Table ofContents

 

 

 

**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C.  20549**

 

**FORM 10-Q**

 
| **(Mark One)**                                                                                                                                                    |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                              |   |
| **x**                                                                                                                                                             | **QUARTERLY  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE  ACT OF 1934** |
|                                                                                                                                                              |   |
| **For the quarterly period ended March 27,  2010**                                                                                                           |
|                                                                                                                                                              |   |
| **or**                                                                                                                                                            |
|                                                                                                                                                              |   |
| **o**                                                                                                                                                             | **TRANSITION  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE  ACT OF 1934** |
|                                                                                                                                                              |   |
| **For the transition period from             to            ** |

 

**CommissionFile Number: 1-8183**

 

**SUPREME INDUSTRIES, INC.**

(Exact name ofregistrant as specified in its charter)

** **

| **Delaware**                                                      | ** ** | **75-1670945**                        |
|-------------------------------------------------------------------|------------|---------------------------------------|
| (State or other  jurisdiction of

incorporation or  organization) |       | (I.R.S. Employer  Identification No.) |

 

**2581 E.Kercher Rd., P.O. Box 237, Goshen, Indiana 46528**

(Address ofprincipal executive offices)       (ZipCode)

 

Registrant’stelephone number, including area code:  **(574) 642-3070**

 

Indicate by check markwhether the registrant (1) has filed all reports required to be filed by Section 13or 15(d) of the Securities Exchange Act of 1934 during the preceding 12months (or for such shorter period that the registrant was required to filesuch reports), and (2) has been subject to such filing requirements forthe past 90 days.

Yes  x  No  o

 

Indicate by check markwhether the registrant has submitted electronically and posted on its corporateWeb site, if any, every Interactive Data File required to be submitted andposted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) duringthe preceding 12 months (or for such shorter period that the registrant wasrequired to submit and post such files).

Yes  o  No  o

 

Indicate by check markwhether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer or a smaller reporting company.  See the definitions of “large acceleratedfiler,” “accelerated filer” and “smaller reporting company” in Rule 12b-2of the Exchange Act.

 

| Large  accelerated filer o |   | Accelerated  filer o         |
|----------------------------|--------|------------------------------|
|                       |   |                         |
| Non-accelerated  filer o   |   | Smaller  reporting company x |

 

Indicate by check markwhether the registrant is a shell company (as defined in Rule 12b-2 of theExchange Act).

Yes  o  No  x

 

Indicate the number ofshares outstanding of each of the issuer’s classes of common stock, as of thelatest practicable date.

 

| **Common Stock ($.10 Par Value)** | ** ** | **Outstanding at April 27, 2010** |
|-----------------------------------|------------|----------------------------------------|
| **Class A**                  | ** ** | **12,227,860**                         |
| **Class B**                  | ** ** | **2,120,382**                          |

 

 

 

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SUPREME INDUSTRIES, INC.

 

CONTENTS

 
| ** **                                                                         | ** **                                                                                  | **Page No.** |
|------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------|-------------------|
|                                                                               |                                                                                        |              |
| PART I.        FINANCIAL  INFORMATION |                                                                                        |
|                                                                               |                                                                                        |              |
| ITEM 1.                                                                            | Financial Statements                                                                        | 1                 |
|                                                                               |                                                                                        |              |
|                                                                               | Consolidated  Balance Sheets                                                                | 1                 |
|                                                                               |                                                                                        |              |
|                                                                               | Consolidated Statements of Operations                                                       | 3                 |
|                                                                               |                                                                                        |              |
|                                                                               | Consolidated Statements of Cash Flows                                                       | 4                 |
|                                                                               |                                                                                        |              |
|                                                                               | Notes to Consolidated Financial Statements                                                  | 5                 |
|                                                                               |                                                                                        |              |
| ITEM 2.                                                                            | Management’s Discussion and Analysis of  Financial Condition and Results of Operations | 8                 |
|                                                                               |                                                                                        |              |
| ITEM 3.                                                                            | Quantitative  and Qualitative Disclosures About Market Risk                                 | 15                |
|                                                                               |                                                                                        |              |
| ITEM 4.                                                                            | Controls and  Procedures                                                                    | 15                |
|                                                                               |                                                                                        |              |
| PART II.        OTHER  INFORMATION    |                                                                                        |
|                                                                               |                                                                                        |              |
| ITEM 1.                                                                            | Legal Proceedings                                                                           | 16                |
|                                                                               |                                                                                        |              |
| ITEM 1A.                                                                           | Risk Factors                                                                                | 16                |
|                                                                               |                                                                                        |              |
| ITEM 2.                                                                            | Unregistered  Sales of Equity Securities and Use of Proceeds                                | 16                |
|                                                                               |                                                                                        |              |
| ITEM 3.                                                                            | Defaults Upon  Senior Securities                                                            | 16                |
|                                                                               |                                                                                        |              |
| ITEM 4.                                                                            | Reserved                                                                                    | 16                |
|                                                                               |                                                                                        |              |
| ITEM 5.                                                                            | Other Information                                                                           | 16                |
|                                                                               |                                                                                        |              |
| ITEM 6.                                                                            | Exhibits                                                                                    | 17                |
|                                                                               |                                                                                        |              |
| SIGNATURES                                                                         |                                                                                        |
|                                                                               |                                                                                        |
| INDEX TO  EXHIBITS                                                                 |                                                                                        |
|                                                                               |                                                                                        |
| EXHIBITS                                                                           |                                                                                        |

 

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**PART I. FINANCIAL INFORMATION**

 

**ITEM 1.****             ****FINANCIAL STATEMENTS.**

 

**SupremeIndustries, Inc. and Subsidiaries**

Consolidated Balance Sheets

 
| ** **                                       | ** ** | **March 27,** | ** **  | **December 26,** | ** ** |
|--------------------------------------------------|------------|--------------------|-------------|-----------------------|------------|
| ** **                                       | ** ** | **2010**           | ** **  | **2009**              | ** ** |
| ** **                                       | ** ** | **(Unaudited)**    | ** **  | ** **            | ** ** |
| **ASSETS**                                       |       |               |        |                  |       |
|                                             |       |               |        |                  |       |
| **Current  assets:**                             |       |               |        |                  |       |
| Cash and cash  equivalents                       |       | $                  | 100,054     |                  | $          | 1,222,411 |   |
| Investments                                      |       | 2,596,118          |        | 1,645,407             |       |
| Accounts receivable,  net                        |       | 21,903,274         |        | 22,710,669            |       |
| Inventories                                      |       | 34,436,012         |        | 31,553,351            |       |
| Other current assets                             |       | 4,721,950          |        | 8,870,300             |       |
|                                             |       |               |        |                  |       |
| **Total  current assets**                        |       | 63,757,408         |        | 66,002,138            |       |
|                                             |       |               |        |                  |       |
| **Property,  plant and equipment, at cost**      |       | 88,816,326         |        | 89,501,666            |       |
| Less, Accumulated  depreciation and amortization |       | 47,125,562         |        | 47,264,582            |       |
|                                             |       |               |        |                  |       |
| **Property,  plant and equipment, net**          |       | 41,690,764         |        | 42,237,084            |       |
|                                             |       |               |        |                  |       |
| **Other  assets**                                |       | 569,898            |        | 1,181,357             |       |
|                                             |       |               |        |                  |       |
| **Total  assets**                                |       | $                  | 106,018,070 |                  | $          | 109,420,579 |   |

 

See accompanying notes toconsolidated financial statements.

