What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2025-03-11 compared with 2024-03-14 · 532 added, 483 removed, 546 unchanged (65% of the section changed)

2 unchanged sentences

Report of Independent Registered Public Accounting Firm (PCAOB ID 248 )

Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2023 and 2022

Consolidated Balance Sheets as of December 31, 2023 and 2022 38

Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2023 and 2022 39

Consolidated Statements of Cash Flows for the years ended December 31, 2023 and 2022 40

Consolidated Statements of Comprehensive Income for the years ended December 31, 2024 2023

Consolidated Balance Sheets as of December 31, 2024 2023 39

Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2024 2023 40

Consolidated Statements of Cash Flows for the years ended December 31, 2024 2023 41

Notes to the Consolidated Financial Statements:

Note 1 - Description of Business, Basis of Presentation and Summary of Accounting Policies 42

Note 2 - Operating Segment Information 49

Note 3 - Net Sales 51

Note 4 - Net Income Per Share 52

Note 5 - Long-Term Debt 53

Note 6 - Acquisitions 54

Note 7 - Contingencies 54

Note 8 - Inventories 55

Note 9 - Intangible Assets 56

Note 10 - Property, Plant and Equipment, Net 57

Note 11 - Income Tax Expense 58

Note 12 - Share-Based Compensation 60

Note 13 - Stock Repurchase Plan 63

Note 14 - Leases 64

Note 15 - Benefit Plans 65

Note 16 - Other Information 66

Note 17 - Subsequent Events 66

Report of Independent Registered Public Accounting Firm

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We have audited the accompanying consolidated balance sheets of Superior Group of Companies, Inc.

(a Florida corporation) and subsidiaries (the “Company”) as of December 31, 2023 and 2022, and the related consolidated statements of comprehensive income (loss), shareholders’ equity, and cash flows for each of the two years in the period ended December 31, 2023, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated March 13, 2024 expressed an adverse opinion.

(a Florida corporation) and subsidiaries (the “Company”) as of December 31, 2024 and 2023, and the related consolidated statements of comprehensive income, shareholders’ equity, and cash flows for each of the two years in the period ended December 31, 2024, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2024, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated March 11, 2025 expressed an unqualified opinion.

Basis for opinion

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

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The Company considers historical and projected financial performance as well as industry information.

We identified the quantitative fair value assessment of the CID Resources trade name in the fourth quarter as a critical audit matter.

We identified the quantitative fair value assessment of the CID Resources trade name as a critical audit matter.

The principal considerations for our determination that the impairment assessment of this indefinite-lived intangible asset is a critical audit matter are that the impairment assessment requires the Company to utilize subjective assumptions to estimate the discounted cash flows attributable to the CID Resources trade name, such as royalty rate and discount rate.

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(a Florida corporation) and subsidiaries (the “Company”) as of December 31, 2024, based on criteria established in the 2013 Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

In our opinion, because of the effect of the material weakness described in the following paragraphs on the achievement of the objectives of the control criteria, the Company has not maintained effective internal control over financial reporting as of December 31, 2023, based on criteria established in the 2013 Internal Control — Integrated Framework issued by COSO.

A material weakness is a deficiency, or combination of control deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis.

The following material weakness has been identified and included in management’s assessment.

As of December 31, 2023, management identified a material weakness relating to segregation of duties, change management and user access within certain proprietary information technology systems of the Contact Centers segment.

The Company determined that management’s review controls over these areas are not designed effectively to detect a material misstatement related to the completeness, accuracy, and presentation of the financial statements.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated financial statements of the Company as of and for the year ended December 31, 2023.

The material weakness identified above was considered in determining the nature, timing, and extent of audit tests applied in our audit of the 2023 consolidated financial statements, and this report does not affect our report dated March 13, 2024 which expressed an unqualified opinion on those financial statements.

In our opinion, the Company maintained in all material respects, effective internal control over financial reporting as of December 31, 2024, based on criteria established in the 2013 Internal Control — Integrated Framework issued by COSO.

Basis for opinion

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Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Other information

We do not express an opinion or any other form of assurance on management’s remediation plans related to the currently reported material weakness in internal control over financial reporting as of December 31, 2023.

/s/ GRANT THORNTON LLP

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AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands, except shares and per share data)

Years Ended December 31,

$ 565,676 $ 543,302

Costs and expenses:

Cost of goods sold

345,098 339,755

Selling and administrative expenses

Goodwill impairment charge

Intangible assets impairment charge

Other periodic pension costs

199,926 184,060

Interest expense

Gain on sale of property, plant and equipment

Income (loss) before income tax expense

Income tax expense (benefit)

Net income (loss)

Net income (loss) per share:

551,382 533,533

Income before income tax expense

Income tax expense

$ 12,004 $ 8,772

Net income per share:

$ 0.75 $ 0.55

$ 0.73 $ 0.54

Weighted average shares outstanding during the period:

16,008,015 15,968,199

16,504,384 16,159,308

Other comprehensive income (loss), net of tax

Defined benefit pension plans

Recognition of net losses included in net periodic pension costs

Current period gain (loss)

Loss on cash flow hedging activities

$ 301 $ ( 9 )

Foreign currency translation adjustment

Other comprehensive income

Comprehensive income (loss)

( 3,375 ) 735

Other comprehensive income (loss)

( 3,074 ) 726

Comprehensive income

$ 8,930 $ 9,498

Cash dividends per common share

$ 0.56 $ 0.56

See accompanying Notes to the Consolidated Financial Statements.

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$ 18,766 $ 19,896

Accounts receivable, less allowance for doubtful accounts of $ 4,237 and $ 7,622 , respectively

Accounts receivable

95,092 103,494

Accounts receivable - other

96,675 98,067

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Operating lease right-of-use assets

15,567 17,909

Deferred tax asset

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Long-term operating lease liabilities

10,486 12,809

Other long-term liabilities

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120,139 122,464

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

( 1,122 ) ( 1,113 )

Foreign currency translation adjustment

Accumulated other comprehensive loss, net of tax

( 5,359 ) ( 2,285 )

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16,376,683 $ 16 $ 72,615 $ 122,979 $ ( 3,011 ) $ 192,599

Cumulative-effect adjustment from adoption of ASU 2016-13

- - - $ ( 76 ) - $ ( 76 )

Common shares issued upon exercise of options and SARs, net

80,434 - 886 ( 158 ) - 728

Performance based shares issued

11,707 - - - - -

Restricted shares issued, net of forfeitures

48,044 - - - - -

Restricted shares issued in conjunction with acquisition of business

Issuance of common stock under stock incentive plans and related tax effect

188,029 - 274 ( 99 ) - 175

1 unchanged sentence

- - 3,787 - - 3,787

Tax withheld on vesting of restricted shares and performance based shares

( 7,557 ) - ( 314 ) - - ( 314 )

Written put options

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- - - ( 9,188 ) - ( 9,188 )

Comprehensive income (loss):

- - - 8,772 - 8,772

Cash flow hedges, net of taxes of $ 6

- - - - ( 47 ) ( 47 )

Pensions, net of taxes of $ 3

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16,564,712 $ 16 $ 77,443 $ 122,464 $ ( 2,285 ) $ 197,638

Common shares issued upon exercise of options and SARs, net

29,835 - 274 ( 99 ) - 175

Performance based shares issued

Issuance of common stock under stock incentive plans and related tax effect

443,681 - 2,526 ( 214 ) - 2,312

Restricted shares issued, net of forfeitures

Common shares repurchased and retired

( 523,472 ) - ( 2,586 ) ( 4,831 ) - ( 7,417 )

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- - - ( 9,284 ) - ( 9,284 )

Comprehensive income (loss):

- - - 12,004 - 12,004

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CASH FLOWS FROM OPERATING ACTIVITIES

Net income (loss)

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

$ 12,004 $ 8,772

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

Goodwill impairment charge

Intangible assets impairment charge

13,185 13,995

Inventory write-downs

Provision for bad debts - accounts receivable

Share-based compensation expense

Deferred income tax benefit

Gain on sale of property, plant and equipment

( 1,581 ) ( 1,635 )

Change in fair value of acquisition-related contingent liabilities

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Accounts receivable

Accounts receivable - other

Contract assets

( 3,434 ) 4,310

( 1,031 ) 24,672

Prepaid expenses and other current assets

( 2,375 ) 8,515

( 2,953 ) ( 2,222 )

