UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the fiscal year ended
For the transition period from ____________ to _______________
Commission File Number
SUPERIOR GROUP OF COMPANIES, INC.
(Exact Name of Registrant as Specified in Its Charter)
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(Address of Principal Executive Offices, including Zip Code)
Registrant’s telephone number, including area code: (
Securities registered pursuant to Section 12(b) of the Act:
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Securities registered pursuant to Section 12(g) of the Act: N/A
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Non-accelerated filer ☐ | Smaller Reporting Company | Emerging Growth Company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes
At June 30, 2021, the aggregate market value of the registrant’s common shares held by non-affiliates, computed by reference to the last sales price of $23.91 as reported by the NASDAQ Stock Market, was approximately $
The number of shares of common stock outstanding as of March 16, 2022 was
Documents Incorporated by Reference:
Portions of the registrant’s Definitive Proxy Statement to be filed with the Commission not later than 120 days after the conclusion of the registrant’s fiscal year ended December 31, 2021, relating to its 2022 Annual Meeting of Shareholders, are incorporated by reference to furnish the information required by Items 10, 11, 12, 13 and 14 of Part III.
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| PART II |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |
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| PART III |
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Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
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Certain Relationships and Related Transactions and Director Independence |
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PART I
Special Note Regarding Forward-Looking Statements
Certain matters discussed in this Form 10-K are “forward-looking statements” intended to qualify for the safe harbors from liability established by the Private Securities Litigation Reform Act of 1995. These forward-looking statements can generally be identified by use of the words “may,” “will,” “should,” “could,” “expect,” “anticipate,” “estimate,” “believe,” “intend,” “project,” “potential,” or “plan” or the negative of these words or other variations on these words or comparable terminology. Forward-looking statements in this Form 10-K may include, without limitation: (1) the projected impact of the COVID-19 pandemic on our, our customers’, and our suppliers’ businesses, (2) projections of revenue, income, and other items relating to our financial position and results of operations, (3) statements of our plans, objectives, strategies, goals and intentions, (4) statements regarding the capabilities, capacities, market position and expected development of our business operations, and (5) statements of expected industry and general economic trends.
Such forward-looking statements are subject to certain risks and uncertainties that may materially adversely affect the anticipated results. Such risks and uncertainties include, but are not limited to, the following: the impact of competition; the effect of uncertainties related to the COVID-19 pandemic, including existing and possible future variants, on the United States of America (“U.S.” or “United States”) and global markets, our business, operations, customers, suppliers and employees, including without limitation the length and scope of restrictions imposed by various governments and organizations and the success of efforts to deliver effective vaccines on a timely basis to a number of people sufficient to prevent or substantially lower the severity of incidents of infection or variants, among other factors; our ability to navigate successfully the challenges posed by current global supply disruptions; general economic conditions, including employment levels, in the areas of the United States in which the Company’s customers are located; changes in the healthcare, retail, hotel, food service, transportation and other industries where uniforms and service apparel are worn; our ability to identify suitable acquisition targets, discover liabilities associated with such businesses during the diligence process, successfully integrate any acquired businesses, or successfully manage our expanding operations; the price and availability of cotton and other manufacturing materials; attracting and retaining senior management and key personnel; the effect of the Company’s material weakness in internal control over financial reporting and/or the restatement of its financial statements for the periods ended June 30 and September 30, 2021; the Company’s ability to successfully remediate its material weakness in internal control over financial reporting and to maintain effective internal control over financial reporting; and those risks discussed under Item 1A of this report entitled “Risk Factors.” 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. The forward-looking statements made herein are only made as of the date of this Form 10-K and we disclaim any obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances, except as may be required by law.
Overview
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 its state of incorporation to Florida. In 2018, the Company changed its name to Superior Group of Companies, Inc.
On July 1, 2013, the Company acquired substantially all of the assets of HPI Direct, Inc. (“HPI”), a company specializing in the design, manufacture and distribution of uniforms to major domestic retailers, foodservice chains, transportation and other service industries throughout the United States.
Effective March 1, 2016, the Company acquired substantially all of the assets of BAMKO, Inc. BAMKO is a full-service merchandise sourcing and promotional products company based in Los Angeles, California. With sales offices in the United States and Brazil, as well as support offices in China, Hong Kong, and India, BAMKO serves many well-known companies and brands. The transaction also included the acquisition of BAMKO’s subsidiaries in Hong Kong, China, Brazil and England as well as an affiliate in India. Depending on the context, when using the term “BAMKO” in this Form 10-K, we refer either to the Company’s wholly-owned subsidiary housing the acquired business (BAMKO, LLC) or to the business acquired in the transaction, as subsequently grown through additional acquisitions.
On August 21, 2017, the Company, through BAMKO, acquired substantially all of the assets of PublicIdentity, Inc. (“Public Identity”). Public Identity is a promotional products and branded merchandise agency that provides promotional products and branded merchandise to corporate clients and universities.
On November 30, 2017, BAMKO closed on the acquisition of substantially all of the assets of Tangerine Promotions, Ltd. and Tangerine Promotions West, Inc. (collectively, “Tangerine”), a promotional products and branded merchandise agency that serves many well-known brands. Tangerine is a leading provider of Point-of-Purchase (POP) and Point-of-Sale (POS) merchandise.
On May 2, 2018, the Company acquired CID Resources, Inc. (“CID”), a Delaware corporation, which manufactures medical uniforms, lab coats, and layers, and sells its products to specialty uniform retailers, ecommerce medical uniform retailers, and other retailers.
On January 29, 2021, the Company, through BAMKO, acquired substantially all of the assets of Gifts By Design, Inc. (“Gifts by Design”) of Seattle, Washington. Gifts by Design is a promotional products and branded merchandise agency that is well-established as a developer and supplier of corporate awards, incentives, and recognition programs for some of the world’s biggest brands. The purchase price for the acquisition consisted of $6.0 million in cash at closing.
On December 2, 2021, the Company, principally through BAMKO, acquired substantially all of the assets of Sutter’s Mill Specialties, Inc. (“Sutter’s Mill”) of Tempe, Arizona. Sutter’s Mill is a vertically integrated manufacturer of high quality, decorated promotional products. Sutter’s Mill has the capability to print on demand and create customized promotional programs and products for customers of any size. The purchase price of the acquisition consisted of the following: (a) approximately $10.4 million in cash at closing, subject to a working capital adjustment, (b) the issuance of 45,620 restricted shares of Superior’s common stock that vest ratably over a three-year period, and (c) potential future payments of approximately $4.5 million in additional contingent consideration for calendar years 2022 through 2024 based on the results of the acquired business.
Superior is comprised of three reportable business segments: (1) Uniforms and Related Products, (2) Remote Staffing Solutions, and (3) Promotional Products.
Superior’s Uniforms and Related Products segment, through its primary signature marketing brands Fashion Seal Healthcare®, HPI®, and WonderWink®, manufactures and sells a wide range of uniforms, corporate identity apparel, career apparel and accessories that are worn by employees in the hospital and healthcare fields; retail stores; hotels; fast food and other restaurants; transportation; and the private security, industrial and commercial markets. Superior services its Remote Staffing Solutions segment through multiple The Office Gurus® entities, including its subsidiaries in El Salvador, Belize, Jamaica, Dominican Republic, and the United States (collectively, “TOG”). TOG is primarily a near-shore premium provider of cost effective multilingual telemarketing and business process outsourced solutions. The Promotional Products segment, through the BAMKO®, Public Identity®, Tangerine®, Gifts by Design and Sutter’s Mill brands, services customers that purchase primarily promotional and related products.
Products
The Company manufactures (through third parties or its own facilities) and sells a wide range of uniforms, corporate identity apparel, career apparel and accessories for the medical, health, industrial, commercial, leisure, and public safety markets in its Uniforms and Related Products segment. The Promotional Products segment produces and sells products for a wide variety of industries primarily to support marketing efforts.
The Company’s principal products are:
Uniforms and service apparel for personnel of:
• Hospitals and healthcare facilities;
• Fast food and other restaurants;
• Retail stores;
• Special purpose industrial facilities;
• Transportation companies;
• Hotels;
• Entertainment destinations;
• Public and private safety and security organizations; and
• Miscellaneous service uses.
Miscellaneous products:
• Directly related to uniforms and service apparel (e.g. headwear and footwear);
• For use by linen suppliers and industrial launderers (e.g. industrial laundry bags); and
• Other miscellaneous products.
Personal protective equipment, including:
• Face masks;
• Goggles;
• Isolation gowns;
• Covid testing kits;
• Sanitizers;
• Gloves; and
• Barrier fabric lab wear.
Promotional and related products to support:
• Branded marketing programs;
• Corporate awards, incentives and recognition programs;
• Event promotions;
• Employee and consumer rewards and incentives; and
• Specialty packaging and displays.
Uniforms and related products are typically distributed through our distribution centers in the United States. Promotional products typically are either shipped directly from our vendors to our customers or distributed through our distribution centers in the United States.
For a depiction of net sales from external customers, income before taxes on income and total assets by segment for each of the years ended December 31, 2021, 2020 and 2019, please refer to Note 16 to our Consolidated Financial Statements included in Part II, Item 8 (“Financial Statements and Supplementary Data”) (collectively referred to as “Financial Statements,” and individually referred to as “statements of comprehensive income,” “balance sheets,” “statements of shareholders’ equity,” and “statements of cash flows” herein).
During the years ended December 31, 2021, 2020 and 2019, uniforms and service apparel and related products accounted for approximately 49%, 55% and 63%, respectively, of net sales. During the years ended December 31, 2021, 2020 and 2019, promotional and related products accounted for approximately 40%, 38% and 29%, respectively, of net sales.
Services
Through the recruitment and employment of highly qualified English-speaking agents, we provide our customers with extended office support from a versatile call and contact center environment in our Remote Staffing Solutions segment. During the years ended December 31, 2021, 2020 and 2019, our Remote Staffing Solutions segment accounted for approximately 11%, 7% and 8%, respectively, of net sales.
Competition
Superior competes in its Uniforms and Related Products segment with more than three dozen firms, including divisions of larger corporations. Superior competes with national and regional companies, such as, Lands’ End, Inc., Medline Industries, Inc., Standard Textile Co., Inc., Careismatic Brands, Barco Uniforms, Inc., Lakeland Industries, Inc. and FIGS, Inc. Superior also competes with local firms in most major metropolitan areas. The nature and degree of competition varies with the customer and the market. We believe Superior is one of the leading suppliers of garments to hospitals, retailers, hotels, food service establishments, and linen suppliers. Superior experiences competition primarily based on breadth of products and services offered, styling and pricing. We believe that the strength of our brands and marketing, coupled with the quality of our products, allow us to compete effectively.
The market in which TOG operates has evolved into a global multi-billion dollar marketplace that is highly competitive and fragmented. TOG’s competitors in the Remote Staffing Solutions segment range in size from very small firms offering specialized services or short-term project completion to very large independent firms, and include the in-house operations of many customers and potential customers. We compete directly and indirectly with various companies that provide contact center and other business process solutions on an outsourced basis. These companies include, but are certainly not limited to, global providers such as APAC Customer Services, Atento, TaskUs, Inc., Harte Hanks, Inc., Concentrix, Sitel, Sykes, and Teleperformance. TOG also competes with local entities in other offshore locations. The list of potential competitors includes both publicly traded and privately held companies.
The promotional products industry is highly fragmented. We compete with a multitude of foreign, regional, and local competitors that vary by market. Major competitors in the Promotional Products segment include companies such as BDA, Inc., HALO Branded Solutions, Inc., Staples, Inc., Cimpress PLC, and InnerWorkings, Inc. We believe our creative services, product development, proprietary web platforms and extensive global sourcing network, along with our success with major brands, will enable us to continue to be competitive and grow in this market.
Customers
The Uniforms and Related Products segment has a substantial number of customers, none of which accounted for more than 10% of the segment’s 2021 net sales. No customer accounted for more than 10% of the Remote Staffing Solutions segment’s 2021 external revenues. The Promotional Products segment’s largest customer represented 13% of the segment’s 2021 net sales.
Resources Material to Our Business
Raw Materials
The principal fabrics used in the manufacture of finished goods for Superior's Uniforms and Related Products segment are cotton, polyester, cotton-synthetic and poly-synthetic blends. The majority of such fabrics are sourced in China. If Superior or its suppliers are unable to source raw materials from China, it could significantly disrupt Superior’s business.
Despite the concentration of raw material sourcing, Superior does not have a concentration of suppliers of finished goods in any single country or region of the world. However, the Company’s suppliers generally source or manufacture finished goods in parts of the world that may be affected by economic uncertainty, political unrest, labor disputes, health emergencies, or the imposition of duties, tariffs or other import regulations by the United States. The Company believes that its redundant network of suppliers, including its own manufacturing facilities in Haiti, provide sufficient capacity to mitigate any dependency risks on a single supplier.
The Promotional Products segment relies on the supply of different types of raw materials as well as textiles, including plastic, glass, fabric and metal. The vast majority of these raw materials are principally sourced from China, either directly by BAMKO or its suppliers. If we are unable to continue to obtain our raw materials and finished products from China or if our suppliers are unable to source raw materials from China, it could significantly disrupt our business.
Prices within the promotional products industry are directly affected by the cost of raw materials. The market for promotional products is price sensitive and has historically exhibited price and demand cyclicality. The Promotional Products segment has flexibility in its suppliers, as other suppliers of the same or similar products are widely available. Additionally, the nature of the promotional products industry is such that should specific types of raw materials undergo significant cost increases, it is possible that alternative products using different materials could be utilized for similar promotional activities. However, if cost increases cannot be entirely passed on to customers and alternative suppliers or suitable product alternatives are unavailable, profit margins could decline.
Intellectual Property
Superior owns and uses several trademarks and service marks relating to its brands that have significant value and are instrumental to its ability to market its products. Superior’s most significant trademarks, which are critically important to the marketing and operation of Superior’s Uniforms and Related Products segment, are Fashion Seal Healthcare® and WonderWink®. For the year ended December 31, 2021, Fashion Seal Healthcare (presently registered with the United States Patent and Trademark Office until 2029) and WonderWink (presently registered with the United States Patent and Trademark Office until October 2022 and is expected to be extended beyond 2022) represented approximately 21% and 20%, respectively, of sales in that segment.
Seasonal Fluctuations
Our results of operations have not historically reflected material seasonal tendencies and we do not believe that seasonal fluctuations will have a material impact on us in the foreseeable future.
Effects of Compliance with Government Regulations
Trade Regulations
As disclosed above, the Company’s suppliers generally source or manufacture finished goods in parts of the world that may be affected by the imposition of duties, tariffs or other import regulations by the United States. The Company believes that its redundant network of suppliers, including its own manufacturing facilities in Haiti, provide sufficient capacity to mitigate any dependency risks on a single supplier.
The Promotional Products segment relies on raw materials that are principally sourced from China, either directly by BAMKO or its suppliers. If we are unable to continue to obtain our raw materials and finished products from China or if our suppliers are unable to source raw materials from China, it could significantly disrupt our business. Further, we are affected by economic, political and other conditions in China and the United States, including those resulting in the imposition or increase of import duties, tariffs and other import regulations and widespread health emergencies, which could have a material adverse effect on this business segment.
Environmental Matters
In view of the nature of our business, compliance with federal, state, and local laws regulating the discharge of materials into the environment, or otherwise relating to the protection of the environment, has had no material effect upon our operations or earnings, and we do not expect it to have a material impact in the foreseeable future.
Human Capital Resources
The Company’s key human capital management objectives are to attract, retain and develop quality talent. To support these objectives, the Company’s human resources initiatives are designed to: keep people safe and healthy; enhance the Company’s culture; acquire and retain diverse talent; reward and support employees through competitive pay, benefits and other programs; and develop talent to prepare them for critical roles and leadership positions. In 2021, the Company deployed resources to positively impact all of these objectives.
As of December 31, 2021, the Company had approximately 6,000 full-time employees worldwide, which is a year-over-year increase of approximately 1,400 people. As of December 31, 2021, approximately 1,000 employees were employed in the U.S. and approximately 5,000 employees were employed in foreign countries. The Remote Staffing Solutions segment has the Company’s largest labor force at approximately 3,100 full-time employees as of December 31, 2021.
Available Information
The Company maintains an internet website at the following address: www.superiorgroupofcompanies.com. The information on the Company’s website is not incorporated by reference in this annual report on Form 10-K.
We make available on or through our website certain reports and amendments to those reports that we file with or furnish to the Securities and Exchange Commission (the “SEC”) in accordance with the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These include our annual reports on Form 10-K, our quarterly reports on Form 10-Q, our current reports on Form 8-K, and Section 16 filings, and amendments thereto, by our officers, directors and 10% shareholders. We make this information available on our website free of charge as soon as reasonably practicable after we or they electronically file the information with, or furnish it to, the SEC. We also provide electronic copies of such filings free of charge upon request.
Our business, operations and financial condition are subject to various risks, and many of those risks are driven by factors that we cannot control or predict. The following discussion addresses those risks that management believes are the most significant. You should take these risks into account in evaluating or making any investment decision involving the Company. Additional risks and uncertainties not presently known or that we currently believe to be less significant may also adversely affect us.
Risks Relating to Our Business and Operations
Our business could be materially adversely impacted by the coronavirus (COVID-19) pandemic.
COVID-19 was declared a pandemic by the World Health Organization and the Centers for Disease Control and Prevention in March of 2020. The global spread of COVID-19 has created significant volatility and uncertainty and economic disruption. The extent to which the COVID-19 pandemic ultimately impacts our business, financial condition, results of operations or cash flows will depend on numerous factors that continue to evolve and which we may not be able to accurately predict, including, without limitation: the duration and scope of the pandemic; the success of efforts to deliver effective vaccines on a timely basis to a number of people sufficient to prevent or substantially lower the severity of incidents of infection or variants; the duration and scope of governmental, business and individuals’ actions that have been and will be taken in response to the pandemic (including restrictions on travel and transport and workforce pressures); the effect on our suppliers and customers and customer demand for our core products and services within certain industries such as the restaurant, transportation, hospitality and entertainment industries; the effect on our sources of supply; the impact of the pandemic on economic activity and actions taken in response; closures of our and our suppliers’ and customers’ offices and facilities; the ability of our customers to pay for our products and services; financial market volatility; commodity prices; and the pace of recovery from the pandemic.
On September 9, 2021 President Biden announced a proposed new rule which would mandate the COVID-19 vaccine or weekly testing for most U.S. employees, which would include our employees. That executive proposal was struck down by the U.S. Supreme Court on January 13, 2022. However, the Biden Administration may seek to impose alternative vaccine mandates and other governmental authorities have imposed more targeted vaccine and testing orders and regulations, and may continue to do so in the future. If a new mandate is ultimately issued and implemented, we expect there would be further disruptions to our operations, such as inability to maintain adequate staffing at our facilities, difficulties in replacing disqualified employees with temporary employees or new hires, and increased compliance burdens, including financial costs, diversion of administrative resources, and increased downtimes to accommodate for any required ongoing COVID-19 testing, which may result in delays in the manufacturing process, and negatively impact our future sales levels and ongoing customer relationships.
COVID-19 has led and may continue to lead to changes in customer purchasing patterns. We have seen disruptions in our customers’ businesses, including, but not limited to, our customers’ willingness and ability to spend, layoffs and furloughs of our customers’ employees, and temporary or permanent closures of businesses that consume our products and services. Prolonged periods of difficult conditions could have material adverse impacts on our business, financial condition, results of operations and cash flows.
The potential effects of COVID-19 also could impact us in a number of other ways, including, but not limited to, 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, reduced credit-worthiness of our customers, and potential impairment of the carrying value of goodwill or other indefinite-lived intangible assets.
Any of these events could materially adversely affect our business, financial condition, results of operations and cash flows.
Shortages of sourced goods or raw materials from suppliers, interruptions in our manufacturing, and local conditions in the countries in which we operate could adversely affect our results of operations.
Along with many manufacturers that source goods and raw materials from abroad, we are currently experiencing continued significant supply disruptions and delays due to a variety of reasons. These changes are partially driven by interruptions in global supply chains (including as a result of port congestion and trucking shortages) and partially by a shift in customer buying habits to e-commerce, which has the effect of increasing demand for shipping capacity from Asia, leading to capacity constraints. Both factors have increased shipping times as well as the price of shipping, whether by sea, air, rail, or vehicle. Shipping delays combined with significant increases in orders for our products have recently created, and are expected to continue to create, inventory pressure for us.
An interruption in any of our supply sources or facilities could adversely affect our results of operations until alternate sources or facilities can be secured. The Uniforms and Related Products segment’s principal fabrics used in the manufacture of its finished goods are cotton, polyester, cotton-synthetic and poly-synthetic blends. The majority of such fabrics are sourced in China. The Promotional Products segment relies on the supply of different types of raw materials as well as textiles, including plastic, glass, fabric and metal. The vast majority of these raw materials are principally sourced from China, either directly by BAMKO or its suppliers. If we are unable to continue to obtain our raw materials and finished products from China or if our suppliers are unable to source raw materials from China, it could significantly disrupt our business. Further, the Company and the Company’s suppliers generally source or manufacture finished goods in parts of the world that may be affected by economic uncertainty, political unrest, logistical challenges (such as port strikes and embargos), foreign currency fluctuations, labor disputes, health emergencies, or the imposition of duties, tariffs or other import regulations by the United States. For example, political and civil unrest in Haiti may worsen, which could cause manufacturing disruptions in our Haiti facilities and those of our suppliers. The materialization of any of these risks could result in additional expense to us or limit our supply of necessary goods and raw materials, which effects may be material.
See also “Risks Relating to Our Industries - Increases in the price of finished goods and raw materials used to manufacture our products could materially increase our costs and decrease our profitability.”
