<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 March 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 1-5869-1
SUPERIOR UNIFORM GROUP, INC.
Incorporated - Florida Employer Identification No.
---------------------------
11-1385670
10099 Seminole Boulevard
Post Office Box 4002
Seminole, Florida 33775-0002
Telephone No.: 727-397-9611
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 May 9, 2000 the registrant had 7,123,327 common shares
outstanding.
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
SUPERIOR UNIFORM GROUP, INC.
CONDENSED SUMMARY OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------------
2000 1999
------------ ------------
(Unaudited)
<S> <C> <C>
Net sales $ 38,821,270 $ 37,504,104
------------ ------------
Costs and expenses:
Cost of goods sold 25,621,942 24,878,451
Selling and administrative expenses 10,747,597 9,416,552
Interest expense 360,386 346,106
------------ ------------
36,729,925 34,641,109
------------ ------------
Earnings before taxes on income 2,091,345 2,862,995
Taxes on income 760,000 1,051,000
------------ ------------
Net earnings $ 1,331,345 $ 1,811,995
============ ============
Weighted average number of shares out-
standing during the period (Basic) 7,465,843 Shs. 7,847,255 Shs.
(Diluted) 7,474,206 Shs. 7,895,357 Shs.
Basic earnings per common share $ 0.18 $ 0.23
============ ============
Diluted earnings per common share $ 0.18 $ 0.23
============ ============
Cash dividends declared per common
share $ 0.135 $ 0.135
============ ============
</TABLE>
The results of the three months ended March 31, 2000 are not necessarily
indicative of results to be expected for the full year ending December 31, 2000.
See accompanying notes to condensed interim financial statements.
Page 2
<PAGE> 3
SUPERIOR UNIFORM GROUP, INC.
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
March 31,
2000 December 31,
(Unaudited) 1999
------------ ------------
(1)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 238,191 $ 3,021,376
Accounts receivable and other current assets 33,927,589 32,616,210
Inventories(*) 49,548,643 46,063,039
------------ ------------
TOTAL CURRENT ASSETS 83,714,423 81,700,625
PROPERTY, PLANT AND EQUIPMENT, net 29,609,466 29,460,159
EXCESS OF COST OVER FAIR VALUE OF
ASSETS ACQUIRED 8,539,439 8,646,163
OTHER ASSETS 3,042,781 3,045,165
------------ ------------
$124,906,109 $122,852,112
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 10,684,509 $ 9,033,483
Other current liabilities 9,557,213 6,810,227
Current portion of long-term debt 3,180,363 3,162,986
------------ ------------
TOTAL CURRENT LIABILITIES 23,422,085 19,006,696
LONG-TERM DEBT, net of current portion 21,642,168 19,472,577
DEFERRED INCOME TAXES 1,385,000 1,655,000
SHAREHOLDERS' EQUITY 78,456,856 82,717,839
------------ ------------
$124,906,109 $122,852,112
============ ============
</TABLE>
(*) Inventories consist of the following:
<TABLE>
<CAPTION>
March 31,
2000 December 31,
(Unaudited) 1999
------------ ------------
<S> <C> <C>
Finished goods $ 34,970,874 $ 34,343,293
Work in process 3,841,585 3,698,341
Raw materials 10,736,184 8,021,405
------------ ------------
$ 49,548,643 $ 46,063,039
============ ============
</TABLE>
(1) The balance sheet as of December 31, 1999 has been derived from the audited
financial statement as of that date and has been condensed.
See accompanying notes to condensed interim financial statements.
Page 3
<PAGE> 4
SUPERIOR UNIFORM GROUP, INC.
CONDENSED SUMMARY OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended March 31,
------------------------------
2000 1999
----------- ------------
(Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 1,331,345 $ 1,811,995
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 1,172,819 967,776
Deferred income taxes (270,000) (165,000)
Changes in assets and liabilities, net of acquisition:
Accounts receivable and other current assets (1,311,379) 4,318,336
Inventories (3,485,604) (310,383)
Accounts payable 1,651,026 (1,580,445)
Other current liabilities 2,746,986 847,173
----------- ------------
Net cash flows provided by operating
activities 1,835,193 5,889,452
----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant, and equipment (1,215,402) (1,052,051)
Proceeds from disposals of property, plant and equipment -- 13,663
Other assets 2,384 (86,254)
----------- ------------
Net cash (used) in investing activities (1,213,018) (1,124,642)
----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term debt 2,823,000 12,000,000
Repayment of long-term debt (636,032) (6,816,667)
Declaration of cash dividends (1,020,374) (1,059,430)
Common stock acquired and retired (4,571,954) --
Proceeds received on exercised stock options -- 15,188
----------- ------------
Net cash provided by (used in) financing activities (3,405,360) 4,139,091
----------- ------------
Net increase (decrease) in cash and cash
equivalents (2,783,185) 8,903,901
Cash and cash equivalents balance,
beginning of year 3,021,376 514,001
----------- ------------
Cash and cash equivalents balance,
end of period $ 238,191 $ 9,417,902
=========== ============
</TABLE>
See accompanying notes to condensed interim financial statements.
