What changed in this filing

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Item 7. Management’s Discussion and Analysis

2026-03-03 compared with 2025-03-11 · 99 added, 68 removed, 157 unchanged (52% of the section changed)

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Business Outlook

Superior Group of Companies, Inc.

(together with its subsidiaries, the “Company,” “Superior,” “we,” “our,” or “us”) is comprised of three reportable business segments:

Superior is comprised of three reportable business segments:

(1) Branded Products, (2) Healthcare Apparel and (3) Contact Centers.

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We sell our brands of healthcare service apparel to healthcare laundries, dealers, distributors and retailers primarily in the United States.

From a long-term perspective, we expect that demand for our signature marketing brands, including Fashion Seal Healthcare® and Wink®, will continue to provide opportunities for growth and increased market share.

From a long-term perspective, we expect that demand for our portfolio of brands Wink® and Fashion Seal Healthcare®, our trade name CID Resources and our license of Carhartt Medical, will continue to provide opportunities for growth and increased market share.

Contact Centers

In our Contact Centers segment (also known as “The Office Gurus”), which operates in El Salvador, Belize, Jamaica, Dominican Republic, and the United States, we provide outsourced, nearshore business process outsourcing, contact and call-center support services to North American customers.

In our Contact Centers segment (also known as The Office Gurus), which operates in El Salvador, Belize, Dominican Republic, the United States and Jamaica until its closure on June 15, 2025, we provide outsourced, nearshore and onshore business process outsourcing, contact and call-center support services to North American customers.

These services are also provided internally to the Company’s other two operating segments.

The Office Gurus has become an award-winning business process outsourcer offering inbound and outbound voice, email, text, chat and social media support.

The nearshore call-center market has grown as businesses look to reduce operating costs while maintaining high-quality customer support.

Nearshore operators are able to provide comparable service to their U.S.

The nearshore call-center market specifically has grown as businesses look to reduce operating costs while maintaining high-quality customer support.

Nearshore operators can provide comparable service to their U.S.

counterparts at a fraction of the price.

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Global Economic and Political Conditions

Economic and political events over the past several years have altered the landscape in which we and other U.S.

companies operate in a variety of ways.

World events, including the Russian invasion of Ukraine and the resulting economic sanctions have impacted the global economy, including by exacerbating inflationary and other pressures.

The ongoing conflict in the Middle East could continue to affect oil prices and have other negative effects on the global economy.

Civil unrest in countries where we manufacture products, such as Haiti, may result in our facilities incurring damage or destruction that interrupts our manufacturing processes and adversely affects our reputation and our relationships with our customers.

While inflation and interest rates decreased in 2024, the effects of the conflict in the Middle East, further fluctuations in inflationary conditions and interest rates, additional sanctions or retaliatory measures related to the Russia-Ukraine crisis or other situations, including deteriorating or prolonged diplomatic tension between the United States and China, could further negatively affect U.S.

and international commerce and exacerbate or prolong the period of high energy prices.

Prolonged or recurring disruptions or instability in the United States and global economies, and how the world reacts to those disruptions or instability, could have long-term impacts on our business.

These business impacts could negatively affect us in a number of ways, including, but not limited to, reduced demand for our core products and services, reductions to our revenue and profitability, costs associated with complying with new or amended laws and regulations affecting our business, declines in our stock price, reduced availability and less favorable terms of future borrowings, valuation of our pension obligations, reduced credit-worthiness of our customers, and potential impairment of the carrying value of indefinite-lived intangible assets.

During 2025, the U.S.

government imposed higher tariffs and/or new tariffs which impacted certain sources of the Company’s materials and production.

Additionally, the U.S.'s trade agreements and/or preferences with certain countries in Africa, through the African Growth and Opportunity Act (AGOA), and with Haiti, through the Haitian Hemispheric Opportunity through Partnership Encouragement Act (HOPE) and the Haiti Economic Lift Program of 2010 (HELP), expired on September 30, 2025.

In February 2026, these agreements were retroactively extended until December 2026.

The process and timing for receiving a refund of duties paid in the interim period between expiration and when retroactivity was granted has yet to be determined.

