10-Q

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 September 30, 2004

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

10055 Seminole Boulevard

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  ¨

Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act)    Yes  ¨    No  x

As of October 29, 2004, the registrant had 7,468,312 common shares outstanding, which is registrant’s only class of common stock.

PART I - FINANCIAL INFORMATION

ITEM 1. Financial Statements

SUPERIOR UNIFORM GROUP, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED SUMMARY OF OPERATIONS

(Unaudited)

	Three Months Ended September 30,
	2004			2003
Net sales	$	36,960,340		$	36,016,237
Costs and expenses:
Cost of goods sold		24,509,825			23,706,890
Selling and administrative expenses		9,530,370			9,076,648
Interest expense		157,032			172,812
		34,197,227			32,956,350
Earnings before taxes on income		2,763,113			3,059,887
Taxes on income		960,000			1,070,000
Net earnings	$	1,803,113		$	1,989,887
Weighted average number of shares outstanding during the period
(Basic)		7,464,850	Shs.		7,225,470	Shs.
(Diluted)		7,592,817	Shs.		7,407,808	Shs.
Basic net earnings per common share	$	0.24		$	0.28
Diluted net earnings per common share	$	0.24		$	0.27
Dividends per common share	$	0.135		$	0.135

See accompanying notes to condensed consolidated interim financial statements.

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SUPERIOR UNIFORM GROUP, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED SUMMARY OF OPERATIONS

(Continued)

(Unaudited)

	Nine Months Ended September 30,
	2004			2003
Net sales	$	106,125,651		$	102,559,641
Costs and expenses:
Cost of goods sold		70,877,302			67,708,746
Selling and administrative expenses		28,325,765			28,317,186
Interest expense		471,670			524,571
		99,674,737			96,550,503
Earnings before taxes on income		6,450,914			6,009,138
Taxes on income		2,240,000			2,110,000
Net earnings	$	4,210,914		$	3,899,138
Weighted average number of shares outstanding during the period
(Basic)		7,434,006	Shs.		7,171,451	Shs.
(Diluted)		7,605,264	Shs.		7,298,633	Shs.
Basic net earnings per common share	$	0.57		$	0.54
Diluted net earnings per common share	$	0.55		$	0.53
Dividends per common share	$	0.405		$	0.405

The results of the nine months ended September 30, 2004 are not necessarily indicative of results to be expected for the full year ending December 31, 2004.

See accompanying notes to condensed consolidated interim financial statements.

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SUPERIOR UNIFORM GROUP, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED BALANCE SHEETS

	September 30, 2004 (Unaudited)		December 31, 2003 (1)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	4,366,795	$	14,915,079
Accounts receivable and other current assets		30,316,483		26,575,352
Inventories*		40,196,662		36,380,470
TOTAL CURRENT ASSETS		74,879,940		77,870,901
PROPERTY, PLANT AND EQUIPMENT, NET		22,477,591		18,289,436
GOODWILL		1,615,512		741,929
OTHER INTANGIBLE ASSETS, NET		1,567,878		—
OTHER ASSETS		6,405,527		6,071,667
	$	106,946,448	$	102,973,933
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	8,549,358	$	5,400,401
Other current liabilities		3,122,189		5,078,982
Current portion of long-term debt		1,466,328		1,179,021
TOTAL CURRENT LIABILITIES		13,137,875		11,658,404
LONG-TERM DEBT		6,093,047		6,266,047
DEFERRED INCOME TAXES		365,000		165,000
SHAREHOLDERS’ EQUITY		87,350,526		84,884,482
	$	106,946,448	$	102,973,933

* Inventories consist of the following:

	September 30, 2004 (Unaudited)		December 31, 2003 (1)
Finished goods	$	32,764,757	$	30,826,116
Work in process		1,053,244		386,517
Raw materials		6,378,661		5,167,837
	$	40,196,662	$	36,380,470

(1) The balance sheet as of December 31, 2003 has been derived from the audited balance sheet as of that date and has been condensed.

See accompanying notes to condensed consolidated interim financial statements.

