What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-08-04 compared with 2026-05-04 · 167 added, 73 removed, 115 unchanged (68% of the section changed)

29 unchanged sentences

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.

In February 2026, these agreements were retroactively extended until December 2026 and during the six months ended June 30, 2026, the Company recorded a consolidated duties receivable of $2.3 million within other current assets through a reduction of inventory and reversal of cost of goods sold of $0.4 million, primarily in its Healthcare Apparel segment of which the majority has been collected.

If not renewed and/or extended beyond 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.

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government created a system through which refunds of certain entries could be processed.

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

Although the United States Supreme Court ruling invalidated the tariffs paid prior to February 24, 2026, as of March 31, 2026, the Company has not recorded a tariff refund receivable due to the uncertainty of the amount and collection of a refund.

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.

The Company's accounting policy is to recognize tariff refunds (as a reduction of cost of goods sold) when the refund is probable and recognize corresponding refunds to customers (as a reduction of net sales) where contractually required or an implicit obligation exists.

As of June 30, 2026, the Company has recorded a $4.3 million tariff refund, of which $3.1 million has been received in cash and corresponding refunds to customers of $2.7 million.

government implemented a new 10.0% tariff under Section 122 of the Trade Act of 1974, effective as of February 24, 2026.

This tariff terminated on July 24, 2026.

government implemented new tariffs generally ranging from 10.0% to 12.5% under Section 301 of the Trade Act of 1974, effective as of July 24, 2026.

It is uncertain how inflation and interest rates will be impacted during the remainder of this year and in future years 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 War with Iran in 2026 and other conflicts in the Middle East, continue to negatively affect the global economy.

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Prolonged or recurring disruptions or instability in the United States and global political and economic environments, 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.

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 additional impairment of the carrying value of indefinite-lived intangible assets and potentially goodwill.

Results of Operations

Three Months Ended March 31, 2026 Compared to Three Months Ended March 31, 2025 (in thousands)

For the Three Months Ended March 31,

Three Months Ended June 30, 2026 Compared to Three Months Ended June 30, 2025 (in thousands)

For the Three Months Ended June 30,

Branded Products

1 unchanged sentence

Contact Centers

Intersegment eliminations

Consolidated net sales

Gross margin:

Branded Products

Healthcare Apparel

Contact Centers

Net intersegment eliminations

Consolidated gross margin

Selling and administrative expenses:

Branded Products

Healthcare Apparel

Contact Centers

Intersegment Eliminations

Corporate selling and administrative expenses

Consolidated selling and administrative expenses

Interest expense, net

Tradename impairment charge

Income before income tax expense

Income tax (benefit) expense

Adjusted EBITDA(1)

(1) Please refer to "Non-GAAP Financial Measure" below for a reconciliation of Adjusted EBITDA to net income.

The Company generated net income of $1.2 million and $1.6 million during the three months ended June 30, 2026 and 2025, respectively.

The decrease in net income for the three months ended June 30, 2026 compared to the three months ended June 30, 2025 was due to a significant decline in our Healthcare Apparel segment results, primarily driven by a trade name impairment charge and write-down of inventory, partially offset by net tariff refunds.

This decline was partially offset by growth in our Branded Products and Contact Centers segments.

Adjusted EBITDA

Adjusted EBITDA was $7.7 million and $6.1 million during the three months ended June 30, 2026 and 2025, respectively.

The Adjusted EBITDA increase was primarily due to growth in our Branded Products and Contact Centers segments, partially offset by a decline in our Healthcare Apparel segment.

For a reconciliation of Adjusted EBITDA to net income, its most directly comparable financial measure calculated and presented in accordance with generally accepted accounting principles in the United States of America (“GAAP”), please read “Non-GAAP Financial Measure” below.

Net sales for the Company increased 2.6%, or $3.8 million, for the three months ended June 30, 2026 compared to the three months ended June 30, 2025.

The increase was attributable to increases in net sales in our Branded Products segment, partially offset by declines in our Healthcare Apparel and Contact Centers segments.

