ITEM 1. BUSINESS. &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
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History &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
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Supreme Industries, Inc., a Delaware Corporation (the "Company" or "Supreme"), is one of the nation's leading manufacturers of specialized vehicles, including truck bodies and shuttle buses. The Company was incorporated in 1979 and originally had one operating subsidiary, TGC Industries, Inc., which was spun-off to stockholders of the Company effective July 31, 1986.
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Supreme Corporation, the Company's wholly-owned operating subsidiary, was formed in January 1984 to acquire a company engaged in the business of manufacturing, selling and repairing specialized truck bodies, shuttle buses and related equipment.
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Financial Information About Operating Segments
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The Company has two operating segments, specialized vehicles and vertically integrated fiberglass products. The vertically integrated fiberglass products segment does not meet the quantitative thresholds for separate disclosure.
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General Description of the Company's Business
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The specialized vehicle industry consists of companies that manufacture and/or distribute specialized truck bodies and shuttle buses. Depending on the product, it is either built directly on a truck chassis or built separately and installed at a later date. The truck chassis, which consists of an engine, frame with wheels, and in some cases a cab, is manufactured by third parties who are major automotive or truck companies. Such companies typically do not build specialized truck bodies. See "Competition."
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Supreme's products are medium-priced although prices can range from $1,000 to $175,000. Supreme's truck bodies are offered in aluminum or fiberglass reinforced plywood panel ("FRP") construction and are available in lengths of 9 to 45 feet and heights up to 13 feet, 6 inches. Examples of optional equipment offered by Supreme include lift gates, cargo-handling equipment, customized doors, special bumpers, ladder racks, and refrigeration equipment, which are configured with the truck bodies to meet the end-user's needs.
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Supreme also makes its own fiberglass wind deflectors under the name of Fuel Shark, which reduce wind resistance and improve fuel efficiency. Supreme is not in the business of manufacturing recreational vehicles or long-distance truck-trailers. The following is a brief summary of Supreme's products:
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&nbsp Van bodies. Supreme's van bodies are typically fabricated up to 28 feet in length with pre-painted aluminum or FRP panels, aerodynamic front and side corners, hardwood floors and various door configurations to accommodate end-user loading and unloading requirements. This product is used for diversified dry freight transportation. &nbsp
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&nbsp Iner-City® cutaway van bodies. An ideal route truck for a variety of commercial applications, the Iner-City's aluminum or FRP bodies are manufactured on cutaway chassis, which allow access from the cab to the cargo area. Borrowing many design elements from Supreme's larger van body, the Iner-City is shorter in length (10 to 17 feet) than a van body. &nbsp
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&nbsp Spartan service bodies. Built on the cutaway chassis out of durable FRP, the Spartan Service Body is a virtual workshop on wheels. In lengths from 10 to 14 feet, the Spartan's selection of compartments, shelves, doors, and pre-designed options provides job-site protection from the weather while offering a secure lockable workspace. &nbsp
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&nbsp Spartan cargo vans. Built on a cutaway chassis and constructed of FRP, the Spartan Cargo Van provides the smooth maneuverability of a commercial van with the full-height, spacious cargo area of a truck body. In lengths of 10 to 14 feet and available with a variety of pre-designed options, the Spartan Cargo Van is a bridge product for those moving up from a traditional cargo van into the truck body category. &nbsp
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&nbsp Kold King® insulated van bodies. Kold King insulated bodies, in lengths up to 28 feet, provide versatility and dependability for temperature controlled applications. Flexible for either hand-load or pallet load requirements, they are ideal for multi-stop distribution of both fresh and frozen products. &nbsp
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&nbsp IceOTherm insulated bodies. IceOTherm is the high efficiency, lightweight insulated body that provides superior load protection for hand-load applications. Available in lengths of 10 to 16 feet, the IceOTherm's unique urethane foam and fiberglass pultrusion body design creates a lighter body, superior thermal efficiency, and a cleaner appearance than traditional insulated bodies. &nbsp
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&nbsp Stake bodies. Stake bodies are flatbeds with various configurations of removable sides. The stake body is utilized for a broad range of agricultural and construction industries transportation needs. &nbsp
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&nbsp Armored trucks. Supreme's armored trucks are built to customer specifications in either aluminum, galvaneal or stainless steel. &nbsp
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&nbsp StarTrans® shuttle buses. The StarTrans® shuttle buses have seating capacities for 12 to 29 people and are offered with a variety of seating arrangements and with options such as wheelchair lifts, custom interiors, and special exterior paint schemes. The shuttle bus line features an improved aerodynamic exterior design and is intended for use by hotels, nursing homes, car leasing companies, and airport-related users. &nbsp
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&nbsp StarTrans® mid-size buses. Supreme's StarTrans® mid-size buses (President and Ambassador) are offered in lengths of up to 31 feet with capacities of up to 35 passengers. This product serves the public transit and tour markets and provides the Company's dealer network with a more comprehensive product line. &nbsp
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&nbsp StarTrans® trolleys. Supreme's StarTrans® trolley line is similar in size to the mid-size bus line but resembles a San Francisco trolley car. It is marketed to resort areas, theme parks and cities desiring unique transportation vehicles. &nbsp
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&nbsp Kold King®, Nordica®, Iner-City®, Spartan, StarTrans®, and Fuel Shark are trademarks used by Supreme in its marketing of truck bodies and buses. Kold King®, Nordica®, Iner-City®, and StarTrans® are trademarks registered in the U.S. Patent and Trademark Office. &nbsp
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Some examples of specialized vehicles that are not manufactured by Supreme are dump bodies, utility bodies and garbage packers. Neither Supreme nor any of its competitors manufacture every type of specialized vehicle. Supreme intends to continue to expand its products line, but there is no assurance that it will do so.
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Manufacturing
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Supreme's manufacturing facilities are located in Goshen, Indiana; Griffin, Georgia; Cleburne, Texas; Moreno Valley, California; Jonestown, Pennsylvania and Woodburn, Oregon. Supreme's management estimates that the capacity utilization of its plants and equipment ranges from 60% to 90% of capacity when annualized on a one-shift basis. At various times during the year, several of the Company's plants operate at 100% capacity to meet fleet requirements.
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Supreme builds specialized truck bodies and installs other equipment on truck chassis, most of which are provided by bailment pool arrangements or are owned by dealers or end-users. These truck bodies are built on an assembly line from engineered structural components, such as floors, roofs, and wall panels. These components are manufactured from Supreme's proprietary designs and are installed on the truck chassis. Supreme then installs optional equipment and applies any special finishes that the customer has specified. At each step of the manufacturing and installation process, Supreme conducts quality control procedures to ensure that the products meet its customers' specifications. Supreme's products are generally produced to firm orders and are designed and engineered by Supreme. Order levels will vary depending upon price, competition, prevailing economic conditions and other factors.
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Supreme is more vertically integrated than many of its competitors. The Company manufactures its own fiberglass reinforced plywood, fiberglass parts, and has extensive roll forming and metal bending capabilities. A portion of the excess capacity of these fabrication capabilities is used to supply products to the recreational vehicle and marine industries. These supply facilities are located in Goshen and Ligonier, Indiana.
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Supreme provides limited warranties against construction defects in its products. These warranties generally provide for the replacement or repair of defective parts or workmanship for periods of up to five years following the date of retail sale.
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Supreme generally does not purchase vehicle chassis for its inventory. Supreme accepts shipment of vehicle chassis owned by dealers or end-users, for the purpose of installing and/or manufacturing its specialized truck bodies and buses on such chassis. In the event of a labor disruption or other uncontrollable event adversely affecting the limited number of companies which manufacture and/or deliver such chassis, Supreme's level of manufacturing could be substantially reduced. The Company has established relationships with all major chassis manufacturers, and in the event of a disruption in supply from one manufacturer the Company would attempt to divert its demand to the other manufacturers. Approximately 30% of the chassis involved in Supreme's manufacturing have been secured through bailment or consignment agreements with three major chassis manufacturers that provide for truck chassis pools at each of Supreme's manufacturing facilities.
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Raw Materials
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Supreme does not have any long-term raw material contracts and is dependent upon suppliers of lumber, fiberglass, aluminum and steel for its manufacturing. However, there are several readily available sources for these raw materials. Supreme's operations could be affected by labor disruptions at its raw material suppliers or freight carriers. The single greatest threat to Supreme would be the disruption of chassis availability since virtually all of Supreme's products are built on chassis. The Company believes that it enjoys good relationships with all chassis manufacturers that supply the chassis upon which the Company's products are built. In the event of a problem with one chassis supplier, the Company would attempt to divert its products to other chassis suppliers.
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Marketing
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Supreme normally sells the vehicle and/or equipment that has been installed on the chassis to either truck dealers, truck equipment distributors, fleet leasing companies or directly to end-users. Truck bodies purchased by a truck dealer from Supreme are sold by the dealer to its own customers. Since Supreme or its distributors (but not the truck dealers) generally service all Supreme products sold by the truck dealers, each truck dealer is normally located within relatively close geographic proximity to Supreme or the distributor supplying such dealer.
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Supreme's distributor/dealer network consists of approximately 40 bus distributors, a limited number of truck equipment distributors and approximately 500 truck dealers. Management believes that this large distributor/dealer network, coupled with Supreme's geographically-dispersed plant and distribution sites, gives Supreme a distinct marketing advantage over its competitors. Supreme generally delivers its products within 4 to 8 weeks after the receipt of orders.
