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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, 1997
[ ] 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 33772
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 20, 1998, 7,852,052 common shares were outstanding, and the
aggregate market value of the registrant's common shares held by non-affiliates
was approximately $88 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, 1998,
for its Annual Meeting of Shareholders to be held May 8, 1998, is incorporated
by reference to furnish the information required by Items 10, 11, 12 and 13 of
Part III.
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PART I
Item 1. Business
(a) Superior Surgical Mfg. Co., Inc. ("registrant" or the
"Company") was organized as a New York company in
1920 and was incorporated in 1922. 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 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.
Registrant has a substantial number of customers, the largest
of which accounted for no more than 4% of registrant's 1997
sales. Although registrant at all times
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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, 1998, the backlog of all orders
was approximately $8,500,000, compared to approximately
$7,400,000 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) Leesburg, Georgia - Plant of approximately 85,000 square feet,
owned by Registrant; used for manufacturing,
warehousing and shipping until the fourth quarter of
1997, when operations were terminated. Scheduled to
be sold.
(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 111,000 square feet,
owned by the registrant; used for regional
administrative offices, warehousing, shipping and
small retail operation.
(f) 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.
(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.
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(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) Miscellaneous -
New Orleans, Louisiana, sales office - leased;
Burbank, California, 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; Tallulah, Louisiana, used for manufacturing -
lease terminated in 1997; Pine Bluff, Arkansas, used
for manufacturing first part of 1997 - scheduled to
be sold.
Item 3. Legal Proceedings
None.
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Item 4. Submission of Matters to a Vote of Security Holders
None
PART II
Item 5. Market Price of and Dividends on Registrant's Common Equity
and Related Stockholder Matters.
(a) 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
-------------------------------------------------------------------------------------------------
1997 1996
------------------------------------------------ -------------------------------------------
Mar. 31 June 30 Sept. 30 Dec. 31 Mar. 31 June 30 Sept. 30 Dec. 31
------- ------- -------- ------- ------- ------- -------- -------
Common Shares:
High $14-3/8 $13 $16-3/4 $ 16 $ 10-1/2 $12-1/8 $12-1/8 $13-1/2
Low $12-7/8 $11 $11-3/8 $ 13-1/2 $ 8-7/8 $10-1/4 $10 $11-7/8
Dividends (total
for 1997-$.455;
1996-$.38) $.11 $.11 $.11 $.12-1/2 $.09 $.09 $.09 $.11
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 $16,320,000 were available at
December 31, 1997 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 20, 1998, registrant had 453 shareholders of record and the
closing price for registrant's common shares on the American Stock Exchange was
$17.25 per share.
(b) Not applicable
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Item 6. SELECTED FINANCIAL DATA
Years Ended December 31, 1997 1996 1995 1994 1993
------------ ------------ ------------ ------------ ------------
Net sales ......................... $144,607,048 $141,420,626 $135,197,798 $135,067,397 $130,126,690
------------ ------------ ------------ ------------ ------------
Costs and expenses:
Cost of goods sold .............. $ 96,213,237 $ 93,897,373 $ 91,169,728 $ 89,308,729 $ 87,280,624
Selling and administrative
expenses ...................... 32,903,249 32,333,924 30,162,203 28,537,946 27,835,521
Provision for dispute
settlement .................... -- -- 4,250,000 -- 2,250,000
Interest expense - net .......... 1,100,553 1,295,233 968,830 959,715 641,669
------------ ------------ ------------ ------------ ------------
$130,217,039 $127,526,530 $126,550,761 $118,806,390 $118,007,814
------------ ------------ ------------ ------------ ------------
Earnings before taxes on
income .......................... $ 14,390,009 $ 13,894,096 $ 8,647,037 $ 16,261,007 $ 12,118,876
Taxes on income ................... 5,220,000 5,200,000 4,885,000 6,180,000 4,415,000
------------ ------------ ------------ ------------ ------------
Net earnings ...................... $ 9,170,009 $ 8,694,096 $ 3,762,037 $ 10,081,007 $ 7,703,876
============ ============ ============ ============ ============
Basic earnings per common
