Notes to Consolidated Financial Statements
Years Ended December 31, 2012 and 2011
NOTE 1 – Summary of Significant Accounting Policies:
a) Business description
Superior Uniform Group
®
, through its Signature marketing brands
—
Fashion Seal
®
, Fashion Seal Healthcare
®
, Martin’s
®
, Worklon
®
, UniVogue
®
and
Blade
—
manufactures and sells a wide range of uniforms, image apparel and accessories, primarily in domestic markets. Superior specializes in managing comprehensive uniform programs, and is dedicated to servicing the Healthcare, Hospitality, Restaurant/Food Services, Retail Employee I.D., Governmental/Public Safety, Entertainment, Commercial, and Cleanroom markets. The Company also provides remote staffing solutions through its direct and indirect subsidiaries and its affiliates, The Office Gurus, Ltda., De C.V., The Office Gurus, LLC, The Office Gurus, Ltda., and The Office Gurus, Ltd.
b) Basis of presentation
The consolidated financial statements include the accounts of Superior Uniform Group, Inc. and its wholly owned direct subsidiaries, The Office Gurus, LLC, SUG Holding, Fashion Seal Corporation, and Superior Office Solutions, Inc.; The Office Gurus, LTDA, De C.V. and The Office Masters, LTDA, De C.V., each a subsidiary of Fashion Seal Corporation and Superior Office Solutions, Inc.; The Office Gurus, Ltda. and Scratt Kit S.R.L., each a wholly owned subsidiary of Superior Office Solutions, Inc.; Superior Sourcing, a wholly owned subsidiary of SUG Holding; and The Office Gurus, Ltd., an affiliated entity in the process of becoming a wholly owned indirect subsidiary of Superior Uniform Group, Inc. All of these entities are referred to collectively as “the Company”.
c) Cash and cash equivalents
The Company considers all highly liquid investments with an original maturity of three months or less at the time of purchase to be cash equivalents.
d) Revenue recognition and allowance for doubtful accounts
The Company recognizes revenue as products are shipped and title passes and as services are provided. The Company collects sales tax for various taxing authorities. It is the Company’s policy to record these amounts on a net basis. Therefore, these amounts are not included in net sales for the Company. A provision for estimated returns and allowances is recorded based upon historical experience and current allowance programs. Judgments and estimates are used in determining the collectability of accounts receivable. The Company analyzes specific accounts receivable and historical bad debt experience, customer credit worthiness, current economic trends and the age of outstanding balances when evaluating the adequacy of the allowance for doubtful accounts. Management judgments and estimates are used in connection with establishing the allowance in any accounting period. Changes in estimates are reflected in the period they become known. Charge-offs of accounts receivable are made once all collection efforts have been exhausted. 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.
e) Accounts receivable-other
The Company purchases raw materials and has them delivered to certain suppliers of the Company. The Company pays for the raw materials and then deducts the cost of these materials from payments to the suppliers at the time the related finished goods are invoiced to the Company by those suppliers.
f) Advertising expenses
The Company expenses advertising costs as incurred. Advertising costs for the years ended December 31, 2012 and 2011, respectively, were $51,000 and $84,000.
g) Cost of goods sold and shipping and handling fees and costs
Cost of goods sold consists primarily of direct costs of acquiring inventory, including cost of merchandise, inbound freight charges, purchasing and receiving costs, inspection costs, and warehousing costs for our Uniforms and Related Products segment. Cost of goods sold for our Remote Staffing Solutions segment includes salaries and payroll related benefits for agents. The Company includes shipping and handling fees billed to customers in net sales. Shipping and handling costs associated with out-bound freight are generally recorded in cost of goods sold. Other shipping and handling costs are included in selling and administrative expenses and totaled $5,458,000 and $5,721,000 for the years ended December 31, 2012 and 2011, respectively.
h) Inventories
Inventories are stated at the lower of cost (first-in, first-out method) or market value. Judgments and estimates are used in determining the likelihood that 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.
i) Property, plant and equipment
Property, plant and equipment are stated at cost, less accumulated depreciation and amortization. Major renewals and improvements are capitalized, while replacements, maintenance and repairs which do not improve or extend the life of the respective assets are expensed currently. Costs of assets sold or retired and the related accumulated depreciation and amortization are eliminated from accounts and the net gain or loss is reflected in the statement of earnings within selling and administrative expenses.
j) Other intangible assets
Other intangible assets consist of customer lists acquired in previous business acquisitions and a license agreement.
The breakdown of intangible assets as of December 31, 2012 and 2011 was as follows:
|
|
|
|
|
|
|
|
|
December 31, 2012
|
|
|
|
|
|
|
|
|
|
|
Cost
|
|
$
|
1,021,000
|
|
7 years
|
|
$
|
2,861,000
|
|
3.5 years
|
Accumulated amortization
|
|
|
(462,000
|
)
|
|
|
|
(1,635,000
|
)
|
|
Intangible asset impairment
|
|
|
-
|
|
|
|
|
(1,226,000
|
)
|
|
Net
|
|
$
|
559,000
|
|
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2011
|
|
|
|
|
|
|
|
|
|
|
Cost
|
|
$
|
1,021,000
|
|
7 years
|
|
$
|
2,861,000
|
|
3.5 years
|
Accumulated amortization
|
|
|
(316,000
|
)
|
|
|
|
(817,000
|
)
|
|
Net
|
|
$
|
705,000
|
|
|
|
$
|
2,044,000
|
|
|
Amortization expense for other intangible assets was $964,000 and $1,023,000 for the years ended December 31, 2012 and 2011, respectively. Amortization expense for other intangible assets is expected to be $146,000 for each of the years ending December 31, 2013, 2014, and 2015; and $121,000 in 2016. The Company recognized a pre-tax, non-cash impairment charge of $1,226,000 in the fourth quarter of 2012 to write off the remaining balance of the licensing agreement. This impairment charge is included in the results of our Uniforms and Related Products segment. Refer to Note 6.
k) Depreciation and amortization
Plant and equipment are depreciated on the straight-line basis at 2.5% to 5% for buildings, 2.5% to 20% for improvements, 10% to 33.33% for machinery, equipment and fixtures and 20% to 33.33% for transportation equipment. Leasehold improvements are amortized over the terms of the leases inasmuch as such improvements have useful lives of at least the terms of the respective leases.
