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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, 1994
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-5869-1
SUPERIOR SURGICAL MFG. CO., INC.
Incorporated - New York I.R.S. Employer Identification
No. 11-1385670
10099 Seminole Blvd.
Seminole, Florida 34642
Telephone (813) 397-9611
Securities registered pursuant to Section 12 (b) of the Act:
Common Shares with a par value Listed on
of $1.00 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 17, 1995, 8,363,552 common shares were outstanding, and
the aggregate market value of the registrant's common shares held by
non-affiliates was approximately $62.5 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, 1995,
for its Annual Meeting of Shareholders to be held May 1, 1995, 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 22.
Page 1 of 34
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PART I
Item 1. Business
(a) The business (organized in 1920) of Superior Surgical
Mfg. Co., Inc. ("registrant" or the "Company") 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 distinct segments or lines of business; registrant's entire 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.
Uniforms and service apparel account for 90-95% of
total sales and revenues; no single class of product
listed above as a miscellaneous product of the
registrant 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.
I-1 Page 2 of 34
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Registrant has a substantial number of customers, the
largest of which accounted for no more than 4% of
registrant's 1994 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
February 28, 1995, the backlog of all orders was
approximately $9,300,000, compared to approximately
$9,800,000 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 serious effect upon its
operations or earnings. Substantially all of
registrant's business is non-seasonal in nature. The
registrant has about 1,900 employees.
Item 2. Properties
All Properties are in satisfactory condition, 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.
(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) Leesburg, Georgia - Plant of approximately 85,000 square feet,
leased from Development Authority of Leesburg,
Georgia under lease requiring payment of only a
nominal rental; used for manufacturing, warehousing,
and shipping.
(d) 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.
(e) Tampa, Florida - Plant of approximately 46,000 square feet,
owned by the registrant; used for regional
administrative offices, warehousing, shipping, and
small retail operation.
I-2 Page 3 of 34
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(f) Miami, Florida - Plant of approximately 9,000 square feet,
leased from private owners under a lease expiring in
1997; used for regional sales office, warehousing,
shipping, and small retail operation.
(g) 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.
(h) Memphis, Tennessee - Plant of approximately 15,000 square
feet, leased from private owners under lease expiring
1995; used for warehousing, shipping and retail
sales.
(i) Miscellaneous-
New Orleans, Louisiana, sales office - leased;
Burbank, California, 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; Houston, Texas, sales office - leased; Delhi,
Louisiana, used for manufacturing - leased;
Lexington, Mississippi, used for manufacturing -
leased; Tallulah, Louisiana, used for manufacturing -
leased; Charlotte, North Carolina, used for warehouse
and sales office - leased; Pine Bluff, Arkansas, used
for manufacturing - owned; Terry, Mississippi, used
for manufacturing - owned.
Item 3. Legal Proceedings
The Company has been advised that it is a target of a Federal criminal
investigation relating to a previously reported dispute involving alleged false
statements and false claims purportedly made in connection with contracts
ostensibly awarded by the U.S. Department of Veterans Affairs. The
investigation is also evaluating actions by agents of the Company in connection
with the matter, including those of Gerald M. Benstock, a Director of the
Company. A former vice president of the Company has entered into a plea
agreement with Federal authorities in connection with this matter; the specific
terms and conditions of which are not known to the Company. Federal authorities
are also pursuing a civil investigation of the Company relating to these
matters. The dispute does not involve the integrity of the Company's products.
The Company is cooperating with these investigations, and settlement
discussions are continuing. The Company previously offered to settle all
potential charges relating to these matters and in 1993 recorded a liability in
that amount which is reflected in its financial statements. That offer,
however, was rejected by Federal authorities. While the Company has further
concluded that it possesses specific defenses which will be vigorously asserted
in the event the parties are unable to arrive at a negotiated settlement, the
Company is unable to estimate the outcome of this uncertainty.
Additionally, in the event the Company is indicted or convicted on
criminal charges, or if significant civil damages are pursued, certain
collateral consequences are likely to result, such as suspension or debarment
from the award of future Federal government contracts. The Company believes
that a suspension or debarment in connection with Federal government contracts
would not have a material adverse effect on the Company; however, such action
may also impede the Company's ability to receive certain contracts awarded
under various Federal grant and other non-procurement programs. The precise
impact of any potential exclusion under various Federal grant and other
non-procurement programs is not clear.
I-3 Page 4 of 34
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Item 4. Submission of Matters to a Vote of Security Holders
(a) None
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
--------------------------------------------------------------------------------------------
1994 1993
-------------------------------------------- -------------------------------------------
Mar. 31 June 30 Sept. 30 Dec. 31 Mar. 31 June 30 Sept. 30 Dec. 31
------- ------- -------- ------- ------- ------- -------- -------
Common Shares:
High $16 $14-1/2 $15-1/8 $15-1/8 $22-1/4 $18-3/8 $17-5/8 $16-3/8
Low $13-5/8 $12-3/8 $11-3/4 $12-3/8 $16-5/8 $15-7/8 $12-3/8 $13-1/8
Dividends (total
for 1994-$.32;
1993-$.28) $.08 $.08 $.08 $.08 $.07 $.07 $.07 $.07
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 $9,799,000 were available at
December 31, 1994 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, will increase
from time to time.
As of March 17, 1995, registrant had 620 shareholders of record.
On March 17, 1995, the closing price for registrant's common shares on
the American Stock Exchange was $ 11.25 per share.
I-4, II-1 Page 5 of 34
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Item 6.