share ........................... $ 1.15 $ 1.07 $ .45 $ 1.17 $ .89
============ ============ ============ ============ ============
Diluted earnings per common
share ........................... $ 1.14 $ 1.07 $ .45 $ 1.17 $ .89
============ ============ ============ ============ ============
Cash dividends per common
share ........................... $ .455 $ .38 $ .36 $ .32 $ .28
============ ============ ============ ============ ============
At year end:
Total assets .................... $108,354,855 $105,659,094 $106,133,637 $104,864,385 $ 87,168,003
------------ ------------ ------------ ------------ ------------
Long-term debt .................. $ 13,466,666 $ 15,733,333 $ 18,000,000 $ 18,600,000 $ 4,200,000
------------ ------------ ------------ ------------ ------------
Working capital ................. $ 63,764,610 $ 60,242,628 $ 55,081,842 $ 64,295,804 $ 53,096,945
------------ ------------ ------------ ------------ ------------
Shareholders Equity ............. $ 78,117,115 $ 74,156,424 $ 69,517,878 $ 70,937,920 $ 68,568,495
------------ ------------ ------------ ------------ ------------
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OPERATIONS: Net sales in 1995 were essentially the same as those in 1994 which
the Company believes was primarily due to general business conditions in the
market in which the Company sold. In 1996 and 1997, net sales increased 5% and
2%, respectively, due 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 a percent of sales, cost of goods sold were 66.5% in 1997, 66.4% in 1996 and
67.4% in 1995. The increase in 1995 was due principally to increased costs and
the inability to raise sales prices sufficiently to cover increased costs. The
decrease in 1996 was primarily the result of increased manufacturing
efficiencies which continued into 1997.
Selling and administrative expenses increased by 2% in 1997, 7% in 1996 and by
6% in 1995. The increases were attributable to increases in costs. As a
percentage of sales, selling and administrative expenses have not changed
significantly over the past several years and no material change is expected in
1998.
The provision for dispute settlement in the amount of $4,250,000 in 1995
represents the final sum of the payment to be made under agreements with the
Department of Justice and the United States
Attorney's Office in Tampa, Florida to resolve the previously announced dispute
with the federal government arising out of certain contractual relations. (See
Note 9 of Notes to Financial Statements.)
Interest expense as a percentage of sales was 0.8% in 1997; in 1996 and 1995 it
was 0.9% and 0.7%, respectively. The increase in 1996 as a percentage of sales
was principally due to lesser interest income generated on certificates of
deposit. The decrease in 1997 was due to reduced long term debt.
The effective income tax rate in 1997 was 36.3%; in 1996, it was 37.4% and in
1995, it was 56.5%. Included in the 1995 calculations is the non-deductible
portion of the dispute charge. The effective tax rate for 1995 without this
charge would have been 37.9%.
In 1997, the Company showed net income (after taxes) of 6.3% of sales with a
return of 12.0% on average equity; for 1996, net income was 6.2% of sales with a
return of 12.1% on average equity, while in 1995, the corresponding figures were
2.8% and 5.4%.
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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 1997 was $63,764,610 and the working
capital ratio 5.4:1; for 1996, it was $60,242,628 and the ratio 5.6:1; while for
1995, the figures were $55,081,842 and 4.2:1. 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 1997, the Company's percentage of long term debt to long-term debt and equity
was 14.7%; in 1996, it was 17.5%; and in 1995, it was 20.6%
The Company has an on-going capital expenditure program designed to maintain and
improve its facilities. Capital expenditures were approximately $2,240,000,
$2,625,000, and $9,750,000 in the years 1997, 1996 and 1995, respectively.
Capital expenditures for 1998 are expected to be approximately $13,000,000 due
primarily to the acquisition and implementation of new computer hardware and
software and secondary to other asset acquisitions. The Company at all times
evaluates its capital expenditure programs in light of prevailing economic
conditions.
In 1995, the Company's cash and cash equivalents balance decreased by
approximately $5,800,000, principally due to capital expenditures, expenditures
in financing activities (dividends and repurchase of 230,000 shares of its
common stock) offset by cash flows from operating activities. In 1996, the
accumulation of cash balances which would normally be placed in cash equivalents
were depleted significantly by the one-time payment of $6,500,000 to settle the
government dispute as discussed earlier. In addition, the repurchase of 80,000
common shares of the Company's stock had the effect of decreasing cash balances
by approximately $965,000.
