<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, 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 7,959,752 common
shares outstanding.
<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,
------------------------------
1997 1996
------------ ------------
(Unaudited)
<S> <C> <C>
Net sales .................................... $ 33,513,631 $ 34,672,192
------------ ------------
Costs and expenses:
Cost of goods sold ......................... $ 22,243,695 $ 23,191,176
Selling and administrative expenses ........ 8,045,282 8,096,154
Interest expense ........................... 304,598 293,545
------------ ------------
$ 30,593,575 $ 31,580,875
------------ ------------
Earnings before taxes on income .............. $ 2,920,056 $ 3,091,317
Taxes on income .............................. 1,095,000 1,175,000
------------ ------------
Net earnings ................................. $ 1,825,056 $ 1,916,317
============ ============
Weighted average number of shares out-
standing during the period ................. 8,054,905 Shs 8,133,552 Shs
Net earnings per common share .............. $ 0.23 $ 0.24
============ ============
Cash dividends declared per common
share .................................... $ 0.11 $ 0.09
============ ============
</TABLE>
The results of the three months ended March 31, 1997 are not necessarily
indicative of results to be expected for the full year ending December 31,
1997.
See accompanying notes to summarized interim financial statements.
Page 2
<PAGE> 3
SUPERIOR SURGICAL MFG. CO., INC.
CONDENSED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
March 31,
1997 December 31,
(Unaudited) 1996
----------- ------------
(1)
<S> <C> <C>
CURRENT ASSETS:
Cash and certificates of deposit ........... $ 3,694,650 $ 4,718,632
Accounts receivable and other current assets 25,171,839 24,550,365
Inventories* ............................... 46,776,554 44,112,968
------------ ------------
TOTAL CURRENT ASSETS ................ $ 75,643,043 $ 73,381,965
PROPERTY, PLANT AND EQUIPMENT ................ 28,302,184 28,995,394
EXCESS OF COST OVER FAIR VALUE OF
ASSETS ACQUIRED ........................... 817,113 818,276
OTHER ASSETS ................................. 2,554,566 2,463,459
------------ ------------
$107,316,906 $105,659,094
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable ........................... $ 7,510,070 $ 6,417,139
Other current liabilities .................. 4,340,967 4,455,531
Current portion of long-term debt .......... 2,266,667 2,266,667
------------ ------------
TOTAL CURRENT LIABILITIES ........... $ 14,117,704 $ 13,139,337
LONG-TERM DEBT ............................... 15,316,666 15,733,333
DEFERRED INCOME TAXES ........................ 2,720,000 2,630,000
SHAREHOLDERS' EQUITY ......................... 75,162,536 74,156,424
------------ ------------
$107,316,906 $105,659,094
============ ============
* Inventories consist of the following:
March 31,
1997 December 31,
(Unaudited) 1996
------------ ------------
Finished goods ....................... $ 28,056,504 $ 27,926,040
Work in process ...................... 3,440,119 3,577,252
Raw materials ........................ 15,279,931 12,609,676
------------ ------------
$ 46,776,554 $ 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.
See accompanying notes to summarized interim financial statements.
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SUPERIOR SURGICAL MFG. CO., INC.
SUMMARY OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended March 31,
---------------------------
1997 1996
------------ -----------
(Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings .................................... $ 1,825,056 $ 1,916,317
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization ................ 1,090,109 1,037,293
Deferred income taxes ........................ 90,000 185,000
Changes in assets and liabilities:
Accounts receivable and other current
assets ................................... (621,474) 304,217
Inventories ................................ (2,663,586) (1,094,735)
Accounts payable ........................... 1,092,931 2,161,424
Other current liabilities .................. (114,564) 1,502,465
----------- -----------
Net cash flows provided from operating
activities ..................................... $ 698,472 $ 6,011,981
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant, and equipment ..... $ (395,735) $ (472,922)
Other assets .................................... (91,107) (575,367)
----------- -----------
Net cash (used) in investing activities ......... $ (486,842) $(1,048,289)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Declaration of cash dividends ................... $ (885,957) $ (732,020)
Reduction in Long-Term Debt ..................... (416,667) -0-
Proceeds received on exercised stock options .... 67,012 -0-
----------- -----------
Net cash (used) provided in financing activities $(1,235,612) $ (732,020)
----------- -----------
Net (decrease) increase in cash and
certificates of deposit ...................... $(1,023,982) $ 4,231,672
Cash and certificates of deposit balance,
beginning of year ................................. 4,718,632 5,421,553
----------- -----------
Cash and certificates of deposit balance,
end of period ..................................... $ 3,694,650 $ 9,653,225
=========== ===========
</TABLE>
See accompanying notes to summarized interim financial statements.