Accounts payable and other current liabilities

Payment of acquisition-related contingent liabilities

( 686 ) ( 279 )

Long-term pension liability

Other long-term liabilities

Net cash provided by (used in) operating activities

Net cash provided by operating activities

33,428 78,929

CASH FLOWS FROM INVESTING ACTIVITIES

Additions to property, plant and equipment

Proceeds from disposals of property, plant and equipment

Acquisition of businesses

( 4,435 ) ( 4,963 )

Acquisition of business

Other investments

Net cash used in investing activities

( 8,435 ) ( 5,508 )

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from borrowings of debt

Repayment of debt

Borrowings under revolving lines of credit

Payments under revolving lines of credit

( 50,000 ) ( 64,000 )

Payment of term loan

( 4,687 ) ( 3,750 )

Debt issuance costs

Payment of cash dividends

( 9,284 ) ( 9,188 )

Payment of acquisition-related contingent liabilities

( 897 ) ( 553 )

Proceeds received on exercise of stock options

Tax withholdings on vesting of restricted shares and performance based shares and on exercise of stock rights

Net cash provided by (used in) financing activities

Shares withheld for taxes

Common stock reacquired and retired

Net cash used in financing activities

( 24,474 ) ( 71,616 )

Effect of currency exchange rates on cash

Net increase in cash and cash equivalents

( 1,649 ) 369

Net (decrease) increase in cash and cash equivalents

( 1,130 ) 2,174

Cash and cash equivalents balance, beginning of year

19,896 17,722

Cash and cash equivalents balance, end of year

$ 18,766 $ 19,896

Supplemental disclosure of cash flow information:

Income taxes paid (refunded), net

$ 2,303 $ ( 978 )

Interest paid

$ 5,917 $ 9,588

See accompanying Notes to the Consolidated Financial Statements.

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Superior’s Branded Products segment, primarily through its signature marketing brands BAMKO® and HPI®, produces and sells customized merchandising solutions, promotional products and branded uniform programs.

Branded products are manufactured through third parties or in Superior’s own facilities, and are sold to customers in a wide range of industries, including retail, hotel, food service, entertainment, technology, transportation and other industries.

The segment currently has sales offices in the United States, Canada, Brazil, the United Kingdom and Colombia, with support services in China and India.

Superior’s Healthcare Apparel segment, primarily through its signature marketing brands Fashion Seal Healthcare®, Wink™ and CID Resources, manufactures (through third parties or in its own facilities) and sells a wide range of healthcare apparel, such as scrubs, lab coats, protective apparel and patient gowns.

This segment sells healthcare service apparel to healthcare laundries, dealers, distributors, retailers and consumers primarily in the United States.

Branded products are manufactured through third parties or in Superior’s own facilities, and are sold to customers in a wide range of industries, including retail chain, food service, entertainment, technology, transportation and other industries.

The segment currently has sales offices or operations in the United States, Canada and Brazil, with support services in China and India.

Superior’s Healthcare Apparel segment, primarily through its signature marketing brands Fashion Seal Healthcare®, Wink® and CID Resources, manufactures (through third parties or in its own facilities) and sells a wide range of healthcare apparel, such as scrubs, lab coats, protective apparel and patient apparel.

This segment sells its products to healthcare laundries, dealers, distributors, retailers and consumers primarily in the United States.

Superior’s Contact Centers segment, through multiple The Office Gurus® entities, including subsidiaries in El Salvador, Belize, Jamaica, Dominican Republic and the United States (collectively, “TOG”), provides outsourced, nearshore business process outsourcing, contact and call-center support services to North American customers.

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The accompanying consolidated financial statements of Superior included herein have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) (“U.S.” or “United States”) and the rules and regulations of the Securities and Exchange Commission (the “SEC”).

The Company refers to the consolidated financial statements collectively as “financial statements,” and individually as “statements of comprehensive income (loss),” “balance sheets,” “statements of shareholders’ equity,” and “statements of cash flows” herein.

Reportable Segments

Beginning in the second quarter of 2022, the Company realigned its reportable segments to correspond with changes to its organizational responsibilities, management structure and operating model.

Prior to implementing the current segment reporting, the Company’s Uniforms and Related Products segment included healthcare apparel, uniforms and corporate overhead.

As part of the change in reportable segments, the branded portion of the uniforms business was combined with the previous Promotional Products segment to form the Branded Products segment, the healthcare apparel business became its own segment named Healthcare Apparel and income and expenses related to corporate functions that are not specifically attributable to an individual reportable segment are no longer presented in segment results.

The previous Remote Staffing Solutions segment was renamed the Contact Centers segment.

As a result of this re-segmentation, the Company performed a quantitative goodwill impairment test.

Refer to Note 6 for additional information.

The Company refers to the consolidated financial statements collectively as “financial statements,” and individually as “statements of comprehensive income,” “balance sheets,” “statements of shareholders’ equity,” and “statements of cash flows” herein.

Reclassifications

The accompanying financial statements for the previous year contain certain reclassifications to conform to the presentation used in the current period.

Reclassifications only impact items within our statements of comprehensive income, our balance sheets and our statements of cash flows.

These reclassifications did not have an effect on the Company’s consolidated results of operations, financial position or cash flows for the year ended December 31, 2024.

Use of estimates

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Revenue recognition

Revenue is recognized when control of the promised goods or services are transferred to our customers, in an amount that reflects the consideration that we expect to receive in exchange for those goods or services.

See Note 15 for further discussion on revenue recognition.

Revenue from contracts with customers is recognized using a five -step model consisting of the following:

(i) identify the contract with a customer;

(ii) identify the performance obligations in the contract;

(iii) determine the transaction price;

(iv) allocate the transaction price to the performance obligations in the contract;

and (v) recognize revenue when (or as) the Company satisfies a performance obligation.

Performance obligations are satisfied when the Company transfers control of a good or service to a customer, which can occur over time or at a point in time.

The amount of revenue recognized is based on the consideration to which the Company expects to be entitled to in exchange for those goods or services, including the expected value of variable consideration.

The Company records contract assets when revenue is recognized but has not yet invoiced the customer.

This occurs when costs are incurred for the production of goods with customers for which we recognize revenue over time but the associated revenues have not been billed to the customer.

Contract liabilities are recorded for arrangements where the Company has billed the customer but has not shipped the goods and the transaction does not meet the criteria for bill and hold revenue recognition.

The Company also has bill and hold arrangements with certain customers.

For these arrangements, control over the product is transferred when the product is ready for physical transfer to the customer, as we have a present right to payment, the customer can direct the use of the product (i.e., request shipment to its facility), and legal title has passed to the customer.

Revenue is recognized at the time the product is produced and we have transferred control to the customer.

For our Branded Products and Healthcare Apparel segments, revenue is primarily generated from the sale of finished products to customers.

Revenues for our Branded Products and Healthcare Apparel segments are recognized when the performance obligations under the contract terms are satisfied.

For certain contracts with customers in which the Company has an enforceable right to payment for goods with no alternative use, revenue is recognized over time upon receipt of finished goods into inventory.

Revenue for goods that do have an alternative use or that the customer is not obligated to purchase under the terms of a contract is generally recognized when the goods are transferred to the customer.

Revenue from the sale of personal protective equipment, including facemasks, is generally recognized at a point in time when the goods are transferred to the customer, which typically occurs upon shipment or delivery depending on the terms of the underlying contract.

The Company includes shipping and handling fees billable to customers in net sales.

Shipping and handling activities that occur after the transfer of promised goods are accrued as control is transferred to the customer rather than being treated as a separate performance obligation.

For our Contact Centers segment, revenue is generated from providing our customers with contact center services.

Revenue for our Contact Centers segment is recognized as services are delivered.

Revenue is measured at the amount of consideration we expect to receive in exchange for the goods or services.

Variable consideration for estimated returns, allowances and other price variances is recorded based upon historical experience and current allowance programs.

Contract terms may involve variable consideration clauses such as sales discounts and customer rebates, and revenue is adjusted accordingly for these provisions.

Estimated amounts are included in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved.

The promised amount of consideration in a contract is not adjusted for the effects of a significant financing component when we expect, at contract inception, that the period between our transfer of a promised good or service to a customer and when the customer pays for that product or service will be one year or less.

Sales taxes are excluded from the measurement of a performance obligation’s transaction price.