Selected Financial Data
Years Ended December 31, 1994 1993 1992 1991 1990
------------ ------------ ------------ ------------ ------------
Net sales . . . . . . . . . . . . . . . . $135,067,397 $130,126,690 $128,665,516 $117,502,780 $123,002,478
------------ ------------ ------------ ------------ ------------
Costs and expenses:
Cost of goods sold . . . . . . . . . . . . 89,308,729 $ 87,280,624 $ 85,250,260 $ 78,059,449 $ 82,310,560
Selling and administrative
expenses . . . . . . . . . . . . . . . . 28,537,946 27,835,521 26,964,446 25,779,480 25,861,916
Provision for dispute
settlement . . . . . . . . . . . . . . . - 2,250,000 - - -
Interest expense - net . . . . . . . . . . 959,715 641,669 586,628 823,623 1,074,837
------------ ------------ ------------ ------------ ------------
$118,806,390 $118,007,814 $112,801,334 $104,662,552 $109,247,313
------------ ------------ ------------ ------------ ------------
Earnings before taxes on
income . . . . . . . . . . . . . . . . . . $ 16,261,007 $ 12,118,876 $ 15,864,182 $ 12,840,228 $ 13,755,165
Taxes on income . . . . . . . . . . . . . . 6,180,000 4,415,000 5,950,000 4,815,000 5,090,000
------------ ------------ ------------ ------------ ------------
Net earnings . . . . . . . . . . . . . . . $ 10,081,007 $ 7,703,876 $ 9,914,182 $ 8,025,228 $ 8,665,165
============ ============ ============ ============ ============
Net earnings per common
share . . . . . . . . . . . . . . . . . . $ 1.17 $ .89 $ 1.15 $ .94 $ 1.00
============ ============ ============ ------------ ------------
Cash dividends per common
share . . . . . . . . . . . . . . . . . . $ .32 $ .28 $ .25 $ .22 $ .18
============ ============ ============ ============ ============
At year end:
Total assets . . . . . . . . . . . . . . . $104,864,385 $ 87,168,003 $ 80,585,153 $ 74,470,776 $ 69,192,818
------------ ------------ ------------ ------------ ------------
Long-term debt . . . . . . . . . . . . . . $ 18,600,000 $ 4,200,000 $ 4,955,000 $ 7,110,385 $ 8,945,544
------------ ------------ ------------ ------------ ------------
Working capital . . . . . . . . . . . . . $ 64,295,804 $ 53,096,945 $ 51,353,415 $ 47,873,560 $ 43,241,802
------------ ------------ ------------ ------------ ------------
Shareholders' equity . . . . . . . . . . . $ 70,937,920 $ 68,568,495 $ 63,082,410 $ 54,659,128 $ 47,685,519
------------ ------------ ------------ ------------ ------------
================================================================================
Item 7.
Management's Discussion And Analysis Of
Financial Condition And Results Of Operations
OPERATIONS: Net sales of the Company increased by 10% in 1992 compared to 1991.
The increases in 1992 were attributable to new customers and new uniform
programs for existing customers. Net sales for 1993 increased by 1% over 1992,
due to the continuation of new uniform Programs and new customers for
non-healthcare marketplaces, offset by the uncertain and sluggish healthcare
marketplace which negatively affected those sales in 1993. Sales increased by
4% in 1994 over 1993 due to increased demand continuing the trend from 1993.
As a percent of sales, cost of goods sold was 66.1% in 1994, 67.1% in 1993 and
66.3% in 1992. The reductions in 1992 and 1994 were the result of greater
manufacturing efficiencies. The increase in 1993 was due to increased costs and
the inability of the Company to raise sales prices.
Selling and administrative expenses increased by 3% in 1993 and 1994. The
increases were attributable to normal cost pressures. As a percentage of sales,
selling and administrative expenses have not changed significantly over the
past several years, and no dramatic change is anticipated in 1995.
The provision for dispute settlement in the amount of $2,250,000 in 1993
involves certain sales by the Company to an agency of the Federal government as
previously reported. The government has yet to make any claim in connection
with the dispute. While management continues to believe that the Company has
complied with the terms and conditions of its obligations with the government,
the Company sought resolution of the dispute by offering $2,250,000
($1,415,000 net of tax effect) for full and complete settlement of the matter.
The Company elected to accrue the offered amount for the fourth quarter of 1993
which represents an after tax charge against earnings of approximately $.16 per
share. The offer of settlement has been rejected by the government. While the
future impact is unclear, the dispute and Federal investigation concerning the
dispute may have an adverse effect on future sales and a material, one-time
payment may be necessary to resolve this matter. See Note 12 of Notes to
Financial Statements for this continuing contingency.
Interest expense as a percentage of sales was 0.7% in 1994; it was 0.5% in 1993
and 0.4% in 1992. The reductions in 1992 and 1993 as a percentage of sales are
principally due to reduced borrowings by the Company. The Increase in 1994 was
due to increased borrowings.
The effective income tax rate in 1994 was 38.0%; in 1993 it was 36.4% and in
1992 it was 37.5%. Included in the income tax provision for 1993 is the effect
of recalculating the effective income tax rate for 1993, based on the Revenue
Reconciliation Act of 1993, which raised corporate income tax rates retroactive
to January 1, 1993. Also included is the adjustment to the deferred income tax
provision necessary to comply with Financial Accounting Standards Board
Statement No.109 (FAS No.109), requiring deferred tax calculations on the
liability method. The aggregate effect of these changes was to decrease the
income tax provision and increase net earnings for 1993 by approximately $.02
per share.
In 1994, the Company showed net income (after taxes) of 7.5% of sales, with a
return of 14.5% on average equity; for 1993 net income was 5.9% of sales, with
a return of 11.7% on average equity, while for 1992 the corresponding figures
were 7.7% and 16.8%.
II-2 Page 6 of 34
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Management's Discussion and Analysis of
Financial Condition and Results of Operations (cont'd)
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 1994 was $64,295,804 and the working
capital ratio 6.3 to 1; for 1993 it was $53,096,945 and the ratio 5.8 to 1,
while for 1992 the figures were $51,353,415 and 5.7 to 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.