Page 4
<PAGE> 5
SUPERIOR UNIFORM GROUP, INC.
NOTES TO CONDENSED 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
Historical basic per share data is based on the weighted average number of
shares outstanding. Historical diluted per share data is reconciled by adding
to weighted average shares outstanding the dilutive impact of the exercise of
outstanding stock options.
Three Months Ended March 31,
2000 1999
---------- ----------
Net income $1,331,345 $1,811,995
Weighted average shares
outstanding 7,465,843 7,847,255
Basic earnings per common
share $ .18 $ .23
Three Months Ended March 31,
2000 1999
---------- ----------
Net Income $1,331,345 $1,811,995
Weighted average shares
outstanding 7,465,843 7,847,255
Common stock equivalents 8,363 48,102
Total weighted average shares
outstanding 7,474,206 7,895,357
Diluted earnings per common share $ .18 $ .23
Page 5
<PAGE> 6
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.
f) Comprehensive Income
The Company adopted the provisions of FAS 130, "Reporting Comprehensive Income"
in the first quarter of 1998. FAS No. 130 requires disclosures of comprehensive
income including per-share amounts in addition to the existing income
statement. Comprehensive income is defined as the change in equity during a
period, from transactions and other events, excluding changes resulting from
investments by owners (e.g., supplemental stock offering) and distributions to
owners (e.g., dividends). As of March 31, 2000, there are no items requiring
separate disclosure in accordance with this statement.
g) Operating Segments
The Company adopted the provisions of FAS No. 131 "Disclosures about Segments
of an Enterprise and Related Information." in the first quarter of 1998. FAS
No. 131 requires disclosures of certain information about operating segments
and about products and services, geographic areas in which the Company
operates, and their major customers. The Company has evaluated the effect of
this new standard and has determined that currently they operate in one
segment, as defined in this statement.
h) Reclassifications
Certain reclassifications to the 1999 financial information have been made to
conform to the 2000 presentation.
Note 2 - Acquisition:
Effective April 1, 1999, the Company acquired substantially all of the net
assets of The Empire Company, a supplier of uniforms, corporate I.D. wear and
promotional products with revenues for the year ended December 1998 of
approximately $14,000,000. The acquisition has been accounted for utilizing the
purchase method of accounting. The purchase price for this acquisition was
approximately $9,134,000 and was allocated as follows:
Cash $ 264,326
Accounts Receivable 1,813,291
Other Current Assets 78,684
Inventories 1,690,688
Property, Plant & Equipment 577,429
Other Assets 5,318
Excess of Cost Over Fair Value
of Assets Acquired 6,211,607
-----------
TOTAL ASSETS $10,641,343
===========
Accounts Payable and Accrued Expenses $ 1,507,836
===========
Page 6
<PAGE> 7
Note 3 - Long Term Debt
<TABLE>
<CAPTION>
March 31, March 31,
2000 1999
----------- -----------
<S> <C> <C>
Note payable - bank, pursuant to revolving
credit agreement, maturing March 26, 2002 $ 2,823,000 $ --
6.75% term loan payable to First Union, with monthly payments
of principal and interest, maturing April 1, 2009 11,216,198 12,000,000
6.65% note payable to MassMutual Life Insurance Company
due $1,666,667 annually through 2005 9,583,333 11,250,000
9.9% note payable to MassMutual Life Insurance Company
due $600,000 annually through 2001 1,200,000 1,800,000
----------- -----------
24,822,531 25,050,000
Less payments due within one year included in current liabilities 3,180,363 3,050,469
----------- -----------
$21,642,168 $21,999,531
=========== ===========
</TABLE>
On March 26, 1999, the Company entered into a new 3-year credit agreement that
made available to the Company up to $15,000,000 on a revolving credit basis.
