Supreme Industries, Inc. (NYSE MKT: STS) announced consolidated net sales increased to $95.5 million in the second quarter, up 3% from $92.9 million in the same quarter of 2016.

Gross margin was 20% of net sales, which was down from 24.1% of net sales in same quarter last year. The year-over-year margin decline was primarily due to a significantly higher proportion of lower-margin rental fleet sales in the current year. In addition, material costs, group health insurance and workers' compensation expenses were higher in 2017, compared with 2016.

Second-quarter operating income in 2017 was $9.0 million, versus $12.5 million in 2016's comparable quarter. Net income in the quarter was $6.3 million, or $0.37 per diluted share, compared with $8.3 million, or $0.48 per diluted share, in the prior-year quarter.

"We shipped considerably more rental fleet truck bodies during the second quarter as compared to last year. Our quarterly net income of $6.3 million represents our second-highest quarterly results, only surpassed by our record set in the second quarter of 2016," said Mark Weber, President and Chief Executive Officer. "In addition to the unfavorable mix, we also experienced material cost increases that have recently been addressed with a mid-year pricing adjustment that should benefit margins during the second half of 2017."

Order backlog was a second quarter record at $84.1 million, up 17% from $71.9 million at the same time last year, excluding the trolley backlog of $3.6 million (the trolley product line was divested in 2017).

"Our work truck order intake remained strong during the quarter, even with continued slow economic growth," Weber added. "The record order backlog at the end of the second quarter had a much stronger mix of retail and leasing orders, which is very encouraging and should meaningfully improve margins as we enter the second half of the year."

Consolidated net sales rose modestly to $164.1 million in the year's first half, compared with $162.3 million in the comparable period last year. Gross margin was 19.6% of net sales, compared with 23.1% of net sales in the first half of 2016. Gross margin in 2017 was negatively impacted by a product mix, higher overhead expenses, and previously disclosed inefficiencies in the first quarter from delays in receiving customer-supplied chassis.

Operating income was $12 million in the first half of 2017, down from $18.3 million in the same period of last year. First-half net income was $8.2 million, or $0.48 per diluted share, versus net income of $12.1 million, or $0.70 per share in 2016's first half.