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Supreme markets products in geographic areas where the Company does not have a strong distributor. The Company currently has distribution/mounting facilities in or near the cities of St. Louis, Missouri; Louisville, Kentucky; Cleveland and Columbus, Ohio; Orlando, Florida; Houston and San Antonio, Texas; Denver, Colorado; San Francisco, California and Harrisville, Rhode Island.
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Approximately 85 employees are engaged in direct sales. Supreme engages in direct advertising in trade publications, trade shows and cooperative advertising campaigns with distributors.
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Competition
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The competitive nature of the specialized vehicle industry creates a number of challenges for the Company. Important factors include product pricing, quality of product, lead times, geographic proximity to customers and the ability to manufacture a product customized to customer specifications. Management believes that the Company has a competitive advantage in each of these areas due to its years of experience in the industry, established dealer/distributor relationships, strong relationships with chassis manufacturers and its nationwide presence. However, specialized vehicles are produced by a number of smaller, regional companies, which create product pricing pressures that could adversely impact the Company's profits. Chassis manufacturers have not generally shown an interest in manufacturing specialized vehicles, including truck bodies and shuttle buses, because such manufacturers' highly-automated assembly line operations do not lend themselves to the efficient production of a wide variety of highly specialized vehicles with various options and equipment.
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Trademarks
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The Company owns and maintains trademarks that are used in marketing specialized products manufactured by Supreme. Management believes that these trademarks have significant customer goodwill.
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Working Capital
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The Company utilizes its revolving line of credit to finance its accounts receivable and inventories. The Company had working capital of $50.9 million and $42.9 million at December 25, 2004 and December 27, 2003, respectively.
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Major Customers
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No single customer, or group of customers, accounted for 10% or more of the Company's revenues for the fiscal years ended in 2004, 2003 and 2002. The Company's export sales are not significant.
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Environment Regulation
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The Company's manufacturing operations are subject to federal, state, and local statutes and regulations relating to the protection of the environment, work site safety standards, and product size and weight limitations. Such regulations increase the Company's cost of doing business. Because other companies are subject to similar regulations, such regulations are not believed to have an adverse effect on the Company's competitive position.
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Employees
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As of December 25, 2004 and December 27, 2003, the Company employed approximately 2,300 and 2,000 employees, respectively, none of whom are represented by a collective bargaining unit. The Company considers its relations with its employees to be satisfactory.
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Back Log
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The Company's backlog of firm orders was $89.1 million at December 25, 2004 compared to $66.1 million at December 27, 2003.
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Executive Officers of the Registrant
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The name, age, business background, positions held with the Registrant and tenure of each of the Registrant's executive officers are set forth below. No family relationship exists among any of the executive officers.
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Name, Age, and Business Experience
&nbsp Served as Executive Officer Since &nbsp Position(s) With
Company
Herbert M. Gardner, 65Executive Vice President of Barrett-Gardner Associates, Inc., an investment banking firm since November 2002 and previously Senior Vice President of Janney Montgomery Scott LLC, investment bankers; Chairman of the Board of the Company since 1979 and President of the Company since June 1992. Director of Rumson-Fair Haven Bank and Trust Company, a New Jersey state independent, commercial bank and trust company; Also a Director of Nu Horizons Electronics Corp., an electronic component distributor; TGC Industries, Inc., a company engaged in the geophysical services industry; Co-Active Marketing Group, Inc., a marketing and sales promotion company.
&nbsp &nbsp Chairman of the Board and President
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Omer G. Kropf, 63Executive Vice President of the Company since August 1984; President and Chief Executive Officer of Supreme Corporation, a subsidiary of the Company, from January 1984 to November 2000 and co-holder of Office of the President of Supreme Corporation since November 2000.
&nbsp &nbsp Executive Vice President
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William J. Barrett, 65President of Barrett-Gardner Associates, Inc., an investment banking firm since November 2002 and previously Senior Vice President of Janney Montgomery Scott LLC, investment bankers; Secretary and Assistant Treasurer of the Company and a Director since 1979. Chairman of the Board and Director of Rumson-Fair Haven Bank and Trust Company, a New Jersey state independent, commercial bank and trust company; and a Director of TGC Industries, Inc., a company engaged in the geophysical services industry.
&nbsp &nbsp Executive Vice President (Long Range and Strategic Planning) and Secretary
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Robert W. Wilson, 60Treasurer, Executive Vice President and Chief Financial Officer of the Company since December 1992; Vice President of Finance since 1988 and co-holder of Office of the President of Supreme Corporation, a subsidiary of the Company, since November 2000.
&nbsp &nbsp Executive Vice President, Treasurer, Chief Financial Officer, and Assistant Secretary
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ITEM 2.
ITEM 2. PROPERTIES. &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
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Set forth below is a brief summary of the properties which are owned or leased by the Registrant as of December 25, 2004.
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&nbsp Manufacturing of Products &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp Jonestown, Pennsylvania 514,987 &nbsp Owned &nbsp Specialized Vehicles
&nbsp Goshen, Indiana 264,568 &nbsp Leased &nbsp Specialized Vehicles
&nbsp Goshen, Indiana 236,623 &nbsp Owned &nbsp Specialized Vehicles
&nbsp Cleburne, Texas 176,235 &nbsp Owned &nbsp Specialized Vehicles
&nbsp Woodburn, Oregon 144,494 &nbsp Owned &nbsp Specialized Vehicles
&nbsp Griffin, Georgia 105,379 &nbsp Leased &nbsp Specialized Vehicles
&nbsp Moreno Valley, California 103,200 &nbsp Owned &nbsp Specialized Vehicles
&nbsp Griffin, Georgia 26,400 &nbsp Owned &nbsp Specialized Vehicles
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&nbsp Manufacturing of Component Parts &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp Goshen, Indiana 57,570 &nbsp Owned &nbsp Fiberglass Products
&nbsp Ligonier, Indiana 32,142 &nbsp Owned &nbsp Fiberglass Products
&nbsp Ligonier, Indiana 18,960 &nbsp Leased &nbsp Fiberglass Products
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&nbsp Harrisville, Rhode Island 20,000 &nbsp Owned &nbsp Specialized Vehicles
&nbsp St. Louis, Missouri 15,000 &nbsp Owned &nbsp Specialized Vehicles
&nbsp Houston, Texas 14,533 &nbsp Owned &nbsp Specialized Vehicles
&nbsp Streetsboro, Ohio 11,900 &nbsp Owned &nbsp Specialized Vehicles
&nbsp Denver, Colorado 11,575 &nbsp Leased &nbsp Specialized Vehicles
&nbsp Springfield, Ohio 11,200 &nbsp Owned &nbsp Specialized Vehicles
&nbsp Vallejo, California 8,540 &nbsp Leased &nbsp Specialized Vehicles
&nbsp San Antonio, Texas 7,000 &nbsp Owned &nbsp Specialized Vehicles
&nbsp Louisville, Kentucky 6,664 &nbsp Owned &nbsp Specialized Vehicles
&nbsp Apopka, Florida 5,200 &nbsp Owned &nbsp Specialized Vehicles
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&nbsp Property Held for Sale (1) &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp Wilson, North Carolina 113,694 &nbsp Owned &nbsp Not Applicable
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&nbsp Goshen, Indiana 26,000 &nbsp Owned &nbsp Not Applicable
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&nbsp Total square footage 1,931,864 &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
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&nbsp (1) During the third quarter of 2002, the Company ceased business operations at its facility in Wilson, North Carolina. The property has been listed for sale; however, the Company has been unable to sell the property because of the economic conditions and excess building facilities in this region of the country.
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ITEM 3.
ITEM 3. LEGAL PROCEEDINGS. &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
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The Company is subject to various investigations, claims and legal proceedings covering a wide range of matters that arise in the ordinary course of its business activities. Each of these matters is subject to various uncertainties, and it is possible that some of these matters may be resolved unfavorably to the Company. The Company has established accruals for matters that are probable and reasonably estimable. Management believes that any liability that may ultimately result from the resolution of these matters in excess of accruals and or amounts provided by insurance coverage will not have a material adverse effect on the consolidated financial position or results of operations of the Company.
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ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. &nbsp
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No matters were submitted by the Company to a vote of the Company's security holders, through the solicitation of proxies or otherwise, during the fourth quarter of the year ended December 25, 2004.
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PART II
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ITEM 5.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER
&nbsp &nbsp MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
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The Company's Class A Common Stock is traded on the American Stock Exchange (ticker symbol STS). The number of record holders of the Class A Common Stock as of March 7, 2005 was approximately 295. Due to the number of shares held in nominee or street name, it is likely that there are more than 295 beneficial owners of the Company's Class A Common Stock.