 

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**SupremeIndustries, Inc. and Subsidiaries**

ConsolidatedBalance Sheets, Concluded

 
| ** **                                          | ** ** | **March 27,** | ** **  | **December 26,** | ** ** |
|-----------------------------------------------------|------------|--------------------|-------------|-----------------------|------------|
| ** **                                          | ** ** | **2010**           | ** **  | **2009**              | ** ** |
| ** **                                          | ** ** | **(Unaudited)**    | ** **  | ** **            | ** ** |
| **LIABILITIES AND STOCKHOLDERS’ EQUITY**       |       |               |        |                  |       |
|                                                |       |               |        |                  |       |
| **Current liabilities:**                            |       |               |        |                  |       |
| Current  maturities of long-term debt               |       | $                  | 19,585,309  |                  | $          | 26,226,289 |   |
| Trade  accounts payable                             |       | 15,450,094         |        | 9,906,429             |       |
| Accrued  income taxes                               |       | 987,800            |        | 989,300               |       |
| Other  accrued liabilities                          |       | 7,258,049          |        | 7,386,251             |       |
|                                                |       |               |        |                  |       |
| **Total current liabilities**                       |       | 43,281,252         |        | 44,508,269            |       |
|                                                |       |               |        |                  |       |
| **Long-term debt**                                  |       | 1,103,402          |        | 1,115,410             |       |
|                                                |       |               |        |                  |       |
| **Deferred income taxes**                           |       | 1,211,262          |        | 1,211,262             |       |
|                                                |       |               |        |                  |       |
| **Total liabilities**                               |       | 45,595,916         |        | 46,834,941            |       |
|                                                |       |               |        |                  |       |
| **Stockholders’ equity**                       |       | 60,422,154         |        | 62,585,638            |       |
|                                                |       |               |        |                  |       |
| **Total liabilities and stockholders’ equity** |       | $                  | 106,018,070 |                  | $          | 109,420,579 |   |

 

Seeaccompanying notes to consolidated financial statements.

 

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**SupremeIndustries, Inc. and Subsidiaries**

Consolidated Statements of Operations (Unaudited)

 
| ** **                                                    | ** ** | **Three Months Ended** | ** ** |
|---------------------------------------------------------------|------------|------------------------|------------|
| ** **                                                    | ** ** | **March 27,**     | ** ** | **March 28,** | ** ** |
| ** **                                                    | ** ** | **2010**               | ** ** | **2009** | ** ** |
|                                                          |       |                   |       |   |   |
| Net  sales                                                    |       | $                      | 48,496,817 |   | $ | 48,621,989 |   |
| Cost  of sales                                                |       | 44,988,347             |       | 45,717,913 |   |
| **Gross profit**                                              |       | 3,508,470              |       | 2,904,076 |   |
|                                                          |       |                   |       |   |   |
| Selling,  general and administrative expenses                 |       | 5,619,930              |       | 5,646,453 |   |
| Other  income                                                 |       | (217,168               | )          | (299,739 | ) |
| **Operating loss**                                            |       | (1,894,292             | )          | (2,442,638 | ) |
|                                                          |       |                   |       |   |   |
| Interest  expense                                             |       | 519,320                |       | 457,326 |   |
| **Loss from continuing operations before****income taxes**    |       | (2,413,612             | )          | (2,899,964 | ) |
|                                                          |       |                   |       |   |   |
| Income  tax benefit                                           |       | —                 |       | (1,715,206 | ) |
| **Loss from continuing operations**                           |       | (2,413,612             | )          | (1,184,758 | ) |
|                                                          |       |                   |       |   |   |
| Discontinued  operations                                      |       |                   |       |   |   |
| Operating  income (loss) of discontinued motorhome operations |       | 5,204                  |       | (213,219 | ) |
| **Net loss**                                                  |       | $                      | (2,408,408 | ) | $ | (1,397,977 | ) |
|                                                          |       |                   |       |   |   |
| **Loss Per Share:**                                           |       |                   |       |   |   |
| Loss  from continuing operations                              |       | $                      | (0.17      | ) | $ | (0.08 | ) |
| Loss  from discontinued operations                            |       | —                 |       | (0.02 | ) |
| **Net loss**                                                  |       | $                      | (0.17      | ) | $ | (0.10 | ) |
|                                                          |       |                   |       |   |   |
| **Shares used in the computation of****loss per share:**      |       |                   |       |   |   |
| Basic                                                         |       | 14,256,540             |       | 14,156,657 |   |
| Diluted                                                       |       | 14,256,540             |       | 14,156,657 |   |

 

Seeaccompanying notes to consolidated financial statements.

 

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**SupremeIndustries, Inc. and Subsidiaries**

Consolidated Statements of Cash Flows (Unaudited)

 
| ** **                                                                       | ** ** | **Three Months Ended** | ** ** |
|----------------------------------------------------------------------------------|------------|------------------------|------------|
| ** **                                                                       | ** ** | **March 27,**     | ** ** | **March 28,** | ** ** |
| ** **                                                                       | ** ** | **2010**               | ** ** | **2009** | ** ** |
| **Cash flows from operating activities:**                                        |       |                   |       |   |   |
| Net  loss                                                                        |       | $                      | (2,408,408 | ) | $ | (1,397,977 | ) |
| Adjustments  to reconcile net loss to net cash provided by operating activities: |       |                   |       |   |   |
| Depreciation  and amortization                                                   |       | 987,683                |       | 1,065,384 |   |
| Provision  for losses on doubtful receivables                                    |       | 50,339                 |       | 9,640 |   |
| Stock-based  compensation expense                                                |       | 139,144                |       | 188,203 |   |
| Losses  (gains) on sale of property, plant andequipment                          |       | 10,784                 |       | (10,589 | ) |
| Changes  in operating assets and liabilities                                     |       | 7,433,215              |       | 5,898,229 |   |
|                                                                             |       |                   |       |   |   |
| **Net cash provided by operating activities**                                    |       | 6,212,757              |       | 5,752,890 |   |
|                                                                             |       |                   |       |   |   |
| **Cash flows from investing activities:**                                        |       |                   |       |   |   |
| Additions  to property, plant and equipment                                      |       | (348,623               | )          | (936,593 | ) |
| Proceeds  from sale of property, plant and equipment                             |       | 604,749                |       | 11,350 |   |
| Purchases  of investments                                                        |       | (940,438               | )          | (28,833 | ) |
| Decrease  in other assets                                                        |       | 2,186                  |       | 2,186 |   |
|                                                                             |       |                   |       |   |   |
| **Net cash used in investing activities**                                        |       | (682,126               | )          | (951,890 | ) |
|                                                                             |       |                   |       |   |   |
| **Cash flows from financing activities:**                                        |       |                   |       |   |   |
| Proceeds  from revolving line of credit and long-term debt                       |       | 13,248,877             |       | 22,792,300 |   |
| Repayments  of revolving line of credit and long-term debt                       |       | (19,901,865            | )          | (27,693,739 | ) |
|                                                                             |       |                   |       |   |   |
| **Net cash used in financing activities**                                        |       | (6,652,988             | )          | (4,901,439 | ) |
|                                                                             |       |                   |       |   |   |
| **Change in cash and cash equivalents**                                          |       | (1,122,357             | )          | (100,439 | ) |
|                                                                             |       |                   |       |   |   |
| **Cash and cash equivalents, beginning of period**                               |       | 1,222,411              |       | 932,608 |   |
|                                                                             |       |                   |       |   |   |
| **Cash and cash equivalents, end of period**                                     |       | $                      | 100,054    |   | $ | 832,169 |   |

 

See accompanying notes toconsolidated financial statements.

