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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, 1999
[ ] 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 I.R.S. Employer Identification
No. 11-1385670
10099 Seminole Blvd.
Seminole, Florida 33772
Telephone (727) 397-9611
Securities registered pursuant to Section 12 (b) of the Act:
Common Shares with a par value Listed on
of $.001 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 15, 2000, 7,248,327 common shares were outstanding, and
the aggregate market value of the registrant's common shares held by
non-affiliates was approximately $45 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, 2000,
for its Annual Meeting of Shareholders to be held May 5, 2000, 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 25.
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PART I
Item 1. Business
(a) Superior Uniform Group, Inc. ("registrant" or the "Company")
was organized in 1920 and was incorporated in 1922 as a New
York company under the name Superior Surgical Mfg. Co., Inc.
In 1998, the Company changed its name to Superior Uniform
Group, Inc. and its state of incorporation to Florida.
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 significant distinct segments or lines of business;
over 95% of registrant's 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.
3. Corporate and resort embroidered sportswear.
Uniforms and service apparel account for 90-95% of
total sales and revenues; no other single class of
product listed above 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.
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Registrant has a substantial number of customers,
the largest of which accounted for no more than 5%
of registrant's 1999 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 January 28, 2000, the backlog of all
orders was approximately $7,463,000, compared to
approximately $6,241,000 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 1,700 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) 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.
(d) Tampa, Florida - Plant of approximately 111,000 square feet,
owned by the registrant; used for regional administrative
offices, warehousing, shipping and small retail operation.
(e) Miami, Florida - Plant of approximately 9,000 square feet,
leased from private owners under a lease expiring in 2002;
used for regional sales office, warehousing, shipping, and
small retail operation.
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(f) 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.
(g) Marietta, Georgia - Plant and warehouse of approximately
33,000 square feet leased from private owners.
(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) Portland, Oregon - Plant and warehouse of approximately
40,000 square feet leased from private owners.
(j) Miscellaneous -
New Orleans, Louisiana, 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; Seattle, Washington,
sales office - leased.
Item 3. Legal Proceedings
None.
Item 4. Submission of Matters to a Vote of Security Holders
(a) None
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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.
QUARTER ENDED
--------------------------------------------------------------------------------------------------
1999 1998
---------------------------------------------- -----------------------------------------------
Mar. 31 June 30 Sept. 30 Dec. 31 Mar. 31 June 30 Sept. 30 Dec. 31
------- ------- -------- ------- ------- ------- -------- -------
Common Shares:
High $15-3/4 $14-1/8 $12-7/8 $11-3/4 $17-1/2 $ 18-5/8 $16-3/4 $14-3/4
Low $12-1/2 $ 12 $10-3/4 $ 8 $15-1/4 $15-5/16 $12-3/8 $11-5/8
Dividends (total
for 1999-$.54;
1998-$.51) $ .135 $ .135 $ .135 $ .135 $ .125 $ .125 $ .125 $ .135
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 $10,420,000 were available at
December 31, 1999 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 15, 2000, registrant had 353 shareholders of record and the
closing price for registrant's common shares on the American Stock Exchange was
$10.00 per share.
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Item 6.
Selected Financial Data
Years Ended December 31, 1999 1998 1997 1996 1995
------------ ------------ ------------ ------------ ------------
Net sales $168,005,646 $160,717,583 $144,607,048 $141,420,626 $135,197,798
------------ ------------ ------------ ------------ ------------
Costs and expenses:
Cost of goods sold 110,902,060 106,620,526 96,213,237 93,897,373 91,169,728
Selling and administrative
expenses 41,202,030 36,991,002 32,903,249 32,333,924 30,162,203
Business process
re-engineering charge -- 3,474,391 -- -- --
Provision for dispute
settlement -- -- -- -- 4,250,000
Interest expense 1,605,261 1,115,724 1,100,553 1,295,233 968,830
------------ ------------ ------------ ------------ ------------
153,709,351 148,201,643 130,217,039 127,526,530 126,550,761
------------ ------------ ------------ ------------ ------------
Earnings before taxes on income 14,296,295 12,515,940 14,390,009 13,894,096 8,647,037
Taxes on income 5,180,000 4,570,000 5,220,000 5,200,000 4,885,000
------------ ------------ ------------ ------------ ------------
Net earnings $ 9,116,295 $ 7,945,940 $ 9,170,009 $ 8,694,096 $ 3,762,037
============ ============ ============ ============ ============
Basic earnings per common share $ 1.17 $ 1.01 $ 1.15 $ 1.07 $ 0.45
============ ============ ============ ============ ============
Diluted earnings per common share $ 1.17 $ 1.00 $ 1.14 $ 1.07 $ 0.45
============ ============ ============ ============ ============
Cash dividends per common share $ 0.54 $ 0.51 $ 0.46 $ 0.38 $ 0.36
============ ============ ============ ============ ============
At year end:
Total assets $122,852,112 $119,038,910 $108,354,855 $105,659,094 $106,133,637
------------ ------------ ------------ ------------ ------------
Long-term debt $ 19,472,577 $ 17,600,000 $ 13,466,666 $ 15,733,333 $ 18,000,000
------------ ------------ ------------ ------------ ------------
Working capital $ 62,693,929 $ 67,040,464 $ 63,764,610 $ 60,242,628 $ 55,081,842
------------ ------------ ------------ ------------ ------------
Shareholders' equity $ 82,717,839 $ 80,503,405 $ 78,117,115 $ 74,156,424 $ 69,517,878
------------ ------------ ------------ ------------ ------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
OPERATIONS: In 1999 and 1998, net sales increased 5% and 11%, respectively. The
increases were attributed 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 as well as corporate and resort embroidered sportswear) as well as the
April 1999 acquisition of The Empire Company and the January 1998 acquisition
of Sope Creek.
