<PAGE> 1
FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
[ ] 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 I.R.S. Employer Identification
No. 11-1385670
10099 Seminole Blvd.
Seminole, Florida 33772
Telephone (813) 397-9611
Securities registered pursuant to Section 12(b) of the Act:
Common Shares with a par value Listed on
of $1.00 each American Stock Exchange
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
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
-----
As of March 21, 1997, 8,056,752 common shares were outstanding, and
the aggregate market value of the registrant's common shares held by
non-affiliates was approximately $68.2 million (based on the closing price of
the registrant's common shares on the American Stock Exchange on said date).
Documents Incorporated by Reference:
Registrant's Proxy Statement to be filed on or before March 30, 1997,
for its Annual Meeting of Shareholders to be held May 2, 1997, is incorporated
by reference to furnish the information required by Items 10, 11, 12 and 13 of
Part III.
Exhibit index may be found on Page 22.
Page 1
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PART I
Item 1. Business
(a) Superior Surgical Mfg. Co., Inc. ("registrant" or
the "Company") was organized as a New York
company in 1920 and was incorporated in 1922.
Registrant's business has not changed in any
significant way during the past five years.
(b) Although registrant operates, for selling,
promotional and other reasons through various
divisions, nevertheless there are no distinct
segments or lines of business; registrant's
entire business consists of the sale of
uniforms and service apparel, and
miscellaneous products directly related
thereto.
(c) Registrant manufactures and sells a wide range of
apparel and accessories for the medical and health
fields as well as for the industrial, commercial,
leisure, and public safety markets. Its principal
products are:
1. Uniforms and service apparel for personnel
of:
A) Hospitals and health facilities;
B) Hotels, commercial buildings,
residential buildings, and food
service facilities;
C) General and special purpose
industrial uses;
D) Commercial enterprises (career
apparel for banks, airlines, etc.);
E) Public and private safety and
security organizations;
F) Miscellaneous service uses.
2. Miscellaneous products directly related to:
A) Uniforms and service apparel
specified above (e.g. operating room
masks, boots, and sheets);
B) Linen suppliers and industrial
launderers, to whom a substantial
portion of the registrant's uniforms
and service apparel are sold; such
products being primarily industrial
laundry bags.
Uniforms and service apparel account for 90-95% of
total sales and revenues; no single class of product
listed above as a miscellaneous product of the
registrant accounts for more than 10% of total sales
and revenues.
Registrant competes with national and regional
manufacturers and also with local firms in most major
metropolitan areas. Industry statistics are not
available, but the registrant believes that it is one
of the leading suppliers of garments to hospitals and
industrial clean rooms, hotels and motels, food
service establishments and uniforms to linen
suppliers. Registrant experiences competition
primarily in the areas of product development,
styling and pricing.
Registrant competes with more than three dozen firms
including divisions of larger corporations. The
nature and degree of competition varies with the
customer and market where it occurs.
I-1 Page 2
<PAGE> 3
Registrant has a substantial number of customers, the
largest of which accounted for no more than 4% of
registrant's 1996 sales. Although registrant at all
times has a substantial backlog of orders, registrant
does not consider this significant since its backlog
of orders at any time consists primarily of recurrent
firm orders being processed and filled. Registrant
normally completes shipments of orders from stock
between 1 and 2 weeks after their receipt. As of
February 28, 1997, the backlog of all orders was
approximately $7,400,000, compared to approximately
$7,300,000 a year earlier.
Registrant markets itself to its customers as a
"stock house". Therefore, registrant at all times
carries substantial inventories of raw materials
(principally piece goods) and finished garments which
requires substantial working capital. Registrant's
principal raw materials are textile products,
generally available from a number of sources.
While registrant owns and uses several trademarks,
its mark "Fashion Seal Uniforms" (presently
registered to August 7, 2007, subject to renewal) is
important since more than 50% of registrant's
products are sold under that name. In view of the
nature of registrant's business, compliance with
Federal, state, or local laws regulating the
discharge of materials into the environment, or
otherwise relating to the protection of the
environment, has had no material effect upon its
operations or earnings. Substantially all of
registrant's business is non-seasonal in nature. The
registrant has approximately 1,900 employees.
Item 2. Properties
The Company has an ongoing program designed to maintain and improve
its facilities. Generally, all properties are in satisfactory condition. The
Company's properties are currently fully utilized (except as otherwise noted),
and have aggregate productive capacity to meet registrant's present needs as
well as those of the foreseeable future. The material manufacturing locales
are rented for nominal amounts due to cities providing incentives for
manufacturers to locate in their area - all such properties may be purchased
for nominal amounts. As a result, it is believed that the subject lease
expirations and renewal terms thereof are not material.
(a) Seminole, Florida - Plant of approximately 60,000 square feet
owned by the registrant; used as principal
administrative office and for warehousing and
shipping, as well as the corporate design center.
(b) Eudora, Arkansas - Plant of approximately 217,000 square feet,
partially leased from the City of Eudora under lease
requiring payment of only a nominal rental; used for
manufacturing, warehousing, and shipping .
(c) Leesburg, Georgia - Plant of approximately 85,000 square feet,
leased from Development Authority of Leesburg, Georgia
under lease requiring payment of only a nominal
rental; used for manufacturing, warehousing, and
shipping .
(d) Lake Village, Arkansas - Plant of approximately 35,000 square
feet, leased from the City of Lake Village under
lease requiring payment of only a nominal amount;
used for manufacturing.
(e) Tampa, Florida - Plant of approximately 111,000 square feet,
owned by the registrant; used for regional
administrative offices, warehousing, shipping and
small retail operation.
(f) Miami, Florida - Plant of approximately 9,000 square feet,
leased from private owners under a lease expiring in
1997; used for regional sales office, warehousing,
shipping, and small retail operation.
I-2 Page 3
<PAGE> 4
(g) McGehee, Arkansas - Plant of approximately 26,000 square feet,
leased from the City of McGehee under lease requiring
payment of only a nominal rental; used for
manufacturing.
(h) Memphis, Tennessee - Plant of approximately 4,000 square feet,
leased from private owners under lease expiring 2002;
used for warehousing, shipping and retail sales.
(I) Miscellaneous -
New Orleans, Louisiana, sales office - leased;
Burbank, California, sales office - leased; Las Vegas,
Nevada, warehouse and sales office - leased; Atlanta,
Georgia, warehouse and sales office - leased; San
Antonio, Texas, sales office - leased; Yazoo City,
Mississippi, used for manufacturing - leased; Hamburg,
Arkansas, used for manufacturing - owned; Delhi,
Louisiana, used for manufacturing - leased; Lexington,
Mississippi, used for manufacturing - owned; Tallulah,
Louisiana, used for manufacturing - leased; Pine
Bluff, Arkansas, used for manufacturing - scheduled
to be sold.
Item 3. Legal Proceedings
None.
I-3 Page 4
<PAGE> 5
Item 4. Submission of Matters to a Vote of Security Holders
(a) None
PART II
Item 5. Market Price of and Dividends on Registrant's Common Equity and
Related Stockholder Matters.