If not renewed and/or extended after December 2026, the cost of continuing to do business in these countries likely will negatively impact our results of operations and financial position, or result in us moving sourcing and manufacturing from these countries to countries with more favorable cost structures.

We will continue to monitor the status of the trade agreements and preferences involving the U.S.

government and the countries in which we source and/or manufacture products.

See Item 8, “ NOTE 7 – Contingencies and Geographic Supply Concentrations ,” and "Item 1A — Risk Factors — Recently imposed tariffs may have a material adverse impact on our business.

On February 20, 2026, the United States Supreme Court ruled that the International Emergency Economic Powers Act (IEEPA) does not authorize the President to impose tariffs, effectively invalidating the tariffs imposed via that method.

These IEEPA tariffs stopped being collected at 12:00 a.m.

on February 24, 2026.

The Supreme Court’s ruling left open the questions of whether, how, and when payors of the tariffs might receive refunds.

A determination of these, and other questions, could take a significant amount of time to resolve.

Soon after the Supreme Court’s decision, President Trump announced his intention to impose tariffs using different legal bases.

Already, a new 10% tariff has been implemented under Section 122 of the Trade Act of 1974, effective as of February 24, 2026.

The Supreme Court’s ruling and President Trump’s response add new uncertainty to global trade, including the Company’s exposure to tariffs.

It is uncertain how inflation and interest rates will be impacted in 2026 by the imposition of tariffs and other trade-related actions or inactions.

World events, such as the Russia-Ukraine War, the joint U.S-Israeli strikes on Iran in February 2026 and other conflicts in the Middle East, continue to negatively affect the global economy.

Additionally, civil unrest in countries where we manufacture products, like Haiti, may result in our facilities incurring damage or destruction and could interrupt our manufacturing processes and adversely affect our reputation and our relationships with our customers.

Prolonged or recurring disruptions or instability in the United States and global political and economic environment, and how the world reacts to those disruptions or instability, could have long-term impacts on our business.

These business impacts could negatively affect us in a number of ways, including, but not limited to, reduced demand for our core products and services, declines in our revenue and profitability, increased costs related to higher oil and natural gas prices and/or supply imbalances in the oil and natural gas markets, costs associated with complying with new or amended laws and regulations and mitigating the increased cost of the new tariffs and duties affecting our business, declines in our stock price, reduced availability and less favorable terms of future borrowings, negative impacts on the valuation of our pension obligations, reduced credit-worthiness of our customers, and potential impairment of the carrying value of indefinite-lived intangible assets and goodwill.

The Year Ended December 31, 2025 Compared to the Year Ended December 31, 2024

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The Company generated net income of $7.0 million during the year ended December 31, 2025 and net income of $12.0 million during the year ended December 31, 2024.

The increase in net income during the year ended December 31, 2024 compared to the year ended December 31, 2023 was primarily due to increases in net sales and gross margins in all three of our reportable segments, and a decrease in interest expense, partially offset by an increase in selling and administrative expenses across all of our reportable segments.

The decrease in net income during the year ended December 31, 2025 compared to the year ended December 31, 2024 was primarily due to decreases in gross margins in all three of our reportable segments, partially offset by a decrease in interest expense.

EBITDA was $25.7 million and $34.1 million during the years ended December 31, 2025 and 2024, respectively.

EBITDA for the year ended December 31, 2024 compared to the year ended December 31, 2023 increased primarily due to increased net sales and gross margins in all three of our reportable segments, partially offset by an increase in selling and administrative expenses across all of our reportable segments.

EBITDA for the year ended December 31, 2025 compared to the year ended December 31, 2024 decreased primarily due to lower gross margins in all three of our reportable segments.

For a reconciliation of EBITDA to net income, its most directly comparable financial measure calculated and presented in accordance with GAAP, please read “Non-GAAP Financial Measure” below.

Net sales for the Company increased 0.1% or $0.5 million, for the year ended December 31, 2025 compared to the year ended December 31, 2024.

The increase was attributable to net sales increases in all three of our reportable segments.

The increase was primarily attributable to a net sales increase in our Branded Products reportable segment.

