Form 10-Q

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM 10-Q

 

 

(Mark One)

 

x QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2009

OR

 

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 001-05869

 

 

SUPERIOR UNIFORM GROUP, INC.

 

 

 

Incorporated - Florida   Employer Identification No.
  11-1385670

10055 Seminole Boulevard

Seminole, Florida 33772-2539

Telephone No.: 727-397-9611

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every

Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter)

during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ¨    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated

filer or a smaller reporting company. See the definitions of “large accelerated filer, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one)

 

Large accelerated filer   ¨    Accelerated filer   ¨
Non-accelerated filer   ¨  (Do not check if a smaller reporting company)    Smaller Reporting Company   x

Indicate by check mark whether the Company is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

As of July 21, 2009, the Registrant had 6,018,602 common shares outstanding, which is the registrant’s only

class of common stock.

 

 

 


PART I - FINANCIAL INFORMATION

 

ITEM 1. Financial Statements

SUPERIOR UNIFORM GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

THREE MONTHS ENDED JUNE 30,

(Unaudited)

 

           2009    2008  

Net sales

     $ 24,971,523    $ 31,699,285   
                 

Costs and expenses:

       

Cost of goods sold

       16,689,786      21,041,384   

Selling and administrative expenses

       7,235,529      8,609,888   

Interest expense

       24,936      77,209   
                 
       23,950,251      29,728,481   
                 

Earnings from continuing operations before taxes on income

       1,021,272      1,970,804   

Income tax expense

       320,000      760,000   
                 

Earnings from continuing operations

       701,272      1,210,804   

Loss from discontinued operations, net of tax benefits of $-0- and $15,000, respectively

       —        (32,531
                 

Net earnings

     $ 701,272    $ 1,178,273   
                 

Weighted average number of shares outstanding during the period

   (Basic     6,029,936      6,611,262   
   (Diluted     6,029,936      6,612,110   

Per Share Data:

       

Basic

       

Earnings from continuing operations

     $ 0.12    $ 0.18   

Loss from discontinued operations, net of tax benefits

       0.00      0.00   
                 

Net earnings

     $ 0.12    $ 0.18   
                 

Diluted

       

Earnings from continuing operations

     $ 0.12    $ 0.18   

Loss from discontinued operations, net of tax benefits

       0.00      0.00   
                 

Net earnings

     $ 0.12    $ 0.18   
                 

Cash dividends per common share

     $ 0.135    $ 0.135   
                 

See accompanying notes to condensed consolidated interim financial statements.

 

2


SUPERIOR UNIFORM GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

SIX MONTHS ENDED JUNE 30,

(Continued)

(Unaudited)

 

           2009    2008  

Net sales

     $ 48,687,617    $ 64,981,915   
                 

Costs and expenses:

       

Cost of goods sold

       32,998,920      43,415,437   

Selling and administrative expenses

       15,305,657      17,909,516   

Interest expense

       64,713      181,350   
                 
       48,369,290      61,506,303   
                 

Earnings from continuing operations before taxes on income

       318,327      3,475,612   

Income tax expense

       120,000      1,350,000   
                 

Earnings from continuing operations

       198,327      2,125,612   

Loss from discontinued operations, net of tax benefit of $-0- and $80,000, respectively

       —        (145,969
                 

Net earnings

     $ 198,327    $ 1,979,643   
                 

Weighted average number of shares outstanding during the period

   (Basic     6,039,559      6,640,956   
   (Diluted     6,039,559      6,643,091   

Per Share Data:

       

Basic

       

Earnings from continuing operations

     $ 0.03    $ 0.32   

Loss from discontinued operations, net of tax benefits

       0.00      (0.02
                 

Net earnings

     $ 0.03    $ 0.30   
                 

Diluted

       

Earnings from continuing operations

     $ 0.03    $ 0.32   

Loss from discontinued operations, net of tax benefits

       0.00      (0.02
                 

Net earnings

     $ 0.03    $ 0.30   
                 

Cash dividends per common share

     $ 0.27    $ 0.27   
                 

See accompanying notes to condensed consolidated interim financial statements.

 

3


SUPERIOR UNIFORM GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

 

     June 30,
2009
(Unaudited)
    December 31,
2008 (1)
 
ASSETS   

CURRENT ASSETS:

    

Cash and cash equivalents

   $ 5,634,150      $ 133,152   

Accounts receivable and other current assets

     18,246,222        20,054,629   

Inventories*

     35,282,883        43,410,146   
                

TOTAL CURRENT ASSETS

     59,163,255        63,597,927   

PROPERTY, PLANT AND EQUIPMENT, NET

     11,389,504        12,587,454   

OTHER INTANGIBLE ASSETS, NET

     416,778        535,857   

DEFERRED INCOME TAXES

     3,025,000        2,610,000   

OTHER ASSETS

     252,381        260,039   
                
   $ 74,246,918      $ 79,591,277   
                
LIABILITIES AND SHAREHOLDERS’ EQUITY   

CURRENT LIABILITIES:

    

Accounts payable

   $ 4,730,988      $ 4,626,789   

Other current liabilities

     2,342,173        2,518,956   

Current portion of long-term debt

     —          650,604   
                

TOTAL CURRENT LIABILITIES

     7,073,161        7,796,349   

LONG-TERM DEBT

     —          3,379,000   

LONG-TERM PENSION LIABILITY

     7,020,296        7,056,055   

OTHER LONG-TERM LIABILITIES

     690,000        665,000   

SHAREHOLDERS’ EQUITY:

    

Preferred stock, $1 par value - authorized 300,000 shares (none issued)

     —          —     

Common stock, $.001 par value - authorized 50,000,000 shares, issued and outstanding - 6,025,952 and 6,056,754 shares, respectively.