 

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**SUPREMEINDUSTRIES, INC. AND SUBSIDIARIES**

NotesTo Consolidated Financial Statements

 

NOTE1 - BASIS OF PRESENTATION AND OPINION OF MANAGEMENT

 

The accompanying unauditedconsolidated condensed financial statements have been prepared in accordancewith the instructions to Form 10-Q and therefore do not include all of theinformation and financial statement disclosures necessary for a fairpresentation of consolidated financial position, results of operations, andcash flows in conformity with accounting principles generally accepted in theUnited States of America.  In the opinionof management, the information furnished herein includes all adjustmentsnecessary to reflect a fair statement of the interim periods reported.  All adjustments are of a normal and recurringnature.  The December 26, 2009consolidated balance sheet data was derived from audited financial statements,but does not include all disclosures required by accounting principlesgenerally accepted in the United States of America.  References to “we,” “us,” “our,” “its,” “Supreme,”or the “Company” refer to Supreme Industries, Inc. and its subsidiaries.

 

The Company has adopted a52- or 53-week fiscal year ending the last Saturday in December.  The results of operations for the threemonths ended March 27, 2010 and March 28, 2009 each contained 13weeks.

 

NOTE 2 — DISCONTINUEDOPERATIONS

 

In the fourth quarter of2009, the Company terminated its Silver Crown luxury motorhome product line.This decision was triggered by a significant reduction of new motorhome salesorders and the cancellation of existing sales orders due to the extremely tightcredit markets caused by the economic recession. The Company decided to exitthe motorhome product line as part of a plan to focus on core truck and busproducts and to reduce overall fixed costs.

 

The Company is assessingthe viability of selling or leasing the real estate of the Silver Crowndivision and expects to retain the remaining fixed assets; therefore, they arenot classified as held for sale at March 27, 2010 or December 26,2009. The Company plans to sell the finished units on hand as of March 27,2010 relating to this product line and to complete the production of existingsales orders over the course of the next few months.

 

The 2010 operatingresults for the Silver Crown division are classified as discontinuedoperations, and prior years’ operating results have been reclassified todiscontinued operations as follows:

 
| ** **                            | ** ** | **Three Months Ended**   | ** ** |
|---------------------------------------|------------|--------------------------|------------|
| ** **                            | ** ** | **March 27,  2010** | ** ** | **March 28,  2009** | ** ** |
| Net  sales                            |       | $                        | 1,567,977  |   | $ | 650,552 |   |
| Pretax  income (loss) from operations |       | 16,391                   |       | (253,746 | ) |
| Net  income (loss)                    |       | 5,204                    |       | (213,219 | ) |
|                                       |            |                          |            |  |  |  |  |

 

NOTE 3 — OTHERCOMPREHENSIVE INCOME

 

Other comprehensiveincome includes unrealized gains (losses) on hedge-activity, net of tax, andunrealized gains (losses) on available-for-sale securities, net of tax.  Total comprehensive loss combines net lossand other comprehensive income.

 

For the three-month periodsended March 27, 2010 and March 28, 2009, total and othercomprehensive income are as follows:

 
| ** **                  | ** ** | **Three Months Ended** | ** ** |
|-----------------------------|------------|------------------------|------------|
| ** **                  | ** ** | **March 27,**     | ** ** | **March 28,** | ** ** |
| ** **                  | ** ** | **2010**               | ** ** | **2009** | ** ** |
| Net  loss                   |       | $                      | (2,408,408 | ) | $ | (1,397,977 | ) |
| Other  comprehensive income |       | 105,780                |       | 67,922 |   |
| Total  comprehensive loss   |       | $                      | (2,302,628 | ) | $ | (1,330,055 | ) |

 

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**SUPREMEINDUSTRIES, INC. AND SUBSIDIARIES**

Notes To ConsolidatedFinancial Statements

 

NOTE 4 — INVENTORIES

 

Inventories, which arestated at the lower of cost or market with cost determined using the first-in,first-out method, consist of the following:

 
| ** **       | ** ** | **March 27,** | ** ** | **December 26,** | ** ** |
|------------------|------------|--------------------|------------|-----------------------|------------|
| ** **       | ** ** | **2010**           | ** ** | **2009**              | ** ** |
| Raw  materials   |       | $                  | 18,609,440 |                  | $          | 17,512,758 |   |
| Work-in-progress |       | 7,704,087          |       | 6,528,059             |       |
| Finished  goods  |       | 8,122,485          |       | 7,512,534             |       |
|             |       | $                  | 34,436,012 |                  | $          | 31,553,351 |   |

 

NOTE 5 — FAIR VALUEMEASUREMENT

 

Generally acceptedaccounting principles (“GAAP”) define fair value as the exchange price thatwould be received for an asset or paid to transfer a liability (an exit price)in the principal or most advantageous market for the asset or liability in anorderly transaction between market participants on the measurement date. GAAP also establishes a fair value hierarchy which requires an entity tomaximize the use of observable inputs and minimize the use of unobservableinputs when measuring fair value.  The standard describes three levels ofinputs that may be used to measure fair value:

 

Level 1: Quoted prices(unadjusted) for identical assets or liabilities in active markets that theentity has the ability to access as of the measurement date.

 

Level 2: Significantother observable inputs other than Level 1 prices such as quoted prices forsimilar assets or liabilities; quoted prices in markets that are not active; orother inputs that are observable or can be corroborated by observable marketdata.

 

Level 3: Significantunobservable inputs that reflect a company’s own assumptions about theassumptions that market participants would use in pricing an asset orliability.

 

The Company used thefollowing methods and significant assumptions to estimate the fair value ofitems:

 

Investments: The fairvalues of investments available for sale are determined by obtaining quotedprices on nationally recognized securities exchanges (Level 1 inputs).

 

The carrying amounts of cash and cash equivalents,accounts receivable, and trade accounts payable approximated fair value as of March 27,2010 and December 26, 2009 because of the relatively short maturities ofthese financial instruments.  Thecarrying amount of long-term debt, including current maturities, approximatedfair value as of March 27, 2010 and December 26, 2009, based uponterms and conditions available to the Company at those dates in comparison tothe terms and conditions of its outstanding long-term debt.