The principal market on which registrant's common
shares are traded is the American Stock Exchange;
said shares have also been admitted to unlisted
trading on the Midwest Stock Exchange.
The table below presents, for registrant's common
shares, dividend information and high and low sales
prices as reported in the consolidated transaction
reporting system of the American Stock Exchange.
<TABLE>
<CAPTION>
QUARTER ENDED
----------------------------------------------------------------------------------------------------
1996 1995
------------------------------------------------- ---------------------------------------------
Mar. 31 June 30 Sept. 30 Dec. 31 Mar. 31 June 30 Sept. 30 Dec. 31
------- ------- -------- ------- ------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Common Shares:
High $10-1/2 $12-1/8 $12-1/8 $13-1/2 $14-3/4 $13 $11 $10-3/8
Low $ 8-7/8 $10-1/4 $10 $11-7/8 $10-3/4 $10-3/4 $9-1/2 $8-3/4
Dividends (total
for 1996-$.38;
1995-$.36) $.09 $.09 $.09 $.11 $.09 $.09 $.09 $.09
</TABLE>
Long-term debt agreements of the registrant include covenants which,
among other things, restrict dividends payable. Under the most restrictive debt
agreement, retained earnings of approximately $13,060,000 were available at
December 31, 1996 for declaration of dividends. Registrant expects that, so
long as earnings and business conditions warrant, it will continue to pay
dividends and that the amount thereof, as such conditions permit, and as the
Directors approve, will increase from time to time.
On March 21, 1997, registrant had 504 shareholders of record and the
closing price for registrant's common shares on the American Stock Exchange was
$13.00 per share.
I-4, II-1 Page 5
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Item 6.
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Years Ended December 31, 1996 1995 1994 1993 1992
--------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales . . . . . . . . . . . . . . $141,420,626 $135,197,798 $135,067,397 $130,126,690 $128,665,516
------------ ------------ ------------ ------------ ------------
Costs and expenses:
Cost of goods sold . . . . . . . $ 93,897,373 $ 91,169,728 $ 89,308,729 $ 87,280,624 $ 85,250,260
Selling and administrative
expenses . . . . . . . . . . . 32,333,924 30,162,203 28,537,946 27,835,521 26,964,446
Provision for dispute
settlement . . . . . . . . . . - 4,250,000 - 2,250,000 -
Interest expense - net 1,295,233 968,830 959,715 641,669 586,628
------------ ------------ ------------ ------------ ------------
$127,526,530 $126,550,761 $118,806,390 $118,007,814 $112,801,334
------------ ------------ ------------ ------------ ------------
Earnings before taxes on
income . . . . . . . . . . . . . $ 13,894,096 $ 8,647,037 $ 16,261,007 $ 12,118,876 $ 15,864,182
Taxes on income . . . . . . . . . . . 5,200,000 4,885,000 6,180,000 4,415,000 5,950,000
------------ ------------ ------------ ------------ ------------
Net earnings . . . . . . . . . . . . $ 8,694,096 $ 3,762,037 $ 10,081,007 $ 7,703,876 $ 9,914,182
============ ============ ============ ============ ============
Net earnings per common
share . . . . . . . . . . . . . $1.07 $ .45 $ 1.17 $ .89 $ 1.15
===== ====== ======== ======= =======
Cash dividends per common
share . . . . . . . . . . . . . $ .38 $ .36 $ .32 $ .28 $ .25
===== ====== ======== ======= =======
At year end:
Total assets . . . . . . . . . . $105,659,094 $106,133,637 $104,864,385 $ 87,168,003 $ 80,585,153
------------ ------------ ------------ ------------ ------------
Long-term debt . . . . . . . . . $ 15,733,333 $ 18,000,000 $ 18,600,000 $ 4,200,000 $ 4,955,000
------------ ------------ ------------ ------------ ------------
Working capital . . . . . . . . . $ 60,242,628 $ 55,081,842 $ 64,295,804 $ 53,096,945 $ 51,353,415
------------ ------------ ------------ ------------ ------------
Shareholders Equity . . . . . . . $ 74,156,424 $ 69,517,878 $ 70,937,920 $ 68,568,495 $ 63,082,410
------------ ------------ ------------ ------------ ------------
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OPERATIONS: Net sales for 1994 increased by 4% over 1993 due to the
continuation of new uniform programs (the Company manufactures and sells a
wide range of uniforms, career apparel and accessories for the hospital and
healthcare fields; hotels; fast food and other restaurants; and public
safety, industrial, transportation and commercial markets). Sales in 1995
were essentially the same as those in 1994, which the Company believes was
primarily due to general business conditions in the market in which the
Company sold in 1994. In 1996, the trends appearing in 1995 were overcome
along the lines as they were in 1994, resulting in a 5% increase in 1996
over 1995.
As a percent of sales, cost of goods sold were 66.4% in 1996, 67.4% in 1995
and 66.1% in 1994. The increase in 1995 was due principally to increased
costs and the inability to raise sales prices sufficiently to cover
increased costs. The decrease in 1996 was primarily the result of
increased manufacturing efficiencies.
Selling and administrative expenses increased by 7% in 1996, 6% in 1995 and
by 3% in 1994. The increases were attributable to increases in costs. As
a percentage of sales, selling and administrative expenses have not changed
significantly over the past several years and no material change is
expected in 1997.
The provision for dispute settlement in the amount of $4,250,000 in 1995
represents the final sum of the payment to be made under agreements with
the Department of Justice and the United States Attorney's Office in Tampa,
Florida to resolve the previously-announced dispute with the federal
government arising out of certain contractual relations.
II-2 Page 6
<PAGE> 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CON'T)
(See Note 11 of Notes to Financial Statements.)
Interest expense as a percentage of sales was 0.9% in 1996; in 1995 and 1994 it
was 0.7%. The increase in 1996 as a percentage of sales was principally due to
lesser interest income generated on certificates of deposit.
The effective income tax rate in 1996 was 37.4%; in 1995 , it was 56.5% and in
1994, it was 38.0%. Included in the 1995 calculations is the non-deductible
portion of the dispute charge. The effective tax rate for 1995 without this
charge would have been 37.9%.
In 1996, the Company showed net income (after taxes) of 6.2% of sales with a
return of 12.1% on average equity; for 1995, net income was 2.8% of sales with
a return of 5.4% on average equity, while in 1994, the corresponding figures
were 7.5% and 14.5%.
LIQUIDITY AND CAPITAL RESOURCES: The Company uses a number of standards for its
own purposes in measuring its liquidity: working capital, profitability ratios;
long-term debt as a percentage of long-term debt and equity, and activity
ratios. In its computations, as in this report, all inventory figures are on a
FIFO basis.
The working capital of the Company in 1996 was $60,242,628 and the working
capital ratio 5.6:1; for 1995, it was $55,081,842 and the ratio 4.2:1; while
for 1994, the figures were $64,295,804 and 6.3:1. The Company has operated
without hindrance or restraint with its present working capital, believing that
income generated from operations and outside sources of credit, both trade and
institutional, are more than adequate.
