<PAGE> 1
FORM lO-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarter ended September 30, 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 October 27, 2000, the registrant had 7,123,327 common shares
outstanding.
Page 1
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
SUPERIOR UNIFORM GROUP, INC.
CONDENSED SUMMARY OF OPERATIONS
Three Months Ended September 30,
--------------------------------
2000 1999
----------- -----------
(Unaudited)
Net sales $42,496,735 $42,133,377
----------- -----------
Costs and expenses:
Cost of goods sold 28,047,847 27,913,067
Selling and administrative expenses 11,204,306 10,371,488
Interest expense 597,188 414,701
----------- -----------
39,849,341 38,699,256
----------- -----------
Earnings before taxes on income 2,647,394 3,434,121
Taxes on income 960,000 1,261,000
----------- -----------
Net earnings $ 1,687,394 $ 2,173,121
=========== ===========
Weighted average number of shares out-
standing during the period (Basic) 7,123,327 Shs. 7,727,657 Shs.
(Diluted) 7,123,327 Shs. 7,747,840 Shs.
Basic earnings per common share $ 0.24 $ 0.28
=========== ===========
Diluted earnings per common share $ 0.24 $ 0.28
=========== ===========
Cash dividends declared per common
share $ 0.135 $ 0.135
=========== ===========
Nine Months Ended September 30,
---------------------------------
2000 1999
------------ ------------
(Unaudited)
Net sales $126,050,768 $122,463,593
------------ ------------
Costs and expenses:
Cost of goods sold 83,193,509 81,131,032
Selling and administrative expenses 33,521,133 30,355,804
Interest expense 1,506,046 1,222,529
------------ ------------
118,220,688 112,709,365
------------ ------------
Earnings before taxes on income 7,830,080 9,754,228
Taxes on income 2,850,000 3,580,000
------------ ------------
Net earnings $ 4,980,080 $ 6,174,228
============ ============
Weighted average number of shares out-
standing during the period (Basic) 7,237,499 Shs. 7,784,795 Shs.
(Diluted) 7,241,707 Shs. 7,820,150 Shs.
Basic earnings per common share $ 0.69 $ 0.79
============ ============
Diluted earnings per common share $ 0.69 $ 0.79
============ ============
Cash dividends declared per common
share $ 0.405 $ 0.405
============ ============
The results of the nine months ended September 30, 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>
September 30,
2000 December 31,
(Unaudited) 1999
------------ ------------
(1)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 195,895 $ 3,021,376
Accounts receivable and other current assets 35,246,526 32,616,210
Inventories(*) 55,203,560 46,063,039
------------ ------------
TOTAL CURRENT ASSETS 90,645,981 81,700,625
PROPERTY, PLANT AND EQUIPMENT, NET 28,582,217 29,460,159
EXCESS OF COST OVER FAIR VALUE OF
ASSETS ACQUIRED 8,329,749 8,646,163
OTHER ASSETS 3,227,900 3,045,165
------------ ------------
$130,785,847 $122,852,112
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 9,619,619 $ 9,033,483
Other current liabilities 5,487,348 6,810,227
Current portion of long-term debt 3,206,821 3,162,986
------------ ------------
TOTAL CURRENT LIABILITIES 18,313,788 19,006,696
LONG-TERM DEBT 30,696,791 19,472,577
DEFERRED INCOME TAXES 1,595,000 1,655,000
SHAREHOLDERS' EQUITY 80,180,268 82,717,839
------------ ------------
$130,785,847 $122,852,112
============ ============
(*) Inventories consist of the following:
September 30,
2000 December 31,
(Unaudited) 1999
------------ ------------
Finished goods $ 37,372,875 $ 34,343,293
Work in process 5,932,604 3,698,341
Raw materials 11,898,081 8,021,405
------------ ------------
$ 55,203,560 $ 46,063,039
============ ============
</TABLE>
(1) The balance sheet as of December 31, 1999 has been derived from the audited
balance sheet 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>
Nine Months Ended September 30,
-------------------------------
2000 1999
------------ ------------
(Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 4,980,080 $ 6,174,228
Adjustments to reconcile net earnings to net
cash (used in) provided from operating activities:
Depreciation and amortization 3,627,043 3,082,083
Deferred income taxes (60,000) (45,000)
Changes in assets and liabilities, net of acquisition:
Accounts receivable and other current assets (2,630,316) 5,583,805
Inventories (9,140,521) 3,770,918
Accounts payable 586,136 (1,451,480)
Other current liabilities (1,322,879) 515,240
------------ ------------
Net cash flows (used in) provided from operating
activities (3,960,457) 17,629,794
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant, and equipment (2,458,582) (3,975,371)
Proceeds from disposals of property, plant
