Superior Uniform Group, Inc. Business Information, Profile, and History

Company Perspectives:

The mission of Superior Uniform Group, Inc. is to enhance our long term profitability by maintaining a leadership position in understanding and serving the uniform/career apparel industry, as we market, manufacture, and sell a brand line of proprietary products. We are committed to: providing customer satisfaction in product quality, value and service; maintaining our reputation for creativity, reliability and integrity; and offering employees opportunities for growth and self-development in a secure and stable work environment.

History of Superior Uniform Group, Inc.

Superior Uniform Group, Inc. is the second largest maker of uniform and service apparel, behind Cintas Corporation, in the United States. Superior's products are sold to five distinct marketplaces: employee identification; cleanrooms; healthcare; security/public safety; and corporate identification. The company's products include corporate I.D. wear as well as career apparel and accessories for the hospital and healthcare, hotel, fast food, transportation, industrial, and commercial markets. Superior stocks approximately 6,500 styles in addition to offering special custom order services. The company markets its products through sales presentations, catalogue sales, trade advertising/shows, and conventions. It competes with national and regional manufacturers and also with local firms in most major metropolitan areas.

Early History

Superior Surgical Manufacturing Company was founded in 1920 as a family business that initially focused on manufacturing and distributing apparel products for hospitals and other institutions within the healthcare industry. In addition to clothing, the company also sold medical instrument kits, restraints, operating room masks, and gauze sponges.

It was business as usual until the 1960s when the company underwent significant changes. Following its initial public offering in 1968, Superior acquired companies which allowed for further diversification of product lines. Several new factories were opened throughout the southeastern region of the United States, which greatly increased production capabilities. The company's sales force was expanded and divided into regional territories, with sales management centers located in Atlanta, Chicago, Dallas, Los Angeles, and New York. Additional sales facilities and showrooms were then placed strategically throughout the country. In 1979, Superior moved its headquarters from Huntington Township, New York, to Seminole, Florida, relocating over 80 key employees and their families.

Earnings rose steadily until a slight slowdown occurred in 1986, but the company experienced an upswing after issuing an innovative sales catalogue and following a licensing agreement with Disney. The agreement allowed Superior to manufacture and sell hospital sleeping garments for children. The company's Looney Tunes designs featured six major Disney characters, designed to make a child's hospital stay more pleasant. Superior overcame the period of recession and was soon back on track.

As a result of increased sales in the healthcare sector and a continued focus toward efficiency, Superior Surgical finished 1990 with record results. Sales were up over eight percent, while earnings were reported up 27 percent to $4.01 a share. Realizing the growing awareness to environmental issues, Superior began making operation room garments that could be reused. The firm issued its newest Health Care Catalog, and the publication was a tremendous factor in increased sales and shareholder equity. In the words of a Miami Herald analyst's report, "It seems every time we look at this (Superior Uniform) stock, its price is near all-time highs." Along with achieving new stock highs, the company increased its dividend. Superior continued to post outstanding results. Earnings for the quarter ended Sept. 30, 1993 were 84 cents per share, up from 69 cents the year earlier. The company expected 1993 to be a record year. Superior was focused at that time on the recently enacted Occupational Safety and Health Administration (OSHA) regulations, which were intended to protect healthcare personnel from blood-borne pathogens. Superior reacted quickly in designing and manufacturing a complete line of reusable protective apparel, linen collection systems, and accessories designed to comply with OSHA regulations while helping hospitals and other healthcare facilities reduce waste and disposal costs.

Alterations in the 1990s

Until 1990 Superior had one large warehouse, where every morning employees would receive a stack of orders. They would roam the entire warehouse picking items, which were then delivered to a consolidated packing station. The company was shipping 80 percent of its orders (for which it had inventory) within two weeks, a time frame that became unacceptable for many customers who were demanding shorter lead times. Superior decided to overhaul its warehouse and distribution system. Managers organized six modules of five employees and the warehouse was divided into six sections. Each team became responsible for one section and the processing of an order--from the placing of new merchandise on the shelves to the staging of orders for shipping. Each module was given its own packing station with a label printer and a computer terminal which was online to the company's main computer in Seminole, Florida. The teams became familiar with a particular section of goods, where specific products should be placed, and how to work more efficiently as a small, integrated group. The new system enabled the company to ship 99.3 percent of its orders the same day, and simplified the invoice processing. Following the success of the modular set-up in the distribution center, Superior began implementing modular systems throughout the company.

In response to high employment rates and a forward-looking focus, Superior invested heavily in streamlining efficiencies through technology. Approximately two percent of annual sales ($12 million over five years) was spent "de-skilling" operations and modernizing equipment. The automated contoured seamer was introduced, for example, reducing the training cycle from 20 weeks to two weeks, saving almost $3,200 per operator. Prior to that innovation, each day an operator was away from the job the company lost a day of production. With an average absenteeism rate of about four percent, the de-skilled automated operation--expensive in the short run--was anticipated to pay off in seven to ten years. The company implemented other technologies from programmable sewing machines to weaving machines for garment ties. Superior relied on the expertise of equipment suppliers, including Atlanta Attachment Company, Juki America Inc., and Scovill Fasteners Inc. to update and innovate for them, easing its dependence on vast inhouse electronic and mechanical workers.