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The Company's Class A Common Stock closed at a price of $6.70 per share on the American Stock Exchange on March 7, 2005 on which date there were 10,105,328 shares of Class A Common Stock outstanding. High and low sales prices of the Class A Common Stock for the two-year period ended December 25, 2004 were:
The Board of Directors approved the following cash dividends on its outstanding Class A and Class B Common Stock during the years ended December 25, 2004 and December 27, 2003:
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&nbsp &nbsp &nbsp &nbsp &nbsp Cash Dividend &nbsp
&nbsp Declaration Date Record Date &nbsp Paid Date &nbsp Per Share &nbsp
&nbsp September 24, 2003 October 16, 2003 &nbsp October 24, 2003 &nbsp $.025 &nbsp
&nbsp January 23, 2004 February 6, 2004 &nbsp February 16, 2004 &nbsp $.030 &nbsp
&nbsp April 29, 2004 May 10, 2004 &nbsp May 17, 2004 &nbsp $.035 &nbsp
&nbsp July 20, 2004 August 2, 2004 &nbsp August 9, 2004 &nbsp $.035 &nbsp
&nbsp October 21, 2004 November 1, 2004 &nbsp November 8, 2004 &nbsp $.035 &nbsp
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On September 24, 2003, the Company declared a 10% common stock dividend paid on October 16, 2003 to stockholders of record as of October 6, 2003. All share and per share data have been adjusted to reflect this stock dividend on a retroactive basis.
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ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA. &nbsp &nbsp &nbsp
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&nbsp &nbsp &nbsp &nbsp &nbsp For Fiscal Years Ended &nbsp
Consolidated Income Statement Data: &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
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&nbsp Revenue &nbsp $308.0 &nbsp $226.9 &nbsp $210.1 &nbsp $226.7 &nbsp $263.5 &nbsp
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp Net income &nbsp 4.7 &nbsp 4.6 &nbsp 3.6 &nbsp 4.9 &nbsp 8.0 &nbsp
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp Net income per share: (a) &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp &nbsp Basic earnings per share &nbsp .39 &nbsp .39 &nbsp .30 &nbsp .41 &nbsp .65 &nbsp
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp &nbsp Diluted earnings per share &nbsp .38 &nbsp .38 &nbsp .30 &nbsp .41 &nbsp .65 &nbsp
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp Cash dividends per common share .135 &nbsp .025 &nbsp - &nbsp - &nbsp - &nbsp
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
Consolidated Balance Sheet Data: &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
(in millions) &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp Working capital &nbsp $50.9 &nbsp $42.9 &nbsp $29.3 &nbsp $29.4 &nbsp $35.2 &nbsp
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp Total assets &nbsp 129.2 &nbsp 106.3 &nbsp 87.9 &nbsp 91.6 &nbsp 103.0 &nbsp
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp Long-term debt (excluding &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp &nbsp current maturities) &nbsp 28.8 &nbsp 17.4 &nbsp 7.4 &nbsp 13.1 &nbsp 25.9 &nbsp
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp Stockholders' equity &nbsp 67.6 &nbsp 63.6 &nbsp 59.0 &nbsp 55.1 &nbsp 50.8 &nbsp
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
(a) All per share amounts have been adjusted for all common stock dividends paid.
&nbsp
Page 10 of 56
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL &nbsp
&nbsp &nbsp &nbsp CONDITION AND RESULTS OF OPERATIONS. &nbsp
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
Comparison of 2004 with 2003
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
Revenue includes net sales and other income. Net sales for the year ended December 25, 2004 were $307.3 million, an increase of $82.4 million over the $224.9 million for the year ended December 27, 2003. All of the Company's major product lines increased over the levels experienced in 2003. The largest increase in net sales was in the Company's dry freight product line which grew $61.6 million over 2003. The balance of the increase in net sales was spread over its remaining product lines. The opening of the Company's Northwest production facility in Oregon contributed $9.9 million to the increase in net sales, primarily in the dry freight area.
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
The improving market conditions experienced in the fourth quarter of 2003 carried over into 2004. On a unit basis, new orders increased approximately 52%, and backlog grew to a record $89.1 million. The Company anticipates demand to remain strong barring any negative repercussions from the significant price increases passed on to its customers during the year. While the Company implemented several price increases during the year, these price increases only impacted revenues by an estimated 3% to 4% due to the Company's significant backlog and policy of honoring quotes outstanding at the time of the increase.
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
Other income decreased $1.4 million to $.6 million in 2004 from $2.0 million in 2003. Gains on sale of property, plant and equipment were $87,000 in 2004 compared to $1.1 million in 2003 and this accounted for most of the decrease in other income.
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
Gross profit as a percentage of net sales declined 2.7% in 2004 to 10.0% from 12.7% in 2003. The startup and training costs of approximately $1.5 million at the Company's new Oregon manufacturing facility impacted 2004 margins; however, the most significant cause for the decrease in gross profit was the unprecedented rise in the Company's raw material costs. The following table presents the components of cost of sales as a percentage of net sales and their change from year to year.
&nbsp &nbsp &nbsp &nbsp &nbsp December 25, &nbsp December 27, &nbsp Percent
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp Change
&nbsp &nbsp &nbsp Materials &nbsp 57.6% &nbsp 53.9% &nbsp 3.7%
&nbsp &nbsp &nbsp Direct Labor &nbsp 15.0 &nbsp 14.8 &nbsp .2
&nbsp &nbsp &nbsp Overhead &nbsp 14.3 &nbsp 15.4 &nbsp -1.1
&nbsp &nbsp &nbsp Delivery &nbsp 3.1 &nbsp 3.2 &nbsp -.1
&nbsp &nbsp &nbsp &nbsp &nbsp 90.0% &nbsp 87.3% &nbsp 2.7%
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp &nbsp &nbsp Gross Profit &nbsp 10.0% &nbsp 12.7% &nbsp -2.7%
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
The Company experienced rapidly escalating raw material costs throughout 2004. The most significant increases were encountered in the Company's steel purchases which aggregate approximately 20% of total raw material purchases. Steel costs, on average, increased approximately 71% during 2004 from the levels paid during 2003. Cost of all other major raw material items also increased significantly in 2004 from the levels experienced in 2003. Cost of resins and gelcoats used in the Company's composites products increased 58% and 21%, respectively. Plywood costs spiked as high as 31%, but leveled off at 19% over prices paid in 2003. Other items experiencing cost increases as compared with 2003 were flooring at 10% and aluminum at 8 to 9%.
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
The Company's major suppliers indicated that they do not see an end to escalating raw material costs. Raw materials anticipated to be most affected in 2005 are steel, resins and gelcoats. The Company is seeking to purchase its raw material requirements at the best terms and prices possible and is expanding vendor relationships both domestically and internationally.
Page 11 of 56
The slight increase in direct labor of .2% was attributed primarily to startup and training costs at the Company's bus operation in California, its new Oregon facility and, to a lesser extent, the Armored plant startup in Texas.
&nbsp
Both overhead and delivery expenses improved as a percentage of net sales in 2004 when compared to 2003. The improvement in overhead was due to the fixed nature of certain expenses that do not fluctuate when volume changes. The Company has been unfavorably impacted since 2000 by rising overhead expenses that the Company has been unable to pass on due to competitive market conditions. The categories that have felt the most pressure are commercial and general liability insurance, workers' compensation insurance and group health insurance.
&nbsp
To improve gross profit and mitigate rising material costs, the Company implemented a series of price increases beginning in March 2004. The most recent price increase was effective January 1, 2005. The cumulative effect of these price increases now totals approximately 20%. Product lines containing large amounts of steel and composite materials had price increases significantly above average. Prior to the March increases, the Company had not had a price increase since June 2000.
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
Industry practice is such that price increases take effect approximately 30 days after announcement. In addition, firm backlogged orders historically have been honored and not subject to price increases for either escalating material cost increases or otherwise. As a result of significant backlogs (approximately 70 to 90 days throughout the year), each of the price increases did not take effect for 4 to 6 months after announcement. Therefore, we estimate that approximately $11.4 million of material cost increases were not recovered through price increases in 2004. To help eliminate the effect of the above industry practices, the Company now makes its price increases effective immediately, while attempting to include escalation provisions in large fleet orders. With regard to dealer and direct non-fleet backlogged business, the Company is evaluating various strategies for more post-order pricing flexibility. Changing historical industry practices is a long-term effort and therefore should material costs continue to escalate, there will continue to be a degree of material cost increase absorption due to the delay in effectiveness of price increases. In addition, competitive conditions in certain markets and products affect the net selling price the Company may realize and it is difficult to predict the effect our price increases may have on customer demand.
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
Selling, general and administrative expenses were $24.3 million or 7.9% of net sales in 2004 compared to $22.2 million or 9.9% of net sales in 2003. The largest component of selling, general and administrative expense was compensation related expense which comprised approximately 72% and 71% of total selling, general and administrative expenses in 2004 and 2003, respectively. The dollar increase in 2004 relates to additional commission expense on increased net sales, additional incentive programs that resulted in higher volume and investment in upgrading the Company's sales literature. The Company benefited from cooperative marketing income in both 2004 and 2003 in approximately the same dollar amounts. These cooperative marketing funds, received from original equipment manufacturers ("OEM"), are used to offset marketing and promotional expenses for the Company's products. There is no assurance that these programs will continue or that the Company will benefit from these programs as the OEM tend to reduce them as their business improves.
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
Interest expense increased $234,070 in 2004 to $1,016,732 from $782,662 in 2003. The increase in interest expense was primarily the result of gradually increasing interest rates and additional borrowings under the Company's revolving credit agreement to fund increases in accounts receivable and inventories associated with substantially higher net sales throughout 2004.
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp
&nbsp
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
Page 12 of 56
The Company's effective income tax rate was 22.2% for 2004 compared to 38.6% in 2003. The favorable rate reduction in 2004 resulted from federal and state research and development tax credits claimed on amended tax filings. Additionally, other tax reserves were credited to income as they were no longer required as the result of the favorable conclusion of tax audits or the expiration of the statute of limitations on open years (See Note 7 of the Notes to Consolidated Financial Statements).
