Good afternoon, everyone. Welcome to the Superior Uniform Group’s 2016 Second Quarter Earnings Conference Call. With us today are Michael Benstock, the Company’s Chief Executive Officer and Andy Demott, its Chief Operating Officer, CFO and Treasurer. After the speakers’ opening remarks, there will be a Q&A session. [Operator Instructions] This call is being recorded and your participation implies that you agree to this. If you don’t, then simply drop off the line. Now I will turn the call over to Hala Elsherbini, Senior Vice President of Halliburton Investor Relations who will read the Safe Harbor statement. Please go ahead.

Thank you and good afternoon. This conference call may contain forward-looking statements about Superior Uniform Group’s business opportunities and its anticipated results of operations. Please bear in mind that forward-looking information is subject to risks and uncertainties and actual results may differ from what you hear today. Many of these risks and uncertainties are described in Superior Uniform Group’s Annual Report on Form 10-K for fiscal 2015 in this morning’s news release and in the Company’s other filings with the SEC. Forward-looking statements in this conference call are based on management's current expectations and beliefs. Management does not undertake any duty to update the forward-looking statements made during this conference call or elsewhere. Please note that all growth comparisons that management makes today will relate to the corresponding periods in 2015 unless otherwise noted. With that, I will turn the call over to Michael.

Good afternoon everyone and thank you for joining us to discuss our second quarter 2016 and year to date performance. As usual I'll review key highlights for the quarter and provide commentary on market trends. Andy will then provide specific details on our financial performance and I will conclude by providing an update on our business outlook. We'll then be happy to take your questions. For the second quarter we reported solid top line growth with a 19.5% increase in net sales, including stellar performance from our March 1st acquisition of BAMKO. This represented our 15th consecutive quarter of revenue growth. BAMKO delivered exceptional result generating net sales of $9.8 million an 88% increase over the prior year period. The Office Gurus our remote staffing segment also contributed nicely to second quarter results with net sales to outside customers up 25.8%. While we are very pleased with our second quarter performance and we remain on track with our overall long term growth expectations, our results warrant further explanation. First, organic sales growth leveled off in our Uniform related product segment. This followed a sequentially strong first quarter that delivered significantly better results. As expected we saw strong customer buying in the first three months of the year, which led to lighter order flow in the second quarter. In addition it's important to note that we delivered a phenomenal second quarter last year including our successful efforts if you remember to achieve more than 15% organic growth in that quarter to replace in excess of $5 million of major rollouts from the second quarter of 2014. Second, unlike previous quarters our SG&A increased faster than revenues, earnings were lower than a year ago due to a disproportionate amount of expense items. Andy will discuss this further in his financial review but…

Thank you Michael, and good afternoon everyone. Let's start with a closer look at the income statement for the three month period ended June 30th 2016. Net sales rose 19.5% to nearly $64.7 million. This improvement is largely from the BAMKO acquisition which contributed 18.2% of the gain. Excluding BAMKO uniforms and related products were essentially flat with last year's second quarter and remote staffing solutions contributed 1.4% of the overall increase. Uniforms and related products net sales increased 19.1% from a year ago. Without BAMKO organic growth was slower in the second quarter than in the first. As Michael indicated buying activity in the first quarter of 2016 was significantly higher than the prior year period. Some of the volume we usually see in the second quarter occurred in the first quarter of this year and remote staffing solutions quarterly sales to outside customers grew 25.8% from a year ago as we continued to execute on our plan to increase business with existing customers and to attract new ones. Cost of goods sold rose 20.5% to $42.9 million as the percent of net sales cost of goods sold increased to 66.3% from 65.8% for the second quarter last year. Here’s a closer look at what happened. For uniforms cost of goods sold as a percentage of net sales stood at 67.4% compared with 56.8% a year ago. There were three factors behind the change, the first two came from our non BAMKO operations. We saw an increase in direct party cost and overhead cost to the percentage of net sales. These were partially offset by slightly lower cost of goods sold on BAMKO sales as a percentage of net sales. For remote staffing cost of goods sold as a percent of net sales increased to 45.2% from 44.2% a…

