-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PFZNX7AoKtnyJ5TpM5w2ZbyU1mji6JYxsXYlxLpm5vywgZXUg1dNFaaNM9pkL3S4 xemS+PZkqTCeM3HdS7+7DA== 0000950144-98-005506.txt : 19980504 0000950144-98-005506.hdr.sgml : 19980504 ACCESSION NUMBER: 0000950144-98-005506 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980501 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: SUPERIOR SURGICAL MANUFACTURING CO INC CENTRAL INDEX KEY: 0000095574 STANDARD INDUSTRIAL CLASSIFICATION: APPAREL & OTHER FINISHED PRODS OF FABRICS & SIMILAR MATERIAL [2300] IRS NUMBER: 111385670 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-05869 FILM NUMBER: 98608412 BUSINESS ADDRESS: STREET 1: 10099 SEMINOLE BLVD STREET 2: P O BOX 4002 CITY: SEMINOLE STATE: FL ZIP: 34642 BUSINESS PHONE: 8133979611 MAIL ADDRESS: STREET 1: 10099 SEMINOLE BLVD STREET 2: PO BOX 4002 CITY: SEMINOLE STATE: FL ZIP: 34642-0002 10-Q 1 SUPERIOR SURGICAL FORM 10-Q 1 FORM lO-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter ended March 31, 1998 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 1-5869-1 SUPERIOR SURGICAL MFG. CO., INC. Incorporated - New York Employer Identification No. 11-1385670 10099 Seminole Boulevard Post Office Box 4002 Seminole, Florida 33775-0002 Telephone No.: 813-397-9611 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 that 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 ----- -------- As of the date of this report, the registrant had 7,890,752 common shares outstanding. Page 1 2 PART I - FINANCIAL INFORMATION ITEM 1. Financial Statements SUPERIOR SURGICAL MFG. CO., INC. CONDENSED CONSOLIDATED SUMMARY OF OPERATIONS
Three Months Ended March 31, ------------------------------------- 1998 1997 --------------- --------------- (Unaudited) Net sales......................................... $ 37,432,507 $ 33,513,631 --------------- --------------- Costs and expenses: Cost of goods sold............................... $ 24,791,285 $ 22,243,695 Selling and administrative expenses.............. 8,902,639 8,045,282 Business process re-engineering costs 1,094,912 Interest expense................................. 192,550 304,598 --------------- --------------- $ 34,981,386 $ 30,593,575 --------------- --------------- Earnings before taxes on income................... $ 2,451,121 $ 2,920,056 Taxes on income................................... 890,000 1,095,000 --------------- --------------- Net earnings...................................... $ 1,561,121 $ 1,825,056 =============== =============== Weighted average number of shares out- standing during the period (Basic)............... 7,871,098 Shs. 8,054,905 Shs. (Diluted).............. 8,001,605 Shs. 8,115,932 Shs. Basic earnings per common share.................. $ 0.20 $ 0.23 =============== =============== Diluted earnings per common share................ $ 0.20 $ 0.22 =============== =============== Cash dividends declared per common share........................................... $ 0.125 $ 0.11 =============== ===============
The results of the three months ended March 31, 1998 are not necessarily indicative of results to be expected for the full year ending December 31, 1998. See accompanying notes to summarized interim financial statements. Page 2 3 SUPERIOR SURGICAL MFG. CO., INC. CONDENSED CONSOLIDATED BALANCE SHEETS ASSETS
March 31, 1998 December 31, (Unaudited) 1997 ---------------- --------------- (1) CURRENT ASSETS: Cash and cash equivalents........................... $ 5,785,046 $ 8,889,948 Accounts receivable and other current assets........ 27,603,605 26,722,727 Inventories*........................................ 45,585,662 42,523,009 ---------------- --------------- TOTAL CURRENT ASSETS............................ $ 78,974,313 $ 78,135,684 PROPERTY, PLANT AND EQUIPMENT........................ 26,544,928 26,772,477 EXCESS OF COST OVER FAIR VALUE OF ASSETS ACQUIRED................................... 2,854,081 813,626 OTHER ASSETS......................................... 2,678,882 2,633,068 ---------------- --------------- $ 111,052,204 $ 108,354,855 ================ ===============
LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable.................................... $ 9,612,113 $ 6,806,955 Other current liabilities........................... 6,365,592 5,297,452 Current portion of long-term debt................... 2,266,667 2,266,667 ---------------- --------------- TOTAL CURRENT LIABILITIES....................... $ 18,244,372 $ 14,371,074 LONG-TERM DEBT....................................... 13,050,000 13,466,666 DEFERRED INCOME TAXES................................ 2,360,000 2,400,000 SHAREHOLDERS' EQUITY................................. 77,397,832 78,117,115 ---------------- --------------- $ 111,052,204 $ 108,354,855 ================ ===============
* Inventories consist of the following:
March 31, 1998 December 31, (Unaudited) 1997 ---------------- --------------- Finished goods............................. $ 27,566,187 $ 25,835,299 Work in process............................ 4,857,226 4,627,273 Raw materials.............................. 13,162,249 12,060,437 ---------------- --------------- $ 45,585,662 $ 42,523,009 ================ ===============
(1) The balance sheet as of December 31, 1997 has been taken from the audited financial statement as of that date and has been condensed. See accompanying notes to summarized interim financial statements. Page 3 4 SUPERIOR SURGICAL MFG. CO., INC. CONSOLIDATED SUMMARY OF CASH FLOWS
Three Months Ended March 31, -------------------------------------- 1998 1997 ----------------- ---------------- (Unaudited) CASH FLOWS FROM OPERATING ACTIVITIES Net earnings.................................................... $ 1,561,121 $ 1,825,056 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization................................. 959,947 1,090,109 Other......................................................... 83,863 Deferred income taxes......................................... (40,000) 90,000 Changes in assets and liabilities: Accounts receivable and other current assets...................................................... (880,878) (621,474) Inventories.................................................. (3,062,653) (2,663,586) Accounts payable ............................................ 2,805,158 1,092,931 Other current liabilities.................................... 1,068,140 (114,564) ----------------- ---------------- Net cash flows provided from operating activities.................................................. $ 2,494,698 $ 698,472 ----------------- ---------------- CASH FLOWS FROM INVESTING ACTIVITIES Additions to property, plant, and equipment - net.............. $ (789,256) $ (395,735) Goodwill acquired.............................................. (2,067,461) Other assets................................................... (45,814) (91,107) ----------------- ---------------- Net cash (used) in investing activities........................ $ (2,902,531) $ (486,842) ----------------- ---------------- CASH FLOWS FROM FINANCING ACTIVITIES Declaration of cash dividends.................................. $ (979,363) $ (885,957) Reduction in Long-Term Debt.................................... (416,666) (416,667) Common stock acquired and retired.............................. (1,780,701) Proceeds received on exercised stock options................... 479,661 67,012 ----------------- ---------------- Net cash (used) in financing activities........................ $ (2,697,069) $ (1,235,612) ----------------- ---------------- Net (decrease) in cash and cash equivalents................................................... $ (3,104,902) $ (1,023,982) Cash and cash equivalents balance, beginning of year.............................................. 8,889,948 4,718,632 ----------------- ---------------- Cash and cash equivalents balance, end of period.................................................. $ 5,785,046 $ 3,694,650 ================= ================
See accompanying notes to summarized interim financial statements. Page 4 5 SUPERIOR SURGICAL MFG. CO., INC. NOTES TO SUMMARIZED INTERIM FINANCIAL STATEMENTS Note 1 - Summary of Significant Interim Accounting Policies: a) Recognition of costs and expenses Costs and expenses other than product costs are charged to income in interim periods as incurred, or allocated among interim periods based on an estimate of time expired, benefit received or activity associated with the periods. Procedures adopted for assigning specific cost and expense items to an interim period are consistent with the basis followed by the registrant in reporting results of operations at annual reporting dates. However, when a specific cost or expense item charged to expense for annual reporting purposes benefits more than one interim period, the cost or expense item is allocated to the interim periods. b) Inventories Inventories at interim dates are determined by using both perpetual records and gross profit calculations. c) Accounting for income taxes The provision for income taxes is calculated by using the effective tax rate anticipated for the full year. d) Earnings per share The Company adopted the provisions of the Financial Accounting Standards Board Opinion No. 128, "Earnings Per Share," ("FAS 128"), during the fourth quarter of 1997, as required. Historic basic per share data under FAS 128 is based on the weighted average number of shares outstanding. Historical diluted per share data under FAS 128 is reconciled by adding to weighted average shares outstanding the dilutive impact of the exercise of outstanding stock options. The weighted average number of shares outstanding during 1998 and 1997 were 7,871,098 and 8,054,905, respectively. Dilutive potential common shares were 130,507 and 61,027, respectively. e) Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles 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. f) New Accounting Pronouncements Comprehensive Income. In June of 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income." SFAS