 

NOTE 6 — REVOLVING LINEOF CREDIT

 

On March 31, 2010, Supreme Corporation, theCompany’s wholly-owned subsidiary, together with certain of the Company’sdirect or indirect subsidiaries, amended its existing credit facility (the “CreditAgreement”). The amendment waived (as of the date of the amendment) thefinancial covenant defaults regarding minimum tangible net worth and adjustedEBITDA.  In addition, such amendmentrequires, as additional collateral, mortgages on all real estate owned bySupreme Corporation and its subsidiaries. The Company had available borrowings, as restricted by the borrowingbase, of approximately $5.0 million as of March 27, 2010.

 

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**SUPREMEINDUSTRIES, INC. AND SUBSIDIARIES**

Notes To ConsolidatedFinancial Statements, Continued

 

NOTE 6 — REVOLVING LINE OF CREDIT - continued

 

The Company is in theprocess of negotiating for an additional amendment to the Credit Agreement thatwill reset the minimum tangible net worth and adjusted EBITDA financialcovenants which, if obtained, will provide initial compliance with thesefinancial covenants.  Despite itsprevious non-compliance with certain covenants, the Company has made scheduledpayments of principal and interest on a timely basis. The remaining terms ofthe Credit Agreement are substantially the same as the previous CreditAgreement disclosed in the Annual Report on Form 10-K for the year ended December 26,2009.

 

NOTE 7 - LOSS PER SHARE

 

As of March 27, 2010, the assumed exercise orissuance of 230,055 shares for the three-month period then ending relating tostock plans were not included in the computation of diluted loss per share. Asof March 28, 2009, the assumed exercise or issuance of 179,486 shares forthe three-month period then ending relating to stock plans were not included inthe diluted loss per share.  Inclusion ofthese shares in the respective periods would have been antidilutive.

 

NOTE 8 - STOCK-BASEDCOMPENSATION

 

The following tablesummarizes the activity for the unvested restricted stock units and restrictedstock for the three months ended March 27, 2010:

 
| ** **                        | ** ** | ** **     | ** ** | **Weighted  -** | ** ** |
|-----------------------------------|------------|----------------|------------|-----------------|------------|
| ** **                        | ** ** | ** **     | ** ** | **Average**     | ** ** |
| ** **                        | ** ** | **Number  of** | ** ** | **Grant  Date** | ** ** |
| ** **                        | ** ** | **Shares**     | ** ** | **Fair  Value** | ** ** |
| Unvested,  December 26, 2009 |       | 111,736        |       | $               | 4.62       |   |
| Granted                           |       | —         |       | n/a             |       |
| Vested                            |       | (22,583        | )          | 5.04            |       |
| Unvested,  March 27, 2010    |       | 89,153         |       | $               | 4.52       |   |

 

The total fair value ofthe shares vested during the three months ended March 27, 2010 was$113,749.

 

A summary of the statusof the Company’s outstanding stock options as of March 27, 2010, andchanges during the three months ended March 27, 2010, are as follows:

 
| ** **                           | ** ** | ** **    | ** ** | **Weighted -** | ** ** |
|--------------------------------------|------------|---------------|------------|----------------|------------|
| ** **                           | ** ** | ** **    | ** ** | **Average**    | ** ** |
| ** **                           | ** ** | **Number of** | ** ** | **Exercise**   | ** ** |
| ** **                           | ** ** | **Shares**    | ** ** | **Price**      | ** ** |
| Outstanding,  December 26, 2009 |       | 1,246,082     |       | $              | 5.00       |   |
| Granted                              |       | —        |       | n/a            |       |
| Exercised                            |       | —        |       | n/a            |       |
| Forfeited                            |       | —        |       | n/a            |       |
| Outstanding,  March 27, 2010    |       | 1,246,082     |       | $              | 5.00       |   |

 

As of March 27,2010, outstanding options had an intrinsic value of $75,192 and aweighted-average remaining contractual life of 3.21 years.

 

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**SUPREMEINDUSTRIES, INC. AND SUBSIDIARIES**

 
| **ITEM 2****.** | **MANAGEMENT’S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.** |
|-----------------|--------------------------------------------------------------------------------------------------|

 

Established in 1974 as atruck body manufacturer, Supreme Industries, Inc., through itswholly-owned subsidiary, Supreme Corporation, is one of the nation’s leadingmanufacturers of specialized commercial vehicles. Utilizing a nationwide directsales and distribution network, as well as manufacturing and service facilitiesin nine states across the continental United States, Supreme is able to meetthe needs of customers across all of North America.

 

The Company engagesprincipally in the production and sale of customized truck bodies, buses, andother specialty vehicles. Building on its expertise in providing both cargo andpassenger transportation solutions, the Company’s specialty offerings includeproducts such as customized armored vehicles, homeland response vehicles, andportable storage units.

 

The Company and itsproduct offerings are sensitive to various factors which include, but are notlimited to, economic conditions, interest rate fluctuations, volatility in thesupply chain of vehicle chassis, and the availability of credit and financingto the Company, our vendors, dealers, and end users.  The Company’sbusiness is also affected by the availability and costs of certain rawmaterials that serve as significant components of its product offerings. The Company’s risk factors are disclosed in Item 1A “Risk Factors” in theCompany’s Annual Report on Form 10-K for the year ended December 26,2009 and herein in Item 1A.

 

The following discussionshould be read in conjunction with the consolidated financial statements andrelated notes thereto elsewhere in this document and pertain to continuingoperations unless otherwise noted.

 

**Resultsof Operations**

 

***Overview***

 

During the first quarterof 2010, we reduced our operating loss from $2.4 million to $1.9 million butwere unable to adjust our cost structure nor increase our revenues adequatelyto avoid the loss in the current quarter. We increased our gross profit by 21% and reduced our operating loss by22%, on relatively flat consolidated sales, as compared with the first quarterof 2009. Despite the gross profit improvement, we continued to experience aloss from operations during the quarter as our higher-margin truck and armoredsales declined 17% and 19%, respectively. We have a significantly improved armored product backlog as of the endof April with adequate chassis availability which should improve theperformance of the armored division in the second quarter assuming no materialadverse developments in this sector.  Wehave also begun to see indications of improved demand for our core truck productsand we are hopeful that this improvement will continue through the secondquarter and beyond.

 

The Company’s salesbacklog was $69.4 million at March 27, 2010, as compared with $68.1million at December 26, 2009. Additionally, our backlog as of the end of April 2010 was $89.7million, on the strength of a $10 million order from the U.S. Department ofState for armored Suburbans, along with increases in our truck and busdivisions. With product enhancements to our Signature body which we believewill improve customer satisfaction, pent-up truck demand due to historic lowsin purchases over the past two years and our growing backlog, we have goodindications that we are well-positioned to improve our performance goingforward.