In 1997, cash and cash equivalents increased by approximately $4,200,000 due
primarily to scheduled reductions in long-term debt of approximately $2,300,000,
the repurchase of 151,900 common shares of the Company's stock for a net impact
of approximately $1,960,000, and the offset of cash flows from operating
activities.
As of December 31, 1997, under its existing revolving credit agreement, the
Company had $10,000,000 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).
The revolving credit agreement 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
($55,000,000), working capital ratio (2.5:1) and payment of dividends. On
December 31, 1997, under the most restrictive terms of the debt agreements,
retained earnings of approximately $16,320,000 were available for declaration of
dividends. The Company is in full compliance with all terms, conditions and
covenants of the various credit agreements. With funds from such credit
facility, anticipated cash flows generated from operations and other available
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 planned expansion.
In June 1997, the Financial Accounting Standards Board issued Accounting
Standard No. 130 (SFAS 130), "Reporting Comprehensive Income," and Accounting
Standard No. 131 (SFAS 131), "Disclosures About Segments of an Enterprise and
Related Information." The Company is presently in the process of evaluating the
effect of these new standards on the presentation and disclosures in the
Company's financial statements and the required information, if any, will be
reflected within the 1998 financial statements.
Management reviews on a continuing basis the anticipated cost, problems and
uncertainties associated with the year 2000 issue. Management believes the
software and related computer technologies essential to its operations will not
be affected by the year 2000 issue in any material way.
Statements contained in this Annual Report which are not historical factors may
constitute forward-looking statements as that term is defined in the Private
Securities Litigation Reform Act of 1995. All forward-looking statements are
subject to risks and uncertainties which could cause actual results to differ
from those projected.
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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not Applicable
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
SUPERIOR SURGICAL MFG. CO., INC.
CONSOLIDATED STATEMENTS OF EARNINGS
Years Ended December 31, 1997, 1996 and 1995
1997 1996 1995
------------ ------------ ------------
Net sales ................................... $144,607,048 $141,420,626 $135,197,798
Costs and expenses:
Cost of goods sold ........................ 96,213,237 93,897,373 91,169,728
Selling and administrative expenses ....... 32,903,249 32,333,924 30,162,203
Provision for dispute settlement .......... -- -- 4,250,000
Interest expense - net .................... 1,100,553 1,295,233 968,830
------------ ------------ ------------
130,217,039 127,526,530 126,550,761
------------ ------------ ------------
Earnings before taxes on income ............. 14,390,009 13,894,096 8,647,037
Taxes on income ............................. 5,220,000 5,200,000 4,885,000
------------ ------------ ------------
Net earnings ................................ $ 9,170,009 $ 8,694,096 $ 3,762,037
============ ============ ============
Basic earnings per common share ............. $ 1.15 $ 1.07 $ 0.45
============ ============ ============
Diluted earnings per common share ........... $ 1.14 $ 1.07 $ 0.45
============ ============ ============
Dividends per common share .................. $ 0.45 $ 0.38 $ 0.36
============ ============ ============
CONSOLIDATED STATEMENTS OF SHAREHOLDERS'
EQUITY
Years Ended December 31, 1997, 1996 and 1995
Additional Total
Common Paid-In Retained Shareholders'
Shares Capital Earnings Equity
------------ ------------ ------------ ------------
Balance, January 1, 1995 ......................... $ 8,363,552 $ 1,801,671 $ 60,772,697 $ 70,937,920
Net earnings ................................... 3,762,037 3,762,037
Purchase and retirement of common shares ....... (230,000) (49,541) (1,912,359) (2,191,900)
Cash dividends declared ($.36 per share) ....... (2,990,179) (2,990,179)
------------ ------------ ------------ ------------
Balance, December 31, 1995 ....................... 8,133,552 1,752,130 59,632,196 69,517,878
Net earnings ................................... 8,694,096 8,694,096
Purchase and retirement of common shares ....... (80,000) (17,234) (867,566) (964,800)
Cash dividends declared ($.38 per share) ....... (3,090,750) (3,090,750)
------------ ------------ ------------ ------------
Balance, December 31, 1996 ....................... 8,053,552 1,734,896 64,367,976 74,156,424
Net earnings ................................... 9,170,009 9,170,009
Common shares issued upon exercise of options .. 34,850 339,669 374,519
Purchase and retirement of common shares ....... (151,900) (35,442) (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 $ 2,039,123 $ 68,141,490 $ 78,117,115
============ ============ ============ ============
See Notes to Consolidated Financial Statements.
