<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 September 30, 1997
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 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 7,977,652 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 September 30,
--------------------------------
1997 1996
------------ ------------
(Unaudited)
<S> <C> <C>
Net sales ..................................... $ 37,117,239 $ 35,433,226
------------ ------------
Costs and expenses:
Cost of goods sold .......................... $ 24,630,986 $ 23,261,706
Selling and administrative expenses ......... 8,304,976 8,161,832
Interest expense ............................ 249,084 339,971
------------ ------------
$ 33,185,046 $ 31,763,509
------------ ------------
Earnings before taxes on income ............... $ 3,932,193 $ 3,669,717
Taxes on income ............................... 1,474,000 1,390,000
------------ ------------
Net earnings .................................. $ 2,458,193 $ 2,279,717
============ ============
Weighted average number of shares out-
standing during the period .................. 7,975,914 Shs. 8,133,552 Shs.
Net earnings per common share ............... $ 0.31 $ 0.28
============ ============
Cash dividends declared per common share .... $ 0.11 $ 0.09
============ ============
<CAPTION>
- ---------------------------------------------------------------------------------------
Nine Months Ended September 30,
--------------------------------
1997 1996
------------ ------------
(Unaudited)
<S> <C> <C>
Net sales ..................................... $108,149,043 $105,002,376
------------ ------------
Costs and expenses:
Cost of goods sold .......................... $ 71,831,620 $ 69,713,756
Selling and administrative expenses ......... 24,893,925 24,134,067
Interest expense ............................ 852,647 973,663
------------ ------------
$ 97,578,192 $ 94,821,486
------------ ------------
Earnings before taxes on income ............... $ 10,570,851 $ 10,180,890
Taxes on income ............................... 3,964,000 3,865,000
------------ ------------
Net earnings .................................. $ 6,606,851 $ 6,315,890
============ ============
Weighted average number of shares out-
standing during the period .................. 8,007,366 Shs. 8,133,552 Shs.
Net earnings per common share ............... $ 0.83 $ 0.78
============ ============
Cash dividends declared per common share .... $ 0.33 $ 0.27
============ ============
</TABLE>
The results of the nine months ended September 30, 1997 are not necessarily
indicative of results to be expected for the full year ending December 31, 1997.
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SUPERIOR SURGICAL MFG. CO., INC.
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
------
September 30,
1997 December 31,
(Unaudited) 1996
------------- ------------
(1)
<S> <C> <C>
CURRENT ASSETS:
Cash and certificates of deposit ..................... $ 9,432,898 $ 4,718,632
Accounts receivable and other current assets ......... 27,610,158 24,550,365
Inventories* ......................................... 42,915,529 44,112,968
------------ ------------
TOTAL CURRENT ASSETS .......................... $ 79,958,585 $ 73,381,965
PROPERTY, PLANT AND EQUIPMENT .......................... 26,704,599 28,995,394
EXCESS OF COST OVER FAIR VALUE OF
ASSETS ACQUIRED ..................................... 814,788 818,276
OTHER ASSETS ........................................... 2,798,109 2,463,459
------------ ------------
$110,276,081 $105,659,094
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable ..................................... $ 8,201,275 $ 6,417,139
Other current liabilities ............................ 5,601,027 4,455,531
Current portion of long-term debt .................... 2,266,667 2,266,667
------------ ------------
TOTAL CURRENT LIABILITIES ..................... $ 16,068,969 $ 13,139,337
LONG-TERM DEBT ......................................... 14,183,333 15,733,333
DEFERRED INCOME TAXES .................................. 2,870,000 2,630,000
SHAREHOLDERS' EQUITY ................................... 77,153,779 74,156,424
------------ ------------
$110,276,081 $105,659,094
============ ============
</TABLE>
* Inventories consist of the following:
<TABLE>
<CAPTION>
September 30,
1997 December 31,
(Unaudited) 1996
------------- ------------
<S> <C> <C>
Finished goods ............................ $ 25,429,622 $ 27,926,040
Work in process ........................... 4,474,765 3,577,252
Raw materials ............................. 13,011,142 12,609,676
------------ ------------
$ 42,915,529 $ 44,112,968
============ ============
</TABLE>
(1) The balance sheet as of December 31, 1996 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>
Nine Months Ended September 30,
-------------------------------
1997 1996
-------------- -------------
(Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings .............................................. $ 6,606,851 $ 6,315,890
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization .......................... 3,277,622 3,170,941
Deferred income taxes .................................. 240,000 915,000
Changes in assets and liabilities:
Accounts receivable and other current assets ......... (3,059,793) 1,258,366
Inventories .......................................... 1,197,439 (4,526,467)
Accounts payable ..................................... 1,784,136 2,010,874
Other current liabilities ............................ 1,145,496 2,251,114
Liability for dispute settlement .................... -- (6,500,000)
------------ -----------
Net cash flows provided from operating activities ......... $ 11,191,751 $ 4,895,718
------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant, and equipment ............... $ (983,339) $(2,123,090)
Other assets .............................................. (334,650) (619,364)
------------ -----------
Net cash (used) in investing activities ................... $ (1,317,989) $(2,742,454)
------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Reduction in long-term debt ............................... $ (1,550,000) $ (300,000)
Declaration of cash dividends ............................. (2,640,403) (2,196,059)
Proceeds received on exercised stock options .............. 329,407 --
Common stock reacquired and retired ....................... (1,298,500) --
------------ -----------
Net cash (used) in financing activities ................... $ (5,159,496) $(2,496,059)
------------ -----------
Net increase (decrease) in cash and
certificates of deposit ................................ $ 4,714,266 $ (342,795)
Cash and certificates of deposit balance,
beginning of year ........................................... 4,718,632 5,421,553
------------ -----------
Cash and certificates of deposit balance,
end of period ............................................... $ 9,432,898 $ 5,078,758
============ ===========
</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.
e) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles 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.