As a percent of sales, cost of goods sold were 66.0% in 1999, 66.3% in 1998,
and 66.5% in 1997. The decreases in 1999 and 1998 were primarily the result of
increased manufacturing and sourcing efficiencies.
As a percentage of sales, selling and administrative expenses were 24.5% in
1999, 23.0% in 1998, and 22.8% in 1997. The increase in 1999 was primarily
attributable to increases in costs associated with the Company's growth in
sales and incremental expenses incurred in preparation for our February 2000
full implementation of our SAP/AFS (Apparel Footwear Solution) computer system.
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MANAGEMENT' S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CON'T)
Included in earnings for the year ended December 31, 1998 are pre-tax charges
in the amount of $3,474,391, as part of our commitment to business process
re-engineering activities (integrated SAP systems). The business process
re-engineering activities extended across substantially all operating processes
of the Company's business including inventory management, manufacturing, sales
and distribution, and human resources. The Company utilizes SAP's R/3 product
along with apparel specific enhancements in the apparel/footwear solution. The
costs associated with the charge consist primarily of charges from external
consultants assisting with the implementation and external costs associated
with training users.
Interest expense as a percentage of sales was 1.0% in 1999, 0.7% in 1998; and
in 1997 was 0.8%. The increase in 1999 is attributed primarily to the increased
level of fixed rate debt incurred in 1999. The decrease in 1998 is attributed
to reduced fixed rate long-term debt, offset by higher borrowings outstanding
on the long-term revolving credit agreement in 1998.
The effective income tax rate in 1999 was 36.2%; in 1998 it was 36.5%; and in
1997 it was 36.3%.
In 1999, the Company reported net income of 5.4% of sales with a return of
11.2% on average shareholders' equity. In 1998, the Company reported net income
of 4.9% of sales with a return of 10% on average shareholders' equity.
Excluding the impact of the pre-tax charge discussed above, the 1998 amounts
would have been 6.3% and 12.8%, respectively. For 1997, the corresponding
figures were 6.3% and 12.0%, respectively.
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 1999 was $62,693,929 and the working
capital ratio 4.3:1; for 1998, it was $67,040,464 and the ratio 4.6:1. 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 to fund the
Company's operations.
In 1999, the Company's percentage of total debt to total debt and equity was
21.5%; and in 1998 it was 19.8%.
The Company has an on-going capital expenditure program designed to maintain
and improve its facilities. Capital expenditures were approximately $4,940,000,
$6,260,000, and $2,240,000, in the years 1999, 1998 and 1997, respectively.
Capital expenditures for 1999 and 1998 included approximately $3,220,000 and
$4,900,000 related to the acquisition and implementation of new computer
hardware and software. The Company at all times evaluates its capital
expenditure programs in light of prevailing economic conditions.
During the years ended December 31, 1999 and 1998, the Company paid cash
dividends of $4,195,843 and $4,031,738, respectively. The Company reacquired
and retired 253,300 and 168,700 of its common shares in the years ended
December 31, 1999 and 1998, respectively, with costs of $2,726,581 and
$2,435,485, respectively.
In 1999, cash and cash equivalents increased by approximately $2,507,000. This
increase is attributed to approximately $20,753,000 in cash generated from
operations offset by approximately $14,112,000 utilized in investing activities
primarily for the acquisition of the Empire Company, computer system
implementation and recurring fixed asset additions and approximately $4,133,000
utilized in financing activities. Cash and cash equivalents decreased by
approximately $8,400,000 during 1998. This decrease is attributed to
approximately $8,330,000 utilized in investing activities primarily for the
computer system implementation, the acquisition of Sope Creek and recurring
fixed asset additions, $1,426,000 utilized in financing activities offset by
approximately $1,380,000 of cash generated from operations.