Company officials anticipated potential long-term problems in finding skilled operators. They considered the possibility of producing offshore, but decided that for the most part high start-up costs and the initial poor quality of workmanship (attributed to training an entire plant of unskilled operators) made it prohibitive--noting problems incurred by some competitors in the industry. It was decided that the company should continue producing the majority of its items domestically and to concentrate investment in equipment with a long-term payback. Superior did, however, enter into seven joint ventures in three Central American countries, Guyana, Honduras, and El Salvador. Shortly thereafter, a plant was added in Mexico. Three of the plants were Catholic missions that provided employment for the needy, according to Cedrone of Bobbin. Benstock explained that the move to offshore production on a limited basis was necessary for competitive reasons. Others were selling items below cost and officials at Superior did not want to lose business on a number of products. The company relocated part of its production, but did not make heavy investments, or build new plants.

Other heavy equipment investments during this period included the addition of three GERBERcutters from Gerber Garment Technology, Inc. and a Satellite Plus system (which allowed micro-scheduling of groups of operators as opposed to entire departments) from Leadtec, a division of Willcox and Gibbs. The installation of the GERBERcutters coincided with the consolidation of Superior's cutting operations at the company's 180,000-square-foot Eudora, Arkansas plant. The equipment enabled the cutting of 150,000 yards of fabric each day by three modular teams of six employees.

In 1996 Superior completed the construction of one of the most innovative distribution centers for apparel in the world, locating it in Eudora. Borrowing technologies from many different industries, it took over three years to design, plan, and construct the $10 million facility. Controlled by a central management system, conveyors were designed to tie into robotics pulling, tilt tray sorting, and vision verification.

Going to Court: 1996

In 1996, Superior pleaded guilty to one count of giving the government false information and was required to reimburse the government $6.5 million, said Charles Wilson, U.S. attorney for the Middle District of Florida, according to the Miami Herald. The probe had focused on a nine-year contract between Superior and the Veterans Affairs Department that ended in 1992. The plea bargain settled allegations that the Pinellas County company knowingly overcharged the Department of Veterans Affairs, the General Service Administration, and other government agencies for medical items and for clothing, the federal authorities said. The settlement resolved potential criminal and civil cases against Superior. The false information involved prices for various medical and veterinary supplies from Fashion Seal Uniforms, a division of Superior, according to court documents. Beginning with the announcement of the government's investigation, the company experienced a downward spiral in its share prices. As part of the settlement, Superior started a training program in ethics and compliance for its employees. The training included supplying employees with a toll-free telephone number to ensure that employees could report any suspicious activity. Superior continued to pursue business with the government, but on an open-order rather than a contractual basis.

Ted Jackovics of the Tampa Tribune reported that Superior planned to implement changes in its product line. CEO and Chairman Gerald Benstock told him that "he is not satisfied with the way the company is performing," and stated plans to shift from manufacturing surgical uniforms to acquiring companies that focused on embroidered sportswear. As the company turned toward producing more non-healthcare-related items it became necessary to reconsider changing the company name. In 1998, Superior Surgical Manufacturing Company was legally changed to Superior Uniform Group, Inc. Executives were hopeful that the name-change would attract more attention to its core leisure wear.

In 1998 Superior acquired Sope Creek, a Marietta, Georgia company that specialized in embroidered golf, resort, and corporate logo apparel. Other acquisitions were being sought in the resort and corporate image lines, which Benstock had targeted as a "fragmented industry," made up of a multitude of cottage businesses. Executives hoped that the company's sales representatives would encourage such existing corporate accounts as Publix and Winn-Dixie, which already bought uniforms from the company, to order casual wear for their workers. Superior executives also had plans for tapping into the corporate identification programs of its 20,000 accounts. Superior's Fashion Seal Uniforms division introduced Fashion Max Scrubs, a line made of a patented permanent finish that wicked moisture away from the wearer's skin. Garments reputedly enhanced evaporation to keep the body cooler, while prohibiting bacterial growth and resisting stains. Also during this time, Fashion Seal and Universal Laundry Bags (another Superior division) offered a full line of cleanroom apparel, laundry bags, stands, and accessories for use in the healthcare and linen supply industries.

Positioning for the Future

Cintas Corporation of Cincinnati, which continued to acquire smaller companies, was the industry leader in uniform production and sales. Striving to remain competitive in the ever consolidating industry, Superior (still considered a medium-sized competitor) followed its Sope Creek buy with the purchase of the 50-year-old Empire Company for approximately $9.1 million, plus the assumption of certain liabilities. The Portland, Oregon company operated as a supplier of uniforms, corporate I.D. wear, and promotional products, with customers largely located in the Northwest. Company executives continued to evaluate the market and to seek additional acquisitions in order to complement and expand the company's existing units.

Members of the Benstock family were well-represented on the board, including Gerald Benstock as well as his sons Michael and Peter. A Florida Trend article quoted Alexander Paris, Jr., a market analyst with Barrington Research Associates in Chicago: "It's a nice small-cap company, good for the long-term, patient small-cap investor." He noted the advantages in having Benstock, his son and son-in-law running the company, "There's a high level of insider ownership, so it's run like a private company."

Principal Divisions: Superior Surgical International; Sope Creek; Universal Laundry Bags; Lamar Caribbean Sales; D'Armigene Design Center; Fashion Seal Uniforms; Worklon; Martin's Uniforms; Appel Uniforms.