Branded Products net sales increased 6.2%, or $5.7 million, for the three months ended June 30, 2026 compared to the three months ended June 30, 2025.

The increase was primarily due to volume increases of $7.5 million within existing customer accounts, partially offset by tariff refunds.

Healthcare Apparel net sales decreased 3.6%, or $1.0 million, for the three months ended June 30, 2026 compared to the three months ended June 30, 2025 primarily due to tariff refunds.

Contact Centers net sales decreased 3.7% or $0.9 million, before intersegment eliminations for the three months ended June 30, 2026 compared to the three months ended June 30, 2025.

The 3.7% decrease versus the prior period reflects client attrition that exceeded growth from new customer acquisitions.

Gross margin rate for the Company was 38.0% for the three months ended June 30, 2026 and 38.4% for the three months ended June 30, 2025.

The rate decrease was primarily due to lower gross margin rates in our Healthcare Apparel and Contact Centers segments.

Gross margin rate for our Branded Products segment was 36.5% for the three months ended June 30, 2026 and 35.6% for the three months ended June 30, 2025.

The rate increase was primarily driven by a favorable shift in the mix of pricing and customers.

Gross margin rate for our Healthcare Apparel segment was 32.9% for the three months ended June 30, 2026 and 35.5% for the three months ended June 30, 2025.

The rate decrease was primarily driven by the impact of a $2.6 million additional write-down of inventory, partially offset by $1.8 million of net tariff refunds.

Gross margin rate for our Contact Centers segment was 50.9% for the three months ended June 30, 2026 and 52.6% for the three months ended June 30, 2025.

The decrease in the gross margin rate was primarily attributable to higher employee-related costs as compared to the prior year period.

Selling and Administrative Expenses

Selling and administrative expenses decreased $0.9 million for the three months ended June 30, 2026, compared to the three months ended June 30, 2025.

As a percentage of net sales, total selling and administrative expenses was 34.7% for the three months ended June 30, 2026 and 36.3% for the three months ended June 30, 2025.

The rate decrease was driven by expense leverage in our Branded Products segment and lower expenses in our Contact Centers segments.

Branded Products selling and administrative expenses increased $0.6 million for the three months ended June 30, 2026 compared to the three months ended June 30, 2025.

As a percentage of net sales, selling and administrative expenses was 26.4% for the three months ended June 30, 2026, down slightly from 27.5% for the three months ended June 30, 2025 driven by expense leverage from the second quarter sales increase.

Healthcare Apparel selling and administrative expenses decreased $0.1 million for the three months ended June 30, 2026 compared to the three months ended June 30, 2025.

Selling and administrative expenses as a percentage of net sales increased to 36.5% for the three months ended June 30, 2026 from 35.7% for the three months ended June 30, 2025.

Contact Centers selling and administrative expenses decreased $1.3 million for the three months ended June 30, 2026 compared to the three months ended June 30, 2025 due to a reduction in credit loss expense as compared to the prior year period.

As a result, selling and administrative expenses as a percentage of net sales decreased to 44.8% for the three months ended June 30, 2026 from 48.4% for the three months ended June 30, 2025.

Corporate selling and administrative expenses were about flat to last year.

Interest Expense, Net

Interest expense, net decreased to $1.0 million for the three months ended June 30, 2026 from $1.3 million for the three months ended June 30, 2025.

This decrease was due to a lower weighted average interest rate on borrowings, from 5.6% for the three months ended June 30, 2025 to 4.8% for the three months ended June 30, 2026.

Intangible Assets Impairment Charge

As a result of an interim impairment assessment, an impairment charge totaling $2.6 million was recognized in the second quarter of 2026 to reduce the carrying value of Healthcare Apparel trade names to their estimated fair value.

An income tax benefit of ($0.01) million was recognized for the three months ended June 30, 2026 compared to an income tax expense of $0.3 million for the three months ended June 30, 2025.

The effective tax rate was (0.8%) benefit and 15.5% expense for the three months ended June 30, 2026 and 2025, respectively.