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SUPERIOR UNIFORM GROUP, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED SUMMARY OF CASH FLOWS

	Nine Months Ended September 30,
	2004			2003
	(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings	$	4,210,914		$	3,899,138
Adjustments to reconcile net earnings to net cash provided from operating activities:
Depreciation and amortization		2,506,317			2,596,327
Provision for bad debts		(22,253	)		126,000
Deferred income tax provision (benefit)		200,000			(35,000	)
Changes in assets and liabilities, net of acquisition:
Accounts receivable and other current assets		(1,492,521	)		(526,507	)
Inventories		(1,750,748	)		5,648,769
Accounts payable		2,467,048			(921,997	)
Other current liabilities		(1,728,794	)		(796,161	)
Net cash flows provided by operating activities		4,389,963			9,990,569
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant, and equipment		(5,666,886	)		(1,168,144	)
Disposals of property, plant and equipment		170,008			168,435
Purchase of business, net of cash acquired		(6,270,360	)		—
Other assets		(322,117	)		(493,946	)
Net cash used in investing activities		(12,089,355	)		(1,493,655	)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of long-term debt		(876,022	)		(819,579	)
Payment of cash dividends		(3,012,074	)		(2,902,465	)
Proceeds received on exercised stock options		1,181,449			1,759,500
Common stock reacquired and retired		(142,245	)		(365,750	)
Net cash used in financing activities		(2,848,892	)		(2,328,294	)
Net (decrease) increase in cash and cash equivalents		(10,548,284	)		6,168,620
Cash and cash equivalents balance, beginning of year		14,915,079			7,470,719
Cash and cash equivalents balance, end of period	$	4,366,795		$	13,639,339

See accompanying notes to condensed consolidated interim financial statements.

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SUPERIOR UNIFORM GROUP, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003

(Unaudited)

NOTE 1 – Summary of Significant Interim Accounting Policies:

a) Basis of presentation

The condensed consolidated interim financial statements include the accounts of Superior Uniform Group, Inc. and its wholly-owned subsidiary, Fashion Seal Corporation. Intercompany items have been eliminated in consolidation. The accompanying unaudited interim financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations. These condensed financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2003, and filed with the Securities and Exchange Commission. The interim financial information contained herein is not certified or audited; it reflects all adjustments (consisting of only normal recurring accruals) which are, in the opinion of management, necessary for a fair statement of the operating results for the periods presented, stated on a basis consistent with that of the audited financial statements. The unaudited financial information included in this report as of and for the three and nine months ended September 30, 2004 has been reviewed by Grant Thornton LLP, independent certified public accountants, and their review report thereon accompanies this filing; such review was made in accordance with established professional standards and procedures for such a review. The results of operations for any interim period are not necessarily indicative of results to be expected for the full year.

b) 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.

c) Inventories

Inventories at interim dates are determined by using both perpetual records on a first-in, first-out basis and gross profit calculations.

d) Accounting for income taxes

The provision for income taxes is calculated by using the effective tax rate anticipated for the full year.

e) 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.

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	Three Months Ended September 30,				Nine Months Ended September 30,
	2004		2003		2004		2003
Earnings used in the computation of basic and diluted earnings per common share:
Net earnings	$	1,803,113	$	1,989,887	$	4,210,914	$	3,899,138
Weighted average shares outstanding		7,464,850		7,225,470		7,434,006		7,171,451
Common stock equivalents		127,967		182,338		171,258		127,182
Total weighted average shares outstanding		7,592,817		7,407,808		7,605,264		7,298,633
Basic net earnings per share	$	0.24	$	0.28	$	0.57	$	0.54
Diluted net earnings per share	$	0.24	$	0.27	$	0.55	$	0.53

f) Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

g) Comprehensive Income

Total comprehensive income represents the change in equity during a period, from sources other than transactions with shareholders and, as such, includes net earnings. For the Company, the only other component of total comprehensive income is the change in the fair value of derivatives accounted for as cash flow hedges.