l) Employee benefits
Pension plan costs are funded currently based on actuarial estimates, with prior service costs amortized over 20 years. 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.
m) Insurance
The Company self-insures for certain obligations related to employee health 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.
n) Taxes on income
Income taxes are provided for under the liability method, whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carryforwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. The calculation of the Company’s tax liabilities also involves dealing with uncertainties in the application of complex tax regulations. The Company recognizes liabilities for uncertain income tax positions based on estimates of whether, and the extent to which, additional taxes will be required. The Company also reports interest and penalties related to uncertain income tax positions as income taxes. Refer to Note 8.
o) Impairment of long-lived assets
Long-lived assets, such as property and equipment, and purchased intangibles subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of the asset is measured by comparison of its carrying amount to future net cash flows the asset is expected to generate. If such assets are considered to be impaired, the impairment to be recognized is measured as the amount by which the carrying amount of the asset exceeds its fair value. The Company recognized an impairment loss of $1,226,000 related to an intangible asset in the year ended 2012. Refer to Note 6. There was no impairment of long-lived assets for the year ended December 31, 2011.
p) 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 December 31, 2012, the Company had 1,284,675 shares of common stock authorized for awards of share-based compensation under its 2003 Incentive Stock and Awards Plan.
The Company recognizes share-based compensation expense for all awards granted to employees, which is based on the fair value of the award on the date of grant. Determining the appropriate fair value model and calculating the fair value of stock compensation awards requires the input of certain highly complex and subjective assumptions, including the expected life of the stock compensation awards and the Company’s common stock price volatility. The assumptions used in calculating the fair value of stock compensation awards represent management’s best estimates, but these estimates involve inherent uncertainties and the application of judgment. As a result, if factors change and the Company deems it necessary to use different assumptions, stock compensation expense could be materially different from what has been recorded in the current period.
q) 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-settled stock appreciation rights.
r) Comprehensive income
Other comprehensive income (loss) is defined as the change in equity during a period, from transactions and other events, excluding changes resulting from investments by owners (e.g., supplemental stock offering) and distributions to owners (e.g., dividends).
s) Operating segments
FASB establishes standards for the way that public companies report information about operating segments in annual financial statements and establishes standards for related disclosures about product and services, geographic areas and major customers. The Company has reviewed the standard and determined that it has two reportable segments, Uniforms and Related Products and Remote Staffing Solutions.
t) Risks and concentrations
Financial instruments that potentially subject the Company to concentrations of credit risk include cash in banks in excess of federally insured amounts. The Company manages this risk by maintaining all deposits in high quality financial institutions and periodically performing evaluations of the relative credit standing of the financial institutions. When assessing credit risk the Company considers whether the credit risk exists at both the individual and group level. Consideration is given to the activity, region and economic characteristics when assessing if there exists a group concentration risk. At December 31, 2012 the Company had no customers with an accounts receivable balance greater than 10% of the total accounts receivable. At December 31, 2011 the Company had one customer with an accounts receivable balance greater than 10% of the total accounts receivable. This customer owed approximately $2,369,000 or approximately 14.9% of the total accounts receivable balance. At December 31, 2012 and 2011 the accounts receivable balances for the Company’s five largest customers totaled $4,930,000 and $5,800,000, respectively or approximately 29.6% and 36.4% of the respective total accounts receivable balances. The Company’s largest customer for each of the years ended December 31, 2012 and 2011 had net sales of approximately $8,412,000 and $6,963,000, respectively, or approximately 7.0% and 6.2% of the respective total net sales for the Company. The Company’s five largest customers for the year ended December 31, 2012 and 2011 had net sales of approximately $31,961,000 and $25,987,000, respectively, or approximately 26.7% and 23.1% of the respective total net sales for the Company.
Included in accounts receivable-other on the Company’s consolidated balance sheets at December 31, 2012 and 2011 are receivable balances from a supplier in Haiti totaling $2,966,000 and $3,722,000, respectively.
In 2012 and 2011, approximately 48% and 52%, respectively, of the Company’s products were obtained from suppliers located in Central America. Any inability by the Company to continue to obtain its products from Central America could significantly disrupt the Company’s business. Because the Company manufactures and sources products in Central America, the Company is affected by economic conditions in those countries, including increased duties, possible employee turnover, labor unrest and lack of developed infrastructure.
u) Fair value of financial instruments
The carrying amounts of cash and cash equivalents, receivables and accounts payable approximated fair value as of December 31, 2012 and 2011, because of the relatively short maturities of these instruments.
v) 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 materially from those estimates.
w) Recent Accounting Pronouncements
In June 2011, the FASB issued ASU 2011-05,
Comprehensive Income (Topic 220): Presentation of Comprehensive Income
(“ASU 2011-05”). ASU 2011-05 requires companies to present the components of net income and other comprehensive income either as one continuous statement or as two consecutive statements. It eliminates the option to present components of other comprehensive income as part of the changes in stockholders’ equity. The standard does not change the items which must be reported in other comprehensive income, how such items are measured or when they must be reclassified to net income. ASU 2011-05 is effective for interim and annual periods beginning after December 15, 2011, with early adoption permitted. The adoption of ASU 2011-05 only impacts presentation and did not have any effect on the Company’s condensed consolidated financial statements or on its financial condition.
In December 2011, the FASB issued Accounting Standards Update No. 2011-12:
Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05
(“ASU 2011-12”). The Update defers the specific requirement to present items that are reclassified from accumulated other comprehensive income to net income separately with their respective components of net income and other comprehensive income. As part of this update, the FASB did not defer the requirement to report comprehensive income either in a single continuous statement or in two separate but consecutive financial statements. ASU 2011-12 is effective for annual periods beginning after December 15, 2011.