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SUPERIOR SURGICAL MFG. CO., INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
ASSETS
1997 1996
------------ ------------
CURRENT ASSETS
Cash and cash equivalents ..................... $ 8,889,948 $ 4,718,632
Accounts receivable, less allowance
for doubtful accounts of $250,000 ............ 25,585,915 23,267,237
Inventories ................................... 42,523,009 44,112,968
Prepaid expenses and other current assets ..... 1,136,812 1,283,128
------------ ------------
TOTAL CURRENT ASSETS .................... 78,135,684 73,381,965
PROPERTY, PLANT AND EQUIPMENT, NET ............... 26,772,477 28,995,394
EXCESS OF COST OVER FAIR VALUE
OF ASSETS ACQUIRED .............................. 813,626 818,276
OTHER ASSETS ..................................... 2,633,068 2,463,459
------------ ------------
$108,354,855 $105,659,094
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable .............................. $ 6,806,955 $ 6,417,139
Accrued expenses .............................. 4,380,174 4,108,202
Taxes on income ............................... 917,278 347,329
Current portion of long-term debt ................ 2,266,667 2,266,667
------------ ------------
TOTAL CURRENT LIABILITIES ............... 14,371,074 13,139,337
LONG-TERM DEBT ................................... 13,466,666 15,733,333
DEFERRED INCOME TAXES ............................ 2,400,000 2,630,000
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 - 7,936,502 and 8,053,552,
respectively ................................ 7,936,502 8,053,552
Additional paid-in capital .................... 2,039,123 1,734,896
Retained earnings ............................. 68,141,490 64,367,976
------------ ------------
TOTAL SHAREHOLDERS' EQUITY .............. 78,117,115 74,156,424
------------ ------------
$108,354,855 $105,659,094
============ ============
See Notes to Consolidated Financial Statements.
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SUPERIOR SURGICAL MFG. CO., INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
1997 1996 1995
------------ ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings ................................................. $ 9,170,009 $ 8,694,096 $ 3,762,037
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization ........................... 4,427,422 4,354,477 3,748,341
Deferred income taxes ................................... (230,000) 1,320,000 395,000
Changes in assets and liabilities:
Accounts receivable ................................... (2,318,678) 1,515,980 (1,426,743)
Inventories ........................................... 1,589,959 (3,023,020) (97,985)
Prepaid expenses and other current assets ............. 146,316 (190,245) (217,751)
Accounts payable ...................................... 389,816 (213,469) (840,844)
Accrued expenses ...................................... 271,972 1,047,184 (65,795)
Liability for dispute settlement ...................... -- (6,500,000) 4,250,000
Taxes on income ....................................... 569,949 (166,804) (449,067)
------------ ------------ ------------
Net cash flows provided from operating activities ............ 14,016,765 6,838,199 9,057,193
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment ................... (2,241,544) (2,623,072) (9,745,755)
Carrying amount of property, plant and equipment disposals ... 41,689 12,435 1,502,230
Other assets ................................................. (169,609) (274,933) (843,736)
------------ ------------ ------------
Net cash (used) in investing activities ...................... (2,369,464) (2,885,570) (9,087,261)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Reduction in long-term debt .................................. (2,266,667) (600,000) (600,000)
Declaration of cash dividends ................................ (3,617,609) (3,090,750) (2,990,179)
Proceeds received on exercise of stock options ............... 374,519 -- --
Common stock reacquired and retired .......................... (1,966,228) (964,800) (2,191,900)
------------ ------------ ------------
Net cash (used) provided in financing activities ............. (7,475,985) (4,655,550) (5,782,079)
------------ ------------ ------------
Net (decrease) increase in cash and cash equivalents ......... 4,171,316 (702,921) (5,812,147)
Cash and cash equivalents balance, beginning of year ......... 4,718,632 5,421,553 11,233,700
------------ ------------ ------------
Cash and cash equivalents balance, end of year ............... $ 8,889,948 $ 4,718,632 $ 5,421,553
============ ============ ============
See Notes to Consolidated Financial Statements.
