Business Context and Reporting Period
Company: Superior Surgical Mfg. Co., Inc. (Superior Group of Companies, Inc.)
Filing Type: Form 10-Q (Quarterly Report)
Reporting Period: Quarter and nine months ended September 30, 1996
Business Overview: The company manufactures surgical products. As of the report date, 8,133,552 common shares were outstanding.
Key Financial Metrics
Three Months Ended September 30, 1996
- Net Sales: $35,433,226
- Net Earnings: $2,279,717
- Earnings Per Share (EPS): $0.28
- Dividends Declared: $0.09 per share
Nine Months Ended September 30, 1996
- Net Sales: $105,002,376
- Net Earnings: $6,315,890
- Earnings Per Share (EPS): $0.78
- Dividends Declared: $0.27 per share
- Cost of Goods Sold (COGS) Margin: Approximately 66.5% of sales
- Selling & Administrative Expenses: Approximately 22.75% of sales
Liquidity and Balance Sheet (as of Sept 30, 1996)
- Cash and Certificates of Deposit: $5,078,758
- Total Current Assets: $75,312,907
- Total Current Liabilities: $16,317,747
- Long-Term Debt: $16,450,000
- Current Portion of Long-Term Debt: $1,850,000
- Available Credit: $10,000,000 under existing revolving Credit Agreement
Material Changes vs. Prior Period
- Revenue Growth: Net sales increased approximately 5% for the nine months ended September 30, 1996, compared to the same period in 1995. Quarterly sales grew 7% in Q3 1996 versus Q3 1995.
- Profitability: Net earnings increased 13% for the quarter ended September 30, 1996, compared to the prior year quarter.
- Interest Expense: Increased 40% to $973,663 for the nine-month period, attributed to debt repayment and lower cash balances invested in certificates of deposit.
- Inventory: Increased 11% to $45,616,415 from December 31, 1995, to support expected future customer demand.
- Accounts Payable: Increased 30% primarily due to increased inventory purchases.
- Dispute Settlement: A liability of $6,500,000 recorded in 1995 for a dispute settlement was paid in the third quarter of 1996, resulting in a zero balance for this item in the current period.
Guidance, Outlook, and Risks
- Outlook: Management attributes sales growth to new customers, new uniform programs, and continued economic momentum in served marketplaces.
- Liquidity: The company reports adequate working capital and believes cash flow from operations, combined with credit sources, is sufficient to meet funding requirements for the foreseeable future.
- Capital Expenditures: The company will continue its ongoing capital expenditure program to maintain and improve facilities, evaluating spending based on economic conditions.
- Risks/Contingencies: No new legal proceedings were reported. The filing notes that interim results are not necessarily indicative of full-year results.
Investor Verification Checklist
- Verify the impact of the $6.5 million dispute settlement payment on cash flow and future legal contingencies.
- Confirm the sustainability of the 5% sales growth trend in the context of the broader economic environment.
- Monitor the 40% increase in interest expense and its effect on future net earnings.
- Review the 11% increase in inventory levels to ensure they align with actual demand and do not lead to future write-downs.
- Assess the utilization of the $10 million available credit line and total debt service obligations.