NOTE 2 - Allowance for Doubtful Accounts Receivable:
The activity in the allowance for doubtful accounts receivable was as follows:
|
|
2012
|
|
|
2011
|
|
Balance at the beginning of year
|
|
$
|
758,000
|
|
|
$
|
600,000
|
|
|
|
|
|
|
|
|
|
|
Provision for bad debts
|
|
|
74,000
|
|
|
|
239,000
|
|
|
|
|
|
|
|
|
|
|
Charge-offs
|
|
|
(125,000
|
)
|
|
|
(90,000
|
)
|
|
|
|
|
|
|
|
|
|
Recoveries
|
|
|
18,000
|
|
|
|
9,000
|
|
|
|
|
|
|
|
|
|
|
Balance at the end of year
|
|
$
|
725,000
|
|
|
$
|
758,000
|
|
NOTE 3 - Reserve for Sales Returns and Allowances:
The activity in the reserve for sales returns and allowances was as follows:
|
|
2012
|
|
|
2011
|
|
Balance at the beginning of year
|
|
$
|
272,000
|
|
|
$
|
218,000
|
|
|
|
|
|
|
|
|
|
|
Provision for returns and allowances
|
|
|
2,203,000
|
|
|
|
2,419,000
|
|
|
|
|
|
|
|
|
|
|
Actual returns and allowances paid to customers
|
|
|
(2,297,000
|
)
|
|
|
(2,365,000
|
)
|
|
|
|
|
|
|
|
|
|
Balance at the end of year
|
|
$
|
178,000
|
|
|
$
|
272,000
|
|
|
|
December 31,
|
|
|
|
2012
|
|
|
2011
|
|
Finished goods
|
|
$
|
27,382,000
|
|
|
$
|
29,030,000
|
|
Work in process
|
|
|
71,000
|
|
|
|
49,000
|
|
Raw materials
|
|
|
11,793,000
|
|
|
|
12,129,000
|
|
|
|
$
|
39,246,000
|
|
|
$
|
41,208,000
|
|
NOTE 5 - Property, Plant and Equipment:
|
|
December 31,
|
|
|
|
|
2012
|
|
|
|
2011
|
|
Land
|
|
$
|
1,790,000
|
|
|
$
|
1,561,000
|
|
Buildings, improvements and leaseholds
|
|
|
8,683,000
|
|
|
|
8,414,000
|
|
Machinery, equipment and fixtures
|
|
|
47,007,000
|
|
|
|
46,202,000
|
|
|
|
|
57,480,000
|
|
|
|
56,177,000
|
|
Accumulated depreciation and amortization
|
|
|
(48,757,000
|
)
|
|
|
(47,765,000
|
)
|
|
|
$
|
8,723,000
|
|
|
$
|
8,412,000
|
|
Depreciation and amortization charges were approximately $1,336,000 and $1,959,000 in 2012 and 2011, respectively.
NOTE 6 – License Agreement:
On January 4, 2011 , the Company entered into a License and Distribution Agreement, as amended, (the “License Agreement”) with EyeLevel Interactive, LLC, which has since been assigned by EyeLevel Interactive, LLC to an affiliate of it named EyeLevel Interactive North America, LLC (“Licensor”), a leading technology company, pursuant to which the Company was granted a license to market, promote, sell and distribute garments utilizing certain intellectual property of Licensor (the “Products”) to the Company’s current and potential clients. The License Agreement expires three years and 180 days following the Effective Date (the “Term”). The Company may renew the License Agreement for additional three year terms by giving written notice to Licensor at least 90 days prior to the expiration of the then current term, provided the Company has met certain sales requirements relating to the Products and is not otherwise in default under the License Agreement or any manufacturing agreement with Licensor. Any renewal of the License Agreement will be on Licensor’s then current form, provided that the license fee, the restrictive covenants and certain other provisions of the License Agreement will be incorporated into the new form of agreement. The License Fee shall be payable on the first day of the renewal term.
In conjunction with the execution of the License Agreement, the Company paid Licensor a license fee (the “License Fee”) equal to (1) $2.0 million cash, plus (2) a warrant to acquire 360,000 shares of the Company’s common stock (the “Warrant”) at the greater of the Company’s closing price as quoted on the Nasdaq Stock Market or the book value per share of the Company’s common stock as of the Effective Date. This Warrant was exercisable until January 4, 2016, and had an exercise price of $10.63 per share. On March 6, 2012, Licensor exercised its warrant and acquired 44,912 shares of the Company’s stock in exchange for the surrender of the remainder of the warrant. In the event the Company achieves a specified level of Gross Sales (as calculated pursuant to the License Agreement), during the initial Term, from the sale of Products, the Company will be required to pay Licensor an additional cash license fee. If the Company does not attain such level of Gross Sales during the initial Term, the Company may terminate the License Agreement. In addition to the License Fee, the Company shall pay Licensor a monthly royalty fee based upon Gross Sales from the sale of Products for the immediately preceding month of operation, subject to a minimum required payment if the License Agreement is not terminated prior to the end of the then current term.
Although we believe that this new product line provides us with an opportunity for significant growth in our Uniforms and Related Products segment in the future, we have not been able to generate any significant revenues from the product line during the last two years. We have attempted to negotiate an extension of the initial term of the licensing agreement and are continuing to pursue this extension. However, we have not been successful to this point and cannot be assured that we will ultimately be able to negotiate an extension on reasonable terms. Additionally, we have been involved in two significant test programs with two separate customers during 2012. One of these programs was with a major retailer in the northeast in the fourth quarter. The test was adversely affected by hurricane Sandy, and as a result, the customer determined that it did not have sufficient data to conclude on moving forward with a full program. We are in the process of developing another test program with this customer in 2013. Additionally, while the feedback from the other test program has been positive, the customer has been slow to move to a full revenue producing program at this point. As a result of these items and the lack of an extension of the initial term at this point, we concluded that we did not have adequate, verifiable cash flows to support recovery of the intangible asset on our statement of financial position at December 31, 2012. Therefore, we recorded a pre-tax, non-cash impairment charge of $1,226,000 in the fourth quarter of 2012 to write off the remaining balance of the licensing agreement.
|
|
|
|
|
|
|
Note payable to Fifth Third Bank, pursuant
to revolving credit agreement, maturing June 24, 2013
|
|
$
|
-
|
|
|
$
|
640,000
|
|
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 (rounded up to the next 1/8
th
of 1%) plus 0.90% based upon the one-month LIBOR rate for U.S. dollar based borrowings (1.15% at December 31, 2012). 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 December 31, 2012, 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.
