Supreme Industries, Inc. reported that 2008 fourth-quarter and full-year net sales decreased 23 percent and 14 percent to $56.4 million and $268.7 million, respectively, reflecting further deterioration of business conditions precipitated by the economic recession and unprecedented tight credit markets.
This compares with net sales of $73.7 million and $313.3 million in the same periods of 2007.
Year-over-year sales from Supreme’s specialized trucks, its largest product group, declined 23 percent, but were partially offset by strong sales increases of Supreme’s bus products, which were up 21 percent compared with 2007.
“Supreme’s conservative balance sheet management and financial strength provide the ability to strongly rebound after the recession,” said Supreme President and Chief Operating Officer Robert W. Wilson. “Our financial condition allows us to prepare for the eventual upturn by investing in product areas that we believe show significant promise. The new SIGNATURE commercial dry-freight van body and the U.S. Department of State (DOS) armored vehicle development program are two examples of Supreme’s commitment to remaining innovative. The SIGNATURE Van Body offers exceptional user-functionality in terms of engineering, design, and quality, while the DOS contract calls for up to $100 million of armor-plated vehicles to be produced over a five-year period, subject to purchase orders issued by the DOS.
“While the current poor economic conditions are not expected to ease until at least 2010, we believe that Supreme’s broad-based and innovative products position the company for a strong recovery. Additionally, we have taken, and continue to take, costs out of the business, aligning operations to fit the current market conditions. Our 2008 annualized cost reductions totaled approximately $9 million with the largest components of the savings resulting from our 29% headcount reduction, selected facility consolidations, and wage reductions. We will continue to review our cost structure in 2009 and will reduce the size of business operations as economic conditions warrant.”
The net loss for the year’s final quarter was $2.9 million, or $0.20 per diluted share, down from net income of $0.9 million, or $0.06 per diluted share, a year ago. The full-year loss—the first in Supreme’s history—was $3.1 million, or $0.22 per diluted share, versus net income of $4.2 million, or $0.30 per diluted share, for 2007.
The losses for both periods in 2008 include a non-cash, pre-tax write-down of both goodwill and an acquisition-related intangible totaling $1.3 million. The company recorded an impairment charge for its goodwill due primarily to the depressed market price of the company’s Class A Common Stock, and recessionary market conditions for the company’s specialized RV product were the cause of the intangible write-down.
Gross profit margin as a percentage of net sales for the 2008 fourth quarter declined to 7.4 percent from 10.6 percent in last year’s fourth quarter, and declined to 9.1 percent from 11.2 percent year over year. The decreases were primarily attributable to the lower sales volume of our truck products, product mix, and the inability to raise prices in a recessionary environment.
Selling, general and administrative expenses decreased for the fourth quarter and full year by $0.2 million, or 2.5 percent, and $0.5 million, or 1.8 percent, respectively, compared with the same periods in 2007. Interest expense declined 9 percent to $2.3 million from $2.5 million in 2007 as a result of lower interest rates and working capital requirements related to the decreased sales volume.
Cash flow from operations was a positive $1.1 million for 2008, and stockholders’ equity was $70.4 million, or $4.98 per share, at Dec. 27, 2008. At year-end, working capital totaled $60.3 million, compared with $58.5 million at year-end 2007. The working capital ratio at Dec. 27, 2008, was 4.2 to 1, versus 3.3 to 1 at year-end 2007. The company believes that it has adequate availability in its credit facility to finance future foreseeable working capital requirements. Backlog at Dec. 27, 2008, was $60.0 million versus $87.0 million at Dec. 29, 2007.
Due to the present industry conditions and economic recession, the Board of Directors has decided to suspend all dividend programs. Future dividends will necessarily be subject to business conditions, the company’s financial position and requirements for working capital, property, plant and equipment expenditures, and other corporate purposes.