In 1994, the Company's percentage of long-term debt to long-term debt and
equity was 20.8%; in 1993 it was 5.8% and in 1992 it was 7.3%.
The Company has an ongoing capital expenditure program designed to maintain and
improve its facilities. Capital expenditures were approximately $9,100,000,
$6,800,000 and $5,450,000 in the years 1994, 1993 and 1992, respectively.
Projected capital expenditures (principally for manufacturing enhancements) for
1995, while different from those of the last several years are expected to be
substantially lower in 1995 than in 1994. The Company at all times evaluates
its capital expenditure programs in light of prevailing economic conditions.
In 1993, the Company's cash and certificates of deposit balance increased by
approximately $406,000 due to a decelerating rate of increase in accounts
receivable and inventories compared to 1992, increases in depreciation, offset
by a decrease in net earnings and increases in capital expenditures.
In 1994, the Company's cash and certificates of deposit balance increased by
approximately $8,200,000 principally due to new borrowings in the amount of
$15,000,000 offset by the repurchase of 550,000 shares of its common stock for
an aggregate consideration of $6,765,000.
As of December 31, 1994, under its existing revolving credit agreement, the
Company had $9,000,000 available to it. In addition, under the most restrictive
terms of its agreements with its lenders, the Company could avail itself of
$6,000,000 in short-term credit (see Note 4 of Notes to Financial Statements).
With funds from such credit facility, positive cash flows generated from normal
operations, and other favorable credit sources readily available, the Company
believes for the foreseeable future 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 expansion at
a normal rate.
II-3 Page 7 of 34
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Item 8 - Financial Statements and Supplementary Data
SUPERIOR SURGICAL MFG. CO., INC.
Statements of Earnings
Years Ended December 31, 1994, 1993 and 1992
1994 1993 1992
------------ ------------ ------------
Net sales . . . . . . . . . . . . . . . . . . . . . . . . $135,067,397 $130,126,690 $128,665,516
------------ ------------ ------------
Costs and expenses:
Cost of goods sold . . . . . . . . . . . . . . . . . . . $ 89,308,729 $ 87,280,624 $ 85,250,260
Selling and administrative expenses . . . . . . . . . . 28,537,946 27,835,521 26,964,446
Provision for dispute settlement . . . . . . . . . . . . - 2,250,000 -
Interest expense - net . . . . . . . . . . . . . . . . . 959,715 641,669 586,628
------------ ------------ ------------
$118,806,390 $118,007,814 $112,801,334
------------ ------------ ------------
Earnings before taxes on income . . . . . . . . . . . . . $ 16,261,007 $ 12,118,876 $ 15,864,182
Taxes on income . . . . . . . . . . . . . . . . . . . . . 6,180,000 4,415,000 5,950,000
------------ ------------ ------------
Net earnings . . . . . . . . . . . . . . . . . . . . . . $ 10,081,007 $ 7,703,876 $ 9,914,182
============ ============ ============
Net earnings per common share . . . . . . . . . . . . . . $ 1.17 $ .89 $ 1.15
============ ============ ============
Dividends per common share . . . . . . . . . . . . . . . $ .32 $ .28 $ .25
============ ============ ============
=================================================================================================================
Statements of Shareholders' Equity
Years Ended December 31, 1994, 1993 and 1992
Additional Total
Common Paid-In Retained Shareholders'
Shares Capital Earnings Equity
---------- ----------- ----------- -----------
Balance, January 1, 1992 . . . . . . . . . . $2,144,738 $ 3,837,974 $48,676,416 $54,659,128
Net earnings . . . . . . . . . . . . . . . . 9,914,182 9,914,182
Shares issued under four-for-one
stock split of June 1992 . . . . . . . . . 6,497,814 (4,358,074) (2,139,740)
Common shares issued upon exercise
of options . . . . . . . . . . . . . . . . 35,800 635,238 671,038
Cash dividends declared ($.25 per share) . . (2,161,938) (2,161,938)
---------- ----------- ----------- -----------
Balance, December 31, 1992 . . . . . . . . . $8,678,352 $ 115,138 $54,288,920 $63,082,410
Net earnings . . . . . . . . . . . . . . . . 7,703,876 7,703,876
Common shares issued upon exercise
of options . . . . . . . . . . . . . . . . 24,900 191,456 216,356
Cash dividends declared ($.28 per share) . . (2,434,147) (2,434,147)
---------- ----------- ----------- -----------
Balance, December 31, 1993 . . . . . . . . . $8,703,252 $ 306,594 $59,558,649 $68,568,495
Net earnings . . . . . . . . . . . . . . . . 10,081,007 10,081,007
Common shares issued upon exercise
of options . . . . . . . . . . . . . . . . 210,300 1,604,894 1,815,194
Purchase and retirement of common Shares . . (550,000) (109,817) (6,105,183) (6,765,000)
Cash dividends declared ($.32 per share) . . (2,761,776) (2,761,776)
---------- ----------- ----------- -----------
Balance, December 31, 1994 . . . . . . . . . $8,363,552 $ 1,801,671 $60,772,697 $70,937,920
========== =========== =========== ===========
See Notes to Financial Statements.
II-4 Page 8 of 34
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SUPERIOR SURGICAL MFG. Co., INC.