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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 statements 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, 1996, filed with the Securities and Exchange Commission. Reference
is hereby made to registrant's Financial Statements for 1996, 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 September 30, 1997, the condensed summaries
of operations for the nine-months and three-months ended September 30, 1997 and
1996 and the condensed summaries of cash flows for the nine-months ended
September 30, 1997 and 1996. 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 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 of Superior Surgical Mfg. Co., Inc. as of December
31, 1996, 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 20, 1997, 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, 1996 is fairly stated, in all
material respects, in relation to the balance sheet from which it has been
derived.
/s/ Deloitte & Touche LLP
October 24, 1997
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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 decreased by approximately 3% in the first quarter
of 1997 compared to the first quarter of 1996 due to weakness in healthcare
markets. For the second and third quarters of 1997 compared to 1996, sales
increased by approximately 8% and 5% respectively due to continued momentum in
the economic activities in the marketplaces served by the registrant.
Accordingly, for the nine months ended September 30, 1997 sales were
approximately 3% more than the nine months ended September 30, 1996.
Cost of goods sold approximated 66-1/3% for the nine months ended September 30,
1997 and 1996.
Selling and administrative expenses, as a percentage of sales, were
approximately 23% for the first nine months of 1997 and 1996.
Interest expense of $852,647 for the nine month period ended September 30, 1997
decreased 12% from $973,663 for the similar period ended September 30, 1996 due
to repayment of debt and greater cash balances invested in certificates of
deposit.
Net earnings increased 8% to $2,458,193 for the three months ended September 30,
1997 as compared to net earnings of $2,279,717 for the same period ended
September 30, 1996 as a result of increased sales.
Accounts receivable and other current assets increased 12.5% from $24,550,365 on
December 31, 1996 to $27,610,158 as of September 30, 1997.
Inventories as of September 30, 1997 decreased 2.7% to $42,915,529 from
$44,112,968 on December 31, 1996 due mainly to higher turnover in finished goods
to support increasing sales.
Accounts payable increased 28% from $6,417,139 on December 31, 1996 to
$8,201,275 on September 30, 1997 primarily due to increases in purchases of
inventories.
The registrant's current portion of long-term debt of $2,266,667 and long-term
debt of $ 14,183,333 for September 30, 1997 is $ 1,550,000 less than it was at
December 31, 1996, due to scheduled repayments of debt.
LIQUIDITY AND CAPITAL RESOURCES
Cash and certificates of deposit increased by $4,714,266 from $4,718,632 on
December 31, 1996 to $9,432,898 as of September 30, 1997. The change is
primarily a result of normal operations. Additionally, as of September 30, 1997,
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 are adequate to meet its anticipated funding requirements for the
foreseeable future.
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PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings
None.
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.
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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: October 30, 1997 SUPERIOR SURGICAL MFG. CO., INC.
By /s/ Gerald M. Benstock
------------------------------------
Gerald M. Benstock
Chairman and Chief Executive Officer
By /s/ Stephen D. Purifoy
------------------------------------
Stephen D. Purifoy
Chief Financial Officer and Principal
Accounting Officer, Vice President
and Treasurer
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EXHIBIT 15
[DELOITTE & TOUCHE LLP LETTERHEAD]
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 September
30, 1997 and 1996, as indicated in our report dated October 24, 1997; 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 September 30, 1997, 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
- -------------------------
October 24, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED SUMMARY OF OPERATIONS, CONDENSED BALANCE SHEETS AND SUMMARY OF CASH
FLOWS INCLUDED IN THE COMPANY'S FORM 10-Q FOR THE PERIOD ENDED SEPTEMBER 30,
1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 9,432,898
<SECURITIES> 0
<RECEIVABLES> 27,610,158
<ALLOWANCES> 0
<INVENTORY> 42,915,529
<CURRENT-ASSETS> 79,958,585
<PP&E> 26,704,599
<DEPRECIATION> 0
<TOTAL-ASSETS> 110,276,081
<CURRENT-LIABILITIES> 16,068,969
<BONDS> 14,183,333
0
0
<COMMON> 8,007,366
<OTHER-SE> 80,023,779
<TOTAL-LIABILITY-AND-EQUITY> 110,276,081
<SALES> 108,149,043
<TOTAL-REVENUES> 0
<CGS> 71,831,620
<TOTAL-COSTS> 97,578,192
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 852,647
<INCOME-PRETAX> 10,570,851
<INCOME-TAX> 3,964,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,606,851
<EPS-PRIMARY> .83
<EPS-DILUTED> .83
</TABLE>