     6,026        6,056   

Additional paid-in capital

     15,597,899        15,486,181   

Retained earnings

     49,074,577        50,641,401   

Accumulated other comprehensive loss, net of tax:

    

Cash flow hedges

     —          (5,000

Pensions

     (5,215,041     (5,433,765
                

TOTAL SHAREHOLDERS’ EQUITY

     59,463,461        60,694,873   
                
   $ 74,246,918      $ 79,591,277   
                

 

* Inventories consist of the following:

 

     June 30,
2009
(Unaudited)
   December 31,
2008

Finished goods

   $ 27,119,401    $ 34,255,052

Work in process

     83,899      118,030

Raw materials

     8,079,583      9,037,064
             
   $ 35,282,883    $ 43,410,146
             

 

(1) The balance sheet as of December 31, 2008 has been derived from the audited balance sheet as of that date and has been condensed.

See accompanying notes to condensed consolidated interim financial statements.

 

4


SUPERIOR UNIFORM GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

SIX MONTHS ENDED JUNE 30,

(Unaudited)

 

     2009     2008  

CASH FLOWS FROM OPERATING ACTIVITIES

    

Net earnings

   $ 198,327      $ 1,979,643   

Adjustments to reconcile net earnings to net cash provided from operating activities:

    

Depreciation and amortization

     1,497,219        1,617,385   

Provision for bad debts

     62,950        90,481   

Share-based compensation expense

     190,886        203,077   

Deferred income tax benefit

     (532,500     (263,000

Gain on sales of property, plant and equipment

     (136,786     (13,888

Changes in assets and liabilities:

    

Accounts receivable and other current assets

     1,585,140        382,316   

Inventories

     8,191,263        246,877   

Other assets

     60,563        109,321   

Accounts payable

     104,199        (1,077,349

Accrued expenses

     (171,783     566,136   

Pension liability

     300,465        32,940   

Other long-term liabilities

     25,000        87,000   
                

Net cash provided from operating activities

     11,374,943        3,960,939   
                

CASH FLOWS FROM INVESTING ACTIVITIES

    

Additions to property, plant and equipment

     (318,988     (480,373

Disposals of property, plant and equipment

     275,584        15,209   

Other assets

     —          5,000   

Proceeds from sale of assets held for sale

     —          233,870   

Proceeds from notes receivable collections

     43,412        34,506   
                

Net cash provided from (used in) investing activities

     8        (191,788
                

CASH FLOWS FROM FINANCING ACTIVITIES

    

Proceeds from long-term debt

     11,917,000        33,765,000   

Repayment of long-term debt

     (15,946,604     (33,896,469

Payment of cash dividends

     (1,630,681     (1,801,346

Proceeds received on exercise of stock options

     —          18,320   

Common stock reacquired and retired

     (213,668     (1,745,038
                

Net cash used in financing activities

     (5,873,953     (3,659,533
                

Net increase in cash and cash equivalents

     5,500,998        109,618   

Cash and cash equivalents balance, beginning of year

     133,152        769,715   
                

Cash and cash equivalents balance, end of period

   $ 5,634,150      $ 879,333   
                

See accompanying notes to condensed consolidated interim financial statements.

 

5


SUPERIOR UNIFORM GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

SIX MONTHS ENDED JUNE 30, 2009 AND 2008

(Unaudited)

NOTE 1 - Summary of Significant Interim Accounting Policies:

a) Basis of presentation

The condensed consolidated interim financial statements include the accounts of Superior Uniform Group, Inc. and its wholly owned subsidiaries Fashion Seal Corporation and Superior Office Solutions, and their jointly owned subsidiary, The Office Gurus. Intercompany items have been eliminated in consolidation. The accompanying unaudited interim financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations. These condensed consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008, as filed with the Securities and Exchange Commission. The interim financial information contained herein is not certified or audited; it reflects all adjustments (consisting of only normal recurring accruals) which are, in the opinion of management, necessary for a fair statement of the operating results for the periods presented, stated on a basis consistent with that of the audited financial statements. The unaudited financial information included in this report as of and for the three and six months ended June 30, 2009 has been reviewed by Grant Thornton LLP, independent registered public accounting firm, and their review report thereon accompanies this filing. Such review was made in accordance with established professional standards and procedures for such a review. The results of operations for any interim period are not necessarily indicative of results to be expected for the full year.

b) Revenue recognition

The Company records revenue as products are shipped and title passes. A provision for estimated returns and allowances is recorded based on historical experience and current allowance programs.

c) Recognition of costs and expenses

Costs and expenses other than product costs are charged to income in interim periods as incurred, or allocated among interim periods based on an estimate of time expired, benefit received or activity associated with the periods. Procedures adopted for assigning specific cost and expense items to an interim period are consistent with the basis followed by the registrant in reporting results of operations at annual reporting dates. However, when a specific cost or expense item charged to expense for annual reporting purposes benefits more than one interim period, the cost or expense item is allocated to the interim periods.

d) Advertising expenses

The Company expenses advertising costs as incurred. Total advertising costs for the three-month periods ended June 30, 2009 and 2008, respectively were $26,261 and $70,935. Advertising costs for the six-month periods ended June 30, 2009 and 2008, respectively were $42,069 and $103,095.

e) Shipping and handling fees and costs

The Company follows EITF 00-10, Accounting for Shipping and Handling Fees and Costs, which requires shipping and handling fees billed to customers to be classified as revenue and shipping and handling costs to be either classified as cost of sales or disclosed in the notes to the financial statements. The Company includes shipping and handling fees billed to customers in net sales. Shipping and handling costs associated with in-bound and out-bound freight are generally recorded in cost of goods sold. Other shipping and handling costs such as labor and overhead are included in selling and administrative expenses and totaled $1,545,552 and $1,824,634 for the three months ended June 30, 2009 and 2008, respectively. Other shipping and handling costs included in selling and administrative expenses totaled $3,231,130 and $3,817,890, for the six months ended June 30, 2009 and 2008, respectively.

f) Inventories

Inventories at interim dates are determined by using both perpetual records on a first-in, first-out basis and gross profit calculations.