Balance Sheets
December 31, 1994 and 1993
ASSETS
CURRENT ASSETS 1994 1993
----------- ----------
Cash and certificates of deposit . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 11,233,700 $ 3,030,013
Accounts receivable, less allowance for doubtful accounts of $250,000 . . . . . . . . 23,356,474 20,850,179
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,991,963 39,632,993
Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . . . . . 875,132 688,268
----------- ----------
TOTAL CURRENT ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 76,457,269 $64,201,453
PROPERTY, PLANT AND EQUIPMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,234,749 20,872,656
EXCESS OF COST OVER FAIR VALUE OF ASSETS ACQUIRED . . . . . . . . . . . . . . . . . . . 827,577 832,417
OTHER ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,344,790 1,261,477
----------- ----------
$104,864,385 $87,168,003
=========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,471,452 $ 7,139,464
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,126,813 2,594,959
Taxes on income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 963,200 615,085
Current portion of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . 600,000 755,000
----------- -----------
TOTAL CURRENT LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 12,161,465 $ 11,104,508
LONG-TERM DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,600,000 4,200,000
LIABILITY FOR DISPUTE SETTLEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,250,000 2,250,000
DEFERRED INCOME TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 915,000 1,045,000
SHAREHOLDERS' EQUITY:
Preferred stock, $1 par value - authorized 300,000 shares (none issued) . . . . . . . $ - $ -
Common stock, $1 par value - authorized 50,000,000 shares, issued and outstanding -
8,363,552 and 8,703,252, respectively . . . . . . . . . . . . . . . . . . . . . . . . 8,363,552 8,703,252
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,801,671 306,594
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60,772,697 59,558,649
----------- -----------
TOTAL SHAREHOLDERS' EQUITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 70,937,920 $ 68,568,495
----------- -----------
$104,864,385 $ 87,168,003
=========== ===========
See Notes to Financial Statements.
II-5 Page 9 of 34
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SUPERIOR SURGICAL MFG. CO., INC.
Statements of Cash Flows
Years Ended December 31, 1994, 1993, and 1992
1994 1993 1992
----------- ----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . $10,081,007 $ 7,703,876 $ 9,914,182
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . 2,864,847 2,503,726 2,169,028
Liability for dispute settlement . . . . . . . . . . . . . . . . - 2,250,000 -
Deferred Income Taxes . . . . . . . . . . . . . . . . . . . . . (130,000) (625,000) 345,000
Changes in assets and liabilities:
Accounts receivable . . . . . . . . . . . . . . . . . . . . . (2,506,295) (532,998) (2,077,700)
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . (1,358,970) (773,143) (4,945,480)
Prepaid expenses and other current assets . . . . . . . . . . (186,864) (257,826) 305,080
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . 331,988 567,010 (173,451)
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . 531,854 37,890 208,153
Taxes on income . . . . . . . . . . . . . . . . . . . . . . . 348,115 (173,135) (158,062)
----------- ----------- -----------
Net cash flows provided from operating activities . . . . . . . . . $ 9,975,682 $10,700,400 $ 5,586,750
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment . . . . . . . . . . . . $(9,109,599) $(6,808,039) $(5,452,080)
Carrying amount of property, plant and equipment disposals . . . . 887,499 82,944 149,503
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . (83,313) (391,186) 507
----------- ----------- -----------
Net cash used in investing activities . . . . . . . . . . . . . . $(8,305,413) $(7,116,281) $(5,302,070)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in long-term debt . . . . . . . . . . . . . . . . . . . . $15,000,000 $ 3,500,000 $ -
Reduction in long-term debt . . . . . . . . . . . . . . . . . . . (755,000) (4,460,000) (2,530,545)
Declaration of cash dividends . . . . . . . . . . . . . . . . . . (2,761,776) (2,434,147) (2,161,938)
Proceeds received on exercise of stock options . . . . . . . . . . 1,815,194 216,356 671,038
Common stock reacquired and retired . . . . . . . . . . . . . . . (6,765,000) - -
----------- ----------- -----------
Net cash provided in financing activities . . . . . . . . . . . . $ 6,533,418 $(3,177,791) $(4,021,445)
----------- ----------- -----------
Net increase (decrease) in cash and certificates of deposit . . . $ 8,203,687 $ 406,328 $(3,736,765)
Cash and certificates of deposit balance, beginning of year . . . . 3,030,013 2,623,685 6,360,450
----------- ----------- -----------
Cash and certificates of deposit balance, end of year . . . . . . . $11,233,700 $ 3,030,013 $ 2,623,685
=========== =========== ===========
See Notes to Financial Statements.
II-6 Page 10 of 34
11
SUPERIOR SURGICAL MFG. CO., INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
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) Inventories
Inventories are stated at the lower of cost (first-in, first-out method) or
market.
c) 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.
d) 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.
e) Depreciation and amortization
Plants and equipment are depreciated on the straight-line basis at 2-1/2% to 5%
for buildings and improvements and 6-2/3% to 20% for machinery, equipment and
fixtures. 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.
f) 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.
g) 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. Included in the income
tax provision for 1993 is the effect of recalculating the effective income tax
rate for 1993, based on the Revenue Reconciliation Act of 1993, which raised
corporate income taxes retroactive to January 1, 1993. Also included is the
adjustment to the deferred income tax provision necessary to comply with
Financial Accounting Standards Board Statement No. 109 (FAS No. 109), requiring
deferred tax calculations on the liability method. The aggregate effect of
these changes was to decrease the income tax provision and increase net
earnings for 1993 by approximately $.02 per share.
- ---------------------------------------------------------------------------------------------------------------
NOTE 2 - Inventories:
December 31,
----------------------------------
1994 1993
----------- -----------
Finished goods . . . . . . . . . . . . . . . . . . . . . . . . . . $23,887,026 $23,364,435
Work in process . . . . . . . . . . . . . . . . . . . . . . . . . 4,306,872 4,453,175
Raw materials . . . . . . . . . . . . . . . . . . . . . . . . . . 12,798,065 11,815,383
----------- -----------
$40,991,963 $39,632,993
=========== ===========
The opening inventory used in computing cost of goods sold for 1993 was
$38,859,850.
