-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, RJGPoeAMrBw0P/uAuo1AkTS/BQo4yODwQ9e6HAGRU1nHPTpxpszjhvKu643X6n8Q 6ss9tzHThERaPmT5HAFdBw== 0000950144-95-001132.txt : 19950503 0000950144-95-001132.hdr.sgml : 19950503 ACCESSION NUMBER: 0000950144-95-001132 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19950331 FILED AS OF DATE: 19950428 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: SUPERIOR SURGICAL MANUFACTURING CO INC CENTRAL INDEX KEY: 0000095574 STANDARD INDUSTRIAL CLASSIFICATION: 2300 IRS NUMBER: 111385670 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-05869 FILM NUMBER: 95532999 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, 03-31-95 1 FORM 10-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, 1995 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 34642-0002 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 8,363,552 common shares outstanding. Page 1 of 11 2 PART I - FINANCIAL INFORMATION ITEM 1. Financial Statements
SUPERIOR SURGICAL MFG. CO., INC. CONDENSED SUMMARY OF OPERATIONS Three Months Ended March 31, --------------------------------- 1995 1994 ----------- ------------ (Unaudited) Net sales . . . . . . . . . . . . . . . . . . . $34,116,921 $31,907,441 ----------- ----------- Costs and expenses: Cost of goods sold . . . . . . . . . . . . . . $22,686,795 $21,316,047 Selling and administrative expenses . . . . . . 7,613,697 7,108,437 Interest expense . . . . . . . . . . . . . . . 215,112 273,335 ----------- ----------- $30,515,604 $28,697,819 ----------- ----------- Earnings before taxes on income . . . . . . . . . $ 3,601,317 $ 3,209,622 Taxes on income . . . . . . . . . . . . . . . . . 1,370,000 1,220,000 ----------- ----------- Net earnings . . . . . . . . . . . . . . . . . . $ 2,231,317 $ 1,989,622 =========== =========== Weighted average number of shares out- standing during the period . . . . . . . . . . 8,363,552 Shs. 8,818,554 Shs. Net earnings per common share . . . . . . . . . $ 0.27 $ 0.23 =========== =========== Cash dividends declared per common share . . . . . . . . . . . . . . . . . . . . $ 0.09 $ 0.08 =========== ===========
The results of the three months ended March 31, 1995 are not necessarily indicative of results to be expected for the full year ending December 31, 1995. Page 2 of 11 3
SUPERIOR SURGICAL MFG. CO., INC. CONDENSED BALANCE SHEETS ASSETS ------ March 31, 1995 December 31, (Unaudited) 1994 ----------- ------------ (1) CURRENT ASSETS: Cash and certificates of deposit . . . . . . . . . . . . . . . . . $ 11,190,311 $ 11,233,700 Accounts receivable and other current assets. . . . . . . . . . . . 25,388,056 24,231,606 Inventories* . . . . . . . . . . . . . . . . . . . . . . . . . . . 43,390,134 40,991,963 ------------ ------------ TOTAL CURRENT ASSETS . . . . . . . . . . . . . . . . . . . . $ 79,968,501 $ 76,457,269 PROPERTY, PLANT AND EQUIPMENT . . . . . . . . . . . . . . . . . . . . . . . . 27,141,352 26,234,749 EXCESS OF COST OVER FAIR VALUE OF ASSETS ACQUIRED . . . . . . . . . . . . . . . . . . . . . . . . . . 826,414 827,577 OTHER ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,560,569 1,344,790 ------------ ------------ $109,496,836 $104,864,385 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY ------------------------------------ CURRENT LIABILITIES: Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,632,204 $ 7,471,452 Other current liabilities . . . . . . . . . . . . . . . . . . . . 6,068,115 4,090,013 Current portion of long-term debt . . . . . . . . . . . . . . . . 600,000 600,000 ------------ ------------ TOTAL CURRENT LIABILITIES . . . . . . . . . . . . . . . . . . $ 15,300,319 12,161,465 LONG-TERM DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,600,000 18,600,000 LIABILITY FOR DISPUTE SETTLEMENT . . . . . . . . . . . . . . . . . . . . . . 2,250,000 2,250,000 DEFERRED INCOME TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 930,000 915,000 SHAREHOLDERS' EQUITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72,416,517 70,937,920 ------------ ------------ $109,496,836 $104,864,385 ============ ============
* Inventories consist of the following:
March 31, 1995 December 31, (Unaudited) 1994 ------------ ------------ Finished goods . . . . . . . . . . . . . . . . . . . . . $ 25,052,728 $ 23,887,026 Work in process . . . . . . . . . . . . . . . . . . . . 4,066,671 4,306,872 Raw materials . . . . . . . . . . . . . . . . . . . . . 14,270,735 12,798,065 ------------ ------------ 43,390,134 40,991,963 ============ ============
