SUPERIOR GROUP OF COMPANIES, INC. 10-Q

ITEM 1. Financial Statements SUPERIOR GROUP OF COMPANIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) (In thousands, except shares and per share data) Three Months Ended March 31, 2025 2024 Net sales $ 137,097 $ 138,842 Costs and expenses: Cost of goods sold 86,656 83,525 Selling and administrative expenses 50,102 48,938 Interest expense, net 1,245 1,787 138,003 134,250 (Loss) income before income tax (benefit) expense ( 906 ) 4,592 Income tax (benefit) expense ( 148 ) 680 Net (loss) income $ ( 758 ) $ 3,912 Net (loss) income per share: Basic $ ( 0.05 ) $ 0.24 Diluted $ ( 0.05 ) $ 0.24 Weighted average shares outstanding during the period: Basic 15,599,655 16,028,032 Diluted 15,599,655 16,453,452 Other comprehensive income (loss), net of tax: Defined benefit pension plans $ 7 $ 23 Foreign currency translation adjustment 1,011 ( 481 ) Other comprehensive income (loss) 1,018 ( 458 ) Comprehensive income $ 260 $ 3,454 Cash dividends per common share $ 0.14 $ 0.14 See accompanying Condensed Notes to the Consolidated Financial Statements. 4 Table of Contents SUPERIOR GROUP OF COMPANIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands, except shares and par value data) March 31, December 31, 2025 2024 (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 19,757 $ 18,766 Accounts receivable, net 92,539 95,092 Inventories 98,543 96,675 Contract assets 50,759 51,688 Prepaid expenses and other current assets 10,402 10,831 Total current assets 272,000 273,052 Property, plant and equipment, net 40,730 41,879 Operating lease right-of-use assets 14,667 15,567 Deferred tax asset 13,833 13,835 Intangible assets, net 50,207 51,137 Goodwill 2,304 2,304 Other assets 17,232 17,360 Total assets $ 410,973 $ 415,134 LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities: Accounts payable $ 48,809 $ 50,942 Other current liabilities 38,481 44,367 Current portion of long-term debt 5,625 5,625 Current portion of acquisition-related contingent liabilities 940 814 Total current liabilities 93,855 101,748 Long-term debt 90,065 80,410 Long-term pension liability 13,415 13,315 Long-term acquisition-related contingent liabilities 1,096 935 Long-term operating lease liabilities 9,666 10,486 Other long-term liabilities 8,447 9,384 Total liabilities 216,544 216,278 Commitments and contingencies (Note 5) Shareholders’ equity: Preferred stock, $ .001 par value - authorized 300,000 shares ( none issued) - - Common stock, $ .001 par value - authorized 50,000,000 shares, issued and outstanding 16,244,241 and 16,484,921 shares, respectively 15 16 Additional paid-in capital 83,930 84,060 Retained earnings 114,825 120,139 Accumulated other comprehensive loss, net of tax: ( 4,341 ) ( 5,359 ) Total shareholders’ equity 194,429 198,856 Total liabilities and shareholders’ equity $ 410,973 $ 415,134 See accompanying Condensed Notes to the Consolidated Financial Statements. 5 Table of Contents SUPERIOR GROUP OF COMPANIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY THREE MONTHS ENDED March 31, 2025 AND 2024 (Unaudited) (In thousands, except shares and per share data) Accumulated Other Additional Comprehensive Total Common Common Paid-In Retained Income (Loss), Shareholders’ Shares Stock Capital Earnings net of tax Equity Balance, January 1, 2024 16,564,712 $ 16 $ 77,443 $ 122,464 $ ( 2,285 ) $ 197,638 Issuance of common stock under stock incentive plans and related tax effect 179,011 549 ( 100 ) - 449 Share-based compensation expense - - 1,015 - - 1,015 Written put options - - 595 - - 595 Cash dividends declared ($ 0.14 per share) - - - ( 2,330 ) - ( 2,330 ) Comprehensive income (loss): Net income - - - 3,912 - 3,912 Pensions, net of taxes of $ 7 - - - - 23 23 Change in currency translation adjustment, net of taxes of $ 0 - - - - ( 481 ) ( 481 ) Balance, March 31, 2024 16,743,723 $ 16 $ 79,602 $ 123,946 $ ( 2,743 ) $ 200,821 Balance, January 1, 2025 16,484,921 $ 16 $ 84,060 $ 120,139 $ ( 5,359 ) $ 198,856 Issuance of common stock under stock incentive plans and related tax effect 53,752 - 87 - 87 Common shares repurchased and retired ( 294,432 ) ( 1 ) ( 1,500 ) ( 2,276 ) - ( 3,777 ) Share-based compensation expense - - 1,283 - - 1,283 Cash dividends declared ($ 0.14 per share) - - - ( 2,280 ) - ( 2,280 ) Comprehensive income (loss): Net loss - - - ( 758 ) - ( 758 ) Pensions, net of taxes of $ 2 - - - - 7 7 Change in currency translation adjustment, net of taxes of $ 0 - - - - 1,011 1,011 Balance, March 31, 2025 16,244,241 $ 15 $ 83,930 $ 114,825 $ ( 4,341 ) $ 194,429 See accompanying Condensed Notes to the Consolidated Financial Statements. 