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SUPERIOR SURGICAL MFG. CO., INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 1997, 1996 and 1995
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) Principals of Consolidation
The consolidated financial statements of Superior Surgical Mfg. Co., Inc. (the
"Company") include the accounts of Superior Uniform Group, Inc., a wholly owned
subsidiary of the Company. All intercompany accounts and transactions have been
eliminated.
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) 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.
h) 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.
i) 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.
j) 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 - INVENTORIES: December 31
---------------------------------
1997 1996
------------ ----------
Finished goods.......................... $ 25,835,299 $27,926,040
Work in process......................... 4,627,273 3,577,252
Raw materials........................... 12,060,437 12,609,676
------------ -----------
$ 42,523,009 $44,112,968
============ ===========
The opening inventory used in computing cost of goods sold for 1996 was $
41,089,948. General and administrative costs capitalized to inventories are not
material.
- --------------------------------------------------------------------------------
NOTE 3 - PROPERTY, PLANT AND EQUIPMENT: December 31
-----------------------------
1997 1996
------------ -----------
Land.......................................... $ 2,116,331 $ 2,113,030
Buildings, improvements and leaseholds........ 10,944,221 10,775,494
Machinery, equipment and fixtures............. 41,094,918 39,596,614
------------ -----------
54,155,470 52,485,138
Accumulated depreciation and amortization..... 27,382,993 23,489,744
------------ -----------
$ 26,772,477 $28,995,394
============ ===========
Depreciation and amortization charges were $ 4,422,773, $4,349,827, and
$3,743,690 in 1997, 1996 and 1995, respectively.
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12
NOTE 4 - LONG-TERM DEBT:
December 31,
----------------------------
1997 1996
------------ -----------
Note payable-bank, pursuant to revolving
credit and term loan agreement ................. $ -- $ --
6.65% note payable to MassMutual Life
Insurance Company, due
$1,666,667 annually, 1998-2005 ................. 13,333,333 15,000,000
9.9% note payable to MassMutual Life
Insurance Company, due
$600,000 annually, 1998-2001 ................... 2.400,000 3,000,000
------------ -----------
15,733,333 18,000,000
Less payments due within one year
included in current liabilities ................ 2,266,667 2,266,667
----------- -----------
$ 13,466,666 $15,733,333
============ ===========
On January 31, 1996, the Company entered into a 7-year Credit Agreement which
made available to the Company up to $10,000,000 for 4 years on a revolving
credit basis and thereafter for 3 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, 1997) 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 4 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 4 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 MassMutual Life Insurance Company
contain restrictive provisions concerning 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, 1997, under the most restrictive terms of the debt agreements,
retained earnings of approximately $16,320,000 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 are $2,266,667 in each of the years
1998 through 2001, and $1,666,667 in 2002 and thereafter.
NOTE 5 - TAXES ON INCOME:
Aggregate income tax provisions (benefits) consist of the following:
1997 1996 1995
----------- ----------- -----------
Current:
Federal ................... $ 4,960,000 $ 3,205,000 $ 3,865,000
State and local ........... 490,000 675,000 625,000
----------- ----------- -----------
5,450,000 3,880,000 4,490,000
Deferred ..................... (230,000) 1,320,000 395,000
----------- ----------- -----------
$ 5,220,000 $ 5,200,000 $ 4,885,000
=========== =========== ===========
The difference between the total statutory Federal income tax rate and the
actual effective tax rate is accounted for as follows:
1997 1996 1995
---- ---- ----
Statutory Federal income tax rate ........... 34.3% 34.2% 34.0%
State and local income taxes, net
of Federal income tax benefit .............. 2.2 3.2 3.2
Non deductible dispute settlement costs ..... -- -- 18.7
Other items ................................. (0.2) -- 0.6
---- ---- ----
Effective tax rate .......................... 36.3% 37.4% 56.5%
==== ==== ====
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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 1997, 1996 and 1995 included the following
components:
1997 1996 1995
------------ ----------- -----------
Service cost - benefits earned during the period...... $ 683,000 $ 702,000 $ 651,000
Interest cost on projected benefit obligation......... 1,014,000 1,041,000 960,000
Actual (return) loss on assets........................ (2,607,000) (1,784,000) (2,107,000)
Net amortization and deferral......................... 1,705,000 1,163,000 1,593,000
------------ ----------- -----------
Net periodic pension cost............................. $ 795,000 $ 1,122,000 $ 1,097,000
============ =========== ===========
In addition to the net pension expense for 1997 shown above, there is a charge
of $440,000 recorded in accordance with SFAS No. 88, due to the curtailment of
certain pension obligations related to the closing of the Lee County
manufacturing plant and the freezing of benefit accruals at the Yazoo and
Lexington divisions.