In 1996, the Company's percentage of long term debt to long-term debt and
equity was 17.5%; in 1995, it was 20.6% and in 1994, it was 20.8%.
The Company has an on-going capital expenditure program designed to maintain
and improve its facilities. Capital expenditures were approximately
$2,625,000, $9,750,000 and $9,100,000 in the years 1996, 1995 and 1994,
respectively. Projected capital expenditures for 1997, while different from
those of the last several years, are expected to be more in line with 1996
expenditures than those in 1995 and 1994. The Company at all times evaluates
its capital expenditure programs in light of prevailing economic conditions.
In 1994, the Company's cash and certificates of deposit balance increased by
approximately $8,200,000, principally due to new borrowings in the amount of
$15,000,000 offset by the repurchase of 550,000 shares of its common stock for
an aggregate consideration of $6,765,000. In 1995, the Company's cash and
certificates of deposit balance decreased by approximately $5,800,000,
principally due to capital expenditures, expenditures in financing activities
(dividends and repurchase of 230,000 shares of its common stock) offset by cash
flows from operating activities. In 1996, the accumulation of cash balances
which would normally be placed in certificates of deposit were depleted
significantly by the one-time payment of $6,500,000 to settle the government
dispute as discussed earlier. In addition, the repurchase of 80,000 common
shares of the Company's stock had the effect of decreasing cash balances by
approximately $965,000.
As of December 31,1996, under its existing revolving credit agreement, the
Company had $10,000,000 available to it. In addition, under the most
restrictive terms of its agreements with its lenders, the Company could avail
itself of $6,000,000 in short-term credit (see Note 4 of Notes to Financial
Statements). The revolving credit agreement and the agreements with MassMutual
Life Insurance Company contain restrictive provisions concerning debt to net
worth ratios, other borrowing, capital expenditures, rental commitments,
tangible net worth ($55,000,000), working capital ratio (2.5:1) and payment of
dividends. On December 31, 1996, under the most restrictive terms of the debt
agreements, retained earnings of approximately $13,060,000 were available for
declaration of dividends. The Company is in full compliance with all terms,
conditions and covenants of the various credit agreements. With funds from
such credit facility, anticipated cash flows generated from operations and
other available credit sources readily available, the Company believes for the
foreseeable future that its liquidity is satisfactory, its working capital
adequate and its capital resources sufficient for funding its ongoing capital
expenditure program and its operations, including planned expansion.
II-3 Page 7
<PAGE> 8
Item 8 - Financial Statements and Supplementary Data
SUPERIOR SURGICAL MFG. CO., INC.
STATEMENTS OF EARNINGS
Years Ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
1996 1995 1994
------------- ------------- -------------
<S> <C> <C> <C>
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . $ 141,420,626 $ 135,197,798 $ 135,067,397
------------- ------------- -------------
Costs and expenses:
Cost of goods sold . . . . . . . . . . . . . . . . . . $ 93,897,373 $ 91,169,728 $ 89,308,729
Selling and administrative expenses . . . . . . . . . . 32,333,924 30,162,203 28,537,946
Provision for dispute settlement . . . . . . . . . . . . - 4,250,000 -
Interest expense - net . . . . . . . . . . . . . . . . 1,295,233 968,830 959,715
------------- ------------- -------------
$ 127,526,530 $ 126,550,761 $ 118,806,390
------------- ------------- -------------
Earnings before taxes on income . . . . . . . . . . . . . . $ 13,894,096 $ 8,647,037 $ 16,261,007
Taxes on income . . . . . . . . . . . . . . . . . . . . . . 5,200,000 4,885,000 6,180,000
------------- ------------- -------------
Net earnings . . . . . . . . . . . . . . . . . . . . . . . $ 8,694,096 $ 3,762,037 $ 10,081,007
============= ============= =============
Net earnings per common share . . . . . . . . . . . . . . . $1.07 $ .45 $1.17
===== ======== =====
Dividends per common share . . . . . . . . . . . . . . . . $ .38 $ .36 $ .32
===== ======== =====
</TABLE>
STATEMENTS OF SHAREHOLDERS' EQUITY
Years Ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
Additional Total
Common Paid-In Retained Shareholders'
Shares Capital Earnings Equity
------------- ----------- -------------- -------------
<S> <C> <C> <C> <C>
Balance, January 1, 1994 . . . . . . . . . . . . . . . . . $ 8,703,252 $ 306,594 $ 59,558,649 $ 68,568,495
Net earnings . . . . . . . . . . . . . . . . . . . 10,081,007 10,081,007
Common shares issued upon exercise
of options . . . . . . . . . . . . . . . . . . . 210,300 1,604,894 1,815,194
Purchase and retirement of common shares . . . . . (550,000) (109,817) (6,105,183) (6,765,000)
Cash dividends declared ($.32 per share) . . . . . (2,761,776) (2,761,776)
------------ ----------- -------------- -------------
Balance, December 31, 1994 . . . . . . . . . . . . . . . . $ 8,363,552 $ 1,801,671 $ 60,772,697 $ 70,937,920
Net earnings . . . . . . . . . . . . . . . . . . . 3,762,037 3,762,037
Purchase and retirement of common shares . . . . . (230,000) (49,541) (1,912,359) (2,191,900)
Cash dividends declared ($.36 per share) . . . . . (2,990,179) (2,990,179)
------------ ----------- -------------- -------------
Balance, December 31, 1995 . . . . . . . . . . . . . . . . $ 8,133,552 $ 1,752,130 $ 59,632,196 $ 69,517,878
Net earnings . . . . . . . . . . . . . . . . . . . 8,694,096 8,694,096
Purchase and retirement of common shares . . . . . (80,000) (17,234) (867,566) (964,800)
Cash dividends declared ($.38 per share) . . . . . (3,090,750) (3,090,750)
------------ ----------- -------------- -------------
Balance, December 31, 1996 . . . . . . . . . . . . . . . . $ 8,053,552 $ 1,734,896 $ 64,367,976 $ 74,156,424
============ =========== ============== =============
</TABLE>
See Notes to Financial Statements.
II-4 Page 8
<PAGE> 9
SUPERIOR SURGICAL MFG. CO., INC.
BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
ASSETS
<TABLE>
<CAPTION>
CURRENT ASSETS 1996 1995
--------------- -------------
<S> <C> <C>
Cash and certificates of deposit . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,718,632 $ 5,421,553
Accounts receivable, less allowance for doubtful accounts of $250,000 . . . . . . 23,267,237 24,783,217
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44,112,968 41,089,948
Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . . . 1,283,128 1,092,883
--------------- -------------
TOTAL CURRENT ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . $ 73,381,965 $ 72,387,601
PROPERTY, PLANT AND EQUIPMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28,995,394 30,734,584
EXCESS OF COST OVER FAIR VALUE OF ASSETS ACQUIRED . . . . . . . . . . . . . . . . . . 818,276 822,926
OTHER ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,463,459 2,188,526
--------------- -------------
$ 105,659,094 $ 106,133,637
=============== =============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,417,139 $ 6,630,608
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,108,202 3,061,018
Liability for dispute settlement . . . . . . . . . . . . . . . . . . . . . . . . . - 6,500,000
Taxes on income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 347,329 514,133
Current portion of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . 2,266,667 600,000
--------------- -------------
TOTAL CURRENT LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . $ 13,139,337 $ 17,305,759
LONG-TERM DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,733,333 18,000,000
DEFERRED INCOME TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,630,000 1,310,000
SHAREHOLDERS' EQUITY:
Preferred stock, $1 par value - authorized 300,000 shares (none issued). . . . . . $ - $ -
Common stock, $1 par value - authorized 50,000,000 shares, issued and
outstanding - 8,053,552 and 8,133,552 respectively. . . . . . . . . . . . . . 8,053,552 8,133,552
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,734,896 1,752,130
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64,367,976 59,632,196
--------------- -------------
TOTAL SHAREHOLDERS' EQUITY . . . . . . . . . . . . . . . . . . . . . . . . . . $ 74,156,424 $ 69,517,878
--------------- -------------
$ 105,659,094 $ 106,133,637
=============== =============
</TABLE>
See Notes to Financial Statements.
II-5 Page 9
<PAGE> 10
SUPERIOR SURGICAL MFG. CO., INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
------------- ------------- -------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,694,096 $ 3,762,037 $ 10,081,007
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . . 4,354,477 3,748,341 2,864,847
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . 1,320,000 395,000 (130,000)
Changes in assets and liabilities:
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . 1,515,980 (1,426,743) (2,506,295)
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . (3,023,020) (97,985) (1,358,970)
Prepaid expenses and other current assets . . . . . . . . . . . (190,245) (217,751) (186,864)
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . (213,469) (840,844) 331,988
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . 1,047,184 (65,795) 531,854
Liability for dispute settlement . . . . . . . . . . . . . . . . (6,500,000) 4,250,000 -
Taxes on income . . . . . . . . . . . . . . . . . . . . . . . . (166,804) (449,067) 348,115
------------ ----------- -------------
Net cash flows provided from operating activities . . . . . . . . . . . $ 6,838,199 $ 9,057,193 $ 9,975,682
------------ ----------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment . . . . . . . . . . . . . . . (2,623,072) $ (9,745,755) $ (9,109,599)
Carrying amount of property, plant and equipment disposals . . . . . . . 12,435 1,502,230 887,499
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (274,933) (843,736) (83,313)
------------ ----------- -------------
Net cash (used) in investing activities . . . . . . . . . . . . . . . . $ (2,885,570) $ (9,087,261) $ (8,305,413)
------------ ----------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in long-term debt . . . . . . . . . . . . . . . . . . . . . . . $ - $ - $ 15,000,000
Reduction in long-term debt . . . . . . . . . . . . . . . . . . . . . . (600,000) (600,000) (755,000)
Declaration of cash dividends . . . . . . . . . . . . . . . . . . . . . (3,090,750) (2,990,179) (2,761,776)
Proceeds received on exercise of stock options . . . . . . . . . . . . . - - 1,815,194
Common stock reacquired and retired . . . . . . . . . . . . . . . . . . . (964,800) (2,191,900) (6,765,000)
------------ ----------- -------------
Net cash (used) provided in financing activities . . . . . . . . . . . . $ (4,655,550) $ (5,782,079) $ 6,533,418
------------ ----------- -------------
Net (decrease) increase in cash and certificates of deposit . . . . . . $ (702,921) $ (5,812,147) $ 8,203,687
Cash and certificates of deposit balance, beginning of year . . . . . . . . 5,421,553 11,233,700 3,030,013
------------ ----------- -------------
Cash and certificates of deposit balance, end of year . . . . . . . . . . . $ 4,718,632 $ 5,421,553 $ 11,233,700
============ ============= =============
See Notes to Financial Statements.
</TABLE>
II-6 Page 10
<PAGE> 11
SUPERIOR SURGICAL MFG. CO., INC.
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 1996, 1995 and 1994
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
a) Business description
The Company manufactures and sells a wide range of apparel and accessories for
the medical and health fields as well as for the industrial, leisure and public
safety markets. Revenue recognition from the sale of products is recorded at
the time the finished goods are shipped.
b) Inventories
Inventories are stated at the lower of cost (first-in, first-out method) or
market.
c) Property, plant and equipment
Property, plant and equipment are stated at cost. Major renewals and
improvements are capitalized, while replacements, maintenance and repairs which
do not improve or extend the life of the respective assets are expensed
currently. Costs of assets sold or retired and the related accumulated
depreciation and amortization are eliminated from accounts and the net gain or
loss is reflected in the statement of earnings.
d) Excess of cost over fair value of assets acquired
Excess costs over fair value of assets acquired arising prior to 1972
(approximately $742,000) are being carried until such time as there may be
evidence of diminution of value or the term of existence of such value becomes
limited. The Company's policy is to amortize excess costs arising subsequent
to 1971 between 20 and 40 years.
e) Depreciation and amortization
Plants and equipment are depreciated on the straight-line basis at 2-1/2% to 5%
for buildings, 2-1/2% to 20% for improvements, 10% to 20% for machinery,
equipment and fixtures and 20% to 33-1/3% for transportation equipment.
Leasehold improvements are amortized over the terms of the leases inasmuch as
such improvements have useful lives equivalent to the terms of the respective
leases.
f) Employee benefits
Pension plan costs are funded currently based on actuarial estimates, with
prior service costs amortized over 20 years. The Company has no
post-retirement benefit plans other than pensions.
g) Taxes on income
The Company computes taxes currently payable upon determination of taxable
income which differs from pre-tax financial statement income. Deferred taxes
are provided on this difference, primarily the effect of computing depreciation
of plant and equipment by accelerated methods for tax purposes and by the
straight-line method for financial reporting purposes.
h) 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.
NOTE 2 - INVENTORIES:
<TABLE>
<CAPTION>
December 31
1996 1995
------------ ------------
<S> <C> <C>
Finished goods . . . . . . . . . . . . . . . . . . . . . $ 27,926,040 $ 24,783,647
Work in process . . . . . . . . . . . . . . . . . . . . . 3,577,252 3,515,698
Raw materials . . . . . . . . . . . . . . . . . . . . . . 12,609,676 12,790,603
------------ ------------
$ 44,112,968 $ 41,089,948
============ ============
</TABLE>
The opening inventory used in computing cost of goods sold for 1995 was
$40,991,963. General and administrative costs capitalized to inventories are
not material.