Branded Products net sales increased 2.2%, or $7.8 million, for the year ended December 31, 2025 compared to the year ended December 31, 2024.

The increase was primarily due to the expansion of business within existing accounts and new client wins.

Healthcare Apparel net sales increased 4.7%, or $5.3 million, for the year ended December 31, 2024 compared to the year ended December 31, 2023.

The increase was primarily due to higher digital sales from both our wholesale customers and our direct-to-consumer website, partially offset by lower volume from our store-based wholesale customers.

Contact Centers net sales increased 6.0% before intersegment eliminations and 7.4% after intersegment eliminations for the year ended December 31, 2024 compared to the year ended December 31, 2023.

The increase in net sales was attributable to sales growth from both new and existing customers.

The increase was primarily due to an additional $11.0 million in net sales attributable to 3 Point branding company we acquired in December 2024.

This increase was partially offset by a net volume decrease within existing large enterprise accounts.

Healthcare Apparel net sales decreased 2.8%, or $3.3 million, for the year ended December 31, 2025 compared to the year ended December 31, 2024.

The decrease in net sales was primarily due to volume decreases within existing customer accounts.

Contact Centers net sales decreased 4.6% or $4.4 million before intersegment eliminations and 4.3% or $4.0 million after intersegment eliminations for the year ended December 31, 2025 compared to the year ended December 31, 2024.

The decrease in net sales versus the year-ago period reflects continued macroeconomic headwinds, which continue to contribute to client downsizing and customer attrition outpacing new customer acquisitions.

Gross margin is defined as net sales less cost of goods sold.

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Gross margin rate is defined as gross margin divided by net sales.

Gross margin rate for the Company was 39.0% for the year ended December 31, 2024 up from 37.5% for the year ended December 31, 2023.

The rate increase was primarily due to an improvement in gross margin rates in our Branded Products and Healthcare Apparel reportable segments.

Gross margin rate for the Company was 37.6% for the year ended December 31, 2025 down from 39.0% for the year ended December 31, 2024.

The rate decrease was primarily due to decreases in gross margins in all three of our reportable segments.

Gross margin rate for our Branded Products segment was 34.3% for the year ended December 31, 2025 and 35.3% for the year ended December 31, 2024.

The gross margin rate increased as compared to the prior year period primarily driven by sourcing mix resulting in lower product costs and pricing increases to existing customers.

The gross margin rate decreased as compared to the prior year period due to higher product costs.

Gross margin rate for our Healthcare Apparel segment was 36.2% for the year ended December 31, 2025 and 38.4% for the year ended December 31, 2024.

The rate increase was primarily driven by lower supply chain costs.

The gross margin rate decreased as compared to 2024, primarily due to higher product costs in 2025 and unfavorable sales product mix.

Gross margin rate for our Contact Centers segment was 52.9% for the year ended December 31, 2025 and 53.8% for the year ended December 31, 2024.

The rate remained flat year over year as cost increases kept pace with revenue increases.

The decrease in the gross margin rate was attributable to higher agent costs and unfavorable margin mix associated with the closure of our Jamaica contact center.

Selling and Administrative Expenses

As a percentage of net sales, total selling and administrative expenses was 35.3% for the year ended December 31, 2024 and 33.9% for the year ended December 31, 2023.

The rate increase was primarily driven by increased commissions, employee related costs, increased expenditures related to marketing, advertising activities and the expiration of our written put option.

As a percentage of net sales, total selling and administrative expenses was 35.2% for the year ended December 31, 2025, mostly flat compared to 35.3% for the year ended December 31, 2024.

As a percentage of net sales, selling and administrative expenses for our Branded Products segment was 26.6% for the year ended December 31, 2025 and 26.7% for the year ended December 31, 2024.

The rate increase was primarily due to increased employee related costs and sales commissions, partially offset by a decrease in bad debts expense for customer accounts.

The rate remained flat year over year as cost increases kept pace with increases in net sales.

As a percentage of net sales, selling and administrative expenses for our Healthcare Apparel segment was 34.1% for the year ended December 31, 2025 and 34.5% for the year ended December 31, 2024.