&nbsp
Net income for 2004 was $4.7 million, or $.38 per diluted share compared to $4.6 million, or $.38 per diluted share in 2003. Net income was negatively impacted principally by raw material cost increases and positively impacted by the lower effective tax rate as previously discussed.
&nbsp
&nbsp
Liquidity and Capital Resources
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
The Company's revolving line of credit, net income and depreciation and amortization were the major sources of cash flows during 2004. The Company increased the availability under its revolving credit agreement from $30.0 million to $40.0 million for the period January 1 through June 30 of each year. The availability returns to $30.0 million for the period July 1 through December 31 of each year. The increase is necessary to fund the Company's working capital needs during the first six months of the year when its large consumer rental customers require the bulk of their deliveries.
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
Inventories were up $9.2 million and accounts receivables were up $4.3 million at December 25, 2004 from December 27, 2003. An increase of $8.3 million in accounts payable at December 25, 2004 helped fund the working capital requirements.
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
The Company invested $11.8 million in property, plant and equipment during 2004. Major additions were made in Texas, Pennsylvania and Georgia. The Company purchased 32 acres and a 61,000 sq.ft. building for $1.1 million to support its growing armored truck business in Cleburne, Texas. It also invested $.9 million in machinery and equipment for this facility, that will be utilized for the truck product lines as well as the armored truck business. This will give the Company processing abilities it previously had to purchase from others, reduce the labor content of its products as well as reduce the amount of inventory on hand. The Company purchased 30 acres and a 300,000 sq.ft. manufacturing facility adjacent to its primary facility in Jonestown, Pennsylvania for $1.6 million. This purchase will enable us to consolidate operations that will enhance efficiency, provide needed chassis storage space and increase capacity. An additional $.6 million was spent to bring the facility to a production-ready state. We also invested $1.2 million in equipment for the Pennsylvania plant. The major item was a combination turret/laser for $.5 million which will allow us to reduce the labor content of our product as well as reduce inventories and scrap. The other major capacity addition was in our Georgia facility for additional capacity for the Southeast. We invested $.2 million for 10 acres adjacent to our existing Georgia property. We are currently constructing a 60,000 sq.ft. manufacturing facility that is in process. We invested $.5 million in this facility during 2004. The cost to complete this facility in 2005 is estimated to be $.7 million and production is expected to begin late first quarter or early second quarter of 2005.
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
The Company's former manufacturing facility in Wilson, North Carolina (closed in the third quarter of 2002) continues to be listed for sale; however, we have been unable to sell this facility because of economic conditions and excess buildings in this region. We expect the ultimate net sales price will exceed the $1.9 million carrying value and the sales proceeds would provide additional liquidity.
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
The Company believes that cash flow generated from operations and funds available under the Company's revolving line of credit will be sufficient to meet the Company's cash needs during 2005.
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
Page 13 of 56
Comparison of 2003 with 2002 &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
Revenue includes net sales and other income. For the year ended December 27, 2003, net sales increased $15.3 million to $224.9 million from $209.6 million for the year ended December 28, 2002. Other income increased $1.4 million to $2.0 million from $.6 million in the prior year. Supreme's dry freight product lines, which represented 48% of net sales in 2003, were responsible for the majority of the increase in net sales. Sales of Supreme's line of specialty transit buses and trolley replicas decreased slightly during 2003 when compared to 2002. While a small decrease of sales was realized in these bus product lines on a year-over-year basis, the Company was encouraged as each quarter showed gains when compared to the immediately preceding quarter. These bus product lines represented 18% of net sales in 2003 compared to 20% in 2002. The Company's specialized line of Spartan service and cargo products showed a slight revenue decline of $1.7 million in 2003 when compared to 2002. The Company was the first to introduce these specialized products to the market. These products have since been duplicated by virtually every competitor, accounting for the slight decline in net sales. The Company's line of refrigerated products declined $.4 million in 2003 when compared to 2002. This decline was due to the closing of the Wilson, North Carolina plant, which primarily manufactured refrigerated product lines, in the third quarter of 2002. The Company's smaller niche product lines, armored vehicles and fiberglass bodies, showed improvement in 2003 over 2002.
&nbsp
The Company experienced improving market conditions primarily during the last quarter of 2003. For the year, new orders increased 17% compared to 2002. The Company has also received a 5,000 unit, $20.0 million order for products to be manufactured and delivered during the first six months of 2004.
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
The $1.4 million increase in other income was principally attributable to gains on the sale of two properties.
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
Gross profit as a percentage of net sales was 12.7% in 2003 compared to 13.5% in 2002. The gross profit margin for 2003 was negatively impacted by .2% as a result of a $.5 million impairment charge (included in cost of sales) for the North Carolina facility held for sale.
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
Material costs as a percentage of net sales increased in 2003 compared to 2002 primarily as a result of extremely competitive pricing conditions in virtually all of the Company's product lines brought about by excess industry capacity. The Company and its competitors are experiencing improving market conditions which should reduce the excess capacity that was available in 2003. The Company has not experienced any significant material cost increase over the last two years but is anticipating both rising material cost and, in certain instances, availability issues as market conditions improve.
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
The Company experienced a slight decline in direct labor as a percentage of net sales in 2003 as compared to 2002. This decline is attributed to a shift in product mix in 2003 compared to 2002. The Company's FRP van product line, which is less labor intensive than the aluminum van product line, increased significantly in 2003 compared to 2002 resulting in the improvement in direct labor as a percentage of net sales.
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
Overhead expenses as a percentage of net sales were down slightly in 2003 as compared to 2002. Overhead expenses have been unfavorably impacted over the last three years as the Company has incurred increases in their costs but could not pass them through to the customer due to the extremely competitive market conditions. Commercial and general liability insurance, workers' compensation insurance and group health insurance have been under intense upward pressure. While there is some indication the pressure in commercial insurance is abating, the areas of group health and workers' compensation insurance are still under intense upward pressure.
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
Page 14 of 56
Selling, general and administrative expenses were $22.2 million or 9.9% of net sales in 2003 compared to $22.0 million or 10.5% of net sales in 2002. The largest components of selling, general and administrative expenses were compensation related expenses which comprised approximately 71% and 68% of total selling, general and administrative expenses in 2003 and 2002, respectively. Incentive and commission compensation, as well as a concerted effort to improve the Company's product research and development, were responsible for the slight increase in selling, general and administrative compensation costs. These efforts will continue in 2004. The Company's efforts in promoting its products through special marketing programs, combined with OEM cooperative advertising income, are a substantial part of the Company's marketing efforts. OEM marketing income accounted for 8.5% of the total spent on selling, general and administrative expenses in 2003 and 7.3% in 2002. With improving economic conditions there can be no assurance that the Company will continue to benefit from these incentives.
&nbsp
Interest expense declined $213,000 in 2003 when compared to 2002. This decline resulted from favorable interest rates combined with less borrowing during most of 2003. The improved market conditions experienced at the end of 2003, which are expected to continue through 2004, will likely result in increased revolving line of credit borrowings that could result in higher interest expense in 2004.
&nbsp
The Company's effective income tax rate was 38.6% and 38.5% for 2003 and 2002, respectively. The provision for state income taxes had increased primarily the result of fluctuations in state taxable income and varying tax rates in the states in which the Company transacts business.
&nbsp
&nbsp
Contractual Obligations
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
Our fixed, noncancelable obligations as of December 25, 2004 were as follows:
&nbsp &nbsp &nbsp &nbsp &nbsp Payments due by period
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp Less than 1-3 3-5 More than
&nbsp &nbsp &nbsp &nbsp
Total 1 Year Years Years 5 Years
&nbsp &nbsp &nbsp Debt (a) &nbsp $30,400,000 $1,633,333 $26,275,000 $950,000 $1,541,667
&nbsp &nbsp &nbsp Operating leases (b) &nbsp 565,500 485,900 79,600 - -
&nbsp &nbsp &nbsp Total &nbsp $30,965,500 $2,119,233 $26,354,600 $950,000 $1,541,667
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp &nbsp &nbsp (a) Amounts are included on the Consolidated Balance Sheets. See Note 4 of the Notes to Consolidated Financial Statements for additional information regarding debt and related matters.
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp &nbsp &nbsp (b) See Note 8 of the Notes to Consolidated Financial Statements for additional information regarding operating leases.
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
Critical Accounting Policies and Estimates
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
Management's discussion and analysis of its financial position and results of operations are based upon the Company's consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. The Company's significant accounting policies are discussed in Note 1 of the Notes to Consolidated Financial Statements. In management's opinion, the Company's critical accounting policies include allowance for doubtful accounts, excess and obsolete inventories, inventory relief, accrued insurance and accrued warranty.
&nbsp
Allowance for Doubtful Accounts - The Company maintains an allowance for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required which would affect our future operating results.
Page 15 of 56
Excess and Obsolete Inventories - The Company must make estimates regarding the future use of products and provides a provision for obsolete or slow-moving inventories. If actual product life-cycles, product demand or market conditions are less favorable than those projected by management, additional inventory write-downs may be required which would affect future operating results.
