiencies and the redesign of certain manufacturing facilities.
"We continue to successfully implement the strategy of concentrating on sales and markets that meet or exceed our margin criteria,” said Supreme's Chief Financial Officer and Interim Chief Executive Officer Matthew Long. “By enhancing manufacturing efficiencies and better managing costs, we have successfully developed a model that can drive sustainable profits into the future. Entering 2013, we are encouraged by our team's progress to date, and by the opportunities we see before us to continue satisfying our customers with on-time delivery of specialty vehicles that represent the very best quality, safety and value."
For the fourth quarter, consolidated net sales were $57.7 million, down 11.8% from $65.5 million in last year's comparable period. The lower sales related to two large orders in the fourth quarter of 2011 that were not repeated in 2012, along with intense competition and increased discounting in the bus industry on state and municipal bid orders.
Gross margin as a percentage of sales declined slightly to 13.2%, compared with 13.4% in last year's fourth quarter. Gross profit declined to $7.6 million from last year's $8.7 million on the lower sales volume and a change in product mix. Other income increased $0.2 million due to a gain on sale of an investment. For the quarter, the Company reported net income of $0.4 million, or $0.02 per diluted share, compared with net income of $1.9 million, or $0.12 per diluted share, in the fourth quarter of 2011.
Consolidated net sales for 2012 decreased 4.7%, to $286.1 million, from $300.4 million last year.
The Company's effective tax rate was 5.9% for the year ending Dec. 29, 2012, substantially lower than statutory rates due to the reversal of deferred tax asset reserves and the use of net operating loss carryforwards. Reported financial results in 2011 included an income tax benefit of $400,000 recorded in the fourth quarter, resulting from expiring state statues related to uncertain tax positions. Beginning with the first quarter of 2013, the company expects to recognize income taxes at more normalized rates.
Working capital was $38.6 million at Dec. 29, 2012, up from $35.4 million at Dec. 31, 2011. The working capital ratio was 2.7 to 1 versus 2.0 to 1 for the respective periods. During 2012, Supreme invested $7.1 million in facilities and equipment to enhance efficiencies and $6.1 million to exercise two related-party lease purchase options.
On Dec. 19, 2012, the company entered into a five-year revised cash flow credit agreement increasing its line of credit to $45 million with improved liquidity, availability and interest rate pricing. Total debt declined to $14.1 million at year end, compared with $15.9 million last year. Stockholders' equity increased 22% to $67.2 million, or $4.41 per share, at Dec. 29, 2012, compared with $54.9 million, or $3.71 per share, at Dec. 31, 2011. Net cash provided by operating activities during 2012 totaled $12.4 million, compared with $14.5 million in 2011.
As disclosed in the second quarter of 2012, the company self-identified an immaterial error related to revenue recognition. Accordingly, its consolidated financial statements reflect the correction of the immaterial error.