No. 130 requires disclosures of comprehensive income including per-share amounts in addition to the existing income statement. Comprehensive income is defined as the change in equity during a period, from transactions and other events, excluding changes resulting from investments by owners (e.g., Page 5 6 supplemental stock offering) and distributions to owners (e.g., dividends). This statement is effective for financial statement periods beginning after December 15, 1997. As of March 31, 1998, there are no items requiring separate disclosure in accordance with this statement. Operating Segments. In June of 1997, the FASB issued SFAS No. 131 "Disclosures about Segments of an Enterprise and Related Information." SFAS No. 131 requires disclosures of certain information about operating segments and about products and services, geographic areas in which the Company operates, and their major customers. The Company has evaluated the effect of this new standard and has determined that currently they operate in one segment, as defined in this statement. Note 2 - Acquisition: Effective January 2, 1998, the Company acquired the net assets of J & L Group, Inc. ("J&L"), a manufacturer of embroidered sportswear, with revenues for the year ended December 1997 of approximately $6,700,000. The interim information contained above is not certified or audited; it reflects all adjustments (consisting of normal recurring accruals) which are, in the opinion of management, necessary to a fair statement of the operating results for the periods presented, stated on a basis consistent with that of the audited financial statements. The financial information included in this form has been reviewed by Deloitte & Touche LLP, independent certified public accountants; such review was made in accordance with established professional standards and procedures for such a review. All financial information has been prepared in accordance with the accounting principles or practices reflected in the financial statements for the year ended December 31, 1997, filed with the Securities and Exchange Commission. Reference is hereby made to registrant's Financial Statements for 1997, heretofore filed with registrant's Form 10-K. Page 6 7 Board of Directors Superior Surgical Mfg. Co., Inc. Seminole, Florida We have reviewed the accompanying condensed consolidated balance sheet of Superior Surgical Mfg. Co., Inc. (the "Company") as of March 31, 1998 and the condensed consolidated summaries of operations and cash flows for the three-months ended March 31, 1998 and 1997. This condensed financial information is the responsibility of the Company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and of making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the accompanying condensed financial information for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet of Superior Surgical Mfg. Co., Inc. as of December 31, 1997, and the related consolidated statements of earnings, shareholders' equity, and cash flows for the year then ended (not presented herein); and in our report dated February 19, 1998, we expressed an unqualified opinion on those financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 1997 is fairly stated, in all material respects, in relation to the balance sheet from which it has been derived. DELOITTE & TOUCHE LLP Tampa, Florida April 27, 1998 Page 7 8 ITEM 2. Management's Discussion And Analysis of Financial Condition and Results of Operations RESULTS OF OPERATIONS Net sales of the registrant have increased by 12%, from $33,513,631 to $37,432,507, due to new customers and new uniform programs. Cost of goods sold approximated 66.3% for the three months ended March 31, 1998 and 1997. Selling and administrative expenses, as a percentage of sales, were approximately 23.9% for the first three months of 1998 and 1997. Interest expense of $192,550 for the three month period ended March 31, 1998 decreased 37% from $304,598 for the similar period ended March 31, 1997 due to more cash balances invested in cash equivalents in 1998. Net earnings decreased 14% to $1,561,121 for the three months ended March 31, 1998 as compared to net earnings of $1,825,056 for the same period ended March 31, 1997. Included in our earnings for the first quarter of 1998 is a pre-tax charge (in compliance with an Emerging Issues Task Force Consensus issued November 20, 1997) in the amount of $1,094,912 as part of our 1998 commitment to business process re-engineering activities (integrated SAP systems). This charge on an after-tax basis approximates $.09 per share. The Company expects that for the balance of 1998 additional re-engineering process charges will be incurred as we conclude our project. The total pre-tax charge for such matters is expected to approximate $3,500,000 - $4,000,000 and will be significantly completed by the end of 1998. The actual charges may differ from the amount estimated based upon changes in the cost of hardware, software and