Note 8 - Subsequent Events

6 Months Ended

Jun. 30, 2013

Subsequent Events [Text Block]

Subsequent Events [Text Block]

NOTE 8 – Subsequent Events

On July 1, 2013, the Company acquired substantially all of the assets of HPI Direct, Inc. (“HPI Direct”). Since 1993, HPI Direct has built a stellar reputation for quality and responsiveness as a privately owned company specializing in the design, manufacture and distribution of uniforms to major domestic retailers, foodservice chains, transportation and other service industries throughout the United States. HPI Direct’s award-winning image apparel is worn by some of the most prestigious brands in the markets that they serve. The purchase price for the asset acquisition consists of approximately $32.5 million in cash, subject to adjustment and inclusive of the real estate purchase described below, the issuance of approximately 209,000 restricted shares of Superior Uniform Group’s common stock, the potential future payment of up to $7.2 million in additional contingent consideration through 2017, and the assumption of certain liabilities of HPI Direct. The transaction also includes the acquisition of the corporate offices and warehouse distribution facility from an entity related to HPI Direct. Concurrent with the closing of the acquisition, Superior renewed its $15 million revolver agreement and entered into a new term loan for $30 million. Both credit facilities carry five year terms and variable interest rate of LIBOR plus 0.95%. See Note 3 for more information about the loans.

The foregoing description of the asset purchase agreement and real estate purchase agreement does not purport to be complete and is subject to, and qualified in its entirety by, the full text of those agreements, which are attached as exhibits to this Quarterly Report on Form 10-Q and are incorporated herein by reference. These agreements have been attached to provide investors with information regarding their terms. It is not intended to modify or supplement any factual disclosures about the Company in its public reports filed with the Securities and Exchange Commission and it is not intended to be, and should not be relied upon as, disclosures regarding any facts and circumstances relating to the Company or HPI Direct. In particular, the representations, warranties and covenants set forth in each agreement (a) were made solely for purposes of the agreement and solely for the benefit of the contracting parties, (b) may be subject to limitations agreed upon by the contracting parties, including being qualified by confidential disclosures made to a contracting party in connection with the agreement, (c) in certain cases, will survive for only a limited period of time, (d) are qualified in certain circumstances by a materiality standard which may differ from what may be viewed as material by investors, (e) were made only as of the date of the agreement or such other date as is specified in the agreement, and (f) may have been included in the agreement for the purpose of allocating risk between the parties rather than establishing matters as facts. Investors are not third-party beneficiaries under the agreements, and should not rely on the representations, warranties and covenants or any descriptions thereof as characterizations of the actual state of facts or conditions of the parties. Moreover, information concerning the subject matter of the representations and warranties may change after the date of the agreement, which subsequent information may or may not be fully reflected in subsequent public disclosures. Accordingly, the representations and warranties in the agreements should not be viewed or relied upon as statements of actual facts or the actual state of affairs of the Company or any of their its subsidiaries or affiliates.

The assets and liabilities of HPI Direct shown below are based on our preliminary estimates of their acquisition date fair values. The determination of the fair values of the acquired assets and assumed liabilities (and the related determination of estimated lives of depreciable tangible and identifiable intangible assets) requires significant judgment. As such, we have not yet completed our valuation analysis and calculations in sufficient detail necessary to arrive at the final estimates of the fair value of HPI Direct’s assets acquired and liabilities assumed, along with the related allocations to goodwill and intangible assets. The fair values of certain tangible assets, intangible assets, and residual goodwill are the most significant areas not yet finalized and therefore are subject to change. We expect to complete our final fair value determinations no later than the third quarter of 2013. Our final fair value determinations may be significantly different than those shown below.

The following is our preliminary assignment of the aggregate consideration:

Accounts Receivable	$	4,810,000
Inventories		10,091,000
Property, Plant and Equipment		4,500,000
Other Intangible Assets		24,866,000
Total assets	$	44,267,000
Other current liabilities	$	2,270,000
Future contingent liabilities		7,200,000
Total liabilities	$	9,470,000

Based on our preliminary estimate, the aggregate consideration exceeds the aggregate estimated fair value of the acquired assets and assumed liabilities by $24.9 million, which has been reflected as other intangible assets. This amount will ultimately be divided between identified intangible assets and goodwill.

For the three and six-month periods ended June 30, 2013, the Company incurred and expensed transaction related expenses of approximately $230,000. These amounts are included in selling and administrative expenses on the consolidated statements of income.

Revenues and expenses of HPI Direct will be included in the consolidated financial statements beginning July 1, 2013. Due to the factors discussed above, we are not yet able to prepare pro forma operating results reflecting the acquisition of HPI Direct at this time. We expect to complete these calculations during the third quarter of 2013.