NOTE 3 - PROPERTY, PLANT AND EQUIPMENT:
<TABLE>
<CAPTION>
December 31
1996 1995
------------ -------------
<S> <C> <C>
Land . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,113,030 $ 2,101,351
Buildings, improvements and leaseholds . . . . . . . . . 10,775,494 10,611,343
Machinery, equipment and fixtures . . . . . . . . . . . . 39,596,614 38,292,834
------------ -------------
$ 52,485,138 $ 51,005,528
Accumulated depreciation and amortization . . . . . . . . 23,489,744 20,270,944
------------ -------------
$ 28,995,394 $ 30,734,584
============ =============
</TABLE>
Depreciation and amortization charges were $4,349,827, $3,743,690, and
$2,860,007 in 1996, 1995 and 1994, respectively.
II-7 Page 11
<PAGE> 12
NOTE 4 - LONG-TERM DEBT:
<TABLE>
<CAPTION>
December 31,
1996 1995
------------- --------------
<S> <C> <C>
Note payable-bank, pursuant to revolving credit and term loan agreement . . . . . . . . . $ - $ -
6.65% note payable to MassMutual Life Insurance Company, due
$1,666,667 annually, 1997-2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,000,000 15,000,000
9.9% note payable to MassMutual Life Insurance Company, due
$600,000 annually, 1997-2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,000,000 3,600,000
------------ ------------
$ 18,000,000 $ 18,600,000
Less payments due within one year included in current liabilities . . . . . . . . . . . . 2,266,667 600,000
------------ ------------
$ 15,733,333 $ 18,000,000
============ ============
</TABLE>
On January 31, 1996, the Company entered into a 7-year Credit Agreement which
made available to the Company up to $10,000,000 for 4 years on a revolving
credit basis and thereafter for 3 years as a term loan with installment
repayments of principal. Interest is payable at the prime rate of the lender
(8-1/4% at December 31, 1996) for funds borrowed in domestic currency and at
the lender's Eurodollar rate plus 1/2% for funds borrowed in the Eurodollar
market. The Company pays a 1/10% commitment fee per annum on funds not
borrowed during the 4 year revolving credit period. The debt due under the
credit agreement may be prepaid, in part or in full at any time without
penalty; in addition, any amount prepaid during the 4 year revolving credit
term may be reborrowed without penalty. The Credit Agreement also permits
additional unsecured short-term borrowing from banks up to $6,000,000 without
any "clean-up" requirements.
The Credit Agreement and the agreements with MassMutual Life Insurance Company
contain restrictive provisions concerning debt to net worth ratios, other
borrowing, capital expenditures, rental commitments, tangible net worth
($55,000,000), working capital ratio (2.5:1), and payment of dividends. At
December 31, 1996, under the most restrictive terms of the debt agreements,
retained earnings of approximately $13,060,000 were available for declaration
of dividends. The Company is in full compliance with all terms, conditions and
covenants of the various credit agreements.
Principal payments on long-term obligations are $2,266,667 in each of the years
1998 through 2001, assuming debt on the revolving Credit Agreement is rolled
over and the amount then outstanding, if any, does not convert to a term loan.
NOTE 5 - TAXES ON INCOME:
Aggregate income tax provisions (benefits) consist of the following:
<TABLE>
<CAPTION>
1996 1995 1994
------------- -------------- -------------
<S> <C> <C> <C>
Current:
Federal . . . . . . . . . . . . . . . . . . . $ 3,205,000 $ 3,865,000 $ 5,520,000
State and local . . . . . . . . . . . . . . . 675,000 625,000 790,000
------------- -------------- -------------
$ 3,880,000 $ 4,490,000 $ 6,310,000
Deferred . . . . . . . . . . . . . . . . . . . . . 1,320,000 395,000 (130,000)
------------- -------------- -------------
$ 5,200,000 $ 4,885,000 $ 6,180,000
============= ============== =============
</TABLE>
The difference between the total statutory Federal income tax rate and the
actual effective tax rate is accounted for as follows:
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- ---------
<S> <C> <C> <C>
Statutory Federal income tax rate . . . . . . . . . . . . . . . . . . . . . 34.2% 34.0% 34.5%
State and local income taxes, net of Federal income tax benefit . . . . . . 3.2 3.2 3.0
Non deductible dispute settlement costs . . . . . . . . . . . . . . . . . . - 18.7 -
Other items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 0.6 0.5
------ ------ ------
Effective tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37.4% 56.5% 38.0%
====== ====== ======
</TABLE>
II-8 Page 12
<PAGE> 13
NOTE 6 - PENSION PLANS:
Noncontributory qualified defined benefit pension plans, providing for normal
retirement at age 65, cover all eligible employees (as defined). Periodic
benefit payments on retirement are determined based on a fixed amount applied
to service or determined as a percentage of earnings prior to retirement.
Pension plan assets for retirement benefits consist primarily of fixed income
securities and common stock equities.
Net periodic pension cost for 1996, 1995 and 1994 included the following
components:
<TABLE>
<CAPTION>
1996 1995 1994
----------- ------------ ----------------
<S> <C> <C> <C>
Service cost - benefits earned during the period . . . . . . . . . . $ 702,000 $ 651,000 $ 640,000
Interest cost on projected benefit obligation . . . . . . . . . . . . 1,041,000 960,000 824,000
Actual (return) loss on assets . . . . . . . . . . . . . . . . . . (1,784,000) (2,107,000) 199,000
Net amortization and deferral . . . . . . . . . . . . . . . . . . . . 1,163,000 1,593,000 (970,000)
----------- ------------ -----------
Net periodic pension cost . . . . . . . . . . . . . . . . . . . . . . $ 1,122,000 $ 1,097,000 $ 693,000
=========== ============ ===========
</TABLE>
Assumptions used in the pension accounting (one corporate plan and four
plant/factory plans) for the three years ended December 31, 1996 were:
<TABLE>
<CAPTION>
Long Term Rate
Discount Rate of Return Salary Scale
------------- ----------------- ------------
Corp. Plants Corp. Plants Corp. Plants
----- ------ ----- ------ ----- ------
<S> <C> <C> <C> <C> <C> <C>
1994 8.00% 8.00% 8.00% 8.00% 6.00% N/A
1995 7.00% 7.00% 8.00% 8.00% 4.50% N/A
1996 7.50% 7.50% 8.00% 8.00% 4.50% N/A
</TABLE>
The following table sets forth the plans' funded status and amounts recognized
in the Company's balance sheets at December 31, 1996 and 1995, for its pension
plans:
<TABLE>
<CAPTION>
December 31, 1996 December 31, 1995
-------------------------------- ----------------------------
Assets Exceed Accumulated Assets Exceed Accumulated
Accumulated Benefits Accumulated Benefits
Benefits Exceed Assets Benefits Exceed Assets
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation . . . . . . . $ (8,120,000) $ (4,058,000) $ (7,529,000) $ (3,960,000)
================ ============== =============== =============
Accumulated benefit obligation . . . . . $ (8,399,000) $ (4,105,000) $ (7,812,000) $ (4,010,000)
================ ============== =============== =============
Projected benefit obligation . . . . . . $ (11,100,000) $ (4,470,000) $ (10,197,000) $ (4,358,000)
Plan assets at fair value . . . . . . . . . . . 10,903,000 3,527,000 9,192,000 3,113,000
---------------- -------------- --------------- -------------
Projected benefit obligation
over plan assets . . . . . . . . . . . . $ (197,000) $ (943,000) $ (1,005,000) $ (1,245,000)
Unrecognized net (gain) or loss . . . . . . . . (1,792,000) (54,000) (1,155,000) 289,000
Prior service cost not yet recognized in net
periodic pension cost . . . . . . . . . 1,820,000 692,000 2,052,000 734,000
Unrecognized net (asset) obligation at date of
initial application . . . . . . . . . . - 179,000 - 231,000
Adjustment required to recognize minimum . . .