- ---------------------------------------------------------------------------------------------------------------
NOTE 3 - Property, Plant And Equipment:
December 31,
----------------------------------
1994 1993
----------- -----------
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,102,886 $ 1,096,951
Buildings, improvements and leaseholds . . . . . . . . . . . . . . 12,408,158 9,692,279
Machinery, equipment and fixtures . . . . . . . . . . . . . . . . 32,487,680 27,707,971
----------- -----------
$45,998,724 $38,497,201
Accumulated depreciation and amortization . . . . . . . . . . . . 19,763,975 17,624,545
----------- -----------
$26,234,749 $20,872,656
=========== ===========
Depreciation and amortization charges were $2,860,007, $2,496,718 and
$2,162,019 in 1994, 1993 and 1992, respectively.
II-7 Page 11 of 34
12
NOTE 4 - Long-Term Debt:
December 31,
----------------------------
1994 1993
----------- ----------
Note payable-bank, pursuant to revolving credit and term loan agreement . . $ -- $ --
6.65% note payable to Massachusetts Mutual Life Insurance Company due
$1,666,667 annually, 1997-2005 . . . . . . . . . . . . . . . . . . . . . . 15,000,000 --
9.9% note payable to Massachusetts Mutual Life Insurance Company, due
$600,000 annually, 1995-2001 . . . . . . . . . . . . . . . . . . . . . . . 4,200,000 4,800,000
9-1/4% note payable-bank, paid 1994 . . . . . . . . . . . . . . . . . . . . . -- 110,000
Principal payable under factory lease, paid 1994 . . . . . . . . . . . . . . -- 45,000
----------- ----------
$19,200,000 $4,955,000
Less payments due within one year included in current liabilities . . . . . . 600,000 755,000
----------- ----------
$18,600,000 $4,200,000
=========== ==========
On December 1, 1990, the Company, by amending its 1982 Credit Agreement,
entered into an 8 year Credit Agreement (extended an additional year in 1993)
which made available to the Company up to $9,000,000 for 5 years on a revolving
credit basis and thereafter for 4 years as a term loan with installment
repayments of principal. Interest is payable at the prime rate of the lender
(8-1/2% at December 31, 1994) for funds borrowed in domestic currency and at
the lender's Eurodollar rate plus 1/2% for funds borrowed in the Eurodollar
market. The Company pays a 1/10% commitment fee per annum on funds not borrowed
during the 5 year revolving credit period. The debt due under the credit
agreement may be prepaid, in part or in full at any time without penalty; in
addition, any amount prepaid during the 5 year revolving credit term may be
reborrowed without penalty. The Credit Agreement also permits additional
unsecured short-term borrowing from banks up to $6,000,000 without any
"clean-up" requirements.
The Credit Agreement and the agreements with Massachusetts Mutual Life
Insurance Company contain restrictive provisions concerning minimum working
capital ($20,000,000), debt to net worth ratios, other borrowing, capital
expenditures, rental commitments, tangible net worth ($55,000,000), working
capital ratio (2.5:1), and payment of dividends. At December 31, 1994, under
the most restrictive terms of the debt agreements, retained earnings of
approximately $9,799,000 were available for declaration of dividends. The
Company is in full compliance with all terms, conditions and covenants of the
various credit agreements.
Principal payments on long-term obligations, including the assumed conversion
in 1995 of the revolving credit note to a term note for the full $9,000,000,
are approximately $2,400,000 in 1996, $4,066,668 in 1997, $4,066,668 in 1998
and $5,866,668 in 1999.
- --------------------------------------------------------------------------------------------------------------
NOTE 5 - Taxes On Income:
Aggregate income tax provisions (benefits) consist of the following:
1994 1993 1992
---------- ---------- ----------
Current:
Federal . . . . . . . . . . . . . . . . . . . . . . . . . . $5,520,000 $4,340,000 $4,865,000
State and local . . . . . . . . . . . . . . . . . . . . . . 790,000 700,000 740,000
---------- ---------- ----------
$6,310,000 $5,040,000 $5,605,000
Deferred . . . . . . . . . . . . . . . . . . . . . . . . . . (130,000) (625,000) 345,000
---------- ---------- ----------
$6,180,000 $4,415,000 $5,950,000
========== ========== ==========
The difference between the total statutory Federal income tax rate and the
actual effective tax rate is accounted for as follows:
1994 1993 1992
---------- ---------- ----------
Statutory Federal income tax rate . . . . . . . . . . . . . . . . 34.5% 34.2% 34.0%
State and local income taxes, net of Federal income tax benefit . 3.0 3.2 3.1
FAS No. 109 implementation . . . . . . . . . . . . . . . . . . . -- (1.3) --
Other items . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.5 0.3 0.4
---------- ---------- ----------
Effective tax rate . . . . . . . . . . . . . . . . . . . . . . . 38.0% 36.4% 37.5%
========== ========== ==========
II-8 Page 12 of 34
13
NOTE 6 - 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 1994 1993 and 1992 included the following
components:
1994 1993 1992
--------- ----------- -----------
Service cost - benefits earned during the period . . . . . . $ 640,000 $ 687,000 $ 613,000
Interest cost on projected benefit obligation . . . . . . . 824,000 865,000 763,000
Actual (return) loss on assets . . . . . . . . . . . . . . . 199,000 (1,397,000) (1,315,000)
Net amortization and deferral . . . . . . . . . . . . . . . . (970,000) 780,000 842,000
Effect of settlement distributions . . . . . . . . . . . . . -- (15,000) --
--------- ----------- -----------
Net periodic pension cost . . . . . . . . . . . . . . . . . $ 693,000 $ 920,000 $ 903,000
========= =========== ===========
Assumptions used in the pension accounting for the three years ended December
31, 1994 were: (a) a discount rate between 7% and 8% (b) 0 - 6% rates for
compensation increases, and (c) an expected long-term rate of return on assets
of 8%.