Income tax expense and the effective tax rate for the three months ended June 30, 2026 was primarily impacted by the discrete tax benefit relating to the $2.6 million trade name impairment charge recorded during the second fiscal quarter of 2026.

The rate for both periods was further 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 quarter to quarter 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.

Six Months Ended June 30, 2026 Compared to Six Months Ended June 30, 2025 (in thousands)

For the Six Months Ended June 30,

Branded Products

Healthcare Apparel

Contact Centers

Intersegment eliminations

Consolidated net sales

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Intersegment Eliminations

Corporate selling and administrative expenses

Consolidated selling and administrative expenses

Interest expense, net

Income (loss) before income tax expense

Income tax expense (benefit)

Net income (loss)

(1) Please refer to "Non-GAAP Financial Measure" below for a reconciliation of EBITDA to net (loss) income.

The Company generated net income of $0.8 million and a net loss of ($0.8) million during the three months ended March 31, 2026 and 2025, respectively.

The increase in net income for the three months ended March 31, 2026 compared to the three months ended March 31, 2025 is inclusive of $1.0 million of severance payments in the Healthcare Apparel reportable segment, and was primarily due to an increase in consolidated gross margins across our Branded Products and Healthcare Apparel reportable segments, along with a decrease in consolidated interest expense, net.

EBITDA was $4.8 million and $3.5 million during the three months ended March 31, 2026 and 2025, respectively.

The EBITDA increase was primarily due to increased earnings driven by the increase in consolidated gross margins.

For a reconciliation of EBITDA to net income, its most directly comparable financial measure calculated and presented in accordance with generally accepted accounting principles in the United States of America (“GAAP”), please read “Non-GAAP Financial Measure” below.

Net sales for the Company increased 2.8%, or $3.8 million, for the three months ended March 31, 2026 compared to the three months ended March 31, 2025.

Tradename impairment charge

Income before income tax expense

Income tax expense

Adjusted EBITDA(1)

(1) Please refer to "Non-GAAP Financial Measure" below for a reconciliation of Adjusted EBITDA to net income.

The Company generated net income of $2.1 million and $0.8 million during the six months ended June 30, 2026 and 2025, respectively.

The increase in net income for the six months ended June 30, 2026 compared to the six months ended June 30, 2025 was primarily due to growth in our Branded Products and Contact Centers segments along with a decrease in consolidated interest expense, net partially offset by a loss in our Healthcare Apparel segment.

Adjusted EBITDA

Adjusted EBITDA was $12.5 million and $9.6 million during the six months ended June 30, 2026 and 2025, respectively.

The Adjusted EBITDA increase was primarily due to growth in our Branded Products and Contact Centers segments partially offset by a loss in our Healthcare Apparel segment.

Net sales for the Company increased 2.7% or $7.6 million, for the six months ended June 30, 2026 compared to the six months ended June 30, 2025.

The increase was attributable to increases in net sales in our Branded Products and Healthcare Apparel reportable segments, partially offset by a decline in our Contact Centers segment.

Branded Products net sales increased 5.1%, or $4.4 million, for the three months ended March 31, 2026 compared to the three months ended March 31, 2025.

The increase was primarily due to volume increases in branded uniform apparel within existing customer accounts.

Healthcare Apparel net sales increased 4.9%, or $1.3 million, for the three months ended March 31, 2026 compared to the three months ended March 31, 2025.

The increase was primarily due to volume increases within existing customer accounts.

Contact Centers net sales decreased 8.1% or $2.0 million, before intersegment eliminations for the three months ended March 31, 2026 compared to the three months ended March 31, 2025.

The 8.1% decrease versus the year-ago quarter reflects prior year client attrition that exceeded growth from new customer acquisitions.

Gross margin rate for the Company was 37.1% for the three months ended March 31, 2026 and 36.8% for the three months ended March 31, 2025.

The rate increase was due to an improvement in gross margin rates in our Branded Products segment.

