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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUAHT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2000.
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the transition period from ___ to ___.
Commission File No. 1-8183
SUPREME INDUSTRIES, INC.
(Exact name of Registrant as specified in its charter)
Delaware 75-1670945
(State of Incorporation) (IRS Employer Identification No.)
P.O. Box 237, 16441 CR 38, Goshen, Indiana 46528
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) - (219) 642-3070
Securities registered pursuant to Section 12(b) of the Act:
Class A Common Stock ($.10 Par Value) American Stock Exchange
(Title of each class) (Name of Each Exchange on Which Registered)
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of the registrant's knowledge, in the definitive proxy or
information statements incorporated by reference in Part III of the Form 10-K
or any amendment hereto. X
The aggregate market value of the voting stock held by non-affiliates of the
registrant at March 5, 2001: $28,289,318
Indicate the number of shares outstanding of each of the registrant's classes
of common stock, as of the latest practicable date.
Class Outstanding at March 5, 2001
- ------------------------------------- ----------------------------
Class A Common Stock ($.10 Par Value) 8,889,934 shares
Class B Common Stock ($.10 Par Value) 1,917,394 shares
Documents Incorporated by Reference
-----------------------------------
Parts of Form 10-K Into Which the
Document Document is Incorporated
Portions of the Proxy Statement
for Annual Meeting of Shareholders
to be held on May 2, 2001 Part III
The Index to Exhibits is on page ___ in the sequential numbering system.
Total pages ___
Page 1 of 58
PART I
ITEM 1. BUSINESS.
- ------- ---------
History
- -------
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.
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.
In August 1994, the Company acquired the business operations and
substantially all of the operating assets of Murphy Body Company, Inc.,
Wilson, North Carolina. The acquisition provided additional refrigerated
product lines that the Company did not currently produce and added additional
capacity for the Company's existing product lines. The acquisition also
provided better market penetration for all of the Company's product lines
into Virginia and North and South Carolina.
During 1998 the Company reached the decision to close two operating
facilities. The paratransit van line acquired in March 1996 never reached
the volumes anticipated. In addition, as a result of the damage to the
Honduran infrastructure caused by Hurricane Mitch, the Company decided to
close its hardwood flooring operation in Honduras. Neither closing had an
unfavorable effect on the Company's operations.
Financial Information About Operating Segments
- ----------------------------------------------
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.
General Description of the Company's Business
- ---------------------------------------------
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."
Supreme's products are medium-priced with prices generally ranging from
$2,500 to $100,000. Supreme's truck bodies and custom trailers 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,
Page 2 of 58
and refrigeration equipment, which are configured with the truck bodies to
meet the end-user's needs. 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:
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.
Refrigerated Chiller (trademark) insulated van bodies.
Chiller (trademark) vans are insulated FRP bodies which
can accommodate controlled temperature and refrigeration
needs of end-users. All fiberglass exterior laminated
walls are corrosion resistant and utilize foam insulation
which permits varying levels of temperature to as low as
minus twenty degrees Fahrenheit.
Kold King (trademark) aluminum insulated van bodies.
Supreme's advances in insulated foam technology have
created this aluminum insulated body with greater strength,
less weight and better thermal efficiency.
Iner-City (trademark) cutaway van bodies. Aluminum or FRP
cutaway van bodies are manufactured on cutaway chassis
which are available with access to the cargo area from the
cab. The Iner-City (trademark) cutaway van body is similar
to the regular van body except for floor construction and
shorter lengths (10 feet to 15 feet) as compared with van
bodies which are constructed to lengths of up to 28 feet.
Iner-City (trademark) walk-in van bodies. Supreme
manufactures its walk-in vans on a rail truck chassis
having no cab. Supreme fabricates the driver's compartment
and body using FRP panels and aluminum. Some uses for this
product include the distribution of food products and small
packages.
Spartan mini-bodies. Spartan mini-bodies are produced in
three different configurations and designed to be mounted
on small trucks for diversified commercial use.
Armored Trucks. Supreme's armored trucks are built to
customer specifications in either aluminum, galvaneal or
stainless steel.
StarTrans (trademark) shuttle buses. The StarTrans
(trademark) 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.
Page 3 of 58
StarTrans (trademark) mid-size buses. Supreme's StarTrans
(trademark) 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.
StarTrans (trademark) trolleys. Supreme's StarTrans
(trademark) trolley line is similiar 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.
Customized trailers. Supreme manufactures a variety of
customized trailers for special needs, including mobile
laboratories, antique and race car haulers, and trailers
for the broadcasting industry.
Stake bodies. Stake bodies are flatbeds with various
configurations of removable sides. The stake body is
utilized for a broad range of agricultural
transportation needs.
Chiller (trademark), Kold King (trademark), Nordica
(trademark), Iner-City (trademark), Spartan, StarTrans
(trademark), and Fuel Shark are trademarks used by
Supreme in its marketing of truck bodies and buses.
Chiller (trademark), Kold King (trademark), Nordica
(trademark), Iner-City (trademark), and StarTrans
(trademark) are trademarks registered in the U.S.
Patent and Trademark Office.
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 vehicles.
Supreme intends to continue to expand its product line, but there is no
assurance that it will do so.
Manufacturing
- -------------
Supreme's manufacturing facilities are located in Goshen and Ligonier,
Indiana; Griffin, Georgia; Cleburne, Texas; Moreno Valley, California;
Jonestown, Pennsylvania and Wilson, North Carolina. Supreme's management
estimates that the capacity utilization of its plants and equipment range
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.
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 insure 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.
Page 4 of 58
Supreme is more vertically integrated than many of its competitors. The
Company manufactures its own fiberglass reinforced plywood (FRP), 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.
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 five years following the date of retail
sale.
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 manufacturer. Approximately 20% 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.
Raw Materials
- -------------
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 as
virtually all of Supreme's products are built on chassis. The Company
believes it enjoys good relationships with all the chassis manufacturers
that supply the chassis that its products are built on. In the event of a
problem with one chassis supplier the Company would attempt to divert its
products to other chassis suppliers.
Marketing
- ---------
Supreme normally sells the vehicle and/or equipment that has been
installed on the chassis to either truck equipment distributors, truck
dealers 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 (and 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.
Page 5 of 58
Supreme's distributor/dealer network consists of approximately 40 bus
distributors, 85 truck equipment distributors and 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.
Supreme markets products direct to end users in geographic areas where
the Company does not have a strong distributor. The Company currently has
distribution facilities in the areas of St. Louis, MO; Louisville, KY;
Cleveland, OH; Orlando, FL; Houston and San Antonio, TX; Denver, CO; San
Francisco, CA and Woonsocket, RI.
Approximately 80 employees are engaged in direct sales. Supreme engages
in direct advertising in trade publications, trade shows and cooperative
advertising campaigns with distributors.
Competition
- -----------
Specialized vehicles are produced by many companies, most of which
compete on a regional basis. Management believes that Supreme enjoys a
competitive advantage based upon its established distributor/dealer network
and six manufacturing facilities and nine distribution centers. 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.
Trademarks
- ----------
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.
Working Capital
- ---------------
The Company utilizes its revolving line of credit to finance its
accounts receivable and inventories. The Company's Credit Agreement requires
the Company to maintain a minimum working capital of not less than $10
million. The Company had working capital of $35.2 million at December 31,
2000.
Page 6 of 58
Major Customers
- ---------------
The Company had one customer, Budget Group Inc., that accounted for
approximately 11% of the Company's revenues during 1999. No single or group
of customers accounted for 10% or more of the Company's revenues for the
years ended December 31, 2000 and 1998. The Company's export sales are not
significant.
Environment Regulation
- ----------------------
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.
Employees
- ---------
As of December 31, 2000, the Company employed approximately 2,000
employees, none of whom are represented by a collective bargaining unit. The
Company considers its relations with its employees to be satisfactory.
Back Log
- --------
The Company's backlog of firm orders was $48.7 million at December 31,
2000 compared to $74.0 million at December 31, 1999.
Page 7 of 58
Executive Officers of the Registrant
- ------------------------------------
The name, age, business background, position 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.
Served as
Executive Positions With
Name, Age, and Business Experience Officer Since Company
- ------------------------------------------------------------------------------
Herbert M. Gardner, 61 1979 Chairman of the
Senior Vice President of Janney Montgomery Board, President
Scott Inc., investment bankers, since 1978;
Chairman of the Board of the Company since
1979 and President of the Company since
June 1992. Also a Director of: Nu Horizons
Electronics Corp., an electronic component
distributor; Transmedia Network, Inc., a
company that develops and markets
transaction-based dining and other consumer
savings programs; Hirsch International
Corp., importer of computerized embroidery
machines, supplies, and developer of
embroidery machine application software;
Co-Active Marketing Group, Inc., a
marketing and sales promotion company;
TGC Industries, Inc., a company engaged in
the geophysical services industry; and
Rumson-Fair Haven Bank and Trust Company,
a New Jersey state independent, commercial
bank and trust company.
Omer G. Kropf, 59 1984 Executive Vice
Executive Vice President of the Company President
since August 1984; President and Chief
Executive Officer of Supreme Corporation, a
subsidiary of the Company, from January 19,
1984 to November 2, 2000 and co-holder of
Office of the President since November 2000.
Page 8 of 58
Served as
Executive Positions With
Name, Age, and Business Experience Officer Since Company
- ----------------------------------------------------------------------------
William J. Barrett, 61 1979 Secretary and
Senior Vice President of Janney Montgomery Assistant
Scott Inc., investment bankers, since 1976; Treasurer
Secretary and Assistant Treasurer of the
Company and a Director since 1979. Also a
Director of: TGC Industries, Inc., a company
engaged in the geophysical services industry
and American Country Holdings, Inc., a
specialized property and casualty insurance
company with focus on transportation and
hospitality markets; and Rumson-Fair Haven
Bank and Trust Company, a New Jersey state
independent, commercial bank and trust company.
Robert W. Wilson, 56 1992 Executive Vice
Treasurer, Executive Vice President, and President,
Chief Financial Officer of the Company since Treasurer,
December 1992; Vice President of Finance since Chief Financial
1988 and co-holder of the Office of President Officer, and
since November 2000, of Supreme Corporation, Assistant
a subsidiary of the Company. Secretary
Page 9 of 58
ITEM 2. PROPERTIES.
- ------- -----------
Set forth below is a brief summary of the properties which are owned or
leased by the Registrant as of December 31, 2000.