 

We continue to look foropportunities to make our operations leaner and have implemented additionalcost reductions that will be realized during the remainder of 2010. Thecumulative cost reductions to date, which began in mid-2008, have been derivedfrom, among other factors, personnel and salary reductions, suspension of theCompany’s 401(k) contributions, process improvements, plant closures andconsolidations, outsourcing, and improved inventory management. In addition,during the fourth quarter of 2009, the Company terminated its Silver Crownluxury motorhome business. The unprecedented tight credit markets caused by thesevere economic recession led to a significant reduction of new motorhomeorders and the cancellation of existing orders for the business.

 

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The Company’s intenseasset management efforts continue to yield favorable results as evidenced byour improving debt-to-equity ratio, which improved since the end of 2009.  Additionally, we have had a total decrease indebt of 24%, or $6.6 million since year end.

 

In our efforts to reboundfrom the effects of the severe recession as one of the strongest companies inour industry, we continue to focus and execute on our strategy of costcontainment, production efficiencies, revenue enhancement, market expansion,and product diversification.

 

***Net Sales***

 

Net sales for the threemonths ended March 27, 2010 decreased $0.1 million to $48.5 million ascompared with $48.6 million for the three months ended March 28,2009.  The following table presents the components of net sales and thechanges from period to period:

 
| ** **                | ** ** | **Three Months Ended** | ** ** |
|---------------------------|------------|------------------------|------------|
| **($000’s omitted)** | ** ** | **Mar 27,  2010**      | ** ** | **Mar 28,  2009** | ** ** | **Change** | ** ** |
| Specialized  vehicles:    | ** ** | ** **             |       |   |   |   |   |   |   |
| Trucks                    |       | $                      | 21,888     |   | $ | 26,445 |   | $ | (4,557 | ) | -17.2 | % |
| Buses                     |       | 20,647                 |       | 14,020 |   | 6,627 |   | 47.3 |   |
| Armored  vehicles         |       | 5,009                  |       | 6,142 |   | (1,133 | ) | -18.5 |   |
|                      |       | $                      | 47,544     |   | $ | 46,607 |   | $ | 937 |   | 2.0 | % |
| Composites                |       | 953                    |       | 2,015 |   | (1,062 | ) | -52.7 |   |
|                      |       | $                      | 48,497     |   | $ | 48,622 |   | $ | (125 | ) | -0.3 | % |

 

We attribute the decreasein our truck product sales primarily to the continued economic downturn in thetruck industry, which resulted in an industry-wide decline in demand. This, coupled with a delay in shipments to a major fleet customer resultingfrom material and supply chain issues, adversely impacted our truck revenues byapproximately 17% when compared with the comparable quarter of 2009.

 

Our StarTrans busdivision continued to experience strong demand increasing its sales by $6.6million, or 47.3%, compared with the comparable quarter of 2009.  The increase is due in part to theavailability of funds from the 2009 federal economic stimulus plan with stateand local transit authorities purchasing additional product.  With ourstrong backlog for this division, we anticipate continued favorablecontributions from our bus division for the remainder of 2010.

 

Although sales were down$1.1 million, or 18.5%, our armored division continued to experienceconsiderable demand for its products. This is primarily the result of our contract with the U.S. Department ofState to produce armored Suburbans for embassies abroad and improvedcash-in-transit demand.  We believe that the armored division iswell-positioned for the remainder of 2010 due to the increased backlog and thepositive response we are receiving from other governmental agencies regardingour armored product offerings and product quality.

 

The decrease in compositesales of fiberglass reinforced plywood and other fiberglass products of $1.1million, or 52.7%, was due to the overall decline in the commercial truckmarket and lower fiberglass body sales.

 

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***Cost of sales and gross profit***

 

Gross profit increased by$0.6 million, or 20.7%, to $3.5 million for the three months ended March 27,2010 as compared with $2.9 million for the three months ended March 28,2009.  The following table presents the components of cost of sales as apercentage of net sales and the changes from period to period:

 
| ** **    | ** ** | **Three Months Ended**  | ** ** |
|---------------|------------|-------------------------|------------|
| ** **    | ** ** | **Mar 27,********2010** | ** ** | **Mar 28,********2009** | ** ** | **Percent********Change** | ** ** |
| Material      |       | 57.2                    | %          | 58.0 | % | (0.8 | )% |
| Direct Labor  |       | 14.6                    |       | 14.1 |   | 0.5 |   |
| Overhead      |       | 18.2                    |       | 19.7 |   | (1.5 | ) |
| Delivery      |       | 2.8                     |       | 2.2 |   | 0.6 |   |
| Cost of sales |       | 92.8                    |       | 94.0 |   | 1.2 |   |
| Gross profit  |       | 7.2                     | %          | 6.0 | % | 1.2 | % |

 

**Material** — Material cost as a percentage of netsales decreased by 0.8% for the quarter ended March 27, 2010 as comparedwith the corresponding period in 2009. The decrease in the material percentagewas partially attributed to a higher proportion of specialty products soldthrough our bus and armored divisions.  The material percentage for thetruck division also decreased slightly during the quarter resulting from a morefavorable product mix quarter over quarter.

 

As the general economic environment begins to showsigns of improvement, the potential for raw material cost increases remains aconcern for certain commodities (aluminum, steel, and wood).  The Companyclosely monitors all major commodities and continually reviews the financialstrength of its primary vendors.  We also strive to reduce manufacturingcosts through the use of improved technologies, processes, and supply chainmanagement tactics and strategies.

 

**Direct Labor** — Direct labor as a percentage of netsales increased by 0.5% for the quarter ended March 27, 2010 as comparedwith the corresponding period in 2009.   The direct labor percentagewas negatively impacted by our material and supply chain issues, noted earlier,which disrupted our production lines and led to inefficient labor activities.

 

**Overhead** — Overhead as a percentage of net salesdecreased by 1.5% for the quarter ended March 27, 2010 as compared withthe corresponding period in 2009.  The decrease in the overhead percentagewas the result of our aggressive cost reduction program consisting of, amongother factors, personnel and salary reductions, suspension of the Company’s 401(k) contributions,process improvements, and plant closures and consolidations.  We continueto focus on reducing operating expenses and managing our overhead coststructure based on prevailing sales levels.

 

**Delivery** — Delivery as a percentage of net salesincreased by 0.6% for the quarter ended March 27, 2010 as compared with thecorresponding period in 2009.  The Company continues to explore morecost-effective delivery methods to mitigate the adverse impact of high fuelcosts.

 

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***Selling, general and administrative expenses***

 

Selling, general andadministrative (“G&A”) expenses remained consistent at $5.6 million for thethree months ended March 27, 2010 and March 28, 2009.  Thefollowing table presents selling and G&A expenses as a percentage of netsales and the changes from period to period:

 
| ** **                | ** ** | **Three Months Ended** | ** ** |
|---------------------------|------------|------------------------|------------|
| **($000’s omitted)** | ** ** | **Mar 27,  2010**      | ** ** | **Mar 28,  2009** | ** ** | **Change** | ** ** |
| Selling  expenses         |       | $                      | 1,921      |   | 4.0 | % | $ | 1,989 |   | 4.1 | % | $ | (68 | ) | (0.1 | )% |
| G&A  expenses         |       | 3,699                  |       | 7.6 |   | 3,657 |   | 7.5 |   | 42 |   | 0.1 |   |
| Total                     |       | $                      | 5,620      |   | 11.6 | % | $ | 5,646 |   | 11.6 | % | $ | (26 | ) | — | % |

 

**Selling expenses** — Selling expenses declined for thequarter ended March 27, 2010 as compared with the corresponding period in2009.  The slight decrease was a result of lower selling wages and lowerliterature and advertising expenditures.