6 Table of Contents SUPERIOR GROUP OF COMPANIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In thousands) Three Months Ended March 31, 2025 2024 CASH FLOWS FROM OPERATING ACTIVITIES Net (loss) income $ ( 758 ) $ 3,912 Adjustments to reconcile net (loss) income to net cash provided by operating activities: Depreciation and amortization 3,204 3,252 Inventory write-downs 441 420 Share-based compensation expense 1,283 1,015 Change in fair value of acquisition-related contingent liabilities 287 152 Change in fair value of written put options - 392 Other, net 217 144 Changes in assets and liabilities, net of acquisition of a business: Accounts receivable 2,607 9,607 Contract assets 1,069 ( 3,835 ) Inventories ( 2,191 ) 5,010 Prepaid expenses and other current assets 749 2,252 Other assets 113 ( 864 ) Accounts payable and other current liabilities ( 8,362 ) ( 12,122 ) Long-term pension liability 110 108 Other long-term liabilities ( 757 ) 4 Net cash (used in) provided by operating activities ( 1,988 ) 9,447 CASH FLOWS FROM INVESTING ACTIVITIES Additions to property, plant and equipment ( 1,131 ) ( 675 ) Net cash used in investing activities ( 1,131 ) ( 675 ) CASH FLOWS FROM FINANCING ACTIVITIES Borrowings under revolving lines of credit 19,000 7,000 Payments under revolving lines of credit ( 8,000 ) ( 10,000 ) Payments of term loan ( 1,406 ) ( 937 ) Payment of cash dividends ( 2,280 ) ( 2,330 ) Payment of acquisition-related contingent liabilities - ( 557 ) Proceeds received on exercise of stock options and shares withheld for taxes 87 449 Common shares repurchased and retired ( 3,777 ) - Net cash provided by (used in) financing activities 3,624 ( 6,375 ) Effect of currency exchange rates on cash 486 ( 253 ) Net increase in cash and cash equivalents 991 2,144 Cash and cash equivalents balance, beginning of period 18,766 19,896 Cash and cash equivalents balance, end of period $ 19,757 $ 22,040 See accompanying Condensed Notes to the Consolidated Financial Statements. 7 Table of Contents Superior Group of Companies , Inc. and Subsidiaries Condensed Notes to the Consolidated Financial Statements (Unaudited) NOTE 1 – Description of Business and Basis of Presentation : Description of business Superior Group of Companies, Inc. (together with its subsidiaries, “the Company,” “Superior,” “we,” “our,” or “us”) was organized in 1920 and was incorporated in 1922 as a New York company under the name Superior Surgical Mfg. Co., Inc. In 1998, the Company changed its name to Superior Uniform Group, Inc. and redomiciled to Florida. Effective on May 3, 2018, Superior Uniform Group, Inc. changed its name to Superior Group of Companies, Inc. 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 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. Basis of presentation The accompanying unaudited consolidated financial statements of Superior included herein have been prepared in accordance with generally accepted accounting principles in the United States of America ("GAAP") and the rules and regulations of the Securities and Exchange Commission (the "SEC"). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations. Intercompany items have been eliminated in consolidation. These consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company’s Annual Report on Form 10 -K for the year ended December 31, 2024 , and filed with the SEC. Management believes that the information furnished includes all adjustments of a normal recurring nature that are necessary to fairly present our consolidated financial position, results of operations and cash flows for the periods indicated. The results of operations for any interim period are not necessarily indicative of results to be expected for the full year. 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 prior year period contain certain reclassifications. Reclassifications only impact items within our statements of comprehensive income, our statements of shareholders' equity, our statements of cash flows and Note 7 Inventories. These reclassifications did not have an effect on the Company’s consolidated results of operations, financial position or cash flows for the quarter ended March 31, 2025 . 8 Table of Contents 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" . The ASU requires that an entity disclose specific categories in the effective tax rate reconciliation as well as provide additional information for reconciling items that meet a quantitative threshold. 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, 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. The amendments should be applied on a prospective basis although retrospective application 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. 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. 