implementation. The effects of the re-engineering process had no material impact on operational results earlier reported upon. Accounts receivable and other current assets increased 3% from $26,722,727 on December 31, 1997 to $27,603,605 as of March 31, 1998, primarily due to increased sales. Inventories as of March 31, 1998 increased 7% to $45,585,662 from $42,523,009 on December 31, 1997 mainly to support expected customer demand. Accounts payable increased 41% from $6,806,955 on December 31, 1997 to $9,612,113 on March 31, 1998 primarily due to increases in purchases of inventories. The registrant's current portion of long-term debt of $2,266,667 is unchanged, and its long-term debt of $13,050,000 reflects first quarter principal reduction payments for March 31, 1998, as compared to December 31, 1997. LIQUIDITY AND CAPITAL RESOURCES Cash and cash equivalents decreased by $3,104,902 from $8,889,948 on December 31, 1997 to $5,785,046 as of March 31, 1998. The change is a result of the acquisition of the J & L Group, acquiring inventories and principal reductions of long-term debt. Additionally, as of March 31, 1998, under its existing revolving Credit Agreement, the registrant had $10,000,000 available to it. The registrant has operated without hindrance or restraint with its present working capital, as income generated from operations and outside sources of credit, both trade and institutional, have been more than adequate. In the foreseeable future, the registrant will continue its ongoing capital expenditure program designed to maintain and improve its facilities. The registrant at all times evaluates its capital expenditure program in light of prevailing economic conditions. The registrant believes that its cash flow from operating activities together with other capital resources and funds from credit sources will be adequate to meet all of its funding requirements for the remainder of the year and for the foreseeable future. This quarterly report contains certain forward-looking statements that involve a number of risks and uncertainties. Among the factors that could cause actual results to differ materially are the following - general economic conditions in the areas of the United States in which the Company's customers are located; changes in the healthcare, resort and commercial industries where uniforms and service apparel are worn; the impact of competition; and the availability of manufacturing materials. Page 8 9 PART II - OTHER INFORMATION ITEM 1. Legal Proceedings None. ITEM 2. Changes in Securities None. ITEM 3. Defaults Upon Senior Securities Inapplicable. ITEM 4. Submission of Matters to a Vote of Security-Holders None. ITEM 5. Other Information Inapplicable. ITEM 6. Exhibits and Reports on Form 8-K a) Exhibits 15 Letter re: unaudited interim financial information. 27 Financial Data Schedule for the quarter ended March 31, 1998 (for SEC use only). b) Reports on Form 8-K None. SIGNATURES Pursuant to the requirements 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. Date: May 1, 1998 SUPERIOR SURGICAL MFG. CO., INC. By /s/ Gerald M. Benstock -------------------------------------- Gerald M. Benstock Chairman and Chief Executive Officer By /s/ Saul Schechter -------------------------------------- Saul Schechter Executive Vice President, Treasurer And Principal Accounting Officer Page 9 EX-15 2 UNAUDITED INTERIM FINANCIAL INFORMATION 1 EXHIBIT 15 LETTER RE: UNAUDITED INTERIM FINANCIAL INFORMATION Board of Directors Superior Surgical Mfg. Co., Inc. Seminole, Florida We have made a review, in accordance with standards established by the American Institute of Certified Public Accountants, of the unaudited interim financial information of Superior Surgical Mfg. Co., Inc. for the periods ended March 31, 1998 and 1997, as indicated in our report dated April 27, 1998; because we did not perform an audit, we expressed no opinion on that information. We are aware that our report referred to above, which is included in your Quarterly Report on Form 10-Q for the quarter ended March 31, 1998, is incorporated by reference in Registration Statement No. 2-85796 on Form S-8. We also are aware that the aforementioned report, pursuant to Rule 436(c) under the Securities Act of 1933, is not considered a part of the Registration Statement prepared or certified by an accountant or a report prepared or certified by an accountant within the meaning of Sections 7 and 11 of that Act. DELOITTE & TOUCHE LLP Tampa, Florida April 27, 1998 EX-27 3 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS INCLUDED IN THE COMPANY'S FORM 10-Q FOR THE PERIOD ENDED MARCH 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1 U.S. DOLLARS 3-MOS DEC-31-1998 JAN-01-1998 MAR-31-1998 1 5,785,046 0 27,603,605 0 45,585,662 78,974,313 26,544,928 0 111,052,204 18,244,372 13,050,000 0 0 8,001,605 79,757,832 111,052,204 37,432,507 0 24,791,285 34,981,386 0 0 192,550 2,451,121 890,000 0 0 0 0 1,561,121 0.20 0.20
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