 

6


g) Accounting for income taxes

The provision for income taxes is calculated by using the effective tax rate anticipated for the full year.

h) Employee benefit plan settlements

The Company recognizes settlement gains and losses in its financial statements when the cost of all settlements in a year is greater than the sum of the service cost and interest cost components of net periodic pension cost for the plan for the year.

i) Earnings per share

Historical basic per share data is based on the weighted average number of shares outstanding. Historical diluted per share data is reconciled by adding to weighted average shares outstanding the dilutive impact of the exercise of outstanding stock options and stock appreciation rights.

 

     Three Months
Ended June 30,
    Six Months
Ended June 30,
 
     2009    2008     2009    2008  

Earnings used in the computation of basic and diluted net earnings per common share:

          

Earnings from continuing operations

   $ 701,272    $ 1,210,804      $ 198,327    $ 2,125,612   

Loss from discontinued operations, net of tax benefits

     —        (32,531     —        (145,969
                              

Net earnings used in the computation of basic and diluted earnings per share

   $ 701,272    $ 1,178,273      $ 198,327    $ 1,979,643   
                              

Weighted average shares outstanding - basic

     6,029,936      6,611,262        6,039,559      6,640,956   

Common stock equivalents

     —        848        —        2,135   
                              

Weighted average shares outstanding - diluted

     6,029,936      6,612,110        6,039,559      6,643,091   
                              

Per Share Data :

          

Basic

          

Earnings from continuing operations

   $ 0.12    $ 0.18      $ 0.03    $ 0.32   

Loss from discontinued operations, net of tax benefits

     0.00      0.00        0.00      (0.02
                              

Net earnings

   $ 0.12    $ 0.18      $ 0.03    $ 0.30   
                              

Diluted

          

Earnings from continuing operations

   $ 0.12    $ 0.18      $ 0.03    $ 0.32   

Loss from discontinued operations, net of tax benefits

     0.00      0.00        0.00      (0.02
                              

Net earnings

   $ 0.12    $ 0.18      $ 0.03    $ 0.30   
                              

Awards to purchase 1,052,925 and 875,850 shares of common stock with weighted average exercise prices of $11.36 and $13.33 per share, were outstanding during the three-month periods ending June 30, 2009 and June 30, 2008, respectively, but were not included in the computation of diluted EPS because the awards’ exercise prices were greater than the average market price of the common shares.

Awards to purchase an average of 1,066,438 and 907,813 shares of common stock with weighted average exercise prices of $11.37 and $13.31 per share, were outstanding during the six-month periods ending June 30, 2009 and June 30, 2008, respectively, but were not included in the computation of diluted EPS because the awards’ exercise prices were greater than the average market price of the common shares.

j) Use of estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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.

 

7


k) Comprehensive income

Total comprehensive income represents the change in equity during a period from sources other than transactions with shareholders and, as such, includes net earnings. For the Company, the only other components of total comprehensive income are the change in the fair value of derivatives accounted for as cash flow hedges and pension costs.

 

     Three Months
Ended June 30,
   Six Months
Ended June 30,
     2009    2008    2009    2008

Net earnings

   $ 701,272    $ 1,178,273    $ 198,327    $ 1,979,643

Other comprehensive income:

           

Net unrealized gain during the period related to cash flow hedges

     —        18,000      5,000      11,000

Pensions - reclassification to net earnings during the period

     109,362      7,079      218,274      13,658
                           
   $ 810,634    $ 1,203,352    $ 421,601    $ 2,004,301
                           

l) Operating Segments

Statement of Financial Accounting Standards (FAS) No. 131 Disclosures about Segments of an Enterprise and Related Information requires disclosures of certain information about operating segments and about products and services, geographic areas in which the Company operates, and their major customers. The Company has evaluated the effect of this standard and has determined that currently it operates in one segment, as defined in this statement.

m) Derivative Financial Instruments

The Company has had only limited involvement with derivative financial instruments. The Company had one interest rate swap agreement to hedge against the potential impact on earnings from increases in market interest rates associated with interest payments on a variable rate term loan.

This interest rate swap was accounted for as a cash flow hedge in accordance with FAS No. 133 and FAS No. 138. This swap expired on April 1, 2009. Gains of $-0- and $18,000 were included in other comprehensive income for the three months ended June 30, 2009 and 2008, respectively. Gains of $5,000 and $11,000 were included in other comprehensive income for the six months ended June 30, 2009 and 2008, respectively. The original term of the contract was ten years.

n) Share-Based Compensation

The Company awards share-based compensation as an incentive for employees to contribute to the Company’s long-term success. Historically, the Company has issued options and stock settled stock appreciation rights. At June 30, 2009, the Company had 1,591,375 shares of common stock authorized for awards of share-based compensation under its 2003 Incentive Stock and Awards Plan.

For the three months ended June 30, 2009 and 2008, respectively, the Company recognized $12,180 and $15,728 of pre-tax share-based compensation expense under FAS No. 123R, Share-Based Payment (“FAS No. 123R”), recorded in selling and administrative expense in the Condensed Consolidated Statements of Earnings. This expense was offset by a $4,000 and $6,000 deferred tax benefit for non-qualified share–based compensation for the three-month period ended June 30, 2009 and 2008, respectively. For the six months ended June 30, 2009 and 2008, respectively, the Company recognized $190,886 and $203,077 of pre-tax share-based compensation expense under FAS No. 123R, recorded in selling and administrative expense in the Condensed Consolidated Statements of Operations. This expense was offset by a $13,000 and a $21,000 deferred tax benefit for non-qualified share–based compensation for the six-month period ended June 30, 2009 and 2008, respectively. As of June 30, 2009, the Company had no unrecognized compensation cost expected to be recognized for prior share-based awards. The Company’s standard vesting policies provide for immediate vesting at the date of grant.

Stock options and stock settled stock appreciation rights. The Company grants stock options and stock settled stock appreciation rights (“SARS”) to employees that allow them to purchase shares of the Company’s common stock. Options are also granted to outside members of the Board of Directors of the Company. The Company determines the fair value of stock options and SARS at the date of grant using the Black-Scholes valuation model.

All options and SARS vest immediately at the date of grant. Awards generally expire five years after the date of grant with the exception of options granted to outside directors, which expire ten years after the date of grant. The Company issues new shares upon the exercise of stock options and SARS.