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MANAGEMENT' S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CON'T)
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
December 31, 1999, approximately $1,839,000 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 ($60,000,000), plus 50% of net income after
March 31, 1999, ($63,652,000 at December 31, 1999); working capital ratio
(2.5:1), fixed charges coverage ratio (2.5:1), stock repurchases and payment of
dividends. At December 31, 1999, under the most restrictive terms of the debt
agreements, retained earnings of approximately $10,420,000 were available for
declaration of dividends. The Company is in full compliance with all terms,
conditions and covenants of the various credit agreements. The funds from the
new term loan were utilized to pay the outstanding balance on the existing
revolver and the remaining funds were utilized to fund the acquisition of The
Empire Company. With funds from the credit agreement, anticipated cash flows
generated from operations and other credit sources readily available, the
Company believes 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 for 2000.
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.
Statements contained in this Annual 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.
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Item 8 - Financial Statements and Supplementary Data
SUPERIOR UNIFORM GROUP, INC.
STATEMENTS OF EARNINGS
Years Ended December 31, 1999, 1998 and 1997
1999 1998 1997
------------ ------------ ------------
Net sales $168,005,646 $160,717,583 $144,607,048
------------ ------------ ------------
Costs and expenses:
Cost of goods sold 110,902,060 106,620,526 96,213,237
Selling and administrative expenses 41,202,030 36,991,002 32,903,249
Business process re-engineering charge -- 3,474,391 --
Interest expense 1,605,261 1,115,724 1,100,553
------------ ------------ ------------
153,709,351 148,201,643 130,217,039
------------ ------------ ------------
Earnings before taxes on income 14,296,295 12,515,940 14,390,009
Taxes on income 5,180,000 4,570,000 5,220,000
------------ ------------ ------------
Net earnings $ 9,116,295 $ 7,945,940 $ 9,170,009
============ ============ ============
Basic earnings per common share $ 1.17 $ 1.01 $ 1.15
============ ============ ============
Diluted earnings per common share $ 1.17 $ 1.00 $ 1.14
============ ============ ============
Dividends per common share $ 0.54 $ 0.51 $ 0.46
============ ============ ============
STATEMENTS OF SHAREHOLDERS' EQUITY
Years Ended December 31, 1999, 1998, and 1997
Additional Total
Common Common Paid-In Retained Shareholders'
Shares Stock Capital Earnings Equity
---------- ----------- ------------ ------------ -------------
Balance, January 1, 1997 8,053,552 $ 8,054 $ 9,780,394 $ 64,367,976 $ 74,156,424
Net earnings 9,170,009 9,170,009
Common shares issued upon exercise of options 34,850 35 374,484 374,519
Purchase and retirement of common shares (151,900) (152) (187,190) (1,778,886) (1,966,228)
Cash dividends declared ($.455 per share) (3,617,609) (3,617,609)
---------- ----------- ------------ ------------ ------------
Balance, December 31, 1997 7,936,502 7,937 9,967,688 68,141,490 78,117,115
Net earnings 7,945,940 7,945,940
Common shares issued upon exercise of options 78,725 79 907,494 907,573
Purchase and retirement of common shares (168,700) (169) (218,022) (2,217,294) (2,435,485)
Cash dividends declared ($.51 per share) (4,031,738) (4,031,738)
---------- ----------- ------------ ------------ ------------
Balance, December 31, 1998 7,846,527 7,847 10,657,160 69,838,398 80,503,405
Net earnings 9,116,295 9,116,295
Common shares issued upon exercise of options 1,600 1 20,562 20,563
Purchase and retirement of common shares (253,300) (253) (344,562) (2,381,766) (2,726,581)
Cash dividends declared ($.54 per share) (4,195,843) (4,195,843)
---------- ----------- ------------ ------------ ------------
Balance, December 31, 1999 7,594,827 $ 7,595 $ 10,333,160 $ 72,377,084 $ 82,717,839
========== =========== ============ ============ ============
See Notes to Financial Statements
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SUPERIOR UNIFORM GROUP, INC.
BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
ASSETS
1999 1998
------------ ------------
CURRENT ASSETS
Cash and cash equivalents $ 3,021,376 $ 514,001
Accounts receivable, less allowance for doubtful accounts of $450,000
and $250,000, respectively 30,665,353 32,547,966
Inventories 46,063,039 50,761,088
Prepaid expenses and other current assets 1,950,857 1,887,914
------------ ------------
TOTAL CURRENT ASSETS 81,700,625 85,710,969
PROPERTY, PLANT AND EQUIPMENT, NET 29,460,159 27,934,411
EXCESS OF COST OVER FAIR VALUE OF ASSETS ACQUIRED 8,646,163 2,773,063
OTHER ASSETS 3,045,165 2,620,467
------------ ------------
$122,852,112 $119,038,910
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 9,033,483 $ 10,659,144
Accrued expenses 5,745,937 5,008,606
Taxes on income 1,064,290 736,088
Current portion of long-term debt 3,162,986 2,266,667
------------ ------------
TOTAL CURRENT LIABILITIES 19,006,696 18,670,505
LONG-TERM DEBT 19,472,577 17,600,000
DEFERRED INCOME TAXES 1,655,000 2,265,000
SHAREHOLDERS' EQUITY:
Preferred stock, $1 par value - authorized 300,000 shares (none issued) -- --
Common stock, $.001 par value - authorized 50,000,000 shares, issued and
outstanding - 7,594,827 and 7,846,527, respectively 7,595 7,847
Additional paid-in capital 10,333,160 10,657,160
Retained earnings 72,377,084 69,838,398
------------ ------------
TOTAL SHAREHOLDERS' EQUITY 82,717,839 80,503,405
------------ ------------
$122,852,112 $119,038,910
============ ============
See Notes to Financial Statements.
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SUPERIOR UNIFORM GROUP, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
1999 1998 1997
------------ ----------- ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 9,116,295 $ 7,945,940 $ 9,170,009
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 4,214,468 4,543,881 4,427,422
Deferred income taxes (610,000) (135,000) (230,000)
Changes in assets and liabilities, net of acquisitions:
Accounts receivable 3,695,904 (6,059,297) (2,318,678)
Inventories 6,388,737 (7,080,644) 1,589,959
Prepaid expenses and other current assets 15,741 (751,102) 146,316
Accounts payable (2,203,658) 3,511,986 389,816
Accrued expenses (192,508) (413,880) 271,972
Taxes on income 328,202 (181,190) 569,949
------------ ----------- ------------
Net cash flows provided from operating activities 20,753,181 1,380,694 14,016,765
------------ ----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment (4,940,658) (6,259,024) (2,241,544)
Disposals of property, plant and equipment 116,378 753,254 41,689
Purchase of businesses, net of cash acquired (8,869,181) (2,837,155) --
Other assets (419,380) 12,601 (169,609)
------------ ----------- ------------
Net cash used in investing activities (14,112,841) (8,330,324) (2,369,464)
------------ ----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term debt 12,000,000 6,400,000 --
Repayment of long-term debt (9,231,104) (2,266,667) (2,266,667)
Declaration of cash dividends (4,195,843) (4,031,738) (3,617,609)
Proceeds received on exercise of stock options 20,563 907,573 374,519
Common stock reacquired and retired (2,726,581) (2,435,485) (1,966,228)
------------ ----------- ------------
Net cash used in financing activities (4,132,965) (1,426,317) (7,475,985)
------------ ----------- ------------
Net increase (decrease) in cash and cash equivalents 2,507,375 (8,375,947) 4,171,316
Cash and cash equivalents balance, beginning of year 514,001 8,889,948 4,718,632
------------ ----------- ------------
Cash and cash equivalents balance, end of year $ 3,021,376 $ 514,001 $ 8,889,948
============ =========== ============
See Notes to Financial Statements
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SUPERIOR UNIFORM GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 1999, 1998, and 1997
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) Basis of presentation
On May 8, 1998, the shareholders of the Company approved a Plan of Merger
between the Company and its wholly-owned subsidiary Superior Uniform Group,
Inc., a Florida corporation. Superior Uniform Group, Inc. is the surviving
corporation. Concurrent with the merger, the capitalization of the Company
was revised to change the par value of the common stock from $1 par value
to $.001 par value. All share and per share amounts in the accompanying
financial statements have been retroactively adjusted to reflect this
change.
c) Cash and cash equivalents
The Company considers all highly liquid investments with an original
maturity of three months or less at the time of purchase to be cash
equivalents.
d) Inventories
Inventories are stated at the lower of cost (first-in, first-out method) or
market.
e) 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.
f) 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.
g) Impairment of long-lived assets
The Company evaluates the carrying amount of long-lived assets to be held
and used, including excess of cost over fair value of assets acquired, when
events and circumstances warrant such a review. The carrying amount of a
long-lived asset is considered impaired when the estimated undiscounted
cash flow from each asset is estimated to be less than its carrying amount.
h) 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.
i) 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.
j) 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.
k) Earnings per share
The Company adopted the provisions of the Financial Accounting Standards
Board Opinion No. 128, "Earnings Per Share," ("FAS 128"), during the fourth
quarter of 1997, as required. Historical basic per share data under FAS 128
is based on the weighted average number of shares outstanding. Historical
diluted per share data under FAS 128 is reconciled by adding to weighted
average shares outstanding the dilutive impact of the exercise of
outstanding stock options.
l) Comprehensive Income
The Company adopted the provisions of FAS 130, "Reporting Comprehensive
Income" in the first quarter of 1998. FAS 130 requires disclosures of
comprehensive income including per-share amounts in addition to the
existing statement of earnings. 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). For the
years ending December 31, 1999 and 1998, there are no items requiring
separate disclosure in accordance with this statement.
m) Operating Segments
The Company adopted the provisions of FAS 131 "Disclosures about Segments
of an Enterprise and Related Information." in the first quarter of 1998.