Sales commissions are expensed as incurred when we expect that the amortization period of such costs will be one year or less.

Accounts receivable and allowance for doubtful accounts

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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 in the period incurred.

Costs of assets sold or retired and the related accumulated depreciation are eliminated from accounts and the net gain or loss is reflected in the statements of comprehensive income (loss) within selling and administrative expenses.

During the year ended December 31, 2022, the Company sold its corporate headquarters building and related assets for net proceeds of $ 4.8 million and realized a gain on the sale of $ 3.4 million.

This sale was part of management’s plan to relocate the Company’s corporate headquarters to St.

Petersburg, Florida.

This sale is presented within our statements of comprehensive income (loss) as a separate line item titled “gain on sale of property, plant and equipment.”

Property, plant and equipment is recorded at cost and depreciated using the straight-line method over its estimated useful life as follows:

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Leasehold improvements are depreciated over the terms of the leases to the extent that such improvements have useful lives of at least the terms of the respective leases.

The Company primarily leases factories, warehouses, call centers, office space and equipment for various terms under long-term, non-cancelable operating lease agreements.

A right-of-use asset represents the Company’s right to use an underlying asset for the lease term and a lease liability represents the Company’s obligation to make lease payments arising from the lease.

The Company’s leases generally have expected lease terms of one to eight years.

In the normal course of business, it is expected that the Company’s leases will be renewed or replaced by leases on other properties.

Options to renew lease terms are included in determining the right-of-use asset and lease liability when it is reasonably certain that the Company will exercise that option.

Certain of the lease agreements include rental payments adjusted periodically for inflation and generally require the Company to pay real estate taxes, insurance, and repairs.

The Company’s lease agreements generally do not contain any material residual value guarantees or material restrictive covenants.

The Company elected the short-term lease exception guidance under ASC 842.

Impairment of long-lived assets

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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.

There were no impairments of long-lived assets for the years ended December 31, 2023 and 2022 .

There were no material impairments of long-lived assets for the years ended December 31, 2024 and 2023 .

Goodwill and Indefinite-lived intangible assets

The Company has made acquisitions in the past that included goodwill and indefinite-lived intangible assets.

The Company has made acquisitions that include both goodwill and indefinite-lived intangible assets.

Goodwill represents the excess of the cost of an acquisition over the fair value of the net assets acquired.

Goodwill and indefinite-lived intangible assets such as trade names are not amortized but are subject to an annual (or under certain circumstances more frequent) impairment test in the fourth quarter based on their estimated fair value.

Goodwill and indefinite-lived intangible assets such as trade names are not amortized but are subject to an annual impairment test in the fourth quarter based on their estimated fair value.

We test more frequently if there are indicators of impairment, or whenever such circumstances suggest that the carrying value of goodwill or trade names may not be recoverable.

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If, after assessing the totality of events or circumstances, an entity determines it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the impairment test is unnecessary.

Goodwill and indefinite-lived intangible assets are tested at a level of reporting referred to as “the reporting unit.” The Company’s reporting units are defined as each of its three reporting segments.

In conjunction with the re-segmentation during the second quarter of 2022, the Company performed a goodwill impairment analysis and determined that the estimated fair value of the previous Uniforms and Related Products segment was lower than its carrying value primarily as the result of current market conditions, decline in expected cash flows and decrease in the Company’s stock price.

During the third quarter of 2022, the Company determined that a triggering event occurred in relation to the depressed market price of the Company’s common stock and corresponding significant decline in the Company’s market capitalization.

As a result, the Company performed a goodwill impairment analysis and determined that the estimated fair value of the Branded Products segment was lower than its carrying value.

Consequently, the Company recorded a non-cash goodwill impairment charge of $ 45.9 million during the year ended December 31, 2022.

As of December 31, 2022, the Company had no remaining goodwill balance.

In conjunction with the Company’s realignment of its reportable segments during the second quarter of 2022, the Company began an effort to centralize certain branding and go-to-market strategies under the BAMKO brand and determined that it would no longer use certain trade names associated with branded products.

The Company’s rebranding efforts resulted in a $ 5.6 million impairment of indefinite-lived trade names related to its Branded Products segment during the year ended December 31, 2022.

For the year ended December 31, 2023, the Company completed its testing of indefinite-lived intangible assets and determined that the fair value of each indefinite-lived intangible asset was more than its carrying value.

As of December 31, 2023 and 2022 , indefinite-lived intangible assets of $ 13.6 million and $ 14.2 million were included in the Branded Products segment and the Healthcare Apparel segment, respectively.

Contingent Consideration

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The contingent consideration is remeasured to fair value at each reporting date until the contingency is resolved.

Recognition of any changes in fair value are included in selling and administrative expenses in our statements of comprehensive income (loss).

Recognition of any changes in fair value are included in selling and administrative expenses in our statements of comprehensive income.

The Company is the sponsor of an unfunded supplemental executive retirement plan (“SERP”) which includes one active participant.

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The Company also accrues interest and penalties related to uncertain income tax positions as income taxes.

Refer to Note 9 for additional details.

Share-based compensation

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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.

Forfeitures of share-based compensation awards are recognized as they occur.

Other comprehensive income (loss)

Comprehensive income (loss) includes net income (loss) and all other changes in equity during a period except those resulting from investments by or distributions to shareholders.

Other comprehensive income (loss) consists of defined benefit pension plans activities, cash flow hedging activities and foreign currency translation adjustment.

The related tax effects of these items are recorded in income tax expense (benefit) within the statements of comprehensive income (loss), upon reclassification from accumulated other comprehensive income (loss), net of tax.

Comprehensive income (loss) includes net income and all other changes in equity during a period except those resulting from investments by or distributions to shareholders.

Other comprehensive income (loss) consists of defined benefit pension plan activities and foreign currency translation adjustments.

The related tax effects of these items are recorded in income tax expense within the statements of comprehensive income, upon reclassification from accumulated other comprehensive income (loss), net of tax.

Foreign Currency Translations and Transactions

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Monetary assets and liabilities denominated in a currency that is different from a reporting entity’s functional currency are remeasured from the applicable currency to the reporting entity’s functional currency.

Gains or losses resulting from transactions denominated in other currencies are recognized in net income (loss) each period.

Gains or losses resulting from transactions denominated in other currencies are recognized in net income each period.

The majority of the Company’s transactions are settled in U.S.

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Consideration is given to the activity, region and economic characteristics when assessing if there exists a group concentration risk.

At December 31, 2023 and 2022 , the Company had no customer with an accounts receivable balance greater than 10 % of the total accounts receivable.

At December 31, 2023 and 2022 , the five largest customer accounts receivable balances totaled $ 17.9 million and $ 21.4 million, respectively, or approximately 17 % and 20 % of the respective total accounts receivable balances.

The Branded Products segment has a substantial number of customers, none of which accounted for more than 10% of the segment’s 2023 net sales and no customer accounted for more than 10% of the Healthcare Apparel or Contact Center segment's 2023 net sales.

At December 31, 2024 and 2023 , the Company had no customer with an accounts receivable balance greater than 10 % of total accounts receivable.

Principal raw materials used to manufacture the Company’s finished goods include cotton, polyester, spandex, cotton-synthetic, poly-synthetic blends, textiles, plastic, glass, fabric and metal.

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If we are unable to continue to obtain our raw materials and finished products from China or if our suppliers are unable to source raw materials from China, it could significantly disrupt our business.

Further, the Company and the Company’s suppliers generally source or manufacture finished goods in parts of the world that may be affected by economic uncertainty, political unrest, logistical challenges (such as port strikes and embargos), foreign currency fluctuations, labor disputes, health emergencies, or the imposition of duties, tariffs or other import regulations by the United States, any of which could result in additional cost or limit our supply of necessary goods and raw materials.

Further, the Company and the Company’s suppliers generally source or manufacture finished goods in parts of the world that may be affected by economic uncertainty, political unrest, logistical challenges (such as port strikes and embargos), foreign currency fluctuations, labor disputes, health emergencies, natural disasters or the imposition of duties, tariffs or other import regulations by the United States, any of which could result in additional cost or limit our supply of necessary goods and raw materials.

Written Put Options

During the second quarter of 2022, the Company entered into written put options with a former employee that, if exercised by the former employee, requires the Company to repurchase up to 207,970 shares of its common stock at fair market value (as defined in the agreement), subject to certain limitations.