	Three Months Ended September 30,					Nine Months Ended September 30,
	2004			2003		2004		2003
Net earnings	$	1,803,113		$	1,989,887	$	4,210,914	$	3,899,138
Other comprehensive income (loss):
Net unrealized gain (loss) during the period related to cash flow hedges		(17,000	)		149,000		228,000		132,000
Comprehensive income	$	1,786,113		$	2,138,887	$	4,438,914	$	4,031,138

h) Operating Segments

Statement of Financial Accounting Standards (FAS) No. 131 “Disclosures about Segments of an Enterprise and Related Information” 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 standard and has determined that currently it operates in one segment, as defined in this statement.

i) Derivative Financial Instruments

The Company has only limited involvement with derivative financial instruments. The Company has one interest rate swap agreement to hedge against the potential impact on earnings from increases in market interest rates of a variable rate term loan. Under the interest rate swap agreement, the Company receives or makes payments on a monthly basis, based on the differential between a specified interest rate and one month LIBOR. A term loan of $6,569,046 is designated as a hedged item for interest rate swaps at September 30, 2004.

This interest rate swap is accounted for as a cash flow hedge in accordance with FAS 133 and FAS 138. As of the report date, all swaps met effectiveness tests, and as such no gains or losses were included in net income during the quarter related to hedge ineffectiveness and there was no income adjustment related to any portion excluded from the assessment of hedge effectiveness. A (loss) gain of $(17,000) and $149,000 was included in other comprehensive income (loss) for the three months ended September 30, 2004 and 2003, respectively. A gain of $228,000 and $132,000 was included in other comprehensive income (loss) for the nine months ended September 30, 2004 and 2003, respectively. The original term of the contract is ten years.

j) Stock-based Compensation:

In December 2002, the Financial Accounting Standards Board (FASB) issued FAS No. 148, “Accounting for Stock-Based Compensation - Transition and Disclosure.” This Statement amends FAS No. 123, “Accounting for Stock-Based Compensation,” to

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provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, this Statement amends the disclosures in both annual and interim financial statements regarding the method of accounting for stock-based employee compensation and the effect of the method used on reported results.

The Company continues to apply Accounting Principles Board Opinion No. 25 to account for stock-based employee compensation arrangements, where applicable, but has adopted the disclosure requirements of FAS No. 148 beginning with its first quarter ending March 31, 2003. The Company estimated the fair value of options utilizing the Black-Scholes option pricing model.

The following table illustrates the effect on net earnings and earnings per common share as if the fair value based method had been applied to all awards in each period.

	Three Months Ended September 30,				Nine Months Ended September 30,
	2004		2003		2004		2003
Net earnings, as reported	$	1,803,113	$	1,989,887	$	4,210,914	$	3,899,138
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects		306,594		238,764		757,368		585,502
Pro forma net earnings	$	1,496,519	$	1,751,123	$	3,453,546	$	3,313,636
Net earnings per common share:
Basic – as reported	$	0.24	$	0.28	$	0.57	$	0.54
Basic – pro forma	$	0.20	$	0.24	$	0.46	$	0.46
Diluted – as reported	$	0.24	$	0.27	$	0.55	$	0.53
Diluted – pro forma	$	0.20	$	0.24	$	0.45	$	0.45

k) Reclassifications

Certain reclassifications to the 2003 financial information have been made to conform to the 2004 presentation of the condensed consolidated summary of operations.

NOTE 2 – Acquisitions:

On February 27, 2004, the Company acquired substantially all of the net assets of UniVogue, Inc. (“UniVogue”), a supplier of uniforms with a strong national presence, particularly in the hospitality, lodging, food service and culinary markets, with revenues for the year ended December 2003 of approximately $9,300,000. The acquisition has been accounted for utilizing the purchase method of accounting. The purchase price for this acquisition was approximately $6,291,000 and was allocated as follows:

Cash	$	20,431
Accounts Receivable		1,965,646
Other Current Assets		260,711
Inventories		2,065,444
Property, Plant & Equipment		108,032
Other Assets		11,743
Other Intangible Assets		1,667,111
Goodwill		873,583
TOTAL ASSETS	$	6,972,701
Accounts Payable and Accrued Expenses	$	681,910

NOTE 3 – Recent Accounting Pronouncements:

On January 17, 2003, the FASB issued Interpretation No. 46, Consolidation of Variable Interest Entities (“FIN No. 46”). FIN No. 46 addresses consolidation of entities that are not controlled through voting interests or in which the equity investors do not bear the residual economic risks and rewards. These entities have been commonly referred to as special purpose entities. FIN No. 46 provides guidance related to identifying variable interest entities and determining whether such entities should be consolidated. It also provides guidance related to the initial and subsequent measurement of assets, liabilities and non-controlling interests in newly consolidated variable interest entities and requires disclosures for both the primary beneficiary of a variable interest entity and other beneficiaries of the entity. To date, the Company has not created any variable interest entities.