Our success depends upon the continued protection of our trademarks and other intellectual property rights and we may be forced to incur substantial costs to maintain, defend, protect and enforce our intellectual property rights.
Our owned intellectual property and certain of our licensed intellectual property have significant value and are instrumental to our ability to market our products. While we own and use several trademarks, our Fashion Seal Healthcare® and WonderWink® marks are critically important to our business, as approximately 21% and 20%, respectively, of our Uniforms and Related Products segment’s products were sold under those names during the year ended December 31, 2021. We cannot assure that our owned or licensed intellectual property or the operation of our business does not infringe on or otherwise violate the intellectual property rights of others. We cannot assure that third parties will not assert claims against us on any such basis or that we will be able to successfully resolve such claims. In addition, although we seek international protection of our intellectual property, the laws of some foreign countries do not allow us to protect, defend or enforce our intellectual property rights to the same extent as the laws of the United States. We could also incur substantial costs to defend legal actions relating to use of our intellectual property or prosecute legal actions against others using our intellectual property, either of which could have a material adverse effect on our business, results of operations or financial condition. There also can be no assurance that we will be able to negotiate and conclude extensions of existing license agreements on similar economic terms or at all.
Our customers may cancel or decrease the quantity of their orders, which could negatively impact our operating results.
Sales to many of our customers are on an order-by-order basis. If we cannot fill customers’ orders on time, orders may be cancelled and relationships with customers may suffer, which could have an adverse effect on us, especially if the relationship is with a major customer. Furthermore, if any of our customers experience a significant downturn in their business, or fail to remain committed to our programs or brands, the customer may reduce or discontinue purchases from us. The reduction in the amount of our products purchased by customers could have a material adverse effect on our business, results of operations or financial condition.
In addition, some of our customers have experienced significant changes and difficulties, including consolidation of ownership, increased centralization of buying decisions, buyer turnover, restructurings, bankruptcies and liquidations. A significant adverse change in a customer relationship or in a customer’s financial position could cause us to limit or discontinue business with that customer, require us to assume more credit risk relating to that customer’s receivables or limit our ability to collect amounts related to previous purchases by that customer, all of which could have a material adverse effect on our business, results of operations or financial condition.
We pursue acquisitions from time-to-time to expand our business, which may pose risks to our business.
We selectively pursue acquisitions from time-to-time as part of our growth strategy. We compete with others within our industries for suitable acquisition candidates. This competition may increase the price of acquisitions and reduce the number of acquisition candidates available to us. As a result, acquisition candidates may not be available to us in the future on favorable terms.
Acquisition valuations require us to make certain estimates and assumptions to determine the fair value of the acquired entities (including the underlying assets and liabilities). If our estimates or assumptions to value the acquired assets and liabilities are not accurate, we may be exposed to losses, and/or unexpected usage of cash flow to fund the operations of the acquired businesses that may be material.
Even if we are able to acquire businesses on favorable terms, managing growth through acquisitions is a difficult process that includes integration and training of personnel, combining facility and operating procedures, and additional matters related to the integration of acquired businesses within our existing organization. Unanticipated issues related to integration may result in additional expense and in disruption to our operations, and may require a disproportionate amount of our management’s attention, any of which could negatively impact our ability to achieve anticipated benefits, such as revenue and cost synergies. Growth of our business through acquisition generally increases our operating complexity and the level of responsibility for both existing and new management personnel. Managing and sustaining our growth and expansion may require substantial enhancements to our operational and financial systems and controls, as well as additional administrative, operational and financial resources. We may be required to invest in additional support personnel, facilities and systems to address the increased complexities associated with business or segment expansion. These investments could result in higher overall operating costs and lower operating profits for the business as a whole. There can be no assurance that we will be successful in integrating acquired businesses or managing our expanding operations.
In addition, although we conduct due diligence investigations prior to each acquisition, there can be no assurance that we will discover or adequately protect against all material liabilities of an acquired business for which we may be responsible as a successor owner or operator. The failure to identify suitable acquisitions, discover liabilities associated with such businesses in the diligence process, successfully integrate these acquired businesses, or successfully manage our expanding operations, could adversely affect our business, results of operations or financial condition.
In order to finance such acquisitions, we may need to obtain additional funds either through public or private financings, including bank and other secured and unsecured borrowings and/or the issuance of equity or debt securities. There can be no assurance that such financings would be available to us on reasonable terms. Any future issuances of equity securities or debt securities with equity features may be dilutive to our shareholders.
If our information technology systems suffer interruptions or failures, including as a result of cyber-attacks, our business operations could be disrupted and our reputation could suffer.
We rely on information technology systems to process transactions, communicate with customers, manage our business and process and maintain information. The measures we have in place to monitor and protect our information technology systems might not provide sufficient protection from catastrophic events, power surges, viruses, malicious software (including ransomware), attempts to gain unauthorized access to data or other types of cyber-based attacks. As cyber-attacks become more frequent, sophisticated, damaging and difficult to predict, any such event could negatively impact our business operations, such as by product disruptions that result in an unexpected delay in operations, interruptions in our ability to deliver products and services to our customers, loss of confidential or otherwise protected information, corruption of data and expenses related to the repair or replacement of our information technology systems. Compromising and/or loss of information could result in loss of sales or legal or regulatory claims which could adversely affect our revenues and profits or damage our reputation.
Failure to comply with data privacy and security laws and regulations could adversely affect our operating results and business.
In the ordinary course of our business, we might collect and store in our internal and external data centers, cloud services and networks sensitive data, including our proprietary business information and that of our customers, suppliers and business partners, as well as personal information of our customers and employees. The secure processing, maintenance and transmission of this information is critical to our operations and business strategy. The number and sophistication of attempted attacks and intrusions that companies have experienced from third parties has increased over the past few years. Despite our security measures, it is impossible for us to eliminate this risk.
A number of U.S. states have enacted data privacy and security laws and regulations that govern the collection, use, disclosure, transfer, storage, disposal, and protection of personal information, such as social security numbers, financial information and other sensitive personal information. For example, all 50 states and several U.S. territories now have data breach laws that require timely notification to affected individuals, and at times regulators, credit reporting agencies and other bodies, if a company has experienced the unauthorized access or acquisition of certain personal information. Other state laws include the California Consumer Privacy Act, as amended (“CCPA”). The CCPA, among other things, contains disclosure obligations for businesses that collect personal information about California residents and affords those individuals new rights relating to their personal information that may affect our ability to collect and/or use personal information. Meanwhile, several other states and the federal government have considered or are considering privacy laws like the CCPA. We will continue to monitor and assess the impact of these laws, which may impose substantial penalties for violations, impose significant costs for investigations and compliance, allow private class-action litigation and carry significant potential liability for our business.
Outside of the U.S., data protection laws, including the EU General Data Protection Regulation (the “GDPR”), also might apply to some of our operations or business partners. Legal requirements in these countries relating to the collection, storage, processing and transfer of personal data/information continue to evolve. The GDPR imposes, among other things, data protection requirements that include strict obligations and restrictions on the ability to collect, analyze and transfer EU personal data/information, a requirement for prompt notice of data breaches to data subjects and supervisory authorities in certain circumstances, and possible substantial fines for any violations (including possible fines for certain violations of up to the greater of 20 million Euros or 4% of total company revenue). Other governmental authorities around the world have enacted or are considering similar types of legislative and regulatory proposals concerning data protection.
The interpretation and enforcement of the laws and regulations described above are uncertain and subject to change, and may require substantial costs to monitor and implement and maintain adequate compliance programs. Failure to comply with U.S. and international data protection laws and regulations could result in government enforcement actions (which could include substantial civil and/or criminal penalties), private litigation and/or adverse publicity and could negatively affect our operating results and business.
We are subject to international, federal, national, regional, state, local and other laws and regulations, and failure to comply with them may expose us to potential liability.
We are subject to international, federal, national, regional, state, local and other laws and regulations affecting our business, including those promulgated under the Occupational Safety and Health Act, the Consumer Product Safety Act, the Flammable Fabrics Act, the Textile Fiber Product Identification Act, the rules and regulations of the Consumer Products Safety Commission, the Food, Drug, and Cosmetic Act, the rules and regulations of the Food and Drug Administration (FDA), the Foreign Corrupt Practices Act of 1977 (FCPA), various securities laws and regulations including but not limited to the Securities Exchange Act of 1934, the Securities Act of 1933, and the Nasdaq Stock Market LLC Rules, various labor, workplace and related laws, and environmental laws and regulations. Failure to comply with such laws and regulations may expose us to potential liability and have an adverse effect on our results of operations.
Our business may be impacted by non-performance by manufacturers to whom we made advance payments.
We have entered into agreements with manufacturers in which we make payments for raw materials and services in advance of the shipment and delivery of finished products. In the event that advance payments are made to manufacturers that do not have the ability to satisfy their contractual obligations due to their financial instability, geopolitical unrest or other factors, we may incur unrecoverable losses which could have a material adverse effect on our business, results of operations and financial condition.
Implementation of technology initiatives could disrupt our operations in the near term and fail to provide the anticipated benefits.
As our business grows, we continue to make significant investments in our technology, including in the areas of warehouse management, enterprise risk management and product design. The costs, potential problems and interruptions associated with the implementation of technology initiatives could disrupt or reduce the efficiency of our operations in the near term. They may also require us to divert resources from our core business to ensure that implementation is successful. In addition, new or upgraded technology might not provide the anticipated benefits, might take longer than expected to realize the anticipated benefits, might fail or might cost more than anticipated.
Failure to preserve positive labor relationships with our employees could adversely affect our results of operations.
Our operations rely heavily on our employees, and any labor shortage, disruption or stoppage caused by poor relations with our employees could reduce our operating margins and income. While we believe that our employee relations are good, and very few of our employees are currently subject to collective bargaining agreements, unions have traditionally been active in the U.S. apparel industry. Our workforce has been subject to union organization efforts from time to time, and we could be subject to future unionization efforts as our operations expand. Unionization of our workforce could increase our operating costs or constrain our operating flexibility.
Our business may be impacted by unforeseen or catastrophic events, including the emergence of pandemics or other widespread health emergencies, terrorist attacks, extreme weather events or other natural disasters and other unpredicted events.
The occurrence of unforeseen or catastrophic events, such as the emergence of pandemics or other widespread health emergencies (or concerns over the possibility of such pandemics or emergencies), terrorist attacks, extreme weather events or other natural disasters or other unpredicted events, could create economic and financial disruptions, and could lead to operational difficulties (including travel limitations) that could impair our ability to source and supply products and services and manage our businesses, and could negatively impact our customers’ ability or willingness to purchase our products and services.
For example, our corporate headquarters is located in Florida, which is a hurricane-sensitive area; should a hurricane occur, the possibly resulting infrastructure damage and disruption to the area could negatively affect our company, such as by damage to or total destruction of our headquarters, surrounding transportation infrastructure, network communications and other forms of communication. Some of our other locations and those of our suppliers, such as those located in the U.S., Central America and Haiti, also are exposed to hurricanes, earthquakes, floods and other extreme weather events; the damage that such events could produce could affect the supply of our products and services.
Additionally, while the ultimate extent of the impact on our business and financial condition is unknown, we have been negatively affected by actions taken by governments and organizations to address and limit the spread of the coronavirus, such as travel restrictions and limitations affecting the supply of labor and the movement of raw materials and finished products. If available manufacturing capacity is reduced further as a result of the coronavirus, it could have an increased negative effect on the timely supply and pricing of finished products.
Risks Relating to Our Industries
Increases in the price of finished goods, raw materials and labor used to manufacture our products could materially increase our costs and decrease our profitability.
The principal fabrics used for our uniforms are made from cotton, polyester, cotton-synthetic and poly-synthetic blends. The principal components in our promotional products are plastic, glass, fabric and metal. The prices we pay for these fabrics and components and our finished goods are dependent on the market price for the raw materials used to produce them, primarily cotton and chemical components of synthetic fabrics including raw materials such as chemicals and dyestuffs. These finished goods and raw materials are subject to price volatility caused by weather, supply conditions, government regulations, economic and political climate, currency exchange rates, labor costs, and other unpredictable factors. Fluctuations in petroleum prices also may influence the prices of related items such as chemicals, dyestuffs and polyester yarn.
During the year ended December 31, 2021, we saw increases in the cost of specific finished goods and raw materials purchased, as well as in the average cost of finished goods and raw materials purchased, as compared to the prior year, driven by rising inflation rates and challenges in the supply chain which continue to persist. The challenges in the supply chain, which include shipping and logistics issues, also delayed the arrival of product that we could sell; this challenge also persists.
Any increase in raw material prices increases our cost of sales and can decrease our profitability unless we are able to pass the costs on to our customers in the form of higher prices. In addition, if one or more of our competitors is able to reduce their production costs by taking advantage of any reductions in raw material prices or favorable sourcing agreements, we may face pricing pressures from those competitors and may be forced to reduce our prices or face a decline in revenues, either of which could have a material adverse effect on our business, results of operations and financial condition.
Furthermore, significant or sustained inflation could have an adverse impact on our operating and general and administrative expenses. During inflationary periods, these costs could increase at a rate higher than our ability to offset them via customer-facing pricing adjustments, alternative supply sources or other measures. Inflation could also have an adverse effect on consumer spending, which could adversely impact demand for our products and services. If our operating and other expenses increase faster than anticipated due to inflation, our financial condition, results of operations and cash flow could be materially adversely affected.
We face intense competition within our industries and our revenue and/or profits may decrease if we are not able to respond to this competition effectively.
Customers in the uniform and corporate identity apparel, promotional products, and business process outsourcing industries choose suppliers primarily based upon the quality, price and breadth of products and services offered. We encounter competition from a number of companies in the geographic areas we serve. Major competitors for our Uniforms and Related Products segment include companies such as Lands’ End, Inc., Medline Industries, Inc., Standard Textile Co., Inc., Careismatic Brands, Barco Uniforms, Inc., Lakeland Industries, Inc. and FIGS, Inc. Major competitors for our Promotional Products segment include companies such as BDA, Inc., HALO Branded Solutions, Inc., Staples, Inc., Cimpress PLC and InnerWorkings, Inc. Major competitors for our Remote Staffing Solutions segment include companies such as APAC Customer Services, Atento, TaskUs, Inc., Harte Hanks, Inc., Concentrix, Sitel, Sykes, and Teleperformance. We also compete with a multitude of foreign, regional and local competitors that vary by market. If our existing or future competitors seek to gain or retain market share by reducing prices, we may be required to lower our prices, which would adversely affect our operating results. Similarly, if customers or potential customers perceive the products or services offered by our existing or future competitors to be of higher quality than ours or part of a broader product mix, our revenues may decline, which would adversely affect our operating results.
Global, national or regional economic slowdowns, high unemployment levels, fewer jobs, changes in tax laws or cost increases might have an adverse effect on our operating results.
Our primary products within our Uniforms and Related Products segment are used by workers and, as a result, our business prospects are dependent upon levels of employment and overall economic conditions on a global, national and regional level, among other factors. Our revenues are impacted by our customers’ opening and closing of locations and reductions and increases in headcount, including from voluntary turnover and increased automation, which affect the quantity of uniform orders on a per-employee basis. If we are unable to offset these effects, such as through the addition of new customers, the penetration of existing customers with a broader mix of product and service offerings, or decreased production costs that can be passed on in the form of lower prices, our revenue growth rates will be negatively impacted. Likewise, increases in tax rates or other changes in tax laws or other regulations can negatively affect our profitability.
While we do not believe that our exposure is greater than that of our competitors, we could be adversely affected by increases in the prices of fabric, natural gas, gasoline, wages, employee benefits, insurance costs and other components of product cost unless we can recover such increases through proportional increases in the prices for our products and services. Competitive and general economic conditions might limit our ability and that of our competitors to increase prices to cover any increases in our product cost.
The uniform and corporate identity apparel and promotional products industries are subject to pricing pressures that may cause us to lower the prices we charge for our products and adversely affect our financial performance.
Many of our competitors also source their product requirements from developing countries to achieve a lower cost operating environment, possibly with lower costs than our offshore facilities, and those manufacturers may use these cost savings to reduce prices. Some of our competitors have more purchasing power than we do, which may enable them to obtain products at lower costs. To remain competitive, we may adjust our prices and margins from time-to-time in response to these industry-wide pricing pressures. Additionally, increased customer demands for allowances, incentives and other forms of economic support could reduce our margins and affect our profitability. Our financial performance will be negatively affected by these pricing pressures if we are forced to reduce our prices and we cannot reduce our product costs proportionally or if our product costs increase and we cannot increase our prices proportionally.
Changes to trade regulation, quotas, duties, tariffs or other restrictions caused by the changing U.S. and geopolitical environments or otherwise, such as those with respect to China, may materially harm our revenue and results of operations, such as by increasing our costs and/or limiting the amount of products that we can import.
Our operations are subject to various international trade agreements and regulations, such as the Dominican Republic–Central America Free Trade Agreement (CAFTA-DR), Caribbean Basin Trade Partnership Act (CBTPA), Haitian Hemispheric Opportunity through Partnership Encouragement Act, as amended (HOPE), the Food Conservation and Energy Act of 2008 (HOPE II), the Haiti Economic Lift Program of 2010 (HELP), the African Growth and Opportunity Act (AGOA), the Middle East Free Trade Area Initiative (MEFTA) and the activities and regulations of the World Trade Organization (WTO). Generally, these trade agreements and regulations benefit our business by reducing or eliminating the quotas, duties and/or tariffs assessed on products manufactured in a particular country. However, trade agreements and regulations can also impose requirements that have a material adverse effect on our business, revenue and results of operations, such as limiting the countries from which we can purchase raw materials, limiting the products that qualify as duty free, and setting quotas, duties and/or tariffs on products that may be imported into the United States from a particular country. Certain inbound products in our Uniforms and Related Products and Promotional Products segments to the United States are subject to tariffs assessed on the manufactured cost of goods at the time of import. As a result, we have had to increase prices for certain products and may be required to raise those prices further, or raise our prices on other products, which may result in the loss of customers and harm our operating performance. In response, in part, to tariffs levied on products imported from China we have shifted some production out of China and may seek to shift additional production out of China, which may result in additional costs and disruption to our operations.
The countries in which our products are manufactured or into which they are imported may from time-to-time impose new quotas, duties, tariffs and requirements as to where raw materials must be purchased to qualify for free or reduced duty. These countries also may create additional workplace regulations or other restrictions on our imports or adversely modify existing restrictions. Adverse changes in these costs and restrictions could harm our business. We cannot assure that future trade agreements or regulations will not provide our competitors an advantage over us or increase our costs, either of which could have a material adverse effect on our business, results of operations or financial condition. Nor can we assure that the changing geopolitical and U.S. political environments will not result in a trade agreement or regulation being altered which adversely affects our company. The U.S. government may decide to impose or alter existing import quotas, duties, tariffs or other restrictions on products or raw materials sourced from those countries, which include countries from which we import raw materials or in which we manufacture our products. Any such quotas, duties, tariffs or restrictions could have a material adverse effect on our business, results of operations or financial condition.
The apparel industry, including uniforms and corporate identity apparel, is subject to changing fashion trends and if we misjudge consumer preferences, the image of one or more of our brands may suffer and the demand for our products may decrease.
The apparel industry, including uniforms and corporate identity apparel, is subject to shifting customer demands and evolving fashion trends and our success is also dependent upon our ability to anticipate and promptly respond to these changes. Failure to anticipate, identify or promptly react to changing trends or styles may result in decreased demand for our products, as well as excess inventories and markdowns, which could have a material adverse effect on our business, results of operations and financial condition. In addition, if we misjudge consumer preferences, our brand image may be impaired. We believe our products are, in general, less subject to fashion trends compared to many other apparel manufacturers because the majority of what we manufacture and sell are uniforms, scrubs, corporate identity apparel and other accessories.
Our Remote Staffing Solutions business is dependent on the trend toward outsourcing.
Our Remote Staffing Solutions business and growth within that segment depend in large part on the industry trend toward outsourced customer contact management services. Outsourcing means that an entity contracts with a third party, such as us, to provide customer contact services rather than perform such services in-house. There can be no assurance that this trend will continue, as organizations may elect to perform such services themselves. A significant change in this trend could have a material adverse effect on our business, financial condition and results of operations.
Risks Relating to Our Indebtedness and Retirement Plan Obligations
Our indebtedness may limit cash flow available to invest in the ongoing needs of our business.
As of December 31, 2021, our total consolidated indebtedness was $116.8 million. Our outstanding indebtedness may have negative consequences on our business, such as requiring us to dedicate a sizable portion of our cash flow from operations to the payment of debt service, reducing the availability of our cash flow to fund working capital, capital expenditures, acquisitions, dividends, stock buybacks and other general corporate purposes, and increasing our vulnerability to adverse economic or industry conditions.
Our credit agreement contains restrictions that limit our flexibility in operating our business.
Our senior secured credit agreement contains various covenants that limit our ability to engage in specified types of transactions. These covenants limit our and our restricted subsidiaries’ ability to, among other things:
• incur additional indebtedness or issue certain preferred shares;
• pay dividends on, repurchase or make distributions in respect of our capital stock, or make other restricted payments;
• make certain investments;
• sell certain assets;
• acquire other businesses;
• create liens;
• consolidate, merge, sell or otherwise dispose of all or substantially all of our assets; and
• enter into certain transactions with our affiliates.
Substantially all of the assets of the Company are pledged as collateral under our indebtedness. Our credit agreement requires compliance with certain financial ratios and covenants and satisfaction of specified financial tests. Failure to meet any financial ratios, covenants or financial tests could result in an event of default under our credit agreement. If an event of default occurs, our lender could increase our borrowing costs, restrict our ability to obtain additional borrowings under our line of credit, accelerate all amounts outstanding or enforce its interest against collateral pledged under the credit agreement.