Interest is payable at LIBOR plus 0.60% based upon the one-month LIBOR rate for
U.S. dollar based borrowings. The Company pays an annual commitment fee of
0.15% on the average unused portion of the commitment. The available balance
under the credit agreement is reduced by outstanding letters of credit. As of
March 31, 2000, approximately $2,238,000 was outstanding under letters of
credit. The Company also entered into a $12,000,000 10-year term loan on March
26, 1999 with the same bank. The term loan is an amortizing loan, with monthly
payments of principal and interest, maturing on April 1, 2009. The term loan
carries a variable interest rate of LIBOR plus 0.80% based upon the one-month
LIBOR rate for U.S. dollar based borrowings. Concurrent with the execution of
the term loan agreement, the Company entered into an interest rate swap with
the bank under which the Company receives a variable rate of interest on a
notional amount equal to the outstanding balance of the term loan from the bank
and the Company pays a fixed rate of 6.75% on a notional amount equal to the
outstanding balance of the term loan to the bank.
The credit agreement and the term loan with First Union 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 ($59,746,000 at March 31, 2000); working
capital ratio (2.5:1), fixed charges coverage ratio (2.5:1), stock repurchases
and payment of dividends. At March 31, 2000, under the most restrictive terms
of the debt agreements, retained earnings of approximately $10,172,000 were
available for declaration of dividends. The Company is in full compliance with
all terms, conditions and covenants of the various credit agreements.
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133
("SFAS 133"), "Accounting for Derivative Instruments and Hedging Activities,"
which establishes standards for accounting of derivative instruments and
hedging activities, such as swaps. SFAS 133, as amended, is effective for
fiscal quarters of all fiscal years beginning after June 15, 2000. Management
does not believe that the adoption of SFAS 133 will have a significant impact
on the Company's financial statements.
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, 1999, filed with the Securities and Exchange Commission.
Reference is hereby made to registrant's Financial Statements for 1999,
heretofore filed with registrant's Form 10-K.
Page 7
<PAGE> 8
INDEPENDENT ACCOUNTANTS' REPORT
Board of Directors
Superior Uniform Group, Inc.
Seminole, Florida
We have reviewed the accompanying condensed balance sheet of Superior Uniform
Group, Inc. (the "Company") as of March 31, 2000 and the related condensed
summaries of operations and cash flows for the three-month periods ended March
31, 2000 and 1999. These financial statements are the responsibility of the
Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and of making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted
in accordance with auditing standards generally accepted in the United States
of America, the objective of which is the expression of an opinion regarding
the financial statements taken as a whole. Accordingly, we do not express such
an opinion.
Based on our review, we are not aware of any material modifications that should
be made to such condensed financial statements for them to be in conformity
with accounting principles generally accepted in the United States of America.
We have previously audited, in accordance with auditing standards generally
accepted in the United States of America, the balance sheet of Superior Uniform
Group, Inc. as of December 31, 1999, 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 18, 2000, 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, 1999 is
fairly stated, in all material respects, in relation to the balance sheet from
which it has been derived.
/s/ Deloitte & Touche, LLP
May 4, 2000
Page 8
<PAGE> 9
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
RESULTS OF OPERATIONS
Net sales have increased 4% from $37,504,104 for the three months ended March
31, 1999 to $38,821,270 for the three months ended March 31, 2000.
Cost of goods sold approximated 66% and 66.3%, respectively for the three
months ended March 31, 2000 and 1999.
Selling and administrative expenses, as a percentage of sales, were
approximately 27.7% and 25%, respectively for the first three months of 2000 and
1999. This increase is attributed primarily to issues associated with the
Company's February 3, 2000 implementation of its new SAP/AFS (Apparel Footwear
Solution) computer system. The most significant components of the increase are
attributed to the costs of computer consultants working on the implementation
and increased overtime costs for the Company's employees working on the project.
We expect that these increased costs will begin to abate in the second quarter.
This percentage was also adversely impacted as a result of sales of
approximately $2,000,000 that could not be shipped in the current quarter due to
difficulties encountered with the new computer system.
Interest expense of $360,386 for the three month period ended March 31, 2000
increased 4% from $346,106 for the similar period ended March 31, 1999.
Net earnings decreased 27% to $1,331,345 for the three months ended March 31,
2000 as compared to net earnings of $1,811,995 for the same period ended March
31, 1999, primarily as a result of the increased costs incurred relative to the
SAP/AFS implementation.
Accounts receivable and other current assets increased 4% from $32,616,210 on
December 31, 1999 to $33,927,589 as of March 31, 2000.
Inventories as of March 31, 2000 increased 8% to $49,548,643 from $46,063,039
on December 31, 1999.
Accounts payable increased 18% from $9,033,483 on December 31, 1999 to
$10,684,509 on March 31, 2000 primarily due to increases in purchases of raw
material inventories.