Thanks Andy. We were quite focused during the first half of the year executing on several strategic and tactical fronts all in order to fortify our infrastructure for the long term. We finished major expansion efforts in El Salvador substantially increasing needed call center capacity. We elevated our future competitive position and pricing dynamics via our newly completed Haiti manufacturing facility. We managed ongoing improvements in sourcing and greatly enhanced our total solution offering through the BAMKO acquisition, positioning us as one of the top distributors in the USA of branded merchandize. Now as we've done in the past with large acquisitions we'll generally take six to nine months to fully understand BAMKO's operational strength and challenges as well as its operational cultural nuances and work toward realizing synergies and best practices that can translate throughout our entire organization. We remain on track with our stated long term outlook, this means reporting consolidated average organic sales growth of more than 8% per year excluding BAMKO of course over the next three to five years. Increases in our Uniform business were exceeded in average of more than 6% per year, and we’ll continue to seek $2.3 million to $3 million annual increases for the Office Gurus. As the reference, BAMKO generated net sales of approximately $31.5 million in 2015. We believe it can generate average organic growth of more than 15% per year. Overall, our long-term vision is building our team to scale revenues to much higher levels and BAMKO’s infrastructure is already in place to be able to serve us a much higher base of net sales. And we do expect BAMKO to make add-on acquisitions, targeting companies with $5 million to $15 million in sales, good geographical penetration and strong and loyal customer base as well as product lines or services that we can leverage. Our plan is to begin actively making acquisitions in 2017. We continue to have an active pipeline of Uniform acquisition candidates. We regularly cultivate relationships with companies that we believe, at the time, represent a strategic fit. These often have $10 million to $35 million in sales, strong customer relationships and good management teams we can keep in place or augment with our experienced people. While we can’t control the timing of when they decide to make a move, we’re certainly ready when they are. We have the plans, capacity and ability to increase our sales and profits. Our strong balance sheet allows us to fund long-term growth while rewarding shareholders. Overall, we remain confident in our long-term strategy, the strength of our brands and our ability to deliver shareholder value in 2016 and beyond. With that as background, Andy and I will be happy now to take your questions.

We will now begin the question-and-answer session [Operator Instructions]. Our first question comes from Kevin Steinke of Barrington Research. Please go ahead.

You talked about orders in the first quarter being strong, and beginning to later orders in the second quarter. Is there anything you would attribute that to, is that -- you just kind of view that as an anomaly, because I think historically your second quarter has been seasonally stronger than your first. So I don’t know if you’ve had a chance to drill down into the reasons behind that. But just would be interested to hear any color on that?

We look at the first quarter and obviously we were very strong above our expectations for the year. But really wasn’t out of line with what we expected going into the year. From a sales perspective, I mean, we had -- we were pretty close to having the first quarter and second quarter out what we expected internally. But we weren’t looking to increase that guidance last quarter. I think we’re not looking at it every quarter. When you look at a particular quarter people buy different times I mean it's really not a matter of it been a stronger second quarter than the first quarter, or first quarter and the second quarter, it's just the time when some of those orders happen. I think people have loaded up a bit in the first quarter and it did back to off a little bit, and nothing more detail than that. Michael, do you want to add?

We generally forecast a year out on all of our -- and really all the way down to the customer level. And we compare our budgets in November. And I can tell you that the way the quarter is flushed out is not a surprise to us. But as we said in our first quarter conference call even though we’ve had a gain of 15%, we said that we expected the year to be in line with what our guidance had been. And we don’t give guidance on a quarter-to-quarter basis, but we certainly have been pretty forthcoming with what our guidance is for the longer term.

I doesn’t sound like anything is fundamentally changed about how customers are going about ordering, it's just happen to be a timing manner I guess and the full year is on track. So that’s good to hear. So, you mentioned one of the reasons for SG&A expenses being up as investments in your direct healthcare sales efforts. Are those sales people that you’re talking about and how far along are you in making those investments? Do you feel like you have to invest more to get to the point where you need to be? Or are you pretty much done with those investments in direct healthcare?