The credit agreement with Fifth Third Bank contains restrictive provisions concerning liabilities to tangible net worth ratios (.75:1), other borrowings, and fixed charges coverage ratio (2.5:1). The Company is in full compliance with all terms, conditions and covenants of the credit agreement.
NOTE 8 – Taxes on Income:
Aggregate income tax provisions consist of the following:
|
|
2012
|
|
|
2011
|
|
Current:
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
1,508,000
|
|
|
$
|
1,594,000
|
|
State and local
|
|
|
213,000
|
|
|
|
173,000
|
|
|
|
|
1,721,000
|
|
|
|
1,767,000
|
|
Deferred tax benefit
|
|
|
(131,000
|
)
|
|
|
(317,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,590,000
|
|
|
$
|
1,450,000
|
|
The significant components of the deferred income tax asset (liability) are as follows:
|
|
2012
|
|
|
2011
|
|
Deferred income tax assets:
|
|
|
|
|
|
|
|
|
Pension accruals
|
|
$
|
4,300,000
|
|
|
$
|
3,751,000
|
|
Operating reserves and other accruals
|
|
|
1,385,000
|
|
|
|
1,190,000
|
|
Tax carrying value in excess of book basis of goodwill
|
|
|
323,000
|
|
|
|
506,000
|
|
Deferred income tax liabilities:
|
|
|
|
|
|
|
|
|
Book carrying value in excess of tax basis of property
|
|
|
(549,000
|
)
|
|
|
(703,000
|
)
|
Deferred expenses
|
|
|
(1,324,000
|
)
|
|
|
(1,289,000
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred income tax asset
|
|
$
|
4,135,000
|
|
|
$
|
3,455,000
|
|
The difference between the total statutory Federal income tax rate and the actual effective income tax rate is
accounted for as follows:
|
|
2012
|
|
|
2011
|
|
|
|
|
|
|
|
|
|
|
Statutory Federal income tax rate
|
|
|
34.0
|
%
|
|
|
34.0
|
%
|
State and local income taxes, net of Federal income tax benefit
|
|
|
3.0
|
|
|
|
2.0
|
|
Effect of change in unrecognized tax benefit
|
|
|
(1.1
|
)
|
|
|
(1.3
|
)
|
Untaxed foreign income
|
|
|
(9.1
|
)
|
|
|
(11.9
|
)
|
Non-deductible share-based employee compensation expense
|
|
|
4.6
|
|
|
|
3.6
|
|
Non-deductible portion of intangible asset impairment
|
|
|
1.8
|
|
|
|
-
|
|
Other items
|
|
|
1.2
|
|
|
|
(0.4
|
)
|
Effective income tax rate
|
|
|
34.4
|
%
|
|
|
26.0
|
%
|
Only tax positions that meet the more-likely-than-not recognition threshold are recognized in the consolidated financial statements.
As of December 31, 2012 and 2011, respectively, we have $736,000 and $735,000 of unrecognized tax benefits, all of which, if recognized, would favorably affect the annual effective income tax rate. We do not expect any significant amount
of this liability to be paid in the next twelve months. Accordingly, the balance of $736,000 is included in other long-term liabilities.
Changes in the Company’s gross liability for unrecognized tax benefits, excluding interest and penalties, were as follows:
|
|
2012
|
|
|
2011
|
|
Balance at January 1,
|
|
$
|
582,000
|
|
|
$
|
586,000
|
|
Additions based on tax positions related to the current year
|
|
|
68,000
|
|
|
|
79,000
|
|
Reduction for tax positions of prior years
|
|
|
(10,000
|
)
|
|
|
-
|
|
Reductions due to lapse of statute of limitations
|
|
|
(75,000
|
)
|
|
|
(83,000
|
)
|
Balance at December 31,
|
|
$
|
565,000
|
|
|
$
|
582,000
|
|
We recognize interest and penalties accrued related to unrecognized tax benefits in the provision for income taxes. During 2012 and 2011, we recorded $46,000 and $41,000 respectively, for interest and penalties, net of tax benefits. During 2012 and 2011, we reduced the liability by $29,000 and $44,000, respectively, of interest and penalties due to lapse of statute of limitations. At December 31, 2012 and 2011, we had $171,000 and $153,000, respectively, accrued for interest and penalties, net of tax benefit.
We anticipate that it is reasonably possible that the total amount of unrecognized tax benefits could decrease by approximately $53,000 within the next 12 months due to the closure of tax years by expiration of the statute of limitations and audit settlements related to various state tax filing positions. The earliest year open to federal examinations is 2009 and significant state examination is 2002.
We have not provided deferred taxes on undistributed earnings attributable to foreign operations that have been considered to be reinvested indefinitely. These earnings relate to ongoing operations and were $5,578,000 and $4,141,000 at December 31, 2012 and 2011, respectively. It is not practical to determine the income tax liability that would be payable if such earnings were not indefinitely reinvested.
NOTE 9 – Benefit Plans:
Defined Benefit Plans
The Company is the sponsor of two noncontributory qualified defined benefit pension plans, providing for normal retirement at age 65, covering all eligible employees (as defined). Periodic benefit payments on retirement are determined based on a fixed amount applied to service or determined as a percentage of earnings prior to retirement. The Company is also the sponsor of an unfunded supplemental executive retirement plan (SERP) in which several of its employees are participants. Pension plan assets for retirement benefits consist primarily of fixed income securities and common stock equities.
The Company recognizes the funded status of its defined benefit post retirement plans in the Company’s consolidated balance sheets.
At December 31, 2012, the Company’s projected benefit obligation under its pension plans exceeded the fair value of the plans’ assets by $10,468,000 and thus the plans are underfunded.
It is our policy to make contributions to the various plans in accordance with statutory funding requirements and any additional funding that may be deemed appropriate.
The following tables present the changes in the benefit obligations and the various plan assets, the funded status of the plans, and the amounts recognized in the Company's consolidated balance sheets
at December 31, 2012 and 2011:
|
|
December 31,
|
|
|
|
2012
|
|
|
2011
|
|
|
|
|
|
|
|
|
|
|
Changes in benefit obligation
|
|
|
|
|
|
|
|
|
Benefit obligation at beginning of year
|
|
$
|
23,897,000
|
|
|
$
|
20,277,000
|
|
Service cost
|
|
|
595,000
|
|
|
|
559,000
|
|
Interest cost
|
|
|
1,023,000
|
|
|
|
1,092,000
|
|
Actuarial loss
|
|
|
3,469,000
|
|
|
|
3,215,000
|
|
Benefits paid
|
|
|
(1,165,000
|
)
|
|
|
(1,246,000
|
)
|
Benefit obligation at end of year
|
|
|
27,819,000
|
|
|
|
23,897,000
|
|
|
|
|
|
|
|
|
|
|
Changes in plan assets
|
|
|
|
|
|
|
|
|
Fair value of plan assets at beginning of year
|
|
|
15,811,000
|
|
|
|
16,742,000
|
|
Actual return on assets
|
|
|
2,155,000
|
|
|
|
(235,000
|
)
|
Employer contributions
|
|
|
550,000
|
|
|
|
550,000
|
|
Benefits paid
|
|
|
(1,165,000
|
)
|
|
|
(1,246,000
|
)
|
Fair value of plan assets at end of year
|
|
|
17,351,000
|
|
|
|
15,811,000
|
|
|
|
|
|
|
|
|
|
|
Funded status at end of year
|
|
$
|
(10,468,000
|
)
|
|
$
|
(8,086,000
|
)
|
|
|
|
|
|
|
|
|
|
Amounts recognized in consolidated balance sheet
|
|
|
|
|
|
|
|
|
Long-term pension liability
|
|
$
|
(10,468,000
|
)
|
|
$
|
(8,086,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts recognized in accumulated other comprehensive
|
|
|
|
|
|
|
|
|
income consist of:
|
|
|
|
|
|
|
|
|
Net actuarial loss
|
|
$
|
12,223,000
|
|
|
$
|
10,597,000
|
|
Prior service cost
|
|
|
13,000
|
|
|
|
30,000
|
|
|
|
$
|
12,236,000
|
|
|
$
|
10,627,000
|
|
Information for pension plans with projected
benefit obligation in excess of plan assets
|
|
December 31,
|
|
|
|
|
2012
|
|
|
|
2011
|
|
Projected benefit obligation
|
|
$
|
27,819,000
|
|
|
$
|
23,897,000
|
|
Fair value of plan assets
|
|
|
(17,351,000
|
)
|
|
|
(15,811,000
|
)
|
|
|
$
|
10,468,000
|
|
|
$
|
8,086,000
|
|
Components of net periodic benefit cost
Net periodic benefits cost
|
|
|
2012
|
|
|
|
2011
|
|
Service cost - benefits earned during the period
|
|
$
|
595,000
|
|
|
$
|
559,000
|
|
Interest cost on projected benefit obligation
|
|
|
1,023,000
|
|
|
|
1,092,000
|
|
Expected return on plan assets
|
|
|
(1,270,000
|
)
|
|
|
(1,347,000
|
)
|
Amortization of prior service cost
|
|
|
17,000
|
|
|
|
25,000
|
|
Recognized actuarial loss
|
|
|
957,000
|
|
|
|
479,000
|
|
Net periodic pension cost after settlements
|
|
$
|
1,322,000
|
|
|
$
|
808,000
|
|
The estimated net actuarial loss and prior service cost for the defined benefit pension plans that will be amortized from accumulated other comprehensive income into net periodic benefit cost over the next fiscal year are $1,146,000 and $13,000, respectively.
The table below presents various assumptions used in determining the benefit obligation for each year and reflects the percentages for the various plans.
Weighted-average assumptions used to determine benefit obligations at December 31,
|
|
Discount Rate
|
|
|
|
|
|
Salary Scale
|
|
|
|
Corp.
|
|
|
Plants
|
|
|
Corp.
|
|
|
Plants
|
|
|
Corp.
|
|
|
Plants
|
|
2011
|
|
|
4.35
|
%
|
|
|
4.23
|
%
|
|
|
8.00
|
%
|
|
|
8.00
|
%
|
|
|
3.50
|
%
|
|
|
N/A
|
|
2012
|
|
|
3.93
|
%
|
|
|
3.77
|
%
|
|
|
8.00
|
%
|
|
|
8.00
|
%
|
|
|
3.00
|
%
|
|
|
N/A
|
|
Weighted-average assumptions used to determine net periodic benefit cost for years ending December 31,
|
|
|
|
|
Long Term Rate
of Return
|
|
|
Salary Scale
|
|
|
|
Corp.
|
|
|
Plants
|
|
|
Corp.
|
|
|
Plants
|
|
|
Corp.
|
|
|
Plants
|
|
2011
|
|
|
5.49
|
%
|
|
|
5.28
|
%
|
|
|
8.00
|
%
|
|
|
8.00
|
%
|
|
|
4.50
|
%
|
|
|
N/A
|
|
2012
|
|
|
4.35
|
%
|
|
|
4.23
|
%
|
|
|
8.00
|
%
|
|
|
8.00
|
%
|
|
|
3.50
|
%
|
|
|
N/A
|
|
The methodology used to determine the expected rate of return on the pension plan assets was based on a review of actual returns in the past and consideration of projected returns based upon our projected asset allocation. Our strategy with respect to our investments in pension plan assets is to be invested with a long-term outlook. Therefore, the risk and return balance of our asset portfolio should reflect a long-term horizon. Our pension plan asset allocation at December 31, 2011, 2012 and target allocation for 2013 are as follows:
|
|
Percentage of Plan
Assets at
December 31,
|
|
|
Target
Allocation
|
|
Investment description
|
|
2012
|
|
|
2011
|
|
|
2013
|
|
Equity securities
|
|
|
73
|
%
|
|
|
66
|
%
|
|
|
70
|
%
|
Fixed income
|
|
|
22
|
%
|
|
|
31
|
%
|
|
|
25
|
%
|
Other
|
|
|
5
|
%
|
|
|
3
|
%
|
|
|
5
|
%
|
Total
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
The Company plans to contribute $1,000,000 to our defined benefit pension plans in 2013.