9 Table of Contents 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 chain, 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 apparel. This segment sells its products 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 Other Total For the Three Months Ended March 31, 2025: Net sales $ 86,474 $ 27,263 $ 24,225 $ ( 865 ) $ - $ 137,097 Cost of goods sold 58,787 17,130 11,244 ( 505 ) - 86,656 Gross margin 27,687 10,133 12,981 ( 360 ) - 50,441 Selling and administrative expenses 23,420 9,526 10,921 ( 360 ) 6,595 50,102 Depreciation and amortization 1,480 912 722 - 90 3,204 Segment EBITDA(1) $ 5,747 $ 1,519 $ 2,782 $ - $ ( 6,505 ) $ 3,543 Branded Products Healthcare Apparel Contact Centers Intersegment Eliminations Other Total For the Three Months Ended March 31, 2024: Net sales $ 87,068 $ 29,237 $ 23,552 $ ( 1,015 ) $ - $ 138,842 Cost of goods sold 55,327 17,727 10,908 ( 437 ) - 83,525 Gross margin 31,741 11,510 12,644 ( 578 ) - 55,317 Selling and administrative expenses 23,294 9,812 10,421 ( 578 ) 5,989 48,938 Depreciation and amortization 1,500 937 723 - 92 3,252 Segment EBITDA(1) $ 9,947 $ 2,635 $ 2,946 $ - $ ( 5,897 ) $ 9,631 10 Table of Contents The following table reconciles (loss) income before income tax (benefit) expense to Segment EBITDA (in thousands): Three Months Ended March 31, 2025 2024 (Loss) income before income tax (benefit) expense $ ( 906 ) $ 4,592 Interest expense, net 1,245 1,787 Depreciation and amortization 3,204 3,252 Segment EBITDA $ 3,543 $ 9,631 11 Table of Contents NOTE 3 – 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. 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. 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. For further information regarding our net sales disaggregated by reportable segment see Note 2. 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 $ 7.9 million and $ 3.9 million, for the three months ended March 31, 2025 and 2024 , 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): March 31, December 31, 2025 2024 Accounts receivable $ 92,539 $ 95,092 Current contract assets 50,759 51,688 Current contract liabilities 3,463 2,833 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. The majority of the amounts included in contract assets on December 31, 2024 were transferred to accounts receivable during the three months ended March 31, 2025 . 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. During the three months ended March 31, 2025 , $ 2.0 million of revenue was recognized from the contract liabilities balance as of December 31, 2024 . 12 Table of Contents NOTE 4 – Net (Loss) 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, nonvested shares of restricted stock and nonvested 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 periods presented: Three Months Ended March 31, 2025 2024 Net (loss) income used in the computation of basic and diluted net (loss) income per share (in thousands) $ ( 758 ) $ 3,912 Weighted average shares outstanding - basic 15,599,655 16,028,032 Dilutive common stock equivalents - 425,420 Weighted average shares outstanding - diluted 15,599,655 16,453,452 Net (loss) income per share: Basic $ ( 0.05 ) $ 0.24 Diluted $ ( 0.05 ) $ 0.24 Diluted weighted average shares outstanding excludes shares of common stock of 445,786 for the three months ended March 31, 2025, as their inclusion would have been antidilutive given the Company's net loss. Awards to purchase 304,392 and 400,075 shares of common stock with weighted average exercise prices of $ 21.23 and $ 20.86 per share were outstanding during the three months ended March 31, 2025 and 2024 , 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. 13 Table of Contents NOTE 5 – Long-Term Debt: Debt consisted of the following (in thousands): March 31, December 31, 2025 2024 Credit Facilities: Revolving credit facility due August 2027 $ 33,000 $ 22,000 Term loan due August 2027 63,281 64,688 Less: unamortized debt issuance costs ( 591 ) ( 653 ) Total Debt $ 95,690 $ 86,035 Less: Current portion of long-term debt 5,625 5,625 Long-term debt less current maturities $ 90,065 $ 80,410 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 5.4 % as of March 31, 2025 . 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 March 31, 2025 , there were no outstanding letters of credit under the revolving credit facility. Contractual principal payments for the term loan are as follows: remainder of 2025 - $ 4.2 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 March 31, 2025 , the Company was in compliance with these ratios. 14 Table of Contents NOTE 6 – Contingencies and Geographic Supply Concentrations: Contingencies 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 March 31, 2025 was $ 0.9 million, all of which is expected to be paid in the third quarter of 2025. 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. 