 

**G&A expenses** — G&A expenses increased for thequarter ended March 27, 2010 as compared with the corresponding period in2009.  The slight increase was primarily attributable to engaging aconsulting firm to assist the Company with its profit improvement plan. These costs were offset by reduced employee headcount and related payroll andbenefits.  Reductions in our work forcehave been a large part of the cost savings initiatives that began in mid-2008.

 

***Other income***

 

For the three monthsended March 27, 2010, other income was $0.2 million (0.4% of net sales) ascompared with $0.3 million (0.6% of net sales) for the three months ended March 28,2009. Other income consisted of rental income, gain or loss on sale of assets,and other miscellaneous income received by the Company.

 

***Interest expense***

 

Interest expense wasconstant with the 2009 first quarter at $0.5 million and 1.0% of net sales forthe three months ended March 27, 2010 and 0.9% of net sales for the threemonths ended March 28, 2009.  The bank interest expense reflectedhigher performance-based pricing provisions under the Company’s credit facilitywhen recent operating losses triggered an increase in interest rates. This was somewhat offset by lower prevailing interest rates coupled withreduced debt levels due to lower working capital requirements.  Chassisinterest expense increased slightly due to the slowdown in the light-duty truckmarket causing a build-up of consigned chassis inventory.  The Companycontinuously monitors the age of consigned chassis with the objective ofminimizing chassis interest expense.

 

***Pre-tax loss***

 

Loss from continuingoperations before tax improved by $0.5 million to $2.4 million (-5.0% of netsales) for the three months ended March 27, 2010 from a net loss of $2.9million (-6.0% of net sales) for the three months ended March 28, 2009.

 

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***Income taxes***

 

Due to the inability to carry back any current yearnet operating losses to prior years, the Company recorded a deferred tax assetfor the net operating losses generated during the three-month period ended March 27,2010. The ultimate realization of these deferred tax assets is dependent uponfuture taxable income. Because the Company has incurred tax losses in the priortwo years, there is no certainty that the Company will utilize the full benefitof these deferred tax assets; therefore, it has recorded a valuation allowancefor the net operating losses generated during the three months ended March 27,2010, resulting in no tax benefit being reflected for this period. Theestimated effective income tax rate for the three months ended March 28,2009 was 59%. The estimated effective income tax rate for the first quarter of2009 was favorably impacted by tax benefits associated with the Company’swholly-owned captive insurance subsidiary, federal alternative fuel taxcredits, and research and development tax credits. The combination of these taxbenefits along with the incurred pretax losses resulted in an overall taxbenefit position for the Company in 2009.

 

***DiscontinuedOperations***

 

As noted earlier, theCompany terminated its Silver Crown luxury motorhome business and has reflectedprior-period results accordingly as discontinued operations. The unprecedentedtight credit markets caused by the severe economic recession led to asignificant reduction in new motorhome orders and the cancellation of existingorders.  For the quarter ended March 27, 2010, the after taxoperating income from our Silver Crown discontinued operations was $5,000compared with an after tax operating loss of $0.2 million for the three monthsended March 28, 2009.

 

***Basic and diluted loss per share***

 

The following tablepresents basic and diluted loss per share and the changes from period toperiod:

 
| ** **                             | ** ** | **Three Months Ended**  | ** ** |
|----------------------------------------|------------|-------------------------|------------|
| ** **                             | ** ** | **Mar 27,********2010** | ** ** | **Mar 28,********2009** | ** ** | **Change** | ** ** |
| Basic and diluted net loss  per share: | ** ** | ** **              |       |   | ** ** | ** ** | ** ** |
| Loss from continuing  operations       |       | $                       | (0.17      | ) | $ | (0.08 | ) | $ | (0.09 | ) |
| Loss from discontinued  operations     |       |                    | —     |   | (0.02 | ) | 0.02 |   |
| Net loss                               |       | $                       | (0.17      | ) | $ | (0.10 | ) | $ | (0.07 | ) |

 

**Liquidityand Capital Resources**

 

**CashFlows**

 

The Company’s primarysources of liquidity have been cash flows from operating activities andborrowings under a credit facility entered into by Supreme Corporation, theCompany’s wholly-owned subsidiary. Principal uses of cash have been to fundoperating losses, support working capital demands, meet debt servicerequirements, and to fund capital expenditure needs.

 

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***Operating activities***

 

Cash flows fromoperations represent the net loss sustained in the reported periods adjustedfor non-cash charges and changes in operating assets and liabilities. Operating activities provided $6.2 million of cash for the quarter ended March 27,2010 as compared with cash provided of $5.8 million for the quarter ended March 28,2009.  For the 2010 first quarter, cash provided by operating activitieswas favorably impacted by a $4.1 million federal income tax refund receivedgenerated by our 2009 net operating loss carryback, an increase in accountspayable of $5.5 million, and a $0.8 million decrease in accounts receivable.  This was offset by a $2.9 million increase ininventories due to higher production levels to support the increasedbacklog.  The Company continues toimprove its inventory management resulting in higher inventory turns, whichincreased by over 22% quarter over quarter.   The net loss, adjustedfor depreciation and amortization, unfavorably impacted cash flows by $1.4million for the quarter ended March 27, 2010.

 

***Investing activities***

 

Cash used in investingactivities was $0.7 million for the quarter ended March 27, 2010 as comparedwith $1.0 million for the quarter ended March 28, 2009. During thecurrent quarter, the Company made short-term investments totaling $0.9 millionthrough its wholly-owned captive insurance subsidiary and had capitalexpenditures totaling $0.3 million, which consisted primarily of replacementequipment. This amount was reduced by the proceeds from the sale of assetsduring the quarter ended March 27, 2010 totaling $0.6 million.

 

***Financingactivities***

 

Financing activities used$6.7 million of cash for the quarter ended March 27, 2010 principally dueto reduction of bank debt as compared with cash used of $4.9 million for thequarter ended March 28, 2009.  The lower level of bank borrowings forthe quarter occurred primarily as a result of the federal income tax netoperating loss carryback refund received and improved asset management. Because of the prevailing industry conditions, the Company’s Board of Directorssuspended paying cash dividends effective as of February 16, 2009. Futuredividends will  be subject to business conditions, the Company’s financialposition, and requirements for working capital, property, plant, and equipmentexpenditures, and other corporate purposes.

 

**Capital Resources**

 

On March 31, 2010, Supreme Corporation, theCompany’s wholly-owned subsidiary, together with certain of the Company’sdirect or indirect subsidiaries, amended its existing credit facility (the “CreditAgreement”). The amendment waived (as of the date of the amendment) thefinancial covenant defaults regarding minimum tangible net worth and adjustedEBITDA.  In addition, such amendmentrequires, as additional collateral, mortgages on all real estate owned bySupreme Corporation and its subsidiaries.