The following table includes projected benefit payments for the years indicated:
Year
|
|
Projected Benefit Payments
|
2013
|
|
|
$2,063,000
|
|
2014
|
|
|
$1,395,000
|
|
2015
|
|
|
$1,370,000
|
|
2016
|
|
|
$3,705,000
|
|
2017
|
|
|
$2,381,000
|
|
2018-2022
|
|
|
$10,535,000
|
|
Defined Contribution Plan
The Company provides a defined contribution plan covering qualified employees. The plan includes a provision that allows employees to make pre-tax contributions under Section 401(k) of the Internal Revenue Code. The plan provides for the Company to make a guaranteed match equal to 25% of each employee’s eligible contributions. The plan also provides the Company with the option of making an additional discretionary contribution to the plan each year. The Company contributions for the years ended December 31, 2012 and 2011 were approximately $120,000 and $112,000, respectively.
NOTE 10 – Quarterly Results for 2011 and 2012 (Unaudited):
|
|
|
Quarter Ended
|
|
|
|
|
March 31,
2011
|
|
|
June 30,
2011
|
|
|
September 30,
2011
|
|
|
|
|
Net sales
|
|
|
$
|
26,899,000
|
|
|
$
|
27,505,000
|
|
|
$
|
30,731,000
|
|
|
$
|
27,238,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
$
|
9,851,000
|
|
|
$
|
9,928,000
|
|
|
$
|
11,196,000
|
|
|
$
|
9,284,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before taxes on income
|
|
$
|
939,000
|
|
|
$
|
1,432,000
|
|
|
$
|
2,600,000
|
|
|
$
|
615,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
599,000
|
|
|
$
|
932,000
|
|
|
$
|
1,880,000
|
|
|
$
|
725,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per Share Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
0.10
|
|
|
$
|
0.16
|
|
|
$
|
0.31
|
|
|
$
|
0.12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
0.10
|
|
|
$
|
0.15
|
|
|
$
|
0.31
|
|
|
$
|
0.12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Outstanding Shares (Basic)
|
|
|
5,978,828
|
|
|
|
5,995,147
|
|
|
|
5,986,676
|
|
|
|
5,987,598
|
|
Average Outstanding Shares (Diluted)
|
|
|
6,070,970
|
|
|
|
6,092,118
|
|
|
|
6,079,430
|
|
|
|
6,137,137
|
|
|
|
|
Quarter Ended
|
|
|
|
|
March 31,
2012
|
|
|
June 30,
2012
|
|
|
September 30,
2012
|
|
|
December 31,
2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
|
$
|
28,508,000
|
|
|
$
|
29,335,000
|
|
|
$
|
30,599,000
|
|
|
$
|
31,044,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
$
|
9,462,000
|
|
|
$
|
9,662,000
|
|
|
$
|
10,032,000
|
|
|
$
|
10,607,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before taxes on income
|
|
$
|
537,000
|
|
|
$
|
1,567,000
|
|
|
$
|
1,692,000
|
|
|
$
|
825,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
327,000
|
|
|
$
|
977,000
|
|
|
$
|
1,242,000
|
|
|
$
|
485,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per Share Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
0.05
|
|
|
$
|
0.16
|
|
|
$
|
0.20
|
|
|
$
|
0.08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
0.05
|
|
|
$
|
0.16
|
|
|
$
|
0.20
|
|
|
$
|
0.08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Outstanding Shares (Basic)
|
|
|
6,025,874
|
|
|
|
6,066,244
|
|
|
|
6,063,269
|
|
|
|
6,091,377
|
|
Average Outstanding Shares (Diluted)
|
|
|
6,142,616
|
|
|
|
6,140,986
|
|
|
|
6,148,012
|
|
|
|
6,140,372
|
|
NOTE 11
– Rentals:
Aggregate rent expense, including month-to-month rentals, approximated $164,000 and $176,000 for the years ended December 31, 2012 and 2011, respectively. Long-term lease commitments totaling $104,000 are as follows: 2013 - $74,000; 2014 - $29,000; and 2015 - $1,000.
NOTE 12 – Contingencies:
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.
During 2005, the Company entered into severance protection agreements with senior management. The terms of these agreements require the Company to potentially make certain payments to members of senior management in the event of a change in control of the Company.
NOTE 13 – Share-Based Compensation:
In 1993, the Company adopted an Incentive Stock Option Plan (the “1993 Plan”) under which options on 1,500,000 shares were reserved for grant. The 1993 Plan provided for the issuance of incentive stock options. This plan expired in February of 2003. In May, 2003, the stockholders of the Company approved the 2003 Incentive Stock and Awards Plan (the “2003 Plan”), authorizing the granting of incentive stock options, non-qualified stock options, stock-settled stock appreciation rights (“SARS”), restricted stock, performance stock and other share-based compensation. A total of 2,500,000 shares of common stock (subject to adjustment for expirations and cancellations of options outstanding from the 1993 Plan subsequent to its termination) have been reserved for issuance under the 2003 Plan. All awards under both plans have been granted at prices at least equal to the fair market value of the shares on the date of grant. Awards (all of which are exercisable at each respective year end) granted to date under both plans are exercisable in part or in full within five years of grant date with the exception of annual grants to outside directors which are exercisable in part or in full within ten years of grant date. Proceeds from the exercise of awards are credited to common stock to the extent of par value, and the balance is credited to additional paid-in capital. A summary of option transactions during the two years ended December 31, 2012 follows:
|
|
|
|
|
Weighted Average
Exercise Price
|
|
Outstanding December 31, 2010
|
|
|
699,790
|
|
|
$
|
10.29
|
|
Granted
|
|
|
211,631
|
|
|
|
11.43
|
|
Exercised
|
|
|
(117,846
|
)
|
|
|
8.97
|
|
Lapsed
|
|
|
(93,025
|
)
|
|
|
11.65
|
|
Cancelled
|
|
|
(29,050
|
)
|
|
|
10.84
|
|
Outstanding December 31, 2011
|
|
|
671,500
|
|
|
$
|
10.66
|
|
Granted
|
|
|
194,223
|
|
|
|
12.62
|
|
Exercised
|
|
|
(138,252
|
)
|
|
|
9.32
|
|
Lapsed
|
|
|
(86,400
|
)
|
|
|
12.57
|
|
Cancelled
|
|
|
(26,154
|
)
|
|
|
12.37
|
|
Outstanding December 31, 2012
|
|
|
614,917
|
|
|
$
|
11.24
|
|
At December 31, 2012, options outstanding, all of which were fully vested and exercisable, had an intrinsic value of $444,000.