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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 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, 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 March 31, 1997, the condensed summaries of
operations and cash flows for the three-months ended March 31, 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 in scope than an audit conducted
in accordance with generally accepted auditing standards, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that
should be made to the accompanying condensed financial information for them to
be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the balance sheet 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 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.
Deloitte & Touche LLP
April 25, 1997
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ITEM 2. Management's Discussion And Analysis of Financial Condition and
Results of Operations
RESULTS OF OPERATIONS
While the registrant's sales of employee identification and career apparel
increased, net sales have declined due to weaknesses in healthcare markets.
Cost of goods sold approximated 66.7% for the three months ended March 31, 1997
and 1996.
Selling and administrative expenses, as a percentage of sales, were
approximately 23.7% for the first three months of 1997 and 1996.
Interest expense of $304,598 for the three month period ended March 31, 1997
increased 4% from $293,545 for the similar period ended March 31, 1996 due to
lesser cash balances invested in certificates of deposit in 1997. .
Net earnings decreased 5% to $1,825,056 for the three months ended March 31,
1997 as compared to net earnings of $1,916,317 for the same period ended March
31, 1996 as a result of decreased sales in healthcare markets.
Accounts receivable and other current assets increased 3% from $24,550,365 on
December 31, 1996 to $25,171,839 as of March 31, 1997.
Inventories as of March 31, 1997 increased 6% to $46,776,554 from $44,112,968
on December 31, 1996 mainly to support expected customer demand.
Accounts payable increased 17% from $6,417,139 on December 31, 1996 to
$7,510,070 on March 31, 1997 primarily due to increases in purchases of
inventories.
The registrant's current portion of long-term debt of $2,266,667 is unchanged,
and its long-term debt of $17,583,333 reflects first quarter principal
reduction payments for March 31, 1997, as compared to December 31, 1996.
LIQUIDITY AND CAPITAL RESOURCES
Cash and certificates of deposit decreased by $1,023,982 from $4,718,632 on
December 31, 1996 to $3,694,650 as of March 31, 1997. The change is a result of
acquiring inventories and principal reductions of long-term debt. Additionally,
as of March 31, 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 will be adequate to meet all of its funding requirements for the
remainder of the year and 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.
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 the quarter ended March
31, 1997 (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 28, 1997 SUPERIOR SURGICAL MFG. CO., INC.
By /s/ Gerald M. Benstock
----------------------
Gerald M. Benstock
Chairman and Chief Executive Officer
By /s/ John W. Johansen
--------------------
John W. Johansen
Chief Financial Officer and Principal
Accounting Officer, Sr. Vice President
and Treasurer
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<PAGE> 1
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 March 31,
1997 and 1996, as indicated in our report dated April 25, 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 March 31, 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.
Deloitte & Touche LLP
April 25, 1997
Page 10
<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 ENDING MARCH 31, 1997,
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<EXCHANGE-RATE> 1
<CASH> 3,694,650
<SECURITIES> 0
<RECEIVABLES> 25,171,839
<ALLOWANCES> 0
<INVENTORY> 46,776,554
<CURRENT-ASSETS> 75,643,043
<PP&E> 28,302,184
<DEPRECIATION> 0
<TOTAL-ASSETS> 107,316,906
<CURRENT-LIABILITIES> 14,117,704
<BONDS> 15,316,666
0
0
<COMMON> 8,054,905
<OTHER-SE> 77,882,536
<TOTAL-LIABILITY-AND-EQUITY> 107,316,906
<SALES> 33,513,631
<TOTAL-REVENUES> 0
<CGS> 22,243,695
<TOTAL-COSTS> 30,593,575
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 304,598
<INCOME-PRETAX> 2,920,056
<INCOME-TAX> 1,095,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,825,056
<EPS-PRIMARY> 0.23
<EPS-DILUTED> 0.23
</TABLE>