and equipment 25,895 111,078
Purchase of business, net of cash acquired -- (8,959,181)
Other assets (182,735) (140,062)
------------ ------------
Net cash used in investing activities (2,615,422) (12,963,536)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term debt 13,483,574 12,000,000
Reduction in long-term debt (2,215,525) (8,298,649)
Declaration of cash dividends (2,945,697) (3,152,600)
Proceeds received on exercised stock options -- 20,563
Common stock reacquired and retired (4,571,954) (1,659,390)
------------ ------------
Net cash provided from (used in) financing activities 3,750,398 (1,090,076)
------------ ------------
Net (decrease) increase in cash and
cash equivalents (2,825,481) 3,576,182
Cash and cash equivalents balance,
beginning of period 3,021,376 514,001
------------ ------------
Cash and cash equivalents balance,
end of period $ 195,895 $ 4,090,183
============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Interest paid $ 1,512,129 $ 1,202,808
============ ============
Income taxes paid $ 5,402,093 $ 4,623,314
============ ============
</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.
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
-------------------------------- --------------------------------
2000 1999 2000 1999
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net income $1,687,394 $2,173,121 $4,980,080 $6,174,228
Weighted average shares
outstanding 7,123,327 7,727,657 7,237,499 7,784,795
Basic earnings per common
share $ .24 $ .28 $ .69 $ .79
Three Months Ended September 30, Nine Months Ended September 30,
-------------------------------- -------------------------------
2000 1999 2000 1999
---------- ---------- ---------- ----------
Net Income $1,687,394 $2,173,121 $4,980,080 $6,174,228
Weighted average shares
outstanding 7,123,327 7,727,657 7,237,499 7,784,795
Common stock equivalents -- 20,183 4,208 35,355
Total weighted average shares
outstanding 7,123,327 7,747,840 7,241,707 7,820,150
Diluted earnings per common
share $ .24 $ .28 $ .69 $ .79
</TABLE>
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 September 30, 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 it operates 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:
On April 1, 1999, the Company acquired substantially all of the net assets of
The Empire Company, ("Empire") 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:
September 30, December 31,
2000 1999
----------- -----------
Note payable - bank, pursuant to revolving
credit agreement, maturing March 26, 2002 $13,483,484 $ --
6.75% term loan payable to First Union, with
monthly payments of principal and interest,
maturing April 1, 2009 10,770,128 11,435,563
6.65% note payable to MassMutual
Life Insurance Company due $1,666,667
annually through 2005 8,750,000 10,000,000
9.9% note payable to MassMutual
Life Insurance Company due $600,000
annually through 2001 900,000 1,200,000
----------- -----------
$33,903,612 $22,635,563
Less payments due within one year included
in current liabilities 3,206,821 3,162,986
----------- -----------
$30,696,791 $19,472,577
=========== ===========
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
September 30, 2000, approximately $1,461,000 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 borrowings, capital expenditures, rental
commitments, tangible net worth ($61,570,000 at September 30, 2000); working
capital ratio (2.5:1), fixed charges coverage ratio (2.5:1), stock repurchases
and payment of dividends. At September 30, 2000, under the most restrictive
terms of the debt agreements, retained earnings of approximately $10,280,000
were available for declaration of dividends. The Company is in full compliance
with all terms, conditions and covenants of the various credit agreements.
Page 7
<PAGE> 8
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133
("SFAS 133"), "Accounting for Derivative Instruments and Hedging Activities,"
(later amended by SFAS 138), which will be in effect on January 1, 2001 for the
Company. SFAS 133 requires, among other things, that all derivatives be
recognized in the balance sheets as either assets or liabilities and measured
at fair value. The corresponding derivative gains and losses should be reported
based upon the hedge relationship, if such a relationship exists. Changes in
the fair value of derivatives that are not designated as hedges or that do not
meet the hedge accounting criteria in SFAS 133 are required to be reported in
income. Management does not believe that the adoption of SFAS 133 will have a
significant impact on the Company's financial statements.