Options exercised during the years ended December 31, 2012 and 2011, had intrinsic values of $269,000 and $256,000, respectively.
The weighted average fair value of options granted for each of the years ended December 31, 2012 and 2011, was $3.38 and $2.97, respectively.
The following table summarizes information about stock options outstanding as of December 31, 2012:
|
|
Shares
|
|
|
Weighted Average Remaining
Contractual Life (Years)
|
|
|
Weighted Average
Exercise Price
|
|
$7.63
|
-
|
$9.80
|
|
|
198,882
|
|
|
|
2.72
|
|
|
$
|
9.38
|
|
$11.02
|
-
|
$13.15
|
|
|
403,535
|
|
|
|
4.01
|
|
|
$
|
12.01
|
|
$16.00
|
|
|
12,500
|
|
|
|
1.33
|
|
|
$
|
16.00
|
|
$7.63
|
-
|
$16.00
|
|
|
614,917
|
|
|
|
3.54
|
|
|
$
|
11.24
|
|
A summary of stock-settled stock appreciation rights transactions during the two years ended December 31, 2012
follows:
|
|
|
|
|
Weighted Average
Exercise Price
|
|
Outstanding December 31, 2010
|
|
|
207,380
|
|
|
$
|
11.30
|
|
Granted
|
|
|
127,144
|
|
|
|
11.24
|
|
Exercised
|
|
|
(2,100
|
)
|
|
|
9.16
|
|
Lapsed
|
|
|
(75,000
|
)
|
|
|
11.20
|
|
Cancelled
|
|
|
-
|
|
|
|
-
|
|
Outstanding December 31, 2011
|
|
|
257,424
|
|
|
$
|
11.32
|
|
Granted
|
|
|
65,752
|
|
|
|
13.15
|
|
Exercised
|
|
|
(134,304
|
)
|
|
|
11.67
|
|
Lapsed
|
|
|
-
|
|
|
|
-
|
|
Cancelled
|
|
|
(12,396
|
)
|
|
|
13.15
|
|
Outstanding December 31, 2012
|
|
|
176,476
|
|
|
$
|
11.60
|
|
At December 31, 2012 SARS outstanding, all of which were fully vested and exercisable, had an aggregate intrinsic value of $64,000.
There were 134,304 SARS exercised during the year ended December 31, 2012. SARS exercised during the year ended December 31, 2012 had an intrinsic value of $122,000. There were 2,100 SARS exercised during the year ended December 31, 2011. SARS exercised during the year ended December 31, 2011 had an intrinsic value of $5,000.
The weighted average fair value of SARS granted for each of the years ended December 31, 2012 and 2011 was $3.59 and $2.96, respectively.
The following table summarizes information about stock appreciation rights outstanding as of December 31, 2012:
|
|
SARS
|
|
|
Weighted Average Remaining
Contractual Life (Years)
|
|
|
Weighted Average
Exercise Price
|
|
$9.16
|
-
|
$9.80
|
|
|
26,184
|
|
|
|
2.08
|
|
|
|
$9.80
|
|
$11.24
|
-
|
$13.15
|
|
|
150,292
|
|
|
|
3.44
|
|
|
|
$11.92
|
|
$9.16
|
-
|
$13.15
|
|
|
176,476
|
|
|
|
3.24
|
|
|
|
$11.60
|
|
At December 31, options and SARS available to issue were 1,284,675 for 2012 and 1,419,700 for 2011. Options and SARS have never been repriced by the Company in any year.
The following table summarizes significant assumptions utilized to determine the fair value of share-based compensation awards:
|
SARS
|
|
Options
|
Exercise price
|
|
|
|
2012
|
$13.15
|
|
$11.72
|
-
|
$13.15
|
2011
|
$11.24
|
|
$11.10
|
-
|
$11.95
|
|
|
|
|
Market price
|
|
|
|
2012
|
$13.15
|
|
$11.72
|
-
|
$13.15
|
2011
|
$11.24
|
|
$11.10
|
-
|
$11.95
|
|
|
|
|
Risk free interest rate (1)
|
|
|
|
2012
|
0.8%
|
|
0.7%
|
-
|
1.9%
|
2011
|
2.3%
|
|
1.2%
|
-
|
3.2%
|
|
|
|
|
Expected award life (2)
|
5 years
|
|
5
|
-
|
10
|
years
|
|
|
|
|
Expected volatility (3)
|
|
|
|
2012
|
45.1%
|
|
36.4%
|
-
|
45.9%
|
2011
|
43.5%
|
|
35.5%
|
-
|
43.9%
|
|
|
|
|
Expected dividend yield (4)
|
|
|
|
2012
|
4.1%
|
|
4.1%
|
-
|
4.6%
|
2011
|
4.8%
|
|
4.5%
|
-
|
4.9%
|
(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 two years ended December 31, 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.
For the years ended December 31, 2012 and 2011, the Company recognized $893,000 and $1,005,000, respectively, of pre-tax share-based compensation expense, recorded in selling and administrative expense in the consolidated statements of earnings. These expenses were offset by $96,000 and $145,000, respectively, of deferred tax benefits for non-qualified share–based compensation. As of December 31, 2012, the Company had no unrecognized compensation cost for share-based awards based upon the Company’s standard vesting policies, which provide for immediate vesting at the date of grant.
During the years ended December 31, 2012 and 2011, the Company received $889,000 and $958,000, respectively, in cash from stock option exercises. Current tax benefits of $60,000 and $55,000, respectively, were recognized for these exercises. Additionally, during the years ended December 31, 2012 and 2011, the Company received 34,073 and 8,491 shares, respectively, of its common stock as payment for the issuance of 41,596 and 10,900 shares, respectively, of its common stock related to the exercise of stock option agreements.