Assumptions used in the calculation of net periodic pension cost (one corporate
plan and four plant/factory plans) for the three years ended December 31, 1997
were:
Long Term Rate
Discount Rate of Return Salary Scale
------------- --------- ------------
Corp. Plants Corp. Plants Corp. Plants
----- ------ ----- ------ ----- ------
1995 8.00% 8.00% 8.00% 8.00% 4.50% N/A
1996 7.00% 7.00% 8.00% 8.00% 4.50% N/A
1997 7.50% 7.50% 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, 1997 and 1996, for its pension
plans:
December 31, 1997 December 31, 1996
------------------------------- ---------------------------------
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 ...................... $ (9,922,000) $ (2,704,000) $ (8,120,000) $ (4,058,000)
============ ============ ============ ============
Accumulated benefit obligation ................. $(10,241,000) $ (2,737,000) $ (8,399,000) $ (4,105,000)
============ ============ ============ ============
Projected benefit obligation ................... $(12,942,000) $ (2,771,000) $(11,100,000) $ (4,470,000)
Plan assets at fair value ............................. 13,768,000 2,308,000 10,903,000 3,527,000
------------ ------------ ------------ ------------
Plan assets in excess of benefit obligation ........... 826,000
Projected benefit obligation
over plan assets ............................... (463,000) (197,000) (943,000)
Unrecognized net gain ................................. (3,129,000) (339,000) (1,792,000) (54,000)
Prior service cost not yet recognized in net
periodic pension cost .......................... 1,251,000 578,000 1,820,000 692,000
Unrecognized net obligation at date of
initial application ............................ 1,000 65,000 -- 179,000
Adjustment required to recognize minimum
liability ...................................... -- (270,000) -- (452,000)
------------ ------------ ------------ ------------
Pension liability ..................................... $ (1,051,000) $ (429,000) $ (169,000) $ (578,000)
============ ============ ============ ============
Discount rate, end of year ............................ 7.25% 7.25% 7.50% 7.50%
============ ============ ============ ============
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14
NOTE 7 - QUARTERLY RESULTS FOR 1996 AND 1997:
Quarter Ended
---------------------------------------------------------------------
March 31, June 30, September 30, December 31,
1996 1996 1996 1996
----------- ----------- ----------- -----------
(Unaudited)
Net sales .......................... $34,672,192 $34,896,958 $35,433,226 $36,418,250
----------- ----------- ----------- -----------
Gross profit ....................... 11,481,016 11,636,084 12,171,520 12,234,633
----------- ----------- ----------- -----------
Earnings before taxes on income .... 3,091,317 3,419,856 3,669,717 3,713,206
----------- ----------- ----------- -----------
Net earnings ....................... $ 1,916,317 $ 2,119,856 $ 2,279,717 $ 2,378,206
=========== =========== =========== ===========
Basic earnings per common share .... $ .24 $ .26 $ .28 $ .29
=========== =========== =========== ===========
Diluted earnings per common share .. $ .24 $ .26 $ .28 $ .29
=========== =========== =========== ===========
Dividends per common share ......... $ .09 $ .09 $ .09 $ . 11
=========== =========== =========== ===========
Average outstanding shares ......... 8,133,552 8,133,552 8,133,552 8,101,378
=========== =========== =========== ===========
Quarter Ended
---------------------------------------------------------------------
March 31, June 30, September 30, December 31,
1997 1997 1997 1997
----------- ----------- ----------- -----------
(Unaudited)