Note 4 - Subsequent Event:
On October 16, 2000, the Company entered into a 5-year term loan with First
Union. The term loan is an amortizing loan, with monthly payments of principal
in the amount of $83,333 plus interest, maturing on November 1, 2005. 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. The proceeds of this
term loan were utilized to reduce the outstanding balance on the Company's
revolving credit agreement. Concurrent with the execution of the new term loan
agreement, First Union and the Company amended the March 26, 1999 term loan and
the revolving credit agreement to revise the net worth requirements. The net
worth requirement included in Note 3 reflects this amendment.
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 8
<PAGE> 9
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 September 30, 2000 and the related condensed
summaries of operations for the three-month and nine-month periods ended
September 30, 2000 and 1999 and of cash flows for the nine-month periods ended
September 30, 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
--------------------------
Tampa, Florida
October 24, 2000
Page 9
<PAGE> 10
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
RESULTS OF OPERATIONS
Net sales of $42,496,735 for the three months ended September 30, 2000
increased approximately 1% from $42,133,377 for the comparable period ended
September 30, 1999. For the nine months ended September 30, 2000, net sales
were approximately 3% more than the comparable period ended September 30, 1999.
Cost of goods sold as a percentage of sales approximated 66.0% for the nine
months ended September 30, 2000 compared to 66.2% for the nine months ended
September 30, 1999.
Selling and administrative expenses, as a percentage of sales, were
approximately 26.6 % for the first nine months of 2000 compared to 24.8% for
the nine months ended September 30, 1999. The increase is primarily attributed
to costs 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
engaged to assist with the implementation and overtime costs for the Company's
employees working on the project. We are beginning to see reductions in these
additional expenses and expect that they will continue to decline over the
remainder of the current year.
Interest expense of $1,506,046 for the nine month period ended September 30,
2000 increased 23% from $1,222,529 for the similar period ended September 30,
1999 due to higher outstanding borrowings in the current period.
Net earnings decreased 22% to $1,687,394 for the three months ended September
30, 2000 as compared to net earnings of $2,173,121 for the same period ended
September 30, 1999. Net earnings for the nine months ended September 30, 2000
decreased 19% to $4,980,080 as compared to net earnings of $6,174,228 for the
same period in 1999.
Accounts receivable and other current assets increased 8% from $32,616,210 on
December 31, 1999 to $35,246,526 as of September 30, 2000.
Inventories increased 20% from $46,063,039 on December 31, 1999 to $55,203,560
as of September 30, 2000.
Accounts payable increased 6% from $9,033,483 on December 31, 1999 to
$9,619,619 on September 30, 2000 primarily due to increases in purchases of
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.
Page 10
<PAGE> 11
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents decreased by $2,825,481 from $3,021,376 on December
31, 1999 to $195,895 as of September 30, 2000. Additionally, total borrowings
under long-term debt agreements increased by $11,268,049 from $22,635,563 on
December 31, 1999 to $33,903,612 on September 30, 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.
In the foreseeable future, the registrant will continue its ongoing capital
expenditure program designed to maintain and improve its facilities. The
registrant at all times evaluates its capital expenditure program in light of
prevailing economic conditions. The registrant believes that its cash flow from
operating activities together with other capital resources and funds from
credit sources are adequate to meet its anticipated funding requirements for
the foreseeable future.
During the nine months ended September 30, 2000 and 1999, the Company paid cash
dividends of $2,945,697 and $3,152,600, respectively. The Company reacquired
and retired 471,500 and 120,400 shares in the nine month periods ended
September 30, 2000 and 1999, respectively, with costs of $4,571,954 and
$1,659,390.
This quarterly report contains 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; and the availability of
manufacturing materials.
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
4.1 Term Promissory Note dated October 16, 2000 between the Company
and First Union
4.2 First Amendment to March 26, 1999 Loan Agreement and Revolving
Credit Note between the Company and First Union
15 Letter re: Unaudited Interim Financial Information.
27 Financial Data Schedule.
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: November 3, 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.
Chief Financial Officer and Principal
Accounting Officer, Vice President
and Treasurer