The rate increase was primarily attributable to an increase in expenditures related to marketing and advertising activities along with employee related costs which were partially offset by expense leverage on increased net sales.

The rate decrease as compared to the prior year period was primarily driven by a decrease in depreciation expense and lower employee related costs.

As a percentage of net sales, selling and administrative expenses for our Contact Centers segment was 45.8% for the year ended December 31, 2025 and 44.4% for the year ended December 31, 2024.

The rate increase was primarily attributable to an increase in employee related expenses, including both headcount and select pay rate increases to support sales growth, as well as, an increase in bad debts expense.

Selling and administrative expenses for our Other segment, which represents unallocated Corporate costs, increased by $3.0 million, primarily driven by an increase in employee related costs, third party professional services and the fair value recognition of a written put option which expired in the second quarter of 2024.

The rate increase as compared to the prior year period was primarily driven by an increase in credit loss expense.

Overall selling and administrative expenses were down in line with the decrease in sales and the exit of Jamaica.

Selling and administrative expenses for our "Other" segment, which represents unallocated corporate costs, decreased by $0.2 million, primarily driven by decreases in employee related costs.

Interest Expense

Interest expense decreased to $5.1 million for the year ended December 31, 2025 from $6.4 million for the year ended December 31, 2024.

This decrease was due to a $30.7 million decrease in our weighted average outstanding borrowings along with a decrease in the weighted average interest rate on those borrowings from 6.7% for the year ended December 31, 2023 to 5.5% for the year ended December 31, 2024.

Income tax expense increased to $2.3 million for the year ended December 31, 2024 from $1.0 million for the year ended December 31, 2023.

This decrease was due to a lower weighted average interest rate on those borrowings from 5.5% for the year ended December 31, 2024 to 5.1% for the year ended December 31, 2025.

Income tax expense decreased to $1.2 million for the year ended December 31, 2025 from $2.3 million for the year ended December 31, 2024.

The effective tax rate was 15.1% and 16.0% for the year ended December 31, 2025 and 2024, respectively.

Income tax expense and the effective tax rate for the year ended December 31, 2024 and 2023 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.

Income tax expense and the effective tax rate for the year ended December 31, 2025 and 2024 were 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.

The effective tax rate may vary from year to year due to discrete, unusual or non-recurring items, the resolution of income tax audits, changes in tax laws, the tax impact from employee share-based payments, or other items.

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Short-Term Liquidity

For the next twelve months, our primary capital requirements are for capital to maintain our operations, meet contractual obligations, primarily consisting of our revolving credit facility, term loan, operating leases and acquisition-related contingent liabilities, and fund capital expenditures, dividends, stock repurchases, any potential merger and acquisition activity and other general corporate purposes.

We currently anticipate that we will spend more in capital expenditures in 2025 than we spent in 2024.

Management currently believes that the combination of our current cash level, cash flows provided by operating activities and availability under the revolving credit facility will be sufficient to satisfy the above requirements for the next twelve months.

For the next twelve months, our primary capital requirements are for capital to maintain our operations, meet contractual obligations, primarily consisting of our revolving credit facility and term loan (collectively, our "Credit Facilities") and operating leases, and fund capital expenditures, dividends, stock repurchases, any potential merger and acquisition activity and other general corporate purposes.

Management believes that the combination of our current cash level, cash flows provided by operating activities and availability under the revolving credit facilities will be sufficient to satisfy the above requirements for the next twelve months.

Long-Term Liquidity

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The Company at all times evaluates its capital expenditure program in light of prevailing economic conditions.

The Company's material contractual obligations include outstanding debt, operating leases, long-term pension liability and non-qualified deferred compensation plan liabilities in Other Liabilities.

The Company's material contractual obligations include outstanding debt, long-term pension liability, operating leases and non-qualified deferred compensation plan liabilities in Other Long-Term Liabilities.

For additional details related to the Company’s long-term contractual obligations for long-term debt see Note 5, for contractual obligations for leases see Note 14 and for contractual obligations for acquisition-related contingent liabilities see Note 7.