FAS 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.
II-8 Page 12
13
n) 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 - ACQUISITIONS:
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
===========
Effective January 2, 1998, the Company acquired the net assets of J & L Group,
Inc., a manufacturer of embroidered sportswear, with revenues for the year
ended December 1997 of approximately $6,700,000. The purchase price for this
acquisition was approximately $2,874,000 and was allocated as follows:
Cash $ 36,773
Accounts Receivable 902,754
Inventories 1,157,435
Property, Plant & Equipment 92,021
Excess of Cost Over Fair Value
of Assets Acquired 2,067,461
----------
TOTAL ASSETS $4,256,444
==========
Accounts Payable and Accrued Expenses $1,382,515
==========
NOTE 3 - BUSINESS PROCESS RE-ENGINEERING CHARGE:
The statement of earnings for the year ended December 31, 1998 includes pre-tax
charges in the amount of $3,474,391 as part of the Company's commitment to
business process re-engineering activities (integrated SAP systems).
NOTE 4 - INVENTORIES:
December 31,
---------------------------------
1999 1998
---- ----
[S] [C] [C]
Finished goods $34,343,293 $34,844,679
Work in process 3,698,341 3,452,278
Raw materials 8,021,405 12,464,131
----------- -----------
$46,063,039 $50,761,088
=========== ===========
The opening inventory used in computing cost of goods sold for 1998 was
$42,523,009. General and administrative costs capitalized to inventories are
not material
II-9 Page 13
14
NOTE 5 - PROPERTY, PLANT AND EQUIPMENT:
December 31,
----------------------------
1999 1998
----------- -----------
Land $ 2,080,661 $ 2,080,661
Buildings, improvements and leaseholds 10,562,769 10,297,967
Machinery, equipment and fixtures 50,339,834 45,838,502
----------- -----------
62,983,264 58,217,130
Accumulated depreciation and amortization 33,523,105 30,282,719
----------- -----------
$29,460,159 $27,934,411
=========== ===========
Depreciation and amortization charges were $4,214,468, $4,435,857, and
$4,422,773 in 1999, 1998 and 1997, respectively.
NOTE 6 - LONG-TERM DEBT:
December 31, December 31,
1999 1998
------------ ------------
Note payable - bank, pursuant to revolving
credit agreement, maturing March 26, 2002 $ -- $ 6,400,000
6.75% term loan payable to First Union, with monthly payments
of principal and interest, maturing April 1, 2009 11,435,563 --
6.65% note payable to MassMutual Life Insurance Company
due $1,666,667 annually through 2005 10,000,000 11,666,667
9.9% note payable to MassMutual Life Insurance Company
due $600,000 annually through 2001 1,200,000 1,800,000
----------- -----------
22,635,563 19,866,667
Less payments due within one year included in current liabilities 3,162,986 2,266,667
----------- -----------
$19,472,577 $17,600,000
=========== ===========
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 December 31,
1999, approximately $1,839,000 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 ($60,000,000), plus 50% of net income after March 31, 1999,
($63,652,000 at December 31, 1999); working capital ratio (2.5:1), fixed charges
coverage ratio (2.5:1), stock repurchases and payment of dividends. At December
31, 1999, under the most restrictive terms of the debt agreements, retained
earnings of approximately $10,420,000 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.
Scheduled principal payments on long-term obligations are $3,162,986 in 2000;
3,224,949 in 2001; $2,698,481 in 2002; $2,770,747 in 2003; $2,845,687 in 2004
and $7,932,713 in 2005 and thereafter.