During the second quarter of 2022, the Company entered into written put options with a former employee that, if exercised by the former employee, required the Company to repurchase up to 207,970 shares of its common stock at fair market value (as defined in the agreement), subject to certain limitations.

The original fair value of the written put options upon entering into the agreement was $ 3.6 million.

The written put options expire after twenty-four months and contain certain quarterly maximums.

During the year ended December 31, 2023 , a total of 75,046 written put options expired unexercised resulting in a $ 0.8 million reduction in other current liabilities with an offset to additional paid-in capital.

The written put options are liabilities under ASC 480, Distinguishing Liabilities from Equity, because the options embody obligations to repurchase the Company’s shares by paying cash.

As of December 31, 2023 and 2022 , the fair value of the written put options was $ 1.8 million and $ 2.0 million, respectively.

The fair value of the written put options is based directly on the Company’s stock price and included in other current liabilities in our balance sheets.

We recognized unrealized losses of $ 0.5 million and unrealized gains of $ 1.6 million on written put options during the years ended December 31, 2023 and 2022 , respectively.

Unrealized gains and losses from changes in the fair value of the written put options are included within selling and administrative expenses in our statements of comprehensive income (loss).

At December 31, 2023 , the Company’s remaining repurchase obligation under the written put options was 132,924 shares of its common stock.

The written put options were liabilities under ASC 480, “ Distinguishing Liabilities from Equity ” because the options embodied obligations to repurchase the Company’s shares by paying cash.

As of December 31, 2023, the fair value of the written put options were $ 1.8 million.

The fair value of the written put options was based directly on the Company’s stock price and were included in other current liabilities in our balance sheets.

The written put options expired after twenty-four months and contained certain quarterly maximums.

During the twelve months ended December 31, 2024, the remaining unexpired options for 132,924 shares expired resulting in a $ 2.4 million reduction in other current liabilities with an offset to additional paid-in capital.

Unrealized gains and losses from changes in the fair value of the written put options were included within selling and administrative expenses in our statements of comprehensive income.

Fair value of financial instruments

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ASUs not listed below were assessed and determined to be not applicable.

Recently Issued Accounting Pronouncements Not Yet Adopted

Recently Adopted Accounting Pronouncements

In November 2023, the FASB issued ASU 2023 - 07, "Segment Reporting (Topic 280 ) — Improvements to Reportable Segment Disclosures" .

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Early adoption is permitted.

The adoption of this guidance will not affect the Company’s consolidated results of operations, financial position or cash flows and the Company is currently evaluating the effect the guidance will have on its disclosures.

We have adopted the disclosure requirements of ASU 2023 - 07 in our consolidated financial statements as of and for the year ended December 31, 2024.

The adoption of the ASU only impacted our disclosures, which are on a retrospective basis, with no impacts on our results of operations, cash flows or financial condition.

The Company’s adoption of this standard did not have a material impact on its financial statements.

See Note 2 for further details.

Recently Issued Accounting Pronouncements Not Yet Adopted

In December 2023, the FASB issued ASU 2023 - 09, "Income Taxes (Topic 740 ) — Improvements to Income Tax Disclosures" .

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Further, the ASU requires certain disclosures of state versus federal income tax expense and taxes paid.

The amendments in this ASU are required to be adopted for fiscal years beginning after December 15, 2024.

The amendments in this ASU are required to be adopted for fiscal years beginning after December 15, 2024, which for the Company is the calendar year beginning January 1, 2025.

Early adoption is permitted for annual financial statements that have not yet been issued.

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NOTE 2 - Allowance for Doubtful Accounts Receivable:

The activity in the allowance for doubtful accounts receivable was as follows (in thousands):

In November 2024, the FASB issued ASU 2024 - 03, “Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220 - 40 ):

Disaggregation of Income Statement Expenses“ The ASU requires the disclosure of additional information about specific categories of costs and expenses in the notes to the consolidated financial statements.

This guidance is effective for annual periods beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027.

Early adoption is permitted.

This ASU will likely result in additional disclosures.

We are currently evaluating the provisions of this ASU.

NOTE 2 – Operating Segment Information:

The Company manages and reports the following segments:

Branded Products segment:

Primarily through our signature marketing brands BAMKO® and HPI®, we produce and sell customized merchandising solutions, promotional products and branded uniform programs.

Branded products are sold to customers in a wide range of industries, including retail, hotel, food service, entertainment, technology, transportation and other industries.

The segment currently has sales offices in the United States and Brazil, with support services in China and India.

Healthcare Apparel segment:

Primarily through our signature marketing brands Fashion Seal Healthcare®, Wink® and CID Resources, we manufacture (through third parties or in our own facilities) and sell a wide range of healthcare apparel, such as scrubs, lab coats, protective apparel and patient gowns.

This segment sells healthcare service apparel to healthcare laundries, dealers, distributors and retailers primarily in the United States.

Contact Centers:

Through multiple The Office Gurus® entities, including our subsidiaries in El Salvador, Belize, Jamaica, Dominican Republic and the United States (collectively, “TOG”), we provide outsourced, nearshore business process outsourcing, contact and call-center support services to North American customers.

Intersegment eliminations include the elimination of revenues and costs from services provided by the Contact Centers segment to the Company’s two other segments.

Such costs are recognized as selling and administrative expenses in the Branded Products and Healthcare Apparel segments.

Income and expenses related to corporate functions that are not specifically attributable to an individual reportable segment are presented within Other in the table below.

The chief operating decision maker, who is the Company’s Chief Executive Officer, evaluates the performance of our segments.

Segment EBITDA is the profitability metric reported to the Company’s CODM for purposes of making decisions about allocation of resources to, and assessing performance of, each reportable segment.

Segment EBITDA is calculated as net sales less cost of goods sold and selling and administrative expenses.

Segment information for total assets is not presented as this information is not used by the Company’s CODM in measuring segment performance or allocating resources between segments.

The following tables set forth financial information related to the Company’s operating segments (in thousands):

Branded Products

Healthcare Apparel

Contact Centers

Intersegment Eliminations

For the Year Ended December 31, 2024:

$ 353,314 $ 119,191 $ 96,949 $ ( 3,778 ) $ - $ 565,676

Cost of goods sold

228,591 73,445 44,742 ( 1,680 ) - 345,098

124,723 45,746 52,207 ( 2,098 ) - 220,578

Selling and administrative expenses

94,384 41,149 42,999 ( 2,098 ) 23,492 199,926

Depreciation and amortization

5,948 3,892 2,968 - 377 13,185

Intangible assets impairment charge

- 260 - - - 260

Segment EBITDA

$ 36,287 $ 8,749 $ 12,176 $ - $ ( 23,115 ) $ 34,097

Branded Products Healthcare Apparel Contact Centers Intersegment Eliminations Other Total

For the Year Ended December 31, 2023:

$ 342,680 $ 113,878 $ 91,500 $ ( 4,756 ) $ - $ 543,302

Cost of goods sold

228,053 71,597 42,352 ( 2,247 ) - 339,755

114,627 42,281 49,148 ( 2,509 ) - 203,547

Selling and administrative expenses

88,225 38,209 39,682 ( 2,509 ) 20,453 184,060

Depreciation and amortization

6,744 3,925 2,942 - 384 13,995

Segment EBITDA

$ 33,146 $ 7,997 $ 12,408 $ - $ ( 20,069 ) $ 33,482

The following table reconciles total Segment EBITDA to income before income tax expense:

Years Ended December 31,

Balance at the beginning of year

Provision for bad debts

Balance at the end of year

NOTE 3 - Reserve for Sales Returns and Allowances:

The activity in the reserve for sales returns and allowances was as follows (in thousands):

Income before income tax expense

$ 14,294 $ 9,769

Interest expense

Depreciation and amortization

13,185 13,995

Intangible assets impairment charge

Segment EBITDA

$ 34,097 $ 33,482

NOTE 3 – Net Sales:

The following table presents disaggregated revenue by operating segment for the periods presented (in thousands):

Years Ended December 31,

Balance at the beginning of year

Provision for returns and allowances

Actual returns and allowances paid to customers

Balance at the end of year

Branded Products Segment:

Branded products

$ 353,271 $ 342,456

Personal protective equipment

Total Branded Products Segment

$ 353,314 $ 342,680

Healthcare Apparel Segment:

Healthcare apparel

$ 115,553 $ 110,871

Personal protective equipment

Total Healthcare Apparel Segment

$ 119,191 $ 113,878

Contact Centers Segment:

Total Contact Centers Segment

$ 96,949 $ 91,500

Net intersegment eliminations

( 3,778 ) ( 4,756 )

Consolidated Net Sales

$ 565,676 $ 543,302

Branded Products and Contact Center segments have a substantial number of customers, none of which accounted for more than 10% of either segment’s 2024 net sales.