 

8


During the six-month periods ended June 30, 2009 and 2008, respectively, the Company received $-0- and $18,320 in cash from stock option exercises. No tax benefit was recognized for these exercises, as the options exercised were qualified incentive stock options.

A summary of options transactions during the six months ended June 30, 2009 follows:

 

     No. of
Shares
    Weighted Average
Exercise Price

Outstanding December 31, 2008

   767,100      $ 12.35

Granted

   158,620        7.87

Exercised

   —          —  

Lapsed

   (122,800     15.09

Cancelled

   (47,025     10.54
            

Outstanding June 30, 2009

   755,895      $ 11.08
            

At June 30, 2009, options outstanding, all of which were fully vested and exercisable, had no aggregate intrinsic value.

Options exercised during the three and six-month periods ended June 30, 2008 had intrinsic values of $1,660. There were no options exercised during the three and six-month periods ended June 30, 2009. The weighted average grant date fair value of the Company’s options granted during the three month periods ended June 30, 2009 and 2008 were $1.03 and $1.31, respectively. The weighted average grant date fair value of the Company’s options granted during the six month periods ended June 30, 2009 and 2008 was $1.05 and $1.05, respectively.

A summary of stock-settled SARS transactions during the six months ended June 30, 2009 follows:

 

     No. of
Shares
   Weighted Average
Exercise Price

Outstanding December 31, 2008

   273,400    $ 12.44

Granted

   23,630      7.89

Exercised

   —        —  

Lapsed

   —        —  

Cancelled

   —        —  
           

Outstanding June 30, 2009

   297,030    $ 12.08
           

At June 30, 2009, SARS outstanding, all of which were fully vested and exercisable, had no aggregate intrinsic value.

There were no SARS exercised during the three-month and six-month periods ended June 30, 2009 and 2008. There were 23,630 SARS granted during the three-month period ended June 30, 2009. There were no SARS granted during the three-month period ended June 30, 2008. The weighted average grant date fair value of the Company’s SARS granted during the six month periods ended June 30, 2009 and 2008 was $1.05 and $1.03, respectively.

The following table summarizes significant assumptions utilized to determine the fair value of share-based compensation awards.

 

9


     Three Months Ended June 30     Six Months Ended June 30  
     SARS    Options     SARS     Options  

Exercise price

         

2009

   N/A    $ 7.63      $ 7.89      $ 7.63-$7.89   

2008

   N/A    $ 9.22      $ 9.16      $ 9.16   

Market price

         

2009

   N/A    $ 7.63      $ 7.89      $ 7.63-$7.89   

2008

   N/A    $ 9.22      $ 9.16      $ 9.16   

Risk free interest rate (1)

         

2009

   N/A      3.2     2.0     2.0%-3.2

2008

   N/A      3.8     2.8     2.9

Expected award life (2)

   N/A      10 years        5 years        5 years   

Expected volatility (3)

         

2009

   N/A      32.2     30.7     30.7%-32.2

2008

   N/A      26.6     23.5     23.7

Expected dividend yield (4)

         

2009

   N/A      7.1     6.8     6.8%-7.1

2008

   N/A      5.9     5.9     5.9

 

(1) The risk-free interest rate is based on the yield of a U.S. treasury bond with a similar maturity as the expected life of the awards.
(2) The expected life in years for awards granted was based on the historical exercise patterns experienced by the Company when the award is made.
(3) The determination of expected stock price volatility for awards granted in each of the three and six-month periods ending June 30, was based on historical Superior common stock prices over a period commensurate with the expected life.
(4) The dividend yield assumption is based on the history and expectation of the Company’s dividend payouts.

o) Subsequent Events

Effective this quarter, the Company implemented Statement of Financial Accounting Standards No. 165, Subsequent Events, (“FAS No. 165”). This standard establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued. The adoption of FAS 165 did not impact our financial position or results of operations. The Company evaluated all events or transactions that occurred after June 30, 2009 up through July 24, 2009, the date these financial statements were issued. During this period the Company did not have any material recognizable subsequent events.

NOTE 2 - Recent Accounting Pronouncements:

In September 2006, the FASB issued FAS No. 157, Fair Value Measurements (“FAS No. 157”). FAS No. 157 defines fair value, establishes a framework for measuring fair value and enhances disclosures about fair value measurements required under other accounting pronouncements, but does not change existing guidance as to whether or not an instrument is carried at fair value. In February 2008, the FASB issued FSP FAS 157-2, “Effective Date of FASB Statement No. 157” which delayed the implementation of the provisions of FAS No. 157 with regard to non-financial assets and liabilities that are not carried at fair value on a recurring basis in financial statements. We have implemented FAS No. 157 for our nonfinancial assets and liabilities that are remeasured at fair value on a non-recurring basis in the first quarter of 2009. The adoption of FAS No. 157 for our nonfinancial assets and liabilities that are remeasured at fair value on a non-recurring basis did not impact our financial position or results of operations; however, it could have an impact in future periods. In addition, we may have additional disclosure requirements in the event we complete an acquisition or incur impairment of our assets in future periods.

A variety of proposed or otherwise potential accounting standards are currently under study by standard-setting organizations and various regulatory agencies. Because of the tentative and preliminary nature of these proposed standards, management has not determined whether implementation of such proposed standards would be material to the Company’s consolidated financial statements.

