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Superior Uniform Group Inc Reports Operating Results (10-Q)

October 21, 2010 | About:
10qk

10qk

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Superior Uniform Group Inc (SGC) filed Quarterly Report for the period ended 2010-09-30.

Superior Uniform Group Inc has a market cap of $63.7 million; its shares were traded at around $10.8 with a P/E ratio of 19.2 and P/S ratio of 0.6. The dividend yield of Superior Uniform Group Inc stocks is 5%.SGC is in the portfolios of Jim Simons of Renaissance Technologies LLC.

Highlight of Business Operations:

The current economic environment in the United States remains very challenging. While we are seeing increased activity, the employment outlook in the United States remains soft. Additionally, voluntary employee turnover at our customers has remained very low. The lack of job growth coupled with less voluntary attrition continues to weigh on the demand for our uniforms and service apparel. As a result of these factors, offset by approximately $1,678,000 in net sales to customers acquired as a result of our acquisition of Blade Sportswear, Inc. in the fourth quarter of 2009, net sales decreased 1.1% from $27,605,000 for the three months ended September 30, 2009 to $27,301,000 for the three months ended September 30, 2010. Net sales increased 4.7% from $76,293,000 for the nine months ended September 30, 2009 to $79,910,000 for the nine months ended September 30, 2010. Net sales for the nine months ended September 30, 2010 included approximately $4,563,000 to customers acquired as a result of our acquisition of Blade in the fourth quarter of 2009.

Cost of goods sold, as a percentage of sales, approximated 63.6% for the three months ended September 30, 2010 compared to 67.5% for the three months ended September 30, 2009. Cost of goods sold, as a percentage of sales, approximated 64.6% for the nine months ended September 30, 2010 compared to 67.7% for the nine months ended September 30, 2009. The decrease as a percentage of sales in the three-month period is attributed to a reduction in direct product costs. The decrease as a percentage of sales in the nine-month period is primarily attributed to a reduction in direct product costs (3.1%) with the balance coming from more efficient operations in our value added services area.

Selling and administrative expenses, as a percentage of sales, approximated 29.1% and 26.2% respectively, for the three-month periods ended September 30, 2010 and 2009. Selling and administrative expenses, as a percentage of net sales, were approximately 29.9% and 29.6%, respectively, for the first nine months of 2010 and 2009. The increase as a percentage of sales in the three-month period is primarily attributed to higher salaries, wages and benefits as a percentage of net sales in the current period (3.0%). The increase as a percentage of sales in the nine-month period is primarily attributed to higher salaries, wages and benefits as a percentage of net sales in the current period (0.6%) which was offset by higher net sales to cover operating expenses.

The Companys effective tax rate for the three months ended September 30, 2010 was 30.8% versus 25.9% for the three months ended September 30, 2009. The 4.9% increase in such effective tax rate is attributed primarily to the following: an increase in the rate from the impact of permanent differences between book and tax basis earnings related to share-based compensation (1.5%), a reduction in the benefit for untaxed foreign income (3.0%), and the impact of other items (0.4%). The Companys effective tax rate for the nine months ended September 30, 2010 was 33.8% versus 27.8% for the nine months ended September 30, 2009. The 6.0% increase in such effective tax rate is attributed primarily to the following: a reduction in the benefit for untaxed foreign income (3.0%), an increase in the quarterly accrual for uncertain tax positions (1.7%), an increase in the rate from the impact of permanent differences between book and tax basis earnings related to share-based compensation (1.5%), and offset by the impact of other items (0.2%).

On June 25, 2010, the Company entered into a 3-year credit agreement with Fifth Third Bank that made available to the Company up to $15,000,000 on a revolving credit basis. Interest is payable at LIBOR plus 0.90% based upon the one-month LIBOR rate for U.S. dollar based borrowings (1.16% at September 30, 2010). 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 September 30, 2010, there were no balances outstanding under letters of credit. The revolving credit agreement expires on June 24, 2013. At the option of the Company, any outstanding balance on the agreement at that date will convert to a one-year term loan. On June 30, 2010, the Companys previous revolving credit agreement with Wachovia Bank expired.

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