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NOTE 4 – Goodwill and Other Intangible Assets:

The Company follows FAS No. 142, “Goodwill and Other Intangible Assets,” which addresses the financial accounting and reporting standards for the acquisition of intangible assets outside of a business combination and for goodwill and other intangible assets subsequent to their acquisition. This accounting standard requires that goodwill be separately disclosed from other intangible assets in the statement of financial position, and no longer be amortized but tested for impairment on a periodic basis.

Other intangible assets were recorded in the period ended September 30, 2004 as the Company completed its valuation of the UniVogue acquisition. Other intangible assets include the value assigned to the customer list acquired in this acquisition of $1,667,111 less accumulated amortization of $99,233. The customer list is being amortized over 7 years.

NOTE 5 - Long-Term Debt:

	September 30 2004		December 31, 2003
Note payable to Wachovia, pursuant to revolving credit agreement, maturing April 26, 2007	$	—	$	—
6.75% term loan payable to Wachovia, with monthly payments of principal and interest, maturing April 1, 2009		6,569,046		7,445,068
Note payable to Bank of America 0% interest payable in three equal installments on July 1, 2005, January 1, 2006, and January 1, 2007		990,329		—
		7,559,375		7,445,068
Less payments due within one year included in current liabilities		1,466,328		1,179,021
Long-term debt less current maturities	$	6,093,047	$	6,266,047

On March 26, 1999, the Company entered into a 3-year credit agreement with Wachovia Bank 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 (2.4% at September 30, 2004). 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 September 30, 2004, approximately $1,115,000 was outstanding under letters of credit. On March 27, 2001 and again on April 27, 2004, the Company entered into agreements with Wachovia Bank to extend the maturity of the revolving credit agreement. The revolving credit agreement matures on June 30, 2007. At the option of the Company, any outstanding balance on the agreement at that date will convert to a one-year term loan. The remaining terms of the original revolving credit agreement remain unchanged. 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 loans with Wachovia contain restrictive provisions concerning debt to net worth ratios, other borrowings, capital expenditures, rental commitments, tangible net worth ($76,963,000 at September 30, 2004); working capital ratio (2.5:1), fixed charges coverage ratio (2.5:1), stock repurchases and payment of dividends. At September 30, 2004, under the most restrictive terms of the debt agreements, retained earnings of approximately $7,624,000 were available for declaration of dividends. The Company is in full compliance with all terms, conditions and covenants of the various credit agreements.

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NOTE 6 – Periodic Pension Expense:

The following table presents the net periodic pension expense under our plans for the following periods:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2004		2003		2004		2003
Service cost - benefits earned during the period	$	168,000	$	174,000	$	504,000	$	524,000
Interest cost on projected benefit obligation		259,000		274,000		775,000		822,000
Expected return on plan assets		313,000		251,000		937,000		751,000
Amortization of prior service cost		43,000		41,000		129,000		129,000
Recognized actuarial loss		9,000		54,000		25,000		160,000
Net periodic pension cost	$	166,000	$	292,000	$	496,000	$	884,000

NOTE 7 – Supplemental Cash Flow Information:

Cash paid for income taxes was $2,646,478 and $1,798,742, respectively for the nine-month periods ended September 30, 2004 and 2003. Cash paid for interest was $485,942 and $526,912, respectively for the nine-month periods ended September 30, 2004 and 2003.

Non-cash investing transactions are excluded from the consolidated statement of cash flows. For the nine-month period ended September 30, 2004, non-cash activities included $930,329 in fixed asset acquisitions financed with long-term borrowings of the same amount. The nine-month period ended September 30, 2003 did not include any such non-cash transactions.