(1) The balance sheet as of December 31, 1994 has been taken from the audited financial statement as of that date and has been condensed. Page 3 of 11 4
SUPERIOR SURGICAL MFG. CO., INC. SUMMARY OF CASH FLOWS Three Months Ended March 31, ----------------------------- 1995 1994 ----------- ----------- (Unaudited) CASH FLOWS FROM OPERATING ACTIVITIES Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,231,317 $ 1,989,622 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization . . . . . . . . . . . . . . 799,125 623,475 Deferred income taxes . . . . . . . . . . . . . . . . . . 15,000 (60,000) Changes in assets and liabilities: Accounts receivable and other current assets . . . . . . . . . . . . . . . . . . . . . . . (1,156,450) (1,230,822) Inventories . . . . . . . . . . . . . . . . . . . . . . (2,398,171) (791,218) Accounts payable . . . . . . . . . . . . . . . . . . . . 1,160,752 46,571 Other current liabilities . . . . . . . . . . . . . . . 1,978,102 283,705 ----------- ----------- Net cash flows provided from operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,629,675 $ 861,333 ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES Additions to property, plant, and equipment . . . . . . . . . . $(1,704,565) $(2,391,876) Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . (215,779) 47,862 ----------- ----------- Net cash (used) in investing activities . . . . . . . . . . . . $(1,920,344) $(2,344,014) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES Increase in long-term debt . . . . . . . . . . . . . . . . . . $ - $15,000,000 Reduction in long-term debt . . . . . . . . . . . . . . . . . . - (100,000) Declaration of cash dividends . . . . . . . . . . . . . . . . . (752,720) (711,804) Proceeds received on exercise of stock options . . . . . . . . - 1,663,694 ----------- ----------- Net cash (used) provided in financing activities . . . . . . . $ (752,720) $15,851,890 ----------- ----------- Net (decrease) increase in cash and certificates of deposit . . . . . . . . . . . . . . . . . $ (43,389) $14,369,209 Cash and certificates of deposit balance, beginning of year . . . . . . . . . . . . . . . . . . . . . . . 11,233,700 3,030,013 ----------- ----------- Cash and certificates of deposit balance, end of period . . . . . . . . . . . . . . . . . . . . . . . . $11,190,311 $17,399,222 =========== ===========
Page 4 of 11 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 bases 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 Earnings per share have been computed based on the weighted average number of shares outstanding during each period. The exercise of outstanding stock options would not have a significant effect on earnings per share. Page 5 of 11 6 Note 2 - Dispute with Governmental Agency: The Company has been advised that it is a target of a Federal criminal investigation relating to a previously reported dispute involving alleged false statements and false claims purportedly made in connection with contracts ostensibly awarded by the U.S. Department of Veterans Affairs. A former vice president of the Company has entered into a plea agreement with Federal authorities in connection with this matter; the specific terms and conditions of which are not known to the Company. Federal authorities are also pursuing a civil investigation of the Company relating to these matters. The dispute does not involve the integrity of the Company's products. The Company is cooperating with these investigations, and settlement discussions are continuing. The Company previously offered to settle all potential charges relating to these matters and in 1993 recorded a liability in that amount which is reflected in its financial statements. That offer, however, was rejected by Federal authorities. While the Company has further concluded that it possesses specific defenses which will be vigorously asserted in the event the parties are unable to arrive at a negotiated settlement, the Company is unable to estimate the outcome of this uncertainty. Additionally, in the event the Company is indicted or convicted on criminal charges, or if significant civil damages are pursued, certain collateral consequences are likely to result, such as suspension or debarment from the award of future Federal government contracts. The Company believes that a suspension or debarment in connection with Federal government contracts would not have a material adverse effect on the Company; however, such action may also impede the Company's ability to receive certain contracts awarded under various Federal grant and other non-procurement