 

The Company is in theprocess of negotiating for an additional amendment to the Credit Agreement thatwill reset the minimum tangible net worth and adjusted EBITDA financialcovenants which, if obtained, will provide initial compliance with thesefinancial covenants.  Despite itsprevious non-compliance with certain bank loan covenants, the Company has metall of its scheduled payments of principal and interest on a timely basis. Theremaining terms of the Credit Agreement are substantially the same as theprevious Credit Agreement disclosed in the Annual Report on Form 10-K forthe year ended December 26, 2009.

 

Under its $25.0 millioncredit facility, the Company had available borrowings, as restricted by theborrowing base, of approximately $5.0 million as of March 27, 2010.  Interest on outstanding borrowings under the bankrevolving line of credit is based on the bank’s prime rate, or certain basispoints above LIBOR, depending on the pricing option selected and the Company’sleverage ratio.  The Company’s cashmanagement system and revolving line of credit are designed to maintain zerocash balances and, accordingly, checks outstanding in excess of bank balancesare classified as additional borrowings under the revolving line of credit.

 

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**Summaryof Liquidity and Capital Resources**

 

The Company’s primarycapital requirements are to support working capital demands, meet its debtservice obligations, and finance capital expenditure requirements. The Companyhas a substantial asset collateral base that it believes is more thansufficient to support the outstanding revolving line of credit balance.Further, additional liquidity is obtained through selling products and collectingthe resulting trade accounts receivable. The funds collected are used to paycreditors and employees, and to fund working capital requirements.

 

The Company believes thatit has adequate availability under its current bank credit facility and sufficientadditional liquidity resources to finance working capital requirements for 2010assuming the receipt of the waiver discussed above.

 

**Critical Accounting Policies and Estimates**

 

Management’s discussionand analysis of its financial position and results of operations are based uponthe Company’s consolidated condensed financial statements which have beenprepared in accordance with accounting principles generally accepted in theUnited States of America.  Thepreparation of these financial statements requires management to make estimatesand judgments that affect the reported amounts of assets, liabilities, revenuesand expenses, and related disclosure of contingent assets and liabilities.  The Company’s significant accounting policiesare discussed in Note 1 of the Notes to Consolidated Financial Statementsincluded in the Annual Report on Form 10-K for the year ended December 26,2009.  In management’s opinion, theCompany’s critical accounting policies include revenue recognition, allowancefor doubtful accounts, excess and obsolete inventories, inventory relief,accrued insurance, and accrued warranty.

 

***RevenueRecognition*** —The Company generally recognizes revenue when products are shipped to thecustomer.  Revenue on certain customer requested bill and holdtransactions is recognized after the customer is notified that the productshave been completed according to customer specifications, have passed all ofthe Company’s quality control inspections, and are ready for delivery based onestablished delivery terms.

 

***Allowance for Doubtful Accounts*** — The Company maintains an allowance fordoubtful accounts for estimated losses resulting from the inability of ourcustomers to make required payments.  If the financial conditions of ourcustomers were to deteriorate, resulting in an impairment of their ability tomake payments, additional allowances may be required which would adverselyaffect our future operating results.

 

***Excess and Obsolete Inventories*** — The Company must make estimatesregarding the future use of raw materials, chassis, and finished products andprovide for obsolete or slow-moving inventories.  If actual product lifecycles, product demand, and/or market conditions are less favorable than thoseprojected by management, additional inventory write-downs may be required,which would adversely affect future operating results.

 

***Inventory Relief*** — For monthly and quarterly financial reporting, costof sales is recorded and inventories are relieved by the use of standard billsof material adjusted for scrap and other estimated factors affecting inventoryrelief.  Because of our large and diverse product line and the customizednature of each order, it is difficult to place full reliance on the bills ofmaterial for accurate relief of inventories.  Although the Companycontinues to refine the process of creating accurate bills of materials, manualadjustments (which are based on estimates) are necessary to assure correctrelief of inventories for products sold.  The calculations to estimatecosts not captured in the bill of materials take into account the customizednature of products, historical inventory relief percentages, scrap variances,and other factors which could impact inventory relief.

 

The accuracy of theinventory relief is not fully known until physical inventories are conducted ateach of the Company’s locations. We conduct semi-annual physical inventories ata majority of our locations and schedule them in a manner that providescoverage in each of our calendar quarters. We have invested significantresources in our continuing effort to improve the physical inventory processand accuracy of our inventory accounting system.

 

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***Accrued Insurance*** - The Company has a self-insured retention againstproduct liability claims with insurance coverage over and above theretention.  The Company is also self-insured for a portion of its employeemedical benefits and workers’ compensation.  Product liability claims areroutinely reviewed by the Company’s insurance carrier, and management routinelyreviews other self-insurance risks for purposes of establishing ultimate lossestimates.  In addition, management must determine estimated liability forclaims incurred but not reported.  Such estimates, and any subsequentchanges in estimates, may result in adjustments to our operating results in thefuture.

 

The Company utilizes awholly-owned small captive insurance company to insure certain of its businessrisks.  Certain risks, traditionally self-insured by the Company and itssubsidiaries, are insured by the captive insurance subsidiary.  Thecaptive insurance subsidiary helps the Company manage its risk exposures and,under the Internal Revenue Code, the net underwriting income of such smallcaptive insurance subsidiary is not taxable.

 

***Accrued Warranty*****— The Company provides limited warranties for periodsof up to five years from the date of retail sale.  Estimated warrantycosts are accrued at the time of sale and are based upon historical experience.

 

**Forward-LookingStatements**

 

This report containsforward-looking statements, other than historical facts, which reflect the viewof management with respect to future events.  When used in this report,words such as “believe,” “expect,” “anticipate,” “estimate,” “intend,” andsimilar expressions, as they relate to the Company or its plans or operations,identify forward-looking statements.  Such forward-looking statements arebased on assumptions made by, and information currently available to,management.  Although management believes that the expectations reflectedin such forward-looking statements are reasonable, it can give no assurancethat the expectations reflected in such forward-looking statements arereasonable, and it can give no assurance that such expectations will prove tobe correct.  Important factors that could cause actual results to differmaterially from such expectations include, without limitation, an economicslowdown in the specialized vehicle industry, limitations on the availabilityof chassis on which the Company’s products are dependent, availability of rawmaterials, raw material cost increases, and severe interest rateincreases.  Furthermore, the Company can provide no assurance that suchraw material cost increases can be passed on to its customers throughimplementation of price increases for the Company’s products.  Theforward-looking statements contained herein reflect the current view of managementwith respect to future events and are subject to those factors and other risks,uncertainties, and assumptions relating to the operations, results ofoperations, cash flows, and financial position of the Company.  TheCompany assumes no obligation to update the forward-looking statements or toupdate the reasons actual results could differ from those contemplated by suchforward-looking statements.

 

**ITEM 3.**                                         **QUANTITATIVE ANDQUALITATIVE DISCLOSURES ABOUT MARKET RISK.**

 

There has been nomaterial change from the information provided in the Company’s Annual Report onForm 10-K, “Item 7A: Quantitative and Qualitative Disclosures About MarketRisk,” for the year ended December 26, 2009.