NOTE 8 – Contingencies:

The Company is involved in various legal actions and claims arising from the normal course of business. In the opinion of management, the ultimate outcome of these matters will not have a material impact on the Company’s results of operations, cash flows, or financial position.

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Report of Independent Registered Public Accounting Firm

Board of Directors and Shareholders

Superior Uniforms Group, Inc.

We have reviewed the accompanying condensed consolidated balance sheet of Superior Uniform Group, Inc. and subsidiary (“the Company”) as of September 30, 2004, the related condensed consolidated summary of operations for the three-month and nine-month periods ended September 30, 2004, and the condensed consolidated summary of cash flows for the nine-month period ended September 30, 2004. These financial statements are the responsibility of the Company’s management.

We conducted our review in accordance with standards of the Public Company Accounting Oversight Board. A review of interim financial information consists principally of applying analytical procedures and 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 interim financial information for it to be in conformity with accounting principles generally accepted in the United States of America.

GRANT THORNTON LLP

/s/ Grant Thornton LLP

Tampa, Florida

October 20, 2004

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ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Certain matters discussed in this Form 10-Q are “forward-looking statements” intended to qualify for the safe harbors from liability established by the Private Securities Litigation Reform Act of 1995. These forward-looking statements can generally be identified as such because the context of the statement will include words such as we “believe,” “anticipate”, “expect” or words of similar import. Similarly, statements that describe our future plans, objectives, strategies or goals are also forward-looking statements. Such forward-looking statements are subject to certain risks and uncertainties that may materially adversely affect the anticipated results. Such risks and uncertainties include, but are not limited, to 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 other factors described in the Company’s filings with the Securities and Exchange Commission. Shareholders, potential investors and other readers are urged to consider these factors carefully in evaluating the forward-looking statements made herein and are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements made herein are only made as of the date of this Form 10-Q and we disclaim any obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances.

Critical Accounting Policies

Our significant accounting policies are described in Note 1 to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2003. Our discussion and analysis of financial condition and results of operations are based upon our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States for the preparation of interim financial statements. The preparation of the financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate the estimates that we have made. These estimates are based upon our historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Our actual results may differ from these estimates under different assumptions or conditions. We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our condensed consolidated financial statements.

Revenue Recognition and Allowance for Doubtful Accounts

The Company recognizes revenue in the period in which the product is shipped. Judgments and estimates are used in determining the collectability of accounts receivable. The Company analyzes specific accounts receivable and historical bad debt experience, customer credit worthiness, current economic trends and the age of outstanding balances when evaluating the adequacy of the allowance for doubtful accounts. Management judgments and estimates are used in connection with establishing the allowance in any accounting period. Changes in estimates are reflected in the period they become known. If the financial condition of the Company’s customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. Material differences may result in the amount and timing of bad debt expense recognition for any given period if management makes different judgments or utilizes different estimates.

Inventories

Inventories are stated at the lower of cost or market value. Judgments and estimates are used in determining the likelihood that new goods on hand can be sold to customers. Historical inventory usage and current revenue trends are considered in estimating both excess and obsolete inventories. If actual product demand and market conditions are less favorable than those projected by management, additional inventory write-downs may be required.

Insurance

The Company self-insures for certain obligations related to health and workers’ compensation programs. The Company also purchases stop-loss insurance policies to protect it from catastrophic losses. Judgments and estimates are used in determining the potential value associated with reported claims and for losses that have occurred, but have not been reported. The Company’s estimates consider historical claim experience and other factors. The Company’s liabilities are based on estimates, and, while the Company believes that the accrual for loss is adequate, the ultimate liability may be in excess of or less than the amounts recorded. Changes in claim experience, the Company’s ability to settle claims or other estimates and judgments used by management could have a material impact on the amount and timing of expense for any period.

Results of Operations

Net sales of $36,960,340 for the three months ended September 30, 2004 increased approximately 2.6% from $36,016,237 for the comparable period ended September 30, 2003. For the nine months ended September 30, 2004, net sales were approximately 3.5% more than the comparable period ended September 30, 2003. The increases in the three and nine-month periods are attributed primarily to the acquisition of UniVogue effective February 27, 2004, which was partially offset by the lower purchasing levels of existing customers.

