<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, 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 34645-0002
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 8,133,552 common
shares outstanding.
Page 1 of 11
<PAGE> 2
PART I - FINANCIAL INFORMATION
------------------------------
ITEM 1. Financial Statements
SUPERIOR SURGICAL MFG. CO., INC.
CONDENSED SUMMARY OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended March 31,
-------------------------------
1996 1995
------------ ------------
(Unaudited)
<S> <C> <C>
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $34,672,192 $34,116,921
----------- -----------
Costs and expenses:
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . $23,191,176 $22,686,795
Selling and administrative expenses . . . . . . . . . . . . . . . . . . . 8,096,154 7,613,697
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . 293,545 215,112
----------- -----------
$31,580,875 $30,515,604
----------- -----------
Earnings before taxes on income . . . . . . . . . . . . . . . . . . . . . . $ 3,091,317 $ 3,601,317
Taxes on income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,175,000 1,370,000
----------- -----------
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,916,317 $ 2,231,317
=========== ===========
Weighted average number of shares out-
standing during the period . . . . . . . . . . . . . . . . . . . . . . . 8,133,552 Shs. 8,363,552 Shs.
Net earnings per common share . . . . . . . . . . . . . . . . . . . . . . $ 0.24 $ 0.27
=========== ===========
Cash dividends declared per common
share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.09 $ 0.09
=========== ===========
</TABLE>
The results of the three months ended March 31, 1996 are not necessarily
indicative of results to be expected for the full year ending December 31,
1996.
Page 2 of 11
<PAGE> 3
SUPERIOR SURGICAL MFG. CO., INC.
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
------
March 31,
1996 December 31,
(Unaudited) 1995
----------- ------------
(1)
<S> <C> <C>
CURRENT ASSETS:
Cash and certificates of deposit . . . . . . . . . . . . . . . . . . . . $ 9,653,225 $ 5,421,553
Accounts receivable and other current assets . . . . . . . . . . . . . . 25,571,883 25,876,100
Inventories* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42,184,683 41,089,948
------------ ------------
TOTAL CURRENT ASSETS . . . . . . . . . . . . . . . . . . . . . . . . $ 77,409,791 $ 72,387,601
PROPERTY, PLANT AND EQUIPMENT . . . . . . . . . . . . . . . . . . . . . . . 30,171,375 30,734,584
EXCESS OF COST OVER FAIR VALUE OF
ASSETS ACQUIRED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 821,764 822,926
OTHER ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,763,893 2,188,526
------------ ------------
$111,166,823 $106,133,637
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,792,032 $ 6,630,608
Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . 5,077,616 3,575,151
Liability for dispute settlement . . . . . . . . . . . . . . . . . . . . 6,500,000 6,500,000
Current portion of long-term debt . . . . . . . . . . . . . . . . . . . . 600,000 600,000
------------ ------------
TOTAL CURRENT LIABILITIES . . . . . . . . . . . . . . . . . . . . . . $ 20,969,648 $ 17,305,759
LONG-TERM DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,000,000 18,000,000
DEFERRED INCOME TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,495,000 1,310,000
SHAREHOLDERS' EQUITY . . . . . . . . . . . . . . . . . . . . . . . . . . . 70,702,175 69,517,878
------------ ------------
$111,166,823 $106,133,637
============ ============
</TABLE>
* Inventories consist of the following:
<TABLE>
<CAPTION>
March 31,
1996 December 31,
(Unaudited) 1995
------------ ------------
<S> <C> <C>
Finished goods . . . . . . . . . . . . . . . . . . . . . . . . . $24,766,532 $24,783,647
Work in process . . . . . . . . . . . . . . . . . . . . . . . . . 4,106,308 3,515,698
Raw materials . . . . . . . . . . . . . . . . . . . . . . . . . . 13,311,843 12,790,603
----------- -----------
$42,184,683 $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.
Page 3 of 11
<PAGE> 4
SUPERIOR SURGICAL MFG. CO., INC.
SUMMARY OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1996 1995
---------- -----------
(Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,916,317 $ 2,231,317
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . 1,037,293 799,125
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . 185,000 15,000
Changes in assets and liabilities:
Accounts receivable and other current
assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 304,217 (1,156,450)
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,094,735) (2,398,171)
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . 2,161,424 1,160,752
Other current liabilities . . . . . . . . . . . . . . . . . . . . . 1,502,465 1,978,102
------------ ------------
Net cash flows provided from operating
activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,011,981 $ 2,629,675
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property,plant,and equipment . . . . . . . . . . . . . . . . $ (472,922) $ (1,704,565)
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (575,367) (215,779)
------------ ------------
Net cash (used) in investing activities . . . . . . . . . . . . . . . . . $ (1,048,289) $ (1,920,344)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Declaration of cash dividends . . . . . . . . . . . . . . . . . . . . . . $ (732,020) $ (752,720)
------------ ------------
Net cash (used) provided in financing activities . . . . . . . . . . . . $ (732,020) $ (752,720)
------------ ------------
Net increase (decrease) in cash and
certificates of deposit . . . . . . . . . . . . . . . . . . . . . . . . $ 4,231,672 $ (43,389)
Cash and certificates of deposit balance,
beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,421,553 11,233,700
------------ ------------
Cash and certificates of deposit balance,
end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,653,225 $ 11,190,311
============ ============
</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 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.