It's a great-great question, and I didn’t know how to lead into. So I am happy you asked it. Our direct healthcare business efforts have been going on for about six years started with -- started with Ernst & Young that was done years ago. And we perceived on the path of approximately three years ago really get and going in terms of hiring the right people into that marketplace and sales people and so on. And over the course of the last three years and even some recently, we’ve loaded up on customer service people and client service people and all the people that you need to support that effort, marketing, in both here and in El Salvador and of course that supports our business as well. And I think we’re at that point -- we’re coming close to that point where we’ll have enough data to evaluate. We’re in so many channels as we’ve spoken about long-term care and home healthcare and the IDN market and more GBL contracts and so on. We’ve done enough business and I think we have enough knowledge now to step back and spend the next six months or so evaluating all that data and doing some course adjustments as we might need to. And part of that might be in figuring out better how to control the expenses. Clearly, we’ve overloaded it a little bit on the front end, anticipating the kind of growth that we’ve been working towards. But it's got to right sized. And as we’ve done, if you remember, and we’ve spoken about this in previous conferences as well in this conference call, one of the first things Andy and I did when I became CEO in 2003 was we looked at all of our business units. And we found that not every one of them was created equal that there were those that were doing a whole lot better than others. We fix some. We’ve exited others. We invested in others and we’re doing quite well. And I think we’re kind of at that point with the healthcare marketplace as well. We’re within range at least of the next six months being able to take a real deep look at it and decide which parts of it are good for us and which parts aren’t and the parts that aren’t good for us we won’t continue an investment and the parts that are good for us we’ll hopefully be able to make even larger investments in.

The higher healthcare claims you experienced, is that just kind of an anomaly with some unusually large claims in the quarter, or are you seeing more people sign up for healthcare insurance? I don’t know if you’ve been able to drill down into that at all on what’s going on with the claims.

It's not a matter of higher number of people being in it. It's the labor pool that’s involved in our healthcare plan is fairly consistent. It's simply a matter of we got hit in the first half of this year with the higher volume of moderately larger claims. I mean, we are protected on the upper end for individual claims but when you get a run of them, we’ve had a very good experience in our healthcare plan for the last couple of years. And when you’re self insured I mean periodically you are subject to this happening. I mean got our outside brokers and everyone digging into it to make sure we’re not doing anything fundamentally off that we need to adjust, but we make our estimates at the beginning of the year when we’re setting our rates and we have the -- what they are telling us with medical trends and it's going inside a bit this year. It happens periodically.

On the sourcing side of things you’ve talked about the last few quarters investing in efforts there, hiring people to build supplier relationships. Is that something where you’re going to continue to invest, or is it just kind of an ongoing process of continuous improvement? Just more thoughts on how you view the sourcing opportunity going forward?

I don’t think our investments are going to become greater than they are now in the next couple of years. I think we’re right staffed where probably a little bit the heavy side for what we’re ultimately capable of doing. We should be able to handle much larger opportunities that come our way with the staff we have today and there are larger opportunities that we’re looking at all the time, and then maybe we would have looked at three or four years ago. Particularly HPI Direct is, as you all know, they did couple of years a major airline program, they’ve done some other major fast food programs. They’re definitely prepared to take on larger chunks of business and they ever were. But they need strong sourcing support behind that. One of the great advantages we have is not only do we have talented people and we constantly top grade within that group to makes sure that we’re getting the best talent and that we’re aware of what’s going on in the world and where we ought to be positioned. But having BAMKO is Chinese office which is staffed also with apparel and textile people, as well as the people can source all the other items that go into apparel, the plastic buttons or the zippers or so on. Ultimately that’s really going to be a game changer for us in terms of being able to source right down to the findings level to the lowest common denominator being able to source few items that go into apparel. And we have not made use of that, that’s part of our discussions with respect to synergies. But Andy and I and our visit to their Chinese office Guangzhou, we’re extremely impressed with their capabilities and we believe that has a very long-term benefit to us.

I want to ask about cross-selling, you talked about already trying to kick off some cross-selling efforts with BAMKO. Just wondering how quickly those efforts can actually start to bear fruit. I mean if you’re going to, one of your existing Uniform customers and trying to cross-sell promotional products. Is it mostly a situation where you have to wait for other contracts to roll off, or by source, if you’re trying to sell uniforms to one of BAMKO’s promotional product customers? How long does that process take, and when can we start seeing the results of it?