 

**ITEM 4.****             ****CONTROLS AND PROCEDURES.**

 

a.                                       Evaluation of Disclosure Controls andProcedures.

 

Inconnection with the preparation of this Form 10-Q, an evaluation wasperformed under the supervision and with the participation of the Company’smanagement, including the Company’s Chief Executive Officer and Chief FinancialOfficer, of the effectiveness of the design and operation of the Company’sdisclosure controls and procedures (as defined in Rules 13a-15(e) and15d-15(e) under the Securities Exchange Act of 1934, as amended).  Based upon that evaluation, the ChiefExecutive Officer and Chief Financial Officer concluded that the Company’sdisclosure controls and procedures are effective as of March 27, 2010.

 

b.             Changes in Internal Control over Financial Reporting.

 

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There has been no changein the Company’s internal control over financial reporting during our lastfiscal quarter that has materially affected, or is reasonably likely to materiallyaffect, the Company’s internal control over financial reporting.

 

The Company continues totake action to assure compliance with the internal controls, disclosurecontrols, and other requirements of the Sarbanes-Oxley Act of 2002. Management, including the Company’s Chief Executive Officer and Chief FinancialOfficer, cannot guarantee that the internal controls and disclosure controlswill prevent all possible errors or fraud.  A control system, no matterhow well conceived and operated, can provide only reasonable, not absolute,assurance that the objectives of a control system have been met. In addition,the design of a control system must reflect the fact that there are resourceconstraints, and the benefit of controls must be relative to their costs. Because of the inherent limitations in all control systems, no system ofcontrols can provide absolute assurance that all control issues and instancesof fraud, if any, within the Company will be detected.  These inherentlimitations include the realities that judgments in decision-making can befaulty and that breakdowns can occur because of simple error or mistake.Further, controls can be circumvented by individual acts of some persons, bycollusion of two or more persons, or by management override of the controls.

 

The design of any systemof controls is also based in part upon certain assumptions about the likelihoodof future events, and there can be no assurance that any design will succeed inachieving its stated goals under all potential future conditions.  Overtime, a control may be inadequate because of changes in conditions or thedegree of compliance with the policies or procedures may deteriorate. Because of inherent limitations in any cost-effective control system, misstatementsdue to error or fraud may occur and not be detected.

 

**PART II.****           ****OTHER INFORMATION**

 

**ITEM 1.****                                        ****LEGAL PROCEEDINGS.**

 

The Company is subject to various investigations, claims, and legalproceedings covering a wide range of matters that arise in the ordinary courseof its business activities.  Each ofthese matters is subject to various uncertainties, and it is possible that someof these matters may be resolved unfavorably tothe Company.  The Company has establishedaccruals for matters that are probable and reasonably estimable.  Management believes that any liability thatmay ultimately result from the resolution of these matters in excess ofaccruals and amounts provided by insurance coverage will not have a materialadverse effect on the consolidated financial position or results of operationsof the Company.

 

**ITEM 1A.****                                RISKFACTORS.**

 

For a discussion of those“Risk Factors” affecting the Company, you should carefully consider the “RiskFactors” discussed in Part I, under “Item 1A: Risk Factors” contained inour Annual Report on Form 10-K for the year ended December 26, 2009,which is herein incorporated by reference.

 

**ITEM 2.****                                        ****UNREGISTERED SALES OFEQUITY SECURITIES AND USE OF PROCEEDS.**

 

Not applicable.

 

**ITEM 3.****                                        ****DEFAULTS UPON SENIORSECURITIES.**

 

Not applicable.

 

**ITEM 4.****             ****RESERVED.**

 

**ITEM 5.****             ****OTHER INFORMATION.**

 

Not applicable.

 

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**ITEM 6.****             ****EXHIBITS.**

 

Exhibits:

 
| Exhibit 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.                                                                              |
|--------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Exhibit 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. |
| Exhibit 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.  |
| Exhibit 3.4   |   | Amended and Restated  Bylaws of the Company dated May 7, 2008, filed as Exhibit 3.1 to  the Company’s Form 8-K filed with the Securities and Exchange Commission  on May 7, 2008, and incorporated herein by reference.                                                                        |
| Exhibit 10.1  |   | Master Amendment dated  March 31, 2010, filed as Exhibit 10.1 to the Company’s  Form 8-K filed on April 6, 2010, and incorporated herein by  reference.                                                                                                                                        |
| Exhibit 31.1* |   | Certification of Chief  Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of  2002.                                                                                                                                                                                                              |
| Exhibit 31.2* |   | Certification of Chief  Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of  2002.                                                                                                                                                                                                              |
| Exhibit 32.1* |   | Certification of Chief  Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of  2002.                                                                                                                                                                                                              |
| Exhibit 32.2* |   | Certification of Chief  Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of  2002.                                                                                                                                                                                                              |

 

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*Filed herewith.

 

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SIGNATURES

 

Pursuant to therequirements of the Securities Exchange Act of 1934, the registrant has dulycaused this report to be signed on its behalf by the undersigned thereunto dulyauthorized.

 

 
|                                 | SUPREME INDUSTRIES,  INC.                              |
|--------------------------------------|--------------------------------------------------------|
|                                 |                                                   |   |
|                                 |                                                   |   |
|                                 | By:                                                    |  /s/ Herbert M. Gardner |
|   DATE:  May 11, 2010 | Herbert M. Gardner                                     |
|                                 | Chairman of the Board  and Chief Executive Officer     |
|                                 |                                                   |
|                                 |                                                   |
|   DATE:  May 11, 2010 | By:                                                    |  /s/ Jeffery D. Mowery |
|                                 | Jeffery D. Mowery                                      |
|                                 | Vice President of  Finance and Chief Financial Officer |

 

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INDEX TO EXHIBITS

 
| **Exhibit    Number** | ** ** | **Description of Document**                                                                                                                                                                                                                                                                                              |
|-----------------------|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                  |       |                                                                                                                                                                                                                                                                                                                     |
| Exhibit 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.                                                                               |
| Exhibit 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. |
| Exhibit 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.   |
| Exhibit 3.4      |       | Amended and Restated  Bylaws of the Company dated May 7, 2008, filed as Exhibit 3.1 to  the Company’s Form 8-K filed with the Securities and Exchange Commission  on May 7, 2008, and incorporated herein by reference.                                                                         |
| Exhibit 10.1     |       | Master Amendment dated  March 31, 2010, filed as Exhibit 10.1 to the Company’s  Form 8-K filed on April 6, 2010, and incorporated herein by  reference                                                                                                                                          |
| Exhibit 31.1*    |       | Certification of Chief  Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of  2002.                                                                                                                                                                                                               |
| Exhibit 31.2*    |       | Certification of Chief  Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of  2002.                                                                                                                                                                                                               |
| Exhibit 32.1*    |       | Certification of Chief  Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of  2002.                                                                                                                                                                                                               |
| Exhibit 32.2*    |       | Certification of Chief  Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of  2002.                                                                                                                                                                                                               |

 

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*Filed herewith.

 

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