Square Owned or Operating
Footage Leased Segment
------- -------- ---------
Manufacturing of Products
- -------------------------
Goshen, Indiana 206,056 Leased Specialized Vehicles
Goshen, Indiana 235,834 Owned Specialized Vehicles
Jonestown, Pennsylvania 246,848 Owned Specialized Vehicles
Wilson, North Carolina 113,694 Owned Specialized Vehicles
Moreno Valley, California 96,928 Owned Specialized Vehicles
Cleburne, Texas 115,060 Owned Specialized Vehicles
Griffin, Georgia 102,795 Leased Specialized Vehicles
Griffin, Georgia 26,150 Owned Specialized Vehicles
---------
1,143,365
---------
Manufacturing of Component Parts
- --------------------------------
Goshen, Indiana 57,570 Owned Fiberglass Products
Ligonier, Indiana 93,212 Leased Fiberglass Products
Ligonier, Indiana 31,134 Owned Fiberglass Products
---------
181,916
---------
Distribution
- ------------
St. Louis, Missouri 15,000 Owned Specialized Vehicles
Houston, Texas 12,841 Owned Specialized Vehicles
Denver, Colorado 12,500 Leased Specialized Vehicles
Woonsocket, Rhode Island 10,720 Owned Specialized Vehicles
Streetsboro, Ohio 11,900 Owned Specialized Vehicles
San Antonio, Texas 7,000 Owned Specialized Vehicles
Vallego, California 8,400 Leased Specialized Vehicles
Louisville, Kentucky 6,664 Owned Specialized Vehicles
Apopka, Florida 6,600 Owned Specialized Vehicles
---------
91,625
---------
Total square footage 1,416,906
=========
Page 10 of 58
ITEM 3. LEGAL PROCEEDINGS.
- ------- ------------------
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.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
- ------- ----------------------------------------------------
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 31, 2000.
PART II
-------
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
- ------- -------------------------------------------------
STOCKHOLDER MATTERS.
--------------------
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 5, 2001 was approximately 360. Due to the number of
shares held in nominee or street name, it is likely that there are more than
360 beneficial owners of the Company's Class A Common Stock.
Page 11 of 58
The Company's Class A Common Stock closed at $3.79 on the American Stock
Exchange on March 5, 2001 on which date there were 8,889,934 shares of Class
A Common Stock outstanding. High and low closing prices of the Class A
Common Stock for the two-year period ended December 31, 2000 were:
2000 1999
--------------- ---------------
High Low High Low
------ ------ ------ ------
1st Quarter $6.55 $4.05 $8.99 $6.37
2nd Quarter 6.82 4.38 9.40 7.92
3rd Quarter 5.50 3.75 7.38 6.19
4th Quarter 4.50 2.13 7.26 5.48
All of the 1,917,394 outstanding shares of the Company's Class B Common
Stock were held by a total of 14 persons as of March 5, 2001. There is no
established trading market for the Class B Common Stock. Class B Common
Stock is freely convertible on a one-for-one basis into an equal number of
shares of Class A Common Stock and ownership of the Class B shares is deemed
to be beneficial ownership of the Class A shares under Rule 13d-3(d) (1)
promulgated under the Securities Exchange Act of 1934.
No cash dividends were paid in 2000 or 1999. The Company paid two 5%
stock dividends during 1999, one on July 19 and one on December 6 and one 5%
stock dividend on May 22, 2000.
Page 12 of 58
ITEM 6. SELECTED FINANCIAL DATA.
- ------- ------------------------
For the Years Ended December 31,
---------------------------------------------------
Consolidated Invome Statement
Data: (in millions, except
per share amounts)
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
Net revenue $ 246.3 $ 246.0 $ 223.7 $ 198.0 $ 159.9
Net income 8.0 8.3 9.0 (a) 8.6 5.1
Net income per share:(b)
Basic earnings per share .72 .68 .68 .65 .40
Diluted earnings per share .71 .68 .67 .64 .38
Consolidated Balance Sheet
Data: (in millions)
Working capital $ 35.2 $ 42.7 $ 39.4 $ 30.4 $ 23.4
Total assets 103.0 110.6 94.2 85.9 68.8
Long-term debt (excluding
current maturities) 25.9 35.3 18.3 17.4 16.1
Stockholders' equity 50.8 44.8 53.5 44.5 35.8
(a) Net income for 1998 was reduced by a $1.3 million extraordinary loss
(see Note B of Notes to Consolidated Financial Statements).
(b) All per share amounts have been restated for all common stock dividends
paid.
Page 13 of 58
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
- ------- -------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS.
------------------------------------
Comparison of 2000 with 1999
- ----------------------------
Revenues for the year ended December 31, 2000 were relatively unchanged
at $246.3 million compared to $246.0 million for the year ended December 31,
1999. A general slowing in the overall economy, particularly in the
automotive and truck equipment sectors, negatively affected the third and
fourth quarters of 2000 and continues into 2001. There was little change in
the Company's overall product offerings in 2000 when compared to 1999. The
Company's northeast market was the only market that experienced growth in
2000 when compared to 1999. This growth was offset by a decline in the
Company's Midwest market combined with small fluctuations in the Company's
other market areas.
Overall revenues by customer category changed little in 2000 when
compared to 1999. No single customer represented more than 6% of the
Company's annual revenues in 2000. Unit shipments declined approximately 3%
in 2000 when compared to 1999.
The Company's gross profit percentage improved to 16.9% in 2000 compared
to 15.4% in 1999. The Company experienced improvements in material and
direct labor as a percentage of revenues in 2000 when compared to 1999.
Overhead, both in dollars and as a percentage of revenue, increased slightly
in 2000 when compared to 1999. Employee-related costs for health insurance
and fringe benefits were up slightly in 2000 when compared to 1999. These
costs are part of the Company's efforts to improve its overall benefit
package to help alleviate high employee turnover during tight labor markets.
Selling, general and administrative expenses were $25.5 million or 10.3%
of revenue in 2000 compared to $22.0 million or 9.0% of revenue in 1999.
Expenses contributing to the increase in order of significance were: wage
expense, depreciation on the new operating software, professional services
and customer delivery costs included in the selling category. A significant
portion of the increase relates to the new operating software implemented
January 1, 2000. While depreciation and amortization expenses will remain
higher as the software is amortized over three years (approximately $800,000
annually), fees relating to professional services will decline in 2001. The
Company plans to reduce selling, general and administrative expenses by $1.0
million during 2001.
Interest expense increased $0.9 million to $3.1 million in 2000 from
$2.2 million in 1999. Contributing to the increase were the five-year term
loan to finance the Dutch Auction completed in May of 1999 being outstanding
for the full year of 2000, the $2.5 million industrial revenue bond issued in
November to purchase the Company's North Carolina manufacturing facility and
a $0.1 million increase in chassis interest expense.
The Company's effective income tax rate fell to 39.0% in 2000 from 39.7%
in 1999. The decline is primarily the result of fluctuations in taxable
income and varying tax rates in the states in which the Company transacts
business.
Page 14 of 58
Comparison of 1999 with 1998
- ----------------------------
Revenues increased $22.3 million to $246.0 million for the year ended
December 31, 1999 from $223.7 million for the year ended December 31, 1998.
Strong growth in the Company's fiberglass reinforced product lines (FRP) was
primarily responsible for the increased revenues. These product lines,
consisting primarily of Iner City (trademark), Van and Spartan Service
Bodies, grew $26.7 million over 1998. The increased FRP Iner Cities
(trademark) and vans replaced aluminum Iner Cities (trademark) and vans
which declined $2.8 million from 1998. A decline of $3.5 million in
specialized refrigerated products is attributed to the loss of a customer
who elected to consolidate their purchases with one supplier.
There were no significant changes either up or down in the Company's
other product lines. Each of the Company's manufacturing locations
experienced revenue growth in 1999 over 1998, except the refrigerated
manufacturing plant in North Carolina. While the loss of one customer was
responsible for a $3.5 million revenue decline, total revenues at this plant
only declined $1.3 million. On a unit basis, total shipments for the Company
increased approximately 9% in 1999 over 1998.
The Company's gross profit percentage declined 2.2% in 1999 to 15.4%
from 17.6% in 1998. This decline was caused primarily by increases in direct
and indirect labor. The cost of raw materials was relatively unchanged from
the prior year. Expenses associated with labor, particularly group health
and workers' compensation insurance, also increased substantially. The
Company attributes these increases to significant employee turnover caused by
tight labor markets and low unemployment rates at each of its manufacturing
facilities. The specialized nature of the Company's product lines requires
skilled employees and significant training. Productivity was adversely
affected as the Company hired 1,716 employees during 1999 to realize a net
gain of 197 employees.
Selling, general and administrative expenses were $22.0 million, or 9.0%
of revenue, in 1999 compared to $20.7 million, or 9.2% of revenue, in 1998.
Approximately two-thirds of selling, general and administrative expenses are
employee or employee-related, a portion of which fluctuated directly with
revenues.
Interest expense increased $.6 million to $2.2 million in 1999 from $1.6
million in 1998. The increase was principally attributable to the $17.1
million five-year term loan which was used to finance the repurchase of
1,688,823 shares of the Company's Class A common stock through a Dutch
Auction in May 1999. Also contributing to the increased interest expense
during 1999 were slightly higher interest rates during the later part of 1999
and increased use of the Company's revolving line of credit to finance higher
levels of accounts receivable and inventories which were related to the
increased revenues experienced in 1999 over 1998.
The Company's effective income tax rate was 39.7% in 1999 as compared to
39.4% in 1998.
Page 15 of 58
Liquidity and Capital Resources
- -------------------------------
Cash flows from operations and availability under the Company's
revolving credit agreement were the major sources of funds for operations and
capital expenditures during 2000. The largest components of cash provided by
operating activities in 2000 included net income of $8.0 million, inventory
reductions of $6.7 million, depreciation and amortization of $4.1 million and
accounts receivable reductions of $3.6 million. The decline in inventories
was a direct result of fewer fleet orders in the Company's backlog at
December 31, 2000 when compared to December 31, 1999 coupled with inventory
management/reduction programs implemented throughout 2000. The decline in
accounts receivable was due to lower revenues in December 2000 compared to
December 1999. The largest component of cash used in 2000 operating
activities was a $3.9 million reduction in trade accounts payable resulting
from reduced inventories.
The Company invested $8.2 million in property, plant and equipment in
2000. The major additions included the purchase of the Company's previously
leased facilities in Wilson, North Carolina ($2.5 million) and St. Louis,
Missouri ($.5 million); purchase of various machinery and equipment
throughout the Company ($1.7 million); enhancements to the Company's new
operating software ($1.0 million); acquisition of land and building for a
distribution facility in the Cleveland, Ohio area ($.6 million); improvements
associated with connecting the Company's Goshen, Indiana facilities to city
utilities ($.4 million); and acquisition of land in the Columbus, Ohio area
for future construction of an additional distribution facility ($.2 million).
The significant financing activities which provided cash were proceeds
from the Company's revolving line of credit and a $2.5 million industrial
revenue bond used to finance the acquisition of the Company's Wilson, North
Carolina facility. The significant cash items used in financing activities
included a $11.6 million net reduction in long-term debt and $2.0 million to
purchase 441,203 shares of treasury stock throughout 2000.
