<PAGE> 1
FORM lO-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
20549
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarter ended June 30, 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 7,975,752 common
shares outstanding.
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PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
SUPERIOR SURGICAL MFG. CO., INC.
CONDENSED SUMMARY OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended June 30,
---------------------------
1997 1996
---------- ------------
(Unaudited)
<S> <C> <C>
Net sales................................... $37,518,173 $34,896,958
----------- -----------
Costs and expenses:
Cost of goods sold........................ $24,956,939 $23,260,874
Selling and administrative expenses....... 8,543,667 7,876,081
Interest expense.......................... 298,965 340,147
----------- -----------
$33,799,571 $31,477,102
----------- -----------
Earnings before taxes on income............. $ 3,718,602 $ 3,419,856
Taxes on income............................. 1,395,000 1,300,000
----------- -----------
Net earnings................................ $ 2,323,602 $ 2,119,856
=========== ===========
Weighted average number of shares out-
standing during the period................ 7,992,148 Shs. 8,133,552 Shs.
Net earnings per common share............. $ 0.29 $ 0.26
=========== ===========
Cash dividends declared per common
share................................... $ 0.11 $ 0.09
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended June 30,
---------------------------
1997 1996
----------- -----------
(Unaudited)
<S> <C> <C>
Net sales................................... $71,031,804 $69,569,150
----------- -----------
Costs and expenses:
Cost of goods sold........................ $47,200,634 $46,452,050
Selling and administrative expenses....... 16,588,949 15,972,235
Interest expense.......................... 603,563 633,692
----------- -----------
$64,393,146 $63,057,977
----------- -----------
Earnings before taxes on income............. $ 6,638,658 $ 6,511,173
Taxes on income............................. 2,490,000 2,475,000
----------- -----------
Net earnings................................ $ 4,148,658 $ 4,036,173
=========== ===========
Weighted average number of shares out-
standing during the period................ 8,023,353 Shs. 8,133,552 Shs.
Net earnings per common share............. $ 0.52 $ 0.50
=========== ===========
Cash dividends declared per common
share................................... $ 0.22 $ 0.18
=========== ===========
</TABLE>
The results of the six months ended June 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
ASSETS
<TABLE>
<CAPTION>
June 30,
1997 December 31,
(Unaudited) 1996
----------- ------------
(1)
<S> <C> <C>
CURRENT ASSETS:
Cash and certificates of deposit........................ $ 4,953,513 $ 4,718,632
Accounts receivable and other current assets............ 26,775,251 24,550,365
Inventories*............................................ 43,970,405 44,112,968
------------ ------------
TOTAL CURRENT ASSETS............................. $ 75,699,169 $ 73,381,965
PROPERTY, PLANT AND EQUIPMENT........................... 27,560,542 28,995,394
EXCESS OF COST OVER FAIR VALUE OF
ASSETS ACQUIRED........................................ 815,951 818,276
OTHER ASSETS.............................................. 2,649,820 2,463,459
------------ ------------
$106,725,482 $105,659,094
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable........................................ $ 7,087,937 $ 6,417,139
Other current liabilities............................... 4,305,073 4,455,531
Current portion of long-term debt....................... 2,266,667 2,266,667
------------ ------------
TOTAL CURRENT LIABILITIES........................ $ 13,659,677 $ 13,139,337
LONG-TERM DEBT............................................ 14,600,000 15,733,333
DEFERRED INCOME TAXES..................................... 2,870,000 2,630,000
SHAREHOLDERS' EQUITY...................................... 75,595,805 74,156,424
------------ ------------
$106,725,482 $105,659,094
============ ============
</TABLE>
* Inventories consist of the following:
<TABLE>
<CAPTION>
June 30,
1997 December 31,
(Unaudited) 1996
--------------- ---------------
<S> <C> <C>
Finished goods............................... $ 26,428,183 $ 27,926,040
Work in process.............................. 3,554,167 3,577,252
Raw materials................................ 13,988,055 12,609,676
--------------- ---------------
$ 43,970,405 $ 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>
Six Months Ended June 30,
-----------------------------
1997 1996
--------- --------
(Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings............................................... $ 4,148,658 $ 4,036,173
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization........................... 2,176,500 2,088,343
Deferred income taxes................................... 240,000 550,000
Changes in assets and liabilities:
Accounts receivable and other current
assets.............................................. (2,224,886) 327,031
Inventories........................................... 142,563 (1,382,142)
Accounts payable ..................................... 670,798 923,825
Other current liabilities............................. (150,458) 273,812
------------ ------------
Net cash flows provided from operating
activities................................................ $ 5,003,175 $ 6,817,042
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Net additions to property, plant and equipment............. $ (739,323) $ (1,553,916)
Other assets............................................... (186,361) (642,628)
------------ ------------
Net cash (used) in investing activities.................... $ (925,684) $ (2,196,544)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Reduction in long-term debt................................ $ (1,133,333) $ (300,000)
Declaration of cash dividends.............................. (1,763,290) (1,464,039)
Proceeds received on exercised stock options............... 235,013 -
Common stock reacquired and retired........................ (1,181,000) -
------------ ------------
Net cash (used) in financing activities.................... $ (3,842,610) $ (1,764,039)
------------ ------------
Net increase (decrease) in cash and
certificates of deposit................................. $ 234,881 $ 2,856,459
Cash and certificates of deposit balance,
beginning of year............................................ 4,718,632 5,421,553
------------ ------------
Cash and certificates of deposit balance,
end of period................................................ $ 4,953,513 $ 8,278,012
============ ============
</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 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 [LOGO & LETTERHEAD]
Board of Directors
Superior Surgical Mfg. Co., Inc.