The following table sets forth the plans' funded status and amounts recognized
in the Company's balance sheets at December 31, 1994 and 1993, for its pension
plans:
December 31, 1994 December 31, 1993
----------------- -----------------
Assets Exceed Accumulated Assets Exceed Accumulated
Accumulated Benefits Accumulated Benefits
Benefits Exceed Assets Benefits Exceed Assets
----------- ----------- ----------- -----------
Actuarial present value of benefit obligations:
Vested benefit obligation . . . . . . . . . . . . . $(5,101,000) $(2,838,000) $(6,127,000) $(2,846,000)
=========== =========== =========== ===========
Accumulated benefit obligation . . . . . . . . . . $(5,405,000) $(2,874,000) $(6,433,000) $(2,886,000)
=========== =========== =========== ===========
Projected benefit obligation . . . . . . . . . . . . $(8,158,000) $(2,874,000) $(8,667,000) $(2,886,000)
Plan assets at fair value . . . . . . . . . . . . . 7,742,000 2,362,000 8,707,000 2,519,000
----------- ----------- ----------- -----------
Projected benefit obligation
under (over) plan assets . . . . . . . . . . . . . . $ (416,000) $ (512,000) $ 40,000 $ (367,000)
Unrecognized net (gain) or loss . . . . . . . . . . (564,000) 122,000 (537,000) (135,000)
Prior service cost not yet recognized in net
periodic pension cost . . . . . . . . . . . . . . . 917,000 177,000 1,066,000 196,000
Unrecognized net (asset) obligation at date of
initial application . . . . . . . . . . . . . . . . (58,000) 284,000 (134,000) 337,000
Adjustment required to recognize minimum
liability . . . . . . . . . . . . . . . . . . . . . -- (583,000) -- (398,000)
----------- ----------- ----------- -----------
Prepaid pension cost (pension liability) . . . . . . $ (121,000) $ (512,000) $ 435,000 $ (367,000)
=========== =========== =========== ===========
- -------------------------------------------------------------------------------------------------------------
NOTE 7 - Rentals:
Aggregate rent expense, including month-to-month rentals, approximated $619,000
$669,000 and $697,000 for the years ended December 31, 1994, 1993 and 1992,
respectively. Long-term lease commitments, the last of which expire in 1998, are
not material.
II-9 Page 13 of 34
14
NOTE 8 - Quarterly Results For 1992, 1993 And 1994:
Quarter Ended
-------------------------------------------------------
March 31, June 30, September 30, December 31,
1992 1992 1992 1992
----------- ----------- ----------- -----------
(Unaudited)
Net sales . . . . . . . . . . . . . . . . . . . . . $30,176,330 $32,840,528 $32,912,162 $32,736,496
----------- ----------- ----------- -----------
Gross profit . . . . . . . . . . . . . . . . . . . $10,111,338 $11,104,558 $10,980,306 $11,219,054
----------- ----------- ----------- -----------
Earnings before taxes on income . . . . . . . . . $ 3,262,852 $ 4,262,268 $ 4,022,182 $ 4,316,880
----------- ----------- ----------- -----------
Net earnings . . . . . . . . . . . . . . . . . . . $ 2,037,852 $ 2,667,268 $ 2,512,182 $ 2,696,880
=========== =========== =========== ===========
Net earnings per common share . . . . . . . . . . $ .24 $ .31 $ .29 $ .31
=========== =========== =========== ===========
Dividends per common share. . . . . . . . . . . . . $ .0625 $ .0625 $ .0625 $ .0625
=========== =========== =========== ===========
Average outstanding shares . . . . . . . . . . . . 8,592,360 8,655,538 8,669,924 8,672,115
=========== =========== =========== ===========
Quarter Ended
-------------------------------------------------------
March 31, June 30, September 30, December 31,
1993 1993 1993 1993
----------- ----------- ----------- -----------
(Unaudited)
Net sales. . . . . . . . . . . . . . . . . . . . . $31,578,095 $33,751,918 $32,382,493 $32,414,184
----------- ----------- ----------- -----------
Gross profit . . . . . . . . . . . . . . . . . . . $10,639,493 $11,205,813 $10,362,782 $10,637,978
----------- ----------- ----------- -----------
Earnings before taxes on income . . . . . . . . . $ 3,585,072 $ 4,001,685 $ 3,328,443 $ 1,203,676
----------- ----------- ----------- -----------
Net earnings . . . . . . . . . . . . . . . . . . . $ 2,465,072 $ 2,506,685 $ 1,993,443 $ 738,676
=========== =========== =========== ===========
Net earnings per common share. . . . . . . . . . . $ .28 $ .29 $ .23 $ .09
=========== =========== =========== ===========
Dividends per common share. . . . . . . . . . . . . $ .07 $ .07 $ .07 $ .07
=========== =========== =========== ===========
Average outstanding shares. . . . . . . . . . . . . 8,686,233 8,691,775 8,692,413 8,699,593
=========== =========== =========== ===========
Quarter Ended
-------------------------------------------------------
March 31, June 30, September 30, December 31,
1994 1994 1994 1994
----------- ----------- ----------- -----------
(Unaudited)
Net sales . . . . . . . . . . . . . . . . . . . . $31,907,441 $35,873,454 $33,247,093 $34,039,409
----------- ----------- ----------- -----------
Gross profit . . . . . . . . . . . . . . . . . . . $10,591,394 $12,050,846 $11,312,800 $11,803,628
----------- ----------- ----------- -----------
Earnings before taxes on income . . . . . . . . . $ 3,209,622 $ 4,598,653 $ 3,971,762 $ 4,480,970
----------- ----------- ----------- -----------
Net earnings . . . . . . . . . . . . . . . . . . . $ 1,989,622 $ 2,853,653 $ 2,461,762 $ 2,775,970
=========== =========== =========== ===========
Net earnings per common share. . . . . . . . . . . $ .23 $ .32 $ .29 $ .33
=========== =========== =========== ===========
Dividends per common share. . . . . . . . . . . . . $ .08 $ .08 $ .08 $ .08
=========== =========== =========== ===========
Average outstanding shares. . . . . . . . . . . . . 8,818,554 8,897,552 8,509,791 8,363,552
=========== =========== =========== ===========
The independent certified public accountants made a limited review of the 1992,
1993 and 1994 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-10 Page 14 of 34
15
NOTE 9 - 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 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, 1994 (including option