Our Healthcare Apparel segment has one customer who accounts for 10% of the segment’s 2024 net sales.

The Company recognizes revenue when the customer takes control of the inventory, either upon shipment or when the material is made available for pick up.

If the customer is deemed to take control of the inventory prior to pick up, the Company recognizes the revenue as a bill-and-hold transaction in accordance with Topic 606.

Sales under bill-and-hold arrangements totaled $ 33.6 million and $ 14.3 million, for the years ended December 31, 2024 and 2023, respectively.

Contract Assets and Contract Liabilities

The following table provides information about accounts receivable, contract assets and contract liabilities from contracts with customers (in thousands):

Accounts receivable

$ 95,092 $ 103,494

Current contract assets

51,688 48,715

Current contract liabilities

Contract assets relate to goods produced without an alternative use for which the Company has an enforceable right to payment but which has not yet been invoiced to the customer.

Accounts receivable, current contract assets, and current contract liabilities were $ 104.8 million, $ 53.0 million, and $ 2.2 million, respectively for the year ended December 31, 2022.

The majority of the amounts included in contract assets on December 31, 2023 were transferred to accounts receivable during the year ended December 31, 2024 .

Contract liabilities relate to payments received in advance of the Company completing its performance under a contract.

Contract liabilities are included in other current liabilities in our balance sheets.

The contract liability balance as of December 31, 2023 was recognized into revenue during the twelve -months ended December 31, 2024

NOTE 4 – Net Income Per Share:

The Company’s basic net income per share is computed based on the weighted average number of shares of common stock outstanding for the period.

Diluted net income per share includes the effect of the Company’s outstanding stock options, stock appreciation rights, unvested shares of restricted stock and unvested performance shares, if the inclusion of these items is dilutive.

The following table presents a reconciliation of basic and diluted net income per share for the years ended December 31, 2024 and 2023 (net income is presented in thousands):

Years Ended December 31,

Net income (in thousands)

$ 12,004 $ 8,772

Weighted average shares outstanding - basic

16,008,015 15,968,199

Dilutive common stock equivalents

496,369 191,109

Weighted average shares outstanding - diluted

16,504,384 16,159,308

Net income per share:

$ 0.75 $ 0.55

$ 0.73 $ 0.54

Awards to purchase 329,848 and 1,113,935 shares of common stock with weighted average exercise prices of $ 21.36 and $ 15.95 , were outstanding during the years ended December 31, 2024 and 2023 , respectively, but were not included in the computation of diluted net income per share because the awards’ exercise prices were greater than the average market price of the common shares.

NOTE 5 – Long-Term Debt:

Debt consisted of the following (in thousands):

Credit Facilities:

Revolving credit facility due August 2027

$ 22,000 $ 25,000

Term loan due August 2027

64,688 69,375

unamortized debt issuance costs

( 653 ) ( 898 )

$ 86,035 $ 93,477

Current portion of long-term debt

Long-term debt

$ 80,410 $ 88,789

On August 23, 2022, the Company entered into a Credit Agreement (the “Credit Agreement”) among the Company, the domestic subsidiaries of the Company, as guarantors, the lenders party thereto (the “Lenders”), and PNC Bank, National Association, as administrative agent for the Lenders (the “Administrative Agent”), pursuant to which the Lenders are providing the Company senior secured credit facilities maturing in August 2027 consisting of a revolving credit facility in the aggregate maximum principal amount of $ 125.0 million and a term loan in the original aggregate principal amount of $ 75.0 million (collectively, the “Credit Facilities”), and the ability to request incremental revolving credit or term loan facilities in an aggregate amount of up to an additional $ 75.0 million, subject to obtaining additional lender commitments and satisfying certain other conditions.

Obligations outstanding under the Credit Facilities accrue interest at a variable rate equal to the secured overnight financing rate (“SOFR”) plus an adjustment between 0.10 % and 0.25 % (depending on the applicable interest period) plus a margin between 1.0 % and 2.0 % (depending on the Company’s net leverage ratio).

The weighted average interest rate on our outstanding borrowings under the Credit Facilities was 5.5 % at December 31, 2024.

During the term of the revolving credit facility, the Company will pay a commitment fee on the unused portion of the revolving credit facility equal to between 0.125 % and 0.250 % (depending on the Company’s net leverage ratio).

The available balance under the revolving credit facility is reduced by outstanding letters of credit.

As of December 31, 2024, there were no outstanding letters of credit under the revolving credit facility.

Contractual principal payments for the term loan are as follows:

2025 - $ 5.6 million;

2026 - $ 6.6 million;

and 2027 - $ 52.5 million.

The term loan does not contain pre-payment penalties.

The Credit Facilities are secured by substantially all of the operating assets of the Company, and the Company’s obligations under the Credit Facilities are guaranteed by all of its domestic subsidiaries.

The Company’s obligations under the Credit Facilities are subject to acceleration upon the occurrence of an event of default as defined in the Credit Agreement.

The Credit Agreement contains customary events of default and negative covenants, including but not limited to those governing indebtedness, liens, fundamental changes, investments, restricted payments (including dividends and related distributions), liquidations, mergers, consolidations or acquisitions, affiliate transactions and sales of assets or subsidiaries.

The Credit Agreement also requires the Company to comply with a fixed charge coverage ratio of at least 1.25 to 1.0 and a net leverage ratio not to exceed 4.0 to 1.0.

The Company’s net leverage ratio (as defined in the Credit Agreement) is generally calculated as the ratio of (a) indebtedness minus unrestricted cash to (b) consolidated EBITDA for the four most recently ended fiscal quarters.

As of December 31, 2024, the Company was in compliance with these ratios.

Debt Maturity Schedule

Contractual maturities of the Credit Facilities (excluding interest to be accrued thereon) at December 31, 2024 are as follows (in thousands):

NOTE 6 – Acquisitions:

On December 4, 2024, the Company, through BAMKO, acquired substantially all of the assets of Cormark Inc.

doing business as 3Point Brand Management ( "3Point" or "acquired company"), for a total purchase price of $ 6.4 million.

The acquired company is an advertising company that specializes in creating a brand for some the country’s biggest brands through apparel, promotional marketing and other products.

The purchase price for the acquisition consisted of the following:

(a) $ 4.0 million of cash consideration, (b) the issuance of 89,445 restricted shares of Superior’s common stock valued at $ 1.5 million, and (c) estimated contingent future payments of $ 0.9 million based on the results of the acquired business through December 2027.

The restricted shares vest ratably over a three -year period and are subject to transfer restrictions.

Total goodwill recorded in connection with the acquisition was $ 2.3 million, and was assigned to the Branded Products reportable segment.

NOTE 7 – Contingencies:

The purchase price to acquire substantially all of the assets of Sutter’s Mill Specialties, Inc.

(“Sutter’s Mill”) in December 2021 included contingent consideration based on varying levels of Sutter’s Mill’s EBITDA in each measurement period from 2022 to 2024.

In July 2023, management agreed to settle the remaining contingent consideration obligation associated with this acquisition for $ 0.5 million, which was paid in the first quarter of 2024.

The purchase price to acquire substantially all of the assets of Guardian Products, Inc.

(“Guardian”) in May 2022 included contingent consideration based on varying levels of Guardian’s EBITDA in each measurement period through April 2025.

The estimated fair value of Guardian acquisition-related contingent consideration payable as of December 31, 2024 was $ 0.8 million, all of which is expected to be paid in the third quarter of 2025.

In the third quarter of 2024, $ 1.0 million was paid for the 2023 measurement period.

The total estimated undiscounted remaining payment related to this contingent consideration payable is between $ 0.8 million and $ 1.0 million.

The Company will continue to evaluate the Guardian liability for remeasurement at the end of each reporting period and any changes will be recorded in the Company’s statements of comprehensive income.

The carrying amount of the liability may fluctuate significantly and actual amounts paid may be different from the estimated value of the liability.

The purchase price to acquire substantially all of the assets of 3Point in December 2024 included contingent consideration based on varying levels of the acquired company’s EBITDA in each measurement period through December 2027.