II-10 Page 14
15
NOTE 7 - TAXES ON INCOME:
Aggregate income tax provisions (benefits) consist of the following:
1999 1998 1997
----------- ----------- -----------
Current:
Federal $ 5,305,000 $ 4,165,000 $ 4,960,000
State and local 485,000 540,000 490,000
----------- ----------- -----------
5,790,000 4,705,000 5,450,000
Deferred (610,000) (135,000) (230,000)
----------- ----------- -----------
$ 5,180,000 $ 4,570,000 $ 5,220,000
=========== =========== ===========
The significant components of the deferred income tax liability are as follows:
1999 1998
---------- ----------
Deferred income tax assets:
Operating reserves and other accruals $1,015,000 $ 815,000
Deferred income tax liabilities:
Book carrying value in excess of tax basis of property 2,220,000 2,630,000
Deferred expenses 450,000 450,000
---------- ----------
Net deferred income tax liability $1,655,000 $2,265,000
========== ==========
The difference between the total statutory Federal income tax rate and the
actual effective income tax rate is accounted for as follows:
1999 1998 1997
------ ------ ------
Statutory Federal income tax rate 34.3 % 34.2 % 34.3 %
State and local income taxes, net of Federal income tax benefit 2.2 2.8 2.2
Other items (0.3) (0.5) (0.2)
---- ---- ----
Effective income tax rate 36.2 % 36.5 % 36.3 %
==== ==== ====
NOTE 8 - 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 1999, 1998 and 1997 included the following
components:
1999 1998 1997
----------- ----------- -----------
Service cost - benefits earned during the period $ 710,000 $ 664,000 $ 683,000
Interest cost on projected benefit obligation 961,000 989,000 1,014,000
Expected return on plan assets (1,186,000) (1,144,000) (1,072,000)
Amortization of transition obligation 33,000 33,000 53,000
Amortization of prior service cost 296,000 296,000 394,000
Recognized actuarial gain (297,000) (310,000) (278,000)
Settlement gain -- (421,000) (66,000)
Curtailment loss -- -- 440,000
----------- ----------- -----------
Net periodic pension cost after curtailments and settlements $ 517,000 $ 107,000 $ 1,168,000
=========== =========== ===========
II-11 Page 15
16
Assumptions used in the calculation of net periodic pension cost (two corporate
plans and three plant/factory plans) for the three years ended December 31, 1999
were:
Long Term Rate
Discount Rate of Return Salary Scale
--------------------- --------------------- -----------------
Corp. Plants Corp. Plants Corp. Plants
----- ------ ----- ------ ----- ------
1997 7.50% 7.50% 8.00% 8.00% 4.50% N/A
1998 7.25% 7.25% 8.00% 8.00% 4.50% N/A
1999 6.75% 6.75% 8.00% 8.00% 4.50% N/A
The following table sets forth the plans' funded status and amounts recognized
in the Company's balance sheets at December 31, 1999 and 1998, for its pension
plans:
December 31,
1999 1998
------------ ------------
CHANGES IN BENEFIT OBLIGATION
Benefit obligation at beginning of year $ 15,229,000 $ 15,713,000
Service cost 710,000 664,000
Interest cost 961,000 989,000
Actuarial (gain) or loss (865,000) 760,000
Plan amendments 147,000 --
Settlement/curtailment -- (2,013,000)
Benefits paid (677,000) (884,000)
------------ ------------
Benefit obligation end of year $ 15,505,000 $ 15,229,000
------------ ------------
CHANGES IN PLAN ASSETS
Fair value of plan assets at beginning of year $ 16,493,000 $ 16,076,000
Actual return on assets 2,295,000 3,202,000
Employer contributions 107,000 --
Benefits paid (677,000) (884,000)
Surplus recovered (111,000) --
Settlements -- (1,901,000)
------------ ------------
Fair value of plan assets at end of year 18,107,000 16,493,000
Funded status 2,602,000 1,264,000
Unrecognized transition obligation -- 33,000
Unrecognized actuarial gain (5,843,000) (3,805,000)
Unrecognized prior service costs 1,385,000 1,191,000
------------ ------------
Accrued benefit costs $ (1,856,000) $ (1,317,000)
============ ============
II-12 Page 16
17
NOTE 9 - QUARTERLY RESULTS FOR 1998 AND 1999 (UNAUDITED):
Quarter Ended
---------------------------------------------------------------
March 31, June 30, September 30, December 31,
1998 1998 1998 1998
----------- ----------- ------------- ------------
Net sales $37,432,507 $38,704,155 $41,675,244 $42,905,677
----------- ----------- ----------- -----------
Gross profit 12,641,222 13,070,657 13,943,285 14,441,893
----------- ----------- ----------- -----------
Earnings before taxes on income 2,451,121 2,824,491 3,376,479 3,863,849
----------- ----------- ----------- -----------
Net earnings $ 1,561,121 $ 1,804,491 $ 2,156,479 $ 2,423,849
=========== =========== =========== ===========
Basic earnings per common share $ 0.20 $ 0.23 $ 0.27 $ 0.31
=========== =========== =========== ===========
Diluted earnings per common share $ 0.20 $ 0.23 $ 0.27 $ 0.31
=========== =========== =========== ===========
Dividends per common share $ 0.125 $ 0.125 $ 0.125 $ 0.135
=========== =========== =========== ===========
Average outstanding shares (Basic) 7,871,098 7,892,173 7,896,163 7,848,660
=========== =========== =========== ===========
Average outstanding shares (Diluted) 8,001,605 8,005,644 7,967,220 7,891,511
=========== =========== =========== ===========
Quarter Ended
---------------------------------------------------------------
March 31, June 30, September 30, December 31,
1999 1999 1999 1999
----------- ----------- ------------- ------------
Net sales $37,504,104 $42,826,112 $42,133,377 $45,542,053
----------- ----------- ----------- -----------
Gross profit 12,625,653 14,486,598 14,220,310 15,771,025
----------- ----------- ----------- -----------
Earnings before taxes on income 2,862,995 3,457,112 3,434,121 4,542,067
----------- ----------- ----------- -----------
Net earnings $ 1,811,995 $ 2,189,112 $ 2,173,121 $ 2,942,067
=========== =========== =========== ===========
Basic earnings per common share $ 0.23 $ 0.28 $ 0.28 $ 0.38
=========== =========== =========== ===========
Diluted earnings per common share $ 0.23 $ 0.28 $ 0.28 $ 0.38
=========== =========== =========== ===========
Dividends per common share $ 0.135 $ 0.135 $ 0.135 $ 0.135
=========== =========== =========== ===========
Average outstanding shares (Basic) 7,847,255 7,779,473 7,727,657 7,714,726
=========== =========== =========== ===========
Average outstanding shares (Diluted) 7,895,357 7,817,253 7,747,840 7,714,726
=========== =========== =========== ===========
The independent certified public accountants made a limited review of the 1998
and 1999 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.