The Company believes that cash flows generated from operations during
2001 and funds available under the Company's revolving line of credit will be
sufficient to meet the Company's cash needs during the year 2001.
New Accounting Pronouncement
- ----------------------------
The Company does not believe the implementation of SFAS No. 133 (see
Note A of Notes to Consolidated Financial Statements) will have a significant
effect on the Company's financial position.
Page 16 of 58
Forward-Looking Statements
- --------------------------
This report contains forward-looking statements, other than historical
facts, which reflect the view of the Company's management with respect to
future events. 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 and severe interest rate increases. The
forward-looking statements contained herein reflect the current views 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.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
- -------- -----------------------------------------------------
RISK
----
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. At December 31, 2000, the Company is party to
two (2) interest rate swap agreements dated September 30, 1998 and May 11,
1999. The September 30, 1998 interest rate swap agreement relates to a
five-year term loan (original principal balance of $7 million) and the May
11, 1999 interest rate swap agreement relates to a five-year term loan
(original principal balance of $17.1 million). Both these term loans bear
interest at LIBOR plus certain basis points determined by the Company's
leverage ratio. The effective interest rates at December 31, 2000 for these
term loans were 6.77%, on outstanding principal balances of $3,849,991, and
6.92%, on outstanding principal balances of $12,401,142. The interest rate
swap agreements are contracts to exchange floating rate for fixed rate
interest payments over the lives of the interest rate swap agreements, which
coincide with the terms of the related debt, 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 the interest rate swap agreements is recognized as an
adjustment to interest expense. The following is a summary of interest rate
swap agreements outstanding at December 31, 2000:
Page 17 of 58
Notional Amount Fixed Rate Maturity
--------------- ---------- --------
$3,850,000 6.7% September 30, 2003
12,401,100 6.9 May 11, 2004
Based on the Company's overall interest rate exposure at December 31,
2000, including floating rate debt and the related interest rate swap
agreements, a hypothetical 10 percent change in interest rates applied to the
fair value of the financial instruments as of December 31, 2000, would have
no material impact on earnings, cash flows or fair values of interest rate
risk sensitive instruments over a one-year period.
Page 18 of 58
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
- ------- --------------------------------------------
Index to Financial Statements Page
----
1. Financial Statements:
Report of Independent Accountants 20
Consolidated Balance Sheets at December 31, 2000 and 1999 21
Consolidated Statements of Income for the years ended
December 31, 2000, 1999 and 1998 22
Consolidated Statements of Stockholders' Equity for the
years ended December 31, 2000, 1999 and 1998 23
Consolidated Statements of Cash Flows for the years
ended December 31, 2000, 1999 and 1998 24
Notes to Consolidated Financial Statements 25 - 37
2. Financial Statement Schedule:
Schedule II - Valuation and Qualifying Accounts for the
three years ended December 31, 2000, 1999 and 1998 38
All other schedules are omitted because they are not
applicable.
3. Supplementary Data
Quarterly Results 39
Page 19 of 58
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
Supreme Industries, Inc.:
In our opinion, the consolidated financial statements listed in the
accompanying index present fairly, in all material respects, the financial
position of Supreme Industries, Inc. and its subsidiaries at December 31,
2000 and 1999, and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 2000 in conformity
with accounting principles generally accepted in the United States of
America. In addition, in our opinion, the financial statement schedule
listed in the accompanying index presents fairly, in all material respects,
the information set forth therein when read in conjunction with the related
consolidated financial statements. 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. We conducted our audits of
these statements in accordance with auditing standards generally accepted in
the United States of America, which 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, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
As more fully described in Note A to the consolidated financial statements,
effective January 1, 1999, the Company adopted Statement of Position No.
98-1, "Accounting for Costs of Computer Software Developed or Obtained for
Internal Use".
/s/PricewaterhouseCoopers LLP
South Bend, Indiana
February 2, 2001
Page 20 of 58
Supreme Industries, Inc. And Subsidiaries
Consolidated Balance Sheets
December 31, 2000 and 1999
ASSETS
2000 1999
-------------- --------------
Current assets:
Cash and cash equivalents $ 184,004 $ 270,935
Accounts receivable, net of allowance for
doubtful accounts of $409,000 in 2000
and $609,000 in 1999 25,566,117 29,026,385
Refundable income taxes - 1,385,000
Inventories 31,815,470 38,552,339
Deferred income taxes 1,315,298 1,268,284
Other current assets 670,524 436,381
------------- ------------
Total current assets 59,551,413 70,939,324
Property, plant and equipment, net 41,394,132 37,464,092
Intangible assets, net 1,095,456 1,298,766
Other assets 932,514 880,246
------------- -------------
Total assets $ 102,973,515 $ 110,582,428
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 5,181,761 $ 4,805,107
Trade accounts payable 8,111,788 12,001,927
Accrued wages and benefits 4,475,008 4,822,619
Accrued income taxes 1,148,415 947,776
Other accrued liabilities 5,399,294 5,708,118
------------- -------------
Total current liabilities 24,316,266 28,285,547
Long-term debt 25,859,972 35,319,246
Deferred income taxes 1,984,466 2,128,452
------------- -------------
Total liabilities 52,160,704 65,733,245
Commitments and contingencies (Note I)
Stockholders' equity:
Preferred Stock, $1 par value; authorized
1,000,000 shares, none issued
Class A Common Stock, $.10 par value;
authorized 20,000,000 shares, issued
11,220,565 shares in 2000 and 10,779,766
shares in 1999 1,122,057 1,077,977
Class B Common Stock, convertible into Class
A Common Stock on a one-for-one basis,
$.10 par value; authorized 5,000,000
shares, issued 1,917,394 shares in 2000
and 1,826,092 shares in 1999 191,739 182,609
Additional paid-in capital 55,615,704 52,975,153
Retained earnings 13,620,142 8,328,929
Treasury stock, Class A Common Stock, at cost,
2,207,000 shares in 2000 and 1,765,797
shares in 1999 (19,736,831) (17,715,485)
------------- -------------
Total stockholders' equity 50,812,811 44,849,183
------------- -------------
Total liabilities and stockholders' equity $ 102,973,515 $ 110,582,428
============= =============
The accompanying notes are a part of the consolidated financial statements.
Page 21 of 58
Supreme Industries, Inc. And Subsidiaries
Consolidated Statements Of Income
for the years ended December 31, 2000, 1999 and 1998
2000 1999 1998
------------- ------------- -------------
Revenue:
Net sales $ 244,973,654 $ 244,953,480 $ 222,566,601
Other income 1,302,531 1,058,515 1,161,320
------------- ------------- -------------
246,276,185 246,011,995 223,727,921
------------- ------------- -------------
Costs and expenses:
Cost of sales 204,587,702 208,011,870 184,433,390
Selling, general and
administrative 25,477,921 22,039,388 20,655,625
Interest 3,119,588 2,242,064 1,647,878
------------- ------------- -------------
233,185,211 232,293,322 206,736,893
------------- ------------- -------------
Income before income taxes
and extraordinary loss 13,090,974 13,718,673 16,991,028
Income taxes 5,106,000 5,451,000 6,700,000
------------- ------------- -------------
Income before extraordinary
loss 7,984,974 8,267,673 10,291,028
Extraordinary loss, net of income
tax benefit of $860,000 - - 1,280,115
------------- ------------- -------------
Net income $ 7,984,974 $ 8,267,673 $ 9,010,913
============= ============= =============
Earnings per share - Basic:
Income before extraordinary
loss $ .72 $ .68 $ .78
Extraordinary loss - - (.10)
------------- ------------- -------------
Net income $ .72 $ .68 $ .68
============= ============= =============
Earnings per share - Diluted:
Income before extraordinary
loss $ .71 $ .68 $ .77
Extraordinary loss - - (.10)
------------- ------------- -------------
Net income $ .71 $ .68 $ .67
============= ============= =============
Shares used in the computation
of earnings per share:
Basic 11,132,967 12,191,155 13,261,450
Diluted 11,265,935 12,242,628 13,402,834
The accompanying notes are a part of the consolidated financial statements.
Page 22 of 58
Supreme Industries, Inc. And Subsidiaries
Consolidated Statements Of Stockholders' Equity
for the years ended December 31, 2000, 1999 and 1998
Class A Common Stock Class B Common Stock Total
---------------------- -------------------- Additional Retained Treasury Stockholders'
Shares Amount Shares Amount Paid-In Capital Earnings Stock Equity
--------- ----------- --------- --------- --------------- ------------- ------------- -------------
Balance, January 1,
1998 8,855,990 $ 885,599 1,546,773 $ 154,677 $ 31,743,249 $ 11,917,755 $ (250,536) $ 44,450,744
Net income - - - - - 9,010,913 - 9,010,913
Conversion of
16,165 shares of
Class B Common
Stock to Class
A Common Stock 16,165 1,616 (16,165) (1,616) - - - -
Exercise of stock
options (12,843
shares of
treasury stock) 110,497 11,050 - - 391,127 - (185,950) 216,227
5% Common Stock
dividends 908,001 90,800 157,720 15,772 11,886,269 (11,992,841) - -
Tax venefit from
exercise of stock
options - - - - 87,000 - - 87,000
Acquisition of
30,859 shares of
treasury stock - - - - - - (278,809) (278,809)
------------ ----------- ---------- --------- ------------ ------------- ------------- ------------
Balance, December 31,
1998 9,890,653 989,065 1,688,328 168,833 44,107,645 8,935,827 (715,295) 53,486,075
Net income - - - - - 8,267,673 - 8,267,673
Conversion of
32,003 shares of
Class B Common
Stock to Class
A Common Stock 32,003 3,200 (32,003) (3,200) - - - -
Exercise of stock
options 20,416 2,042 - - 93,583 - - 95,625
5% Common Stock
dividends 836,694 83,670 169,767 16,976 8,773,925 (8,874,571) - -
Acquisition of
1,689,863 shares
of treasury stock - - - - - - (17,000,190) (17,000,190)
------------ ----------- ---------- --------- ------------ ------------- ------------- ------------
Balance, December 31,
1999 10,779,766 1,077,977 1,826,092 182,609 52,975,153 8,328,929 (17,715,485) 44,849,183
Net income - - - - - 7,984,974 - 7,984,974
5% Common Stock
dividend 440,799 44,080 91,302 9,130 2,640,551 (2,693,761) - -
Aquisition of 441,203
shares of treasury
stock - - - - - - (2,021,346) (2,021,346)
------------ ----------- ---------- --------- ------------ ------------- -------------- ------------
Balance, December 31,
2000 11,220,565 $ 1,122,057 1,917,394 $ 191,739 $ 55,615,704 $ 13,620,142 $ (19,736,831) $ 50,812,811
============ =========== ========== ========= ============ ============= ============== ============
The accompanying notes are a part of the consolidated financial statements.