programs. The precise impact of any potential exclusion under various Federal grant and other non-procurement programs is not clear. - - -------------------------------------------------------------------------------- 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, 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, 1994, filed with the Securities and Exchange Commission. Reference is hereby made to registrant's Financial Statements for 1994, heretofore filed with registrant's Form 10-K. Page 6 of 11 7 DELOITTE & TOUCHE LLP - - ------------ -------------------------------------------------------- (LOGO) Certified Public Accountants Suite 1200 201 East Kennedy Boulevard Tampa, Florida 33602-5821 Telephone: (813) 223-7591 BOARD OF DIRECTORS Superior Surgical Mfg. Co., Inc. Seminole, Florida We have reviewed the accompanying condensed balance sheet of Superior Surgical Mfg. Co., Inc. (the "Company") as of March 31, 1995, and the condensed summaries of operations and cash flows for the three-month periods ended March 31, 1995 and 1994. 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. As discussed in Note 2 to the condensed financial statements, the Company is engaged in a dispute with an agency of the U.S. Government. We have previously audited, in accordance with generally accepted auditing standards, the balance sheet as of December 31, 1994, 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 24, 1995, we expressed an unqualified opinion with two explanatory paragraphs relating to an agency of the U.S. Government and a change in the Company's method of accounting for income taxes on those financial statements. In our opinion, the information set forth in the accompanying condensed balance sheet as of December 31, 1994 is fairly stated, in all material respects, in relation to the balance sheet from which it has been derived. Deloitte & Touche LLP April 21, 1995 Page 7 of 11 - - --------------- DELOITTE TOUCHE TOHMATSU INTERNATIONAL - - --------------- 8 ITEM 2. Management's Discussion And Analysis of Financial Condition and Results of Operations Results of Operations Net sales of the registrant have continued to increase due to new customers and new uniform programs. Cost of goods sold approximated 66-1/2% for the three months ended March 31, 1995 and 1994. Selling and administrative expenses, as a percentage of sales, were approximately 22-1/2% for the first three months of 1995 and 1994. Interest expense of $215,112 for the three month period ended March 31, 1995 decreased 21% from $273,335 for the similar period ended March 31, 1994 due to repayments of debt. Net earnings increased 12% to $2,231,317 for the three months ended March 31, 1995 as compared to net earnings of $1,989,622 for the same period ended March 31, 1994 as a result of increased sales. Accounts receivable and other current assets increased 5% from $24,231,606 on December 31, 1994 to $25,388,056 as of March 31, 1995 primarily due to increased sales. Inventories as of March 31, 1995 increased 6% to $43,390,134 from $40,991,963 on December 31, 1994 mainly to support expected customer demand. Accounts payable increased 15-1/2% from $7,471,452 on December 31, 1994 to $8,632,204 on March 31, 1995 primarily due to increases in purchases of inventories. The registrant's current portion of long-term debt of $600,000 and long-term debt of $18,600,000 for March 31, 1995 is unchanged compared to December 31, 1994. See Note 2 of Notes to Summarized Interim Financial Information for a contingency resulting from a dispute which may have an effect on future operating results. The provision for dispute settlement in the amount of $2,250,000 in 1993 involves certain sales by the Company to an agency of the Federal government as previously reported. The government has yet to make any claim in connection with the dispute. While management continues to believe that the Company has complied with the terms and conditions of its obligations with the government, the Company sought resolution of the dispute by offering $2,250,000 ($1,415,000 net of tax effect) for full and complete settlement of the matter. The Company elected to accrue the offered amount for the fourth quarter of 1993 which represents an after tax charge against earnings of approximately $.16 per share. The offer of settlement has been rejected by the government. While the future impact is unclear, the dispute and Federal investigation concerning the dispute may have an adverse effect on future sales and a material, one-time payment may be