The estimated fair value of the acquired company's acquisition-related contingent consideration payable as of December 31, 2024 was $ 0.9 million, of which $ 0.9 million is expected to be paid in the second quarter of 2026.

The total payments related to this contingent consideration payable is capped at $ 0.9 million per year and $ 2.6 million over the three year measurement period.

The Company will continue to evaluate the acquired company's liability for remeasurement at the end of each reporting period and any changes will be recorded in the Company’s statements of comprehensive income.

The carrying amount of the liability may fluctuate significantly and actual amounts paid may be different from the estimated value of the liability.

The Company is involved in various legal actions and claims arising from the normal course of business.

The ultimate outcome of these matters is not expected to have a material impact on the Company’s results of operations, cash flows, or financial position.

NOTE 8 - Inventories:

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Raw materials

NOTE 5 - Property, Plant and Equipment, Net:

Property, plant and equipment, net, consisted of the following (in thousands):

Buildings, improvements and leaseholds

Machinery, equipment and fixtures

Accumulated depreciation

Property, plant and equipment, net

Depreciation expense was $ 9.4 million and $ 7.9 million in 2023 and 2022 , respectively.

NOTE 6 - Goodwill and Intangible Assets:

Beginning in the second quarter of 2022, the Company realigned its reportable segments to Branded Products, Healthcare Apparel and Contact Centers.

Refer to Note 17 for further information on the Company’s reportable segments.

As a result of this re-segmentation, and in accordance with ASC 350, the Company performed a quantitative goodwill impairment test.

As a result, the Company performed a quantitative goodwill impairment test.

The fair value of goodwill in each impairment test was determined using a combination of an income approach, which estimates fair value based upon projections of future revenues, expenses, and cash flows discounted to their respective present values, and a market approach.

The valuation methodology and underlying financial information included in the Company’s determination of fair value required significant judgments by management.

The principal assumptions used in the Company’s discounted cash flow analysis consisted of (a) long-term projections of financial performance and (b) the weighted-average cost of capital of market participants, adjusted for the risk attributable to the Company and the industry in which it operates.

Under the market approach, the principal assumption included an estimate of a control premium.

Based on the goodwill impairment analysis performed, the Company determined that the estimated fair values of the previous Uniforms and Related Products segment and current Branded Products segment were lower than their carrying value primarily as the result of current market conditions, decline in expected cash flows and/or decrease in the Company’s stock price.

Consequently, the Company recorded a non-cash goodwill impairment charge of $ 45.9 million during the year ended December 31, 2022.

The following table presents the carrying amounts of goodwill attributable to each of the Company’s reportable segments (dollars in thousands):

Branded Products

Healthcare Apparel

As of January 1, 2022:

Gross goodwill

Accumulated impairment losses

Impairment charge

Foreign currency translation

Net goodwill, December 31, 2022

As of December 31, 2022:

Gross goodwill

Accumulated impairment losses

NOTE 9 - Intangible Assets and Goodwill:

Intangible Assets

The Company’s rebranding efforts resulted in a $ 5.6 million impairment of indefinite-lived trade names related to its Branded Products segment during the year ended December 31, 2022.

The carrying amounts of indefinite-lived trade names are summarized as follows (dollars in thousands):

Indefinite-lived Intangible Assets

Carrying Amount, December 31, 2021

Carrying Amount,

December 31, 2023

Impairment Charges

Carrying Amount, December 31, 2022

Carrying Amount, December 31, 2023

Branded Products

Public Identity

Branded Products

Gifts By Design

Carrying Amount,

December 31, 2024

Branded Products

Sutter’s Mill

$ 4,700 $ - $ 4,700

Branded Products

8,900 - 8,900

CID Resources(1)

Healthcare Apparel

Includes trade names and trademarks associated with CID Resources, Wink™ and Zoey and Chloe.

14,160 ( 260 ) 13,900

$ 27,760 $ ( 260 ) $ 27,500

( 1 ) Includes trade names and trademarks associated with CID Resources and Wink®.

As described in Note 1, the Company performs its annual impairment test for definite-lived intangible assets in the fourth quarter.

As part of our annual impairment test the Company determined the fair values were greater than the carrying values.

A quantitative impairment test was performed in the third quarter of 2024.

As a result of this assessment the Company recognized a $ 0.3 million impairment charge during the year ended December 31, 2024.

As a result of our annual assessment for the year ended December 31, 2023 there was no impairment.

Intangible assets as of December 31, 2024 and December 31, 2023 are summarized as follows (dollars in thousands):

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Customer relationships (7-15 year life)

10.9 $ 53,798 $ ( 30,976 ) $ 50,198 $ ( 27,417 )

Non-compete agreements (3-7 year life)

Indefinite-lived intangible assets:

Total intangible assets

5.3 1,778 ( 1,587 ) 1,712 ( 1,507 )

9.1 464 ( 160 ) 414 ( 118 )

2.0 1,030 ( 710 ) 710 ( 592 )

$ 57,070 $ ( 33,433 ) $ 53,034 $ ( 29,634 )

As part of the acquisition disclosed in Note 6, total intangible assets recorded to the Branded Products segment were valued at $ 4.0 million, of which $ 3.6 million related to the customer relationship intangible asset.

Amortization expense for intangible assets for the years ended December 31, 2024 and 2023 was $ 3.8 million and $ 4.6 million, respectively.

Estimated future intangible amortization expense is as follows (in thousands):

NOTE 7 – Other Current Liabilities:

Other current liabilities consisted of the following (in thousands)

Salaries, wages, commissions and other compensation

Contract liabilities

Accrued rebates

Current operating lease liabilities

Written put options

Other accrued expenses

Other current liabilities

NOTE 8 – Long-Term Debt:

Debt consisted of the following (in thousands):

Credit Facilities:

Revolving credit facility due August 2027

Term loan due August 2027

Payments due within one year included in current liabilities

Debt issuance costs

Long-term debt less current maturities

The weighted average interest rate on our outstanding borrowings under the Credit Facilities was 6.7 % at December 31, 2023 .

The available balance under the revolving credit facility is reduced by outstanding letters of credit.

As of December 31, 2023 , there were no outstanding letters of credit under the revolving credit facility.

Contractual principal payments for the term loan are as follows:

2024 - $ 4.6 million;

2025 - $ 5.6 million;

2026 - $ 6.6 million;

and 2027 - $ 52.5 million.

The term loan does not contain pre-payment penalties.

The Company’s obligations under the Credit Facilities are subject to acceleration upon the occurrence of an event of default as defined in the Credit Agreement.

The Credit Agreement also requires the Company to comply with a fixed charge coverage ratio of at least 1.25 to 1.0 and a net leverage ratio not to exceed 4.0 to 1.0.

As of December 31, 2023 , the Company was in compliance with these ratios.

Debt Maturity Schedule

Contractual maturities of debt (excluding interest to be accrued thereon) at December 31, 2023 are as follows (in thousands):

NOTE 9 – Income Tax Expense (Benefit):

The components of income (loss) before income tax expense are as follows (in thousands):

As described in Note 6, the Company acquired $ 2.3 million of goodwill as a result of its acquisition of 3Point, all of which was recorded in our Branded Products reportable segment.

NOTE 10 - Property, Plant and Equipment, Net:

Property, plant and equipment, net, consisted of the following (in thousands):

$ 2,494 $ 2,494

Buildings, improvements and leaseholds

23,801 16,929

Machinery, equipment and fixtures

93,488 98,590

119,783 118,013

Accumulated depreciation

( 77,904 ) ( 71,123 )

Property, plant and equipment, net

$ 41,879 $ 46,890

Depreciation expense was $ 9.4 million and $ 9.4 million in 2024 and 2023 , respectively.

NOTE 11 – Income Tax Expense:

The components of income before income tax expense are as follows (in thousands):

Years Ended December 31,

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16,760 16,354

Income (loss) before income tax expense

Income before income tax expense

$ 14,294 $ 9,769

In 2022, the Company generated a loss before income tax expense of $ 38.0 million primarily due to goodwill and indefinite-lived intangible assets impairment charges totaling $ 51.5 million, these impairment charges were nonrecurring in 2023.