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As of December 31, 2025, we had $23.7 million of cash on our balance sheet, of which $16.2 million of cash was held at foreign subsidiaries.

Excess cash of $9.0 million from foreign operations may generally be transferred to operations in the US.

Excess cash of $8.4 million from foreign operations may generally be transferred to operations in the U.S.

Cash Flows from Operations

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In 2025, net cash provided by operating activities was $19.7 million.

Cash collections from customers exceeded aggregate cash payments to vendors, lessors, employees and lenders primarily driven by the Company’s efforts to reduce outstanding receivable balances.

Cash collections from customers exceeded aggregate cash payments to vendors, lessors, employees and lenders.

Collections are down from the prior year primarily related to timing of order delivery at year end.

In 2024, net cash provided by operating activities was $33.4 million.

Cash collections from customers exceeded aggregate cash payments to vendors, lessors, employees and lenders primarily driven by the Company’s collection of receivable balances coupled with positive non-cash add-backs for contract assets and decreases in cash outflows for inventory.

Cash collections from customers exceeded aggregate cash payments to vendors, lessors, employees and lenders primarily driven by the Company’s efforts to reduce outstanding receivable balances.

Credit Facilities and Debt Activity

The Company’s primary source of liquidity has been its net income and the use of credit facilities and term loans.

The Company’s primary source of liquidity has been its net income and the use of its Credit Facilities.

The Company has access to a revolving credit facility with a maximum principal amount of $125.0 million and a term loan in the original aggregate principal amount of $75.0 million 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.

For the year ended December 31, 2024, the Company had $7.7 million of net debt payments, consisting of $50.0 million in payments on the revolving credit facility and $4.7 million of payments in the term loan.

For the year ended December 31, 2025, the Company had $7.4 million of net debt borrowings, consisting of $82.0 million in payments on the revolving credit facility and $5.6 million of payments in the term loan.

For the year ended December 31, 2024, the Company had $7.7 million in net debt payments, consisting of $50.0 million in payments on the revolving credit facility and $4.7 million in payments on the term loan.

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Both the debt payments and borrowings during 2025 and 2024 primarily related to the utilization of our revolving credit facility in the normal course of business.

In the future, the Company may continue to use credit facilities and other secured and unsecured borrowings as a source of liquidity.

In the future, the Company may continue to use its Credit Facilities and other secured and unsecured borrowings as a source of liquidity.

Additionally, the cost of the Company’s future sources of liquidity may differ from the costs of the Company’s sources of liquidity to date.

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The Company anticipates that it will continue to pay dividends in the future as financial conditions permit.

On August 9, 2024, the Company’s Board of Directors approved a new 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.

On September 19, 2025, the Company entered into a 10b5-1 trading plan (the “Plan”) for the purpose of repurchasing up to a specified number of shares of the Company’s outstanding common stock (the “Repurchase Limit”) in accordance with the $17.5 million share repurchase program ("Program") previously authorized by the Company’s Board of Directors, which was announced by the Company on March 11, 2025.

The Plan is intended to comply with Rule 10b5-1(c) under the Exchange Act.

The Plan allows the Company to repurchase shares up to the Repurchase Limit commencing September 20, 2025 and ending on the earlier of the date on which the Repurchase Limit is reached or other events specified in the Plan.

Repurchases of common stock under the Plan will be administered through an independent broker and are subject to certain price, market, volume and timing constraints specified in the Plan.

The approximate dollar value of shares that may still be purchased under the Program is $10.1 million as of December 31, 2025.

The Program 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.

Shares purchased under the Program are constructively retired and returned to unissued status.

See Part II, Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

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.

Non-GAAP Financial Measure

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Interest expense

Income tax expense

Income tax expense, net

Depreciation and amortization

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Our actual results may differ from these estimates under different assumptions or conditions.

Critical accounting estimates are those estimates made in accordance with generally accepted accounting principles that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on our financial condition or results of operations.

Critical accounting estimates are those estimates made in accordance with GAAP that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on our financial condition or results of operations.

We believe that the following critical accounting policies and estimates have a higher degree of inherent uncertainty and require our most significant judgments.

