<PAGE> 1
FORM lO-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
20549
(Mark One)
/ X / QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarter ended June 30, 1996
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 33775-0002
Telephone No.: 813-397-9611
Indicate by check mark whether the registrant (1) has filed all
reports required to be f 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 8,133,552 common
shares outstanding.
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PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
SUPERIOR SURGICAL MFG. CO., INC.
CONDENSED SUMMARY OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended June 30,
-----------------------------
1996 1995
---------- ----------
(Unaudited)
<S> <C> <C>
Net sales............................................ $34,896,958 $33,045,056
---------- ----------
Costs and expenses:
Cost of goods sold................................. $23,260,874 22,075,331
Selling and administrative expenses................ 7,876,081 7,494,238
Interest expense................................... 340,147 231,861
---------- ----------
$31,477,102 $29,801,430
---------- ----------
Earnings before taxes on income...................... $ 3,419,856 $ 3,243,626
Taxes on income...................................... 1,300,000 1,230,000
---------- ----------
Net earnings......................................... $ 2,119,856 $ 2,013,626
========== ==========
Weighted average number of shares out-
standing during the period......................... 8,133,552 Shs. 8,363,552 Shs.
Net earnings per common share...................... $ 0.26 $ 0.24
========== ==========
Cash dividends declared per common
share............................................ $ 0.09 $ 0.09
========== ==========
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended June 30,
-----------------------------
1996 1995
---------- ----------
(Unaudited)
<S> <C> <C>
Net sales............................................ $69,569,150 $67,161,977
---------- ----------
Costs and expenses:
Cost of goods sold................................. $46,452,050 $44,762,126
Selling and administrative expenses................ 15,972,235 15,107,935
Interest expense................................... 633,692 446,973
---------- ----------
$63,057,977 $60,317,034
---------- ----------
Earnings before taxes on income...................... $ 6,511,173 $ 6,844,943
Taxes on income...................................... 2,475,000 2,600,000
---------- ----------
Net earnings......................................... $ 4,036,173 $ 4,244,943
========== ==========
Weighted average number of shares out-
standing during the period......................... 8,133,552 Shs. 8,363,552 Shs.
Net earnings per common share...................... $ 0.50 $ 0.51
========== ==========
Cash dividends declared per common
share............................................ $ 0.18 $ 0.18
========== ==========
</TABLE>
The results of the six months ended June 30, 1996 are not necessarily
indicative of results to be expected for the full year ending December
31, 1996.
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SUPERIOR SURGICAL MFG. CO., INC.
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30 ,
1996 December 31,
(Unaudited) 1995
----------- ------------
ASSETS (1)
<S> <C> <C>
CURRENT ASSETS:
Cash and certificates of deposit..................... $ 8,278,012 $ 5,421,553
Accounts receivable and other current assets......... 25,549,069 25,876,100
Inventories*......................................... 42,472,090 41,089,948
------------ ------------
TOTAL CURRENT ASSETS.......................... $ 76,299,171 $ 72,387,601
PROPERTY, PLANT AND EQUIPMENT.......................... 30,202,482 30,734,584
EXCESS OF COST OVER FAIR VALUE OF
ASSETS ACQUIRED..................................... 820,601 822,926
OTHER ASSETS........................................... 2,831,154 2,188,526
------------ ------------
$110,153,408 $106,133,637
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable..................................... $ 7,554,433 $ 6,630,608
Other current liabilities............................ 3,848,963 3,575,151
Liability for dispute settlement..................... 6,500,000 6,500,000
Current portion of long-term debt.................... 1,433,333 600,000
------------ ------------
TOTAL CURRENT LIABILITIES..................... $ 19,336,729 $ 17,305,759
LONG-TERM DEBT......................................... 16,866,667 18,000,000
DEFERRED INCOME TAXES.................................. 1,860,000 1,310,000
SHAREHOLDERS' EQUITY................................... 72,090,012 69,517,878
------------ ------------
$110,153,408 $106,133,637
============ ============
</TABLE>
* Inventories consist of the following:
<TABLE>
<CAPTION>
June 30,
1996 December 31,
(Unaudited) 1995
------------- --------------
<S> <C> <C>
Finished goods............................ $ 25,687,670 $ 24,783,647
Work in process........................... 4,263,773 3,515,698
Raw materials............................. 12,520,647 12,790,603
------------- -------------
$ 42,472,090 $ 41,089,948
============= =============
</TABLE>
(1) The balance sheet as of December 31, 1995 has been taken from the
audited financial statement as of that date and has been condensed.
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SUPERIOR SURGICAL MFG. CO., INC.
SUMMARY OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended June 30,
-------------------------
1996 1995
---------- -----------
(Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings........................................ $ 4,036,173 $ 4,244,943
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization.................... 2,088,343 1,712,053
Deferred income taxes............................ 550,000 305,000
Changes in assets and liabilities:
Accounts receivable and other current
assets....................................... 327,031 1,055,726
Inventories.................................... (1,382,142) (3,871,169)
Accounts payable .............................. 923,825 454,832
Other current liabilities...................... 273,812 (476,559)
----------- ------------
Net cash flows provided from operating
activities......................................... $ 6,817,042 $ 3,424,826
----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment.......... $(1,553,916) $ (2,274,858)
Other assets........................................ (642,628) (193,556)
----------- ------------
Net cash (used) in investing activities............. $(2,196,544) $ (2,468,414)
----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Reduction in long-term debt......................... $ (300,000) $ (300,000)
Declaration of cash dividends....................... (1,464,039) (1,505,439)
----------- ------------
Net cash (used) in financing activities............. $(1,764,039) $ (1,805,439)
----------- ------------
Net increase (decrease) in cash and
certificates of deposit.......................... $ 2,856,459 $ (849,027)
Cash and certificates of deposit balance,
beginning of year..................................... 5,421,553 11,233,700
----------- ------------
Cash and certificates of deposit balance,
end of period......................................... $ 8,278,012 $ 10,384,673
=========== ============
</TABLE>
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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 basis followed by the registrant in reporting
results of operations at annual reporting dates. However, when a specific cost
or expense item charged to expense for annual reporting purposes benefits more
than one interim period, the cost or expense item is allocated to the interim
periods.
b) Inventories
Inventories at interim dates are determined by using both perpetual records and
gross profit calculations.
c) Accounting for income taxes
The provision for income taxes is calculated by using the effective tax rate
anticipated for the full year.
d) Earnings per share
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.
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Note 2 - Dispute with Governmental Agency:
The previously announced settlement agreements entered into with the Federal
government resolving all existing legal claims and proceedings by the
government in connection with certain business dealings between the Company and
the Department of Veterans Affairs were approved in Federal court on July 24,
1996 with no additional monetary amounts to be paid beyond what was reserved as
a liability at December 31, 1995.
In addition, the Company has reached an understanding with the Department of
Veterans Affairs which enables the Company to continue to receive Federal
contracts and benefits in the future provided that certain minimal internal
administrative procedures are established by the Company.
- --------------------------------------------------------------------------------
The interim information contained above is not certified or audited; it
reflects all adjustments (consisting of normal recurring accruals) which are,
in the opinion of management, necessary to a fair statement of the operating
results for the periods presented, stated on a basis consistent with that of
the audited financial statements.
The financial information included in this form has been reviewed by Deloitte &
Touche LLP, independent certified public accountants; such review was made in
accordance with established professional standards and procedures for such a
review.
All financial information has been prepared in accordance with the accounting
principles or practices reflected in the financial statements for the year
ended December 31, 1995, filed with the Securities and Exchange Commission.
Reference is hereby made to registrant's Financial Statements for 1995,
heretofore filed with registrant's Form 10-K.
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[DELOITTE & TOUCHE LLP LETTERHEAD]
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 June 30, 1996, the condensed summaries of
operations for the six-months and three-months ended June 30, 1996 and 1995 and
the condensed summaries of cash flows for the six-months ended June 30, 1996 and
1995. This condensed financial information is the responsibility of the
Company's management.
We conducted our reviews 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 reviews, 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.
We have previously audited, in accordance with generally accepted auditing
standards, the balance sheet as of December 31, 1995, and the related statements
of earnings, shareholders' equity, and cash flows for the year then ended (not
presented herein); and in our report dated March 8, 1996, we expressed an
unqualified opinion on those financial statements. In our opinion, the
information set forth in the accompanying condensed balance sheet as of
December 31, 1995 is fairly stated, in all material respects, in relation to the
balance sheet from which it has been derived.
/s/ Deloitte & Touche LLP
- ------------------------------
July 26, 1996
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ITEM 2. Management's Discussion And Analysis of Financial Condition and
Results of Operations
RESULTS OF OPERATIONS
Net sales of the registrant increased by approximately 2% in the first quarter
of 1996 compared to the first quarter of 1995 due to new customers and new
uniform programs. For the second quarter of 1996 compared to the second
quarter of 1995, sales increased by approximately 6% due to continued momentum
in the economic activities in the marketplaces served by the registrant.
Accordingly, for the six months ended June 30, 1996, sales were approximately
4% more than the six months ended June 30, 1995.
Cost of goods sold approximated 66-2/3% for the six months ended June 30, 1996
and 1995.
Selling and administrative expenses, as a percentage of sales, were
approximately 23% for the first six months of 1996 and 1995.
Interest expense of $633,692 for the six month period ended June 30, 1996
increased 42% from $446,973 for the similar period ended June 30, 1995 due to
repayment of debt and lesser cash balances invested in certificates of deposit.
Net earnings increased 5% to $2,119,856 for the three months ended June 30,
1996 as compared to net earnings of $2,013,626 for the same period ended June
30, 1995 as a result of increased sales.
Accounts receivable and other current assets decreased 1% from $25,876,100 on
December 31, 1995 to $25,549,069 as of June 30, 1996.
Inventories as of June 30, 1996 increased 3% to $42,472,090 from $41,089,948
on December 31, 1995 mainly to support expected future customer demand.