transactions from a 1983 Plan which expired in 1993) follows:
Option Prices
--------------------------------------------
No. of Range Per Market
Shares Share Total Price
-------- ------------- ----------- ----------
Outstanding January 1, 1992 . . . . . . . . . . 337,200 $ 5.37-$ 9.47 $ 2,713,150
Granted. . . . . . . . . . . . . . . . . . . . 341,400 $16.44-$18.08 5,654,500 $5,611,763
Exercised . . . . . . . . . . . . . . . . . . . (99,400) $ 5.37-$16.44 (671,038) $1,508,784
Cancelled . . . . . . . . . . . . . . . . . . . (3,600) $ 5.37-$16.44 (42,750)
-------- -----------
Outstanding December 31, 1992 . . . . . . . . . 575,600 $ 8.56-$18.08 $ 7,653,862
Exercised . . . . . . . . . . . . . . . . . . . (24,900) $ 8.56-$16.44 (216,356) $ 435,750
Cancelled . . . . . . . . . . . . . . . . . . . (6,000) $ 8.56-$16.44 (82,875)
-------- -----------
Outstanding December 31, 1993 . . . . . . . . . 544,700 $ 8.56-$18.08 $ 7,354,631
Granted. . . . . . . . . . . . . . . . . . . . 104,925 $13.75-$15.13 1,451,794 $1,442,719
Exercised . . . . . . . . . . . . . . . . . . . (210,300) $ 8.56-$ 9.47 (1,815,194) $3,032,588
Cancelled . . . . . . . . . . . . . . . . . . . (15,100) $13.75-$16.44 (246,325)
-------- -----------
Outstanding December 31, 1994. . . . . . . . . . 424,225 $13.75-$18.08 $ 6,744,906
======== ===========
- --------------------------------------------------------------------------------
NOTE 10 - Earnings Per Share:
Historical per share data is based on the weighted average number of shares
outstanding. The exercise of outstanding stock options would not have a
significant effect on earnings per share. The weighted average number of shares
outstanding during 1994, 1993 and 1992 was 8,645,739, 8,692,540 and 8,647,613,
respectively.
- --------------------------------------------------------------------------------
NOTE 11 - Capital Stock:
On May 27, 1992, the Board of Directors authorized a four-for-one stock split,
effective June, 1992. The accounting treatment was to charge the Additional
Paid-in Capital account for $4,358,074 (the aggregate available additional
paid-in capital prior to the split), charge the Retained Earnings account
$2,139,740 and credit the Common Stock account for $6,497,814. All references
in the financial statements with regard to outstanding shares, average numbers
of shares of common stock and related prices, dividends and per share amounts
have been restated to reflect the foregoing common stock split. In April, 1993,
following approval at the Annual Meeting of Shareholders, the Company's
Certificate of Incorporation was amended to increase the authorized Common
Shares of the Company from 10,000,000 to 50,000,000 shares.
- --------------------------------------------------------------------------------
NOTE 12 - Dispute With Governmental Agency:
The Company has been advised that it is a target of a Federal criminal
investigation relating to a previously reported dispute involving alleged false
statements and false claims purportedly made in connection with contracts
ostensibly awarded by the U.S. Department of Veterans Affairs. A former vice
president of the Company has entered into a plea agreement with Federal
authorities in connection with this matter; the specific terms and conditions
of which are not known to the Company. Federal authorities are also pursuing a
civil investigation of the Company relating to these matters. The dispute does
not involve the integrity of the Company's products.
The Company is cooperating with these investigations, and settlement
discussions are continuing. The Company previously offered to settle all
potential charges relating to these matters and in 1993 recorded a liability in
that amount which is reflected in its financial statements. That offer,
however, was rejected by Federal authorities. While the Company has further
concluded that it possesses specific defenses which will be vigorously asserted
in the event the parties are unable to arrive at a negotiated settlement, the
Company is unable to estimate the outcome of this uncertainty.
Additionally, in the event the Company is indicted or convicted on criminal
charges, or if significant civil damages are pursued, certain collateral
consequences are likely to result, such as suspension or debarment from the
award of future Federal government contracts. The Company believes that a
suspension or debarment in connection with Federal government contracts would
not have a material adverse effect on the Company; however, such action may
also impede the Company's ability to receive certain contracts awarded under
various Federal grant and other non-procurement programs. The precise impact of
any potential exclusion under various Federal grant and other non-procurement
programs is not clear.
II-11 Page 15 of 34
16
NOTE 13 - Accrued Expenses:
December 31,
-------------------------------
1994 1993
---------- ----------
Salaries, wages, commissions and vacation
pay . . . . . . . . . . . . . . . . . . . . . . . . . $1,812,730 $1,728,901
Other accrued expenses . . . . . . . . . . . . . . . 1,314,083 866,058
---------- ----------
$3,126,813 $2,594,959
========== ==========
- --------------------------------------------------------------------------------------------------------------------
NOTE 14 - Supplemental Information:
Year Ended December 31,
--------------------------------------------
1994 1993 1992
---------- ---------- ----------
Income taxes paid . . . . . . . . . . $5,961,885 $5,213,135 $5,763,063
========== ========== ==========
Interest paid . . . . . . . . . . . . $1,436,998 $ 680,083 $ 748,833
========== ========== ==========
II-12 Page 16 of 34
17
DELOITTE & TOUCHE LLP
- --------------------- -----------------------------------------------------------------------
[LOGO] Certified Public Accountants Suite 1200
201 East Kennedy Boulevard
Tampa, Florida 33602-5821
INDEPENDENT AUDITORS' REPORT Telephone: (813) 223-7591
Board of Directors and Shareholders
Superior Surgical Mfg. Co., Inc.