 

10


NOTE 3 - Long-Term Debt:

 

     June 30,
2009
   December 31,
2008

Note payable to Wachovia, pursuant to revolving credit agreement, maturing June 30, 2010

   $             —    $ 3,379,000

6.75% term loan payable to Wachovia, with monthly payments of principal and interest, paid March 31, 2009

          650,604
             
          4,029,604

Less payments due within one year included in current liabilities

          650,604
             

Long-term debt less current maturities

   $    $ 3,379,000
             

On March 26, 1999, the Company entered into a 3-year credit agreement with Wachovia Bank that made available to the Company up to $15,000,000 on a revolving credit basis. Interest is payable at LIBOR plus 0.60% based upon the one-month LIBOR rate for U.S. dollar based borrowings (1.51% at June 30, 2009). The Company pays an annual commitment fee of 0.15% on the average unused portion of the commitment. The available balance under the credit agreement is reduced by outstanding letters of credit. As of June 30, 2009, approximately $85,000 was outstanding under letters of credit. On March 27, 2001, on April 27, 2004, and again on June 25, 2007, the Company entered into agreements with Wachovia Bank to extend the maturity of the revolving credit agreement. The revolving credit agreement matures on June 30, 2010. At the option of the Company, any outstanding balance on the agreement at that date will convert to a one-year term loan. The remaining terms of the original revolving credit agreement remain unchanged. The Company also entered into a $12,000,000 10-year term loan on March 26, 1999 with the same bank. The term loan was paid in full on March 31, 2009. The term loan carried a variable interest rate of LIBOR plus 0.80% based upon the one-month LIBOR rate for U.S. dollar based borrowings. Concurrent with the execution of the term loan agreement, the Company entered into an interest rate swap with the bank under which the Company receives a variable rate of interest on a notional amount equal to the outstanding balance of the term loan from the bank and the Company pays a fixed rate of 6.75% on a notional amount equal to the outstanding balance of the term loan to the bank. This swap agreement expired April 1, 2009.

The credit agreement with Wachovia contains restrictive provisions concerning liabilities to tangible net worth ratios (.75:1), other borrowings, capital expenditures; working capital ratio (2.5:1), and fixed charges coverage ratio (2.5:1). The Company is in full compliance with all terms, conditions and covenants of the various credit agreements.

NOTE 4 - Periodic Pension Expense:

The following table presents the net periodic pension expense under our plans for the following periods:

 

     Three Months
Ended June 30,
    Six Months
Ended June 30,
 
     2009     2008     2009     2008  

Service cost - benefits earned during the period

   $ 182,000      $ 152,000      $ 363,000      $ 305,000   

Interest cost on projected benefit obligation

     262,000        244,000        524,000        488,000   

Expected return on plan assets

     (212,000     (350,000     (423,000     (701,000

Amortization of prior service cost

     8,000        8,000        15,000        16,000   

Recognized actuarial loss

     160,000        3,000        321,000        6,000   
                                

Net periodic pension cost

   $ 400,000      $ 57,000      $ 800,000      $ 114,000   
                                

A contribution of $500,000 was made to the Company’s benefit plans during the six months ended June 30, 2009. There were no contributions made to the Company’s benefit plans during the six months ended June 30, 2008. The Company anticipates making an additional payment of $500,000 during the last six months of 2009.

 

11


NOTE 5 - Supplemental Cash Flow Information:

The Company received a note receivable for $324,606 as partial payment related to the sale of the Sope Creek business during 2008. In the three months ended June 30, 2009, the Company accepted $64,000 in inventory as partial payment on this note receivable.

Cash paid for income taxes was $512,425 and $988,316, respectively, for the six-month periods ended June 30, 2009 and 2008. Cash paid for interest was $69,378 and $184,811, respectively, for the six-month periods ended June 30, 2009 and 2008.

NOTE 6 - Discontinued Operations:

During the fourth quarter of 2007, the Company made a decision to divest its Sope Creek operations. As a result, the related assets of Sope Creek were classified as held for sale at December 31, 2007 and were written down to their estimated fair value less selling costs. The write down to fair value resulted in a charge to loss from discontinued operations of approximately $596,000, net of tax benefit in the fourth quarter of 2007. Additionally, the results of operations of Sope Creek have been reported as a loss from discontinued operations in the condensed consolidated statements of operations. The table below summarizes financial results for the Sope Creek business:

 

     Three Months Ended June 30    Six Months Ended June 30
     2009    2008    2009    2008

Net sales

   $ —      $ —      $ —      $ 281,171

Loss from discontinued operations before income taxes

   $ —      $ 47,531    $ —      $ 225,969

Loss from discontinued operations

   $ —      $ 32,531    $ —      $ 145,969

The Company completed the sale of its Sope Creek business on February 4, 2008. The Company received $225,000 in cash at closing and a short-term note receivable for $324,606. These proceeds, net of expenses related to the transaction, approximated the carrying value of the assets sold, which were classified as assets held for sale in the consolidated balance sheet.

NOTE 7 - Contingencies:

The Company has entered into indemnification agreements with its directors and certain of its officers that will require the Company, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors or officers. The Company maintains director and officer insurance, which may cover certain liabilities arising from its obligation to indemnify its directors and officers in certain circumstances. No claims have ever been filed under these agreements.

It is not possible to determine the aggregate maximum potential loss under these indemnification agreements. Historically, the Company has not incurred any costs as a result of obligations under these agreements and it has not accrued any liabilities related to such indemnification obligations in its condensed consolidated financial statements for any period presented.

The Company is involved in various legal actions and claims arising from the normal course of business. In the opinion of management, the ultimate outcome of these matters will not have a material impact on the Company’s results of operations, cash flows, or financial position.

NOTE 8 - Related Party Transactions:

For the three-month periods ended June 30, 2009 and 2008, the Company expensed approximately $-0- and $21,000, respectively, to Alpert Business Consulting, LLC, a private corporation owned by the son-in-law of the Company’s Chief Executive Officer, for consulting services. For the six-month periods ended June 30, 2009 and 2008, the Company expensed approximately $33,000 and $41,000, respectively, to Alpert Business Consulting, LLC, a private corporation owned by the son-in-law of the Company’s Chief Executive Officer, for consulting services.

 

12


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Shareholders

Superior Uniform Group, Inc.

We have reviewed the accompanying condensed consolidated balance sheet of Superior Uniform Group, Inc. (a Florida Corporation) and subsidiaries as of June 30, 2009, the related condensed consolidated statements of earnings for the three-month and six-month periods ended June 30, 2009 and 2008 and the condensed consolidated statements of cash flows for the six-month periods ended June 30, 2009 and 2008. These interim financial statements are the responsibility of the Company’s management.