Accounts payable increased 14% from $6,630,608 on December 31, 1995 to
$7,554,433 on June 30, 1996 primarily due to increases in purchases of
inventories.
The registrant's current portion of long-term debt of $1,433,333 and long-term
debt of $16,866,667 for June 30, 1996 is $300,000 less than it was at December
31, 1995, due to scheduled repayments of debt.
As a result of earlier charges taken by the Company prior to 1996 in connection
with the Federal government settlement, there will be no additional effect on
earnings resulting from finalization of the matter.
LIQUIDITY AND CAPITAL RESOURCES
Cash and certificates of deposit increased by $2,856,459 from $5,421,553 on
December 31, 1995 to $8,278,012 as of June 30, 1996. The change is primarily
a result of normal operations. Additionally, as of June 30, 1996, under its
existing revolving Credit Agreement, the registrant had $10,000,000 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, have been more than adequate.
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 Company paid $6,500,000 in the third
quarter of 1996 in connection with the settlement of its dispute with the
Federal government. The registrant believes that its cash flow from operating
activities together with other capital resources and funds from credit sources
are adequate to meet all of its funding requirements for the foreseeable
future.
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PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings
The previously announced settlement agreements entered into with the Federal
government resolving all existing legal claims and proceedings by the
government in connection with certain business dealings between the Company and
the Department of Veterans Affairs were approved in Federal court on July 24,
1996 with no additional monetary amounts to be paid beyond what was reserved as
a liability at December 31, 1995.
In addition, the Company has reached an understanding with the Department of
Veterans Affairs which enables the Company to continue to receive Federal
contracts and benefits in the future provided that certain minimal internal
administrative procedures are established by the Company.
ITEM 2. Changes in Securities
None.
ITEM 3. Defaults Upon Senior Securities
Inapplicable.
ITEM 4. Submission of matters to a vote of security-holders
The Annual Meeting of Shareholders was held on May 3, 1996. Of the
8,133,552 shares outstanding and entitled to vote at the meeting, 7,483,786
shares were present at the meeting, in person or by proxy. At the meeting the
shareholders:
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<PAGE> 10
a) Voted for the nomination of all proposed Directors being, Messrs. G.M.
Benstock, A.D. Schwartz, M. Benstock, S. Schechter, P. Benstock, T.K.
Riden and M. Gaetan, PhD. The votes on all directors nominated were as
follows:
<TABLE>
<CAPTION>
Nominee Votes For: Votes Withheld:
------------------ ---------- ---------------
<S> <C> <C>
Gerald M. Benstock 7,422,915 60,871
---------- ---------------
Saul Schechter 7,424,415 59,371
---------- ---------------
Alan D. Schwartz 7,424,415 59,371
---------- ---------------
Michael Benstock 7,424,515 59,271
---------- ---------------
Peter Benstock 7,424,515 59,271
---------- ---------------
Manuel Gaetan 7,422,215 61,571
---------- ---------------
Thomas K. Riden 7,422,215 61,571
---------- ---------------
</TABLE>
b) Ratified the appointment of Deloitte & Touche LLP, independent
certified public accountants, as auditors for the Company's financial
statements for the year ending December 31, 1996 with 7,454,487 votes
for the motion, 18,359 votes against and 10,940 votes abstaining.
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.
b) Reports on Form 8-K
None.
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: July 29, 1996 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
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[DELOITTE & TOUCHE LLP LETTERHEAD]
EXHIBIT 15
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 June 30,
1996 and 1995, as indicated in our report dated July 29, 1996; 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 June 30, 1996, is
incorporated by reference in Registration Statement No. 2-85796 on Form S-8.
We also are aware that the aforementioned report, pursuant to Rule 436(c) under
the Securities Act of 1933, is not considered a part of the Registration
Statement prepared or certified by an accountant or a report prepared or
certified by an accountant within the meaning of Sections 7 and 11 of that Act.
/s/ Deloitte & Touche LLP
July 26, 1996
Page 11
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF SUPERIOR SURGICAL MANUFACTURING COMPANY, INC. FOR THE
SIX MONTHS ENDED JUNE 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 8,278,012
<SECURITIES> 0
<RECEIVABLES> 25,549,069
<ALLOWANCES> 0
<INVENTORY> 42,472,090
<CURRENT-ASSETS> 76,299,171
<PP&E> 30,202,482
<DEPRECIATION> 0
<TOTAL-ASSETS> 110,153,408
<CURRENT-LIABILITIES> 19,336,729
<BONDS> 16,866,667
0
0
<COMMON> 8,133,552
<OTHER-SE> 72,090,012
<TOTAL-LIABILITY-AND-EQUITY> 110,153,408
<SALES> 69,569,150
<TOTAL-REVENUES> 0
<CGS> 46,452,050
<TOTAL-COSTS> 63,057,977
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 633,692
<INCOME-PRETAX> 6,511,173
<INCOME-TAX> 2,475,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,036,173
<EPS-PRIMARY> 0.50
<EPS-DILUTED> 0.50
</TABLE>