Seminole. Florida
We have audited the accompanying balance sheets of Superior Surgical Mfg. Co.,
Inc. as of December 31, 1994 and 1993, and the related statements of
earnings, shareholders' equity and cash flows for each of the three years in
the period ended December 31, 1994. 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, the financial statements referred to above present fairly, in
all material respects, the financial position of Superior Surgical Mfg. Co.,
Inc. as of December 31, 1994 and 1993, and the results of its operations and
its cash flows for each of the three years in the period ended December 31,
1994, in conformity with generally accepted accounting principles.
As described in Note 12 to the financial statements, the Company is engaged in
a dispute with an agency of the U.S. Government. In connection with this
dispute, the Company has made a settlement offer of $2,250,000. The ultimate
outcome of this dispute cannot presently be determined. Accordingly, no
provision for any additional loss that may result upon resolution of this
matter has been made in the accompanying financial statements.
As described in Note 1 to the financial statements, the Company changed its
method of accounting for income taxes effective January 1, 1993 to conform
with Statement of Financial Accounting Standards No. 109.
/s/ Deloitte & Touche LLP
- -------------------------
Deloitte & Touche LLP
February 24, 1995
II-13 Page 17 of 34
DELOITTE TOUCHE
TOHMATSU
INTERNATIONAL
18
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.
Management's Proxy Statement to be filed on or before March 30, 1995 for the
Annual Meeting of Shareholders to be held May 1, 1995, is herein incorporated
by reference to furnish substantially all the information required by the
above items.
II-14, III-I Page 18 of 34
19
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) 1. Financial Statements Page
The following financial statements of Superior Surgical Mfg. Co., Inc.
are included in Part II, Item 8:
Statements of earnings - years ended
December 31, 1994, 1993 and 1992.................................. II-4
Statements of shareholders' equity - years
ended December 31, 1994, 1993 and
1992.............................................................. II-4
Balance sheets - December 31, 1994 and
1993.............................................................. II-5
Statements of cash flows - years ended
December 31, 1994, 1993 and 1992.................................. II-6
Notes to financial statements....................................... II-7 to II-12
Opinion of independent certified public
accountants....................................................... II-13
(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
Exhibit No.:
3.2 By-Laws of the Registrant filed as Exhibit 3.2
to the Registrant's 1992 Annual Report on Form
10-K and incorporated herein by reference.
4.1 Credit Agreement dated December 1, 1982,
as amended on December 1, 1990, between
the Registrant and Manufacturers Hanover
Trust Company (Chemical Bank) filed as Exhibit
4.1 to the Registrant's 1992 Annual Report on
Form 10-K and 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 three months ended March 31, 1994
which is hereby incorporated herein by
reference.
4.3 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.
IV-I Page 19 of 34
20
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. IV-5
Supplemental Pension Plan
13. Forms 10-Q for the first three quarters of 1994 herein
incorporated by reference to Registrant's filings thereof
with the Securities and Exchange Commission.
23. Consents of experts and counsel. IV-6
27. Financial Data Schedule (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 1995 Annual
Meeting of Stockholders, to be filed on or
before March 30, 1995, is hereby incorporated
herein by reference.
(b) Reports on Form 8-K:
There were no reports on Form 8-K for the three months
ended December 31, 1994.
(c) See (a) 3. above.
(d) None
IV-2 Page 20 of 34
21
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 SURGICAL MFG. CO., INC.
/s/ Gerald M. Benstock
----------------------------------
BY: Gerald M. Benstock
(Chairman and Chief Executive
Officer)
/s/ John W. Johansen
----------------------------------
BY: John W. Johansen
(Chief Financial Officer and
Principal Accounting
Officer, Sr. Vice President,
Treasurer and Secretary)
DATE: March 24, 1995
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/ Saul Schechter /s/ Alan D. Schwartz
- ------------------------------- --------------------------------
Saul Schechter, March 24, 1995 Alan D. Schwartz, March 24, 1995
(Director) (Director)
/s/ Manuel Gaetan /s/ Michael Benstock
- ------------------------------- --------------------------------
Manuel Gaetan, March 24, 1995 Michael Benstock, March 24, 1995
(Director) (Director)
/s/ Thomas K. Riden /s/ Peter Benstock
- ------------------------------- --------------------------------
Thomas K. Riden, March 24, 1995 Peter Benstock, March 24, 1995
(Director) (Director)
IV-3 Page 21 of 34
22
SUPERIOR SURGICAL MFG. CO., INC.
EXHIBIT INDEX
(a) 3. Exhibits
Exhibit No.:
3.2 By-Laws of the Registrant filed as Exhibit 3.2
to the Registrant's 1992 Annual Report on Form
10-K and incorporated herein by reference.
4.1 Credit Agreement dated December 1, 1982,
as amended on December 1, 1990, between
the Registrant and Manufacturers Hanover
Trust Company (Chemical Bank) filed as Exhibit
4.1 to the Registrant's 1992 Annual Report on
Form 10-K and 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 three months ended March 31, 1994
which is hereby incorporated herein by reference.
4.3 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 IV-5
Pension Plan.
13. Forms 10-Q for the first three quarters of 1994 herein
incorporated by reference to Registrant's filings thereof
with the Securities and Exchange Commission.
23. Consents of experts and counsel. IV-6
27. Financial Data Schedule (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 1995 Annual
Meeting of Stockholders, to be filed on or
before March 30, 1995, is hereby incorporated
herein by reference.
IV-4 Page 22 of 34