Gross margin rate for our Branded Products segment was 34.1% for the three months ended March 31, 2026 and 32.0% for the three months ended March 31, 2025.

Branded Products net sales increased 5.7% or $10.1 million, for the six months ended June 30, 2026 compared to the six months ended June 30, 2025.

The increase was primarily due to $11.9 million of volume increases within existing customer accounts partially offset by tariff refunds.

Healthcare Apparel net sales increased 0.6% or $0.3 million, for the six months ended June 30, 2026 compared to the six months ended June 30, 2025.

The increase was primarily due to volume increases within existing customer accounts partially offset by tariff refunds.

Contact Centers net sales decreased 5.9% or $2.9 million, before intersegment eliminations for the six months ended June 30, 2026 compared to the six months ended June 30, 2025.

The 5.9% decrease versus the prior year period reflects client attrition that exceeded growth from new customer acquisitions.

Gross margin rate for the Company was 37.6% for the six months ended June 30, 2026 and 2025.

Gross margin rate for our Branded Products segment was 35.3% for the six months ended June 30, 2026 and 33.9% for the six months ended June 30, 2025.

The rate increase was primarily driven by a favorable shift in the mix of pricing and customers.

Gross margin rate for our Healthcare Apparel segment was 35.6% for the three months ended March 31, 2026 and 37.2% for the three months ended March 31, 2025.

The rate decrease was primarily driven by higher costs compared to the prior year period driven by increased sales with lower margin existing customers.

Gross margin rate for our Contact Centers segment was 52.2% for the three months ended March 31, 2026 and 53.6% for the three months ended March 31, 2025.

Gross margin rate for our Healthcare Apparel segment was 34.3% for the six months ended June 30, 2026 and 36.3% for the six months ended June 30, 2025.

The rate decrease was primarily driven by the impact of a $2.6 million additional write-down of inventory, partially offset by $1.8 million net tariff refunds.

Gross margin rate for our Contact Centers segment was 51.5% for the six months ended June 30, 2026 and 53.1% for the six months ended June 30, 2025.

The decrease in the gross margin rate was primarily attributable to higher employee related costs as compared to the prior year period.

Selling and Administrative Expenses

Selling and administrative expenses were relatively flat for the three months ended March 31, 2026, compared to the three months ended March 31, 2025.

As a percentage of net sales, total selling and administrative expenses was 35.8% for the three months ended March 31, 2026 and 36.5% for the three months ended March 31, 2025.

The rate decrease was due to an improvement in selling and administrative expenses as a percentage of net sales rates in our Contact Centers segment and a reduction in Other selling and administrative expenses.

Branded Products selling and administrative expense increased $1.3 million for the three months ended March 31, 2026 compared to the three months ended March 31, 2025 primarily due to increased commission expense.

As a percentage of net sales, selling and administrative expenses for our Branded Products segment was 27.2% for the three months ended March 31, 2026,up slightly from 27.1% for the three months ended March 31, 2025.

Healthcare Apparel selling and administrative expense increased $1.3 million for the three months ended March 31, 2026 compared to the three months ended March 31, 2025 due to $1.0 million employee severance costs and higher digital media costs.

As a percentage of net sales, selling and administrative expenses for our Healthcare Apparel segment was 37.7% for the three months ended March 31, 2026 and 34.9% for the three months ended March 31, 2025.

Contact Centers selling and administrative expense decreased $1.4 million for the three months ended March 31, 2026 compared to the three months ended March 31, 2025 due to cost reductions implemented in 2025 related to closure of its Jamaica office and elimination of various administrative support costs.

As a percentage of net sales, selling and administrative expenses for our Contact Centers segment was 43.0% for the three months ended March 31, 2026 and 45.1% for the three months ended March 31, 2025.

Selling and administrative expenses for Other, which represents Corporate costs, decreased $0.9 million primarily due to lower third party professional services related expenses and lower stock-based compensation expenses.

Selling and administrative expenses decreased $0.6 million for the six months ended June 30, 2026, compared to the six months ended June 30, 2025.

As a percentage of net sales, total selling and administrative expenses was 35.2% for the six months ended June 30, 2026 and 36.4% for the six months ended June 30, 2025.

The rate decrease was due to an improvement in selling and administrative expenses as a percentage of net sales rates in our Branded Products and Contact Centers segments, partially offset by an increased rate in our Healthcare Apparel segment.

Branded Products selling and administrative expense increased $1.9 million for the six months ended June 30, 2026 compared to the six months ended June 30, 2025 primarily due to increased commission expense from increased gross margin.

As a percentage of net sales, selling and administrative expenses for our Branded Products segment was 26.8% for the six months ended June 30, 2026, down slightly from 27.3% for the six months ended June 30, 2025.

Healthcare Apparel selling and administrative expense increased $1.1 million for the six months ended June 30, 2026 compared to the six months ended June 30, 2025 primarily due to $1.0 million of employee severance costs.

As a percentage of net sales, selling and administrative expenses for our Healthcare Apparel segment was 37.1% for the six months ended June 30, 2026 and 35.3% for the six months ended June 30, 2025.

Contact Centers selling and administrative expense decreased $2.6 million for the six months ended June 30, 2026 compared to the six months ended June 30, 2025 primarily due to a reduction in credit loss expense as compared to the prior year period and cost reductions implemented in 2025 related to the closure of our Jamaica office.

As a percentage of net sales, selling and administrative expenses for our Contact Centers segment was 43.9% for the six months ended June 30, 2026 and 46.7% for the six months ended June 30, 2025.

Corporate selling and administrative expenses decreased $0.8 million primarily due to lower third-party professional services and lower share-based compensation expenses.

Interest Expense, Net

Interest expense, net decreased to $0.9 million for the three months ended March 31, 2026 from $1.2 million for the three months ended March 31, 2025.

This decrease was due to a lower weighted average interest rate on those borrowings from 5.4% for the three months ended March 31, 2025 to 4.9% for the three months ended March 31, 2026.

Income tax expense increased to $0.2 million for the three months ended March 31, 2026 from a benefit of $0.1 million for the three months ended March 31, 2025.

The effective tax rate was 20.9% and 16.3% for the three months ended March 31, 2026 and 2025, respectively.

Income tax expense and the effective tax rate for the three months ended March 31, 2026 and March 31, 2025 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 rate was further impacted by discrete items related to the Company’s share-based compensation and long-term incentive plans during the current quarter.

Interest expense, net decreased to $1.9 million for the six months ended June 30, 2026 from $2.5 million for the six months ended June 30, 2025.

This decrease was due to a lower weighted average interest rate on borrowings, from 5.6% for the six months ended June 30, 2025 to 4.8% for the six months ended June 30, 2026.

Intangible Assets Impairment Charge

Income tax expense increased to $0.2 million for the six months ended June 30, 2026 from $0.1 million for the six months ended June 30, 2025.

The effective tax rate was 9.3% and 14.7% for the six months ended June 30, 2026 and 2025, respectively.

Income tax expense and the effective tax rate for the six months ended June 30, 2026 was primarily impacted by the discrete tax benefit relating to the $2.6 million trade name impairment charge recorded during the current quarter, as well as items related to the Company’s share-based compensation and long-term incentive plans.

The rate for both periods was further impacted by the variability in the mix of earnings across the Company’s foreign and domestic operations, which are subject to various statutory tax rates in those jurisdictions.

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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 and operating leases and fund capital expenditures, dividends, stock repurchases, any potential merger and acquisition activity and other general corporate purposes.

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 and operating leases, and fund any potential merger and acquisition activity, capital expenditures, dividends, stock repurchases 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 facility will be sufficient to satisfy the above requirements for the next twelve months.

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Capital expenditures

Capital expenditures were $0.6 million and $1.1 million for the three months ended March 31, 2026 and 2025, respectively.

Capital expenditures were $1.9 million and $2.7 million for the six months ended June 30, 2026 and 2025, respectively.

Sources of Capital and Liquidity

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Net cash provided by operating activities primarily results from cash collected from customers for our promotional products, branded uniforms, healthcare apparel and accessories, offset by cash payments made for raw materials, finished goods, salaries and payroll related benefits, leases and other general corporate expenditures.

For the three months ended March 31, 2026, net cash provided by operating activities was $9.4 million.

Cash collections from customers exceeded aggregate cash payments to vendors, lessors and employees primarily driven by the Company's collection of receivable balances.

For the three months ended March 31, 2025, net cash used in operating activities was $2.0 million.

Lower net sales and cash collections, as well as higher costs of goods sold resulted in net cash used in operating activities.

In addition, inventory increased resulting in a use of cash of $2.2 million.

For the six months ended June 30, 2026, net cash provided by operating activities was $17.7 million.

Cash collections from customers exceeded aggregate cash payments to vendors, lessors and employees, primarily driven by the Company's collection of receivable balances and by reduced inventory purchasing, which provided $2.4 million of cash in the current period compared to $10.7 million of cash outflows in the prior year period.

These sources were partially offset by an $8.2 million increase in contract assets.

For the six months ended June 30, 2025, net cash provided by operating activities was $2.9 million.

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

These cash payments included $10.7 million of cash outflows for inventory purchases, up from the prior year primarily due to the timing of purchases.

Credit Facilities and Debt Activity

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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 three months ended March 31, 2026, the Company had $10.0 million in borrowings and $15.0 million in payments on the revolving credit facility.

For the three months ended March 31, 2026, the Company had $1.4 million in payments on the term loan.

For the three months ended March 31, 2025, the Company had $19.0 million in borrowings and $8.0 million in payments on the revolving credit facility.

For the three months ended March 31, 2025, the Company had $1.4 million in payments on the term loan.

For the six months ended June 30, 2026, the Company had $26.0 million in borrowings and $35.0 million in payments on the revolving credit facility.

For the six months ended June 30, 2026, the Company had $2.8 million in payments on the term loan.

For the six months ended June 30, 2025, the Company had $57.0 million in borrowings and $41.0 million in payments on the revolving credit facility.

For the six months ended June 30, 2025, the Company had $2.8 million in payments on the term loan.

In the future, the Company may continue to use 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.

Please refer to Note 5 to our Notes to the Consolidated Financial Statements located in Item 1 of Part I of this Quarterly Report on Form 10-Q for additional details on our outstanding long-term debt.

Dividends and Share Repurchase Program

During the three months ended March 31, 2026 and 2025, the Company paid cash dividends of $2.2 million and $2.3 million, respectively.

During the six months ended June 30, 2026 and 2025, the Company paid cash dividends of $4.4 million and $4.5 million, respectively.

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

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See Part II, Item 7, "Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Estimates" in our Annual Report on Form 10-K for the year ended December 31, 2025.

Interim Impairment Tests:

The Company performs its goodwill and indefinite-lived intangible impairment tests annually as of August 31st or more frequently as events or changes in circumstances warrant.

Indefinite-lived Intangible Assets:

An indicator of impairment related to the CID Resources indefinite lived intangible assets was identified during the second quarter of 2026 for which a quantitative interim impairment test was performed.

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.

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.

The impairment was primarily driven by updated assumptions reflecting lower expected future sales and profitability of the brands.

In determining the fair value of our trade name indefinite lived intangible assets as of June 30, 2026, we used the following key assumptions:

• Royalty rates of 0.5% - 2.5%;

• A tax rate of 27.0%;

• A long-term growth rate of 3.0%;

• Assumed discount rate of 17.0%.

As a result of the impairment assessment, an impairment charge totaling $2.6 million was recognized in the second quarter of 2026 to reduce the carrying value of the trade names to their estimated fair value.

Non-GAAP Financial Measure

EBITDA, which is a non-GAAP financial measure, is defined as net income excluding interest expense, net, income tax expense, depreciation and amortization expense and impairment charges.