&nbsp
Inventory Relief - For monthly and quarterly financial reporting, cost of sales is recorded and inventories are relieved by the use of standard bills of material. Because of the customized nature of the Company's products, it is difficult to place full reliance on the bills of material for accurate relief of inventories. Although the Company continues to refine the process of creating accurate bills of materials, manual adjustments, which are based on estimates, are necessary to assure correct relief of inventories for products sold. The estimate calculations consider the customized nature of products, historical inventory relief percentages, scrap variances and other factors which could impact inventory relief. The accuracy of the inventory relief is not known until the annual physical inventories and it is not practical to consider more frequent physical inventories because of the sales order backlog and the costs associated with ceasing production for the purpose of conducting physical inventories. If the annual physical inventories result in significant favorable or unfavorable adjustments, such adjustments would affect future operating results.
&nbsp
Accrued Insurance - The Company has a self-insured retention against product liability claims with insurance coverage over and above the retention. The Company is also self-insured for a portion of its employee medical benefits and workers' compensation. Product liability claims are routinely reviewed by the Company's insurance carrier and management routinely reviews other self-insurance risks for purposes of establishing ultimate loss estimates. In addition, management must determine estimated liability for claims incurred but not reported. Such estimates and any subsequent changes in estimates may result in adjustments to our operating results in the future.
&nbsp
Accrued Warranty - The Company provides limited warranties for periods of up to five years from the date of retail sale. Estimated warranty costs are provided at the time of sale and are based upon historical experience.
&nbsp
&nbsp
Pending Accounting Policies
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
See New Accounting Standards to be Adopted in Note 1 of Notes to Consolidated Financial Statements.
&nbsp
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
Forward-Looking Statements
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
This report contains forward-looking statements, other than historical facts, which reflect the view of the Company's management with respect to future events. When used in this report, words such as "believe," "expect," "anticipate," "estimate," "intend," and similar expressions, as they relate to the Company or its plans or operations, identify forward-looking statements. Such forward-looking statements are based on assumptions made by, and information currently available to, the Company's management. Although management believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that the expectations reflected in such forward-looking statements are reasonable, and it can give no assurance that such expectations will prove to have been correct. Important factors that could cause actual results to differ materially from such expectations include, without limitation, limitations on the availability of chassis on which the Company's product is dependent, availability of raw materials, raw material cost increases and severe interest rate increases. Furthermore, the Company can provide no assurance that such raw material cost increases can be passed on to its customers through implementation of price increases for the Company's products. The forward-looking statements contained herein reflect the current view of the Company's management with respect to future events and are subject to those factors and other risks, uncertainties and assumptions relating to the operations, results of operations, cash flows and financial position of the Company. The Company assumes no obligation to update the forward-looking statements or to update the reasons actual results could differ from those contemplated by such forward-looking statements.
Page 16 of 56
Control Risks
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
While the Company believes its control systems are effective, there are inherent limitations in all control systems, and misstatements due to error or fraud may occur and not be detected. The Company continues to take action to assure compliance with the internal controls, disclosure controls, and other requirements of the Sarbanes-Oxley Act of 2002. Our management, including our Chief Executive Officer and Chief Financial Officer, cannot guarantee that our internal controls and disclosure controls will prevent all possible errors or all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. In addition, the design of a control system must reflect the fact that there are resource constraints, and the benefit of controls must be relative to their costs. Because of the inherent limitations in all control systems, no system of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Further, controls can be circumvented by individual acts of some persons, by collusion of two or more persons, or by management override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, a control may be inadequate because of changes in conditions or the degree of compliance with the policies or procedures may deteriorate. Because of inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
ITEM 7A.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
&nbsp &nbsp &nbsp RISK. &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
In the normal course of business, operations of the Company are exposed to fluctuations in interest rates. These fluctuations can vary the cost of investing, financing and operating. The Company's primary risk exposure results from changes in short-term interest rates. In an effort to manage risk exposures, the Company strives to achieve an acceptable balance between fixed and floating rate debt positions. The Company's revolving line of credit is floating rate debt and bears interest at the bank's prime rate or LIBOR plus certain basis points depending on the pricing option selected and the Company's leverage ratio. The Company has been party to interest rate swap agreements, which exchanged floating rate for fixed rate interest payments. The final interest rate swap agreement matured in May 2004 and there were none in existence at December 25, 2004.
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
Based on the Company's overall interest rate exposure at December 25, 2004, a hypothetical 10 percent change in interest rates applied to the fair value of the financial instruments as of December 25, 2004, would have no material impact on earnings, cash flows or fair values of interest rate risk sensitive instruments over a one-year period.
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
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Page 17 of 56
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp Page
&nbsp
1. Financial Statements: &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp &nbsp Report of Crowe Chizek and Company LLC, Independent Registered Public &nbsp &nbsp
&nbsp &nbsp &nbsp Accounting Firm &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp &nbsp Consolidated Balance Sheets at December 25, 2004 and December 27, 2003 &nbsp
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp &nbsp Consolidated Statements of Income for the years ended December 25, 2004, &nbsp &nbsp &nbsp
&nbsp &nbsp &nbsp December 27, 2003 and December 28, 2002 &nbsp &nbsp &nbsp
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp &nbsp Consolidated Statements of Stockholders' Equity for the years ended &nbsp &nbsp &nbsp
&nbsp &nbsp &nbsp December 25, 2004, December 27, 2003 and December 28, 2002 &nbsp
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp &nbsp Consolidated Statements of Cash Flows for the years ended December 25, 2004, &nbsp &nbsp
&nbsp &nbsp &nbsp December 27, 2003 and December 28, 2002 &nbsp &nbsp &nbsp
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp &nbsp Notes to Consolidated Financial Statements &nbsp 24 - 37
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
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&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
2. Financial Statement Schedule: &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp &nbsp Schedule II - Valuation and Qualifying Accounts for the years ended &nbsp &nbsp &nbsp
&nbsp &nbsp &nbsp December 25, 2004, December 27, 2003 and December 28, 2002 &nbsp
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp &nbsp All other schedules are omitted because they are not applicable. &nbsp &nbsp &nbsp &nbsp
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3. Supplementary Data &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp &nbsp Quarterly Results (Unaudited) &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
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&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
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&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
To the Board of Directors and Stockholders of
Supreme Industries, Inc.:
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
We have audited the accompanying consolidated balance sheets of Supreme Industries, Inc. and its subsidiaries as of December 25, 2004 and December 27, 2003, and the related consolidated statements of income, stockholders' equity and cash flows for each of the three years in the period ended December 25, 2004. Our audits also included the financial statement schedule listed in the Index of Item 15(a). These financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits.
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Supreme Industries, Inc. and its subsidiaries as of December 25, 2004 and December 27, 2003, and the results of their operations and their cash flows for each of the three years in the period ended December 25, 2004 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information required to be included therein.