Aggregate income tax provisions consists of the following (in thousands):

Aggregate income tax provision consists of the following (in thousands):

Years Ended December 31,

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( 1,581 ) ( 1,635 )

Income tax expense (benefit)

Income tax expense

$ 2,290 $ 997

The significant components of the deferred income tax asset (liability) are as follows (in thousands):

The significant components of the deferred income tax asset are as follows (in thousands):

Deferred income tax assets:

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( 579 ) ( 430 )

Net deferred income tax asset (liability)

Net deferred income tax asset

$ 13,835 $ 12,356

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Compensation related

2.1 % ( 0.8 %)

Pension termination

R&D tax credits

( 2.7 %) 0.7 %

Impairment charge

General business credits

( 3.4 %) ( 3.1 %)

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16.0 % 10.2 %

The effective tax rate is the result of a variety of factors, and is primarily dependent on our jurisdictional mix of earnings across the Company’s domestic and foreign operations as well as applicable statutory tax rates, the impact of goodwill and indefinite lived intangible impairments, and unrealized gains and losses associated with share-based compensation.

The effective tax rate is the result of a variety of factors, and is primarily dependent on our jurisdictional mix of earnings across the Company’s domestic and foreign operations as well as applicable statutory tax rates and unrealized gains and losses associated with share-based compensation.

The Tax Cuts and Jobs Act of 2017 (“TCJA”) included certain provisions that continue to affect our income taxes, which, among other things, include interest deduction limitations and global intangible low taxed income regulations (“GILTI”).

The 2023 increase in the interest rates on our outstanding borrowings, along with the Company’s level of income resulted in a current year limitation of interest expense deductibility.

The deferred tax assets associated with the disallowed interest expense have an indefinite life and do not expire.

The 2024 reduction of overall interest expense along with the Company’s increased level of income resulted in no current year limitation of interest expense deductibility.

The Company utilized a portion of its disallowed interest deferred tax asset, resulting in a favorable interest expense deduction.

The remaining deferred tax assets associated with the disallowed interest expense have an indefinite life and do not expire.

Management believes these deferred tax assets are more likely than not to be realized and therefore no valuation allowance has been recorded.

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Only tax positions that meet the more-likely-than- not recognition threshold are recognized in the financial statements.

As of December 31, 2023 and 2022 , we had $ 0.8 million of unrecognized tax benefits, all of which, if recognized, would favorably affect the annual effective income tax rate.

As of December 31, 2024 and 2023 , we had $ 0.9 million and $ 0.8 million 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.

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We are also subject to examination in various foreign jurisdictions for tax years 2018 through 2023.

NOTE 10 – Benefit Plans:

Defined Benefit Plans

The Company is the sponsor of an unfunded supplemental executive retirement plan (“SERP”) which includes one active participant.

As of December 31, 2023 , the Company’s projected benefit obligation under the unfunded SERP was $ 13.6 million.

Contributions to the plan are made 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 balance sheets at December 31, 2023 and 2022 (in thousands):

Changes in benefit obligation:

Benefit obligation at beginning of year

Interest cost

Actuarial (gain) loss

Benefits paid

Benefit obligation at end of year

Changes in plan assets:

Employer contributions

Benefits paid

Fair value of plan assets at end of year

Funded status at end of year

Amounts recognized in balance sheets:

Other current liabilities

Long-term pension liability

Net amount recognized

Amounts recognized in accumulated other comprehensive loss consist of:

Net actuarial loss

Information for benefit plans with projected benefit obligation in excess of plan assets depicted as follows (in thousands):

Projected benefit obligation

Fair value of plan assets

Components of net periodic benefit cost related to the SERP were as follows (in thousands):

Years Ended December 31,

Service cost on benefits earned during the period

Interest cost on projected benefit obligation

Recognized actuarial loss

Net periodic pension cost after settlements

The service cost component is included in selling and administrative expenses in our statements of comprehensive income (loss) and the other components of net periodic pension cost are included in other periodic pension costs in our statements of comprehensive income (loss).

The estimated net actuarial loss for the SERP that will be amortized from accumulated other comprehensive income (loss) into net periodic benefit cost over the next fiscal year is $ 0.1 million.

The following table presents the weighted-average assumptions used to determine benefit obligations as of December 31, 2023 and 2022 :

Discount Rate

Long Term Rate of Return

The following table presents the weighted-average assumptions used to determine net periodic benefit cost for years ended December 31, 2023 and 2022 :

Discount Rate

Long Term Rate of Return

The following table includes projected benefit payments for the years indicated (in thousands):

Projected Benefit Payments

In connection with the Company’s unfunded SERP, we have life insurance contracts on the lives of designated individuals.

The insurance contracts associated with the SERP are held in a Rabbi trust.

The trust is the owner and beneficiary of such insurance contracts.

The policies are being utilized to help offset the costs and liabilities of the SERP.

The cash surrender value of the life insurance contracts was $ 4.5 million and $ 3.9 million at December 31, 2023 and 2022 , respectively.

The cash surrender value of these policies is included in other assets in the balance sheets.

During the years ended December 31, 2023 and 2022 we recognized an investment gain of $ 0.6 million and an investment loss of $ 0.8 million, respectively, on the cash surrender value of these life insurance contracts.

In 2013, we initiated a Non-Qualified Deferred Compensation Plan, and we have purchased life insurance contracts on the lives of designated individuals.

The insurance contracts associated with the Non-Qualified Deferred Compensation Plan are also held in a Rabbi trust.

The trust is the owner and beneficiary of such insurance contracts.

The policies are being utilized to help offset the costs and liabilities of the Non-Qualified Deferred Compensation Plan.

The cash surrender value of the life insurance contracts was $ 9.2 million and $ 7.7 million at December 31, 2023 and 2022 , respectively.

The cash surrender value of these policies is included in other assets in the balance sheets.

The liability for participant deferrals was $ 7.9 million and $ 7.7 million as of December 31, 2023 and 2022 , respectively, and is included in other long-term liabilities in the balance sheets.

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 expensed employer matching contributions of $ 0.5 million and $ 0.6 million during the years ended December 31, 2023 and 2022 , respectively.

NOTE 11 – Leases:

The Company primarily leases factories, warehouses, call centers, office space and equipment for various terms under long-term, non-cancelable operating lease agreements.

The Company’s leases generally have expected lease terms of one to eight years.

In the normal course of business, it is expected that the Company’s leases will be renewed or replaced by leases on other properties.

Options to renew lease terms are included in determining the right-of-use asset and lease liability when it is reasonably certain that the Company will exercise that option.

Certain of the lease agreements include rental payments adjusted periodically for inflation and generally require the Company to pay real estate taxes, insurance, and repairs.

The Company’s lease agreements generally do not contain any material residual value guarantees or material restrictive covenants.

As of December 31, 2023 , the Company had $ 17.0 million of operating lease liabilities ($ 4.2 million in other current liabilities and $ 12.8 million in long-term operating lease liabilities), which represents the present value of the remaining lease payments, and $ 17.9 million of operating lease right-of-use assets, which includes prepaid rent of $ 1.6 million.

As of December 31, 2022 , the Company $ 7.0 million of operating lease liabilities ($ 3.1 million in other current liabilities and $ 3.9 million in long-term operating lease liabilities), which represents the present value of the remaining lease payments, and $ 9.1 million of operating lease right-of-use assets, which includes prepaid rent of $ 2.0 million.

The depreciable-life of right-of-use assets is generally limited by the expected lease term.

The Company does not have any material leases, individually or in the aggregate, classified as a finance leasing arrangement.

The components of lease cost were as follows (in thousands):

Years Ended December 31,

Operating lease costs

Short-term lease costs

Total lease costs

Cash flow and noncash information related to our operating leases were as follows (in thousands):

Years Ended December 31,

Operating cash flows – cash paid for operating lease liabilities

Non-cash – Operating lease right-of-use assets obtained in exchange for new lease liabilities

Other supplemental information related to our operating leases was as follows:

Years Ended December 31,

Weighted-average remaining lease term (in years)

Weighted average discount rate

Maturities of operating lease liabilities as of December 31, 2023 were as follows (in thousands):

Operating Leases

Total lease payments

Less imputed interest

Present value of lease liabilities

NOTE 12 – Contingencies:

The purchase price to acquire substantially all of the assets of Sutter’s Mill Specialties, Inc.

(“Sutter’s Mill”) in December 2021 included contingent consideration based on varying levels of Sutter’s Mill’s EBITDA in each measurement period from 2022 to 2024.