necessary to resolve this matter. Liquidity and Capital Resources Cash and certificates of deposit decreased by $43,389 from $11,233,700 on December 31, 1994 to $11,190,311 as of March 31, 1995. The change is primarily a result of normal operations. Additionally, as of March 31, 1995, under its existing revolving Credit Agreement, the registrant had $9,000,000 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, has been more than adequate. Page 8 of 11 9 Liquidity and Capital Resources (cont'd) 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 its funding requirements for the remainder of the year and for the foreseeable future. PART II - OTHER INFORMATION ITEM 1. Legal Proceedings The Company has been advised that it is a target of a Federal criminal investigation relating to a previously reported dispute involving alleged false statements and false claims purportedly made in connection with contracts ostensibly awarded by the U.S. Department of Veterans Affairs. The investigation is also evaluating actions by agents of the Company in connection with the matter, including those of Gerald M. Benstock, a Director of the Company. A former vice president of the Company has entered into a plea agreement with Federal authorities in connection with this matter; the specific terms and conditions of which are not known to the Company. Federal authorities are also pursuing a civil investigation of the Company relating to these matters. The dispute does not involve the integrity of the Company's products. The Company is cooperating with these investigations, and settlement discussions are continuing. The Company previously offered to settle all potential charges relating to these matters and in 1993 recorded a liability in that amount which is reflected in its financial statements. That offer, however, was rejected by Federal authorities. While the Company has further concluded that it possesses the specific defenses which will be vigorously asserted in the event the parties are unable to arrive at a negotiated settlement, the Company is unable to estimate the outcome of this uncertainty. Additionally, in the event the Company is indicted or convicted on criminal charges, or if significant civil damages are pursued, certain collateral consequences are likely to result, such as suspension or debarment from the award of future Federal government contracts. The Company believes that a suspension or debarment in connection with Federal government contracts would not have a material adverse effect on the Company; however, such action may also impede the Company's ability to receive certain contracts awarded under various Federal grant and other non-procurement programs. The precise impact of any potential exclusion under various Federal grant and other non-procurement programs is not clear. 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. Page 9 of 11 10 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 SEC use only) b) Reports on Form 8-K Form 8-K filed with the Commission on February 24, 1995 is herein incorporated by reference. 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: April 28, 1995 SUPERIOR SURGICAL MFG. CO., INC. By /s/ Gerald M. Benstock ----------------------------- Gerald M. Benstock Chairman and Chief Executive Officer By /s/ John W. Johansen ----------------------------- John W. Johansen Chief Financial Officer and Principal Accounting Officer, Sr. Vice President and Treasurer Page 10 of 11 EX-15 2 DELOITTE & TOUCHE LETTER 1 EXHIBIT 15 DELOITTE & TOUCHE LLP - - ----------- --------------------------------------------------------- (LOGO) Certified Public Accountants Suite 1200 201 East Kennedy Boulevard Tampa, Florida 33602-5821 Telephone: (813) 223-7591 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, 1995 and 1994, as indicated in our report dated April 21, 1995 (which includes an explanatory paragraph relating to a dispute with an agency of the U.S. Government); 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, 1995, 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 April 21, 1995 Page 11 of 11 - - --------------- DELOITTE TOUCHE TOHMATSU INTERNATIONAL - - --------------- EX-27 3 FINANCIAL DATA SCHEDULE
5 1 U.S. DOLLARS 3-MOS DEC-31-1995 JAN-01-1995 MAR-31-1995 1 11,190,311 0 25,388,056 0 43,390,134 79,968,501 27,141,352 0 109,496,836 15,300,319 18,600,000 8,363,552 0 0 64,052,965 109,496,836 34,116,921 0 22,686,795 30,300,492 0 0 215,112 3,601,317 1,370,000 0 0 0 0 2,231,317 .27 .27
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