liability . . . . . . . . . . . . . . . - (452,000) - (906,000)
---------------- -------------- --------------- -------------
Prepaid pension cost (pension liability) . . . $ (169,000) $ (578,000) $ (108,000) $ (897,000)
================ ============== =============== =============
</TABLE>
II-9 Page 13
<PAGE> 14
NOTE 7 - QUARTERLY RESULTS FOR 1994, 1995 AND 1996:
<TABLE>
<CAPTION>
Quarter Ended
------------------------------------------------------------------------
March 31, June 30, September 30, December 31,
1994 1994 1994 1994
-------------- -------------- ------------- ------------
(Unaudited)
<S> <C> <C> <C> <C>
Net sales . . . . . . . . . . . . . . . . . $ 31,907,441 $ 35,873,454 $ 33,247,093 $ 34,039,409
-------------- -------------- ------------- -------------
Gross profit . . . . . . . . . . . . . . . $ 10,591,394 $ 12,050,846 $ 11,312,800 $ 11,803,628
-------------- -------------- ------------- -------------
Earnings before taxes on income . . . . . . $ 3,209,622 $ 4,598,653 $ 3,971,762 $ 4,480,970
-------------- -------------- ------------- -------------
Net earnings . . . . . . . . . . . . . . . $ 1,989,622 $ 2,853,653 $ 2,461,762 $ 2,775,970
============== ============== ============= ==============
Net earnings per common share . . . . . . . $ .23 $ .32 $ .29 $.33
===== ======== ====== ====
Dividends per common share . . . . . . . . $ .08 $ .08 $ .08 $.08
===== ======== ====== ====
Average outstanding shares . . . . . . . . 8,818,554 8,897,552 8,509,791 8,363,552
============== ============== ============= =============
</TABLE>
<TABLE>
<CAPTION>
Quarter Ended
------------------------------------------------------------------------
March 31, June 30, September 30, December 31,
1995 1995 1995 1995
-------------- -------------- ------------- ------------
(Unaudited)
<S> <C> <C> <C> <C>
Net sales . . . . . . . . . . . . . . . . . $ 34,116,921 $ 33,045,056 $ 33,267,467 $ 34,768,354
-------------- -------------- ------------- -------------
Gross profit . . . . . . . . . . . . . . . $ 11,430,126 $ 10,969,725 $ 11,045,624 $ 10,582,595
-------------- -------------- ------------- -------------
Earnings (loss) before taxes on income $ 3,601,317 $ 3,243,626 $ 3,246,434 $ (1,444,340)
-------------- -------------- ------------- -------------
Net earnings (loss) . . . . . . . . . . . . $ 2,231,317 $ 2,013,626 $ 2,011,434 $ (2,494,340)
============== ============== ============= =============
Net earnings (loss) per common share $ .27 $ .24 $ .24 $(.30)
===== ======== ====== =====
Dividends per common share $ .09 $ .09 $ .09 $ .09
===== ======== ====== =====
Average outstanding shares . . . . . . . . 8,363,552 8,363,552 8,363,552 8,193,552
============== ============== ============= =============
</TABLE>
<TABLE>
<CAPTION>
Quarter Ended
------------------------------------------------------------------------
March 31, June 30, September 30, December 31,
1996 1996 1996 1996
-------------- -------------- ------------- ------------
(Unaudited)
<S> <C> <C> <C> <C>
Net sales . . . . . . . . . . . . . . . . . $ 34,672,192 $ 34,896,958 $ 35,433,226 $ 36,418,250
-------------- -------------- ------------- -------------
Gross profit . . . . . . . . . . . . . . . $ 11,481,016 $ 11,636,084 $ 12,171,520 $ 12,234,633
-------------- -------------- ------------- --------------
Earnings before taxes on income . . . . . . $ 3,091,317 $ 3,419,856 $ 3,669,717 $ 3,713,206
-------------- -------------- ------------- --------------
Net earnings . . . . . . . . . . . . . . . $ 1,916,317 $ 2,119,856 $ 2,279,717 $ 2,378,206
============== ============== ============= ==============
Net earnings per common share . . . . . . . $ .24 $ .26 $ .28 $ .29
====== ====== ===== ========
Dividends per common share . . . . . . . . $ .09 $ .09 $ .09 $ .11
====== ====== ===== ========
Average outstanding shares . . . . . . . . 8,133,552 8,133,552 8,133,552 8,101,378
============== ============== ============= =============
</TABLE>
The independent certified public accountants made a limited review of the 1994,
1995 and 1996 quarterly financial information in accordance with standards
established by the American Institute of Certified Public Accountants. Such
review was substantially less in scope than an examination in accordance with
generally accepted auditing standards, the objective of which is the expression
of opinion regarding the financial statements taken as a whole, and
accordingly, no such opinion was expressed.
NOTE 8 - STOCK OPTIONS:
In 1993 the Company adopted an Incentive Stock Option Plan under which options
on 1,500,000 shares were reserved for grant. All options under the Plan have
or will be granted at prices at least equal to the fair market value of the
shares on the date of grant. Options (all of which are exercisable at each
respective year end) granted to date under the Plan are exercisable in part or
in full within five years of grant date. Proceeds from the exercise of
options are credited to common stock to the extent of par value, and the
balance is credited to additional paid-in capital. A summary of option
transactions during the three years ended December 31, 1996 (including option
transactions from a 1983 Plan which expired in 1993) follows:
II-10 Page 14
<PAGE> 15
<TABLE>
<CAPTION>
Option Prices
-----------------------------
No. of Range Per Market
Shares Share Total Price
---------- --------------- ------------- ----------
<S> <C> <C> <C> <C>
Outstanding January 1, 1994 . . . . . . . . . . . 544,700 $ 8.56 - $18.08 $ 7,354,631
Granted . . . . . . . . . . . . . . . . . . 104,925 $13.75 - $15.13 1,451,794 $1,442,719
Exercised . . . . . . . . . . . . . . . . . . (210,300) $ 8.56 - $ 9.47 (1,815,194) $3,032,588
Cancelled . . . . . . . . . . . . . . . . . . (15,100) $13.75 - $16.44 (246,325)
-------- -------------
Outstanding December 31, 1994 . . . . . . . . . 424,225 $13.75 - $18.08 $ 6,744,906
Granted . . . . . . . . . . . . . . . . . . 145,400 $10.75 - $11.83 1,571,865 $1,563,050
Cancelled . . . . . . . . . . . . . . . . . . (19,575) $10.75 - $16.44 (289,243)
-------- -------------
Outstanding December 31, 1995 . . . . . . . . . . 550,050 $10.75 - $18.08 $ 8,027,528
Granted . . . . . . . . . . . . . . . . . . 163,825 $10.25 - $11.28 1,730,449 $1,721,378
Cancelled . . . . . . . . . . . . . . . . . (11,550) $10.25 - $16.44 (155,763)
-------- -------------
Outstanding December 31, 1996 . . . . . . . . . . 702,325 $10.25 - $18.08 $ 9,602,214
======= =============
</TABLE>
At December 31, options available to issue were 1,380,975 for 1994, 1,255,150
for 1995, and 1,102,875 for 1996. Options have never been repriced by the
Company in any year.