Seminole, Florida
We have reviewed the accompanying condensed balance sheet of Superior Surgical
Mfg. Co., Inc. (the "Company") as of June 30, 1997, the condensed summaries of
operations for the six-months and three-months ended June 30, 1997 and 1996 and
the condensed summaries of cash flows for the six-months ended June 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 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 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.
Deloitte & Touche LLP
July 25, 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 quarter of 1997 compared to the second quarter of
1996, sales increased by approximately 8% due to continued momentum in the
economic activities in the marketplaces served by the registrant. Accordingly,
for the six months ended June 30, 1997, sales were approximately 2% more than
the six months ended June 30, 1996.
Cost of goods sold approximated 66-2/3% for the six months ended June 30, 1997
and 1996.
Selling and administrative expenses, as a percentage of sales, were
approximately 23% for the first six months of 1997 and 1996.
Interest expense of $603,563 for the six month period ended June 30, 1997
decreased 5% from $633,692 for the similar period ended June 30, 1996 due to
repayment of debt and greater cash balances invested in certificates of
deposit.
Net earnings increased 10% to $2,323,602 for the three months ended June 30,
1997 as compared to net earnings of $2,119,856 for the same period ended June
30, 1996 as a result of increased sales.
Accounts receivable and other current assets increased 9% from $24,550,365 on
December 31, 1996 to $26,775,251 as of June 30, 1997.
Inventories as of June 30, 1997 decreased less than 1% to $43,970,405 from
$44,112,968 on December 31, 1996.
Accounts payable increased 11% from $6,417,139 on December 31, 1996 to
$7,087,937 on June 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 $14,600,000 for June 30, 1997 is $1,133,333 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 $234,881 from $4,718,632 on
December 31, 1996 to $4,953,513 as of June 30, 1997. The change is primarily
a result of normal operations. Additionally, as of June 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 all of its 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
The Annual Meeting of Shareholders was held on May 2, 1997. Of the
8,056,752 shares outstanding and entitled to vote at the meeting, 7,218,337
shares were present at the meeting, in person or by proxy. At the meeting the
shareholders:
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<PAGE> 10
a) Voted for the nomination of all proposed Directors being, Messrs. G.M.
Benstock, A.D. Schwartz, M. Benstock, S. Schechter, P. Benstock, M.
Gaetan, PhD, T. K. Riden and S. Kirschner. The votes on all directors
nominated were as follows:
<TABLE>
<CAPTION>
NOMINEE VOTES FOR: VOTES WITHHELD:
------- ---------- ---------------
<S> <C> <C>
Gerald M. Benstock 7,185,289 33,048
Saul Schechter 7,186,089 32,248
Alan D. Schwartz 7,185,689 32,648
Michael Benstock 7,185,689 32,648
Peter Benstock 7,185,797 32,540
Manuel Gaetan 7,160,597 57,740
Thomas K. Riden 7,161,597 56,740
Sidney Kirschner 7,160,597 57,740
</TABLE>
b) Approved the 1997 Non-Employee Director Nonstatutory Stock Option Plan
with 6,492,926 votes for the motion, 693,906 votes against, and 31,505
votes abstaining.
c) Ratified the appointment of Deloitte & Touche LLP, independent
certified public accountants, as auditors for the Company's financial
statements for the year ending December 31, 1997 with 7,193,659 votes for
the motion, 12,991 votes against and 11,687 votes abstaining.
ITEM 5. Other Information
Inapplicable.
ITEM 6. Exhibits and Reports on Form 8-K
a) Exhibits
15 Letter re: Unaudited Interim Financial Information.
27 Financial Data Schedule for Quarter and Six Months ended June 30, 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: July 28, 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 June 30,
1997 and 1996, as indicated in our report dated July 25, 1997; beause we did
not perform an audit, we expressed no opinion on that information.
We are aware that our report referred to above, which is included in your
Quarterly Report on Form 10-Q for the quarter ended June 30, 1997, is
incorporated by reference in Registration Statement No. 2-85796 on Form S-8.
We also aware that the aforementioned report, pursuant to Rule 436(c) under the
Securities Act of 1933, is not considered a part of the Registration Statement
prepared or certified by an accountant or a report prepared or certified by an
accountant within the meaning of Sections 7 and 11 of that Act.
/s/ Deloitte & Touche LLP
July 25, 1997
Page 11
<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 JUNE 30, 1997
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<CASH> 4,953,513
<SECURITIES> 0
<RECEIVABLES> 26,775,251
<ALLOWANCES> 0
<INVENTORY> 43,970,405
<CURRENT-ASSETS> 75,699,169
<PP&E> 27,560,542
<DEPRECIATION> 0
<TOTAL-ASSETS> 106,725,482
<CURRENT-LIABILITIES> 13,659,677
<BONDS> 14,600,000
0
0
<COMMON> 8,023,353
<OTHER-SE> 78,465,805
<TOTAL-LIABILITY-AND-EQUITY> 106,725,482
<SALES> 71,031,804
<TOTAL-REVENUES> 0
<CGS> 47,200,634
<TOTAL-COSTS> 64,393,146
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 603,563
<INCOME-PRETAX> 6,638,658
<INCOME-TAX> 2,490,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,148,658
<EPS-PRIMARY> 0.52
<EPS-DILUTED> 0.52
</TABLE>