THE YEAR 2000 PROJECT: The Company recognized the need to ensure that its
systems, applications and hardware would recognize and process transactions for
the Year 2000 and beyond and therefore initiated a project to identify its
risks with regard to Year 2000. This project consisted of four phases
including: collecting an inventory of potential risks, assessing the actual
risk, remedial work to correct identified problems, and testing for proper
operation. The project was completed and systems found to be non-compliant were
remedied or replaced.
The cost to repair or replace affected systems was approximately $650,000. Of
this amount, approximately $380,000 was incurred and expensed in 1999 and
$270,000 was incurred and expensed prior to December 31, 1998. The Company does
not expect to incur significant costs during 2000 related to ongoing monitoring
and support activities for the Year 2000 issue.
To date, the Company has not encountered any significant adverse impact from
Year 2000 computer problems. The Company will continue to monitor all business
processes throughout 2000 to address any issues and ensure all processes
continue to function properly. Contingency plans to address potential risks in
the event of Year 2000 failures will be developed as needed.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents decreased by $2,783,185 from $3,021,376 on December
31, 1999 to $238,191 as of March 31, 2000. Additionally, total borrowings under
long-term debt agreements increased by $2,186,968 from $22,635,563 on December
31, 1999 to $24,822,531 on March 31, 2000. The Company 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.
Page 9
<PAGE> 10
In the foreseeable future, the Company will continue its ongoing capital
expenditure program designed to maintain and improve its facilities. The
Company at all times evaluates its capital expenditure program in light of
prevailing economic conditions. The Company 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.
During the three months ended March 31, 2000 and 1999, respectively, the
Company paid cash dividends of $1,020,374 and $1,059,430. During those same
periods, the Company reacquired and retired 471,500 and 0 shares, respectively,
with costs of $4,571,954 and $0. The Company anticipates that it will continue
to pay dividends and that it will reacquire and retire additional shares of its
common stock in the future as financial conditions permit.
Statements contained in this Quarterly Report contain certain forward-looking
statements that involve a number of risks and uncertainties. Among the factors
that could cause actual results to differ materially are the following -
general economic conditions in the areas of the United States in which the
Company's customers are located; changes in the healthcare, resort and
commercial industries where uniforms and service apparel are worn; the impact
of competition; the availability of manufacturing materials; and the impact of
Year 2000 issues.
Page 10
<PAGE> 11
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, 2000 (for SEC use only).
b) Reports on Form 8-K
None.
Page 11
<PAGE> 12
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: May 12, 2000 SUPERIOR UNIFORM GROUP, INC.
By /s/ Gerald M. Benstock
----------------------------------------
Gerald M. Benstock
Chairman and Chief Executive Officer
By /s/ Andrew D. Demott, Jr.
----------------------------------------
Andrew D. Demott, Jr.
Vice President, CFO, Treasurer
and Principal Accounting Officer
Page 12
<PAGE> 1
EXHIBIT 15
May 5, 2000
Board of Directors
Superior Uniform Group, 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 Uniform Group, Inc. for the periods ended March 31,
2000 and 1999, as indicated in our report dated May 4, 2000; 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, 2000, is
incorporated by reference in Registration Statement No. 2-85796 on Form S-8.
We also are aware that the aforementioned report, pursuant to Rule 436(c) under
the Securities Act of 1933, is not considered a part of the Registration
Statement prepared or certified by an accountant or a report prepared or
certified by an accountant within the meaning of Sections 7 and 11 of that Act.
/s/ Deloitte & Touche, LLP
Certified Public Accountants
Tampa, Florida
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED UNAUDITED INTERIM FINANCIAL STATEMENTS INCLUDED IN THE COMPANY'S FORM
10-Q FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2000 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENT.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<EXCHANGE-RATE> 1
<CASH> 238,191
<SECURITIES> 0
<RECEIVABLES> 33,927,589
<ALLOWANCES> 0
<INVENTORY> 49,548,643
<CURRENT-ASSETS> 83,714,423
<PP&E> 29,609,466
<DEPRECIATION> 0
<TOTAL-ASSETS> 124,906,109
<CURRENT-LIABILITIES> 23,422,085
<BONDS> 21,642,168
0
0
<COMMON> 7,474,206
<OTHER-SE> 79,841,856
<TOTAL-LIABILITY-AND-EQUITY> 124,906,109
<SALES> 38,821,270
<TOTAL-REVENUES> 0
<CGS> 25,621,942
<TOTAL-COSTS> 36,729,925
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 360,386
<INCOME-PRETAX> 2,091,345
<INCOME-TAX> 760,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,331,345
<EPS-BASIC> 0.18
<EPS-DILUTED> 0.18
</TABLE>