We may be adversely affected by the discontinuation of LIBOR as a benchmark rate.
On March 5, 2021, the Financial Conduct Authority of the U.K. (the “FCA”), which regulates LIBOR, announced (the “FCA Announcement”) that all LIBOR tenors relevant to us will cease to be published or will no longer be representative after June 30, 2023. The FCA Announcement coincides with the March 5, 2021 announcement of LIBOR’s administrator, the ICE Benchmark Administration Limited (the “IBA”), indicating that, as a result of not having access to input data necessary to calculate LIBOR tenors relevant to us on a representative basis after June 30, 2023, the IBA would have to cease publication of such LIBOR tenors immediately after the last publication on June 30, 2023.
Interest rates on the Company’s current debt instruments are benchmarked against LIBOR. These debt instruments mature after June 30, 2023, which is the date at which banks are expected to stop reporting the data used to create this benchmark reference rate. It is uncertain how many or which industry participants will switch from one benchmark rate to another or whether a benchmark other than Secured Overnight Financing Rate (“SOFR”) will become prevalent. Further, the Company’s debt instruments do not currently identify an alternative benchmark rate to replace LIBOR, leaving such determination to be made if and when necessary, nor is the impact of such a change determinable. The transition to SOFR or any other benchmark rate may impact interest rates on the Company’s borrowings, including its corporate debt and interest-rate swap. If the impact is significantly adverse, the Company’s ability to service its debt or comply with its debt covenants could be jeopardized.
Further, a change from LIBOR to another indexed benchmark rate may affect companies or individuals with exposure to LIBOR with whom the Company relies upon to conduct business, such as its current banking institutions, vendors, customers, brokers/dealers, investment companies or investment advisors. Adverse impacts on any market participants on whom the Company relies to conduct business or access capital markets could significantly affect the Company’s business operations and cash flow.
We have significant retirement plan obligations with respect to certain of our employees and our available cash flow may be adversely affected in the event that payments become due under our supplemental executive retirement plan that is unfunded.
The Company is the sponsor of an unfunded supplemental executive retirement plan (“SERP”) in which several of its employees are participants. In the event that payments become due under the SERP, we will have to use cash flow from operations or other sources to fund our obligations. As of December 31, 2021, we had $15.5 million in unfunded obligations related to the SERP.
Risks Relating to Our Common Stock
Certain existing shareholders have significant control.
At December 31, 2021, our executive officers and Directors, and certain of their family members collectively owned 30.9% of our outstanding common stock. As a result, our executive officers and Directors, and certain of their family members, have significant influence over the election of our Board of Directors, the approval or disapproval of any other matters requiring shareholder approval, and the affairs and policies of our company.
Our management and the Audit Committee of the Board of Directors have decided to restate the Company’s interim financial statements for the periods ended June 30, 2021 and September 30, 2021. In connection with this decision, our management has concluded that certain of our disclosure controls and procedures were not effective as of June 30, 2021, September 30, 2021 and December 31, 2021 due to a material weakness in our internal control over financial reporting for income taxes. If we are unable to remediate the material weakness and otherwise maintain an effective system of internal control over financial reporting, it could result in us not preventing or detecting on a timely basis a material misstatement of the Company’s financial statements.
Management and the Audit Committee of the Board of Directors concluded that it was appropriate to restate the Company’s previously issued unaudited interim financial statements included in the Company’s Quarterly Reports on Form 10-Q for the quarterly periods ended June 30, 2021 and September 30, 2021, filed with the SEC on July 28, 2021 and November 3, 2021, respectively, due to a failure to reverse deferred tax liabilities associated with the termination of the Company’s two qualified defined benefit pension plans in the second quarter 2021.
As part of that process, management identified a material weakness in the Company’s internal control over financial reporting as of June 30, 2021 and September 30, 2021. As further disclosed in “Item 9A. Controls and Procedures” of this Annual Report on Form 10-K, that material weakness continues to exist as of December 31, 2021. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis.
Although we intend to implement a plan to remediate this material weakness, we cannot be certain of the success of the plan. If our remedial measures are insufficient to address the material weakness, or if one or more additional material weaknesses or significant deficiencies in our internal control over financial reporting are discovered or occur in the future, or our disclosure controls and procedures are again determined to be ineffective, we may not be able to prevent or identify irregularities or ensure the fair and accurate presentation of our financial statements included in our periodic reports filed with the U.S. Securities and Exchange Commission. Additionally, the occurrence of, or failure to remediate, a material weakness and any future material weaknesses in our internal control over financial reporting or determination that our disclosure controls and procedures are ineffective may have other consequences that could materially and adversely affect our business, including an adverse impact on the market price of our common stock, potential actions or investigations by the U.S. Securities and Exchange Commission or other regulatory authorities, shareholder lawsuits, a loss of investor confidence and damage to our reputation.
Our share price may change significantly, and you may not be able to resell shares of our common stock at or above the price you paid or at all, and you could lose all or part of your investment as a result. If we sell any common stock or securities convertible into or exercisable for common stock under our universal shelf registration statement, you may be diluted.
The trading price of our common stock, as reported on the Nasdaq Stock Market, could fluctuate due to a number of factors such as those listed in “Risks Relating to Our Business” and include, but are not limited to, the following, some of which are beyond our control:
• quarterly variations in our results of operations;
• results of operations that vary from the expectations of securities analysts and investors;
• results of operations that vary from those of our competitors;
• changes in expectations as to our future financial performance, including financial estimates by securities analysts and investors;
• announcements by us, our competitors or our vendors of significant contracts, acquisitions, divestitures, joint marketing relationships, joint ventures or capital commitments;
• announcements by third parties of significant claims or proceedings against us; and
• general domestic and international economic conditions.
Furthermore, the stock market has experienced extreme volatility that, in some cases, has been unrelated or disproportionate to the operating performance of particular companies. These broad market and industry fluctuations may adversely affect the market price of our common stock, regardless of our actual operating performance.
In the past, following periods of market volatility, shareholders have instituted securities class action litigation. If we were involved in securities litigation, it could have a substantial cost and divert resources and the attention of executive management from our business regardless of the outcome of such litigation.
Finally, in 2020 we filed with the Securities and Exchange Commission a universal shelf registration statement, pursuant to which we may offer and sell up to $120,000,000 in the aggregate of common stock, preferred stock, debt securities, warrants, units and subscription rights, and the selling shareholders may offer and sell up to 750,000 shares in the aggregate of our common stock, in each case from time to time in one or more offerings. Any such offering or sale may cause a decline in our share price and an offering by us of equity securities or securities convertible into or exercisable for equity securities may result in dilution to existing shareholders.
There can be no assurance that we will continue to pay dividends on our common stock, and our indebtedness could limit our ability to pay dividends on our common stock.
Payment of cash dividends on our common stock is subject to our compliance with applicable law and depends on, among other things, our results of operations, financial condition, level of indebtedness, capital requirements, contractual restrictions, business prospects and other factors that our board of directors may deem relevant. Our senior credit facility contains, and the terms of any future indebtedness we incur may contain, limitations on our ability to pay dividends. Although we have paid cash dividends in the past, there can be no assurance that we will continue to pay any dividend in the future.
General Risk Factors
We are subject to periodic litigation in both domestic and international jurisdictions that may adversely affect our financial position and results of operations.
From time-to-time we may be involved in legal or regulatory actions regarding product liability, employment practices, intellectual property infringement, bankruptcies and other litigation or enforcement matters. These proceedings may be in jurisdictions with reputations for aggressive application of laws and procedures against corporate defendants. We are impacted by trends in litigation, including class-action allegations brought under various consumer protection and employment laws. Due to the inherent uncertainties of litigation in both domestic and foreign jurisdictions, we cannot accurately predict the ultimate outcome of any such proceedings. These proceedings could cause us to incur costs and may require us to devote resources to defend against these claims and could ultimately result in a loss or other remedies, such as product recalls, which could adversely affect our financial position and results of operations.
Volatility in the global financial markets could adversely affect results.
In the past, global financial markets have experienced extreme disruption, including, among other things, volatility in securities prices, diminished liquidity and credit availability, rating downgrades of certain investments and declining valuations of others. There can be no assurance that there will not be further change or volatility, which could lead to challenges in our business and negatively impact our financial results. Any future tightening of credit in financial markets could adversely affect the ability of our customers and suppliers to obtain financing for significant purchases and operations and could result in a decrease in orders and spending for our products and services. We are unable to predict the likely duration and severity of any disruption in financial markets and adverse economic conditions and the effects they may have on our business and financial condition.
Inability to attract and retain key management or other personnel could adversely impact our business.
Our success is largely dependent on the skills, experience and efforts of our senior management and other key personnel. If, for any reason, one or more senior executive or key personnel was not to remain active in our company, or if we were unable to attract and retain senior management or key personnel or our costs to do so increase significantly, our results of operations could be adversely affected.
We may recognize impairment charges, which could adversely affect our financial condition and results of operations.
We assess our goodwill, intangible assets and long-lived assets for impairment when required by generally accepted accounting principles in the United States (“GAAP”). These accounting principles require that we record an impairment charge if circumstances indicate that the asset carrying values exceed their estimated fair values. The estimated fair value of these assets is impacted by general economic conditions in the locations in which we operate. Deterioration in these general economic conditions may result in: declining revenue, which can lead to excess capacity and declining operating cash flow; reductions in management’s estimates for future revenue and operating cash flow growth; increases in borrowing rates and other deterioration in factors that impact our weighted average cost of capital; and deteriorating real estate values. If our assessment of goodwill, intangible assets or long-lived assets indicates an impairment of the carrying value for which we recognize an impairment charge, this may adversely affect our financial condition and results of operations.
If we are unable to accurately predict our future tax liabilities, become subject to increased levels of taxation or our tax contingencies are unfavorably resolved, our results of operations and financial condition could be adversely affected.
Changes in tax laws or regulations in the jurisdictions in which we do business, including the United States, or changes in how the tax laws are interpreted, could further impact our effective tax rate, further restrict our ability to repatriate undistributed offshore earnings, or impose new restrictions, costs or prohibitions on our current practices and reduce our net income and adversely affect our cash flows.
We are also subject to tax audits in the United States and other jurisdictions and our tax positions may be challenged by tax authorities. Although we believe that our current tax provisions are reasonable and appropriate, there can be no assurance that these items will be settled for the amounts accrued, that additional tax exposures will not be identified in the future or that additional tax reserves will not be necessary for any such exposures. Any increase in the amount of taxation incurred as a result of challenges to our tax filing positions could result in a material adverse effect on our business, results of operations and financial condition.
Item 1B. Unresolved Staff Comments
None.
The following table describes the material facilities we owned or leased as of December 31, 2021:
| Location |
Status |
Square Feet |
Uses |
|||
| Seminole, Florida |
Owned |
60,000 | Corporate Office, Remote Staffing Solutions and Uniforms and Related Products |
|||
| Belmopan, Belize |
Leased |
13,750 | Remote Staffing Solutions |
|||
| Compton, California |
Leased |
24,449 | Promotional Products |
|||
| Coppell, Texas |
Leased |
114,735 | Uniforms and Related Products |
|||
| Eudora, Arkansas |
Leased |
210,300 | Uniforms and Related Products |
|||
| Kingston, Jamaica |
Leased |
19,500 | Remote Staffing Solutions |
|||
| La Libertad, El Salvador |
Owned |
43,496 | Remote Staffing Solutions |
|||
| Lake Providence, Louisiana |
Leased |
215,000 | Uniforms and Related Products |
|||
| Lexington, Mississippi |
Owned |
40,000 | Uniforms and Related Products |
|||
| Monticello, Arkansas |
Leased |
92,000 | Uniforms and Related Products and Promotional Products |
|||
| Oak Grove, Louisiana |
Leased |
118,330 | Uniforms and Related Products and Promotional Products |
|||
| Phoenix, Arizona |
Leased |
21,243 | Promotional Products |
|||
| Ouanaminthe, Haiti |
Leased |
120,000 | Uniforms and Related Products |
|||
| San Ignacio, Belize |
Owned |
11,732 | Remote Staffing Solutions |
|||
| San Salvador, El Salvador |
Leased |
17,777 | Remote Staffing Solutions |
|||
| Tempe, Arizona |
Leased |
46,725 | Promotional Products |
The Company has an ongoing program designed to maintain and improve its facilities. The Company’s properties have adequate productive capacity to meet the Company’s present needs as well as those of the foreseeable future.
We are a party to certain lawsuits in the ordinary course of business. We do not believe that these proceedings, individually or in the aggregate, will have a material adverse effect on our financial position, results of operations or cash flows.
Item 4. Mine Safety Disclosures
Not applicable.
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
The principal market on which Superior’s common shares are traded is the NASDAQ Stock Market under the symbol “SGC.”
We declared cash dividends of $0.46 per share during the fiscal year ended December 31, 2021, which were paid in the first, second, third and fourth quarters of 2021.
We intend to pay regular quarterly distributions to our holders of common shares, the amount of which may change from time to time; however, there can be no assurances that we will in fact pay such distributions on a regular basis. Future distributions will be declared and paid at the discretion of our Board of Directors, and will depend upon cash generated by operating activities, our financial condition, capital requirements, and such other factors as our Board of Directors deem relevant.
Under our Credit Agreement with Truist Bank, if an event of default exists, we may not make distributions to our shareholders. The Company is in full compliance with all terms, conditions and covenants of such agreement.
On March 16, 2022, we had 134 shareholders of record.
Information regarding the Company’s equity compensation plans is incorporated by reference to the information set forth in Item 12 of Part III of this Form 10-K under the section entitled “Equity Compensation Plan Information.”
Issuer Purchases of Equity Securities
The table below sets forth information with respect to purchases made by or on behalf of Superior Group of Companies, Inc. or any “affiliated purchaser” (as defined in Rule 10b-18(a)(3) under the Exchange Act) of our common stock during the three months ended December 31, 2021.
| Period |
Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs (1) | ||||||||||||
| October 1, 2021 to October 31, 2021 |
- | $ | - | - | ||||||||||||
| November 1, 2021 to November 30, 2021 |
- | - | - | |||||||||||||
| December 1, 2021 to December 31, 2021 |
- | - | - | |||||||||||||
| Total |
- | - | - | 657,451 | ||||||||||||
| (1) | On May 2, 2019, the Company’s Board of Directors approved a stock repurchase program of up to 750,000 shares of the Company’s outstanding common stock. There is no expiration date or other restriction governing the period over which the Company can make share repurchases under the program. All purchases under this program will be open market transactions. |
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with our Financial Statements, which present our results of operations for the years ended December 31, 2021, 2020 and 2019, as well as our financial positions at December 31, 2021 and 2020, contained elsewhere in this Form 10-K. Some of the information contained in this discussion and analysis or set forth elsewhere in this Form 10-K, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. You should review the “Special Note Regarding Forward Looking Statements” and “Risk Factors” sections of this Form 10-K for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.
The discussion that follows includes a comparison of the Company’s results of operations and liquidity and capital resources for the years ended December 31, 2021 and 2020. For the discussion of changes from the year ended December 31, 2019 to the year ended December 31, 2020 and other financial information related to the year ended December 31, 2019, refer to Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, of the Company’s Form 10-K for the year ended December 31, 2020. That document was filed with the United States Securities and Exchange Commission on March 3, 2021.
Recent Acquisitions
On January 29, 2021, the Company, through BAMKO, acquired substantially all of the assets of Gifts By Design, Inc. (“Gifts by Design”) of Seattle, Washington. Gifts by Design is a promotional products and branded merchandise agency that is well-established as a developer and supplier of corporate awards, incentives, and recognition programs for some of the world’s biggest brands. The purchase price for the acquisition consisted of $6.0 million in cash at closing.
On December 2, 2021, the Company, principally through BAMKO, acquired substantially all of the assets of Sutter’s Mill Specialties, Inc. (“Sutter’s Mill”) of Tempe, Arizona. Sutter's Mill is a vertically integrated manufacturer of high quality, decorated promotional products. Sutter's Mill has the capability to print on demand and create customized promotional programs and products for customers of any size. The purchase price of the acquisition consisted of the following: (a) approximately $10.4 million in cash at closing, subject to a working capital adjustment, (b) the issuance of 45,620 restricted shares of Superior’s common stock that vest ratably over a three-year period, and (c) potential future payments of approximately $4.5 million in additional contingent consideration for calendar years 2022 through 2024 based on the results of the acquired business.
Business Outlook
Superior is comprised of three reportable business segments: (1) Uniforms and Related Products, (2) Remote Staffing Solutions, and (3) Promotional Products.
Uniforms and Related Products
In our Uniforms and Related Products segment, we manufacture and sell a wide range of uniforms, career apparel and accessories. Our primary products are service apparel, such as scrubs, lab coats, protective apparel and patient gowns, provided to the healthcare industry, and service apparel, such as uniforms, provided to workers employed by our customers in various industries, including retail, hotel, food service, transportation and other industries. We sell our brands of healthcare service apparel primarily to healthcare laundries, dealers, distributors and retailers. The COVID-19 pandemic initially created increased demand for healthcare service apparel from laundries, dealers and distributors that service hospitals and other medical facilities. From a long-term perspective, we expect that demand for our signature marketing brands, including Fashion Seal Healthcare® and WonderWink®, will continue to provide opportunities for growth and increased market share. Sales of uniforms are impacted by our customers’ opening and closing of locations and reductions, increases, and turnover of employees. The COVID-19 pandemic reduced demand for uniform apparel in many of our customers’ industries, such as the restaurant, transportation and hospitality industries. This, however, was partially offset by demand from customers in certain retail industries, such as grocery and pharmacy customers. The economic environment in the United States is beginning to return to pre-pandemic economic activity levels. While we continue to source some personal protective equipment for our customers, we anticipate that demand for personal protective equipment, including for our Uniforms and Related Products segment, will continue to decline. Based on the longer-term fundamentals of our uniforms business, however, we believe that we have growth opportunities to expand our market share.
Remote Staffing Solutions
This business segment (also known as “The Office Gurus”), which operates in El Salvador, Belize, Jamaica, Dominican Republic, and the United States, initially started to support the Company’s back office needs while improving overall efficiencies and lowering operating costs. After years of consistently improving key performance indicators, lowering costs and providing exceptional service to our Uniforms and Related Products segment in areas such as order entry, cash collections, vendor payables processing, customer service, sales, and others, The Office Gurus started selling their services to outside companies in 2009. The Office Gurus has become an award-winning business process outsourcer offering inbound and outbound voice, email, text, chat and social media support. Although the COVID-19 pandemic has generated uncertainties for our customers and their industries, we have recently seen increased demand for our services. With an environment and career path designed to attract and maintain top talent across all sites, we believe The Office Gurus is positioned well to continue growing this business.
Promotional Products
For more than a decade, we sold promotional products on a limited basis to our existing Uniforms and Related Products customer base. While there were substantial opportunities to sell promotional products to those customers, it was not an area of focus, specialization, or expertise for us. On March 1, 2016, that changed with our acquisition of substantially all of the assets of BAMKO, Inc. (“BAMKO”). BAMKO has many strengths, well-developed systems, and time-tested processes that offer significant competitive advantages. With a robust back-office support platform operated out of India, direct-to-factory sourcing operations based in China, and proprietary technological platforms and programming capabilities that we believe are competitive, BAMKO is well positioned in the promotional products industry and continues to be a platform for potential future acquisitions. We completed two additional acquisitions in this segment in late 2017, as well as acquisitions in January 2021 and December 2021, and remain open to additional acquisitions going forward. In recent years we have seen an increase in customer orders in our promotional products business and expect growth opportunities for our core promotional products business to continue. The COVID-19 pandemic created significant opportunities for us within the personal protective equipment market. Although we will continue to source some personal protective equipment for our customers, we anticipate, based on supply and demand factors, that opportunities to supply personal protective equipment, including through our Promotional Products segment, will continue to decline. Our core promotional products business has not experienced the same downturn during the pandemic that many of our competitors experienced as increased activities from customers in certain industries, such as the delivery service industry, more than offset reduced activities from customers in other industries, such as the restaurant and entertainment industries. From a long-term perspective, we believe that this segment’s synergistic fit with our uniforms business will create opportunities to cross-sell the products of each of these business segments to new and existing customers.
COVID-19 Impact
The COVID-19 pandemic continues to affect our operations around the world and financial performance, and likely will continue to do so for an undetermined period of time. International, federal, state and local efforts to contain the spread of COVID-19 have continued. Government actions to address the situation remain in effect and new actions continue to be enacted or modified, including safety requirements such as recommended or mandatory use of face masks and other personal protective equipment and related products, recommended or mandated vaccinations, social distancing rules and guidelines, travel restrictions, temporary closures of non-essential businesses and other restrictive measures.
In responding to the needs of our customers, we have sourced personal protective equipment, including face masks, isolation gowns, sanitizers and gloves, which contributed $19.6 million and $19.0 million to net sales during the year ended December 31, 2021 for our Uniforms and Related Products segment and Promotional Products segment, respectively. Personal protective equipment net sales for our Promotional Products segment and Uniforms and Related Products segment were $82.7 million and $48.5 million, respectively, during the year ended December 31, 2020.
However, the pandemic also had and could continue to have a number of adverse impacts on our business, including, but not limited to, disruption to the economy and our customers’ willingness and/or ability to spend, temporary or permanent closures of businesses that consume our products and services, additional work restrictions, and supply chains being interrupted, slowed, or rendered inoperable. Our employees and the employees and contractors of our suppliers and customers also could become ill, quarantined, or otherwise unable to work or travel due to health reasons or governmental restrictions.