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&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp /s/Crowe Chizek and Company LLC &nbsp
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South Bend, Indiana &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
January 28, 2005 &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
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Supreme Industries, Inc. And Subsidiaries
Notes to Consolidated Financial Statements
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
1. NATURE OF OPERATIONS AND ACCOUNTING POLICIES. &nbsp
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp Supreme Industries, Inc. and its subsidiaries (collectively the "Company") manufacture specialized truck bodies that are mounted on new truck chassis produced by others. The Company's truck body products include cutaway and dry freight van bodies, refrigerated units, stake bodies and other specialized trucks. The Company also manufactures shuttle buses. At December 25, 2004, the Company had 18 manufacturing, distribution and supply facilities. The Company's customers are located principally in the United States. &nbsp
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp The following is a summary of the significant accounting policies used in the preparation of the accompanying consolidated financial statements: &nbsp
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp Principles of Consolidation - The accompanying consolidated financial statements include the accounts of Supreme Industries, Inc. and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. &nbsp
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp Fiscal Year End - Effective January 1, 2002, the Company changed its fiscal year from a calendar year ending December 31 to a 52 or 53 week fiscal year ending the last Saturday in December. The fiscal years ended December 25, 2004, December 27, 2003 and December 28, 2002 each contained 52 weeks. &nbsp
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp Use of Estimates in the Preparation of Financial Statements - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. &nbsp
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp Revenue Recognition - The production of specialized truck bodies and shuttle buses starts when an order is received from the customer and revenue is recognized when the unit is shipped to the customer. Revenue on certain customer requested bill and hold transactions is recognized subsequent to when the customer is notified that the product(s) have been completed according to customer specifications, have passed all of the Company's quality control inspections and are ready for delivery based upon established delivery terms. These transactions meet the requirements for bill and hold accounting under Securities and Exchange Commission Staff Accounting Bulletin Topic 13, "Revenue Recognition." &nbsp
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp Net sales are net of cash discounts which the Company offers its customers in the ordinary course of business. &nbsp
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp Concentration of Credit Risk - Concentration of credit risk is limited due to the large number of customers and their dispersion among many different industries and geographic regions. The Company performs ongoing credit evaluations of its customers and credit is extended on an unsecured basis. &nbsp
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp Advertising - The Company expenses advertising costs as incurred. Advertising costs for the years ended December 25, 2004, December 27, 2003 and December 28, 2002 were $280,996, $467,813 and $185,994, respectively. &nbsp
Page 24 of 56
Supreme Industries, Inc. And Subsidiaries &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
Notes to Consolidated Financial Statements, Continued &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
1. NATURE OF OPERATIONS AND ACCOUNTING POLICIES, Continued. &nbsp
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp Financial Instruments and Fair Values - The Company has utilized interest rate swap agreements to reduce the impact of changes in interest rates on certain of its floating rate debt. The swap agreements are contracts to exchange the debt obligation's LIBOR floating rate (exclusive of the applicable spread) for fixed rate interest payments over the life of the debt obligations without exchange of the underlying notional amounts. The notional amounts of the interest rate swap agreements are used to measure interest to be paid or received and do not represent the amount of exposure of credit loss. The differential paid or received under interest rate swap agreements is recognized as an adjustment to interest expense. &nbsp
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp There were no interest rate swap agreements outstanding at December 25, 2004. The Company had one interest rate swap agreement outstanding at December 27, 2003 for a notional amount of $2,091,000. The interest rate swap agreement provided a 5.8% fixed interest rate and matured on May 11, 2004. In accordance with Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities," the interest rate swap agreement was designated and qualified as a fair value hedging instrument. It was fully effective, resulting in no net gain or loss recorded in the consolidated statements of income. The fair value of the contract at December 27, 2003 was a $29,910 liability under SFAS No. 133 and changes in fair value were adjusted through accumulated other comprehensive loss. &nbsp
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp The carrying amounts of cash and cash equivalents, accounts receivable and trade accounts payable approximated fair value as of December 25, 2004 and December 27, 2003 because of the relatively short maturities of these financial instruments. The carrying amount of long-term debt, including current maturities, approximated fair value as of December 25, 2004 and December 27, 2003, based upon terms and conditions available to the Company at those dates in comparison to the terms and conditions of its outstanding long-term debt. &nbsp
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp Cash and Cash Equivalents - The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. During 2002, the Company made an interest bearing cash deposit to secure the payment of amounts due under certain insurance policies. This deposit is included in other current assets and was $600,000 and $1,000,000 at December 25, 2004 and December 27, 2003, respectively. &nbsp
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp Accounts Receivable - The Company accounts for trade receivables based on the amounts billed to customers. Past due receivables are determined based on contractual terms. The Company does not accrue interest on any of its trade receivables. &nbsp
&nbsp &nbsp &nbsp &nbsp
&nbsp Allowance for Doubtful Accounts - The allowance for doubtful accounts is determined by management based on the Company's historical losses, specific customer circumstances and general economic conditions. Periodically, management reviews accounts receivable and adjusts the allowance based on current circumstances and charges off uncollectible receivables against the allowance when all attempts to collect the receivable have failed. &nbsp
&nbsp
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Supreme Industries, Inc. And Subsidiaries &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
Notes to Consolidated Financial Statements, Continued &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
1. NATURE OF OPERATIONS AND ACCOUNTING POLICIES, Continued. &nbsp
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp Inventories - Inventories are stated at the lower of cost or market, with cost determined using the first-in, first-out method. &nbsp
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp Property, Plant and Equipment - Property, plant and equipment are recorded at cost. For financial reporting purposes, depreciation is provided based on the straight-line method over the estimated useful lives of the assets. Amortization of leasehold improvements, for financial reporting purposes, is determined by the straight-line method over the lesser of the useful life of the asset or term of the lease. Upon sale or other disposition of assets, the cost and related accumulated depreciation and amortization are removed from the accounts and any resulting gain or loss is reflected in operations (included in other income in the consolidated statements of income). Expenditures for maintenance and repairs are charged to operations as incurred. Betterments and major renewals are capitalized and recorded in the appropriate asset accounts. &nbsp
&nbsp
&nbsp Property Held for Sale - During 2002, the Company ceased business operations at its North Carolina manufacturing facility and reclassified this facility to property held for sale. The closing of the facility did not result in discontinued operations because the operations and cash flows of the facility were absorbed by the Company's other locations. In the fourth quarter of 2003, the Company recognized an impairment loss of $497,406 as it lowered the sales price of the property. In the fourth quarter of 2004, the Company reclassified this asset, with a carrying value of $1,860,000, to property, plant and equipment and resumed depreciation. Although the property continues to be listed for sale, the economic conditions in the region where this building is located has created difficulty in selling this property and prompted the reclassification. &nbsp
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp Intangible Assets - Intangible assets subject to amortization consist of favorable lease agreements with a cost of $1,048,167 less accumulated amortization ($1,018,101 in 2004 and $966,559 in 2003). The favorable leases are being amortized using the straight-line method over the twenty-five year term of the lease which includes renewal terms. Amortization expense for the years ended December 25, 2004, December 27, 2003 and December 28, 2002 was $51,542, $51,542 and $70,412, respectively. Amortization expense is estimated to be $30,066 for 2005 as the lease agreements expire in July 2005. &nbsp
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp Goodwill - The carrying value of goodwill at December 25, 2004 and December 27, 2003 aggregates $735,014. Effective January 1, 2002, the Company adopted SFAS No. 142, "Goodwill and Other Intangible Assets." Under the provisions of SFAS No. 142, goodwill and indefinite lived intangible assets are no longer amortized, goodwill is tested for impairment at least annually at the reporting unit level and other intangible assets deemed to have an indefinite life are tested for impairment at least annually. &nbsp
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SUPREME INDUSTRIES, INC. AND SUBSIDIARIES
SUPPLEMENTARY DATA
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
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Quarterly Results (Unaudited) &nbsp &nbsp &nbsp &nbsp
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp &nbsp &nbsp &nbsp First &nbsp Second &nbsp Third &nbsp Fourth
&nbsp 2004 Quarter &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp Revenue $73,564,467 &nbsp $90,845,945 &nbsp $70,778,471 &nbsp $72,773,572
&nbsp Gross profit 7,150,616 &nbsp 9,615,050 &nbsp 7,656,903 &nbsp 6,347,665
&nbsp Net income 989,769 &nbsp 1,887,747 &nbsp 892,540 &nbsp 978,061
&nbsp Per share: &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp &nbsp Basic .08 &nbsp .16 &nbsp .07 &nbsp .08
&nbsp &nbsp Diluted .08 &nbsp .15 &nbsp .07 &nbsp .08
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
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&nbsp 2003 Quarter &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp Revenue $49,824,210 &nbsp $60,749,259 &nbsp $58,061,838 &nbsp $58,240,873
&nbsp Gross profit 5,767,831 &nbsp 7,758,431 &nbsp 8,334,526 &nbsp 6,701,962
&nbsp Net income 418,421 &nbsp 1,237,238 &nbsp 1,808,600 &nbsp 1,177,440
&nbsp Per share: &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp &nbsp Basic .04 &nbsp .10 &nbsp .15 &nbsp .10
&nbsp &nbsp Diluted .04 &nbsp .10 &nbsp .15 &nbsp .10
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
Net income for the fourth quarter of 2004 was favorably impacted by the recognition of prior year's research and development tax credits (federal - $256,600 and state - $166,200) and tax benefits resulting from the reversal of certain tax reserves (see Note 7 of Notes to Consolidated Financial Statements).
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
Net income for the fourth quarter of 2003 was favorably impacted by $359,000 as a result of pretax gains of $1,084,868 on the sale of two properties, net of a pretax impairment charge of $497,406 on property held for sale.
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
The sum of quarterly earnings per share for the four quarters may not equal annual earnings per share due to rounding and changes in the diluted potential common shares.
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ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp Not applicable.
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
ITEM 9A.
ITEM 9A. CONTROLS AND PROCEDURES
&nbsp a. Evaluation of disclosure controls and procedures.
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp &nbsp The Company's chief executive officer and its chief financial officer, after evaluating the effectiveness of the Company's disclosure controls and procedures (as defined in Securities Exchange Act Rules 13a-14(c) and 15-d-14(c)) as of a date within 90 days of the filing date of this annual report (the "Evaluation Date") have concluded that as of the Evaluation Date, the Company's disclosure controls and procedures were adequate and effective to ensure that material information relating to the Company and its consolidated subsidiaries would be made known to them by others within those entities, particularly during the period in which this annual report was being prepared.
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp b. Changes in internal controls.
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp &nbsp There were no significant changes in the Company's internal controls or in other factors that could significantly affect the Company's disclosure controls and procedures subsequent to the Evaluation Date, nor any significant deficiencies or material weaknesses in such disclosure controls and procedures requiring corrective actions. As a result, no corrective actions were taken.
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
ITEM 9B.
ITEM 9B. OTHER INFORMATION
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp Not applicable. &nbsp &nbsp
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&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
PART III
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ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
&nbsp a. Directors - Certain information required by Item 10 of Form 10-K is hereby incorporated by reference from the Company's definitive proxy statement, which will be filed pursuant to Regulation 14A within 120 days after the Company's year end for the year covered by this report, under caption "Election of Directors" of the proxy statement.
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp b. Executive Officers - See "Executive Officers of the Registrant" in Item 1 of Part I of this Form 10-K.
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ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION. &nbsp &nbsp
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp The information required by Item 11 of Form 10-K is hereby incorporated by reference from the Company's definitive proxy statement, which will be filed pursuant to Regulation 14A within 120 days after the Company's year end for the year covered by this report, under the caption "Executive Compensation" of the proxy statement.
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Page 40 of 56
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp The information required by Item 12 of Form 10-K is hereby incorporated by reference from the Company's definitive proxy statement, which will be filed pursuant to Regulation 14A within 120 days after the Company's year end for the year covered by this report, under the caption "Security Ownership of Certain Beneficial Owners and Management" of the proxy statement.