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 March 31, 2025 was $ 1.1 million, all of which 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. Geographic Concentrations in the Available Supply of Materials and Product The principal fabrics used in the manufacture of finished apparel goods for Superior’s Branded Products and Healthcare Apparel segments are cotton, polyester, spandex, cotton-synthetic and poly-synthetic blends. The majority of such fabrics are sourced, directly or indirectly, from China. Superior does not have a concentration of suppliers of finished apparel in any single country or region of the world, however, it does contract to manufacture or source the majority of its apparel in the following countries: Haiti, China, Madagascar, Kenya, Vietnam, Pakistan, Bangladesh, and the United States. Additionally, we generally source or manufacture apparel in parts of the world that may be affected by economic uncertainty, political unrest, labor disputes, health emergencies, natural disasters or the imposition of duties, tariffs or other import regulations by the United States. The Branded Products segment also relies on the supply of other types of finished products including hard goods such as drinkware and injection molded plastics along with raw materials that are principally sourced from China, either directly or indirectly. During 2025 tariffs, impacting certain sources of the Company's materials and production, were enacted by the U.S. government, including a higher tariff on finished products from China. We continue to monitor these enacted tariffs and the ongoing negotiations between the U.S. government and the countries in which we manufacture, as well as, evaluate sourcing alternatives. NOTE 7 – Inventories: Inventories consisted of the following amounts (in thousands): March 31, December 31, 2025 2024 Finished goods(1) $ 80,726 $ 81,621 Work in process 1,106 684 Raw materials 16,711 14,370 Inventories $ 98,543 $ 96,675 1 ) Certain raw materials were reclassified to finished goods in the current period and the December 31, 2024 balances were adjusted to the current period presentation. 15 Table of Contents NOTE 8 – Income Taxes: The Company calculates its interim income tax (benefit) provision in accordance with the accounting guidance for income taxes in interim periods. At the end of each interim period, the Company makes its best estimate of the annual expected effective tax rate and applies that rate to its ordinary year-to-date income or loss. The tax expense or benefit related to significant, unusual, or extraordinary items that will be separately reported or reported net of their related tax effect are individually computed and recognized in the interim period in which those items occur. The computation of the annual expected effective tax rate at each interim period requires certain estimates and assumptions including, but not limited to, the expected operating income for the year and permanent and temporary differences. The accounting estimates used to compute the provision for income taxes may change as new events occur, additional information is obtained or the tax environment changes. For the three months ended March 31, 2025 , the Company recorded a benefit for income taxes of $ 0.1 million, which represents an effective tax rate of 16.3 %. The income tax benefit and the effective tax rate for the three months ended March 31, 2025 was primarily impacted by the variability in the mix of earnings across the Company’s foreign and domestic operations, subject to various statutory tax rates in those jurisdictions. For the three months ended March 31, 2024 , the Company recorded a provision for income taxes of $ 0.7 million, which represents an effective tax rate of 14.8 %. The income tax provision and the effective tax rate for the three months ended March 31, 2024 was primarily impacted by the variability in the mix of earnings across the Company’s foreign and domestic operations, subject to various statutory tax rates in those jurisdictions as well as the windfall benefits associated with the stock option exercises in the quarter. NOTE 9 – Other Information : The activity in the allowance for doubtful accounts receivable was as follows (in thousands): March 31, December 31, 2025 2024 Balance at the beginning of year $ 3,101 $ 4,237 Credit loss (reversal) expense ( 131 ) 232 Write-Off of Accounts Receivable ( 210 ) ( 1,368 ) Balance at the end of year $ 2,760 $ 3,101 Other current liabilities consisted of the following (in thousands): March 31, December 31, 2025 2024 Salaries, wages, commissions and other compensation $ 10,806 $ 18,544 Contract liabilities 3,463 2,833 Accrued rebates 1,674 1,593 Current operating lease liabilities 4,601 4,572 Customer deposits 8,546 7,750 Other accrued expenses 9,391 9,075 Other current liabilities $ 38,481 $ 44,367 16 Table of Contents