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 goodwill or other indefinite-lived intangible assets. The extent to which the COVID-19 pandemic ultimately impacts our business, financial condition, results of operations or cash flows will depend on numerous factors that continue to evolve and which we may not be able to accurately predict at this time, including the delivery of effective vaccines on a timely basis to a number of people sufficient to prevent or substantially lower the severity of incidents of infection or possible future variants of the virus, the extent and effectiveness of containment actions, availability of widespread rapid testing and effective treatment alternatives. Prolonged or recurring periods of difficult market conditions could have material adverse impacts on our business, financial condition, results of operations and cash flows.
Sourcing of Goods and Raw Materials
Along with many manufacturers that source goods and raw materials from abroad, we are currently experiencing continued significant supply disruptions and delays due to a variety of reasons. These changes are partially driven by interruptions in global supply chains (including as a result of port congestion and trucking shortages) and partially by a shift in customer buying habits to e-commerce, which has the effect of increasing demand for shipping capacity from Asia, leading to capacity constraints. Both factors have increased shipping times as well as the price of shipping, whether by sea, air, rail, or vehicle, this year. Shipping delays combined with significant increases in orders for our products have recently created, and are expected to continue to create, inventory pressure for us.
An interruption in any of our supply sources or facilities could adversely affect our results of operations until alternate sources or facilities can be secured. The Uniforms and Related Products segment’s principal fabrics used in the manufacture of its finished goods are cotton, polyester, cotton-synthetic and poly-synthetic blends. The majority of such fabrics are sourced in China. The Promotional Products segment relies on the supply of different types of raw materials as well as textiles, including plastic, glass, fabric and metal. The vast majority of these raw materials are principally sourced from China, either directly by BAMKO or its suppliers. If we are unable to continue to obtain our raw materials and finished products from China or if our suppliers are unable to source raw materials from China, it could significantly disrupt our business. Further, the Company and the Company’s suppliers generally source or manufacture finished goods in parts of the world that may be affected by economic uncertainty, political unrest, logistical challenges (such as port strikes and embargos), foreign currency fluctuations, labor disputes, health emergencies, or the imposition of duties, tariffs or other import regulations by the United States, any of which could result in additional cost or limit our supply of necessary goods and raw materials.
We currently believe challenges created by such supply chain disruptions are manageable. However, we have limited insight into the extent to which COVID-19 or other factors could further impair our sourcing of goods and materials.
The Year Ended December 31, 2021 Compared to the Year Ended December 31, 2020
Operations
Net Sales (in thousands, except percentages):
| For the Years Ended December 31, | ||||||||||||
| 2021 |
2020 |
% Change |
||||||||||
| Uniforms and Related Products |
$ | 263,933 | $ | 287,333 | (8.1 | %) | ||||||
| Remote Staffing Solutions |
64,312 | 42,365 | 51.8 | % | ||||||||
| Promotional Products |
215,842 | 202,156 | 6.8 | % | ||||||||
| Net intersegment eliminations |
(7,101 | ) | (5,157 | ) | 37.7 | % | ||||||
| Consolidated Net Sales |
$ | 536,986 | $ | 526,697 | 2.0 | % | ||||||
Net sales for the Company increased 2.0% from $526.7 million for the year ended December 31, 2020 to $537.0 million for the year ended December 31, 2021. The principal components of this aggregate increase in net sales were as follows: (1) a decrease in net sales for our Uniforms and Related Products segment (contributing (4.4%)), (2) an increase in net sales for our Remote Staffing Solutions segment after intersegment eliminations (contributing 3.8%) and (3) an increase in net sales for our Promotional Products segment (contributing 2.6%).
Uniforms and Related Products net sales decreased 8.1%, or $23.4 million, for the year ended December 31, 2021 compared to the year ended December 31, 2020. The decrease was primarily due to a decrease of $28.9 million in sales of personal protective equipment resulting from significantly lower volumes and lower market demand for healthcare service apparel when compared to the spike in demand during the early phases of the COVID-19 pandemic that began in the second quarter of 2020. These decreases were partially offset by an increase in demand for uniform apparel.
Remote Staffing Solutions net sales increased 51.8% before intersegment eliminations and 53.8% after intersegment eliminations for the year ended December 31, 2021 compared to the year ended December 31, 2020. These increases were primarily attributed to our providing continued services in 2021 to our customer base that was expanded during 2020, the onboarding of new customers in 2021 and the negative impact of disruptions experienced in 2020 resulting from COVID-19.
Promotional Products net sales increased 6.8%, or $13.7 million, for the year ended December 31, 2021 compared to the year ended December 31, 2020. The increase was primarily due to an increase of $77.4 million in net sales in our core promotional products business, partially offset by a decrease of $63.7 million in the sale of personal protective equipment. The increase in net sales in our core promotional products business was driven by the timing of promotional programs launched for certain customers, growth of our customer base through continued market penetration experienced in 2020 and 2021 and improved market conditions. Additionally, the acquisitions of Gifts by Design and Sutter's Mill in 2021 contributed $16.9 million to net sales for the year ended December 31, 2021. The robust personal protective equipment sales during the year ended December 31, 2020 were driven by market demand during the early phases of the COVID-19 pandemic.
Cost of Goods Sold
Cost of goods sold consists primarily of direct costs of acquiring inventory, including cost of merchandise, inbound freight charges, purchasing costs, and inspection costs for our Uniforms and Related Products and Promotional Products segments. Cost of goods sold for our Remote Staffing Solutions segment includes salaries and payroll related benefits for agents. The Company includes shipping and handling fees billed to customers in net sales. Shipping and handling costs associated with out-bound freight are recorded in cost of goods sold. Other shipping and handling costs are included in selling and administrative expenses.
As a percentage of net sales, cost of goods sold for our Uniforms and Related Products segment was 67.4% for the year ended December 31, 2021 and 65.2% for the year ended December 31, 2020. The percentage increase was primarily driven by higher logistical costs and $2.0 million in inventory write-downs of personal protective equipment during the year ended December 31, 2021, partially offset by the decrease in personal protective equipment sales. Interruptions in global supply chains have led to higher logistical costs in 2021 and are expected to continue in 2022, however, the extent to which we will be impacted is dependent on a number of factors that are difficult to predict. For additional information related to logistical challenges, please refer to the section “ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Business Outlook – Sourcing of Goods and Raw Materials.”
As a percentage of net sales, cost of goods sold for our Remote Staffing Solutions segment was 41.5% for the year ended December 31, 2021 and 42.6% for the year ended December 31, 2020. The percentage decrease was primarily driven by disruptions resulting from COVID-19 during the year ended December 31, 2020.
As a percentage of net sales, cost of goods sold for our Promotional Products segment was 69.4% for the year ended December 31, 2021 and 66.5% for the year ended December 31, 2020. The percentage increase was primarily the result of differences in the mix of products and customers.
Selling and Administrative Expenses
Selling and administrative expenses increased 4.1%, or $5.6 million, for the year ended December 31, 2021 compared to the year ended December 31, 2020. The increase was primarily due to an increase in employee costs driven mostly by increased headcount and the effect of the Company’s decision in 2020 to forgo its discretionary matching contribution under its defined contribution plan, partially offset by a decrease in bad debt expense of $4.5 million on outstanding trade accounts receivable.
As a percentage of net sales, selling and administrative expenses for our Uniforms and Related Products segment was 28.9% for each of the years ended December 31, 2021 and 2020. As a percentage of net sales, selling and administrative expenses remained relatively flat.
As a percentage of net sales, selling and administrative expenses for our Remote Staffing Solutions segment was 36.9% for the year ended December 31, 2021 and 36.1% for the year ended December 31, 2020. As a percentage of net sales, selling and administrative expenses remained relatively flat.
As a percentage of net sales, selling and administrative expenses for our Promotional Products segment was 21.3% for the year ended December 31, 2021 and 20.5% for the year ended December 31, 2020. As a percentage of net sales, selling and administrative expenses remained relatively flat.
Other Periodic Pension Costs
Other periodic pension costs increased to $1.8 million for the year ended December 31, 2021 from $1.0 million for the year ended December 31, 2020. This increase was primarily due to actuarial losses recognized on the supplemental executive retirement plan (“SERP”) of $1.5 million during 2021 compared to actuarial losses recognized on the SERP of $0.7 million in 2020.
Pension Plan Terminations
During the year ended December 31, 2021, the Company completed the termination of its two noncontributory qualified defined benefit pension plans, which were fully funded. Consequently, the Company recognized a settlement charge of $7.8 million during the year ended December 31, 2021, which represents the acceleration of deferred charges previously included within accumulated other comprehensive loss, the impact of remeasuring the plan assets and obligations at termination and additional benefits from asset surpluses paid and expected to be paid to plan participants. The pension plan terminations did not require a cash outlay by the Company.
Gain on Sale of Property, Plant and Equipment
During the year ended December 31, 2020, the Company sold a building and related assets that were previously used as a Distribution Center within our Uniforms and Related Products segment for net proceeds of $5.3 million and realized a gain on sale of $2.2 million. This sale was part of management’s plan to transition the HPI Distribution Center operations to the Company’s largest and most technologically advanced semi-robotic worldwide distribution center, located in Eudora, Arkansas.
Interest Expense
Interest expense decreased to $1.2 million for the year ended December 31, 2021 from $2.0 million for the year ended December 31, 2020. This decrease was primarily the result of a decrease in LIBOR rates on our outstanding borrowings and a loss of $0.3 million recognized on our interest rate swap during the year ended December 31, 2020.
Income Taxes
The effective income tax rate was 11.1% and 20.3% for the years ended December 31, 2021 and 2020, respectively. The decrease in the effective tax rate was primarily driven by decreases of 3.9% for compensation related items, 2.2% for rate impacts due to foreign operations, 1.8% for pension plan terminations and 0.7% for changes in uncertain tax positions. Income tax expense for the year ended December 31, 2021 was favorably impacted by $0.9 million of windfall tax benefits from stock options exercised and $0.6 million of stranded tax benefits recognized as a result of the Company’s termination of its pension plans. For further discussion of changes in the effective tax rate, refer to the Note 7 to the Financial Statements.
Liquidity and Capital Resources
Overview
Management uses a number of standards in measuring the Company’s liquidity, such as: working capital, profitability ratios, cash flows from operating activities, and activity ratios. The Company’s balance sheet generally provides the ability to pursue acquisitions, invest in new product lines and technologies and invest in additional working capital as necessary. As of December 31, 2021, approximately $7.7 million of our cash was held in our foreign subsidiaries, of which $3.7 million of cash was held at foreign subsidiaries from which the Company plans to repatriate the funds as needed for liquidity.
The Company’s primary source of liquidity has been its net income and the use of credit facilities and term loans as described further below. Management currently believes that cash flows provided by operating activities and availability under the revolving credit facility will be sufficient to satisfy the Company’s anticipated working capital requirements and capital expenditures for the next twelve months. Management also currently believes that cash flows provided by operating activities and availability under the revolving credit facility will be sufficient to satisfy the Company’s anticipated working capital requirements and capital expenditures beyond the next twelve months. In the future, the Company may continue to use credit facilities and other secured and unsecured borrowings as a source of liquidity. The Company may also begin relying on the issuance of equity or debt securities, including under its universal shelf registration statement (File No. 333-249760). There can be no assurance that any such financings would be available to us on reasonable terms. Any future issuances of equity securities or securities convertible into or exercisable for equity securities may be dilutive to our shareholders. 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.
Working Capital
Superior’s Uniforms and Related Products segment markets itself to its customers as a “stock house.” Therefore, Superior carries inventories of both raw materials and finished products, the practice of which requires substantial working capital, which we believe to be common in the industry.
Cash and cash equivalents increased by $3.7 million to $8.9 million as of December 31, 2021 from $5.2 million on December 31, 2020. Working capital increased to $188.1 million at December 31, 2021 from $143.6 million at December 31, 2020. The increase in working capital was primarily due to an increase in inventories, an increase in prepaid expenses and other current assets, an increase in accounts receivable and a decrease in other current liabilities, partially offset by an increase in accounts payable. The increase in inventories was primarily driven by the acquisition of Sutter’s Mill in 2021, which included inventory of $9.1 million, and the timing of inventory purchases within our Promotional Products and Uniforms and Related Products segments. The increase in prepaid expenses and other current assets was primarily related to prepaid taxes. The increase in accounts receivable was primarily driven by increased activity and the timing of customer payments received within our Promotional Products segment, partially offset by a decrease from the timing of customer payments received within our Uniforms and Related Products segment. The decrease in other current liabilities was primarily related to significant accruals as of December 31, 2020, associated with the Company’s performance in 2020, that were paid in 2021, including accrued compensation and income taxes. The increase in accounts payable was primarily driven by the timing of inventory purchases within our Promotional Products segment and the acquisition of Sutter’s Mill in 2021.
Cash Flows
Our cash flows from operating, investing and financing activities, as reflected in the statements of cash flows, are summarized in the following table (in thousands):
| For the Years Ended December 31, |
||||||||
| 2021 |
2020 |
|||||||
| Net cash provided by (used in): |
||||||||
| Operating activities |
$ | 17,080 | $ | 41,359 | ||||
| Investing activities |
(34,130 | ) | (6,573 | ) | ||||
| Financing activities |
20,995 | (38,443 | ) | |||||
| Effect of exchange rates on cash |
(182 | ) | (209 | ) | ||||
| Net increase (decrease) in cash and cash equivalents |
$ | 3,763 | $ | (3,866 | ) | |||
Operating Activities. The decrease in net cash provided by operating activities during the year ended December 31, 2021 compared to the year ended December 31, 2020 was primarily attributable to payments made in the current year period related to significant accruals as of December 31, 2020 associated with the Company’s performance in 2020, including accrued compensation and income taxes, advanced customer payments received on personal protective equipment contracts in the prior year period and a $4.2 million contingent consideration payment representing the excess of the total contingent consideration payment made in the current year period over the fair value of the liability estimated at the time of acquisition. Working capital cash changes during the year ended December 31, 2021 included an increase of $21.8 million in inventories and an increase of $7.9 million in prepaid expenses and other current assets. Working capital cash changes during the year ended December 31, 2020 included an increase of $32.7 million in accounts payable and other current liabilities, an increase of $29.3 million in accounts receivable and an increase of $16.8 million in inventories.
Investing Activities. The increase in net cash used in investing activities during the year ended December 31, 2021 compared to the year ended December 31, 2020 was attributable to $10.4 million of cash paid for the acquisition of Sutter's Mill in 2021, $6.0 million of cash paid for the acquisition of Gifts by Design in 2021 and an increase in capital expenditures of $5.8 million primarily related to the expansion of our distribution facility in Eudora, Arkansas. Additionally, the year ended December 31, 2020 included $5.3 million in proceeds from the sale of a building and related assets that were previously used as a Distribution Center within our Uniforms and Related Products segment.
Financing Activities. The increase in net cash provided by financing activities during the year ended December 31, 2021 compared to the year ended December 31, 2020 was primarily attributable to net borrowings of $27.6 million in debt during 2021 compared to net repayments of $31.7 million of debt in 2020. Excess cash generated from operating activities during the year ended December 31, 2021 was used to fund business acquisitions. Excess cash generated from operating activities during the year ended December 31, 2020 was used to repay outstanding borrowings under the revolving credit facility.
Capital Expenditures
In the foreseeable future, the Company expects to continue its ongoing capital expenditure program designed to improve the effectiveness and capabilities of its facilities and technology. During the year ended December 31, 2021, $8.9 million of our capital expenditures related to the expansion of our distribution facility in Eudora, Arkansas. In 2022, we expect to continue the expansion of our domestic distribution centers and invest in technology improvements, but currently anticipate that we will spend less in capital expenditures in 2022 than we spent in 2021. The Company at all times evaluates its capital expenditure program in light of prevailing economic conditions.
Credit Facilities (See Note 6 to the Financial Statements)
As of December 31, 2021, the Company had approximately $116.8 million in outstanding borrowings under its credit facilities with Truist Bank, consisting of $61.5 million outstanding under the revolving credit facility, $15.0 million outstanding under a term loan maturing in February 2024 (“2017 Term Loan”) and $40.2 million outstanding under a term loan maturing in January 2026 (“2018 Term Loan”). The revolving credit facility, 2017 Term Loan and 2018 Term Loan are collectively referred to as the “Credit Facilities.”
On February 8, 2021, the Company entered into a Second Amended and Restated Credit Agreement with Truist Bank (the “Credit Agreement”), pursuant to which the maximum availability under the Company’s existing revolving credit facility was increased from $75.0 million to $125.0 million and its maturity date was extended until February 8, 2026. The 2017 Term Loan and the 2018 Term Loan remain outstanding with the same amortization schedules. The floor on LIBOR for the revolving credit facility was increased from zero to 0.25%, but the interest rates on the revolving credit facility and the term loans were not otherwise modified.
Obligations outstanding under the 2018 Term Loan have a variable interest rate of LIBOR plus a margin of between 0.85% and 1.65% (based on the Company’s funded debt to EBITDA ratio) (0.95% at December 31, 2021). Obligations outstanding under the revolving credit facility and the 2017 Term Loan generally have a variable interest rate of one-month LIBOR (with a 0.25% floor on LIBOR for the revolving credit facility) plus a margin of between 0.68% and 1.50% (based on the Company’s funded debt to EBITDA ratio) (0.93% for the revolving credit facility and 0.78% for the 2017 Term Loan at December 31, 2021). The Company is obligated to pay a commitment fee of 0.15% per annum on the average unused portion of the commitment under the revolving credit facility. The available balance under the revolving credit facility is reduced by outstanding letters of credit. At December 31, 2021, the Company had undrawn capacity of $63.5 million under the revolving credit facility.
Contractual principal payments for the 2017 Term Loan are as follows: 2022 through 2023 - $6.0 million per year; and 2024 - $3.0 million. Contractual principal payments for the 2018 Term Loan are as follows: 2022 through 2025 - $9.3 million per year; and 2026 - $3.1 million. The term loans do not contain pre-payment penalties.
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, and sales of assets. The Credit Agreement also requires the Company to maintain a fixed charge coverage ratio (as defined in the Credit Agreement) of at least 1.25:1 and a funded debt to EBITDA ratio (as defined in the Credit Agreement) not to exceed 5.0:1. As of December 31, 2021, the Company was in compliance with these ratios. The Credit Facilities are secured by substantially all of the operating assets of the Company as collateral, 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.
Dividends and Share Repurchase Program
During the years ended December 31, 2021 and 2020, the Company paid cash dividends of $7.2 million and $6.1 million, respectively. The Company anticipates that it will continue to pay dividends in the future as financial conditions permit.
On May 2, 2019, the Company’s Board of Directors approved a stock repurchase program of up to 750,000 shares of the Company’s outstanding common stock. There is no expiration date or other restriction governing the period over which the Company can make share repurchases under the program. All purchases under this program will be open market transactions. Under this program the Company reacquired and retired 43,458 shares of its common stock during the year ended December 31, 2020. At December 31, 2021, the Company’s remaining repurchase capacity under its common stock repurchase program was 657,451 shares. Shares purchased under the common stock repurchase program are constructively retired and returned to unissued status. The Company considers several factors in determining when to make share repurchases, including among other things, the cost of equity, the after-tax cost of borrowing, the debt to total capitalization targets and its expected future cash needs.
Contractual Obligations
The following table sets forth a summary of our material contractual obligations as of December 31, 2021 (in thousands):
| Payments Due by Period |
||||||||||||||||
| 2022 |
2023-2024 |
2025-2026 | Thereafter |
|||||||||||||
| Debt: |
||||||||||||||||
| Revolving credit facility(1) |
$ | - | $ | - | $ | 61,517 | $ | - | ||||||||
| Term Loans(1) |
15,286 | 27,572 | 12,380 | - | ||||||||||||
| Operating leases |
2,153 | 2,958 | 1,283 | - | ||||||||||||
| Acquisition-related contingent liabilities(2) |
4,762 | 3,000 | 1,500 | - | ||||||||||||
| Total long term contractual cash obligations(3) |
$ | 22,201 | $ | 33,530 | $ | 76,680 | $ | - | ||||||||
| (1) | Excludes estimates for interest payable as amounts are based on variable rates. See Note 6 to the Financial Statements. |
| (2) | The amounts represent the expected cash payment. The amounts in our balance sheet are stated at fair value. |
| (3) | Certain long-term liabilities have been excluded from this table as we cannot make a reasonable estimate of the period of cash settlement. These long-term liabilities include unrecognized tax benefits of $0.9 million, net defined benefit plan liability of $15.1 million and deferred compensation liability of $7.8 million. |
Critical Accounting Estimates
Our significant accounting policies are described in Note 1 to the Financial Statements included in this Form 10-K. Our discussion and analysis of financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with GAAP. The preparation of the financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate the estimates that we have made. These estimates are based upon our historical experience and on various other assumptions that we believe to be reasonable under the circumstances. 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. A discussion of our critical accounting estimates, the underlying judgments and uncertainties used to make them and the likelihood that materially different estimates would be reported under different conditions or using different assumptions is as follows:
Allowance for Losses on Accounts Receivable
Judgments and estimates are used in determining the collectability of accounts receivable and in establishing allowances for doubtful accounts. The Company analyzes specific trade accounts receivable and historical bad debt experience, customer credit worthiness, current economic trends and the age of outstanding balances when evaluating the adequacy of the allowance for doubtful accounts. Management judgments and estimates are used in connection with establishing the allowance in any accounting period. Changes in estimates are reflected in the period they become known. If the financial condition of the Company’s customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. An additional impairment in value of 5% of accounts receivable would require an increase in the allowance for doubtful accounts and would result in additional expense of approximately $5.4 million. During the years ended December 31, 2021, 2020 and 2019, we recorded bad debt expense of $2.3 million, $6.7 million and $1.3 million, respectively. The Company’s concentration of risk is also monitored and as of December 31, 2021, the five largest customer accounts receivables balances totaled $29.6 million or approximately 28% of the respective total accounts receivable balances.
Revenue Recognition
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 termination 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.
Inventories
The Company’s Uniforms and Related Products segment markets itself to its customers as a “stock house.” Therefore, the Company at all times carries inventories of both raw materials and finished products. Inventories are stated at the lower of cost or net realizable value. Judgments and estimates are used in determining the likelihood that goods on hand can be sold to customers. Historical inventory usage and current revenue trends are considered in estimating both excess and obsolete inventories. If actual product demand and market conditions are less favorable than those projected by management, additional inventory write-downs may be required, which may be material.
Goodwill and indefinite-lived intangible assets
The Company has made acquisitions in the past that included goodwill and indefinite-lived intangible assets. Goodwill represents the excess of the cost of an acquisition over the fair value of the net assets acquired. Goodwill and indefinite-lived intangible assets such as trade names are not amortized but are subject to an annual (or under certain circumstances more frequent) impairment test in the fourth quarter based on their estimated fair value. We test more frequently, if there are indicators of impairment, or whenever such circumstances suggest that the carrying value of goodwill or trade names may not be recoverable. Examples of such events and circumstances that the Company would consider include the following:
| • |
macroeconomic conditions such as deterioration in general economic conditions, limitations on accessing capital, or other developments in equity and credit markets; |
| • |
industry and market considerations such as a deterioration in the environment in which the Company operates, an increased competitive environment, a decline in market-dependent multiples or metrics (considered in both absolute terms and relative to peers), a change in the market for the Company’s products or services, or a regulatory or political development; |
| • |
cost factors such as increases in raw materials, labor, or other costs that have a negative effect on earnings and cash flows; |
| • |
overall financial performance such as negative or declining cash flows or a decline in actual or planned revenue or earnings compared with actual and projected results of relevant prior periods; and |
| • |
other relevant entity-specific events such as changes in management, key personnel, strategy, or customers. |
Goodwill and indefinite-lived intangible assets are tested at a level of reporting referred to as “the reporting unit.” The Company’s reporting units are defined as each of its three reporting segments. As of December 31, 2021, goodwill of $24.4 million and $15.0 million were included in the Uniforms and Related Products segment and the Promotional Products segment, respectively. As of December 31, 2021, indefinite-lived intangible assets of $18.8 million and $14.5 million were included in the Uniforms and Related Products segment and the Promotional Products segment, respectively.
An entity has the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not (that is, a likelihood of more than 50%) that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events or circumstances, an entity determines it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the impairment test is unnecessary. For each of the years ended December 31, 2021, 2020 and 2019, the Company completed its testing of goodwill and indefinite-lived intangible assets and determined that the fair value of each applicable reporting unit was more than its carrying value.
Contingent Consideration
The purchase price to acquire substantially all of the assets of Sutter’s Mill in 2021 included contingent consideration based on varying levels of Sutter’s Mill’s EBITDA in each measurement period from 2022 to 2024. The estimated fair value for Sutter’s Mill acquisition-related contingent consideration payable as of December 31, 2021 was $2.6 million. The total estimated undiscounted remaining payment related to this contingent consideration payable is between $2.4 million and $4.7 million. The Company’s fair value estimate of contingent consideration is primarily derived from management’s forecasted EBITDA of Sutter’s Mill. The Company will continue to evaluate this 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 materially different from the estimated value of the liability.
Insurance
The Company self-insures for certain obligations related to employee health programs. The Company also purchases stop-loss insurance policies to protect it from catastrophic losses. Judgments and estimates are used in determining the potential value associated with reported claims and for losses that have occurred, but have not been reported. The Company’s estimates consider historical claim experience and other factors. The Company’s liabilities are based on estimates, and, while the Company believes that the accrual for loss is adequate, the ultimate liability may be in excess of or less than the amounts recorded. Changes in claim experience, the Company’s ability to settle claims or other estimates and judgments used by management could have a material impact on the amount and timing of expense for any period.
SERP
The Company is the sponsor of an unfunded supplemental executive retirement plan (“SERP”) in which several of its employees are participants. In calculating our obligations and related expense, we make various assumptions and estimates, after consulting with outside actuaries and advisors. The annual determination of expense involves calculating the estimated total benefits ultimately payable to plan participants. Significant assumptions related to the calculation of our obligations include the discount rates used to calculate the present value of benefit obligations to be paid in the future. We review these assumptions annually based upon currently available information, including information provided by our actuaries. The Company’s pension obligations are determined using estimates including those related to discount rates. The discount rates used for the Company’s SERP of 2.36% was determined based on the FTSE Russell Pension Liability Curve. This rate was selected as the best estimate of the rate at which the benefit obligations could be effectively settled on the measurement date taking into account the nature and duration of the benefit obligations of the plan. For additional information on our benefit plans, please refer to Note 8 to the Financial Statements.
Income Taxes
The Company is required to estimate and record income taxes payable for federal, state and foreign jurisdictions in which the Company operates. This process involves estimating actual current tax expense and assessing temporary differences resulting from differing accounting treatment between tax and book that result in deferred tax assets and liabilities. In addition, accruals are also estimated for federal and state tax matters for which deductibility is subject to interpretation. Taxes payable and the related deferred tax differences may be impacted by changes to tax laws, changes in tax rates and changes in taxable profits and losses. The Tax Cuts and Jobs Act (“Tax Act”) enacted on December 22, 2017 imposes a U.S. tax on global intangible low taxed income (“GILTI”) that is earned by certain foreign affiliates owned by a U.S. shareholder. GILTI is generally intended to impose tax on the earnings of a foreign corporation that are deemed to exceed a certain threshold return relative to the underlying business investment. In accordance with guidance issued by FASB, the Company made a policy election to treat future taxes related to GILTI as a current period expense in the reporting period in which the tax is incurred. The Company was impacted by GILTI relative to the earnings of its foreign subsidiaries, and is expected to be impacted in future periods, which may be material to our financial statements. Deferred income taxes are provided on undistributed earnings of foreign subsidiaries in the period in which the Company determines it no longer intends to permanently reinvest such earnings outside the United States. The Company expects to permanently reinvest the earnings from its wholly-owned Brazilian and UK subsidiaries, and accordingly, has not provided deferred taxes on the subsidiaries’ undistributed net earnings or basis differences. The Company believes that the tax liability that would be incurred upon repatriation of the earnings from its Brazilian and UK subsidiaries is immaterial at December 31, 2021.
Reserves are also estimated for uncertain tax positions that are currently unresolved. The Company routinely monitors the potential impact of such situations and believes that it is properly reserved. For the year ended December 31, 2021, there was a decrease of $0.3 million in total unrecognized tax benefits. As of December 31, 2021, 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.
Share-Based Compensation
The Company recognizes expense for all share-based payments to employees, including grants of employee stock options, in the financial statements based on their fair values. In the Company’s share-based compensation strategy we utilize a combination of stock options and stock-settled stock appreciation rights (“SARs”) that vest over time and restricted shares and performance shares of common stock that vest over time or if performance targets are met. The fair value of the options and SARs granted is recognized as expense on the date of grant or over the service period. The Company uses the Black-Scholes valuation model to value any share-based compensation. Option valuation methods, including Black-Scholes, require the input of highly complex and subjective assumptions including the risk free interest rate, dividend rate, expected term and common stock price volatility rate. The Company determines the assumptions to be used based upon current economic conditions. While different assumptions may result in materially different stock compensation expenses, changing any one of the individual assumptions by 10% would not have a material impact on the recorded expense. Expense for unvested shares of restricted stock and performance shares is recognized over the required service period. For additional information on share-based compensation and the assumptions we use, please refer to Note 11 to the Financial Statements.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Interest Rate Risk
We are subject to market risk exposure related to changes in interest rates on our debt. Interest on our Credit Facilities is based upon the one-month LIBOR rate. In order to reduce the interest rate risk on our debt, the Company entered into an interest rate swap agreement on a portion of its borrowings. Excluding the effect of the interest rate swap agreement, a hypothetical increase in the LIBOR rate of 100 basis points as of January 1, 2021 would have resulted in approximately $1.2 million in additional pre-tax interest expense for the year ended December 31, 2021. For further information regarding our debt instruments, see Note 6 to the Financial Statements.
Foreign Currency Exchange Risk
Sales to customers outside of the United States are subject to fluctuations in foreign currency exchange rates, which may negatively impact gross margin realized on our sales. Less than 5% of our sales contracts are denominated in foreign currencies. We cannot predict the effect of exchange rate fluctuations on our operating results. In certain cases, we may enter into foreign currency cash flow hedges to reduce the variability of cash flows associated with our sales and expenses denominated in foreign currency. As of December 31, 2021, we had no foreign currency exchange hedging contracts. There can be no assurance that our strategies will adequately protect our operating results from the effect of exchange rate fluctuations.
Financial results of our foreign subsidiaries in the Promotional Products segment are denominated in their local currencies, which include the Hong Kong dollar, the Chinese renminbi, the British pound, the Indian rupee, the Brazilian real and the Canadian dollar. These operations may also have net assets and liabilities not denominated in their functional currency, which exposes us to changes in foreign currency exchange rates that impact income. Excluding intercompany payables and receivables considered to be long-term investments, changes in exchange rates for assets and liabilities not denominated in their functional currency are reported as foreign currency gains (losses) within selling and administrative expenses in our statements of comprehensive income. During the years ended December 31, 2021 and 2020, foreign currency losses were not significant. We also have exposure to foreign currency exchange risk from the translation of foreign subsidiaries from the local currency into the U.S. dollar. Comprehensive income during the year ended December 31, 2021 included a foreign currency translation adjustment loss of $0.3 million primarily related to exchange rate movements of the Brazilian real.
Item 8. Financial Statements and Supplementary Data
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
Page |
| Report of Independent Registered Public Accounting Firm (PCAOB ID |
|
| Consolidated Statements of Comprehensive Income for the years ended December 31, 2021, 2020 and 2019 |
|
| Consolidated Balance Sheets as of December 31, 2021 and 2020 | |
| Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2021, 2020 and 2019 | |
| Consolidated Statements of Cash Flows for the years ended December 31, 2021, 2020 and 2019 | |
| Notes to the Consolidated Financial Statements | |
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders
Superior Group of Companies, Inc. and Subsidiaries
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Superior Group of Companies, Inc. and Subsidiaries (the “Company”) as of December 31, 2021 and 2020, and the related consolidated statements of comprehensive income, shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2021 and the related notes. We have also audited the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO criteria).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company did not maintain, in all material respects, effective internal control over financial reporting as of December 31, 2021 based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO because a material weakness in internal control over financial reporting existed as of that date related to the accounting for income taxes.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis. The material weakness referred to above is described in Management's Report on Internal Control over Financial Reporting appearing under Item 9A. We considered this material weakness in determining the nature, timing, and extent of audit tests applied in our audit of the 2021 consolidated financial statements, and our opinion regarding the effectiveness of the Company’s internal control over financial reporting does not affect our opinion on those consolidated financial statements.
Basis for Opinions
The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles in the United States of America. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles in the United States of America, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the consolidated financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Accounts Receivable - Specific Reserve
As described in Note 1 to the consolidated financial statements, the Company’s allowance for doubtful accounts receivable was approximately $6.4 million as of December 31, 2021. The allowance for doubtful accounts receivable consists of a general and a specific allowance. The specific allowance component represents reserves for losses estimated to have been incurred associated with accounts receivable specifically identified by management and evaluated based on factors such as the customer credit worthiness, the age of outstanding balances, and information obtained from discussions with the customer. If, based on management’s evaluation of these factors, it is expected that a loss has been incurred on the collection of an accounts receivable balance, a specific allowance is recognized based on management’s judgment regarding the incurred losses. We identified the estimate of incurred losses on the specific allowance component of the allowance for doubtful accounts receivable as a critical audit matter.
The principal considerations for our determination that performing procedures to evaluate the allowance for doubtful accounts receivable is a critical audit matter was the significant judgment by management when determining the estimated losses incurred for accounts receivable balances with a specific reserve, which in turn led to a high degree of auditor judgment and effort in performing procedures and evaluating management’s significant assumptions related to the estimated incurred losses.
The primary procedures we performed to address this critical audit matter included:
| ● |
Testing the design and operating effectiveness of the key controls relating to management’s process for identifying specific impaired receivables and determining the expected losses incurred. |
| ● |
Testing management’s process for developing the estimate, including evaluation of the factors, judgments and evidence used to identify receivable balances and determine the losses. |
| ● |
Obtaining a detail of individual accounts receivable balances and specific allowance by customer and evaluating the relevance and reliability of the data, factors, and assumptions considered by management in determining the estimated expected losses incurred, including whether management consistently applies the criteria in developing the estimate. |
| ● |
Performing analytical analysis, including a retrospective review of specific allowances and losses recognized in 2021 and subsequent collections to evaluate if the ultimate outcome supports management’s process for developing the estimates. |
Accounting for Income Taxes
As described in Notes 1 and 7 to the Company’s consolidated financial statements, the Company operates in multiple jurisdictions through its wholly-owned subsidiaries. The Company services customers from operating facilities located both inside and outside the United States. As a result, the Company is subject to income taxes in multiple domestic and foreign jurisdictions, each of which affect the Company’s accounting for income taxes. Accounting for the consolidated income tax provision requires estimates based on management’s understanding of current enacted tax laws and tax rates of each tax jurisdiction.
We identified the evaluation of the accounting for income tax accounts as a critical audit matter. The principal considerations for our determination that performing procedures to evaluate the accounting for income taxes is a critical audit matter. There is complexity and auditor judgement in the evaluation of the audit evidence necessary to assess the completeness and accuracy of the current and deferred income tax provisions specifically related to the significant number of deferred income tax positions resulting from previous business combinations, multi-jurisdictional operations, and the application of foreign tax laws and regulations. As a result, there is a need to involve personnel with specialized skill and knowledge.
The primary procedures we performed to address this critical audit matter included:
| ● |
Testing the design and operating effectiveness of certain internal controls over management’s process for determining the income tax provision including controls over the identification and determination of the completeness and accuracy of the current and deferred income tax provisions. |
| ● |
Evaluating the application of the relevant tax laws and regulations, and the impact of those on the determination of the Company’s current and deferred income tax provisions including performing procedures designed to test the completeness and accuracy of the statutory rates used and permanent and temporary differences identified by obtaining an understanding of the tax laws applicable in various jurisdictions. |
| ● |
Utilizing personnel with specialized skill and knowledge in domestic and international tax rules and laws to assist in evaluating the appropriateness and consistency of management’s judgments, estimates, assumptions and documentation pertaining to the accuracy of the Company’s current and deferred income tax provisions. |
| ● |
Obtaining a detail of the permanent and temporary differences and deferred taxes and testing certain balances for accuracy by agreeing the reported amounts to applicable support such as statutory rates and internal accounting records. |
/s/
Mayer Hoffman McCann P.C.
We have served as the Company’s auditor since 2013.
March 23, 2022
| CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME |
||||||||||
| (In thousands, except shares and per share data) |
| Years Ended December 31, | ||||||||||||
| 2021 |
2020 |
2019 |
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| Net sales |
$ | $ | $ | |||||||||
| Costs and expenses: |
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| Cost of goods sold |
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| Selling and administrative expenses |
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| Other periodic pension costs |
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| Pension plan termination charge |
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| Interest expense |
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| Gain on sale of property, plant and equipment |
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| Income before taxes on income |
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| Income tax expense |
||||||||||||
| Net income |
$ | $ | $ | |||||||||
| Net income per share: |
||||||||||||
| Basic |
$ | $ | $ | |||||||||
| Diluted |
$ | $ | $ | |||||||||
| Weighted average shares outstanding during the period |
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| Basic |
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| Diluted |
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| Other comprehensive income (loss), net of tax: |
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| Defined benefit pension plans: |
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| Recognition of net losses included in net periodic pension costs |
$ | $ | $ | |||||||||
| Recognition of settlement loss included in net periodic pension costs |
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| Recognition of net losses included in pension plan termination charges |
||||||||||||
| Current period loss |
( |
) | ( |
) | ( |
) | ||||||
| Loss on cash flow hedging activities |
( |
) | ( |
) | ( |
) | ||||||
| Foreign currency translation adjustment |
( |
) | ( |
) | ||||||||
| Other comprehensive income (loss) |
( |
) | ||||||||||
| Comprehensive income |
$ | $ | $ | |||||||||
| Cash dividends per common share |
$ | $ | $ | |||||||||
| See accompanying Notes to the Consolidated Financial Statements. |
| CONSOLIDATED BALANCE SHEETS |
| (In thousands, except share and par value data) |
| December 31, | ||||||||
| 2021 | 2020 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable, less allowance for doubtful accounts of $ and $, respectively | ||||||||
| Accounts receivable - other | ||||||||
| Inventories | ||||||||
| Contract assets | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Property, plant and equipment, net | ||||||||
| Operating lease right-of-use assets | ||||||||
| Intangible assets, net | ||||||||
| Goodwill | ||||||||
| Other assets | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Other current liabilities | ||||||||
| Current portion of long-term debt | ||||||||
| Current portion of acquisition-related contingent liabilities | ||||||||
| Total current liabilities | ||||||||
| Long-term debt | ||||||||
| Long-term pension liability | ||||||||
| Long-term acquisition-related contingent liabilities | ||||||||
| Long-term operating lease liabilities | ||||||||
| Deferred tax liability | ||||||||
| Other long-term liabilities | ||||||||
| Commitments and contingencies (Note 10) | ||||||||
| Shareholders’ equity: | ||||||||
| Preferred stock, $ par value - authorized shares ( issued) | ||||||||
| Common stock, $ par value - authorized shares, issued and outstanding - and shares, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Retained earnings | ||||||||
| Accumulated other comprehensive income (loss), net of tax: | ||||||||
| Pensions | ( | ) | ( | ) | ||||
| Cash flow hedges | ||||||||
| Foreign currency translation adjustment | ( | ) | ( | ) | ||||
| Total shareholders’ equity | ||||||||
| Total liabilities and shareholders’ equity | $ | $ | ||||||
| See accompanying Notes to the Consolidated Financial Statements. |
| CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY |
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| (In thousands, except shares and per share data) |
| Accumulated | ||||||||||||||||||||||||
| Other | ||||||||||||||||||||||||
| Additional | Comprehensive | Total | ||||||||||||||||||||||
| Common | Common | Paid-In | Retained | (Loss) Income, | Shareholders’ | |||||||||||||||||||
| Shares | Stock | Capital | Earnings | net of tax | Equity | |||||||||||||||||||
| Balance, January 1, 2019 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| Common shares issued upon exercise of options | ( | ) | ||||||||||||||||||||||
| Restricted shares issued | ||||||||||||||||||||||||
| Share-based compensation expense | ||||||||||||||||||||||||
| Tax benefit from vesting of acquisition-related restricted stock | ||||||||||||||||||||||||
| Cash dividends declared ($ per share) | ( | ) | ( | ) | ||||||||||||||||||||
| Common stock reacquired and retired | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
| Comprehensive income (loss): | ||||||||||||||||||||||||
| Net earnings | ||||||||||||||||||||||||
| Cash flow hedges, net of taxes of $ | ( | ) | ( | ) | ||||||||||||||||||||
| Pensions, net of taxes of $ | ||||||||||||||||||||||||
| Change in currency translation adjustment, net of taxes of $ | ||||||||||||||||||||||||
| Balance, December 31, 2019 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| Common shares issued upon exercise of options | ( | ) | ||||||||||||||||||||||
| Restricted shares issued | ||||||||||||||||||||||||
| Share-based compensation expense | ||||||||||||||||||||||||
| Tax withheld on exercise of Stock Appreciation Rights (SARs) | ( | ) | ( | ) | ||||||||||||||||||||
| Tax benefit from vesting of acquisition-related restricted stock | ( | ) | ( | ) | ||||||||||||||||||||
| Cash dividends declared ($ per share) | ( | ) | ( | ) | ||||||||||||||||||||
| Common stock reacquired and retired | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
| Comprehensive income (loss): | ||||||||||||||||||||||||
| Net earnings | ||||||||||||||||||||||||
| Cash flow hedges, net of taxes of $ | ( | ) | ( | ) | ||||||||||||||||||||
| Pensions, net of taxes of $ | ( | ) | ( | ) | ||||||||||||||||||||
| Change in currency translation adjustment, net of taxes of $ | ( | ) | ( | ) | ||||||||||||||||||||
| Balance, December 31, 2020 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| Common shares issued upon exercise of options and SARs, net | 1 | ( | ) | |||||||||||||||||||||
| Performance based shares issued | ||||||||||||||||||||||||
| Restricted shares issued | ||||||||||||||||||||||||
| Restricted shares issued in conjunction with acquisition of business | ||||||||||||||||||||||||
| Share-based compensation expense | ||||||||||||||||||||||||
| Tax withheld on exercise of Stock Appreciation Rights (SARs) | ( | ) | ( | ) | ||||||||||||||||||||
| Tax withheld on exercise of performance based shares | ( | ) | ( | ) | ||||||||||||||||||||
| Tax benefit from vesting of acquisition-related restricted stock | ||||||||||||||||||||||||
| Cash dividends declared ($ per share) | ( | ) | ( | ) | ||||||||||||||||||||
| Comprehensive income (loss): | ||||||||||||||||||||||||
| Net earnings | ||||||||||||||||||||||||
| Cash flow hedges, net of taxes of $ | ( | ) | ( | ) | ||||||||||||||||||||
| Pensions, net of taxes of $ | ||||||||||||||||||||||||
| Change in currency translation adjustment, net of taxes of $ | ( | ) | ( | ) | ||||||||||||||||||||
| Balance, December 31, 2021 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
See accompanying Notes to the Consolidated Financial Statements.
