-----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, QTwnXIzLFvaH0dSEk0J6sCyx+X43Rxc16ff+aGssC4Cs+qu7Xlcz+z+5WojhyiTc UwB0e1jOCic2syEsa/B0Xw== 0000950144-00-006503.txt : 20000515 0000950144-00-006503.hdr.sgml : 20000515 ACCESSION NUMBER: 0000950144-00-006503 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000512 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SUPERIOR UNIFORM GROUP 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: 628902 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 FORMER COMPANY: FORMER CONFORMED NAME: SUPERIOR SURGICAL MANUFACTURING CO INC DATE OF NAME CHANGE: 19920703 10-Q 1 SUPERIOR UNIFORM GROUP, INC. 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, 2000 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 1-5869-1 SUPERIOR UNIFORM GROUP, INC. Incorporated - Florida Employer Identification No. --------------------------- 11-1385670 10099 Seminole Boulevard Post Office Box 4002 Seminole, Florida 33775-0002 Telephone No.: 727-397-9611 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 May 9, 2000 the registrant had 7,123,327 common shares outstanding. 2 PART I - FINANCIAL INFORMATION ITEM 1. Financial Statements SUPERIOR UNIFORM GROUP, INC. CONDENSED SUMMARY OF OPERATIONS
Three Months Ended March 31, ---------------------------------- 2000 1999 ------------ ------------ (Unaudited) Net sales $ 38,821,270 $ 37,504,104 ------------ ------------ Costs and expenses: Cost of goods sold 25,621,942 24,878,451 Selling and administrative expenses 10,747,597 9,416,552 Interest expense 360,386 346,106 ------------ ------------ 36,729,925 34,641,109 ------------ ------------ Earnings before taxes on income 2,091,345 2,862,995 Taxes on income 760,000 1,051,000 ------------ ------------ Net earnings $ 1,331,345 $ 1,811,995 ============ ============ Weighted average number of shares out- standing during the period (Basic) 7,465,843 Shs. 7,847,255 Shs. (Diluted) 7,474,206 Shs. 7,895,357 Shs. Basic earnings per common share $ 0.18 $ 0.23 ============ ============ Diluted earnings per common share $ 0.18 $ 0.23 ============ ============ Cash dividends declared per common share $ 0.135 $ 0.135 ============ ============
The results of the three months ended March 31, 2000 are not necessarily indicative of results to be expected for the full year ending December 31, 2000. See accompanying notes to condensed interim financial statements. Page 2 3 SUPERIOR UNIFORM GROUP, INC. CONDENSED BALANCE SHEETS
ASSETS March 31, 2000 December 31, (Unaudited) 1999 ------------ ------------ (1) CURRENT ASSETS: Cash and cash equivalents $ 238,191 $ 3,021,376 Accounts receivable and other current assets 33,927,589 32,616,210 Inventories(*) 49,548,643 46,063,039 ------------ ------------ TOTAL CURRENT ASSETS 83,714,423 81,700,625 PROPERTY, PLANT AND EQUIPMENT, net 29,609,466 29,460,159 EXCESS OF COST OVER FAIR VALUE OF ASSETS ACQUIRED 8,539,439 8,646,163 OTHER ASSETS 3,042,781 3,045,165 ------------ ------------ $124,906,109 $122,852,112 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ 10,684,509 $ 9,033,483 Other current liabilities 9,557,213 6,810,227 Current portion of long-term debt 3,180,363 3,162,986 ------------ ------------ TOTAL CURRENT LIABILITIES 23,422,085 19,006,696 LONG-TERM DEBT, net of current portion 21,642,168 19,472,577 DEFERRED INCOME TAXES 1,385,000 1,655,000 SHAREHOLDERS' EQUITY 78,456,856 82,717,839 ------------ ------------ $124,906,109 $122,852,112 ============ ============
(*) Inventories consist of the following:
March 31, 2000 December 31, (Unaudited) 1999 ------------ ------------ Finished goods $ 34,970,874 $ 34,343,293 Work in process 3,841,585 3,698,341 Raw materials 10,736,184 8,021,405 ------------ ------------ $ 49,548,643 $ 46,063,039 ============ ============
(1) The balance sheet as of December 31, 1999 has been derived from the audited financial statement as of that date and has been condensed. See accompanying notes to condensed interim financial statements. Page 3 4 SUPERIOR UNIFORM GROUP, INC. CONDENSED SUMMARY OF CASH FLOWS
Three Months Ended March 31, ------------------------------ 2000 1999 ----------- ------------ (Unaudited) CASH FLOWS FROM OPERATING ACTIVITIES Net earnings $ 1,331,345 $ 1,811,995 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 1,172,819 967,776 Deferred income taxes (270,000) (165,000) Changes in assets and liabilities, net of acquisition: Accounts receivable and other current assets (1,311,379) 4,318,336 Inventories (3,485,604) (310,383) Accounts payable 1,651,026 (1,580,445) Other current liabilities 2,746,986 847,173 ----------- ------------ Net cash flows provided by operating activities 1,835,193 5,889,452 ----------- ------------ CASH FLOWS FROM INVESTING ACTIVITIES Additions to property, plant, and equipment (1,215,402) (1,052,051) Proceeds from disposals of property, plant and equipment -- 13,663 Other assets 2,384 (86,254) ----------- ------------ Net cash (used) in investing activities (1,213,018) (1,124,642) ----------- ------------ CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from long-term debt 2,823,000 12,000,000 Repayment of long-term debt (636,032) (6,816,667) Declaration of cash dividends (1,020,374) (1,059,430) Common stock acquired and retired (4,571,954) -- Proceeds received on exercised stock options -- 15,188 ----------- ------------ Net cash provided by (used in) financing activities (3,405,360) 4,139,091 ----------- ------------ Net increase (decrease) in cash and cash equivalents (2,783,185) 8,903,901 Cash and cash equivalents balance, beginning of year 3,021,376 514,001 ----------- ------------ Cash and cash equivalents balance, end of period $ 238,191 $ 9,417,902 =========== ============
See accompanying notes to condensed interim financial statements. Page 4 5 SUPERIOR UNIFORM GROUP, INC. NOTES TO CONDENSED 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 Historical basic per share data is based on the weighted average number of shares outstanding. Historical diluted per share data is reconciled by adding to weighted average shares outstanding the dilutive impact of the exercise of outstanding stock options. Three Months Ended March 31, 2000 1999 ---------- ---------- Net income $1,331,345 $1,811,995 Weighted average shares outstanding 7,465,843 7,847,255 Basic earnings per common share $ .18 $ .23 Three Months Ended March 31, 2000 1999 ---------- ---------- Net Income $1,331,345 $1,811,995 Weighted average shares outstanding 7,465,843 7,847,255 Common stock equivalents 8,363 48,102 Total weighted average shares outstanding 7,474,206 7,895,357 Diluted earnings per common share $ .18 $ .23 Page 5 6 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) Comprehensive Income The Company adopted the provisions of FAS 130, "Reporting Comprehensive Income" in the first quarter of 1998. FAS 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., supplemental stock offering) and distributions to owners (e.g., dividends). As of March 31, 2000, there are no items requiring separate disclosure in accordance with this statement. g) Operating Segments The Company adopted the provisions of FAS No. 131 "Disclosures about Segments of an Enterprise and Related Information." in the first quarter of 1998. FAS 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. h) Reclassifications Certain reclassifications to the 1999 financial information have been made to conform to the 2000 presentation. Note 2 - Acquisition: Effective April 1, 1999, the Company acquired substantially all of the net assets of The Empire Company, a supplier of uniforms, corporate I.D. wear and promotional products with revenues for the year ended December 1998 of approximately $14,000,000. The acquisition has been accounted for utilizing the purchase method of accounting. The purchase price for this acquisition was approximately $9,134,000 and was allocated as follows: Cash $ 264,326 Accounts Receivable 1,813,291 Other Current Assets 78,684 Inventories 1,690,688 Property, Plant & Equipment 577,429 Other Assets 5,318 Excess of Cost Over Fair Value of Assets Acquired 6,211,607 ----------- TOTAL ASSETS $10,641,343 =========== Accounts Payable and Accrued Expenses $ 1,507,836 =========== Page 6 7 Note 3 - Long Term Debt
March 31, March 31, 2000 1999 ----------- ----------- Note payable - bank, pursuant to revolving credit agreement, maturing March 26, 2002 $ 2,823,000 $ -- 6.75% term loan payable to First Union, with monthly payments of principal and interest, maturing April 1, 2009 11,216,198 12,000,000 6.65% note payable to MassMutual Life Insurance Company due $1,666,667 annually through 2005 9,583,333 11,250,000 9.9% note payable to MassMutual Life Insurance Company due $600,000 annually through 2001 1,200,000 1,800,000 ----------- ----------- 24,822,531 25,050,000 Less payments due within one year included in current liabilities 3,180,363 3,050,469 ----------- ----------- $21,642,168 $21,999,531 =========== ===========
