Supreme Industries Inc. (NYSE MKT: STS) said fourth-quarter gross profit was $11.1 million—a 45.7% increase from the $7.6 million reported in the fourth quarter of 2012—primarily due to product mix, continued manufacturing efficiency improvements and higher capacity utilization.

Consolidated net sales for 2014 decreased 1.4%, to $282.3 million, from $286.1 million last year, due to lower bus and specialty vehicle sales offset by increased truck body volume. For the twelve months, gross profit increased to $46.8 million, from last year's $43.5 million. Gross margin, as a percentage of sales, increased to 16.6%, compared with 15.2% in 2012. The margin growth reflects improved product mix and margin-expansion initiatives including process improvements, manufacturing efficiencies and competitive sourcing.

Gross margin expanded to 15.2% of quarterly sales, compared with 13.2% in last year's fourth quarter, despite margin pressure in the bus product line.

Consolidated net sales increased 25.6%, to $72.5 million, compared with $57.7 million last year. The revenue increase was attributable to a fall fleet build and improved retail demand for truck bodies, partially offset by lower sales volume in the specialty vehicle and bus divisions.

An income tax expense of $0.7 million was recorded in the quarter due to the company's return to normalized tax rates. In last year's comparable period, the company recorded an income tax benefit of $0.1 million that included the reversal of a deferred tax valuation allowance due to improved profitability.

Net income for the fourth quarter was $1.7 million, or $0.10 per diluted share, up from net income of $0.4 million, or $0.02 per diluted share, last year.

During the quarter, the company announced its intention to divest the highly competitive shuttle bus business. The increasingly competitive environment in the bus industry has led to higher discounting making it more difficult to meet Supreme's profitability objectives. While shuttle bus products represented less than 13% of the company's consolidated 2013 sales, the business generated unacceptable margins in 2013.

On a proforma basis, adjusting and eliminating the net losses of the shuttle bus business (including costs associated with the King County lawsuit) and normalizing the 2012 income tax expense, diluted earnings per share more than doubled to $0.13, compared with $0.05 a year ago.

"The decision to divest the shuttle bus business is expected to help us maximize shareholder value by optimally allocating resources where they will earn the highest return. Supreme's core business of manufacturing and selling customized truck bodies has recently undergone successful facilities and manufacturing process upgrades, resulting in better operating efficiencies and expanding margins for these products," said President and Chief Executive Officer Mark Weber.

Income tax expense increased by $3.2 million versus last year resulting from the normalized tax rates in 2013, and last year's reversal of the valuation allowance.

Reported net income for the twelve months was $6.4 million, or $0.39 per diluted share, compared with $11.8 million, or $0.73 per diluted share last year. On a proforma basis, adjusting and eliminating for the impact of the shuttle bus business (including costs associated with the King County lawsuit) and normalizing the 2012 income tax expense, diluted earnings per share for the full year improved to $0.68 compared to $0.53 for 2012.

Backlog at the end of the year increased 28.4% to $71.5 million, compared with $55.7 million at the end of 2012, excluding shuttle bus business.

Additional year-over-year key performance indicators include:

  • Working capital was $37.6 million at December 28, 2013, compared to $38.6 million for the fourth quarter 2012.
  • Net cash provided by operating activities in 2013 was $13.5 million, compared with $12.4 million in 2012.
  • Total debt declined more than 30% to $9.7 million at year end, compared with $14.1 last year.
  • Stockholders' equity increased 10.3% to $74.1 million at December 28, 2013, compared with $67.2 million at December 29, 2012.
  • Book value, on a per-share basis, grew to $4.59 at year-end versus $4.20 at the end of last year.