In July 2023, management agreed to settle the remaining contingent consideration obligation associated with this acquisition for $ 0.5 million payable in the first quarter of 2024.

The purchase price to acquire substantially all of the assets of Guardian Products, Inc.

(“Guardian”) in May 2022 included contingent consideration based on varying levels of Guardian’s EBITDA in each measurement period through April 2025.

The estimated fair value of Guardian acquisition-related contingent consideration payable as of December 31, 2023 was $ 1.4 million, of which $ 0.9 million is expected to be paid in the third quarter of 2024.

During the year ended December 31, 2023 $ 0.8 million was paid for the 2022 measurement period.

The total estimated undiscounted remaining payment related to this contingent consideration payable is between $ 1.9 million and $ 2.2 million.

The carrying amount of the liability may fluctuate significantly and actual amounts paid may be different from the estimated value of the liability.

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 is not expected to have a material impact on the Company’s results of operations, cash flows, or financial position.

NOTE 12 – Share-Based Compensation:

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All options and SARs have been or will be granted with exercise prices at least equal to the fair market value of the shares on the date of grant.

At December 31, 2023 , the Company had 1,262,209 shares of common stock available for grant of share-based compensation under the 2022 Plan.

At December 31, 2024 , the Company had 605,983 shares of common stock available for grant for share-based compensation awards under the 2022 Plan.

The 2022 Plan replaced the 2013 Plan.

No new awards will be granted under the 2013 Plan, but outstanding awards granted under the 2013 Plan will continue unaffected.

Share-based compensation is recorded in selling and administrative expense in the statements of comprehensive income (loss).

Share-based compensation is recorded in selling and administrative expense in the statements of comprehensive income.

The following table details the share-based compensation expense by type of award and the total related tax benefit for the periods presented (in thousands):

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Expected award life (years)

3 - 10 3 - 10

Expected volatility

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Risk free interest rate

4.0 % 1.6 % - 3.8 %

Expected award life (years)

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Expected dividend yield

4.7 % 2.4 % - 5.6 %

Weighted average fair value per share at grant date

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Additionally, during the years ended December 31, 2024 and 2023 the Company received 12,366 and 7,627 shares, respectively, of its common stock as payment of the exercise price in the exercise of stock options for 19,899 and 9,115 shares, respectively, of its common stock.

As of December 31, 2023 , the Company had $ 0.9 million in unrecognized compensation related to nonvested stock options to be recognized over the remaining weighted average vesting period of 1.2 years.

As of December 31, 2024 , the Company had $ 0.6 million in unrecognized compensation related to nonvested stock options to be recognized over the remaining weighted average vesting period of one year.

A summary of stock-settled SARs transactions during the year ended December 31, 2024 follows:

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( 107,093 ) 23.15

( 34,029 ) 19.75

Outstanding, December 31, 2024

656,992 15.69

The table above includes 89,445 restricted shares issued in the acquisition of 3Point.

See Note 6 for additional details.

As of December 31, 2024 , the Company had $ 5.1 million of unrecognized compensation cost related to nonvested restricted stock grants expected to be recognized over the remaining weighted average vesting period of 1.8 years.

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The awards are subject to accelerated vesting on a pro rata basis under certain circumstances as outlined in the 2013 Plan and the 2022 Plan, except in those circumstances in which award agreements or change in control agreements specify full vesting.

On May 1, 2024, the Compensation Committee approved the Company entering into a grant of 125,000 and 75,000 performance shares to Michael Benstock, Chief Executive Officer and Michael Koempel, Chief Financial Officer, respectively, under the 2022 Equity Incentive and Awards Plan.

The performance shares agreements were executed on May 6, 2024.

Each performance share represents a contingent right to receive one share of common stock.

The performance shares will vest if, in each case and during a four -year performance period beginning on January 1, 2024, subject to additional requirements, the average closing price of the Company’s common stock over a rolling thirty ( 30 ) day period equals or exceeds 115 %, 130 %, and 150 % of the closing share price on May 10, 2024 and the executive is still employed by the Company twelve ( 12 ) months after the applicable stock price condition has been satisfied.

The fair value and derived service periods of the shares were determined based on a Monte Carlo valuation model, which includes estimates of the Company’s stock price volatility of 50 % and a risk free rate assumption of 4.6 %.

Expense for these grants is being recognized on a straight-line basis over each tranche’s derived service period.

A summary of performance share transactions during the year ended December 31, 2024 follows:

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( 14,068 ) 17.77

( 99,439 ) 19.62

Outstanding, December 31, 2024

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As of December 31, 2024 , the Company had $ 2.1 million of unrecognized compensation cost related to nonvested performance share grants expected to be recognized over the remaining weighted average service period of 1.3 years.

NOTE 14 – Net Income (Loss) Per Share:

The Company’s basic net income (loss) per share is computed based on the weighted average number of shares of common stock outstanding for the period.

Diluted net income (loss) per share includes the effect of the Company’s outstanding stock options, stock appreciation rights, unvested shares of restricted stock and unvested performance shares, if the inclusion of these items is dilutive.

The following table presents a reconciliation of basic and diluted net income (loss) per share for the years ended December 31, 2023 and 2022 :

NOTE 13 – Stock Repurchase Plan:

On August 9, 2024, the Company’s Board of Directors approved a stock repurchase plan.

Under the plan, the Company is authorized to repurchase up to $ 10 million of its common stock over a period of one year ending in August 2025.

This plan replaces the May 2, 2019 plan, as amended, which authorized the repurchase of up to 750,000 shares.

92,549 shares had been repurchased under the May 2, 2019 plan as of August 9, 2024.

No further shares will be repurchased under that plan.

The new stock repurchase plan allows the Company to purchase common stock from time to time through, among other ways, open market purchases, privately negotiated transactions, block purchases, and/or pursuant to Rule 10b5 - 1 trading plans, subject to applicable securities laws and other legal requirements and relevant factors.

The number of shares purchased and the timing of any purchases will depend upon a number of factors, including the price and availability of the Company’s stock and general market conditions.

The stock repurchase plan may be modified, suspended or terminated at any time, without prior notice.

Shares repurchased may be reissued later in connection with employee benefit plans and other general corporate purposes.

Shares purchased under the common stock repurchase plan are constructively retired and returned to unissued status.

As of December 31, 2024, 523,472 shares have been purchased under the new plan and $ 2.6 million remains available to repurchase shares under the $ 10 million authorized.

NOTE 14 – Leases:

The Company does

not have any material leases, individually or in the aggregate, classified as a finance leasing arrangement.

The components of lease cost were as follows (in thousands):

Years Ended December 31,

Net income (loss) used in the computation of basic and diluted net income per share (in thousands)

Operating lease expense

$ 5,123 $ 4,495

Weighted average shares outstanding - basic

Short-term lease expense

Total lease expense

$ 5,554 $ 5,104

Dilutive common stock equivalents

Weighted average shares outstanding - diluted

Cash flow and noncash information related to our operating leases were as follows (in thousands):

Years Ended December 31,

Operating cash flows – cash paid for operating lease liabilities

$ 4,481 $ 3,368

Net income (loss) per share:

Non-cash – Operating lease right-of-use assets obtained in exchange for new lease liabilities

$ 1,533 $ 13,908

Other supplemental information related to our operating leases was as follows:

Years Ended December 31,

Weighted-average remaining lease term (in years)

Weighted average discount rate

6.78 % 6.57 %

Diluted weighted average shares outstanding excludes shares of common stock of 400,381 for the year ended December 31, 2022 as their inclusion would have been antidilutive given the Company’s net loss.

Awards to purchase 1,113,935 and 687,117 shares of common stock with weighted average exercise prices of $ 15.95 and $ 21.06 , were outstanding during the years ended December 31, 2023 and 2022 , respectively, but were not included in the computation of diluted net income (loss) per share because the awards’ exercise prices were greater than the average market price of the common shares.

NOTE 15 – Net Sales:

For our Branded Products and Healthcare Apparel segments, revenue is primarily generated from the sale of finished products to customers.

Revenues for our Branded Products and Healthcare Apparel segments are recognized when the performance obligations under the contract terms are satisfied.

Revenue from the sale of personal protective equipment, including facemasks, isolation gowns, sanitizers and gloves, is generally recognized at a point in time when the goods are transferred to the customer, which typically occurs upon shipment or delivery depending on the terms of the underlying contract.