On March 26, 1999, the Company entered into a new 3-year credit agreement that made available to the Company up to $15,000,000 on a revolving credit basis. Interest is payable at LIBOR plus 0.60% based upon the one-month LIBOR rate for U.S. dollar based borrowings. The Company pays an annual commitment fee of 0.15% on the average unused portion of the commitment. The available balance under the credit agreement is reduced by outstanding letters of credit. As of March 31, 2000, approximately $2,238,000 was outstanding under letters of credit. The Company also entered into a $12,000,000 10-year term loan on March 26, 1999 with the same bank. The term loan is an amortizing loan, with monthly payments of principal and interest, maturing on April 1, 2009. The term loan carries a variable interest rate of LIBOR plus 0.80% based upon the one-month LIBOR rate for U.S. dollar based borrowings. Concurrent with the execution of the term loan agreement, the Company entered into an interest rate swap with the bank under which the Company receives a variable rate of interest on a notional amount equal to the outstanding balance of the term loan from the bank and the Company pays a fixed rate of 6.75% on a notional amount equal to the outstanding balance of the term loan to the bank. The credit agreement and the term loan with First Union and the agreements with MassMutual Life Insurance Company contain restrictive provisions concerning debt to net worth ratios, other borrowing, capital expenditures, rental commitments, tangible net worth ($59,746,000 at March 31, 2000); working capital ratio (2.5:1), fixed charges coverage ratio (2.5:1), stock repurchases and payment of dividends. At March 31, 2000, under the most restrictive terms of the debt agreements, retained earnings of approximately $10,172,000 were available for declaration of dividends. The Company is in full compliance with all terms, conditions and covenants of the various credit agreements. In June 1998, the Financial Accounting Standards Board issued SFAS No. 133 ("SFAS 133"), "Accounting for Derivative Instruments and Hedging Activities," which establishes standards for accounting of derivative instruments and hedging activities, such as swaps. SFAS 133, as amended, is effective for fiscal quarters of all fiscal years beginning after June 15, 2000. Management does not believe that the adoption of SFAS 133 will have a significant impact on the Company's financial statements. 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, 1999, filed with the Securities and Exchange Commission. Reference is hereby made to registrant's Financial Statements for 1999, heretofore filed with registrant's Form 10-K. Page 7 8 INDEPENDENT ACCOUNTANTS' REPORT Board of Directors Superior Uniform Group, Inc. Seminole, Florida We have reviewed the accompanying condensed balance sheet of Superior Uniform Group, Inc. (the "Company") as of March 31, 2000 and the related condensed summaries of operations and cash flows for the three-month periods ended March 31, 2000 and 1999. These financial statements are 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 auditing standards generally accepted in the United States of America, 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 such condensed financial statements for them to be in conformity with accounting principles generally accepted in the United States of America. We have previously audited, in accordance with auditing standards generally accepted in the United States of America, the balance sheet of Superior Uniform Group, Inc. as of December 31, 1999, and the related statements of earnings, shareholders' equity, and cash flows for the year then ended (not presented herein); and in our report dated February 18, 2000, we expressed an unqualified opinion on those financial statements. In our opinion, the information set forth in the accompanying condensed balance sheet as of December 31, 1999 is fairly stated, in all material respects, in relation to the balance sheet from which it has been derived. /s/ Deloitte & Touche, LLP May 4, 2000 Page 8 9 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations RESULTS OF OPERATIONS Net sales have increased 4% from $37,504,104 for the three months ended March 31, 1999 to $38,821,270 for the three months ended March 31, 2000. Cost of goods sold approximated 66% and 66.3%, respectively for the three months ended March 31, 2000 and 1999. Selling and administrative expenses, as a percentage of sales, were approximately 27.7% and 25%, respectively for the first three months of 2000 and 1999. This increase is attributed primarily to issues associated with the Company's February 3, 2000 implementation of its new SAP/AFS (Apparel Footwear Solution) computer system. The most significant components of the increase are attributed to the costs of computer consultants working on the implementation and increased overtime costs for the Company's employees working on the project. We expect that these increased costs will begin to abate in the second quarter. This percentage was also adversely impacted as a result of sales of approximately $2,000,000 that could not be shipped in the current quarter due to difficulties encountered with the new computer system. Interest expense of $360,386 for the three month period ended March 31, 2000 increased 4% from $346,106 for the similar period ended March 31, 1999. Net