We conducted our reviews in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our reviews, we are not aware of any material modifications that should be made to the accompanying condensed consolidated financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of the Company as of December 31, 2008, and the related consolidated statements of earnings, stockholders’ equity, and cash flows for the year then ended (not presented herein); and in our report dated February 27, 2009, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2008, is fairly stated, in all material respects, in relation to the balance sheet from which it has been derived.

/s/ GRANT THORNTON LLP

Tampa, Florida

July 23, 2009

 

13


ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Certain matters discussed in this Form 10-Q are “forward-looking statements” intended to qualify for the safe harbors from liability established by the Private Securities Litigation Reform Act of 1995. These forward-looking statements can generally be identified as such because the context of the statement will include words such as we “believe,” “anticipate,” “expect” or words of similar import. Similarly, statements that describe our future plans, objectives, strategies or goals are also forward-looking statements. Such forward-looking statements are subject to certain risks and uncertainties that may materially adversely affect the anticipated results. Such risks and uncertainties include, but are not limited, to the following: general economic conditions in the areas of the United States in which the Company’s customers are located; changes in the healthcare, resort and commercial industries where uniforms and service apparel are worn; the impact of competition; the availability of manufacturing materials, and other factors described in the Company’s filings with the Securities and Exchange Commission, including those described in the “Risk Factors” section of our Annual Report on Form 10-K for the fiscal year ended December 31, 2008. Shareholders, potential investors and other readers are urged to consider these factors carefully in evaluating the forward-looking statements made herein and are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements made herein are only made as of the date of this Form 10-Q and we disclaim any obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances.

Critical Accounting Policies

Our significant accounting policies are described in Note 1 to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008. Our discussion and analysis of financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of the financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate the estimates that we have made. These estimates are based upon our historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Our actual results may differ from these estimates under different assumptions or conditions.

Our critical accounting estimates are those that we believe require our most significant judgments about the effect of matters that are inherently uncertain. A discussion of our critical accounting estimates, the underlying judgments and uncertainties used to make them and the likelihood that materially different estimates would be reported under different conditions or using different assumptions is as follows:

Allowance for Losses on Accounts Receivable

These allowances are based on both recent trends of certain customers estimated to be a greater credit risk as well as general trends of the entire customer pool. If the financial condition of the Company’s customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. An additional impairment in value of one percent of net accounts receivable would require an increase in the allowance for doubtful accounts and would result in additional expense of approximately $160,000.

Inventories

Inventories are stated at the lower of cost or market value. Judgments and estimates are used in determining the likelihood that new goods on hand can be sold to customers. Historical inventory usage and current revenue trends are considered in estimating both excess and obsolete inventories. If actual product demand and market conditions are less favorable than those projected by management, additional inventory write-downs may be required.

Insurance

The Company self-insures for certain obligations related to health insurance programs. The Company also purchases stop-loss insurance policies to protect it from catastrophic losses. Judgments and estimates are used in determining the potential value associated with reported claims and for losses that have occurred, but have not been reported. The Company’s estimates consider historical claim experience and other factors. The Company’s liabilities are based on estimates, and, while the Company believes that the accrual for loss is adequate, the ultimate liability may be in excess of or less than the amounts recorded. Changes in claim experience, the Company’s ability to settle claims or other estimates and judgments used by management could have a material impact on the amount and timing of expense for any period.

Pensions

The Company’s pension obligations are determined using estimates including those related to discount rates, asset values and changes in compensation. The discount rates used for the Company’s pension plans were determined based on the Citigroup Pension Yield Curve. This rate was selected as the best estimate of the rate at which the benefit obligations could be effectively settled on the measurement date taking into account the nature and duration of the benefit obligations of the plan using high-quality fixed-income investments currently available (rated AA or better) and expected to be available during the period to maturity of the benefits. The 8% expected return on plan assets was determined based on historical long-term investment returns as well as future expectations given target investment asset allocations and current economic conditions.

 

14


The 4.5% rate of compensation increase represents the long-term assumption for expected increases in salaries among continuing active participants accruing benefits under the plans. Interest rates and pension plan valuations may vary significantly based on worldwide economic conditions and asset investment decisions.

Income Taxes

The Company is required to estimate and record income taxes payable for federal and state jurisdictions in which the Company operates. This process involves estimating actual current tax expense and assessing temporary differences resulting from differing accounting treatment between tax and book that result in deferred tax assets and liabilities. In addition, accruals are also estimated for federal and state tax matters for which deductibility is subject to interpretation. Taxes payable and the related deferred tax differences may be impacted by changes to tax laws, changes in tax rates and changes in taxable profits and losses. Federal income taxes are not provided on that portion of unremitted earnings of foreign subsidiaries that are expected to be reinvested indefinitely. Reserves are also estimated for uncertain tax positions that are currently unresolved. The Company routinely monitors the potential impact of such situations and believes that it is properly reserved. We accrue interest and penalties related to unrecognized tax benefits in income tax expense, and the related liability is included in the total liability for unrecognized tax benefits under FIN No. 48.

Share-based Compensation

The Company adopted Statement of Financial Accounting Standards No. 123 (revised 2004) (“FAS No. 123R”) on January 1, 2006. FAS No. 123R requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values. This statement revises FAS No. 123, and supersedes Accounting Principles Board (APB) Opinion 25. Share-based compensation expense that was recorded in 2009 and 2008 includes the compensation expense for the share-based payments granted in those years. In the Company’s share-based compensation strategy we utilize a combination of stock options and stock appreciation rights (“SARS”) that fully vest on the date of grant. Therefore, the fair value of the options and SARS granted is recognized as expense on the date of grant. The Company used the Black-Scholes-Merton valuation model to value any share-based compensation under FAS No. 123R. Option valuation methods, including Black-Scholes-Merton, require the input of assumptions including the risk free interest rate, dividend rate, expected term and volatility rate. The Company determines the assumptions to be used based upon current economic conditions. The impact of changing any of the individual assumptions by 10% would not have a material impact on the recorded expense.