Net sales .......................... $33,513,631 $37,518,173 $37,117,239 $36,458,005
----------- ----------- ---------- -----------
Gross profit ....................... 11,269,936 12,561,234 12,486,253 12,076,388
----------- ----------- ----------- -----------
Earnings before taxes on income .... 2,920,056 3,718,602 3,932,193 3,819,158
----------- ---------- ----------- -----------
Net earnings ....................... $ 1,825,056 $ 2,323,602 $ 2,458,193 $ 2,563,158
=========== =========== =========== ===========
Basic earnings per common share .... $ .23 $ .29 $ .31 $ .32
=========== =========== =========== ===========
Diluted earnings per common share .. $ .22 $ .29 $ .30 $ .32
=========== =========== =========== ===========
Dividends per common share ......... $ .11 $ .11 $ .11 $ .125
=========== =========== =========== ===========
Average outstanding shares ......... 8,054,905 7,992,148 7,975,914 7,964,398
=========== =========== =========== ===========
The independent certified public accountants made a limited review of the 1996
and 1997 quarterly consolidated 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 consolidated financial statements taken as a
whole, and accordingly, no such opinion was expressed.
NOTE 8 - RENTALS:
Aggregate rent expense, including month-to-month rentals, approximated $520,000,
$550,000 and $567,000, for the years ended December 31, 1997, 1996, and 1995,
respectively. Long-term lease commitments, the last of which expire in 2002, are
not material.
NOTE 9 - DISPUTE WITH GOVERNMENTAL AGENCY:
The Company reached agreements in 1996 with the Department of Justice and the
United States Attorney's Office in Tampa, Florida, to resolve its previously
announced disputes with the Federal government arising out of certain
contractual relations with the Department of Veterans Affairs (formerly the
Veterans Administration) from 1983 to 1992. The agreements and $6,500,000
payment resolved investigations of the Company arising from the VA contracts.
The Company charged $4,250,000, or approximately $.51 per share against its
earnings in the fourth quarter of 1995 in anticipation of the settlements. No
additional charges resulted from the settlements in 1996 and the Company is free
to continue to sell to all Federal agencies, including the VA.
-14-
15
NOTE 10 - 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, 1997 (including option transactions from a 1983 Plan
which expired in 1993) follows:
Option Prices
-------------------------------------------
No. of Range Per
Market Shares Share Total Price Market Price
------ ----- ----------- ------------
Outstanding January 1, 1995.......... 424,225 $13.75 - $18.08 $6,744,906
Granted.......................... 145,400 $10.75 - $11.83 1,571,865 $1,563,050
Cancelled........................ (19,575) $10.75 - $16.44 (289,243)
-------- ----------
Outstanding December 31, 1995......... 550,050 $10.75 - $18.08 8,027,528
Granted.......................... 163,825 $10.25 - $11.28 1,730,449 $1,721,378
Cancelled........................ (11,550) $10.25 - $16.44 (155,763)
-------- ----------
Outstanding December 31, 1996......... 702,325 $10.25 - $18.08 9,602,214
-------- ----------
Granted.......................... 137,275 $13.75 - $15.13 1,905,347 $1,896,272
Exercised........................ (34,850) $10.25 - $13.75 (374,519)
Lapsed........................... (277,200) $16.44 - $18.08 (4,598,087)
Cancelled........................ (48,375) $10.75 - $16.44 (724,834)
-------- ----------
Outstanding December 31, 1997......... 479,175 $10.25 - $15.13 $5,810,121
======== ==========
At December 31, options available to issue were 1,255,150 for 1995, 1,102,875
for 1996 and 1,291,175 for 1997. Options have never been repriced by the Company
in any year.
