<PAGE> 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
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
<TABLE>
<CAPTION>
SUPERIOR SURGICAL MFG. CO., INC.
CONDENSED SUMMARY OF OPERATIONS
Three Months Ended March 31,
---------------------------------
1995 1994
----------- ------------
(Unaudited)
<S> <C> <C>
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
=========== ===========
</TABLE>
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
<PAGE> 3
<TABLE>
<CAPTION>
SUPERIOR SURGICAL MFG. CO., INC.
CONDENSED BALANCE SHEETS
ASSETS
------
March 31,
1995 December 31,
(Unaudited) 1994
----------- ------------
(1)
<S> <C> <C>
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
============ ============
</TABLE>
* Inventories consist of the following:
<TABLE>
<CAPTION>
March 31,
1995 December 31,
(Unaudited) 1994
------------ ------------
<S> <C> <C>
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
============ ============
</TABLE>
(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
<PAGE> 4
<TABLE>
<CAPTION>
SUPERIOR SURGICAL MFG. CO., INC.
SUMMARY OF CASH FLOWS
Three Months Ended March 31,
-----------------------------
1995 1994
----------- -----------
(Unaudited)
<S> <C> <C>
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
=========== ===========
</TABLE>
Page 4 of 11
<PAGE> 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
<PAGE> 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
<PAGE> 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
- - ---------------
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
- - ---------------
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<EXCHANGE-RATE> 1
<CASH> 11,190,311
<SECURITIES> 0
<RECEIVABLES> 25,388,056
<ALLOWANCES> 0
<INVENTORY> 43,390,134
<CURRENT-ASSETS> 79,968,501
<PP&E> 27,141,352
<DEPRECIATION> 0
<TOTAL-ASSETS> 109,496,836
<CURRENT-LIABILITIES> 15,300,319
<BONDS> 18,600,000
<COMMON> 8,363,552
0
0
<OTHER-SE> 64,052,965
<TOTAL-LIABILITY-AND-EQUITY> 109,496,836
<SALES> 34,116,921
<TOTAL-REVENUES> 0
<CGS> 22,686,795
<TOTAL-COSTS> 30,300,492
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 215,112
<INCOME-PRETAX> 3,601,317
<INCOME-TAX> 1,370,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,231,317
<EPS-PRIMARY> .27
<EPS-DILUTED> .27
</TABLE>