Results of Operations

The current economic environment in the United States remains very challenging. A significant number of companies, including many of our customers, have closed locations, reduced headcount or both. Additionally, voluntary employee turnover has been reduced significantly. Fewer available jobs coupled with less attrition resulted in decreased demand for our uniforms and service apparel. Additionally, customers are being more cost conscious and are delaying purchases of new uniforms whenever possible. As a result of these factors, net sales decreased 21.2% from $31,699,285 for the three months ended June 30, 2008 to $24,971,523 for the three months ended June 30, 2009 and net sales decreased 25.1% from $64,981,915 for the six months ended June 30, 2008 to $48,687,617 for the six months ended June 30, 2009.

As a result of these significant declines in our revenue, we have implemented aggressive cost reduction initiatives to limit the impact on our results of operations. These initiatives are aimed at eliminating nonessential positions, streamlining our existing processes and shifting administrative positions to our Central American subsidiary when possible. As a result of these initiatives, we have eliminated approximately $3.8 million in payroll and related benefits on an annual basis. These specific initiatives were started during the first quarter of 2009 and are expected to produce total payroll related savings during fiscal 2009 of approximately $2.9 million. These initiatives are in addition to prior year staff reductions. While we believe that we have implemented appropriate cost reduction measures to address the current economic environment, if weak economic conditions continue, it could have a material adverse effect on our revenues and results of operations.

Cost of goods sold, as a percentage of sales, approximated 66.8% for the three months ended June 30, 2009 compared to 66.4% for the three months ended June 30, 2008. Cost of goods sold, as a percentage of sales, approximated 67.8% for the six months ended June 30, 2009 compared to 66.8% for the six months ended June 30, 2008. The increases as a percentage of sales in the three and six-month periods are primarily attributed to the significant reductions in net sales outpacing the reductions in overhead included within cost of sales. The Company’s gross margins may not be comparable with other entities, since some entities include all of the cost related to their distribution network in cost of goods sold. As disclosed in Note 1 to the Condensed Consolidated Financial Statements, the Company includes a portion of the costs associated with its distribution network in selling and administrative expenses. The amounts included in selling and administrative expenses for the three-month periods ended June 30, 2009 and 2008, respectively, were $1,545,552 and $1,824,634. The amounts included in selling and administrative expenses for the six-month periods ending June 30, 2009 and 2008, respectively, were $3,231,130 and $3,817,890.

 

15


Selling and administrative expenses, as a percentage of sales, approximated 29.0% and 27.2% respectively, for the three-month periods ended June 30, 2009 and 2008. Selling and administrative expenses, as a percentage of net sales, were approximately 31.4% and 27.6%, respectively, for the first six months of 2009 and 2008. The increase as a percentage of sales in the three-month period is primarily attributed to decreased sales volume (6.2%) plus increased retirement plan expenses (1.1%) which was partially offset by decreased salaries, wages and benefits other than pension expense (5.3%). The increase as a percentage of sales in the six-month period is attributed to decreased sales volume (7.8%) plus increased retirement plan expenses (0.9%) which was partially offset by decreased salaries, wages and benefits other than pension expense (4.6%), and a gain on the sale of a warehouse in 2009 (0.3%).

Interest expense of $24,936 for the three-month period ended June 30, 2009 decreased 67.7% from $77,209 for the similar period ended June 30, 2008. Interest expense of $64,713 for the six-month period ended June 30, 2009 decreased 64.3% from $181,350 for the similar period ended June 30, 2008. The decrease in the three and six-month periods ended June 30, 2009 is attributed to the reduction in outstanding borrowings in the current periods.

The Company’s effective tax rate for the three months ended June 30, 2009 was 31.3% versus 38.6% for the three months ended June 30, 2008. The Company’s effective tax rate for the six months ended June 30, 2009 was 37.7% versus 38.8% for the six months ended June 30, 2008. The decrease in the three month rates are attributed primarily to a benefit for untaxed foreign income (8.5%), an increased accrual for uncertain tax positions (1.0%) in the current period, and the increase from the impact of permanent differences between book and tax basis earnings (0.2%) as a result of share-based compensation and other items. The decrease in the six month rates are attributed primarily to a benefit for untaxed foreign income (8.5%), an increased accrual for uncertain tax positions (5.1%) in the current period and the increase from the impact of permanent differences between book and tax basis earnings related to share-based compensation (1.1%), and other items (1.2%).

Liquidity and Capital Resources

Accounts receivable and other current assets decreased 9.0% from $20,054,629 on December 31, 2008 to $18,246,222 as of June 30, 2009 primarily as a result of the significant reduction in net sales.

Inventories decreased 18.7% from $43,410,146 on December 31, 2008 to $35,282,883 as of June 30, 2009 as a result of inventory reduction measures implemented by management in anticipation of the lower expected net sales.

Accounts payable increased 2.3% from $4,626,789 on December 31, 2008 to $4,730,988 on June 30, 2009. This increase is inconsistent with the significant reduction in inventories discussed above due to the fact that the Company pays for a significant portion of its inventory purchases at the time the goods are shipped from its suppliers. As a result, a large portion of these purchases are never reflected in accounts payable balances.

Other current liabilities decreased 7.0% from $2,518,956 on December 31, 2008 to $2,342,173 on June 30, 2009 primarily due to lower accruals for customer rebates due to lower sales volume.

Cash and cash equivalents increased by $5,500,998 from $133,152 on December 31, 2008 to $5,634,150 as of June 30, 2009. The Company generated $11,374,943 in cash from operating activities, and used $5,873,953 in financing activities. Financing activities included the payment of cash dividends as discussed below and net repayments of long-term debt of $4,029,604 and the reacquisition of the Company’s common stock of $213,668.

The Company has a $15,000,000 revolving credit facility with Wachovia Bank, which matures on June 30, 2010. At the option of the Company, any outstanding balance on the agreement at that date will convert to a one-year term loan. As of June 30, 2009, the Company had no outstanding balance on its revolving credit facility. The available balance under the credit facility is reduced, however, by its outstanding letters of credit. As of June 30, 2009, the Company had approximately $85,000 outstanding under letters of credit. Interest on the revolving credit facility is payable at LIBOR plus 0.60% based upon the one-month LIBOR rate for U.S. dollar based borrowings (1.51% at June 30, 2009). The Company pays an annual commitment fee of 0.15% on the average unused portion of the commitment. The Company is in full compliance with all terms, conditions and covenants of its revolving credit facility.