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Cost of goods sold as a percentage of sales approximated 66.3% for the three months ended September 30, 2004 compared to 65.8% for the three months ended September 30, 2003. Cost of goods sold as a percentage of sales approximated 66.8% for the nine months ended September 30, 2004 compared to 66.0% for the nine months ended September 30, 2003. The increases in the three and nine-month periods are attributed to higher shipping expenses during the current periods that were not fully offset by higher billings to customers for shipping and handling. These increases were offset by the savings from the increase in the amount of goods sourced outside of the United States.

Selling and administrative expenses, as a percentage of sales, were approximately 25.8% and 25.2%, respectively, for the three-month periods ended September 30, 2004 and 2003. Selling and administrative expenses, as a percentage of sales, were approximately 26.7% and 27.6%, respectively, for the first nine months of 2004 and 2003. The increase in selling and administrative expenses as a percentage of net sales for the three-month period ended September 30, 2004, is primarily attributed to $272,000 in external consulting costs incurred during the quarter associated with the Company’s efforts to prepare for compliance with Section 404 of the Sarbanes-Oxley Act. The decrease in selling and administrative expenses as a percentage of net sales for the nine-month period ended September 30, 2004, is primarily attributed to the increased sales volume in the current period, which was partially offset by approximately $380,000 in external consulting costs incurred during the period associated with the Company’s efforts to prepare for compliance with Section 404 of the Sarbanes-OxleyAct.

Interest expense of $471,670 for the nine-month period ended September 30, 2004 decreased 10.1% from $524,571 for the similar period ended September 30, 2003 due to lower outstanding borrowings in the current period.

Net earnings decreased to $1,803,113 for the three months ended September 30, 2004 as compared to net earnings of $1,989,887 for the same period ended September 30, 2003. Net earnings for the nine months ended September 30, 2004 increased to $4,210,914 as compared to net earnings of $3,899,138 for the same period in 2003. The decrease in earnings for the three-month period was primarily due to the increased costs incurred associated with higher shipping expenses and with Sarbanes-Oxley, offset by the increased sales volume for the quarter. The increase in earnings for the nine-month period was primarily attributed to the increased sales volume for the period offset by the increased costs associated with higher shipping expenses and Sarbanes-Oxley.

Liquidity and Capital Resources

Cash and cash equivalents decreased by $10,548,284 from $14,915,079 on December 31, 2003 to $4,366,795 as of September 30, 2004. This decrease is attributed to $4,389,963 provided from operating activities offset by $12,089,355 utilized in investing activities and $2,848,892 utilized in financing activities. The $12,089,355 utilized in investing activities consists primarily of $6,270,360 for the acquisition of UniVogue and $5,496,878 for net additions to fixed assets with the vast majority of these funds expended on the upgrade of the Company’s central warehouse facility in Eudora, Arkansas. Total borrowings under long-term debt agreements increased by $114,307 from $7,445,068 on December 31, 2003 to $7,559,375 on September 30, 2004 as a result of scheduled repayments of $876,022, offset by $990,329 of new borrowings related to the acquisition of software associated with the company’s ERP system. 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. At September 30, 2004, our principal sources of liquidity consisted of cash and available borrowings under our revolving credit facility with Wachovia.

Accounts receivable and other current assets increased 14.1% from $26,575,352 on December 31, 2003 to $30,316,483 as of September 30, 2004, primarily due to the acquisition of UniVogue in the first quarter of 2004.

Inventories increased 10.5% from $36,380,470 on December 31, 2003 to $40,196,662 as of September 30, 2004, primarily due to the acquisition of UniVogue in the first quarter of 2004.

Other intangible assets increased from $0 as of December 31, 2003 to $1,567,878 as of September 30, 2004, as a result of the acquisition of UniVogue. The Company completed its valuation of the intangible assets associated with the acquisition and has assigned $1,667,111 to the customer list of the acquired company. This amount is included as other intangible assets in the condensed consolidated balance sheet and is being amortized over a seven-year period. The balance of intangible assets acquired in the acquisition of $873,583 has been assigned to goodwill and is not being amortized.