The effect on compensation expense, if determined under the provisions of SFAS
No. 123, based on the fair value at the grant date consistent with those
provisions is not material to net earnings or net earnings per common share.
The fair value of options granted is not significant. The Company estimated
the fair value of options utilizing the Black-Scholes option pricing model
based on the following assumptions:
<TABLE>
<CAPTION>
Related Party
Options Other Options
--------------- -------------
<S> <C> <C>
Exercise price
1996 $11.28 $10.25 - $10.88
1995 $11.83 $10.75
Market price
1996 $10.25 $10.25 - $10.88
1995 $10.75 $10.75
Risk free interest rate
1996 5.25% 5.25% - 6.55%
1995 6.20% 6.20%
Expected option life 5 years 5 years
Expected volatility
1996 25.2% 25.2% - 25.7%
1995 25.0% 25.0%
Dividend yield 3% 3%
</TABLE>
NOTE 9 - RENTALS:
Aggregate rent expense, including month-to-month rentals, approximated
$550,000, $567,000, and $619,000 for the years ended December 31, 1996, 1995
and 1994, respectively. Long-term lease commitments, the last of which expire
in 2002, are not material.
NOTE 10 - EARNINGS PER SHARE:
Historical per share data is based on the weighted average number of shares
outstanding. The exercise of outstanding stock options would not have a
significant effect on earnings per share. The weighted average number of
shares outstanding during 1996, 1995 and 1994 was 8,125,465, 8,320,703, and
8,645,739, respectively.
NOTE 11 - DISPUTE WITH GOVERNMENTAL AGENCY:
The Company reached agreements in 1996 with the Department of Justice and the
United States Attorney's Office in Tampa, Florida, to resolve its previously
announced disputes with the Federal government arising out of certain
contractual relations with the Department of Veterans Affairs (formerly the
Veterans Administration) from 1983 to 1992. The agreements and $6,500,000
payment resolved investigations of the Company arising from the VA contracts.
The Company charged $4,250,000, or approximately $.51 per share against its
earnings in the fourth quarter of 1995 in anticipation of the settlements. No
additional charges resulted from the settlements in 1996 and the Company is
free to continue to sell to all Federal agencies, including the VA.
II-11 Page 15
<PAGE> 16
NOTE 12 - ACCRUED EXPENSES:
<TABLE>
<CAPTION>
December 31,
-----------------------------
1996 1995
------------ ------------
<S> <C> <C>
Salaries, wages, commissions and vacation
pay............................................ $2,247,570 $1,348,561
Other accrued expenses ........................ 1,860,632 1,712,457
---------- ----------
$4,108,202 $3,061,018
========== ==========
</TABLE>
NOTE 13 - SUPPLEMENTAL INFORMATION:
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------
1996 1995 1994
----------- ----------- ----------
<S> <C> <C> <C>
Income taxes paid................................ $ 3,846,804 $ 4,939,067 $5,961,885
=========== =========== ==========
Interest paid......................................... $ 1,453,201 $ 1,411,805 $1,436,998
=========== =========== ==========
</TABLE>
II-12 Page 16
<PAGE> 17
SUPERIOR SURGICAL MFG. CO., INC.
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders
Superior Surgical Mfg. Co., Inc.
Seminole, Florida
We have audited the accompanying balance sheets of Superior Surgical Mfg. Co.,
Inc. as of December 31, 1996 and 1995, and the related statements of earnings,
shareholders' equity and cash flows for each of the three years in the period
ended December 31, 1996. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Superior Surgical Mfg. Co.,
Inc. as of December 31, 1996 and 1995, and the results of its operations and
its cash flows for each of the three years in the period ended December 31,
1996, in conformity with generally accepted accounting principals.
Deloitte & Touche, LLP
Certified Public Accountants
Tampa, Florida
February 20, 1997
Page 17
<PAGE> 18
PART II
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure
NONE
PART III
Items 10, 11, Directors and Executive Officers; Executive
12 and 13 Compensation; Security Ownership of Management and
others; Certain Transactions.
The information required by Items 10, 11, 12 and 13 of Form 10-K is
incorporated by reference to the information contained in the sections
captioned "Directors and Officers, Executive Compensation," "Security Ownership
of Certain Beneficial Owners and Management," and "Certain Relationships and
Related Transactions" in the Company's definitive Proxy Statement for the
Annual Meeting of Shareholders to be held May 2, 1997, a copy of which will be
filed with the Securities and Exchange Commission on or before March 30, 1997.
II-14, III-1 Page 18
<PAGE> 19
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
<TABLE>
<CAPTION> Page
----
<S> <C> <C> <C>
(a) 1. Financial Statements
The following financial statements of Superior Surgical Mfg. Co., Inc.
are included in Part II, Item 8:
Statements of earnings - years ended
December 31, 1996, 1995 and 1994.......................... II-4
Statements of shareholders' equity - years
ended December 31, 1996, 1995 and
1994....................................................... II-4
Balance sheets - December 31, 1996 and
1995....................................................... II-5
Statements of cash flows - years ended
December 31, 1996, 1995 and 1994.......................... II-6
Notes to financial statements...................................... II-7 to II-12
Opinion of independent certified public
accountants................................................ II-13
</TABLE>
(a) 2. Financial Statement Schedules
All schedules are omitted because they are not
applicable, or not required, or because the required
information is included in the financial statements or
notes thereto.
(a) 3. Exhibits
<TABLE>
<CAPTION>
<S> <C>
Exhibit No.:
3.2 By-Laws of the Registrant filed as Exhibit
to the Registrant's 1996 third quarter Interim on Form
10-Q and incorporated herein by reference.
4.1 Credit Agreement dated January 31, 1996,
between the Registrant and Chemical Bank, filed
with the Commission as Exhibit 4.1 in registrant's
1995 Form 10-K which is hereby incorporated
herein by reference.
4.2 Note Agreement dated January 5, 1994 between
the registrant and Massachusetts Mutual Life
Insurance Company filed with the Commission
as Exhibit 4.2 in registrant's 1994 Form 10-Q
for the three months ended March 31, 1994
which is hereby incorporated herein by
reference.