The Company believes EBITDA is an important measure of operating performance because it allows management, investors and others to evaluate and compare the Company’s core operating results from period to period by removing (i) the impact of the Company’s capital structure (interest expense from outstanding debt), (ii) tax consequences and (iii) asset base (depreciation and amortization).

The Company uses EBITDA internally to monitor operating results and to evaluate the performance of its business.

In addition, the compensation committee has used EBITDA in evaluating certain components of executive compensation, including performance-based annual incentive programs.

EBITDA is not a measure of financial performance under GAAP.

EBITDA should not be considered in isolation or as an alternative to net income, cash flows from operating activities or any other measure determined in accordance with GAAP.

The items excluded to calculate EBITDA are significant components in understanding and assessing the Company’s results of operations.

The Company’s EBITDA may not be comparable to a similarly titled measure of another company because other entities may not calculate EBITDA in the same manner.

The following table reconciles net income to EBITDA (in thousands):

Three Months Ended March 31,

Net income (loss)

Adjusted EBITDA, which is a non-GAAP financial measure, is defined as net income excluding interest expense, net, income tax expense, depreciation and amortization expense and impairment charges.

The Company believes Adjusted EBITDA is an important measure of operating performance because it allows management, investors and others to evaluate and compare the Company’s core operating results from period to period by removing (i) the impact of the Company’s capital structure (interest expense from outstanding debt), (ii) tax consequences, (iii) asset base (depreciation and amortization) and (iv) impairments.

The Company uses Adjusted EBITDA internally to monitor operating results and to evaluate the performance of its business.

In addition, the compensation committee has used Adjusted EBITDA in evaluating certain components of executive compensation, including performance-based annual incentive programs.

Adjusted EBITDA is not a measure of financial performance under GAAP.

Adjusted EBITDA should not be considered in isolation or as an alternative to net income, cash flows from operating activities or any other measure determined in accordance with GAAP.

The items excluded to calculate Adjusted EBITDA are significant components in understanding and assessing the Company’s results of operations.

The Company’s Adjusted EBITDA may not be comparable to a similarly titled measure of another company because other entities may not calculate Adjusted EBITDA in the same manner.

The following table reconciles net income to Adjusted EBITDA (in thousands):

Three Months Ended June 30,

Six Months Ended June 30,

Interest expense, net

Income tax expense (benefit)

Depreciation and amortization

Income tax (benefit) expense

Segment depreciation and amortization

Corporate depreciation and amortization

Tradename impairment charge

Adjusted EBITDA

Cautionary Note Regarding Forward-Looking Statements

6 unchanged sentences

the impact of competition;

uncertainties related to tariffs, duties, trade wars and related matters, supply disruptions, inflationary environments (including with respect to shipping costs and the cost of finished goods and raw materials and shipping costs), employment levels (including labor shortages), and general economic and political conditions in the areas of the world in which the Company operates or from which it sources its supplies or the areas of the United States of America ( “ U.S.

the impact of global conflicts, such as the Russia-Ukraine War and the joint U.S.-Israeli War with Iran in 2026, uncertainties related to tariffs, duties, trade wars and related matters, supply disruptions, inflationary environments (including with respect to shipping costs and the cost of finished goods and raw materials and shipping costs), employment levels (including labor shortages), and general economic and political conditions in the areas of the world in which the Company operates or from which it sources its supplies or the areas of the United States of America ( “ U.S.

” or “ United States ” ) in which the Company ’ s customers are located;

4 unchanged sentences

the Company ’ s ability to maintain effective internal control over financial reporting;

and other factors described in the Company’s filings with the Securities and Exchange Commission (the "SEC"), including those risks described in Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2025 entitled "Risk Factors" and other disclosures contained therein and in this Quarterly Report on Form 10-Q for the quarter ended March 31, 2026 .

Shareholders, potential investors and other readers are urged to consider these factors carefully in evaluating the forward-looking statements made herein and are cautioned not to place undue reliance on such forward-looking statements.

1 unchanged sentence

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-Q

Item 2. Management’s Discussion and Analysis