II-13 Page 17
18
NOTE 10 - RENTALS:
Aggregate rent expense, including month-to-month rentals, approximated
$1,151,000, $767,000, and $520,000, for the years ended December 31, 1999, 1998,
and 1997, respectively. Long-term lease commitments are as follows: 2000 -
$952,000; 2001 - $689,000; 2002 - $306,000; 2003 - $146,000; 2004 and thereafter
- - $689,000.
NOTE 11 - 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, 1999 follows:
No. of Weighted Average Market
Shares Exercise Price Total Price
-------- ---------------- ---------- ----------
Outstanding January 1, 1997 702,325 $13.67 $9,602,214
Granted 137,275 13.88 1,905,347 $1,896,272
Exercised (34,850) 10.75 (374,519)
Lapsed (277,200) 16.59 (4,598,087)
Cancelled (48,375) 14.98 (724,834)
-------- ------ ----------
Outstanding December 31, 1997 479,175 12.13 5,810,121
Granted 135,050 15.72 2,122,525 $2,113,450
Exercised (78,725) 11.53 (907,573)
Cancelled (11,975) 13.32 (159,527)
-------- ------ ----------
Outstanding December 31, 1998 523,525 13.11 6,865,546
Granted 158,000 13.33 2,106,891 $2,098,751
Exercised (1,600) 12.85 (20,563)
Lapsed (69,900) 13.88 (970,521)
Cancelled (7,925) 12.97 (102,750)
-------- ------ ----------
Outstanding December 31, 1999 602,100 $13.09 $7,878,603
======== ====== ==========
The weighted average remaining life for options outstanding at December 31, 1999
was 2.6 years. At December 31, options available to issue were 908,375 for 1997,
764,150 for 1998 and 782,725 for 1999. Options have never been repriced by the
Company in any year.
The effect on compensation expense, if determined under the provisions of FAS
123, "Accounting for Stock-Based Compensation" 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:
II-14 Page 18
19
Related Party
Options Other Options
------------- ---------------
Exercise price
1999 $16.29 $12.38 - $14.81
1998 $18.15 $15.00 - $16.50
1997 $15.13 $13.75 - $13.88
Market price
1999 $14.81 $12.38 - $14.81
1998 $16.50 $15.00 - $16.50
1997 $13.75 $13.75 - $13.88
Risk free interest rate
1999 4.75% 4.75% - 6.00%
1998 5.43% 5.43% - 5.62%
1997 6.17% 6.08% - 6.17%
Expected option life 5 years 5 years
Expected volatility
1999 23.1% 23.1% - 25.8%
1998 26.2% 24.9% - 26.2%
1997 26.5% 26.2% - 26.5%
Dividend yield 3.6% 3.6% - 4.4%
NOTE 12 - EARNINGS PER SHARE:
The following table represents the computation of basic and diluted earnings per
share:
1999 1998 1997
---------- ---------- ----------
Net income $9,116,295 $7,945,940 $9,170,009
Weighted average shares
outstanding 7,767,278 7,877,024 7,996,536
Basic earnings per common
share $ 1.17 $ 1.01 $ 1.15
========== ========== ==========
1999 1998 1997
---------- ---------- ----------
Net Income $9,116,295 $7,945,940 $9,170,009
Weighted average shares
outstanding 7,767,278 7,877,024 7,996,536
Common stock equivalents 26,516 88,901 65,428
---------- ---------- ----------
Total weighted average shares
outstanding 7,793,794 7,965,925 8,061,964
Diluted earnings per common
share $ 1.17 $ 1.00 $ 1.14
========== ========== ==========
II-15 Page 19
20
NOTE 13 - ACCRUED EXPENSES:
December 31,
----------------------------
1999 1998
---------- ----------
Salaries, wages, commissions and vacation pay $2,552,703 $2,592,119
Other accrued expenses 3,193,234 2,416,487
---------- ----------
$5,745,937 $5,008,606
========== ==========
NOTE 14 - SUPPLEMENTAL INFORMATION:
Year Ended December 31,
------------------------------------------------
1999 1998 1997
---------- ---------- ----------
Income taxes paid $5,261,798 $4,586,097 $4,680,144
========== ========== ==========
Interest paid $1,586,740 $1,200,456 $1,248,171
========== ========== ==========
II-16 Page 20
21
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders
Superior Uniform Group, Inc.