Page 23 of 58
Supreme Industries, Inc. And Subsidiaries
Consolidated Statements Of Cash Flows
for the years ended December 31, 2000, 1999 and 1998
2000 1999 1998
-------------- -------------- --------------
Cash flows from operating
activities:
Net income $ 7,984,974 $ 8,267,673 $ 9,010,913
Adjustments to reconcile net
cash provided by operating
activities:
Extraordinary loss - - 1,280,115
Depreciation and
amortization 4,122,320 2,985,064 2,731,510
Amortization of
intangibles 203,310 203,310 203,309
Provision (credit) for
losses on doubtful
receivables (134,991) 343,438 532,963
Deferred income taxes (191,000) 474,000 461,000
Loss (gain) on sale of
property, plant and
equipment 103,272 (7,870) 139,496
Changes in operating
assets and liabilities,
excluding effect of
disposition of business
in 1998:
Accounts receivable 3,595,259 (660,264) (5,944,456)
Inventories 6,736,869 (9,759,689) (970,035)
Other current assets 1,150,857 (221,144) (802,776)
Trade accounts payable (3,890,139) 1,765,963 (438,163)
Other current
liabilities (455,796) 2,780,687 (1,054,471)
-------------- -------------- --------------
Net cash provided
by operating
activities 19,224,935 6,171,168 5,149,405
-------------- -------------- --------------
Cash flows from investing
activities:
Proceeds from sale of
property, plant and
equipment 28,650 34,759 113,745
Additions to property,
plant and equipment (8,184,282) (9,133,723) (6,062,276)
Decrease (increase) in
other assets (52,268) 111,701 (37,699)
-------------- -------------- --------------
Net cash (used
in investing
activities (8,207,900 (8,987,263) (5,986,230)
-------------- -------------- --------------
Cash flows from financing
activities:
Proceeds from revolving
line of credit and other
long-term debt 106,025,242 114,786,099 96,031,172
Repayments of revolving
line of credit and other
long-term debt (115,107,862) (94,979,928) (95,192,385)
Proceeds from exercise of
stock options - 95,625 216,227
Tax benefit from exercise
of stock options - - 87,000
Acquisition of treasury
stock (2,021,346) (17,000,190) (278,809)
-------------- -------------- --------------
Net cash provided
by (used in)
financing
activities (11,103,966) 2,901,606 863,205
-------------- -------------- --------------
Increase (decrease) in cash
and cash equivalents (86,931) 85,511 26,380
Cash and cash equivalents,
beginning of year 270,935 185,424 159,044
-------------- -------------- --------------
Cash and cash equivalents,
end of year $ 184,004 $ 270,935 $ 185,424
============== ============== ==============
Supplemental disclosures of
cash flow information:
Cash paid during the year
for:
Interest, net of
amount capitalized
in 1999 $ 3,044,783 $ 2,335,105 $ 1,693,904
Income taxes 5,036,591 5,205,852 6,226,972
Noncash investing and financing
activities:
Common Stock dividends 2,693,761 8,874,571 11,992,841
Class A Common Stock
exchanged in exercise of
stock options - - 185,950
Conversion of Class B Common
Stock to Class A Common
Stock - 3,200 1,616
The accompanying notes are a part of the consolidated financial statements.
Page 24 of 58
Supreme Industries, Inc. And Subsidiaries
Notes to Consolidated Financial Statements
A. NATURE OF OPERATIONS AND ACCOUNTING POLICIES.
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 cut-away and dry freight van bodies, refrigerated units, stake
bodies and other specialized trucks. The Company also manufactures
shuttle buses and trailers. At December 31, 2000, the Company had 17
manufacturing, distribution and supply facilities. The Company's
customers are located principally in the United States.
The following is a summary of the significant accounting policies used in
the preparation of the accompanying consolidated financial statements:
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.
Accounting Change - Effective January 1, 1999, the Company adopted
American Institute of Certified Public Accountants' Statement of
Position ("SOP") No. 98-1, "Accounting for Costs of Computer Software
Developed or Obtained for Internal Use". SOP 98-1 requires internal
and external costs incurred to develop internal use computer software
during the application development stage to be capitalized and
amortized over the software's useful life. Prior to January 1, 1999,
these costs were expensed as incurred. During the year ended December
31, 1999, the Company capitalized $400,000 of internal costs which
previously would have been expensed under generally accepted
accounting principles. These capitalized costs were related to the
Company's new management information system which was implemented
during 1998-1999. The effect of this change in accounting principle
for the year ended December 31, 1999 was to increase net income by
approximately $241,000 or $.02 per share (basic and diluted).
Revenue Recognition - The production of specialized truck bodies and
shuttle buses starts when an order is received from the customer.
Revenue is recognized when the unit is shipped to the customer. In
December 1999, the staff of the Securities and Exchange Commission
issued Staff Accounting Bulletin ("SAB") 101, "Revenue Recognition in
Financial Statements"; SAB 101 outlines the basic criteria that must
be met to recognize revenue and provides guidance for disclosure
related to revenue recognition policies. The Company's implementation
of SAB 101 during its fourth quarter of 2000 had no impact on the
Company's consolidated financial statements.
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. In 1999, the Company had
one customer that accounted for approximately 11% of the Company's net
sales. The Company performs an ongoing credit evaluation of its
customers' financial condition, and credit is extended to customers on
an unsecured basis. Future credit losses are provided for currently
through the allowance for doubtful accounts and actual credit losses
are charged to the allowance when incurred.
Page 25 of 58
Supreme Industries, Inc. And Subsidiaries
Notes to Consolidated Financial Statements, Continued
A. NATURE OF OPERATIONS AND ACCOUNTING POLICIES, Continued.
Cash and Cash Equivalents - The Company considers all highly liquid
investments with original maturities of three months or less to be
cash equivalents.
Fair Value of Financial Instruments - The carrying amounts of cash and
cash equivalents, accounts receivable and trade accounts payable
approximated fair value as of December 31, 2000 and 1999 because of
the relatively short maturities of these instruments. The carrying
amount of long-term debt, including current maturities, approximated
fair value as of December 31, 2000 and 1999, 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. The
estimated fair value of the outstanding interest rate swap agreements
(see Note I), based on current market rates, approximated a net asset
at December 31, 2000 and 1999 of $17,967 and $405,000, respectively,
which are not recorded on the consolidated balance sheets.
Inventories - Inventories are stated at the lower of cost or market,
with cost determined using the first-in, first-out method.
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.
Expenditures for maintenance and repairs are charged to operations as
incurred. Betterments and major renewals are capitalized and recorded
in the appropriate asset accounts.
Capitalized Interest - Interest costs capitalized during the
construction period of plant and equipment were $100,000 for the year
ended December 31, 1999.
Intangible Assets - Intangible assets consist of goodwill - $3,379,031
and patents - $325,000, and are recorded at cost and shown net of
accumulated amortization. Amortization of goodwill is provided using
the straight-line method over the estimated benefit period (16 to 25
years), and patents are amortized over seven years using the
straight-line method. Accumulated amortization at December 31, 2000
and 1999 was $2,608,575 and $2,405,265, respectively.
Page 26 of 58
Supreme Industries, Inc. And Subsidiaries
Notes to Consolidated Financial Statements, Continued
A. NATURE OF OPERATIONS AND ACCOUNTING POLICIES, Continued.
Evaluation of Impairment of Long-Lived Assets - In accordance with
Statement of Financial Accounting Standards ("SFAS") No. 121,
"Accounting for the Impairment of Long-Lived Assets and Long-Lived
Assets to be Disposed Of," the Company evaluates the carrying value of
long-lived assets whenever significant events or changes in
circumstances indicate the carrying value of these assets may be
impaired. The Company evaluates potential impairment of long-lived
assets by comparing the carrying value of the assets to the expected
net future cash inflows resulting from use of the assets. Management
believes that no material impairment of long-lived assets exists at
December 31, 2000.
Stock-Based Compensation - The Company has adopted the disclosure only
provisions of SFAS No. 123, "Accounting for Stock-Based Compensation"
and, accordingly, accounts for its stock option plans under the
provisions of Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees."
Warranty - Estimated warranty costs are provided at the time of sale
and are based upon historical experience and have averaged less than
one percent (1%) of net sales.
Income Taxes - Deferred income taxes are determined using the
liability method.
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.
Earnings Per Share - Basic earnings per share is computed by dividing
net income by the weighted average number of shares of common stock
outstanding during the period. Diluted earnings per share is computed
by dividing net income by the weighted average number of shares of
common stock outstanding plus the dilutive effect of stock options.
The computations of the number of shares used in the determination of
basic and diluted earnings per share give retroactive recognition to
all common stock dividends declared and paid during the periods.
Segment Information - The Company's principal business is
manufacturing specialized vehicles. Management has not separately
organized the business beyond specialized vehicles and vertically
integrated fiberglass manufacturing processes. The vertically
integrated fiberglass manufacturing subsidiary constitutes a segment
by definition of SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information"; however, this segment does not
meet the quantitative thresholds for separate disclosure as set forth
in this Statement. The vertically integrated fiberglass manufacturing
subsidiaries' revenues are less than 10 percent of consolidated
revenues, the absolute amount of their reported income is less than 10
percent of the absolute amount of consolidated net income, and finally,
their assets are less than 10 percent of consolidated assets.
Page 27 of 58
Supreme Industries, Inc. And Subsidiaries
Notes to Consolidated Financial Statements, Continued
A. NATURE OF OPERATIONS AND ACCOUNTING POLICIES, Concluded.
New Accounting Pronouncement - On June 15, 1998, the Financial
Accounting Standards Board issued SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities." SFAS No. 133, as
amended by SFAS No. 137, is effective for all fiscal quarters of
fiscal years beginning after June 15, 2000 (January 1, 2001 for the
Company). SFAS No. 133 requires that all derivative instruments be
recorded on the balance sheet at their fair value. Changes in the
fair value of derivatives are recorded each period in current earnings
or other comprehensive income, depending on whether a derivative is
designated as part of a hedge transaction and, if it is, the type of
hedge transaction. The Company's interest rate swap agreements (see
Note I) are derivative instruments and the changes in fair value of
these financial instruments, which are cash flow hedges, will be
reported in other comprehensive income. Management of the Company
anticipates that, due to its limited use of derivative instruments,
the adoption of SFAS No. 133 will not have a significant effect on the
Company's financial position.
B. EXTRAORDINARY LOSS.
During the fourth quarter of 1998, the Company ceased manufacturing
operations at its subsidiary located in Honduras as a direct result of
the damage to the Honduran roads and bridges caused by Hurricane Mitch.