| CONSOLIDATED STATEMENTS OF CASH FLOWS |
| (In thousands) |
| Years Ended December 31, | ||||||||||||
| 2021 |
2020 |
2019 |
||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES |
||||||||||||
| Net income |
$ | $ | $ | |||||||||
| Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||||||
| Depreciation and amortization |
||||||||||||
| Provision for bad debts - accounts receivable |
||||||||||||
| Share-based compensation expense |
||||||||||||
| Deferred income tax benefit |
( |
) | ( |
) | ( |
) | ||||||
| Gain on sale of property, plant and equipment |
( |
) | ( |
) | ||||||||
| Change in fair value of acquisition-related contingent liabilities |
( |
) | ||||||||||
| Pension plan termination charge |
||||||||||||
| Changes in assets and liabilities, net of acquisition of businesses: |
||||||||||||
| Accounts receivable |
( |
) | ( |
) | ( |
) | ||||||
| Accounts receivable - other |
( |
) | ( |
) | ||||||||
| Contract assets |
( |
) | ||||||||||
| Inventories |
( |
) | ( |
) | ( |
) | ||||||
| Prepaid expenses and other current assets |
( |
) | ( |
) | ( |
) | ||||||
| Other assets |
( |
) | ( |
) | ||||||||
| Accounts payable and other current liabilities |
||||||||||||
| Payment of acquisition-related contingent liabilities |
( |
) | ||||||||||
| Long-term pension liability |
( |
) | ||||||||||
| Other long-term liabilities |
||||||||||||
| Net cash provided by operating activities |
||||||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES |
||||||||||||
| Additions to property, plant and equipment |
( |
) | ( |
) | ( |
) | ||||||
| Proceeds from disposals of property, plant and equipment |
||||||||||||
| Acquisition of businesses |
( |
) | ||||||||||
| Net cash used in investing activities |
( |
) | ( |
) | ( |
) | ||||||
| CASH FLOWS FROM FINANCING ACTIVITIES |
||||||||||||
| Proceeds from borrowings of debt |
||||||||||||
| Repayment of debt |
( |
) | ( |
) | ( |
) | ||||||
| Payment of cash dividends |
( |
) | ( |
) | ( |
) | ||||||
| Payment of acquisition-related contingent liabilities |
( |
) | ( |
) | ( |
) | ||||||
| Proceeds received on exercise of stock options |
||||||||||||
| Tax withholdings on exercise of stock rights |
( |
) | ( |
) | ||||||||
| Tax (provision) benefit from vesting of acquisition-related restricted stock |
( |
) | ||||||||||
| Common stock reacquired and retired |
( |
) | ( |
) | ||||||||
| Net cash provided by (used in) financing activities |
( |
) | ( |
) | ||||||||
| Effect of currency exchange rates on cash |
( |
) | ( |
) | ||||||||
| Net increase (decrease) in cash and cash equivalents |
( |
) | ||||||||||
| Cash and cash equivalents balance, beginning of year |
||||||||||||
| Cash and cash equivalents balance, end of year |
$ | $ | $ | |||||||||
| Supplemental disclosure of cash flow information: |
||||||||||||
| Income taxes paid |
$ | $ | $ | |||||||||
| Interest paid |
$ | $ | $ | |||||||||
| See accompanying Notes to the Consolidated Financial Statements. |
Superior Group of Companies, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
NOTE 1 – Description of Business, Basis of Presentation and Summary of Significant Accounting Policies:
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 its state of incorporation to Florida. Effective on May 3, 2018, Superior Uniform Group, Inc. changed its name to Superior Group of Companies, Inc.
Superior’s Uniforms and Related Products segment, through its primary signature marketing brands Fashion Seal Healthcare®, HPI®, and WonderWink®, manufactures (through third parties or its own facilities) and sells a wide range of uniforms, corporate identity apparel, career apparel and accessories that are worn by employees in the hospital and healthcare fields; retail stores; hotels; fast food and other restaurants; transportation; and the private security, industrial and commercial markets.
Superior services its Remote Staffing Solutions segment through multiple The Office Gurus® entities, including its subsidiaries in El Salvador, Belize, Jamaica, Dominican Republic, and the United States (collectively, “TOG”). TOG is primarily a near-shore premium provider of cost effective multilingual telemarketing and business process outsourced solutions.
The Promotional Products segment, through the BAMKO®, Public Identity®, Tangerine®, Gifts by Design and Sutter’s Mill brands, services customers that purchase primarily promotional and related products. The segment currently has sales offices in the United States, Brazil and Canada with support services in China, Hong Kong and India.
Basis of presentation
The accompanying consolidated financial statements of Superior included herein have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) (“U.S.” or “United States”) and the rules and regulations of the Securities and Exchange Commission (the “SEC”). The Company refers to the consolidated financial statements collectively as “financial statements,” and individually as “statements of comprehensive income,” “balance sheets,” “statements of shareholders’ equity,” and “statements of cash flows” herein.
Use of estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amount of assets, liabilities, revenue and expenses, as well as the disclosures of contingent assets and liabilities. Because of the inherent uncertainties in this process, actual future results could differ from those expected at the reporting date.
Cash and cash equivalents
The Company considers all highly liquid investments with an original maturity of three months or less at the time of purchase to be cash equivalents.
Revenue recognition
Revenue is recognized when control of the promised goods or services are transferred to our customers, in an amount that reflects the consideration that we expect to receive in exchange for those goods or services. See Note 14 for further discussion on revenue recognition.
Accounts receivable and allowance for doubtful accounts
Judgments and estimates are used in determining the collectability of accounts receivable and in establishing allowances for doubtful accounts. The Company analyzes specific accounts receivable and historical bad debt experience, customer credit worthiness, current economic trends and the age of outstanding balances when evaluating the adequacy of the allowance for doubtful accounts. Changes in estimates are reflected in the period they become known. Charge-offs of accounts receivable are made once all collection efforts have been exhausted. If the financial condition of the Company’s customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.
Accounts receivable-other
The Company purchases raw materials and has them delivered to certain suppliers of the Company. The Company pays for the raw materials and then deducts the cost of these materials from payments to the suppliers at the time the related finished goods are invoiced to the Company by those suppliers.
Cost of goods sold and shipping and handling fees and costs
Cost of goods sold for our Uniforms and Related Products segment and our Promotional Products segment consist primarily of direct costs of acquiring inventory, including cost of merchandise, inbound freight charges, purchasing, receiving and inspection costs. Cost of goods sold for our Remote Staffing Solutions segment includes salaries and payroll related benefits for agents. The Company includes shipping and handling fees billed to customers in net sales. Shipping and handling costs associated with out-bound freight are generally recorded in cost of goods sold. Other shipping and handling costs are included in selling and administrative expenses and totaled $
Inventories
Inventories are stated at the lower of cost (first-in, first-out method or average cost) or net realizable value. Judgments and estimates are used in determining the likelihood that goods on hand can be sold to customers. Historical inventory usage and current revenue trends are considered in estimating both excess and obsolete inventories. If actual product demand and market conditions are less favorable than those projected by management, additional inventory write-downs may be required.
Property, plant and equipment
Property, plant and equipment are stated at cost, less accumulated depreciation and amortization. Major renewals and improvements are capitalized, while replacements, maintenance and repairs which do not improve or extend the life of the respective assets are expensed on a current basis. Costs of assets sold or retired and the related accumulated depreciation and amortization are eliminated from accounts and the net gain or loss is reflected in the statements of comprehensive income within selling and administrative expenses. During the year ended December 31, 2020, the Company sold a building and related assets that were previously used as a Distribution Center within our Uniforms and Related Products segment for net proceeds of $
Property, plant and equipment is recorded at cost and depreciated using the straight-line method over its estimated useful life as follows:
| Buildings (in years) | | |
| Improvements (in years) | | |
| Machinery, equipment and fixtures (in years) | | |
| Transportation equipment (in years) | |
Leasehold improvements are amortized over the terms of the leases to the extent that such improvements have useful lives of at least the terms of the respective leases.
Intangible assets, net
Intangible assets consist of customer relationships, non-compete agreements and trade names acquired in previous business acquisitions.
Intangible assets as of December 31, 2021 and 2020 are summarized as follows (dollars in thousands):
| December 31, 2021 | December 31, 2020 | |||||||||||||||||||
| Item | Weighted Average Life (In years) | Gross Carrying Amount | Accumulated Amortization | Gross Carrying Amount | Accumulated Amortization | |||||||||||||||
| Definite-lived intangible assets: | ||||||||||||||||||||
| Customer relationships (- year life) | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||||||
| Non-compete agreements (- year life) | ( | ) | ( | ) | ||||||||||||||||
| Total | $ | 47,009 | $ | ( | ) | $ | 42,941 | $ | ( | ) | ||||||||||
| Indefinite-lived intangible assets: | ||||||||||||||||||||
| Trade names | $ | $ | ||||||||||||||||||
| Total intangible assets | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||||||
Amortization expense for intangible assets for the years ended December 31, 2021, 2020 and 2019 was $
Estimated future intangible amortization expense is as follows (in thousands):
| 2022 | $ | |||
| 2023 | ||||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| Thereafter | ||||
| Total | $ |
Trade names:
As part of the acquisition of substantially all of the assets of HPI Direct, Inc. in 2013, the Company recorded $
Impairment of long-lived assets
Long-lived assets, such as property and equipment, and purchased intangibles subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of the asset is measured by comparison of its carrying amount to future net cash flows the asset is expected to generate. If such assets are considered to be impaired, the impairment to be recognized is measured as the amount by which the carrying amount of the asset exceeds its fair value. There were
Goodwill and indefinite-lived intangible assets
The Company has made acquisitions in the past that included goodwill and indefinite-lived intangible assets. Goodwill represents the excess of the cost of an acquisition over the fair value of the net assets acquired. Goodwill and indefinite-lived intangible assets such as trade names are not amortized but are subject to an annual (or under certain circumstances more frequent) impairment test in the fourth quarter based on their estimated fair value. We test more frequently, if there are indicators of impairment, or whenever such circumstances suggest that the carrying value of goodwill or trade names may not be recoverable. Examples of such events and circumstances that the Company would consider include the following:
| • | macroeconomic conditions such as deterioration in general economic conditions, limitations on accessing capital, or other developments in equity and credit markets; |
| • | industry and market considerations such as a deterioration in the environment in which the Company operates, an increased competitive environment, a decline in market-dependent multiples or metrics (considered in both absolute terms and relative to peers), a change in the market for the Company’s products or services, or a regulatory or political development; |
| • | cost factors such as increases in raw materials, labor, or other costs that have a negative effect on earnings and cash flows; |
| • | overall financial performance such as negative or declining cash flows or a decline in actual or planned revenue or earnings compared with actual and projected results of relevant prior periods; and |
| • | other relevant entity-specific events such as changes in management, key personnel, strategy, or customers. |
Goodwill and indefinite-lived intangible assets are tested at a level of reporting referred to as “the reporting unit.” The Company’s reporting units are defined as each of its
An entity has the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not (that is, a likelihood of more than 50%) that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events or circumstances, an entity determines it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the impairment test is unnecessary. For each of the years ended December 31, 2021, 2020 and 2019, the Company completed its testing of goodwill and indefinite-lived intangible assets and determined that the fair value of each applicable reporting unit was more than its carrying value.
Contingent Consideration
Contingent consideration relating to consideration transferred in exchange for an acquired business is recognized at its estimated fair value at the acquisition date. The contingent consideration is remeasured to fair value at each reporting date until the contingency is resolved. Any changes in fair value are recognized each reporting period in non-cash changes in fair value of estimated contingent consideration in the accompanying statements of comprehensive income.
SERP
The Company is the sponsor of an unfunded supplemental executive retirement plan (“SERP”) in which several of its employees are participants. In calculating our obligations and related expense, we make various assumptions and estimates, after consulting with outside actuaries and advisors. The annual determination of expense involves calculating the estimated total benefits ultimately payable to plan participants. Significant assumptions related to the calculation of our obligations include the discount rates used to calculate the present value of benefit obligations to be paid in the future. We review these assumptions annually based upon currently available information, including information provided by our actuaries.
Insurance
The Company self-insures for certain obligations related to employee health programs. The Company also purchases stop-loss insurance policies to protect it from catastrophic losses. Judgments and estimates are used in determining the potential value associated with reported claims and for losses that have occurred, but have not been reported. The Company’s estimates consider historical claim experience and other factors. The Company’s liabilities are based on estimates, and, while the Company believes that the accrual for loss is adequate, the ultimate liability may be in excess of or less than the amounts recorded. Changes in claim experience, the Company’s ability to settle claims or other estimates and judgments used by management could have a material impact on the amount and timing of expense for any period.
Taxes on income
Income taxes are provided for under the liability method, whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carryforwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. The calculation of the Company’s tax liabilities also involves dealing with uncertainties in the application of complex tax regulations. The Company recognizes liabilities for uncertain income tax positions based on estimates of whether, and the extent to which, additional taxes will be required. The Company also accrues interest and penalties related to uncertain income tax positions as income taxes. Refer to Note 7 for additional details.
Share-based compensation
The Company awards share-based compensation as an incentive for employees to contribute to the Company’s long-term success. The Company grants options, stock-settled stock appreciation rights, restricted stock and performance shares. The Company recognizes share-based compensation expense for all awards granted to employees, which is based on the fair value of the award on the date of grant. Determining the appropriate fair value model and calculating the fair value of stock compensation awards requires the input of certain highly complex and subjective assumptions, including the expected life of the stock compensation awards and the Company’s common stock price volatility, risk free interest rate and dividend rate. The assumptions used in calculating the fair value of stock compensation awards represent management’s best estimates, but these estimates involve inherent uncertainties and the application of judgment. As a result, if factors change and the Company deems it necessary to use different assumptions, stock compensation expense could be materially different from what has been recorded in the current period.
Other comprehensive income
Other comprehensive income (loss) is defined as the change in equity during a period, from transactions and other events, excluding changes resulting from investments by owners (e.g., supplemental stock offering) and distributions to owners (e.g., dividends).
Risks and concentrations
Financial instruments that potentially subject the Company to concentrations of credit risk include cash in banks in excess of federally insured amounts. The Company manages this risk by maintaining all deposits in high quality financial institutions and periodically performing evaluations of the relative credit standing of the financial institutions. When assessing credit risk the Company considers whether the credit risk exists at both the individual and group level. Consideration is given to the activity, region and economic characteristics when assessing if there exists a group concentration risk. At December 31, 2021, the Company had no customer with an accounts receivable balance greater than 10% of the total accounts receivable. At December 31, 2020, the Company had
The Uniforms and Related Products segment’s principal fabrics used in the manufacture of its finished goods are cotton, polyester, cotton-synthetic and poly-synthetic blends. The majority of such fabrics are sourced in China. The Promotional Products segment relies on the supply of different types of raw materials as well as textiles, including plastic, glass, fabric and metal. The vast majority of these raw materials are principally sourced from China, either directly by BAMKO or its suppliers. If we are unable to continue to obtain our raw materials and finished products from China or if our suppliers are unable to source raw materials from China, it could significantly disrupt our business. Further, the Company and the Company’s suppliers generally source or manufacture finished goods in parts of the world that may be affected by economic uncertainty, political unrest, logistical challenges (such as port strikes and embargos), foreign currency fluctuations, labor disputes, health emergencies, or the imposition of duties, tariffs or other import regulations by the United States, any of which could result in additional cost or limit our supply of necessary goods and raw materials.
Fair value of financial instruments
The carrying amounts of cash and cash equivalents, receivables and accounts payable approximated fair value as of December 31, 2021 and 2020, because of the relatively short maturities of these instruments. The carrying amount of the Company’s long-term debt approximated fair value as the rates are adjustable based upon current market conditions.
Recent Accounting Pronouncements
We consider the applicability and impact of all Accounting Standard Updates (“ASUs”). ASUs not listed below were assessed and determined to be not applicable.
Recently Adopted Accounting Pronouncements
In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting of Income Taxes”, which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. On January 1, 2021, the Company adopted this standard on a prospective basis. The Company’s adoption of this standard did not have a material impact on its financial statements.
Recently Issued Accounting Pronouncements Not Yet Adopted
In June 2016, the FASB issued ASU 2016-13, “Financial Instruments—Credit Losses (Topic 326).” The update changes the impairment model for most financial assets and certain other instruments, including trade and other receivables, held-to-maturity debt securities and loans, and requires entities to use a new forward-looking expected loss model that will result in the earlier recognition of allowance for losses. In February 2020, the FASB issued ASU 2020-2, “Financial Instruments – Credit Losses (Topic 326) and Leases (Topic 842): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 119 and Update to SEC Section on Effective Date Related to Accounting Standards Update No. 2016-02, Leases (Topic 842).” The update delayed the effective date of ASU 2016-13, “Financial Instruments—Credit Losses (Topic 326)” for Smaller Reporting Companies until fiscal years beginning after December 15, 2022. Adoption will require a modified retrospective approach beginning with the earliest period presented. The Company’s adoption of this standard is not expected to have a material impact on its financial statements.
In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848) Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” This update provides optional guidance for a limited period of time to ease potential accounting impacts associated with transitioning away from reference rates that are expected to be discontinued, such as interbank offered rates and LIBOR. This guidance includes practical expedients for contract modifications due to reference rate reform. Generally, contract modifications related to reference rate reform may be considered an event that does not require remeasurement or reassessment of a previous accounting determination at the modification date. This guidance may be applied through December 31, 2022. The Company will apply this guidance to transactions and modifications to contracts and hedging relationships that reference LIBOR.
| NOTE 2 - Allowance for Doubtful Accounts Receivable: |
| The activity in the allowance for doubtful accounts receivable was as follows (in thousands): |
| Years Ended December 31, | ||||||||||||
| 2021 | 2020 | 2019 | ||||||||||
| Balance at the beginning of year | $ | $ | $ | |||||||||
| Provision for bad debts | ||||||||||||
| Charge-offs | ( | ) | ( | ) | ( | ) | ||||||
| Recoveries | ||||||||||||
| Balance at the end of year | $ | $ | $ | |||||||||
| NOTE 3 - Reserve for Sales Returns and Allowances: |
| The activity in the reserve for sales returns and allowances was as follows (in thousands): |
| Years Ended December 31, | ||||||||||||
| 2021 | 2020 | 2019 | ||||||||||
| Balance at the beginning of year | $ | $ | $ | |||||||||
| Provision for returns and allowances | ||||||||||||
| Actual returns and allowances paid to customers | ( | ) | ( | ) | ( | ) | ||||||
| Balance at the end of year | $ | $ | $ | |||||||||
| NOTE 4 - Inventories: |
Inventories consisted of the following amounts (in thousands):
| December 31, | ||||||||
| 2021 | 2020 | |||||||
| Finished goods | $ | $ | ||||||
| Work in process | ||||||||
| Raw materials | ||||||||
| Inventories | $ | $ | ||||||
| NOTE 5 - Property, Plant and Equipment, Net: |
Property, plant and equipment, net, consisted of the following (in thousands):
| December 31, | ||||||||
| 2021 | 2020 | |||||||
| Land | $ | $ | ||||||
| Buildings, improvements and leaseholds | ||||||||
| Machinery, equipment and fixtures | ||||||||
| Accumulated depreciation and amortization | ( | ) | ( | ) | ||||
| Property, plant and equipment, net | $ | $ | ||||||
| Depreciation and amortization charges were $ |
Debt consisted of the following (in thousands):
| December 31, | ||||||||
| 2021 | 2020 | |||||||
| Credit Facilities: | ||||||||
| Revolving credit facility due February 2026 | $ | $ | ||||||
| Term loan due February 2024 (“2017 Term Loan”) | ||||||||
| Term loan due January 2026 (“2018 Term Loan”) | ||||||||
| $ | $ | |||||||
| Less: | ||||||||
| Payments due within one year included in current liabilities | ||||||||
| Debt issuance costs | ||||||||
| Long-term debt less current maturities | $ | $ | ||||||
The Company is party to a credit agreement with Truist Bank, consisting of a revolving credit facility, a term loan maturing in February 2024 (“2017 Term Loan”) and a term loan maturing in January 2026 (“2018 Term Loan”). The revolving credit facility, 2017 Term Loan and 2018 Term Loan are collectively referred to as the “Credit Facilities.”
On March 30, 2020, the Company entered into debt deferment agreements with Truist Bank to: (i) defer contractual principal and interest payments due between April 1, 2020 and June 1, 2020 under the 2017 Term Loan and 2018 Term Loan until their respective maturity dates; and (ii) defer contractual interest payments due between April 1, 2020 and June 1, 2020 under the revolving credit facility until its maturity date.