Accounts payable increased 58.3% from $5,400,401 on December 31, 2003 to $8,549,358 on September 30, 2004, primarily due to higher inventory levels and the acquisition of UniVogue in the first quarter of 2004.

Other current liabilities decreased 38.5% from $5,078,982 on December 31, 2003 to $3,122,189 on September 30, 2004 primarily due to a $1,356,000 reduction in the pension plan liabilities of the Company as a result of current year contributions.

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.

Page 13

During the nine-month periods ended September 30, 2004 and 2003, respectively, the Company paid cash dividends of $3,012,074 and $2,902,465, respectively. In July 2002, our Board of Directors reset the common stock repurchase program authorization so that the Company may make future repurchases of its stock of up to 700,000 shares.

The Company reacquired and retired 10,000 shares of its common stock, at a cost of $142,245, in the nine-month period ended September 30, 2004. The Company reacquired and retired 35,000 shares of its common stock, at a cost of $365,750, in the prior year period. At September 30, 2004, we had 639,000 shares remaining on our common stock repurchase authorization. Shares purchased under our share repurchase program are constructively retired and returned to unissued status. We consider several factors in determining when to make share repurchases, including among other things, our cost of equity, our after-tax cost of borrowing, our debt to total capitalization targets and our expected future cash needs. There is no expiration date or other restriction governing the period over which we can make our share repurchases under the program. The Company anticipates that it will continue to pay dividends and that it will reacquire additional shares of its common stock in the future as financial conditions permit.

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 its anticipated funding requirements for the remainder of the year and for the foreseeable future.

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

The Company is exposed to market risk from changes in interest rates, which may adversely affect its results of operations and financial condition. The Company seeks to minimize the risks from these interest rates when considered appropriate, through the limited use of derivative financial instruments. The Company’s policy is to not use financial instruments for trading or other speculative purposes and is not a party to any leveraged financial instruments. The Company has debt obligations with variable interest rates tied to LIBOR which are described in “Liquidity and Capital Resources” as well as Note 1 of the Notes to Consolidated Financial Statements. The Company estimates that a hypothetical increase in interest rates of 1% would have resulted in no material change in the Company’s interest expense for the nine-month period ended September 30, 2004.

The Company has one interest rate swap agreement to hedge against the potential impact on earnings from increases in market interest rates of a variable rate term loan. Under the interest rate swap agreement, the Company receives or makes payments on a monthly basis, based on the differential between a specified interest rate and one month LIBOR. A term loan of $6,569,046 is designated as a hedged item for interest rate swaps at September 30, 2004. This interest rate swap is accounted for as a cash flow hedge in accordance with FAS 133 and FAS 138. As of the report date, the swap met the effectiveness test, and as such no gains or losses were included in net income during the quarter related to hedge ineffectiveness and there was no income adjustment related to any portion excluded from the assessment of hedge effectiveness. A gain (loss) of ($17,000) and $149,000 was included in other comprehensive income for the three months ended September 30, 2004 and 2003, respectively. A gain of $228,000 and $132,000 was included in other comprehensive income for the nine months ended September 30, 2004 and 2003, respectively. The original term of the contract is ten years.

The Company is also exposed to changes in prevailing market interest rates affecting the return on its investments but does not consider this interest rate market risk exposure to be material to its financial condition or results of operations. The Company invests primarily in highly liquid debt instruments with strong credit ratings and short-term (less than three months) maturities.

ITEM 4. Controls and Procedures

(a). The Chief Executive Officer, Michael Benstock, and the Chief Financial Officer, Andrew D. Demott, Jr., evaluated the effectiveness of Superior’s disclosure controls and procedures as of the end of the period covered by this report (the “Evaluation Date”), and concluded that, as of the Evaluation Date, Superior’s disclosure controls and procedures were effective to ensure that information Superior is required to disclose in its filings with the Securities and Exchange Commission under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms, and to ensure that information required to be disclosed by Superior in the reports that it files under the Exchange Act is accumulated and communicated to Superior’s management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. There have been no changes in the Company’s internal controls over financial reporting identified in connection with this evaluation that occurred during the period covered by this report and that have affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. Legal Proceedings

None.