Page 5 of 11
<PAGE> 6
Note 2 - Dispute with Governmental Agency:
The Company has been 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 awarded by the U. S. Department
of Veterans Affairs. Federal authorities were also pursuing a civil
investigation of the Company relating to these matters. The dispute did not
involve the integrity of the Company's products.
The Company and the government have signed settlement agreements which, subject
to court approval, should resolve all issues regarding the investigation and
dispute. In addition, the Company is currently in active discussions with the
Department of Veterans Affairs (formerly the Veterans Administration) with
regard to the Company's ability to receive future Federal contracts and other
benefits. Management expects that no restrictions will be placed on the
Company upon finalization of the agreements.
_______________________________________________________________________________
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.
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) 273-8300
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, 1996, and the condensed
summaries of operations and cash flows for the three-months ended March 31,
1996 and 1995. 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.
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
April 22, 1996
Page 7 of 11
<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 66.7% for the three months ended March 31,
1996 and 1995.
Selling and administrative expenses, as a percentage of sales, were
approximately 22.9% for the first three months of 1996 and 1995.
Interest expense of $293,545 for the three month period ended March 31, 1996
increased 36% from $215,112 for the similar period ended March 31, 1995 due
to lesser cash balances invested in certificates of deposit in 1996.
Net earnings decreased 14% to $1,916,317 for the three months ended March 31,
1996 as compared to net earnings of $2,231,317 for the same period ended March
31, 1995 as a result of increased expenses, primarily selling and
administrative.
Accounts receivable and other current assets decreased 1% from $25,876,100 on
December 31, 1995 to $25,571,883 as of March 31, 1996.
Inventories as of March 31, 1996 increased 3% to $42,184,683 from $41,089,948
on December 31, 1995 mainly to support expected customer demand.
Accounts payable increased 33% from $6,630,608 on December 31, 1995 to
$8,792,032 on March 31, 1996 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 $18,000,000 for March 31, 1996 is unchanged compared to December 31,
1995.
Liquidity And Capital Resources
Cash and certificates of deposit increased by $4,231,672 from $5,421,553 on
December 31, 1995 to $9,653,225 as of March 31, 1996. The change is primarily
a result of normal operations. Additionally, as of March 31, 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 registrant believes that its cash flow
from operating activities together with other capital resources and funds from
credit sources will be adequate to meet all of its funding requirements for the
remainder of the year and for the foreseeable future.
Page 8 of 11
<PAGE> 9
PART II - OTHER INFORMATION
---------------------------
ITEM 1. Legal Proceedings
As previously reported, the Company has been a target of a federal
criminal investigation relating to a dispute involving alleged false statements
and false claims purportedly made in connection with contracts ostensibly
awarded by the U. S. Department of Veterans Affairs. Federal authorities have
also conducted a civil investigation of the Company relating to these matters.
The dispute does not involve the integrity of the Company's products.
The Company has reached agreements with the Department of Justice and
the United States Attorney's Office in Tampa, Florida, to resolve these
previously announced disputes. The agreements are subject to additional
approval by the Court. If finalized, the agreements will resolve the disputes
and criminal and civil investigations of the Company arising from the VA
contracts. The agreements provide for a $6,200,000 payment to settle civil and
contractual disputes and a $300,000 fine coupled with a guilty plea by the
Company for one count for a violation of the Federal False Statements Act. The
Company is not certain whether or not a previously terminated officer will be
charged in connection with the matter. However, upon finalization of the
agreements, the investigations are expected to be concluded with none of the
Company's existing officers or directors being charged. The Company is in
active discussions with the Department of Veterans Affairs (formerly the
Veterans Administration) with regard to the Company's ability to receive future
Federal contracts and other benefits. Management expects that no restrictions
will be placed on the Company upon finalization of the agreements and resulting
plea. The Company accrued $6,500,000 through December 31, 1995 in anticipation
of the dispute settlement. Management is not aware of any additional charges
that may result should a finalization of the settlement occur.
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
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: April 26, 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
Treasurer
Page 10 of 11
<PAGE> 1
EXHIBIT 15
DELOITTE &
TOUCHE LLP
- ------------ ---------------------------------------------------------
Certified Public Accountants Suite 1200
201 East Kennedy Boulevard
Tampa, Florida 33602-5821
Telephone: (813) 273-8300
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,
1996 and 1995, as indicated in our report dated April 22, 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 March 31, 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
April 22, 1996
Page 11 of 11
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<EXCHANGE-RATE> 1
<CASH> 9,653,225
<SECURITIES> 0
<RECEIVABLES> 25,571,883
<ALLOWANCES> 0
<INVENTORY> 42,184,683
<CURRENT-ASSETS> 77,409,791
<PP&E> 30,171,375
<DEPRECIATION> 0
<TOTAL-ASSETS> 111,166,823
<CURRENT-LIABILITIES> 20,969,648
<BONDS> 18,000,000
0
0
<COMMON> 8,133,552
<OTHER-SE> 70,702,175
<TOTAL-LIABILITY-AND-EQUITY> 111,166,823
<SALES> 34,672,192
<TOTAL-REVENUES> 0
<CGS> 23,191,176
<TOTAL-COSTS> 31,580,875
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 293,545
<INCOME-PRETAX> 3,091,317
<INCOME-TAX> 1,175,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,916,317
<EPS-PRIMARY> 0.24
<EPS-DILUTED> 0.24
</TABLE>