Seminole, Florida
We have audited the accompanying balance sheets of Superior Uniform Group, Inc.
(the "Company") as of December 31, 1999 and 1998, and the related statements of
earnings, shareholders' equity and cash flows for each of the three years in the
period ended December 31, 1999. 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, such financial statements present fairly, in all material
respects, the financial position of the Company as of December 31, 1999 and
1998, and the results of its operations and its cash flows for each of the three
years in the period ended December 31, 1999 in conformity with generally
accepted accounting principles.
/s/ Deloitte & Touche LLP
- ----------------------------
Deloitte & Touche LLP
Certified Public Accountants
Tampa, Florida
February 18, 2000
II-17 Page 21
22
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 Compensation;
12 and 13 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 5, 2000, a copy of which will be filed with the Securities and
Exchange Commission on or before March 31, 2000.
II-18, III-1 Page 22
23
PART IV
Item 14 Exhibits, Financial Statement Schedules and Reports on Form 8-K
Page
(a) 1. Financial Statements
The following financial statements of Superior Uniform Group, Inc.
are included in Part II, Item 8:
Statements of earnings - years ended
December 31, 1999, 1998 and 1997............................. II-5
Statements of shareholders'equity - years
ended December 31, 1999, 1998 and 1997....................... II-5
Balance sheets - December 31, 1999 and 1998...................... II-6
Statements of cash flows - years ended
December 31, 1999, 1998 and 1997............................. II-7
Notes to financial statements.................................... II-8 to II-16
Opinion of independent certified public accountants.............. II-17
(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
See Exhibit Index
(b) Reports on Form 8-K:
There were no reports on Form 8-K for the three months ended
December 31, 1999.
(c) See (a) 3. above.
(d) None
IV-1 Page 23
24
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 UNIFORM GROUP, INC.
/s/ Gerald M. Benstock
---------------------------------
BY: Gerald M. Benstock
(Chairman and Chief Executive
Officer)
/s/ Andrew D. Demott, Jr.
---------------------------------
BY: Andrew D. Demott, Jr.
(Treasurer and Principal
Accounting Officer)
DATE: March 24, 2000
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/ Michael Benstock /s/ Alan D. Schwartz
- --------------------------------- -------------------------------------
Michael Benstock, March 24, 2000 Alan D. Schwartz, March 24, 2000
(Director) (Director)
/s/ Saul Schechter /s/ Peter Benstock
- --------------------------------- -------------------------------------
Saul Schechter, March 24, 2000 Peter Benstock, March 24, 2000
(Director) (Director)
/s/ Manual Gaetan /s/ Sidney Kirschner
- --------------------------------- -------------------------------------
Manuel Gaetan, March 24, 2000 Sidney Kirschner, March 24, 2000
(Director) (Director)
IV-2 Page 24
25
SUPERIOR UNIFORM GROUP, INC.
EXHIBIT INDEX
(a) 3. Exhibits
Exhibit No.: Description
3.1 Amended and restated Articles of Incorporation
of the Registrant filed as Exhibit 3.1 to the
Registrant's Interim Report on Form 10-Q for
the quarter ended June 30, 1998 and
incorporated herein by reference.
3.2 By-Laws of the Registrant filed as Exhibit 3.2
to the Registrant's 1998 Interim Report on
Form 10-Q for the quarter ended June 30, 1998
and incorporated herein by reference.
4.1 Credit Agreement dated March 26, 1999, between
the Registrant and First Union, filed with the
Commission as Exhibit 4.1 in registrant's Form
10-Q for the quarter ended March 31, 1999 and
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 quarter ended March 31, 1994 which is
hereby incorporated herein by reference. (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
1999 - herein incorporated by reference to
Registrant's filings thereof with the
Securities and Exchange Commission.
23. Consent of independent accountants.
27. Financial Data Schedule for year ended
December 31, 1999 (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 2000 Annual
Meeting of Stockholders, to be filed on or
before March 31, 2000 is hereby incorporated
herein by reference.