The Uniform as you know is a longer process generally the time line for sale is it can be as long as three years. We as an average of two years when we’re looking at opportunities from the time and it really depends on the complexity of an opportunity you could get a large contract transportation program that literally spent two years in the design phase and the approval phase before you even get to a new uniform a year or two later. But we’re finding the cross-selling opportunities we’re -- definitely they’re introducing us to their customers, we’re introducing them to ours. The opportunities on the promotional side are happening a lot faster than on the uniform. And that was what we expected.

Right, that make sense. Okay…

And to give you a little time frame, because I didn’t say how. The promotional products business is a much faster business. Certainly, I would expect from the time we’re introduced to people within one year we’re doing business with them, and it delivered product already.

One last question from me, you’ve talked about last few quarters remote staffing, margins coming down a little bit, just as you penetrate more domestic customers. Is that a consorted effort on your part to be going after more domestic customers, or is that just how the pipeline is playing out now? Just trying to get a sense if that continued margin trend in remote stacking will continue based on the mix shift to domestic.

Our strategy there, we’ve built our domestic center here after having already a call center in El Salvador, and the reason why we did it was because we had some customers who did not believe that they were good fit for a near shore facility. So, we decided we’ve empty space in our corporate headquarters. We would put a call center here, all of our call center management once here then the people running the business. And we did so successfully. We found customers who were just as I described. We’re reluctant to go near shore. We’ve brought them in here and most of the customers we brought in here have now moved part or all of their operation to our near shore facilities. Once they’ve developed some trust in us, we were able to move them to our near shore facilities, which is more profitable to us than our domestic facilities. And that really, it will be an ongoing strategy. We’ll have some customers who’ll never move offshore and that’s fine. But the ones who we developed strong relationships with, I believe, we can convince them to take more of their business near shore where we make more money and we can use this more as a proving ground for their programs, work out all the things, work out all the process, help them in terms of whatever their mission is and then move it offshore when it's really more cookie cutter.

Our next question comes from Ralph Marash with First Manhattan Company. Please go ahead. Mr. Marash, your line is open.

In both El Salvador with the call center in Haiti with Uniform Manufacturing, are they ramping according to the original schedule that you’d planned?

Haiti is ahead of schedule and fascinated starting with a work course of zero and watching the first 12 people come in there and 18 more after that and we’ve done it to the increment to the 18 since then. It's at about 117 people right now, so it's about -- it's more than three quarters of its way towards its ultimate goal. And right now we’re just working on efficiency. We’re ahead in terms of our efficiency. We’re not ahead in terms of the number of people. We’ve been very, very careful to put on the people that we could train in the amount of time we had originally prescribed. So we’re very satisfied with that. El Salvador should have been completed. The call center was actually completed months ago and we’re waiting for permits and should be told that it’ll be probably had about in total the entire project and eight months delay of when we should have been in that building versus now that we are. And very happy to be in there, and we have all the correct permits and we’re rocking and rolling at this point. Our facility that we came out of will be doing something else with, either putting up the sale or lease in the very near future in next couple of weeks.

Just to remind me. So you own the old building in El Salvador?

We do.

Yes, we do.

And at what point would you think that both of those operations would be gross margin accretive instead of our cost?

Well, I don’t think we were indicating that that El Salvador was gross margin erosion. I think we were referring to that when Michael mentioned relative to some expenses associated with having two facilities and moving people from one to the others, that’s all that was associated with El Salvador. And I think we’ve said that we expect to Haiti operation to be back to a breakeven where they’re producing in the level they’re supposed to and not a lot by the end of the year.

[Operator Instructions] This concludes our question-and-answer session. I would like to turn the conference back over to Michael Benstock for any closing remarks.

Thank you very much. Andy and I appreciate your interest and the time you spent with us today. We look forward to sharing our progress in the third quarter, for the third quarter with you in October. In the meantime, we hope you enjoy the rest of your summer. Thank you again.

The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.