4.3 The Registrant, by signing this Registration
Statement, agrees to furnish the Commission
upon its request a copy of any instrument which
defines the rights of holders of long-term debt
of the Registrant and which authorizes a
total amount of securities not in excess of
10% of the total assets of the Registrant.
</TABLE>
IV-1 Page 19
<PAGE> 20
<TABLE>
<CAPTION>
<S> <C>
10.1 Description of the informal bonus plan for
officers of the Registrant filed as Exhibit 10 to the
Registrant's 1992 Annual Report on Form 10-K
and incorporated herein by reference.
10.2 1993 Incentive Stock Option Plan of the Registrant
filed as Exhibit 4.3 to the Registrant's August 18,
1993 Registration Statement on Form S-8 and
incorporated herein by reference.
10.3 1994 Superior Surgical Mfg. Co., Inc.
Supplemental Pension Plan filed as Exhibit 10.3 to
the Registrant's 1994 Annual Report on Form 10-K
and incorporated herein by reference.
13. Forms 10-Q for the first three quarters of 1996 -
herein incorporated by reference to Registrant's
filings thereof with the Securities and Exchange
Commission.
23. Consent of independent accountants. IV-5
27. Financial Data Schedule for year ended
December 31, 1996 (For SEC use only.)
99. The information contained under the headings
"Directors and Executive Officers, Executive
Compensation"; "Security Ownership of
Certain Beneficial Owners and Management";
and "Certain Relationships and Related
Transactions" in the definitive Proxy
Statement of the Registrant to be used in
connection with the Registrant's 1997 Annual
Meeting of Stockholders, to be filed on or
before March 30, 1997, is hereby incorporated
herein by reference.
</TABLE>
(b) Reports on Form 8-K:
There were no reports on Form 8-K for the three
months ended December 31, 1996.
(c) See (a) 3. above.
(d) None
IV-2 Page 20
<PAGE> 21
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
SUPERIOR SURGICAL MFG. CO., INC.
/s/ Gerald M. Benstock
-------------------------------------
BY: Gerald M. Benstock
(Chairman and Chief Executive
Officer)
/s/ John W. Johansen
-------------------------------------
BY: John W. Johansen
(Chief Financial Officer and Principal
Accounting Officer, Sr. Vice
President, Treasurer and Secretary)
DATE: March 28, 1997
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated:
/s/ Saul Schechter /s/ Alan D. Schwartz
- --------------------------------- ---------------------------------------
Saul Schechter, March 28, 1997 Alan D. Schwartz, March 28, 1997
(Director) (Director)
/s/ Manuel Gaetan /s/ Michael Benstock
- --------------------------------- ---------------------------------------
Manuel Gaetan, March 28, 1997 Michael Benstock, March 28, 1997
(Director) (Director)
/s/ Thomas K. Riden /s/ Peter Benstock
- --------------------------------- ---------------------------------------
Thomas K. Riden, March 28, 1997 Peter Benstock, March 28, 1997
(Director) (Director)
/s/ Sidney Kirschner
- ---------------------------------
Sidney Kirschner, March 28, 1997
(Director)
IV-3 Page 21
<PAGE> 22
SUPERIOR SURGICAL MFG. CO., INC.
EXHIBIT INDEX
(a) 3. Exhibits
<TABLE>
<CAPTION>
<S> <C>
Exhibit No.:
3.2 By-Laws of the Registrant filed as Exhibit
to the Registrant's 1996 third quarter Interim on Form
10-Q and incorporated herein by reference.
4.1 Credit Agreement dated January 31, 1996,
between the Registrant and Chemical Bank, filed
with the Commission as Exhibit 4.1 in registrant's
1995 Form 10-K which is hereby incorporated herein
by reference.
4.2 Note Agreement dated January 5, 1994 between
the registrant and Massachusetts Mutual Life
Insurance Company filed with the Commission
as Exhibit 4.2 in registrant's 1994 Form 10-Q
for the three months ended March 31, 1994
which is hereby incorporated herein by reference.
4.3 The Registrant, by signing this Registration
Statement, agrees to furnish the Commission
upon its request a copy of any instrument which
defines the rights of holders of long-term debt
of the Registrant and which authorizes a
total amount of securities not in excess of
10% of the total assets of the Registrant.
10.1 Description of the informal bonus plan for
officers of the Registrant filed as Exhibit 10 to the
Registrant's 1992 Annual Report on Form 10-K
and incorporated herein by reference.
10.2 1993 Incentive Stock Option Plan of the Registrant
filed as Exhibit 4.3 to the Registrant's August 18,
1993 Registration Statement on Form S-8 and
incorporated herein by reference.
10.3 1994 Superior Surgical Mfg. Co., Inc. Supplemental
Pension Plan filed as Exhibit 10.3 to the Registrant's
1994 Annual Report on Form 10-K and incorporated
herein by reference.
13. Forms 10-Q for the first three quarters of 1996 -
herein incorporated by reference to Registrant's
filings thereof with the Securities and Exchange
Commission.
23. Consent of independent accountants. IV-5
27. Financial Data Schedule for year ended
December 31, 1996 (For SEC use only.)
99. The information contained under the headings
"Directors and Executive Officers, Executive
Compensation"; "Security Ownership of
Certain Beneficial Owners and Management";
and "Certain Relationships and Related
Transactions" in the definitive Proxy
Statement of the Registrant to be used in
connection with the Registrant's 1997 Annual
Meeting of Stockholders, to be filed on or
before March 30, 1997, is hereby incorporated
herein by reference.
</TABLE>
IV-4 Page 22
<PAGE> 1
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Post-Effective Amendment
No. 1 to Registration Statement No. 2-85796 of Superior Surgical Mfg. Co., Inc.
on Form S-8 of our report dated February 20, 1997, appearing in the Annual
Report on Form 10-K of Superior Surgical Mfg. Co., Inc. for the year ended
December 31, 1996.
/s/ Deloitte & Touche LLP
Tampa, Florida
March 28, 1997
IV-5 Page 23
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATIN EXTRACTED FROM THE FINANCIAL
STATEMENTS CONTAINED IN THE COMPANY'S ANNUAL REPORT ON FORM 1O-K AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 4,718,632
<SECURITIES> 0
<RECEIVABLES> 23,517,237
<ALLOWANCES> 250,000
<INVENTORY> 44,112,968
<CURRENT-ASSETS> 73,381,965
<PP&E> 28,995,394
<DEPRECIATION> 0
<TOTAL-ASSETS> 105,659,094
<CURRENT-LIABILITIES> 13,139,337
<BONDS> 15,733,333
0
0
<COMMON> 8,053,552
<OTHER-SE> 66,102,872
<TOTAL-LIABILITY-AND-EQUITY> 105,659,094
<SALES> 141,420,626
<TOTAL-REVENUES> 0
<CGS> 93,897,373
<TOTAL-COSTS> 127,526,530
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,295,233
<INCOME-PRETAX> 13,894,096
<INCOME-TAX> 5,200,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,694,096
<EPS-PRIMARY> 1.07
<EPS-DILUTED> 1.07
</TABLE>