The effect on compensation expense, if determined under the provisions of SFAS
No. 123, 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:
Related Party
Options Other Options
------- -------------
Exercise price
1997 $15.13 $13.75 - $13.88
1996 $11.28 $10.25 - $10.88
1995 $11.83 $10.75
Market price
1997 $13.75 $13.75 - $13.88
1996 $10.25 $10.25 - $10.88
1995 $10.75 $10.75
Risk free interest rate
1997 6.17% 6.08% - 6.17%
1996 5.25% 5.25% - 6.55%
1995 6.20% 6.20%
Expected option life 5 years 5 years
Expected volatility
1997 26.5% 26.2% - 26.5%
1996 25.2% 25.2% - 25.7%
1995 25.0% 25.0%
Dividend yield 3% 3%
NOTE 11 - 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,
as required. Historic 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. The weighted
average number of shares outstanding during 1997, 1996, and 1995 were 7,996,536,
8,125,465, and 8,320,703, respectively. Dilutive potential common shares were
65,428, 17,493 and 0, respectively.
NOTE 12 - SUBSEQUENT EVENT:
Effective January 2, 1998, the Company acquired the net assets of J & L Group,
Inc. ("J&L"), a manufacturer of embroidered sportswear, with revenues for the
year ended December 1997 of approximately $6,700,000. Total assets of J&L as of
December 31, 1997 were not material.
-15-
16
NOTE 13 - ACCRUED EXPENSES:
December 31,
-----------------------
1997 1996
------ -----
Salaries, wages, commissions and
vacation pay ...................... $2,071,405 $2,247,570
Other accrued expenses ............ 2,308,769 1,860,632
---------- ----------
$4,380,174 $4,108,202
========== ==========
NOTE 14 - SUPPLEMENTAL INFORMATION:
Year Ended December 31,
----------------------------------------------
1997 1996 1995
---------- ----------- -----------
Income taxes paid................. $4,680,144 $ 3,846,804 $ 4,939,067
========== =========== ===========
Interest paid..................... $1,248,171 $ 1,453,201 $ 1,411,805
========== =========== ===========
-16-
17
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders
Superior Surgical Mfg. Co., Inc.
Seminole, Florida
We have audited the accompanying consolidated balance sheets of Superior
Surgical Mfg. Co., Inc. and subsidiaries (the "Company") as of December 31, 1997
and 1996, and the related consolidated statements of earnings, shareholders'
equity and cash flows for each of the three years in the period ended December
31, 1997. 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 consolidated financial statements present fairly, in all
material respects, the financial position of the Company as of December 31, 1997
and 1996, and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 1997, in conformity with generally
accepted accounting principles.
Deloitte & Touche LLP
Tampa, Florida
February 19, 1998
-17-
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.
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 8, 1998, a copy of which will be filed with the Securities and
Exchange Commission on or before March 30, 1998.
-18-
19
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/ Saul Schechter
-------------------------------------
By: Saul Schechter
(Treasurer and Principal Accounting
Officer)
DATE: March 27, 1998
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 27, 1998 Alan D. Schwartz, March 27, 1998
(Director) (Director)
/s/ Manuel Gaetan /s/ Peter Benstock
- -------------------------------- --------------------------------
Manuel Gaetan, March 27, 1998 Peter Benstock, March 27, 1998
(Director) (Director)
/s/ Sidney Kirschner
- --------------------------------
Sidney Kirschner, March 27, 1998
(Director)
-19-
20
SUPERIOR SURGICAL MFG. CO., INC.
EXHIBIT INDEX
Exhibit No. Description
----------- -----------
3.1 Restated Certificate of Incorporation of the Registrant filed
with the Commission as Exhibit 3.1 in the Registrant's 1993
Form 10-K and incorporated herein by reference.
3.2 By-Laws of the Registrant filed as Exhibit to the Registrant's
Form 10-Q for the three months ended September 30, 1996 and
incorporated herein by reference.
4.1 Credit Agreement dated January 31, 1996, between the Registrant
and Chemical Bank, filed with the Commission as Exhibit 4.1
in Registrant's 1995 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 and incorporated herein
by reference. (The Registrant, by signing this Report 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.
23. Consent of independent accountants.
27. Financial Data Schedule for year ended December 31, 1997 (For
SEC use only.)
99. The information contained under the headings "Directors and
Executive Officers, Executive Compensation"; "Security
Ownership of Certain Beneficial Owners and 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 1998 Annual Meeting of
Stockholders, to be filed on or before March 30, 1998 is
hereby incorporated herein by reference.
-20-