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Superior Uniform Group, Inc. Reports Operating Results For 2012

Stocks in this article: SGC

"As we have discussed in our previous releases, our gross margins were greatly pressured in the first three quarters of 2012 as we worked our way through the higher priced inventory relative to the cotton crisis. As a result, our gross margins for the year ended December 31, 2012 were 33.3% as compared to 35.8% for the prior year. As expected, we saw significant improvement in our gross margins in the fourth quarter up to 34.2% compared to 33.0% for the first nine months of 2012. We expect that this trend will continue in 2013. 

"Although we believe that our everyBODY media® 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 related 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 yet 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 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. Our operating results also include approximately $818,000 of amortization expense associated with this licensing agreement in each of the years ended December 31, 2012 and 2011. This amortization expense will not repeat in 2013.

 "Our financial position remains very strong as we ended the year in a positive cash position and with a debt free balance sheet despite prepaying our regular quarterly dividend for the full year of 2013 during the fourth quarter of 2012. 

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