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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.

Variable consideration is recorded based upon historical experience.

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

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An additional write-down in value of 5% of inventories would result in additional expense of approximately $5.0 million.

Indefinite-lived intangible assets such as trade names are not amortized but are subject to an annual impairment test in the fourth quarter based or on an interim basis if there are indicators of impairment present.

During the third quarter of 2024, the Company performed an interim impairment test on certain of its indefinite-lived trade name intangible assets within the Healthcare segment which resulted in an immaterial impairment of $0.3 million.

Annual Impairment Tests:

The Company performs its goodwill and indefinite-lived intangible impairment tests annually or more frequently as events or changes in circumstances warrant.

The timing of the annual impairment tests was changed to August 31 st , and historically was performed during the fourth quarter.

Please see Note 1 – Description of Business, Basis of Presentation and Summary of Accounting Policies – Change in Accounting Policy , which disclosure is incorporated herein by reference.

Indefinite-lived Intangible Assets:

As of August 31, 2025, the Company performed its annual impairment test for its indefinite-lived trade name intangible assets which did not result in an impairment.

We conducted a quantitative assessment using the relief-from-royalty method, which we believe to be an acceptable methodology due to its common use by valuation specialists in determining the fair value of intangible assets.

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Each royalty rate is determined based on the profitability of the trade name to which it relates.

In determining the fair value of our trade name indefinite lived intangible assets as of September 30, 2024, we used the following key assumptions:

• A weighted-average royalty rate of 2.8%;

In determining the fair value of our trade name indefinite lived intangible assets as of August 31, 2025, we used the following key assumptions:

• Royalty rates of 0.75% - 3.0%;

• A tax rate of 27.0%;

• A long-term growth rate of 3.0%;

• An assumed discount rate of 16.5%

The Company performed its annual impairment test for definite-lived intangible assets in the fourth quarter of 2024 and 2023.

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

• Assumed discount rates of 14.5% - 16.5%

The discounted cash flow approach that we use for valuing goodwill as part of our impairment testing approach involves estimating future cash flows expected to be generated from the related assets, discounted to their present value using a risk-adjusted discount rate.

Terminal values are also estimated and discounted to their present value.

Assessing the recoverability of goodwill requires us to make estimates and assumptions about sales, operating margins, growth rates and discount rates based on our forecasts, business plans, economic projections, anticipated future cash flows and marketplace data.

We performed our annual impairment test as of August 31, 2025, which did not result in any goodwill impairment.

In determining the fair value of our reporting unit, we used the following assumptions:

Expected cash flows underlying our business plans for the initial five-year period were based on a detailed, multi-year forecast performed by our BAMKO reporting unit;

Long-term growth rate of 3.0%;

Discount rate of 14.0%

No impairments were identified during the third quarter 2025 annual goodwill and indefinite-lived intangible impairment tests.

This methodology assumes that, in lieu of ownership, a third party would be willing to pay a royalty in order to exploit the related benefits of these assets.

The assumptions that have the most significant effect on the fair value calculations are the royalty rates, projected revenue growth rates, discount rates, and terminal values.

Each royalty rate is determined based on the profitability of the trade name to which it relates.

Q4 Impairment Test

The Company identified an indicator of impairment related to the CID Resources indefinite-lived intangible asset of the Healthcare Apparel segment.

A quantitative interim impairment test was performed using the relief-from-royalty method which resulted in no impairment.

The assumptions used to determine the fair value of our trade name indefinite lived intangible assets as of December 31, 2025 were consistent with the annual test as of August 31, 2025, discussed above.

The Company is required to estimate and record income taxes payable for federal, state and foreign jurisdictions in which the Company operates.

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As of December 31, 2025, we had an accrued liability of $0.9 million for unrecognized tax benefits.

We accrue interest and penalties related to unrecognized tax benefits in income tax expense, and the related liability is included in other long-term liabilities in our balance sheet.

We recognize interest and penalties associated with the unrecognized tax benefit as part of the income tax provision and include accrued interest and penalties with the related reserve in other long-term liabilities in our consolidated balance sheets.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis