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Superior Group of Companies, Inc. Reports Operating Results for the Second Quarter Ended June 30, 2022

·14 min read
Superior Group of Companies
Superior Group of Companies

– Total Sales Increased 13% Over Prior Year Quarter to $148 Million –
– Sales Growth in Branded Products of 29% and Contact Center Sales of 37% – 
– Healthcare Apparel Sales Were $26 Million Versus $37 Million Prior Year Quarter –
– Net Loss was ($26.7) Million Versus $6.4 Million Prior Year Quarter, Including One-time Non-cash After-tax Charges of $28 Million and $4.5 Million, respectively –

SEMINOLE, Fla., Aug. 08, 2022 (GLOBE NEWSWIRE) -- Superior Group of Companies, Inc. (NASDAQ: SGC) (the “Company”) today announced its second quarter operating results for 2022.

The Company announced that for the second quarter ended June 30, 2022, net sales increased 13.1% to $147.9 million, compared to second quarter 2021 net sales of $130.8 million. Pretax loss was ($29.0) million in the second quarter of 2022 compared to pretax income of $5.5 million in the second quarter of 2021. Net loss was ($26.7) million or ($1.70) per diluted share for the second quarter of 2022 compared to net income of $6.4 million, or $0.40 per diluted share for the second quarter of 2021.

In the second quarter of 2022, the Company recognized pre-tax, non-cash impairment charges related to goodwill of $24.5 million ($23.6 million net of tax, or $1.50 per diluted share) and tradenames of $5.6 million ($4.4 million net of tax, or $0.28 per diluted share). In the second quarter of 2021, the Company recognized a pre-tax, non-cash settlement charge related to the termination of its defined benefit pension plans of $6.9 million ($4.5 million net of tax, or $0.28 per diluted share).

On an adjusted basis, which excludes the above charges in 2022 and 2021, net income was $1.3 million or $0.08 per diluted share for the second quarter of 2022 compared to net income of $10.9 million, or $0.68 per diluted share for the second quarter of 2021. At the conclusion of this press release is a reconciliation of reported-to-adjusted results, including a description of the significant items.

During the second quarter, the Company began the transition of key leadership positions as previously communicated with the addition of Catherine Beldotti Donlan, President of Healthcare Apparel and Mike Koempel, Chief Financial Officer. The transition has been seamless with the support of Peter Benstock serving as a healthcare apparel advisor and Andy Demott, former Chief Financial Officer, continuing to serve as Chief Operating Officer. The Company also added management expertise in supply chain, distribution and division management to support its long-term growth objectives.

“In order to further position for growth, we re-aligned the Company along three business segments: Healthcare Apparel, Branded Products and Contact Centers,” said Michael Benstock, Chief Executive Officer of the Company. “This re-alignment enables a more singular focus on healthcare, the ability to capitalize on synergies across all branded product offerings and a continued focus on driving significant growth in our contact centers. Overall, while we were pleased with our revenue growth this quarter, we recognize the ever-evolving macro environment and emerging challenges of rising interest rates and historic levels of inflation. As a result, we are taking a disciplined and prudent approach to cash management and have begun to implement cost initiatives of at least $8 million in annualized savings, while still maintaining our focus on consistent sales growth.”

CONFERENCE CALL

Superior Group of Companies will hold a conference call later today, August 8, 2022 at 5:00 p.m. Eastern Time to discuss the Company’s results. Interested investors may join the teleconference by dialing (844) 861-5505 for U.S. dialers and (412) 317-6586 for International dialers. The Canadian Toll-Free number is (866) 605-3852. Please ask to be joined into the Superior Group of Companies call. The live webcast and archived replay can also be accessed in the investor information section of the Company’s website at https://ir.superiorgroupofcompanies.com/Presentations.

A telephone replay of the teleconference will be available one hour after the end of the call through 6:00 p.m. Eastern Time on August 22, 2022. To access the replay, dial (877) 344-7529 in the United States or (412) 317-0088 from international locations. Canadian dialers can access the replay at (855) 669-9658. Please reference conference number 7715703 for all replay access.

Disclosure Regarding Forward Looking Statements

Certain matters discussed in this press release 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 by use of the words "may," "will," "should," "could," "expect," "anticipate," "estimate," "believe," "intend," "project," "potential," or "plan" or the negative of these words or other variations on these words or comparable terminology. Forward-looking statements in this press release may include, without limitation: (1) the projected impact of the COVID-19 pandemic on our, our customers', and our suppliers' businesses, (2) projections of revenue, income, and other items relating to our financial position and results of operations, (3) statements of our plans, objectives, strategies, goals and intentions, (4) statements regarding the capabilities, capacities, market position and expected development of our business operations, and (5) statements of expected industry and general economic trends.

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: the impact of competition; the effect of uncertainties related to the COVID-19 pandemic, including existing and possible future variants, on the United States of America ("U.S." or "United States") and global markets, our business, operations, customers, suppliers and employees, including without limitation the length and scope of restrictions imposed by various governments and organizations and the success of efforts to deliver effective vaccines on a timely basis to a number of people sufficient to prevent or substantially lower the severity of incidents of infection or variants, among other factors; our ability to navigate successfully the challenges posed by current global supply disruptions; general economic conditions, including employment levels, in the areas of the United States in which the Company's customers are located; changes in the healthcare, retail, hotel, food service, transportation and other industries where uniforms and service apparel are worn; our ability to identify suitable acquisition targets, discover liabilities associated with such businesses during the diligence process, successfully integrate any acquired businesses, or successfully manage our expanding operations; the price and availability of cotton and other manufacturing materials; attracting and retaining senior management and key personnel; the effect of the Company's material weakness in internal control over financial reporting; the Company's ability to successfully remediate its material weakness in internal control over financial reporting and to maintain effective internal control over financial reporting; 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, 2021 and the Quarterly Report on Form 10-Q for the quarter ended March 31, 2022 and June 30, 2022. 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 press release and we disclaim any obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances, except as may be required by law.

About Superior Group of Companies, Inc. (SGC)

Superior Group of Companies™, established in 1920, is a combination of companies that help our customers unlock the power of their brands by creating extraordinary brand engagement experiences for their employees and customers. SGC’s commitment to service, technology, quality and value-added benefits, as well as our financial strength and resources, provides unparalleled support for our customers’ diverse needs while embracing a “Customer 1st, Every Time!” philosophy and culture in all of our business segments. Visit www.superiorgroupofcompanies.com for more information.

Contact:

Investor Relations
investors@superiorgroupofcompanies.com

Comparative figures are as follows:

SUPERIOR GROUP OF COMPANIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands, except share and per share data)

 

 

 

Three Months Ended June 30,

 

 

 

2022

 

 

2021

 

Net sales

 

$

147,933

 

 

$

130,787

 

 

 

 

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

 

 

 

Cost of goods sold

 

 

99,800

 

 

 

83,629

 

Selling and administrative expenses

 

 

45,969

 

 

 

33,906

 

Goodwill impairment charge

 

 

24,458

 

 

 

-

 

Intangible assets impairment charge

 

 

5,581

 

 

 

-

 

Other periodic pension costs

 

 

528

 

 

 

440

 

Pension plan termination charge

 

 

-

 

 

 

6,945

 

Interest expense

 

 

583

 

 

 

330

 

 

 

 

176,919

 

 

 

125,250

 

Income (loss) before taxes on income

 

 

(28,986

)

 

 

5,537

 

Income tax benefit

 

 

(2,311

)

 

 

(840

)

Net income (loss)

 

$

(26,675

)

 

$

6,377

 

 

 

 

 

 

 

 

 

 

Net income (loss) per share:

 

 

 

 

 

 

 

 

Basic

 

$

(1.70

)

 

$

0.41

 

Diluted

 

$

(1.70

)

 

$

0.40

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding during the period:

 

 

 

 

 

 

 

 

Basic

 

 

15,732,264

 

 

 

15,433,412

 

Diluted

 

 

15,732,264

 

 

 

16,087,736

 

 

 

 

 

 

 

 

 

 

Cash dividends per common share

 

$

0.14

 

 

$

0.12

 

 

 

 

 

 

 

 

 

 



SUPERIOR GROUP OF COMPANIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands, except share and per share data)

 

 

 

Six Months Ended June 30,

 

 

 

2022

 

 

2021

 

Net sales

 

$

291,515

 

 

$

271,634

 

 

 

 

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

 

 

 

Cost of goods sold

 

 

193,601

 

 

 

175,433

 

Selling and administrative expenses

 

 

88,183

 

 

 

69,017

 

Goodwill impairment charge

 

 

24,458

 

 

 

-

 

Intangible assets impairment charge

 

 

5,581

 

 

 

-

 

Other periodic pension costs

 

 

1,056

 

 

 

869

 

Pension plan termination charge

 

 

-

 

 

 

6,945

 

Interest expense

 

 

882

 

 

 

605

 

 

 

 

313,761

 

 

 

252,869

 

Income (loss) before taxes on income

 

 

(22,246

)

 

 

18,765

 

Income tax expense (benefit)

 

 

(801

)

 

 

1,910

 

Net income (loss)

 

$

(21,445

)

 

$

16,855

 

 

 

 

 

 

 

 

 

 

Net income (loss) per share:

 

 

 

 

 

 

 

 

Basic

 

$

(1.37

)

 

$

1.10

 

Diluted

 

$

(1.37

)

 

$

1.05

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding during the period:

 

 

 

 

 

 

 

 

Basic

 

 

15,705,646

 

 

 

15,327,374

 

Diluted

 

 

15,705,646

 

 

 

16,039,605

 

 

 

 

 

 

 

 

 

 

Cash dividends per common share

 

$

0.26

 

 

$

0.22

 

 

 

 

 

 

 

 

 

 


SUPERIOR GROUP OF COMPANIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and par value data)

 

 

 

June 30,

 

 

December 31,

 

 

 

2022

 

 

2021

 

 

 

 

(Unaudited)

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

10,305

 

 

$

8,935

 

Accounts receivable, less allowance for doubtful accounts of $7,248 and $6,393, respectively

 

 

110,375

 

 

 

107,053

 

Accounts receivable - other

 

 

4,217

 

 

 

5,546

 

Inventories

 

 

127,036

 

 

 

120,555

 

Contract assets

 

 

46,088

 

 

 

38,018

 

Prepaid expenses and other current assets

 

 

20,367

 

 

 

19,162

 

Total current assets

 

 

318,388

 

 

 

299,269

 

Property, plant and equipment, net

 

 

52,970

 

 

 

49,690

 

Operating lease right-of-use assets

 

 

9,513

 

 

 

8,246

 

Deferred tax asset

 

 

1,440

 

 

 

-

 

Intangible assets, net

 

 

58,429

 

 

 

60,420

 

Goodwill

 

 

21,587

 

 

 

39,434

 

Other assets

 

 

11,353

 

 

 

13,186

 

Total assets

 

$

473,680

 

 

$

470,245

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

48,569

 

 

$

52,340

 

Other current liabilities

 

 

40,630

 

 

 

38,989

 

Current portion of long-term debt

 

 

15,286

 

 

 

15,286

 

Current portion of acquisition-related contingent liabilities

 

 

1,304

 

 

 

4,507

 

Total current liabilities

 

 

105,789

 

 

 

111,122

 

Long-term debt

 

 

133,407

 

 

 

100,845

 

Long-term pension liability

 

 

15,679

 

 

 

15,420

 

Long-term acquisition-related contingent liabilities

 

 

2,754

 

 

 

2,569

 

Long-term operating lease liabilities

 

 

4,495

 

 

 

3,729

 

Deferred tax liability

 

 

-

 

 

 

359

 

Other long-term liabilities

 

 

8,411

 

 

 

9,211

 

Commitments and contingencies (Note 6)

 

 

 

 

 

 

 

 

Shareholders’ equity:

 

 

 

 

 

 

 

 

Preferred stock, $.001 par value - authorized 300,000 shares (none issued)

 

 

-

 

 

 

-

 

Common stock, $.001 par value - authorized 50,000,000 shares, issued and outstanding 16,318,059 and 16,127,505 shares, respectively

 

 

16

 

 

 

16

 

Additional paid-in capital

 

 

70,629

 

 

 

69,351

 

Retained earnings

 

 

137,986

 

 

 

163,836

 

Accumulated other comprehensive income (loss), net of tax:

 

 

 

 

 

 

 

 

Pensions

 

 

(3,939

)

 

 

(4,577

)

Cash flow hedges

 

 

37

 

 

 

47

 

Foreign currency translation adjustment

 

 

(1,584

)

 

 

(1,683

)

Total shareholders’ equity

 

 

203,145

 

 

 

226,990

 

Total liabilities and shareholders’ equity

 

$

473,680

 

 

$

470,245

 

 

 

 

 

 

 

 

 

 


SUPERIOR GROUP OF COMPANIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

 

 

 

Six Months Ended June 30,

 

 

 

2022

 

 

2021

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

 

 

Net income (loss)

 

$

(21,445

)

 

$

16,855

 

Adjustments to reconcile net income (loss) to net cash used in operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

6,103

 

 

 

4,373

 

Goodwill impairment charge

 

 

24,458

 

 

 

-

 

Intangible assets impairment charge

 

 

5,581

 

 

 

-

 

Inventory write-downs

 

 

4,795

 

 

 

924

 

Provision for bad debts - accounts receivable

 

 

1,282

 

 

 

1,244

 

Share-based compensation expense

 

 

2,454

 

 

 

1,669

 

Deferred income tax benefit

 

 

(2,018

)

 

 

(2,926

)

Change in fair value of acquisition-related contingent liabilities

 

 

626

 

 

 

1,741

 

Pension plan termination charge

 

 

-

 

 

 

6,945

 

Changes in assets and liabilities, net of acquisition of businesses:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(3,025

)

 

 

(896

)

Accounts receivable - other

 

 

458

 

 

 

(1,392

)

Contract assets

 

 

(8,176

)

 

 

(1,868

)

Inventories

 

 

(9,377

)

 

 

(9,662

)

Prepaid expenses and other current assets

 

 

(925

)

 

 

(2,565

)

Other assets

 

 

1,812

 

 

 

(1,401

)

Accounts payable and other current liabilities

 

 

(7,325

)

 

 

(14,535

)

Payment of acquisition-related contingent liabilities

 

 

(3,346

)

 

 

(4,220

)

Long-term pension liability

 

 

1,116

 

 

 

384

 

Other long-term liabilities

 

 

(693

)

 

 

2,320

 

Net cash used in operating activities

 

 

(7,645

)

 

 

(3,010

)

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

 

 

 

Additions to property, plant and equipment

 

 

(7,039

)

 

 

(11,326

)

Acquisition of businesses

 

 

(11,202

)

 

 

(6,026

)

Net cash used in investing activities

 

 

(18,241

)

 

 

(17,352

)

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

Proceeds from borrowings of debt

 

 

117,790

 

 

 

127,574

 

Repayment of debt

 

 

(85,299

)

 

 

(101,801

)

Payment of cash dividends

 

 

(4,171

)

 

 

(3,437

)

Payment of acquisition-related contingent liabilities

 

 

(1,416

)

 

 

(1,641

)

Proceeds received on exercise of stock options

 

 

495

 

 

 

2,122

 

Tax withholdings on vesting of restricted shares and performance based shares

 

 

(232

)

 

 

(405

)

Tax benefit from vesting of acquisition-related restricted stock

 

 

-

 

 

 

171

 

Net cash provided by financing activities

 

 

27,167

 

 

 

22,583

 

 

 

 

 

 

 

 

 

 

Effect of currency exchange rates on cash

 

 

89

 

 

 

137

 

Net increase in cash and cash equivalents

 

 

1,370

 

 

 

2,358

 

Cash and cash equivalents balance, beginning of period

 

 

8,935

 

 

 

5,172

 

Cash and cash equivalents balance, end of period

 

$

10,305

 

 

$

7,530

 

 

 

 

 

 

 

 

 

 


SUPERIOR GROUP OF COMPANIES, INC. AND SUBSIDIARIES

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES

(Unaudited)

(In thousands, except share and par value data)

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Net income (loss)

 

$

(26,675

)

 

$

6,377

 

 

$

(21,445

)

 

$

16,855

 

Adjustment for items:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Goodwill impairment charge

 

 

24,458

 

 

 

-

 

 

 

24,458

 

 

 

-

 

Intangible assets impairment charge

 

 

5,581

 

 

 

-

 

 

 

5,581

 

 

 

-

 

Pension plan termination charge

 

 

-

 

 

 

6,945

 

 

 

-

 

 

 

6,945

 

Tax impact of adjustment

 

 

(2,040

)

 

 

(2,410

)

 

 

(2,040

)

 

 

(2,410

)

Adjusted net income(1)

 

$

1,324

 

 

$

10,912

 

 

$

6,554

 

 

$

21,390

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted net income (loss) per share

 

$

(1.70

)

 

$

0.40

 

 

$

(1.37

)

 

$

1.05

 

Adjustment for items, after-tax, per diluted share

 

 

1.78

 

 

 

0.28

 

 

 

1.77

 

 

 

0.28

 

Diluted adjusted net income per share(1)

 

$

0.08

 

 

$

0.68

 

 

$

0.40

 

 

$

1.33

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding during the period:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted, as reported

 

 

15,732,264

 

 

 

16,087,736

 

 

 

15,705,646

 

 

 

16,039,605

 

Diluted, as adjusted(2)

 

 

16,223,433

 

 

 

16,087,736

 

 

 

16,194,351

 

 

 

16,039,605

 

(1) Adjusted net income and diluted adjusted net income per share, which are non-GAAP measures, are defined as net income and net income per share, excluding the impacts of impairment and pension plan termination charges. Management believes adjusted net income and diluted adjusted net income per share provides useful information to investors because it allows management, investors and others to evaluate and compare our operating results from period to period by removing the impact of impairment and pension plan termination charges that are not reflective of our core business.

(2) Diluted weighted average shares outstanding used to calculate diluted adjusted net income per share includes shares of common stock of 491,169 and 488,705 for the three and six months ended June 30, 2022, respectively. These shares were excluded from diluted weighted average shares outstanding used to calculate diluted net income (loss) per share, as the Company recognized a net loss their inclusion would have been antidilutive.