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
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ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp The information required by Item 13 of Form 10-K is hereby incorporated by reference from the Company's definitive proxy statement, which will be filed pursuant to Regulation 14A within 120 days after the Company's year end for the year covered by this report, under the caption "Transactions with Management" of the proxy statement.
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ITEM 14.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp The information required by Item 14 of Form 10-K is hereby incorporated by reference from the Company's definitive proxy statement, which will be filed pursuant to Regulation 14A within 120 days after the Company's year-end for the year covered by this report, under the caption "Principal Accounting Fees and Services" of the proxy statement.
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PART IV
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ITEM 15.
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
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&nbsp (a) The following financial statements and financial statement schedule are included in Item 8 herein:
&nbsp &nbsp &nbsp (1) Financial Statements &nbsp &nbsp
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&nbsp &nbsp &nbsp &nbsp Report of Crowe Chizek and Company LLC, Independent Registered Public Accounting Firm
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&nbsp &nbsp &nbsp &nbsp Consolidated Balance Sheets as of December 25, 2004 and December 27, 2003
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&nbsp &nbsp &nbsp &nbsp Consolidated Statements of Income for the years ended December 25, 2004, December 27, 2003 and December 28, 2002
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&nbsp &nbsp &nbsp &nbsp Consolidated Statements of Stockholders' Equity for the years ended December 25, 2004, December 27, 2003 and December 28, 2002
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&nbsp &nbsp &nbsp &nbsp Consolidated Statements of Cash Flows for the years ended December 25, 2004, December 27, 2003 and December 28, 2002
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&nbsp &nbsp &nbsp &nbsp Notes to Consolidated Financial Statements
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&nbsp &nbsp &nbsp (2) Financial Statement Schedule
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&nbsp &nbsp &nbsp &nbsp Schedule II - Valuation and Qualifying Accounts
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&nbsp &nbsp &nbsp (3) Exhibits
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&nbsp &nbsp &nbsp &nbsp See Index to Exhibits
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SIGNATURES
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Pursuant to the requirements of Section 13 and 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, therunto duly authorized.
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&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp SUPREME INDUSTRIES, INC.
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Date: March 17, 2005 &nbsp &nbsp &nbsp By: /s/Herbert M. Gardner
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp Herbert M. Gardner, Chairmanof the Board
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Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
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/s/Herbert M. Gardner &nbsp Chairman of the Board and March 17, 2005
Herbert M. Gardner &nbsp &nbsp President (Principal Executive Officer) &nbsp &nbsp
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/s/Omer G. Kropf &nbsp Executive Vice President and March 17, 2005
Omer G. Kropf &nbsp &nbsp Director &nbsp &nbsp &nbsp &nbsp
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/s/William J. Barrett &nbsp Secretary, Assistant Treasurer and March 17, 2005
William J. Barrett &nbsp &nbsp Director &nbsp &nbsp &nbsp &nbsp
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/s/Robert W. Wilson &nbsp Executive Vice President, Treasurer, March 17, 2005
Robert W. Wilson &nbsp &nbsp Chief Financial Officer, Assistant Secretary and Director (Principal Financial and Accounting Officer) &nbsp &nbsp
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/s/Robert J. Campbell &nbsp Director March 17, 2005
Robert J. Campbell &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
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/s/Thomas Cantwell &nbsp Director March 17, 2005
Thomas Cantwell &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
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/s/Mark C. Neilson &nbsp Director &nbsp &nbsp March 17, 2005
Mark C. Neilson &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
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/s/H. Douglas Schrock &nbsp Director March 17, 2005
H. Douglas Schrock &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
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Page 43 of 56
INDEX TO EXHIBITS
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Exhibit Description
3.1 Certificate of Incorporation of the Company, filed as Exhibit 3(a) to the Company's Registration Statement on Form 8-A, filed with the Commission on September 18, 1989, and incorporated herein by reference.
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3.2 Certificate of Amendment of Certificate of Incorporation of the Company filed with the Secretary of State of Delaware on June 10, 1993 filed as Exhibit 3.2 to the Company's annual report on Form 10-K for the fiscal year ended December 31, 1993, and incorporated herein by reference.
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3.3 Certificate of Amendment of Certificate of Incorporation of the Company filed with the Secretary of State of Delaware on May 29, 1996 filed as Exhibit 3.3 to the Company's annual report on Form 10-K for the fiscal year ended December 31, 1996, and incorporated herein by reference.
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3.4 Bylaws of the Company, filed as Exhibit 3(b) to the Company's Registration Statement on Form 8-A, filed with the Commission on September 18, 1989, and incorporated herein by reference.
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4.1 Credit Agreement dated as of April 25, 1994, between the Company, Supreme Corporation, and NBD Bank and signed in connection with certain long-term indebtedness, filed as Exhibit 4.25 to the Company's annual report on Form 10-K for the fiscal year ended December 31, 1994, and incorporated herein by reference.
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4.2 First Amendment to Credit Agreement dated February 20, 1996, filed as Exhibit 4.2 to the Company's annual report on Form 10-K for the fiscal year ended December 31, 1996, and incorporated herein by reference.
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4.3 Second Amendment to Credit Agreement dated October 25, 1996 filed as Exhibit 4.3 to the Company's annual report on Form 10-K for the fiscal year ended December 31, 1996, and incorporated herein by reference.
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4.4 Third Amendment to Credit Agreement dated June 23, 1998 filed as Exhibit 4.4 to the Company's annual report on Form 10-K for the fiscal year ended December 31, 1998, and incorporated herein by reference.
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4.5 Fourth Amendment to the Credit Agreement dated September 30, 1998 signed in connection with certain long term indebtedness, filed as Exhibit 4.5 to the Company's annual report on Form 10-K for the fiscal year ended December 31, 1998 and incorporated herein by reference.
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4.6 Fifth Amendment to the Credit Agreement dated May 12, 1999 signed in connection with certain long term indebtedness, filed as Exhibit 4.6 to the Company's annual report on Form 10-K for the fiscal year ended December 31, 1999 and incorporated herein by reference.
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4.7 Sixth Amendment to the Credit Agreement dated May 31, 2000 signed in connection with certain long term indebtedness, filed as Exhibit 4.7 to the Company's annual report on Form 10-K for the fiscal year ended December 31, 2000, and incorporated herein by reference.
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4.8 Seventh Amendment to the Credit Agreement dated April 30, 2001 signed in connection with certain long term indebtedness, filed as Exhibit 4.8 to the Company's annual report on Form 10-K for the fiscal year ended December 31, 2001, and incorporated herein by reference.
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4.9 Credit Agreement dated April 25, 2003, between the Company, Supreme Corporation, and Bank One, NA, signed in connection with certain long-term indebtedness, filed as Exhibit 4.1 to the Company's quarterly report on Form 10-Q for the fiscal period ended March 29, 2003, and incorporated herein by reference.
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4.10 Credit Agreement dated January 5, 2004, between the Company, Supreme Corporation, and Bank One, NA, signed in connection with certain long-term indebtedness, filed as Exhibit 4.10 to the Company's annual report on Form 10-K for the fiscal year ended December 27, 2003, and incorporated herein by reference.
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4.11 First Amendment to the Credit Agreement dated March 19, 2004 signed in connection with certain long term indebtedness, filed as Exhibit 4.1 to the Company's quarterly report on Form 10-Q for the fiscal period ended March 27, 2004, and incorporated herein by reference.
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4.12 Second Amendment to the Credit Agreement dated December 17, 2004 signed in connection with certain indebtedness, filed as Exhibit 99.1 on Form 8-K dated December 27, 2004.
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10.1 The Company's 1992 Stock Option Plan, filed as Exhibit 10.7 to the Company's annual report on Form 10-K for the fiscal year ended December 31, 1992, and incorporated herein by reference.
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10.2 Form of Stock Option grant agreement used to evidence options granted under the Company's 1992 Stock Option Plan, filed as Exhibit 10.8 to the Company's annual report on Form 10-K for the fiscal year ended December 31, 1992, and incorporated herein by reference.
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10.3 The Company's 1998 Stock Option Plan, filed as Exhibit 10.3 to the Company's annual report on Form 10-K for the fiscal year ended December 31, 1998, and incorporated herein by reference.
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10.4 Amendment No. 1 to the Company's 1998 Stock Option Plan, filed as Exhibit 10.4 to the Company's annual report on Form 10-K for the fiscal year ended December 31, 1999, and incorporated herein by reference.
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10.5 Amendment No. 2 to the Company's 1998 Stock Option Plan, filed as Exhibit 10.5 to the Company's annual report on Form 10-K for the fiscal year ended December 31, 2000, and incorporated herein by reference.
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10.6 The Company's 2001 Stock Option Plan, filed as Exhibit 10.6 to the Company's annual report on Form 10-K for the fiscal year ended December 31, 2001, and incorporated herein by reference.
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10.7 Amendment No. 1 to the Company's 2001 Stock Option Plan.
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10.8 Inventory Loan and Security Agreement dated October 12, 1988, among General Motors Acceptance Corporation and the Company, its subsidiaries, and certain subsidiaries of Supreme Corporation, filed as Exhibit 10.19 to the Company's annual report on Form 10-K for the fiscal year ended December 31, 1988, and incorporated herein by reference.