Because of the damage to the Honduran infrastructure, the Company was
unable to cost-effectively obtain raw materials for its hardwood flooring
plant and export finished product to its U.S. plants. The extraordinary
loss of $1,280,115, net of a $860,000 tax benefit, primarily represents
the carrying value of the abandoned inventory and machinery and equipment
which the Company was unable to remove from Honduras.
C. INVENTORIES.
Inventories consist of the following:
2000 1999
------------ ------------
Raw materials $ 19,822,278 $ 23,687,824
Work-in-progress 5,384,975 5,175,269
Finished goods 6,608,217 9,689,246
------------ ------------
Total $ 31,815,470 $ 38,552,339
============ ============
Page 28 of 58
Supreme Industries, Inc. And Subsidiaries
Notes to Consolidated Financial Statements, Continued
D. PROPERTY, PLANT AND EQUIPMENT.
Property, plant and equipment consists of the following:
2000 1999
------------ ------------
Land and improvements $ 6,718,824 $ 5,306,675
Buildings and improvements 20,150,010 16,745,903
Leasehold improvements 7,203,791 6,949,875
Machinery and equipment 32,636,059 29,891,747
Construction in progress 128,060 178,194
------------ ------------
66,836,744 59,072,394
Less, Accumulated depreciation
and amortization 25,442,612 21,608,302
------------ ------------
Property, plant and
equipment, net $ 41,394,132 $ 37,464,092
============ ============
E. LONG-TERM DEBT.
Long-term debt consists of the following:
2000 1999
------------ ------------
Revolving line of credit $ 8,969,802 $ 15,402,454
Term Note C, payable in quarterly
installments of $609,143 plus
interest at LIBOR plus certain
basis points determined by the
Company's leverage ratio (effective
rate of 6.92% and 7.26% at December
31, 2000 and 1999, respectively),
with final maturity in May 2004 12,401,142 15,837,714
Term Note B, payable in monthly
installments of $116,667 plus
interest at LIBOR plus certain basis
points determined by the Company's
leverage ratio (effective rate of
6.77%, and 7.48% at December 31, 2000
and 1999, respectively), with final
maturity in September 2003 3,849,991 5,249,995
Obligations under industrial development
revenue bonds, variable rates, with
maturities in August 2010 and April
2015, collateralized by specific
real estate 5,405,937 3,170,996
Real estate mortgage, fixed rate of
6.36%, with final maturity in
July 2001 414,861 463,194
------------ ------------
Total 31,041,733 40,124,353
Less, Current maturities 5,181,761 4,805,107
------------ ------------
Long-term debt $ 25,859,972 $ 35,319,246
============ ============
Page 29 of 58
Supreme Industries, Inc. And Subsidiaries
Notes to Consolidated Financial Statements, Continued
E. LONG-TERM DEBT, Concluded.
The revolving line of credit, term notes and a letter of credit facility
are part of a master credit agreement (the "Credit Agreement"). All
borrowings under the Credit Agreement are unsecured. The Credit
Agreement provides for a revolving line of credit facility as defined, up
to $20 million and increasing to $27 million during the period each year
from February 1 to June 30. Interest on outstanding borrowings under the
revolving line of credit is based on the bank's prime rate or certain
basis points above LIBOR depending on the pricing option selected and the
Company's leverage ratio, as defined. The weighted average interest rate
on borrowings outstanding at December 31, 2000 and 1999 was 8.4% and 8.2%,
respectively. The revolving line of credit also requires a quarterly
commitment fee ranging from 1/8% to 3/16% per annum depending on the
Company's leverage ratio and based upon the annualized average unused
portion. All amounts outstanding under the revolving line of credit will
be due at maturity, April 30, 2003.
In addition to the required quarterly installments, Term Note C requires
an annual principal payment to be paid within 105 days after year-end,
equal to 20% of the preceding year's net income which exceeds $5.0
million, with such additional annual payment not to exceed $1.0 million
in any year. The additional principal payment required to be made in
2001 based on net income for the year ended December 31, 2000 is $596,995
($653,535 was paid in 2000 based on 1999 net income). The Company also
made an additional principal payment of $346,465 during 2000.
Outstanding letters of credit, which reduce availability under the credit
facility, aggregated $1.2 million at December 31, 2000 and 1999. Under
separate agreements, at December 31, 2000, the Company has outstanding
$4.9 million ($2.6 million at December 31, 1999) in irrevocable letters
of credit in favor of bond trustees as a credit enhancement for
bondholders of two of the industrial development revenue bonds.
The Credit Agreement contains, among other matters, certain restrictive
covenants including maintenance of a minimum consolidated tangible net
worth of $28 million plus 50% of cumulative net income of the Company, as
defined, commencing with the year ended December 31, 1999 ($36.1 million
at December 31, 2000), minimum consolidated working capital of $10
million and required financial ratios.
The Company's cash management system and revolving line of credit are
designed to maintain zero cash balances and, accordingly, checks
outstanding in excess of bank balances are classified as additional
borrowings under the revolving line of credit. Checks outstanding in
excess of bank balances at December 31, 2000 and 1999 aggregated
$2,670,000 and $4,402,000, respectively.
Maturities of long-term debt for each of the next five years are as
follows: 2001 - $5,181,761; 2002 - $4,303,239; 2003 - $12,789,698;
2004 - $4,961,098 and 2005 - $433,333.
Page 30 of 58
Supreme Industries, Inc. And Subsidiaries
Notes to Consolidated Financial Statements, Continued
F. RETIREMENT PLAN.
The Company maintains a defined contribution plan which covers
substantially all employees of the Company and its participating
subsidiaries who have reached the age of twenty-one years and have
completed one year of credited service. The plan provides that eligible
employees can contribute from one to fifteen percent of their annual
compensation and the Company will match thirty percent of employees'
contributions up to seven percent of the employees' compensation. The
Board of Directors may increase or decrease the Company's contribution on
a year-by-year basis. Expense related to this plan for the years ended
December 31, 2000, 1999 and 1998 was $379,213, $413,829 and $317,632,
respectively.
G. STOCKHOLDERS' EQUITY.
Preferred Stock
---------------
The Company is authorized to issue 1,000,000 shares of preferred stock
($1 par value), of which none has been issued. The Board of Directors is
vested with the authority to determine and state the designations and
relative preferences, limitations, voting rights, if any, and other
rights of the preferred shares.
Common Stock
------------
The Board of Directors approved the following 5% common stock dividends
during the years ended December 31, 2000, 1999 and 1998:
Declaration Record Paid
Date Date Date
----------------- ----------------- -----------------
May 12, 1998 May 25, 1998 June 1, 1998
October 29, 1998 November 13, 1998 November 20, 1998
June 29, 1999 July 12, 1999 July 19, 1999
November 17, 1999 November 29, 1999 December 6, 1999
April 27, 2000 May 15, 2000 May 22, 2000
All per share data have been adjusted to reflect the stock dividends on
a retroactive basis.
Convertible Class B Common Stock
--------------------------------
Class B Common Stock is convertible into Class A Common Stock on a
one-for-one basis. Holders of Class A Common Stock are entitled to elect
one-third of the Board of Directors, rounded to the lowest whole number.
Holders of Class B Common Stock elect the remainder of the directors.
Page 31 of 58
Supreme Industries, Inc. And Subsidiaries
Notes to Consolidated Financial Statements, Continued
G. STOCKHOLDERS' EQUITY, Continued.
Stock Options
-------------
During 1992, the Company adopted the 1992 Stock Option Plan under which
401,117 (adjusted for all subsequent stock dividends through December
1998) shares of Class A Common Stock were reserved for grant. At
December 31, 1998, there were no options available for granting under the
1992 Stock Option Plan. On October 29, 1998, the Company's Board of
Directors approved, and the Company's stockholders subsequently ratified,
the 1998 Stock Option Plan under which 790,079 (adjusted for all
subsequent stock dividends) shares of Class A Common Stock were reserved
for grant. Under the terms of the stock option plans, both incentive
stock options and non-statutory stock options can be granted by a
specially designated Stock Option Committee. No options may be exercised
during the first year after the date of grant. Options are exercisable
cumulatively in three installments of 33 1/3 % each year thereafter.
Options granted under the stock option plans expire five years after the
date of grant. The 392,000 options granted on November 2, 2000 have an
additional condition that none of such options become exercisable unless
and until the quoted price of the Company's Class A Common Stock on the
American Stock Exchange reaches $8 and remains at $8 or higher for a
continuous period of thirty days.
The following table summarizes stock option activity:
Weighted -
Average
Number Exercise
of Shares Price
---------- ----------
Outstanding, January 1, 1998 238,400 $3.65
Granted 271,665 7.14
Exercised (135,489) 2.97
Expired or canceled (26,593) 4.22
---------
Outstanding, December 31, 1998 347,983 6.60
Exercised (21,437) 4.46
Expired or canceled (14,968) 6.77
---------
Outstanding, December 31, 1999 311,578 6.75
Granted 722,606 4.15
Expired or canceled (12,425) 6.28
---------
Outstanding, December 31, 2000 1,021,759 4.92
As of December 31, 2000, 6,192 shares were reserved for the granting of
future stock options compared to 716,373 shares at December 31, 1999.
Page 32 of 58
Supreme Industries, Inc. And Subsidiaries
Notes to Consolidated Financial Statements, Continued
G. STOCKHOLDERS' EQUITY, Concluded.
Options outstanding at December 31, 2000 are exercisable at prices of
$5.07, $7.15, $5.36 and $3.13 per share and have a weighted-average
remaining contractual life of 4.0 years. Information about stock options
outstanding and exercisable at December 31, 2000 is as follows:
Options Outstanding Options Exercisable
-------------------------------------- ------------------------
Number Weighted - Number
Outstanding Average Weighted - Exercisable Weighted -
At Remaining Average At Average
Exercise December 31, Contractual Exercise December 31, Exercise
Price 2000 Life Price 2000 Price
-------- ------------ ----------- ---------- ------------ ----------
$5.07 54,845 .33 years $5.07 54,845 $5.07
7.15 244,308 2.83 years 7.15 162,858 7.15
5.36 330,606 4.32 years 5.36 - 5.36
3.13 392,000 4.84 years 3.13 - 3.13
--------- --------
1,021,759 217,703
========= ========
At December 31, 1999 and 1998, there were exercisable options outstanding
to purchase 142,624 and 59,861 shares at weighted-average exercise prices
of $6.30 and $4.76, respectively.
The weighted-average grant-date fair values of options granted during the
years ended December 31, 2000 and 1998 were $1.72 and $2.48, respectively.
Had the Company adopted the provisions of SFAS No. 123, "Accounting for
Stock-Based Compensation," the Company's net income and net income per
share would have been:
2000 1999 1998
---------- ---------- ----------
Pro forma net income $7,827,164 $8,172,275 $8,948,357
Pro forma net income
per share:
Basic .70 .67 .68
Diluted .69 .67 .68
The pro forma amounts shown above and the weighted-average grant-date
fair values of options granted were estimated using the Black-Scholes
option-pricing model with the following assumptions:
2000 1999 1998
---------- --------- ----------
Risk free interest rate 5.75% 4.6% 4.5%
Expected life 5 years 5 years 5 years
Expected volatility 36.3% 34.5% 29.8%
Expected dividends - - -
Page 33 of 58
Supreme Industries, Inc. And Subsidiaries
Notes to Consolidated Financial Statement, Continued
H. INCOME TAXES.
Income taxes applicable to income before income taxes and extraordinary
loss consist of the following:
2000 1999 1998
----------- ----------- -----------
Federal:
Current $ 4,411,000 $ 3,978,000 $ 4,987,000
Deferred (156,000) 389,000 380,000
----------- ----------- -----------
4,255,000 4,367,000 5,367,000
----------- ----------- -----------
State:
Current 886,000 999,000 1,252,000
Deferred (35,000) 85,000 81,000
----------- ----------- -----------
851,000 1,084,000 1,333,000
----------- ----------- -----------
Total $ 5,106,000 $ 5,451,000 $ 6,700,000
=========== =========== ===========
Although not affecting the total provision, the amounts previously
reported for the allocation of federal and state income taxes between
current and deferred for 1998 have been revised based upon determinations
made when the related tax returns were filed.
The components of the net deferred tax asset and the net deferred tax
liability were as follows:
2000 1999
----------- -----------
Current deferred tax asset (liability):
Receivables $ 82,134 $ 161,366
Inventories 217,534 217,447
Accrued liabilities 1,038,243 902,264
Other (22,613) (12,793)
----------- -----------
Deferred tax asset $ 1,315,298 $ 1,268,284
----------- -----------
Long-term deferred tax liability (asset):
Depreciation $ 2,167,025 $ 2,119,101
Accrued liabilities (177,539) -
Other (5,020) 9,351
----------- -----------
Deferred tax liability $ 1,984,466 $ 2,128,452
=========== ===========
A reconciliation of the provision for income taxes to the amount computed
by applying the statutory Federal income tax rate (35%) to income before
income taxes and extraordinary loss is as follows:
2000 1999 1998
----------- ----------- -----------
Income taxes at statutory
rate $ 4,581,800 $ 4,801,500 $ 5,946,900
State income taxes, net of
federal benefit 553,200 704,600 866,500
Amortization of goodwill 36,900 36,900 36,900
Earnings of Honduran
subsidiary (operating in
government free zone), not
subject to U.S. income taxes - - (116,900)
Other (65,000) (92,000) (33,400)
----------- ----------- -----------
Total $ 5,106,000 $ 5,451,000 $ 6,700,000
=========== =========== ===========
Page 34 of 58
Supreme Industries, Inc. And Subsidiaries
Notes to Consolidated Financial Statements, Continued
I. COMMITMENTS AND CONTINGENCIES.
Lease Commitments and Related Party Transactions
------------------------------------------------
The Company leases certain office and manufacturing facilities under
operating lease agreements which expire at various dates from March 2001
through July 2005. Certain of the lease agreements are with related
parties for which related party rent expense was $665,562, $499,762 and
$477,462 for the years ended December 31, 2000, 1999 and 1998,
respectively.
The rent expense under all operating leases aggregated $1,018,856,
$1,019,714 and $1,026,699 for the years ended December 31, 2000, 1999
and 1998, respectively.
At December 31, 2000, future minimum rental payments under noncancelable
operating leases aggregated $3,330,088, and are payable as follows:
2001 - $894,598; 2002 - $795,287; 2003 - $677,122; 2004 - $617,767 and
2005 - $345,314.
In addition to the above related party lease transactions, the Company
purchases delivery services from a company owned by an officer/director
of the Company. During the years ended December 31, 2000, 1999, and
1998, the Company purchased delivery services from this related party
aggregating $3,723,000, $2,810,000 and $2,498,000, respectively.
Obligation To Purchase Consigned Inventories
--------------------------------------------
The Company obtains vehicle chassis for its specialized vehicle products
directly from the chassis manufacturer under converter pool agreements.
Chassis are obtained from the manufacturers based on orders from
customers, and to a lesser extent, for unallocated orders. Although each
manufacturer's agreement has different terms and conditions, the
agreements generally provide that the manufacturer will provide a supply
of chassis to be maintained from time to time at the Company's various
production facilities under the conditions that the Company will store
such chassis and will not make any additions or modifications to such
chassis and will not move, sell or otherwise dispose of such chassis,
except under the terms of the agreement. The manufacturer does not
transfer the certificate of origin to the Company and, accordingly, the
Company accounts for the chassis as consigned inventory belonging to the
manufacturer. Under these agreements if the chassis is not delivered to a
customer within 90 days of delivery to the Company, the Company is
required to pay a finance charge on the chassis. At December 31, 2000
and 1999, chassis inventory, accounted for as consigned inventory to the
Company by the manufacturers, aggregated $45.6 million and $34.9 million,
respectively. Typically, chassis are converted and delivered to customers
within 90 days of the receipt of the chassis by the Company.
Page 35 of 58
Supreme Industries, Inc. And Subsidiaries
Notes to Consolidated Financial Statements, Concluded
I. COMMITMENTS AND CONTINGENCIES, Continued.
Self-Insurance
--------------
The Company is self-insured for a portion of product liability ($100,000
per occurrence with an annual aggregate of $500,000), certain employee
health benefits ($75,000 annually per employee with an annual aggregate
of approximately $2,000,000) and workers' compensation in certain states
($250,000 per occurrence with an annual aggregate of approximately
$3,950,000). The Company accrues for the estimated losses occurring from
both asserted and unasserted claims. The estimate of the liability for
unasserted claims arising from incurred but not reported claims is based
on an analysis of historical claims data.
Stock Repurchase Programs
-------------------------
On September 2, 1998, the Board of Directors authorized the Company to
repurchase up to 500,000 shares of Class A Common Stock in open market
purchases or privately negotiated transactions through the close of
business on February 26, 1999. The Company purchased 30,859 shares under
this repurchase program through December 31, 1998.
On April 12, 1999, the Company announced a "Dutch Auction" offer to its
stockholders to acquire up to 2,000,000 shares of its Class A and Class
B Common Stock at a cash purchase price not greater than $10.00 per share
nor less than $8.75 per share. The Company purchased 1,688,823 shares of
Class A Common Stock at $10.00 per share, plus expenses of $103,653,
through the offer. The Company financed this stock repurchase program
with a term note (see Note E). During the year ended December 31, 1999,
the Company also purchased 1,040 shares of Class A Common Stock for
$8,307.
On December 28, 1999, the Board of Directors authorized the Company to
repurchase up to 500,000 shares of Class A Common Stock in open market
purchases or privately negotiated transactions through the close of
business on June 30, 2000. The Company purchased 245,635 shares under
this repurchase program.
On July 14, 2000, the Board of Directors authorized the Company to
repurchase up to 500,000 shares of Class A Common Stock in open market or
privately negotiated transactions through the close of business on
December 31, 2000. The program was subsequently terminated with the last
purchase under the program on December 14, 2000. The Company purchased
195,568 shares under this repurchase program.
On December 20, 2000, the Board of Directors announced a "Dutch Auction"
offer to its stockholders to acquire up to 1,500,000 shares of its
Class A and Class B Common Stock at a price not greater than $3 nor less
than $2 1/4 per share through the close of business on January 23, 2001.
The Company purchased 123,475 shares under this repurchase program.
On February 2, 2001, the Board of Directors authorized the Company to
repurchase up to 1,000,000 shares of Class A Common Stock in open market
purchases or privately negotiated transactions commencing on February 7,
2001 and ending on the close of business on December 31, 2001.
Page 36 of 58
Supreme Industries, Inc. And Subsidiaries
Notes to Consolidated Financial Statements, Concluded
I. COMMITMENTS AND CONTINGENCIES, Concluded.
Financial Instruments With Off Balance Sheet Risk
-------------------------------------------------
The Company has entered into interest rate swap agreements to reduce the
impact of changes in interest rates on certain of its floating rate debt
(Term Notes B and C). 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.
The following is a summary of interest rate swap agreements outstanding
at December 31, 2000 and 1999:
Notional Amount
-----------------------
2000 1999 Fixed Rate Maturity
---------- ---------- ---------- ------------------
$3,850,000 $5,250,000 6.7% September 30, 2003
12,401,100 15,837,700 6.9% May 11, 2004
The actual market or credit exposure of these types of financial
instruments are significantly less than the notional amounts. The
primary risk associated with the swaps is the inability of counterparties
to meet the terms of the contracts. The Company does not expect the
counterparties to fail to meet their respective obligations.
Other
-----
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 operation of the
Company.
Page 37 of 58
SUPREME INDUSTRIES, INC. AND SUBSIDIARIES
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
Column C
Column B Additions
Balance Charged to Column E
Column A Beginning Costs and Column D Balance
Description Period Expenses Deductions End of Period
- ------------------------- --------- ---------- ---------- -------------
Year ended December 31,
2000:
Reserves and
allowances deducted
from asset accounts:
Allowance for
doubtful
receivalbes $ 844,000 $(135,000) $ 65,000 (1) $ 644,000 (2)
Year ended December 31,
1999:
Reserves and
allowances deducted
from asset accounts:
Allowance for
doubtful
receivables $ 691,000 $ 300,000 $ 147,000 (1) $ 844,000 (2)
Year ended December 31,
1998:
Reserves and
allowances deducted
from asset accounts:
Allowance for
doubtful
receivables $ 555,000 $ 533,000 $ 397,000 (1) $ 691,000 (2)
(1) Uncollectible accounts written off, net of recoveries.
(2) Reflected in the consolidated balance sheets as follows: deducted from
accounts receivable - $409,000 at December 31, 2000, $609,000 at December 31,
1999 and $456,000 at December 31, 1998; deducted from other receivables
included in other assets - $235,000 at December 31, 2000, 1999 and 1998.
Page 38 of 58
SUPREME INDUSTRIES, INC. AND SUBSIDIARIES
SUPPLEMENTARY DATA
Quarterly Results
First Second Third Fourth
- -----------------------------------------------------------------------------
2000 Quarter
- -----------------------------------------------------------------------------
Net revenue $71,781,085 $67,982,871 $54,008,406 $52,503,823
Gross profit 12,578,531 10,789,553 9,019,424 9,300,975
Net income 2,809,107 2,175,929 1,171,886 1,828,052
Per share:
Basic .25 .20 .11 .17
Diluted .25 .20 .11 .17
- -----------------------------------------------------------------------------
1999 Quarter
- -----------------------------------------------------------------------------
Net revenue $56,376,042 $66,485,606 $67,013,683 $56,136,664
Gross profit 9,541,644 10,830,874 11,616,545 6,011,062
Net income 2,397,865 2,842,879 2,929,787 97,142
Per share:
Basic .18 .23 .26 .01
Diluted .18 .23 .26 .01
- -----------------------------------------------------------------------------
1998 Quarter
- -----------------------------------------------------------------------------
Net revenue $55,493,345 $61,322,192 $51,406,038 $55,506,346
Gross profit 9,372,971 11,716,559 8,240,373 9,964,628
Income before
extraordinary loss 2,387,733 3,491,050 1,713,084 2,699,161
Net income 2,387,733 3,491,050 1,713,084 1,419,046
Per share:
Basic .18 .27 .12 .20
Diluted .18 .27 .12 .20
Net income
Basic .18 .27 .12 .10
Diluted .18 .27 .12 .10
- -----------------------------------------------------------------------------
Accounting adjustments, net of tax effect, for book to physical inventory
results and year-end adjustment to certain assets and accrued liabilities had
a favorable (unfavorable) impact on fourth quarter results as follows:
2000 - $1,055,000 and 1999 - $(747,000). Book to physical inventory results
had a favorable impact on third quarter results in 2000 of $1,530,000.
The sum of quarterly earnings per share for the four quarters may not equal
annual earnings per share due to rounding in retroactive restatements for
stock dividends and changes in the diluted potential common shares.
Net income for the fourth quarter of 1998 was reduced by a $1.3 million
extraordinary loss, net of tax (see Note B of Notes to Consolidated
Financial Statements).
Page 39 of 58
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
- ------- ---------------------------------------------
ON ACCOUNTING AND FINANCIAL DISCLOSURE.
---------------------------------------
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
- -------- ---------------------------------------------------
(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 the
caption "Election of Directors" of the proxy statement.
(b) Executive Officers - See "Executive Officers of the Registrant" in
Item 1 of Part I of this Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION.
- -------- -----------------------
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.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
- -------- ---------------------------------------------------
MANAGEMENT.
-----------
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.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
- -------- -----------------------------------------------
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.
Page 40 of 58
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
- -------- -------------------------------------------------------
FORM 8-K.
---------
a. The following financial statements and financial statement
schedule are included in Item 8 herein:
1. Financial Statements
--------------------
Report of Independent Accountants
Consolidated Balance Sheets as of December 31, 2000 and 1999
Consolidated Statements of Income for the years ended
December 31, 2000, 1999 and 1998
Consolidated Statements of Stockholders' Equity for the years
ended December 31, 2000, 1999 and 1998
Consolidated Statements of Cash Flows for the years ended
December 31, 2000, 1999 and 1998
Notes to Consolidated Financial Statements
2. Financial Statement Schedule
----------------------------
Schedule II - Valuation and Qualifying Accounts
3. Exhibits
--------
See Index to Exhibits
b. Reports on Form 8-K
No report on Form 8-K was filed during the quarter ended
December 31, 2000.
Page 41 of 58
SIGNATURES
----------
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, thereunto duly authorized.
SUPREME INDUSTRIES, INC.
Date: March 23, 2001 By: /s/Herbert M. Gardner
Herbert M. Gardner, Chairman
of the Board
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.
/s/Herbert M. Gardner Chairman of the Board March 23, 2001
Herbert M. Gardner and President (Principal
Executive Officer)
/s/Omer G. Kropf Executive Vice President March 23, 2001
Omer G. Kropf and Director
/s/William J. Barrett Secretary, Assistant March 23, 2001
William J. Barrett Treasurer and Director
/s/Robert W. Wilson Executive Vice President, March 23, 2001
Robert W. Wilson Treasurer, Chief Financial
Officer, Assistant Secretary
and Director (Principal
Financial and Accounting
Officer)
/s/Robert J. Campbell Director March 23, 2001
Robert J. Campbell
/s/Thomas Cantwell Director March 23, 2001
Thomas Cantwell
/s/Rice M. Tilley, Jr. Assistant Secretary and Director March 23, 2001
Rice M. Tilley, Jr.
/s/H. Douglas Schrock Director March 23, 2001
H. Douglas Schrock
/s/Rick L. Horn Director March 23, 2001
Rick L. Horn
Page 42 of 58
INDEX TO EXHIBITS
-----------------
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.
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.
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.
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.
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.
4.2 First Amendment to Credit Agreement dated April 25, 1994 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.
4.3 Second Amendment to Credit Agreement dated April 25, 1994 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.
4.4 Third Amendment to Credit Agreement dated June 23, 1998, filed as
exhibit 4.4 to to the Company's annual report on form 10-K for the
fiscal year ended December 31, 1998, and incorporated herein by
reference.
Page 43 of 58
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.
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.
4.7 Sixth Amendment to the Credit Agreement dated May 31, 2000 signed
in connection with certain long term indebtedness.
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.
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.
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.
10.4 Amendment No. 1 to the Company's 1998 Stock Option Plan, filed as
exhibit 10.4 to the Compnay's annual report on Form 10-K for the
fiscal year ended December 31, 1999 and incorporated herein by
reference.
10.4A Amendment No. 2 to the Company's 1998 Stock Option Plan.
10.5 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.
10.6 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.
Page 44 of 58
10.7 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.
10.8 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.
10.9 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.
10.10 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.
10.11 Lease dated Autust 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, 1991, and incorporated herein by reference.
10.12 License Agreement dated to be effective November 5, 1992, between
Supreme Corporation as licensee 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.
Page 45 of 58
10.13 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.
10.14 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.
10.15 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.
10.16 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.
10.17 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.
10.18 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 31, 1997, and incorporated herein by reference.
10.19 Amendment number One to employment contract effective January 1,
1998, between Supreme Corporation and Robert W. Wilson.
21.1 Subsidiaries of the Company.
23.1 Consent of Independent Accountants.
Page 46 of 58
Exhibit 4.7
- -----------
SIXTH AMENDMENT TO CREDIT AGREEMENT
-----------------------------------
THIS SIXTH AMENDMENT TO CREDIT AGREEMENT, dated as of _______ ___, 2000
(this "Amendment"), is among SUPREME INDUSTRIES, INC., a Delaware corporation
("SI") and SUPREME CORPORATION, a Texas corporation ("SC" and together with
SI referred to collectively as the "Borrowers" and each individually as a
"Borrower") and BANK ONE, INDIANA, N.A., f/k/a NBD BANK, a national banking
association (the "Bank").
RECITALS
11111111A. The Borrowers and the Bank are parties to a Credit
Agreement, dated as of April25, 1994, as amended by a First Amendment to
Credit Agreement dated as of February20, 1996, a Second Amendment to Credit
Agreement dated as of October25, 1996, a Third Amendment to Credit Agreement
dated as of June 23, 1998, a Fourth Amendment to Credit Agreement dated as of
September30, 1998 and a Fifth Amendment to Credit Agreement dated as of
May 12, 1999 (as now and hereafter amended, the "Credit Agreement"), pursuant
to which the Bank agreed, subject to the terms and conditions thereof, to
extend credit to the Borrowers.
B. The Borrowers desire to amend the Credit Agreement to provide for
an increase in the Commitment and the Bank is willing to do so strictly in
accordance with the terms hereof.
TERMS
In consideration of the premises and of the mutual agreements herein
contained, the parties agree as follows:
ARTICLE I. AMENDMENTS. Upon fulfillment of the conditions set forth in
Article III hereof, the Credit Agreement shall be amended as follows:
1.1 The paragraph after "Introduction" shall be deletedin
its entirety and the following shall be inserted in its place:
The Borrower desires to obtain a revolving credit
facility, including letters of credit, in the aggregate
principal amount of $20,000,000 increasing to $27,000,000
during the period each year from February 1 through June 30,
together with term loans, in order to provide funds for
refinancing existing indebtedness of the Borrower and other
corporate purposes, and the Bank is willing to make such term
loans and to establish such a credit facility in favor of the
Borrower on the terms and conditions herein set forth.
1.2 Section 1.1 shall be amended as follows:
Page 47 of 58
(a) The definition of "Commitment" shall be deleted
in its entirety and the following shall be inserted in its place:
"Commitment" shall mean the commitment of the
Bank to make Loans and Letter of Credit Advances pursuant to
Section 2.1 in amounts not exceeding an aggregate principal
amount outstanding at any time of $20,000,000, increasing to
$27,000,000 during the period each year from and including
February 1 to and including June 30, as such amount may be
reduced from time to time pursuant to Section 2.2. Term Loan
A was disbursed on the Effective Date, Term Loan B was
disbursed on the Fourth Amendment Effective Date and Term
Loan C shall be disbursed on the Fifth Amendment Effective
Date in the original principal amount of $17,056,000.
(b) The definition of "Eurodollar Rate" shall be deleted
in its entirety and the following shall be inserted in its place:
"Eurodollar Rate" shall mean, with respect
to any Eurodollar Rate Loan and the related Eurodollar
Interest period, the per annum rate that is equal to the
sum of:
(a) the Applicable Margin, plus
(b) the rate per annum obtain by dividing
(i) the offered rate for the period equal to or next greater
than such Eurodollar Interest Period for U.S. Dollar deposits
of not less than $1,000,000.00 as of 11:00 A.M. City of London,
England time two Eurodollar Business Days prior to the first
day of such Eurodollar Interest Period as shown on the display
designated as "British Bankers Association Interest Settlement
Rates" on Reuters for the purpose of displaying such rate (in
the event that such rate is not available on Reuters, then such
offered rate shall be otherwise independently determined by the
Bank from an alternate, substantially similar independent source
available to the Bank or shall be calculated by the Bank by a
substantially similar methodology as that theretofore used to
determine such offered rate) by (ii) an amount equal to one
minus the stated maximum rate (expressed as a decimal) of all
reserve requirements (including, without limitation, any
marginal, emergency, supplemental, special or other reserves)
that is specified on the first day of such Eurodollar Interest
period by the Board of Governors of the Federal Reserve System
(or any successor agency thereto) for determining the maximum
reserve requirement with respect to eurocurrency funding
(currently referred to as "Eurocurrency liabilities" in
Regulation D of such Board) maintained by a member bank of
such System;
Page 48 of 58
(c) The definition of "Guarantors" shall be deleted
in its entirety and the following shall be inserted in its place:
"Guarantors" shall mean Supreme Corporation of
Texas, Supreme Truck Bodies of California, Inc., Supreme
Mid-Atlantic Corporation, Supreme/Murphy Truck Bodies, Inc.
And SC Tower Structural Laminating, Inc. and each other person
otherwise entering into a Guarantee from time to time, and
"Guarantor" shall mean any one of the Guarantors.
