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

July 24, 2009 | About:
10qk

Superior Uniform Group Inc (SGC) filed Quarterly Report for the period ended 2009-06-30.

Superior Uniform Group manufactures and sells a wide range of uniforms corporate I.D. 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 well as corporate and resort embroidered sportswear. (Press Release) Superior Uniform Group Inc has a market cap of $47 million; its shares were traded at around $7.7684 with a P/E ratio of 64.7 and P/S ratio of 0.4. The dividend yield of Superior Uniform Group Inc stocks is 7%.

Highlight of Business 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.

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 Companys 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.

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 Companys 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 Companys 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%).

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.

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Rating: 3.2/5 (5 votes)

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