In the foreseeable future, the Company will continue its ongoing capital expenditure program designed to maintain and improve its facilities. The Company at all times evaluates its capital expenditure program in light of prevailing economic conditions.

During the six months ended June 30, 2009 and 2008, respectively, the Company paid cash dividends of $1,630,681 and $1,801,346. The Company reacquired 30,802 and 191,803 shares of its common stock at a total cost of $213,668 and $1,745,038 in the six-month periods ended June 30, 2009 and June 30, 2008, respectively. The Company anticipates that it will continue to pay dividends and that it will repurchase and retire additional shares of its common stock in the future as financial conditions permit.

 

16


The Company believes that its cash flow from operating activities together with other capital resources and funds from credit sources will be adequate to meet all of its funding requirements for the remainder of the year and for the foreseeable future.

 

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

Not applicable.

 

ITEM 4T. Controls and Procedures

The Principal Executive Officer, Michael Benstock, and the Principal Financial Officer, Andrew D. Demott, Jr., evaluated the effectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by this report (the “Evaluation Date”), and, based on such evaluation, concluded that, as of the Evaluation Date, the Company’s disclosure controls and procedures were effective to ensure that information the Company is required to disclose in its filings with the Securities and Exchange Commission under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms, and to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. There have been no changes in the Company’s internal control over financial reporting identified in connection with this evaluation that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II - OTHER INFORMATION

 

ITEM 1. Legal Proceedings

None.

 

ITEM 1A. Risk Factors

We are exposed to certain risks and uncertainties that could have a material adverse impact on our business, financial condition and operating results. There have been no material changes to the Risk Factors described in Part I, Item 1A-Risk Factors in our annual report on Form 10-K for the year ended December 31, 2008.

 

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds

ISSUER PURCHASES OF EQUITY SECURITIES

The table below sets forth the information with respect to purchases made by or on behalf of Superior Uniform Group, Inc. or any “affiliated purchaser” (as defined in Rule 10b-18(a)(3) under the Exchange Act), of our common shares during the three months ended June 30, 2009.

 

17


Period

   (a) Total Number
of Shares
Purchased
   (b) Average Price Paid
per Share
   (c) Total Number of
Shares Purchased as Part
of Publicly Announced
Plans or Programs
   (d) Maximum Number of
Shares that May Yet Be
Purchased Under the Plans
or Programs (1)

Month #1 (April 1, 2009 to April 30, 2009)

   7,790    $ 7.10    7,790   

Month #2 (May 1, 2009 to May 31, 2009)

   2,300    $ 7.39    2,300   

Month #3 (June 1, 2009 to June 30, 2009)

   2,260    $ 7.40    2,260   
                     

TOTAL

   12,350    $ 7.21    12,350    557,813
                     

 

(1) In July 2002, the Company’s Board of Directors authorized the Company to repurchase 750,000 shares of its common stock. Through May 4, 2006, the Company repurchased 728,098 shares of its common stock under such repurchase program. On May 5, 2006, the Company’s Board of Directors approved additional repurchases of 750,000 shares of the Company’s outstanding shares of common stock. Through July 31, 2008, the Company repurchased 625,881 shares of its common stock under such repurchase program. On August 1, 2008, the Company’s Board of Directors approved an increase to the outstanding authorization to allow for the repurchase of 1,000,000 additional shares of the Company’s outstanding shares of common stock. There is no expiration date or other restriction governing the period over which the Company can make share repurchases under the program. All such purchases were open market transactions.

Under our credit agreement with Wachovia, if an event of default exists, we may not make distributions to our shareholders. The Company is in full compliance with all terms, conditions and covenants of its credit agreement.

 

ITEM 3. Defaults Upon Senior Securities

Inapplicable.

 

ITEM 4. Submission of Matters to a Vote of Security-Holders

The Annual Meeting of Shareholders was held on May 1, 2009. Of the 6,047,260 shares outstanding and entitled to vote at the meeting, 4,934,212 shares were present at the meeting, in person or by proxy. At the meeting the shareholders:

a) Voted on the election of the nominated Directors – Messrs. G. M. Benstock, M. Benstock, A. D. Schwartz, M. Gaetan, PhD, S. Kirschner, R. Hensley, and P. Mellini. The votes on all directors nominated were as follows:

 

Nominee

   Votes For:    Votes Withheld:

Gerald M. Benstock

   4,452,234    481,978

Michael Benstock

   4,920,317    13,895

Alan D. Schwartz

   4,916,774    17,438

Manuel Gaetan

   4,922,115    12,097

Sidney Kirschner

   4,923,115    11,097

Robin Hensley

   4,921,299    12,912

Paul Mellini

   4,914,487    19,725

 

18


The tabulation of votes for the election of directors resulted in no broker non-votes.

b) Ratified the appointment of Grant Thornton LLP, independent certified public accountants, as auditors for the Company’s financial statements for the year ending December 31, 2009 with 4,926,944 votes for the motion, 5,248 votes against and 2,019 votes abstaining.

 

ITEM 5. Other Information

None.

 

ITEM 6. Exhibits

See Exhibit Index.

 

19


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

Date: July 24, 2009   SUPERIOR UNIFORM GROUP, INC.
  By  

/s/ Michael Benstock

    Michael Benstock
    Chief Executive Officer (Principal Executive Officer)
  By  

/s/ Andrew D. Demott, Jr.

    Andrew D. Demott, Jr.
   

Sr. Vice President, Chief Financial Officer and Treasurer

(Principal Financial and Accounting Officer)

 

20


EXHIBIT INDEX

 

Exhibit No.

 

Description

15

  Grant Thornton LLP Awareness Letter.

31.1

  Certification by the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2

  Certification by the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32

  Certification of Periodic Financial Report by the Chief Executive Officer and the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.