(d) The definition of "Prime Rate" shall be deleted
in its entirety and the following shall be inserted in its place:
"Prime Rate" means a rate per annum equal to
the prime rate of interest announced from time to time by the
Bank or its parent (which is not necessarily the lowest rate
charged to any customer), changing when and as said prime rate
changes.
(e) The definition of "Termination Date" shall be
amended by deleting the reference in clause (a) to "April 30, 2001" and
inserting "April 30, 2003" in place thereof.
1.3 Sections 5.2(b) and (e) shall be deleted in their entirety and
the following shall be inserted in place thereof:
(b) Working Capital. Permit or suffer the
Consolidated Working Capital of the Borrower and its Subsidiaries to be less
than $10,000,000 as of the end of any fiscal quarter of the Borrower,
commencing with the fiscal quarter ending June 30, 2000.
(e) Debt Coverage Ratio. Permit or suffer the
Consolidated Debt Coverage Ratio of the Borrower and its Subsidiaries to be
less than 1.40 to 1.00 as of the end of any fiscal quarter of the Borrower,
commencing with the fiscal quarter ending June 30, 2000, determined on the
basis of the four fiscal quarters then ending.
1.4 The form of Revolving Credit Note attached as Exhibit A-1 shall
be substituted and replaced with the form of Revolving Credit Note attached
hereto (the "New Revolving Credit Note").
1.5 The guarantees of Atlantic Sales Corporation and SC Freedom One,
Inc. are terminated.
Page 49 of 58
ARTICLE II. REPRESENTATIONS. Each Borrower represents and warrants to the
Bank that:
222222223.3 The execution, delivery and performance of this Amendment
and are within its powers, have been duly authorized and are not in
contravention with any law, of the terms of its Articles of Incorporation or
By-laws, or any undertaking to which it is a party or by which it is bound.
4.4 This Amendment is and the New Revolving Credit Note when issued
hereunder will be, the legal, valid and binding obligations of the Borrower
enforceable against it in accordance with the terms thereof.
5.5 After giving effect to the amendments herein contained, the
representations and warranties contained in Article IV of the Credit
Agreement are true on and as of the date hereof with the same force and
effect as if made on and as of the date hereof.
6.6 No Event of Default or any event or condition which might become
an Event of Default with notice or lapse of time, or both, exists or has
occurred and is continuing on the date hereof.
ARTICLE III. CONTITIONS OF EFFECTIVENESS. This Amendment shall not become
effective until each of the following has been satisfied:
773333338.8 This Amendment shall be signed by the Borrowers and the
Bank.
9.9 The New Revolving Credit Note shall be signed and delivered by
the Borrowers to the Bank.
3.3 The Borrowers shall have paid a facility fee to the Bank in
the amount of $42,500.
3.4 Each of the Fuarantors shall have executed the Consent and
Agreement at the end of this Amendment.
ARTICLE IV. MISCELLANEOUS.
101044444411.11 References in the Credit Agreement or in any note,
certificate, instrument or other document to the "Credit Agreement" shall be
deemed to be references to the Credit Agreement as amended hereby and as
further amended from time to time.
4.2 The Borrowers agree that the Bank may provide any information the
Bank may have about the Borrowers or about any matter relating to the Credit
Agreement to Bank One Corporation, or any of its subsidiaries or affiliates
or their successors, or to any one or more assignees or potential assignees
of the Credit Agreement.
12.3 The Borrowers agree to pay and to save the Bank harmless for the
payment of all costs and expenses arising in connection with this Amendment,
including the reasonable fees of counsel to the Bank in connection with
preparing this Amendment and the related documents.
Page 50 0f 58
13.4 Each Borrower acknowledges and agrees that the Bank has fully
performed all of their obligations under all documents executed in connection
with the Credit Agreement and all actions taken by the Bank are reasonable
and appropriate under the circumstances and within their rights under the
Credit Agreement and all other documents executed in connection therewith
and otherwise available. Each Borrower represents and warrants that it is
not aware of any claims or causes of action against the Bank, any participant
lender or any of their successors or assigns.
14.5 Except as expressly amended hereby, each Borrower agrees that
the Credit Agreement, the Notes, the Security Documents and all other
documents and agreements executed by the Company in connection with the
Credit Agreement in favor of the Bank are ratified and confirmed and shall
remain in full force and effect and that it has no set off, counterclaim or
defense with respect to any of the foregoing. Terms used but not defined
herein shall have the respective meanings ascribed thereto in the Credit
Agreement.
15.6 This Amendment may be signed upon any number of counterparts
with the same effect as if the signatures thereto and hereto were upon the
same instrument.
IN WITNESS WHEREOF, the parties signing this Amendment have caused this
Amendment to be executed and delivered as of __________, 2000.
SUPREME INDUSTRIES, INC.
By: ____________________
Its: _______________
SUPREME CORPORATION
By: ____________________
Its: _______________
BANK ONE, INDIANA, N.A.
By: ____________________
Its: _______________
Page 51 of 58
CONSENT AND AGREEMENT
---------------------
As of the date and year first above written, each of the undersigned
hereby:
(5) fully consents to the terms and provisions of the above Amendment
and the consummation of the transactions contemplated hereby and agrees to
all terms and provisions of the above Amendment applicable to it;
(6) agrees that each Guaranty and all other agreements executed by
any of the undersigned in connection with the Credit Agreement or otherwise
in favor of the Bank (collectively, the "Security Documents") are hereby
ratified and confirmed and shall remain in full force and effect, and each of
the undersigned acknowledges that it has no setoff, counterclaim or defense
with respect to any Security Document; and
(7) acknowledges that its consent and agreement hereto is a condition
to the Bank's obligation under this Amendment and it is in its interest and
to its financial benefit to execute this consent and agreement.
SUPREME CORPORATION OF TEXAS
By: ____________________
Its: _______________
SUPREME TRUCK BODIES OF CALIFORNIA, INC.
By: ____________________
Its: _______________
SUPREME MID-ATLANTIC CORPORATION
By: ____________________
Its: _______________
Page 52 of 58
SUPREME/MURPHY TRUCK BODIES, INC.
By: ____________________
Its: _______________
SC TOWER LAMINATING, INC.
By: ____________________
Its: _______________
Page 53 of 58
Exhibit 10.4A
- -------------
AMENDMENT NO. 2
TO
1998 STOCK OPTION PLAN
OF
SUPREME INDUSTRIES, INC.
By means of a 1998 Stock Option Plan (the "Plan") dated October 29,
1998, Supreme Industries, Inc. (the "Company") put into effect a Stock Option
Plan for the benefit of its officers, employees, and advisors.
Article VIII of the Plan permits the Board of Directors of the Company
to amend the Plan from time to time.
In order to provide greater flexibility so as to permit assignments
(under certain circumstances) of non-statutory stock options, Section 6:4.A.
should be amended appropriately.
In order to provide such additional flexibility, at its meeting held on
August 10, 2000, the Company's Board of Directors passed a resolution
agreeing to amend the Plan so as to provide such flexibility.
The purpose of this Amendment is to amend the Plan by deleting Section
6:4.A. in its entirety and substitute therefore the following:
"A. Decrease in term of Option. In addition to such other
terms and conditions as may be included in a particular
Agreement granting an Option, an Option shall be exercisable
during a Holder's lifetime only by him or her or by his or
her guardian or legal representative (or assignee after a
permitted assignment). An Incentive Stock Option shall not
be transferrable other than by will or by the laws of
descent and distribution. A non-statutory stock option
shall not be transferrable other than by will or the laws
of descent and distribution or to a qualified charity or a
member of the Holder's family. For this purpose, a
"qualified charity" shall mean an organization described in
Section 170(c) of the Internal Revenue Code of 1986, as
amended. Each Option shall also be subject to the following
terms and conditions (except to the extent a Holder's
Agreement otherwise provides):"
Page 54 of 58
DATED to be effective August 10, 2000.
SUPREME INDUSTRIES, INC.
By:/s/ HERBERT M. GARDNER
____________________________
Herbert M. Gardner
Chairman of the Board
Page 55 of 58
Exhibit 10.19
- -------------
AMENDMENT NUMBER ONE TO EMPLOYMENT CONTRACT
SUPREME CORPORATION
(Robert W. Wilson)
By instrument dated January 1, 1998, Supreme Corporation ("Company")
entered into an Employment Contract with Robert W. Wilson ("Employee").
Paragraph 2 of the Employment Contract provides for a term of three
years ending on December 31, 2000. By means of this instrument, such term
is hereby extended for an additional three years ending on December 31, 2003.
The following subparagraph is hereby added to Paragraph 5 of the
Employment Contract:
"e. Tax Preparation. Company shall reimburse Employee for
those reasonable costs incurred by Employee in preparing and
filing his federal and state tax returns.
Signed to be effective ____________ ___, 2000.
COMPANY: EMPLOYEE:
SUPREME CORPORATION
By:___________________________ ___________________________
Omer G. Kropf Robert W. Wilson
President 50580 Trails North
16500 County Rd. 38 Granger, IN 46530
P.O. Box 463
Goshen, IN 46526
Page 56 of 58
Exhibit 21.1
- ------------
Subsidiaries of the Registrant (a)
- ----------------------------------
Supreme Corporation, a Texas corporation
Supreme Corporation of Texas, a Texas corporation
Supreme SCT Operations, L.P., a Texas limited partnership
Supreme SCT Corporation, a Delaware corporation
Supreme SCT Operating Co., Inc., a Delaware corporation
Supreme Truck Bodies of California, Inc., a California corporation
Supreme STB Corporation, a California corporation
Supreme SMA Operations, L.P., a Pennsylvania corporation
Supreme SMA Corporation, a Delaware corporation
Supreme SMA Operating Co., Inc., a Delaware corporation
Supreme Mid-Atlantic Corporation, a Texas corporation
Supreme/Murphy Truck Bodies, Inc., a North Carolina corporation
SC Tower Structural Laminating, Inc., a Texas corporation
PA Land Holding Corp., a Texas corporation
(a) All subsidiaries are 100% owned by the Registrant.
Page 57 of 58
Exhibit 23.1
- ------------
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements
of Supreme Industries, Inc. (formerly ESI Industries, Inc.) on Form S-3
(File No. 33-64047) and on Form S-8 (File Nos. 333-89867 and 33-59343) and
in the related Prospectus of our report dated February 2, 2001, on our audits
of the consolidated financial statements and financial statement schedule of
Supreme Industries, Inc. and subsidiaries at December 31, 2000 and 1999, and
for each of the three years in the period ended December 31, 2000, which
report is included in this Annual Report on Form 10-K.
/s/PricewaterhouseCoopers LLP
South Bend, Indiana
March 16, 2001
Page 58 of 58