earnings decreased 27% to $1,331,345 for the three months ended March 31, 2000 as compared to net earnings of $1,811,995 for the same period ended March 31, 1999, primarily as a result of the increased costs incurred relative to the SAP/AFS implementation. Accounts receivable and other current assets increased 4% from $32,616,210 on December 31, 1999 to $33,927,589 as of March 31, 2000. Inventories as of March 31, 2000 increased 8% to $49,548,643 from $46,063,039 on December 31, 1999. Accounts payable increased 18% from $9,033,483 on December 31, 1999 to $10,684,509 on March 31, 2000 primarily due to increases in purchases of raw material inventories. THE YEAR 2000 PROJECT: The Company recognized the need to ensure that its systems, applications and hardware would recognize and process transactions for the Year 2000 and beyond and therefore initiated a project to identify its risks with regard to Year 2000. This project consisted of four phases including: collecting an inventory of potential risks, assessing the actual risk, remedial work to correct identified problems, and testing for proper operation. The project was completed and systems found to be non-compliant were remedied or replaced. The cost to repair or replace affected systems was approximately $650,000. Of this amount, approximately $380,000 was incurred and expensed in 1999 and $270,000 was incurred and expensed prior to December 31, 1998. The Company does not expect to incur significant costs during 2000 related to ongoing monitoring and support activities for the Year 2000 issue. To date, the Company has not encountered any significant adverse impact from Year 2000 computer problems. The Company will continue to monitor all business processes throughout 2000 to address any issues and ensure all processes continue to function properly. Contingency plans to address potential risks in the event of Year 2000 failures will be developed as needed. LIQUIDITY AND CAPITAL RESOURCES Cash and cash equivalents decreased by $2,783,185 from $3,021,376 on December 31, 1999 to $238,191 as of March 31, 2000. Additionally, total borrowings under long-term debt agreements increased by $2,186,968 from $22,635,563 on December 31, 1999 to $24,822,531 on March 31, 2000. The Company 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. Page 9 10 In the foreseeable future, the Company will continue its ongoing capital expenditure program designed to maintain and improve its facilities. The Company at all times evaluates its capital expenditure program in light of prevailing economic conditions. The Company 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. During the three months ended March 31, 2000 and 1999, respectively, the Company paid cash dividends of $1,020,374 and $1,059,430. During those same periods, the Company reacquired and retired 471,500 and 0 shares, respectively, with costs of $4,571,954 and $0. The Company anticipates that it will continue to pay dividends and that it will reacquire and retire additional shares of its common stock in the future as financial conditions permit. Statements contained in this Quarterly Report contain 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; the availability of manufacturing materials; and the impact of Year 2000 issues. Page 10 11 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, 2000 (for SEC use only). b) Reports on Form 8-K None. Page 11 12 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 12, 2000 SUPERIOR UNIFORM GROUP, INC. By /s/ Gerald M. Benstock ---------------------------------------- Gerald M. Benstock Chairman and Chief Executive Officer By /s/ Andrew D. Demott, Jr. ---------------------------------------- Andrew D. Demott, Jr. Vice President, CFO, Treasurer and Principal Accounting Officer Page 12 EX-15 2 UNAUDITED INTERIM FINANCIAL INFORMATION 1 EXHIBIT 15 May 5, 2000 Board of Directors Superior Uniform Group, 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 Uniform Group, Inc. for the periods ended March 31, 2000 and 1999, as indicated in our report dated May 4, 2000; 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, 2000, 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. /s/ Deloitte & Touche, LLP Certified Public Accountants Tampa, Florida EX-27 3 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONDENSED UNAUDITED INTERIM FINANCIAL STATEMENTS INCLUDED IN THE COMPANY'S FORM 10-Q FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENT. 1 U.S. DOLLARS 3-MOS DEC-31-2000 JAN-01-2000 MAR-31-2000 1 238,191 0 33,927,589 0 49,548,643 83,714,423 29,609,466 0 124,906,109 23,422,085 21,642,168 0 0 7,474,206 79,841,856 124,906,109 38,821,270 0 25,621,942 36,729,925 0 0 360,386 2,091,345 760,000 0 0 0 0 1,331,345 0.18 0.18
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