On February 8, 2021, the Company entered into a Second Amended and Restated Credit Agreement with Truist Bank (the “Credit Agreement”), pursuant to which the maximum availability under the Company’s existing revolving credit facility was increased from $
Obligations outstanding under the 2018 Term Loan have a variable interest rate of LIBOR plus a margin of between
Contractual principal payments for the 2017 Term Loan are as follows: 2022 through 2023 - $
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, and sales of assets. The Credit Agreement also requires the Company to maintain a fixed charge coverage ratio (as defined in the Credit Agreement) of at least and a funded debt to EBITDA ratio (as defined in the Credit Agreement) not to exceed As of December 31, 2021, the Company was in compliance with these ratios. The Credit Facilities are secured by substantially all of the operating assets of the Company as collateral, 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 Company is a party to an interest rate swap with a total notional value of $
Debt Maturity Schedule
Contractual maturities of debt (excluding interest to be accrued thereon) at December 31, 2021 are as follows (in thousands):
| 2022 | $ | |||
| 2023 | ||||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| Thereafter | ||||
| Total debt | $ |
Aggregate income tax provisions consist of the following (in thousands):
| Years Ended December 31, | ||||||||||||
| 2021 | 2020 | 2019 | ||||||||||
| Current: | ||||||||||||
| Federal | $ | $ | $ | |||||||||
| State and local | ||||||||||||
| Foreign | ||||||||||||
| Deferred Taxes: | ||||||||||||
| Deferred tax benefit | ( | ) | ( | ) | ( | ) | ||||||
| Income tax expense | $ | $ | $ | |||||||||
The significant components of the deferred income tax (liability) asset are as follows (in thousands):
| December 31, | ||||||||
| 2021 | 2020 | |||||||
| Deferred income tax assets: | ||||||||
| Pension accruals | $ | $ | ||||||
| Operating reserves and other accruals | ||||||||
| Tax credits | ||||||||
| Deferred income tax liabilities: | ||||||||
| Book carrying value in excess of tax basis of property | ( | ) | ( | ) | ||||
| Book carrying value in excess of tax basis of intangibles | ( | ) | ( | ) | ||||
| Tax effect of revenue recognition standard ASC 606 | ( | ) | ||||||
| Deferred expenses | ( | ) | ( | ) | ||||
| Net deferred income tax liability | $ | ( | ) | $ | ( | ) | ||
The difference between the total statutory Federal income tax rate and the actual effective income tax rate is accounted for as follows:
| Years Ended December 31, | ||||||||||||
| 2021 | 2020 | 2019 | ||||||||||
| Statutory federal income tax rate | % | % | % | |||||||||
| State and local income taxes, net of federal income tax benefit | % | % | % | |||||||||
| Rate impacts due to foreign operations | ( | %) | ( | %) | ( | %) | ||||||
| Changes in uncertain tax positions | ( | %) | % | % | ||||||||
| Compensation related | ( | %) | % | ( | %) | |||||||
| Pension termination | ( | %) | ||||||||||
| R&D tax credits | ( | %) | ( | %) | ( | %) | ||||||
| Other | ( | %) | % | ( | %) | |||||||
| Effective income tax rate | % | % | % | |||||||||
The Tax Cuts and Jobs Act enacted on December 22, 2017 imposed a U.S. tax on global intangible low taxed income (“GILTI”) that is earned by certain foreign affiliates owned by a U.S. shareholder. The computation of GILTI is generally intended to impose tax on the earnings of a foreign corporation that are deemed to exceed a certain threshold return relative to the underlying business investment. In accordance with guidance issued by FASB, the Company made a policy election to treat future taxes related to GILTI as a current period expense in the reporting period in which the tax is incurred. Deferred income taxes are provided on undistributed earnings of foreign subsidiaries in the period in which the Company determines it no longer intends to permanently reinvest such earnings outside the United States. The Company expects to permanently reinvest the earnings from its wholly-owned Brazilian and UK subsidiaries, and accordingly, has not provided deferred taxes on the subsidiaries’ undistributed net earnings or basis differences. The Company believes that the tax liability that would be incurred upon repatriation of the earnings from its Brazilian and UK subsidiaries is immaterial at December 31, 2021.
Only tax positions that meet the more-likely-than-not recognition threshold are recognized in the financial statements. As of December 31, 2021 and 2020, we had $
Changes in the Company’s gross liability for unrecognized tax benefits, excluding interest and penalties, were as follows (in thousands):
| December 31, | ||||||||
| 2021 | 2020 | |||||||
| Balance at the beginning of year | $ | $ | ||||||
| Additions based on tax positions related to the current year | ||||||||
| Additions for tax positions of prior years | ||||||||
| Reductions due to lapse of statute of limitations | ( | ) | ( | ) | ||||
| Balance at the end of year | $ | $ | ||||||
We recognize interest and penalties accrued related to unrecognized tax benefits in the provision for income taxes. During the years ended December 31, 2021, 2020 and 2019, we recorded $
We anticipate that it is reasonably possible that the total amount of unrecognized tax benefits could decrease by approximately $
Defined Benefit Plans
The Company had previously sponsored
The Company is also the sponsor of an unfunded supplemental executive retirement plan (“SERP”) in which several employees participate. The Company’s projected benefit obligation under the unfunded SERP was $
The following tables present the changes in the benefit obligations and the various plan assets, the funded status of the plans, and the amounts recognized in the Company’s balance sheets at December 31, 2021 and 2020 (in thousands):
| December 31, | ||||||||||||||||||||||||
| 2021 | 2020 | |||||||||||||||||||||||
| Pension Plans | SERP | Total | Pension Plans | SERP | Total | |||||||||||||||||||
| Changes in benefit obligation: | ||||||||||||||||||||||||
| Benefit obligation at beginning of year | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Service cost | ||||||||||||||||||||||||
| Interest cost | ||||||||||||||||||||||||
| Actuarial loss | ||||||||||||||||||||||||
| Benefits paid | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
| Lump sum benefits paid | ( | ) | ( | ) | ||||||||||||||||||||
| Amendments | ||||||||||||||||||||||||
| Effect of settlement/curtailment | ( | ) | ( | ) | ||||||||||||||||||||
| Benefit obligation at end of year | ||||||||||||||||||||||||
| Changes in plan assets: | ||||||||||||||||||||||||
| Fair value of plan assets at beginning of year | ||||||||||||||||||||||||
| Actual return on assets | ( | ) | ( | ) | ||||||||||||||||||||
| Employer contributions | ( | ) | ||||||||||||||||||||||
| Benefits paid | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
| Lump sum benefits paid | ( | ) | ( | ) | ||||||||||||||||||||
| Fair value of plan assets at end of year | ||||||||||||||||||||||||
| Funded status at end of year | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||
| Amounts recognized in balance sheets: | ||||||||||||||||||||||||
| Other assets | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Other current liabilities | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
| Long-term pension liability | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Net amount recognized | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||
| Amounts recognized in accumulated other comprehensive income consist of: | ||||||||||||||||||||||||
| Net actuarial loss | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Information for benefit plans with projected benefit obligation in excess of plan assets depicted as follows (in thousands): |
| December 31, | ||||||||||||||||||||||||
| 2021 | 2020 | |||||||||||||||||||||||
| Pension Plans | SERP | Total | Pension Plans | SERP | Total | |||||||||||||||||||
| Projected benefit obligation | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Fair value of plan assets | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
| Underfunded (Overfunded) | $ | ( | ) | $ | $ | $ | $ | $ | ||||||||||||||||
| Components of net periodic benefit cost related to pension plans were as follows (in thousands): |
| Years Ended December 31, | ||||||||||||
| 2021 | 2020 | 2019 | ||||||||||
| Interest cost on projected benefit obligation | $ | $ | $ | |||||||||
| Expected return on plan assets | ( | ) | ( | ) | ( | ) | ||||||
| Recognized actuarial loss | ||||||||||||
| Settlement loss | ||||||||||||
| Pension plan termination charge | ||||||||||||
| Net periodic pension cost after settlements | $ | $ | ( | ) | $ | |||||||
The termination of the Company’s two noncontributory qualified defined benefit pension plans in 2021 resulted in a non-cash charge of $
Components of net periodic benefit cost related to the SERP were as follows (in thousands):
| Years Ended December 31, | ||||||||||||
| 2021 | 2020 | 2019 | ||||||||||
| Service cost - benefits earned during the period | $ | $ | $ | |||||||||
| Interest cost on projected benefit obligation | ||||||||||||
| Recognized actuarial loss | ||||||||||||
| Net periodic pension cost after settlements | $ | $ | $ | |||||||||
The service cost component is included in selling and administrative expenses in our statements of comprehensive income and the other components of net periodic pension cost are included in other periodic pension costs in our statements of comprehensive income. The estimated net actuarial loss for the SERP that will be amortized from accumulated other comprehensive income into net periodic benefit cost over the next fiscal year is $
The following table presents the weighted-average assumptions used to determine benefit obligations as of December 31, 2020 and 2021:
| Discount Rate | Long Term Rate of Return | Salary Scale | ||||||||||||||||||||||||||||||||||
| Pension Plans | Pension Plans | Pension Plans | ||||||||||||||||||||||||||||||||||
| Corporate | Plants | SERP | Corporate | Plants | SERP | Corporate | Plants | SERP | ||||||||||||||||||||||||||||
| 2020 | % | % | % | % | % | N/A | N/A | N/A | % | |||||||||||||||||||||||||||
| 2021 | N/A | N/A | % | N/A | N/A | N/A | N/A | N/A | % | |||||||||||||||||||||||||||
The following table presents the weighted-average assumptions used to determine net periodic benefit cost for years ended December 31, 2019, 2020 and 2021:
| Discount Rate | Long Term Rate of Return | Salary Scale | ||||||||||||||||||||||||||||||||||
| Pension Plans | Pension Plans | Pension Plans | ||||||||||||||||||||||||||||||||||
| Corporate | Plants | SERP | Corporate | Plants | SERP | Corporate | Plants | SERP | ||||||||||||||||||||||||||||
| 2019 | % | % | % | % | % | N/A | N/A | N/A | % | |||||||||||||||||||||||||||
| 2020 | % | % | % | % | % | N/A | N/A | N/A | % | |||||||||||||||||||||||||||
| 2021 | % | % | % | % | % | N/A | N/A | N/A | % | |||||||||||||||||||||||||||
The Company does not plan to contribute any significant amounts to its defined benefit pension plans in 2022.
The following table includes projected benefit payments for the years indicated (in thousands):
| Projected Benefit Payments | |||||||||||||
| Year | Pension Plans | SERP | Total | ||||||||||
| 2022 | $ | $ | $ | ||||||||||
| 2023 | |||||||||||||
| 2024 | |||||||||||||
| 2025 | |||||||||||||
| 2026 | |||||||||||||
| 2027-2031 | |||||||||||||
Rabbi Trust
In connection with the Company’s unfunded SERP, we have life insurance contracts on the lives of designated individuals. The insurance contracts associated with the SERP are held in a Rabbi trust. The trust is the owner and beneficiary of such insurance contracts. The policies are being utilized to help offset the costs and liabilities of the SERP. The cash surrender value of the life insurance contracts was $
In 2013, we initiated a Non-Qualified Deferred Compensation Plan, and we have purchased life insurance contracts on the lives of designated individuals. The insurance contracts associated with the Non-Qualified Deferred Compensation Plan are also held in a Rabbi trust. The trust is the owner and beneficiary of such insurance contracts. The policies are being utilized to help offset the costs and liabilities of the Non-Qualified Deferred Compensation Plan. The cash surrender value of the life insurance contracts was $
Defined Contribution Plan
The Company provides a defined contribution plan covering qualified employees. The plan includes a provision that allows employees to make pre-tax contributions under Section 401(k) of the Internal Revenue Code. The plan provides for the Company to make a guaranteed match equal to
The Company primarily leases factories, warehouses, call centers, office space and equipment for various terms under long-term, non-cancelable operating lease agreements. A right-of-use asset represents the Company’s right to use an underlying asset for the lease term and a lease liability represents the Company’s obligation to make lease payments arising from the lease. The Company’s leases generally have expected lease terms of to years. In the normal course of business, it is expected that the Company’s leases will be renewed or replaced by leases on other properties. Options to renew lease terms are included in determining the right-of-use asset and lease liability when it is reasonably certain that the Company will exercise that option. Certain of the lease agreements include rental payments adjusted periodically for inflation and generally require the Company to pay real estate taxes, insurance, and repairs. The Company’s lease agreements generally do not contain any material residual value guarantees or material restrictive covenants. As of December 31, 2021, the Company had $
The components of lease cost were as follows (in thousands):
| Years Ended December 31, | ||||||||||||
| 2021 | 2020 | 2019 | ||||||||||
| Operating lease costs | $ | $ | $ | |||||||||
| Short-term lease costs | ||||||||||||
| Total lease costs | $ | $ | $ | |||||||||
Cash flow and noncash information related to our operating leases were as follows (in thousands):
| Years Ended December 31, | ||||||||||||
| 2021 | 2020 | 2019 | ||||||||||
| Operating cash flows – cash paid for operating lease liabilities | $ | $ | $ | |||||||||
| Non-cash – Operating lease right-of-use assets obtained in exchange for new lease liabilities | $ | $ | $ | |||||||||
Other supplemental information related to our operating leases was as follows:
| Years Ended December 31, | ||||||||||||
| 2021 | 2020 | 2019 | ||||||||||
| Weighted-average remaining lease term (in years) | ||||||||||||
| Weighted average discount rate | % | % | % | |||||||||
Maturities of operating lease liabilities as of December 31, 2021 were as follows (in thousands):
| Operating Leases | ||||
| 2022 | $ | |||
| 2023 | ||||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| Thereafter | ||||
| Total lease payments | ||||
| Less imputed interest | ||||
| Present value of lease liabilities | $ | |||
NOTE 10 – Contingencies:
The purchase price to acquire substantially all of the assets of BAMKO, Inc. (“BAMKO”) in 2016 included contingent consideration based on varying levels of BAMKO’s consolidated EBITDA in each measurement period through 2021. The remaining payment for the BAMKO acquisition-related contingent consideration payable is $
The Company is involved in various legal actions and claims arising from the normal course of business. In the opinion of management, the ultimate outcome of these matters is not expected to have a material impact on the Company’s results of operations, cash flows, or financial position.
NOTE 11 – Share-Based Compensation:
In May 2013, the shareholders of the Company approved the 2013 Incentive Stock and Awards Plan (the “2013 Plan”), authorizing the granting of incentive stock options, non-qualified stock options, stock appreciation rights (“SARs”), restricted stock, performance shares and other stock based compensation. A total of
Share-based compensation is recorded in selling and administrative expense in the statements of comprehensive income. The following table details the share-based compensation expense by type of award and the total related tax benefit for the periods presented (in thousands):
| Years Ended December 31, | ||||||||||||
| 2021 | 2020 | 2019 | ||||||||||
| Stock options and SARs | $ | $ | $ | |||||||||
| Restricted stock | ||||||||||||
| Performance shares | ||||||||||||
| Total share-based compensation expense | $ | $ | $ | |||||||||
| Related income tax benefit | $ | $ | $ | |||||||||
Stock Options and Stock Appreciation Rights (“SARs”)
The Company grants stock options and stock-settled SARs to employees that allow them to purchase shares of the Company’s common stock. Stock options are also granted to outside members of the Board of Directors of the Company. The Company determines the fair value of stock options and SARs at the date of grant using the Black-Scholes valuation model. Assumptions regarding volatility, risk-free interest rate, expected term and dividend yield are required for the Black-Scholes model. The risk-free interest rate is based on the yield of a U.S. treasury bond with a similar maturity to the award’s expected life. The expected life for awards granted is based on the historical exercise patterns experienced by the Company when the award is made. The determination of expected stock price volatility for awards is based on historical Superior common stock prices over a period commensurate with the expected life. The dividend yield assumption is based on the history and expectation of the Company’s dividend payouts.
The following table summarizes significant assumptions utilized to determine the fair value of stock options and SARs:
| Years Ended December 31, | ||||||||||||
| 2021 | 2020 | 2019 | ||||||||||
| Stock Options: | ||||||||||||
| Risk free interest rate | ||||||||||||
| Expected award life (years) | ||||||||||||
| Expected volatility | ||||||||||||
| Expected dividend yield | ||||||||||||
| Weighted average fair value per share at grant date | $ | $ | $ | |||||||||
| SARs: | ||||||||||||
| Risk free interest rate | % | 0.2% - 1.4% | % | |||||||||
| Expected award life (years) | ||||||||||||
| Expected volatility | % | 35.6% - 55.8% | % | |||||||||
| Expected dividend yield | % | 3.6% - 5.3% | % | |||||||||
| Weighted average fair value per share at grant date | $ | $ | $ | |||||||||
All stock options and SARs granted prior to August 3, 2018 vested immediately when granted. Awards issued thereafter vest either one or years after the grant date. Employee awards expire years after the grant date, and those issued to directors expire years after the grant date. The Company issues new shares upon the exercise of stock options and SARs. Stock options and SARs granted in tandem with stock options are subject to accelerated vesting under certain circumstances as outlined in the 2013 Plan.
A summary of stock option transactions during the year ended December 31, 2021 follows:
| Weighted Average | Aggregate | |||||||||||||||
| No. of | Weighted Average | Remaining Life | Intrinsic Value | |||||||||||||
| Shares | Exercise Price | (in years) | (in thousands) | |||||||||||||
| Outstanding, January 1, 2021 | $ | $ | ||||||||||||||
| Granted | ||||||||||||||||
| Exercised | ( | ) | ||||||||||||||
| Lapsed or cancelled | ||||||||||||||||
| Outstanding, December 31, 2021 | ||||||||||||||||
| Exercisable, December 31, 2021 | ||||||||||||||||
Intrinsic value is the difference between the market value of our common stock and the exercise price of each stock option multiplied by the number of stock options outstanding for those stock options where the market value exceeds their exercise price. Options exercised during the years ended December 31, 2021, 2020 and 2019 had intrinsic values of $
| A summary of stock-settled SARs transactions during the year ended December 31, 2021 follows: |
| Weighted Average | Aggregate | |||||||||||||||
| No. of | Weighted Average | Remaining Life | Intrinsic Value | |||||||||||||
| Shares | Exercise Price | (in years) | (in thousands) | |||||||||||||
| Outstanding, January 1, 2021 | $ | $ | ||||||||||||||
| Granted | ||||||||||||||||
| Exercised | ( | ) | ||||||||||||||
| Outstanding, December 31, 2021 | ||||||||||||||||
| Exercisable, December 31, 2021 | ||||||||||||||||
SARs exercised during the years ended December 31, 2021 and 2020 had intrinsic values of $
Restricted Stock
The Company has granted shares of restricted stock to directors and certain employees, which vest at a specified future date, generally after years, over years or when certain conditions are met. The shares are subject to accelerated vesting under certain circumstances as outlined in the 2013 Plan. Expense for each of these grants is based on the fair value at the date of the grant and is being recognized on a straight-line basis over the respective service period.
| A summary of restricted stock transactions during the year ended December 31, 2021 follows: |
| Weighted Average | ||||||||
| No. of | Grant Date | |||||||
| Shares | Fair Value | |||||||
| Outstanding, January 1, 2021 | $ | |||||||
| Granted | ||||||||
| Vested | ( | ) | ||||||
| Forfeited | ( | ) | ||||||
| Outstanding, December 31, 2021 | ||||||||
As of December 31, 2021, the Company had $
Performance Shares
The Company has granted performance shares, which either contain only service-based vesting conditions or service-based and performance-based vesting conditions. The service-based awards vest after the service period is met, which is generally to years. Expense for these grants is based on the fair value on the date of the grant and is being recognized on a straight-line basis over the respective service period. The performance-based awards generally vest after years if the performance and service targets are met. The Company evaluates the performance conditions associated with these grants each reporting period to determine the expected number of shares to be issued. Expenses for grants of performance shares are recognized on a straight-line basis over the respective service period based on the grant date fair value and expected number of shares to be issued. The awards are subject to accelerated vesting on a pro rata basis under certain circumstances as outlined in the 2013 Plan, except in those circumstances in which award agreements or change in control agreements specify full vesting.
| A summary of performance share transactions during the year ended December 31, 2021 follows: |
| Weighted Average | ||||||||
| No. of | Grant Date | |||||||
| Shares | Fair Value | |||||||
| Outstanding, January 1, 2021 | $ | |||||||
| Granted | ||||||||
| Vested | ( | ) | ||||||
| Forfeited | ( | ) | ||||||
| Outstanding, December 31, 2021 | ||||||||
As of December 31, 2021, the Company had $
| NOTE 12 – Earnings Per Share: |
The Company’s basic net income per share is computed based on the weighted average number of shares of common stock outstanding for the period. Diluted net income per share includes the effect of the Company’s outstanding stock options, stock appreciation rights, unvested shares of restricted stock and unvested performance shares, if the inclusion of these items is dilutive.
The following table presents a reconciliation of basic and diluted net income per share for the years ended December 31, 2021, 2020 and 2019:
| Years Ended December 31, | ||||||||||||
| 2021 | 2020 | 2019 | ||||||||||
| Net income used in the computation of basic and diluted net income per share (in thousands) | $ | $ | $ | |||||||||
| Weighted average shares outstanding - basic | ||||||||||||
| Dilutive common stock equivalents | ||||||||||||
| Weighted average shares outstanding - diluted | ||||||||||||
| Net income per share: | ||||||||||||
| Basic | $ | $ | $ | |||||||||
| Diluted | $ | $ | $ | |||||||||
Awards to purchase
| NOTE 13 – Other Current Liabilities: |
Other current liabilities consisted of the following (in thousands)
| December 31, | ||||||||
| 2021 | 2020 | |||||||
| Salaries, wages, commissions and compensated absences | $ | $ | ||||||
| Contract liabilities | ||||||||
| Accrued rebates | ||||||||
| Current operating lease liabilities | ||||||||
| 401K profit sharing accrual | ||||||||
| Other accrued expenses | ||||||||
| Other current liabilities | $ | $ | ||||||
For our Uniforms and Related Products and Promotional Products segments, revenue is primarily generated from the sale of finished products to customers. Revenue for our Uniforms and Related Products and Promotional Products segments is recognized when the performance obligations under the contract terms are satisfied. For certain contracts with customers in which the Company has an enforceable right to payment for goods with no alternative use, revenue is recognized over time upon receipt of finished goods into inventory. Revenue for goods that do have an alternative use or that the customer is not obligated to purchase under the terms of a contract is generally recognized when the goods are transferred to the customer. Revenue from the sale of personal protective equipment, including face masks, isolation gowns, sanitizers and gloves, is generally recognized at a point in time when the goods are transferred to the customer, which typically occurs upon shipment or delivery depending on the terms of the underlying contract. 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 Remote Staffing segment, revenue is generated from providing our customers with staffing solution services. Revenue for our Remote Staffing 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 termination 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.