Page 14

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds

The table below sets forth the information with respect to purchases made by or on behalf of Superior Uniform Group, Inc. or any “affiliated purchaser” (as defined in Rule 10b-18(a)(3) under the Exchange Act), of our common shares during the three months ended September 30, 2004.

ISSUER PURCHASES OF EQUITY SECURITIES

Period	(a) Total Number of Shares Purchased	(b) Average Price Paid per Share		(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	(d) Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs (1)
Month #1 (July 1, 2004 to July 31, 2004)
Month #2 (August 1, 2004 to August 31, 2004)
Month #3 (September 1, 2004 to September 30, 2004)	10,000	$	14.22	10,000
TOTAL	10,000	$	14.22	10,000	639,000

(1) In July 2002, the Company’s Board of Directors approved a program to repurchase up to 700,000 shares of the Company’s outstanding shares of common stock. There is no expiration date or other restriction governing the period over which the Company can make share repurchases under the program.

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

a)

Exhibit No.	Description
15	Letter re: Unaudited Interim Financial Information.
31.1	Certification by the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification by the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32	Certification of Periodic Financial Report by the Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Page 15

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: November 5, 2004	SUPERIOR UNIFORM GROUP, INC.
	By	/s/ Michael Benstock
		Michael Benstock
		Chief Executive Officer
	By	/s/ Andrew D. Demott, Jr.
		Andrew D. Demott, Jr.
		Sr. Vice President, Chief Financial Officer
		and Treasurer (Principal Accounting Officer)

Page 16

EXHIBIT INDEX

Exhibit No.	Description
15	Letter re: Unaudited Interim Financial Information.
31.1	Certification by the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification by the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32	Certification of Periodic Financial Report by the Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

EX-15

EXHIBIT 15

Securities and Exchange Commission

Washington, D.C. 20549

We have made a review of the condensed consolidated financial statements of Superior Uniform Group, Inc. and subsidiary (“the Company”) as of September 30, 2004 and for the three-month and nine-month periods ended September 30, 2004, in accordance with standards established by the Public Company Accounting Oversight Board, and issued our report thereon dated October 20, 2004. We are aware that such financial statements and our above-mentioned report appearing in the Form 10-Q of the Company for the quarter ended September 30, 2004 are being incorporated by reference in the Registration Statements on Form S-8 (File No. 333-105906, effective June 6, 2003) and that such report pursuant to Rule 436(c) of the Securities Act of 1933 is not considered a part of a registration statement prepared or certified by an accountant or a report prepared or certified by an accountant within the meaning of Paragraphs 7 and 11 of that Act.

/s/ GRANT THORNTON LLP

Tampa, Florida

October 20, 2004

EX-31.1

Exhibit 31.1

Certification of Chief Executive Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act and Rule 13a-14(a)

or 15d-14(a) under the Securities Exchange Act of 1934

I, Michael Benstock, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Superior Uniform Group, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information ; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 5, 2004	/s/ Michael Benstock
	Michael Benstock
	Chief Executive Officer

EX-31.2

Exhibit 31.2

Certification of Chief Financial Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act and Rule 13a-14(a)

or 15d-14(a) under the Securities Exchange Act of 1934

I, Andrew D. Demott, Jr., certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Superior Uniform Group, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information ; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 5, 2004	/s/ Andrew D. Demott, Jr.
	Andrew D. Demott, Jr.
	Chief Financial Officer

EX-32

Exhibit 32

Written Statement of the Chief Executive Officer and Chief Financial Officer

Pursuant to 18 U.S.C. '1350

Solely for the purposes of complying with 18 U.S.C. '1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, we, the undersigned Chief Executive Officer and Chief Financial Officer of Superior Uniform Group, Inc. (the “Company”), hereby certify, based on their knowledge, that the Quarterly Report on Form 10-Q of the Company for the period ended September 30, 2004 (the “Report”) fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and that information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Michael Benstock

Michael Benstock

Chief Executive Officer

/s/ Andrew D. Demott, Jr.

Andrew D. Demott, Jr.

Chief Financial Officer

Date: November 5, 2004