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10.9 Form of Demand Promissory Note dated September 28, 1988, from the Company, and relating to the Agreement described 10.3 above, filed as Exhibit 10.20 to the Company's annual report on Form 10-K for the fiscal year ended December 31, 1988, and incorporated herein by reference.
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10.10 Intercreditor Agreement dated as of December 31, 1991, among General Motors Acceptance Corporation and Congress Financial Corporation, and relating to the Agreement described in 10.3 above filed as Exhibit 10.14 to the Company's annual report on Form 10-K for the fiscal year ended December 31, 1991, and incorporated herein by reference.
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10.11 Pool Company Wholesale Finance Plan Application for Wholesale Financing and Security Agreements, dated December 5, 1990, among Ford Motor Credit Company and each of Supreme Corporation, Supreme Truck Bodies of California, Inc., Supreme Corporation of Texas, and Supreme Mid-Atlantic Corporation, filed as Exhibit 10.15 to the Company's annual report on form 10-K for the fiscal year ended December 31, 1991, and incorporated herein by reference.
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10.12 Lease dated July 25, 1988, between Supreme Corporation and G-2, Ltd., a Texas limited partnership, relating to Supreme Corporation's Goshen, Indiana facilities, filed as Exhibit 10.22 to the Company's annual report on Form 10-K for the fiscal year ended December 31, 1988, and incorporated herein by reference.
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10.13 Lease dated July 25, 1988, between Supreme Corporation and G-2, Ltd., a Texas limited partnership, relating to Supreme Corporation's Griffin, Georgia facilities, filed as Exhibit 10.23 to the Company's annual report on Form 10-K for the fiscal year ended December 31, 1988, and incorporated herein by reference.
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10.14 Lease dated August 27, 1990, between Supreme Truck Bodies of California, Inc. and Edgar Maas, individually and as Trustee of the Marsha Maas Testamentary Trust, relating to Supreme Corporation's Riverside, California facility, filed as Exhibit 10.19 to the Company's annual report on Form 10-K for the fiscal year ended December 31,
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10.15 License Agreement dated to be effective November 5, 1992, between Supreme Corporation as license and ACCGRUPPENAB, a Swedish Corporation, as licensor, with respect to certain know-how and patent rights, filed as Exhibit 10.19 to the Company's annual report on Form 10-K for the fiscal year ended December 31, 1993, and incorporated herein by reference.
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10.16 Consulting Agreement dated to be effective January 1, 1993, between the Company and William J. Barrett, filed as exhibit 10.21 to the Company's annual report on Form 10-K for the fiscal year ended December 31, 1993, and incorporated herein by reference.
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10.17 Consulting Agreement dated to be effective January 1, 1993, between the company and Herbert M. Gardner, filed as Exhibit 10.22 to the Company's annual report on Form 10-K for the fiscal year ended December 31, 1993, and incorporated herein by reference.
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10.18 Consulting Agreement dated to be effective April 15, 1993, between the Company and Rice M. Tilley, Jr., filed as Exhibit 10.23 to the Company's annual report on Form 10-K for the fiscal year ended December 31, 1993, and incorporated herein by reference.
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10.19 Consulting Agreement dated to be effective April 15, 1993, between the Company and H. Douglas Schrock, filed as Exhibit 10.24 to the Company's annual report on Form 10-K for the fiscal year ended December 31, 1993, and incorporated herein by reference.
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10.20 Employment Contract dated to be effective January 1, 1998, between Supreme Corporation and Robert W. Wilson, filed as Exhibit 10.16 to the Company's annual report on Form 10-K for the fiscal year ended December 1, 1997, and incorporated herein by reference.
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10.21 Amendment Number One to employment contract effective January 1, 1998, between Supreme Corporation and Robert W. Wilson, filed as Exhibit 10.19 to the Company's annual report on Form 10-K for the fiscal year ended December 31, 2000, and incorporated herein by reference.
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10.22 Employment Contract dated to be effective May 1, 1998, between Supreme Corporation and Omer G. Kropf, filed as Exhibit 10.12 to the Company's annual report on Form 10-K for the fiscal year ended December 31, 1998, and incorporated herein by reference.
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10.23 Employment Contract dated to be effective May 1, 2002, between Supreme Corporation and Omer G. Kropf, filed as Exhibit 10.23 to the Company's annual report on Form 10-K for the fiscal year ended December 28, 2002, and incorporated herein by reference.
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10.24 Employment Contract dated to be effective May 1, 2003, between Supreme Industries, Inc. and Herbert M. Gardner, filed as Exhibit 10.1 to the Company's quarterly report on Form 10-Q for the fiscal period ended September 27, 2003, and incorporated herein by reference.
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10.25 Employment Contract dated to be effective May 1, 2003, between Supreme Industries, Inc. and William J. Barrett, filed as Exhibit 10.2 to the Company's quarterly report on Form 10-Q for the fiscal period ended September 27, 2003, and incorporated herein by reference.
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10.26 Employment Contract dated to be effective July 1, 2003, between Supreme Corporation and Robert W. Wilson, filed as Exhibit 10.3 to the Company's quarterly report on Form 10-Q for the fiscal period ended September 27, 2003, and incorporated herein by reference.
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21.1 Subsidiaries of the Registrant.
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23.1 Consent of Crowe Chizek and Company LLC, Independent Registered Public Accounting Firm
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31.1 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
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31.2 Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
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32.1 Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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32.2 Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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Exhibit 21.1
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Subsidiaries of the Registrant (a)
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Supreme Corporation, a Texas corporation
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Supreme Indiana Operations, Inc., a Delaware corporation
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Supreme Indiana Management, Inc., a Delaware corporation
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Supreme Corporation of Texas, a Texas corporation
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Supreme SCT Operations, L.P., a Texas limited partnership
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Supreme SCT, L.L.C., a Delaware limited liability company
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Supreme SCT Operating Co., L.L.C., a Delaware limited liability company
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Supreme Truck Bodies of California, Inc., a California corporation
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Supreme STB Corporation, a California corporation
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Supreme Mid-Atlantic Corporation, a Texas corporation
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Supreme Northwest, L.L.C., a Texas limited liability company
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Supreme/Murphy Truck Bodies, Inc., a North Carolina corporation
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SC Tower Structural Laminating, Inc., a Texas corporation
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Supreme Insurance Company, Inc., a Nevada corporation
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Supreme Properties North, Inc., a Delaware corporation
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Supreme Properties South, Inc., a Delaware corporation
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Supreme Properties East, Inc., a Delaware corporation
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Supreme Properties West, Inc., a Delaware corporation
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(a) All subsidiaries are 100% owned by the Registrant.
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Exhibit 23.1
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CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
We consent to the incorporation by reference in the registration statements of Supreme Industries, Inc. on Form S-8 (File Nos. 333-118584, 333-104386 and 333-89867) and in the related Prospectus of our report dated January 28, 2005 on our audits of the consolidated financial statements and financial statement schedule of Supreme Industries, Inc. and its subsidiaries as of December 25, 2004 and December 27, 2003 and for each of the three years in the period ended December 25, 2004, which report is included in this Annual Report on Form 10-K.
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp /s/Crowe Chizek and Company LLC
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
South Bend, Indiana
March 17, 2005
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Page 50 of 56
Exhibit 31.1
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
I, Herbert M. Gardner, Chief Executive Officer of Supreme Industries, Inc. ("registrant"), certify that:
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
1. I have reviewed this annual report on Form 10-K of the registrant;
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have:
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this annual report based on such evaluation; and
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal year that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting.
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
Page 51 of 56
&nbsp b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
Date: March 17, 2005
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
/s/ Herbert M. Gardner
Chief Executive Officer
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&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
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Page 52 of 56
Exhibit 31.2
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
CERTIFICATION OF CHIEF FINANCIAL OFFICER
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
I, Robert W. Wilson, Chief Financial Officer of Supreme Industries, Inc. ("registrant"), certify that:
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
1. I have reviewed this annual report on Form 10-K of the registrant;
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have:
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this annual report based on such evaluation; and
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal year that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting.
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
Page 53 of 56
&nbsp b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
Date: March 17, 2005
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
/s/ Robert W. Wilson
Chief Financial Officer
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
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Page 54 of 56
Exhibit 32.1
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
Certification of
Chief Executive Officer
of Supreme Industries, Inc. Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
This certification is furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350) and accompanies the annual report on Form 10-K (the "Form 10-K") for the year ended December 25, 2004 of Supreme Industries, Inc. (the "Company"). I, Herbert M. Gardner, the Chief Executive Officer of the Company, certify that, based on my knowledge:
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
(1) The Form 10-K fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
(2) The information contained in the Form 10-K fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the periods covered in this report.
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
Dated: March 17, 2005
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
/s/ Herbert M. Gardner
Chief Executive Officer
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
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Page 55 of 56
Exhibit 32.2 &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
Certification of
Chief Financial Officer
of Supreme Industries, Inc. Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
This certification is furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350) and accompanies the annual report on Form 10-K (the "Form 10-K") for the year ended December 25, 2004 of Supreme Industries, Inc. (the "Company"). I, Robert W. Wilson, the Chief Financial Officer of the Company, certify that, based on my knowledge:
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
(1) The Form 10-K fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
(2) The information contained in the Form 10-K fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the periods covered in this report.
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
Dated: March 17, 2005 &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
/s/ Robert W. Wilson
Chief Financial Officer
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
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Page 56 of 56