NOTE 14 – Earnings Per Share:
The following table represents a reconciliation of basic and diluted earnings per share:
|
|
2012
|
|
|
2011
|
|
|
|
|
|
|
|
|
|
|
Net earnings used in the computation of
basic and diluted earnings per share
|
|
$
|
3,031,000
|
|
|
$
|
4,136,000
|
|
Weighted average shares
outstanding - basic
|
|
|
6,061,691
|
|
|
|
5,987,062
|
|
Common stock equivalents
|
|
|
81,306
|
|
|
|
107,852
|
|
Total weighted average shares
outstanding - diluted
|
|
|
6,142,997
|
|
|
|
6,094,914
|
|
Per Share Data:
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
0.50
|
|
|
$
|
0.69
|
|
Diluted
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
0.49
|
|
|
$
|
0.68
|
|
Awards to purchase an average of 259,131 shares of common stock with a weighted average exercise price of $12.98 per share were outstanding during 2012 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 384,556 shares of common stock with a weighted average exercise price of $12.19 per share were outstanding during 2011 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.
NOTE 15 – Accrued Expenses:
|
|
Year Ended December 31,
|
|
|
|
2012
|
|
|
2011
|
|
Salaries, wages, commissions and vacation pay
|
|
$
|
2,653,000
|
|
|
$
|
3,642,000
|
|
Other accrued expenses
|
|
|
569,000
|
|
|
|
857,000
|
|
|
|
$
|
3,222,000
|
|
|
$
|
4,499,000
|
|
NOTE 16 – Supplemental Cash Flow Information:
|
|
Year Ended December 31,
|
|
|
|
2012
|
|
|
2011
|
|
Income taxes paid
|
|
$
|
1,981,000
|
|
|
$
|
1,107,000
|
|
Interest paid
|
|
$
|
30,000
|
|
|
$
|
34,000
|
|
During the years ended December 31, 2012 and 2011, the Company received 34,073 and 8,491 shares, respectively, of its common stock as payment for the exercise of stock options for 41,596 and 10,900 shares, respectively.
NOTE 17 – Stock Repurchase Plan:
On August 1, 2008, the Company’s Board of Directors reset the common stock repurchase program authorization to allow for the repurchase of 1,000,000 additional shares of the Company’s outstanding shares of common stock. The Company reacquired and retired 36,570 shares and 76,693 shares of its common stock in the years ended December 31, 2012 and 2011, respectively, with approximate costs of $437,000, and $882,000, respectively. At December 31, 2012, the Company had 274,886 shares remaining on its common stock repurchase authorization. Shares purchased under the share repurchase program are constructively retired and returned to unissued status. The Company considers several factors in determining when to make share repurchases, including among other things, the cost of equity, the after-tax cost of borrowing, the debt to total capitalization targets and the expected future cash needs. There is no expiration date or other restriction governing the period over which the Company can make its share repurchases under the program.
NOTE 18 – Operating Segment Information:
The Company classifies its businesses into two operating segments based on the types of products and services provided. The uniform and related products segment consists of the sale of uniforms and related items. The Remote Staffing Solutions segment consists of sales of staffing solutions.
The Company evaluates the performance of each operating segment based on several factors of which the primary financial measures are operating segment net sales and earnings before income taxes. The accounting policies of the operating segments are the same as those described in Note 1 entitled Significant Accounting Policies. Amounts for corporate expenses are included in the Uniforms and Related Products Segment totals. Information related to the operations of the Company's operating segments is set forth below:
|
|
Uniforms and
Related Products
|
|
Remote
Staffing
Solutions
|
|
Intersegment
Eliminations
|
|
Total
|
|
Twelve Months Ended
December 31, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
116,029,000
|
|
|
$
|
7,196,000
|
|
|
$
|
(3,739,000
|
)
|
|
$
|
119,486,000
|
|
Gross margin
|
|
$
|
37,863,000
|
|
|
$
|
4,251,000
|
|
|
|
(2,351,000
|
)
|
|
$
|
39,763,000
|
|
Selling and administrative expenses
|
|
|
33,869,000
|
|
|
|
2,368,000
|
|
|
|
(2,351,000
|
)
|
|
|
33,886,000
|
|
Intangible asset impairment
|
|
|
1,226,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,226,000
|
|
Interest expense
|
|
|
30,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
30,000
|
|
Income before income taxes
|
|
$
|
2,738,000
|
|
|
$
|
1,883,000
|
|
|
$
|
-
|
|
|
$
|
4,621,000
|
|
Depreciation and amortization
|
|
$
|
2,139,000
|
|
|
$
|
161,000
|
|
|
$
|
-
|
|
|
$
|
2,300,000
|
|
Capital expenditures
|
|
$
|
801,000
|
|
|
$
|
846,000
|
|
|
$
|
-
|
|
|
$
|
1,647,000
|
|
Total assets
|
|
$
|
72,980,000
|
|
|
$
|
7,385,000
|
|
|
$
|
(1,452,000
|
)
|
|
$
|
78,913,000
|
|
|
|
Uniforms and
Related Products
|
|
Remote
Staffing
Solutions
|
|
Intersegment
Eliminations
|
|
Total
|
|
Twelve Months Ended
December 31, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
109,442,000
|
|
|
$
|
6,610,000
|
|
|
$
|
(3,679,000
|
)
|
|
$
|
112,373,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin
|
|
$
|
38,685,000
|
|
|
$
|
4,063,000
|
|
|
$
|
(2,489,000
|
)
|
|
$
|
40,259,000
|
|
Selling and administrative expenses
|
|
|
34,915,000
|
|
|
|
2,220,000
|
|
|
|
(2,489,000
|
)
|
|
|
34,646,000
|
|
Interest expense
|
|
|
27,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
27,000
|
|
Income before income taxes
|
|
$
|
3,743,000
|
|
|
$
|
1,843,000
|
|
|
$
|
-
|
|
|
$
|
5,586,000
|
|
Depreciation and amortization
|
|
$
|
2,820,000
|
|
|
$
|
162,000
|
|
|
$
|
-
|
|
|
$
|
2,982,000
|
|
Capital expenditures
|
|
$
|
587,000
|
|
|
$
|
326,000
|
|
|
$
|
-
|
|
|
$
|
913,000
|
|
Total assets
|
|
$
|
76,446,000
|
|
|
$
|
5,686,000
|
|
|
$
|
(1,185,000
|
)
|
|
$
|
80,947,000
|
|