The following table presents disaggregated revenue by operating segment for the periods presented (in thousands):
| Years Ended December 31, | ||||||||||||
| 2021 | 2020 | 2019 | ||||||||||
| Uniforms and Related Products Segment: | ||||||||||||
| Uniforms and related products | $ | $ | $ | |||||||||
| Personal protective equipment | ||||||||||||
| Total Uniforms and Related Products Segment | $ | $ | $ | |||||||||
| Remote Staffing Solutions Segment: | ||||||||||||
| Remote staffing solutions services | $ | $ | $ | |||||||||
| Net intersegment eliminations | ( | ) | ( | ) | ( | ) | ||||||
| Total Remote Staffing Solutions Segment | $ | $ | $ | |||||||||
| Promotional Products Segment: | ||||||||||||
| Promotional products | $ | $ | $ | |||||||||
| Personal protective equipment | ||||||||||||
| Total Promotional Products Segment | $ | $ | $ | |||||||||
| Consolidated Net Sales | $ | $ | $ | |||||||||
Contract Assets and Contract Liabilities
The following table provides information about accounts receivable, contract assets and contract liabilities from contracts with customers (in thousands):
| December 31, | ||||||||
| 2021 | 2020 | |||||||
| Accounts receivable | $ | $ | ||||||
| Current contract assets | ||||||||
| Current contract liabilities | ||||||||
Contract assets relate to goods produced without an alternative use for which the Company has an enforceable right to payment but which has not yet been invoiced to the customer. The majority of the amounts included in contract assets on December 31, 2020 were transferred to accounts receivable during the year ended December 31, 2021. 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 year ended December 31, 2021, $
NOTE 15 – Stock Repurchase Plan:
On May 2, 2019, the Company’s Board of Directors approved a stock repurchase program of up to
NOTE 16 – Operating Segment Information:
The Company classifies its businesses into
The Company evaluates the performance of each operating segment based on several factors of which the primary financial measures are net sales and income before taxes on income. No customer accounted for more than 10% of Company’s total net sales in 2021, 2020 and 2019. Amounts for corporate expenses are included in the totals for the Uniforms and Related Products segment.
The following tables set forth financial information related to the Company’s operating segments (in thousands):
| Uniforms and Related Products | Remote Staffing Solutions | Promotional Products | Intersegment Eliminations | Total | ||||||||||||||||
| As of and For the Year Ended December 31, 2021: | ||||||||||||||||||||
| Net sales | $ | $ | $ | $ | ( | ) | $ | |||||||||||||
| Cost of goods sold | ( | ) | ||||||||||||||||||
| Gross margin | ( | ) | ||||||||||||||||||
| Selling and administrative expenses | ( | ) | ||||||||||||||||||
| Other periodic pension cost | ||||||||||||||||||||
| Pension plan termination charge | ||||||||||||||||||||
| Interest expense | ||||||||||||||||||||
| Income (loss) before taxes on income | $ | ( | ) | $ | $ | $ | $ | |||||||||||||
| Depreciation and amortization | $ | $ | $ | $ | $ | |||||||||||||||
| Capital expenditures | $ | $ | $ | $ | $ | |||||||||||||||
| Total assets | $ | $ | $ | $ | $ | |||||||||||||||
| Uniforms and Related Products | Remote Staffing Solutions | Promotional Products | Intersegment Eliminations | Total | ||||||||||||||||
| As of and For the Year Ended December 31, 2020: | ||||||||||||||||||||
| Net sales | $ | $ | $ | $ | ( | ) | $ | |||||||||||||
| Cost of goods sold | ( | ) | ||||||||||||||||||
| Gross margin | ( | ) | ||||||||||||||||||
| Selling and administrative expenses | ( | ) | ||||||||||||||||||
| Other periodic pension cost | ||||||||||||||||||||
| Gain on sale of property, plant and equipment | ||||||||||||||||||||
| Interest expense | ||||||||||||||||||||
| Income before taxes on income | $ | $ | $ | $ | $ | |||||||||||||||
| Depreciation and amortization | $ | $ | $ | $ | $ | |||||||||||||||
| Capital expenditures | $ | $ | $ | $ | $ | |||||||||||||||
| Total assets | $ | $ | $ | $ | $ | |||||||||||||||
| Uniforms and Related Products | Remote Staffing Solutions | Promotional Products | Intersegment Eliminations | Total | ||||||||||||||||
| As of and For the Year Ended December 31, 2019: | ||||||||||||||||||||
| Net sales | $ | $ | $ | $ | ( | ) | $ | |||||||||||||
| Cost of goods sold | ( | ) | ||||||||||||||||||
| Gross margin | ( | ) | ||||||||||||||||||
| Selling and administrative expenses | ( | ) | ||||||||||||||||||
| Other periodic pension cost | ||||||||||||||||||||
| Interest expense | ||||||||||||||||||||
| Income before taxes on income | $ | $ | $ | $ | $ | |||||||||||||||
| Depreciation and amortization | $ | $ | $ | $ | $ | |||||||||||||||
| Capital expenditures | $ | $ | $ | $ | $ | |||||||||||||||
| Total assets | $ | $ | $ | $ | $ | |||||||||||||||
NOTE 17 – Acquisition of Businesses:
Gifts By Design, Inc.
On January 29, 2021, the Company, through BAMKO, acquired substantially all of the assets of Gifts By Design, Inc. (“Gifts by Design”) of Seattle, Washington. Gifts by Design is a promotional products and branded merchandise agency that is well-established as a developer and supplier of corporate awards, incentives, and recognition programs for some of the world’s biggest brands. The purchase price for the acquisition consisted of $
Assets Acquired and Liabilities Assumed
The total purchase price was allocated to the tangible and intangible assets and liabilities of Gifts by Design based on their estimated fair values as of the acquisition date. The excess of the purchase price over the estimated fair values of the assets acquired and liabilities assumed was allocated to goodwill.
The following table presents the allocation of the total fair value of consideration transferred, as shown above, to the acquired tangible and intangible assets and liabilities of Gifts by Design based on their estimated fair values as of the effective date of the transaction (in thousands):
| Accounts receivable | $ | |||
| Prepaid expenses and other current assets | ||||
| Property, plant and equipment | ||||
| Intangible assets, net | ||||
| Goodwill | ||||
| Total assets | $ | |||
| Accounts payable | ||||
| Other current liabilities | ||||
| Total liabilities | $ |
The Company recorded $
The difference between the fair value of the consideration transferred and the values assigned to the assets acquired and liabilities assumed was recorded as goodwill, which is primarily attributed to the assembled workforce and expanded market opportunities.
Sutter’s Mill Specialties, Inc.
On December 2, 2021, the Company, principally through BAMKO, acquired substantially all of the assets of Sutter’s Mill Specialties, Inc. (“Sutter’s Mill”) of Tempe, Arizona. Sutter’s Mill is a vertically integrated manufacturer of high quality, decorated promotional products. Sutter’s Mill has the capability to print on demand and create customized promotional programs and products for customers of any size.
The purchase price of the acquisition consisted of the following: (a) approximately $
Fair Value of Consideration Transferred
A summary of the purchase price is as follows (in thousands):
| Cash consideration at closing | $ | |||
| Restricted shares of Superior common stock issued | ||||
| Contingent consideration | ||||
| Total Consideration | $ |
Assets Acquired and Liabilities Assumed
The table below presents the allocation of the total fair value of consideration transferred, as shown above, to the acquired tangible and intangible assets and liabilities of Sutter’s Mill based on their estimated fair values as of the effective date of the transaction. The assets and liabilities of Sutter’s Mill shown below are based on our preliminary estimates of their acquisition date fair values. Our final fair value determination may be different than those shown below.
The following is our preliminary assignment of the aggregate consideration (in thousands):
| Accounts receivable | $ | |||
| Inventories | ||||
| Prepaid expenses and other current assets | ||||
| Property, plant and equipment | ||||
| Operating lease right-of-use assets | ||||
| Intangible assets, net | ||||
| Goodwill | ||||
| Other assets | ||||
| Total assets | $ | |||
| Accounts payable | ||||
| Other current liabilities | ||||
| Long-term debt | ||||
| Long-term operating lease liabilities | ||||
| Total liabilities | $ |
The Company recorded $
The difference between the fair value of the consideration transferred and the values assigned to the assets acquired and liabilities assumed was recorded as goodwill, which is primarily attributed to the assembled workforce and expanded market opportunities. The acquisition of Sutter’s Mill was treated as an asset purchase for income tax purpose, and therefore, the resulting goodwill from this acquisition was deductible for U.S. income tax purposes.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Disclosure Controls and Procedures
The Company conducted an evaluation, under supervision and with the participation of the Company’s principal executive officer, Michael Benstock, and the Company’s principal financial officer, Andrew D. Demott, Jr., of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report (the “Evaluation Date”). Based on such evaluation, the Company’s principal executive officer and principal financial officer concluded that, as of the Evaluation Date, the Company’s disclosure controls and procedures were not effective because of the material weakness in the Company’s internal control over financial reporting described below.
A material weakness is defined as a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.
On March 21, 2022, the management and the Audit Committee of the Board of Directors of the Company concluded that, due to a failure to reverse deferred tax liabilities associated with the termination of the Company’s two qualified defined benefit pension plans in the second quarter 2021, the Company's previously issued unaudited interim financial statements as of and for the periods ended June 30, 2021 and September 30, 2021 included in the Company’s quarterly reports on Form 10-Q for the quarters ended June 30, 2021 and September 30, 2021 should be restated.
Specifically, management and the Audit Committee concluded that deferred tax liabilities on the Company’s balance sheet related to previous contributions to the pension plans in excess of book expense recognized should have been reversed when the Company recognized the $6.9 million pension termination charge in the quarter ended June 30, 2021. The impact of this reversal on the Company’s:
| ● |
statements of comprehensive income for the three and six months ended June 30, 2021 and nine months ended September 30, 2021 is an additional tax benefit of approximately $1.8 million, and |
| ● |
balance sheet as of June 30, 2021 and September 30, 2021 is an increase in deferred tax assets of approximately $0.4 million and a decrease in deferred tax liabilities of approximately $1.4 million. |
On March 23, 2022, the Company filed amendments to its quarterly reports on Form 10-Q for the periods ended June 30, 2021 and September 30, 2021 to reflect the restatements.
In connection with the restatement, management reevaluated the effectiveness of the Company’s disclosure controls and procedures and internal control over financial reporting as of June 30, 2021 and September 30, 2021 and concluded that, in light of the error described above, a material weakness existed in the Company’s internal control over financial reporting and that certain of the Company’s disclosure controls and procedures were not effective as of June 30, 2021 and September 30, 2021. Because the error was not discovered until after the end of the fiscal year and no remedial steps had been taken prior to the end of the fiscal year, management concluded that the same material weakness in the Company's internal control over financial reporting and deficiency in the Company's disclosure controls and procedures that existed at June 30, 2021 and September 30, 2021 continued to exist at December 31, 2021.
Notwithstanding the identified material weakness, management, including our principal executive officer and principal financial officer have determined, based on the procedures we have performed, that the consolidated financial statements included in this Annual Report on Form 10-K present fairly, in all material respects, our financial condition, results of operations and cash flows at December 31, 2021 and for the periods presented in accordance with U.S. GAAP.
Management’s Report on Internal Control over Financial Reporting
Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). The Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Internal control over financial reporting includes those policies and procedures that:
| • |
pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company; and |
| • |
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and |
| • |
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements. |
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Management conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting based on the criteria set forth in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.
Based on this evaluation, and as described further above, management has identified a material weakness relating to the accounting for income taxes as of December 31, 2021, principally related to the income tax provision and deferred tax accounts (liabilities and assets). We have determined that management’s review controls over income taxes are not operating effectively to detect a material misstatement in the financial statements related to the completeness, accuracy, and presentation of the aforementioned areas of income taxes. Given the material weakness, we have concluded that internal control over financial reporting was ineffective as of December 31, 2021.
Remediation Efforts with Respect to the Material Weakness
The Company’s management, under the oversight of the Audit Committee, is in the process of developing a plan to remediate the material weakness which is expected to include the following measures:
| • |
implement a tax reporting software solution to streamline our income tax process and enhance our state and federal income tax reporting capabilities; |
| • |
hire additional qualified personnel to bolster the Company's in-house tax capabilities and capacity; and |
| • |
evaluate and, if necessary, enhance the level of precision in the management review controls related to income taxes. |
The material weakness will not be considered remediated until management completes the remediation plan above, the enhanced controls operate for a sufficient period of time, and management has concluded, through testing, that the related controls are effective. The Company will monitor the effectiveness of its remediation plan and will refine its remediation plan as appropriate.
The Company’s independent registered public accounting firm, Mayer Hoffman McCann P.C., has issued a report on the effectiveness of the Company’s internal control over financial reporting, which appears in Part II, Item 8 of this Form 10-K.
Changes in Internal Control over Financial Reporting
There were no changes in the Company’s internal control over financial reporting during the quarter ended December 31, 2021, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
| Other Information |
None.
PART III
| Directors, Executive Officers and Corporate Governance |
The information required by this Item is incorporated herein by reference to the Company’s definitive proxy statement to be filed in connection with its 2022 Annual Meeting of Shareholders.
| Executive Compensation |
The information required by this Item is incorporated herein by reference to the Company’s definitive proxy statement to be filed in connection with its 2022 Annual Meeting of Shareholders.
| Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
| Equity Compensation Plan Information |
| The following table provides information about our common stock that may be issued upon the exercise of options, warrants, rights and restricted stock under all our existing equity compensation plans as of December 31, 2021, including the 2013 Incentive Stock and Awards Plan: |
| Plan category |
(a) Number of securities to be issued upon exercise of outstanding options, warrants and rights |
(b) Weighted-average exercise price of outstanding options, warrants and rights |
(c) Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) |
|||||||||
| Equity compensation Plans approved by Security holders |
1,070,997 | $ | 15.81 | 2,125,120 | ||||||||
| Equity compensation Plans not approved by Security holders |
- | - | - | |||||||||
| Total |
1,070,997 | 2,125,120 | ||||||||||
All other information required by this Item is incorporated herein by reference to the Company’s definitive proxy statement to be filed in connection with its 2022 Annual Meeting of Shareholders
| Certain Relationships and Related Transactions, and Director Independence |
The information required by this Item is incorporated herein by reference to the Company’s definitive proxy statement to be filed in connection with its 2022 Annual Meeting of Shareholders.
| Principal Accountant Fees and Services |
The information required by this Item is incorporated herein by reference to the Company’s definitive proxy statement to be filed in connection with its 2022 Annual Meeting of Shareholders.
PART IV
| Exhibits and Financial Statement Schedules |
|||||
| (a)(1) |
Financial Statements. The following financial statements of Superior Group of Companies, Inc. are included in Part II, Item 8: |
||||
| Report of Independent Registered Public Accounting Firm |
|||||
| Consolidated Statements of Comprehensive Income for the years ended December 31, 2021, 2020 and 2019 |
|||||
| Consolidated Balance Sheets as of December 31, 2021 and 2020 |
|||||
| Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2021, 2020 and 2019 |
|||||
| Consolidated Statements of Cash Flows for the years ended December 31, 2021, 2020 and 2019 |
|||||
| Notes to the Consolidated Financial Statements |
|||||
| (a)(2) |
Financial Statement Schedules. |
||||
|
|
All schedules are omitted because they are not applicable, or not required, or because the required information is included in the consolidated financial statements or notes thereto. |
||||
| (a)(3) |
Exhibits. |
||||
| See Exhibit Index |
|||||
SUPERIOR GROUP OF COMPANIES, INC.
EXHIBIT INDEX
| 31.1* |
|
| 31.2* |
|
| 32.1** |
Written Statement of Chief Executive Officer pursuant to 18 U.S.C. Section 1350. |
| 32.2** |
Written Statement of Chief Financial Officer pursuant to 18 U.S.C. Section 1350. |
| 101.INS+ |
Inline XBRL Instance Document. |
| 101.SCH+ |
Inline XBRL Taxonomy Extension Schema. |
| 101.CAL+ |
Inline XBRL Taxonomy Extension Calculation Linkbase. |
| 101.DEF+ |
Inline XBRL Taxonomy Extension Definition Linkbase. |
| 101.LAB+ |
Inline XBRL Taxonomy Extension Label Linkbase. |
| 101.PRE+ |
Inline XBRL Taxonomy Extension Presentation Linkbase. |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
† Management contracts and compensatory plans and arrangements.
# Portions omitted in accordance with Item 601(b) of Regulation S-K.
* Filed herewith
** Furnished herewith
+ Submitted electronically with this Annual Report.
| Form 10-K Summary |
None.
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| SUPERIOR GROUP OF COMPANIES, INC. | ||
| By: | /s/ Michael Benstock | |
| Michael Benstock | ||
| Chief Executive Officer (Principal Executive Officer) |
DATE: March 23, 2022
BY THESE PRESENTS, each person whose signature appears below constitutes and appoints each of Michael Benstock, Andrew D. Demott, Jr., and Jordan M. Alpert his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution for him or her and in his or her name, place and stead, in any and all capacities to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that said attorney-in-fact or his or her substitute, each acting alone, may lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| /s/ Michael Benstock | |||
| Michael Benstock, March 23, 2022 | |||
| Chief Executive Officer and Director | |||
| (Principal Executive Officer) | |||
| /s/ Andrew D. Demott, Jr | |||
| Andrew D. Demott, Jr., March 23, 2022 | |||
| Chief Operating Officer and Chief Financial Officer | |||
| (Principal Financial and Accounting Officer) | |||
| /s/ Sidney Kirschner | /s/ Venita Fields | ||
| Sidney Kirschner, March 23, 2022 | Venita Fields, March 23, 2022 | ||
| (Chairperson of the Board) | (Director) | ||
| /s/ Paul Mellini | /s/ Robin Hensley | ||
| Paul Mellini, March 23, 2022 | Robin Hensley, March 23, 2022 | ||
| (Director) | (Director) | ||
| /s/ Todd Siegel | |||
| Todd Siegel, March 23, 2022 | |||
| (Director) | |||
EXHIBIT 21.1
SuperioR group OF COMPANIES, Inc.
LIST OF SUBSIDIARIES
As of December 31, 2021, the Registrant directly or indirectly owned the following subsidiaries:
| Company | Incorporation | |
|
Fashion Seal Corporation |
Nevada |
|
| Superior Group Holdings, Inc. | Texas | |
|
The Office Gurus, LLC |
Florida |
|
| The Office Gurus Limited | Jamaica | |
|
SUG Holding |
Cayman Islands |
|
| Superior Group Holdings (IL), LLC | Illinois | |
| SGC Worldwide B.V. | Netherlands | |
| Zing Manufacturing, LLC | Delaware | |
|
The Office Gurus LTDA. De C.V., a subsidiary of Superior Group Holdings (IL), LLC and Fashion Seal Corporation |
El Salvador | |
|
The Office Masters, LTDA. De C.V., a subsidiary of Superior Group Holdings (IL), LLC and Fashion Seal Corporation |
El Salvador | |
| TOG, S.R.L., a subsidiary of Superior Group Holdings (IL), LLC and Fashion Seal Corporation | Dominican Republic | |
|
The Office Gurus, Ltd., a subsidiary of SUG Holding and Fashion Seal Corporation |
Belize | |
|
Power Three Web Ltda., a wholly owned subsidiary of SUG Holding |
Costa Rica | |
|
Superior Sourcing, a wholly owned subsidiary of SUG Holding |
Cayman Islands |
|
|
BAMKO, LLC |
Delaware |
|
|
BAMKO Importação, Exportação e Comércio de Brindes Ltda., a subsidiary of BAMKO, LLC and SUG Holding |
Brazil |
|
| BAMKO Merch Inc., a wholly owned subsidiary of BAMKO, LLC | Canada | |
| Logo Lineup, LLC, a wholly owned subsidiary of BAMKO, LLC | Delaware | |
|
Worldwide Sourcing Solutions Limited, a wholly owned subsidiary of BAMKO, LLC |
Hong Kong |
|
|
Guangzhou Ben Gao Trading Limited, a wholly owned subsidiary of Worldwide Sourcing Solutions Limited |
China |
|
|
BAMKO India Private Limited, a 99%-owned subsidiary of BAMKO, LLC |
India |
|
|
BAMKO UK, Ltd., a wholly owned subsidiary of BAMKO, LLC |
United Kingdom |
|
|
CID Resources, Inc. |
Delaware |
|
| Superior Uniform Arkansas, LLC | Arkansas | |
| Superior Uniform Group, LLC | Florida |
EXHIBIT 23.1
Consent of Independent Registered Public Accounting Firm
We hereby consent to the incorporation by reference in this Annual Report on Form 10-K of Superior Group of Companies, Inc. and Subsidiaries for the year ended December 31, 2021 of our reports dated March 23, 2022, included in its Registration Statement on Forms S-8 (File No. 333-105906 and File No. 333-188944) and Form S-3A (File No. 333-249760) related to the financial statements as of December 31, 2021 and December 31, 2020 and for the three-year period ended December 31, 2021 and internal controls as of December 31, 2021.
/s/ Mayer Hoffman McCann P.C.
St. Petersburg, Florida
EXHIBIT 31.1
CERTIFICATIONS
I, Michael Benstock, certify that:
|
1. |
I have reviewed this annual report on Form 10-K of Superior Group of Companies, Inc.; |
|
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
|
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
|
4. |
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.
|
5. |
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date: March 23, 2022 |
||
|
/s/ Michael Benstock |
||
|
Michael Benstock Chief Executive Officer (Principal Executive Officer) |
EXHIBIT 31.2
CERTIFICATIONS
I, Andrew D. Demott, Jr., certify that:
|
1. |
I have reviewed this annual report on Form 10-K of Superior Group of Companies, Inc.; |
|
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
|
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
|
4. |
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.
|
5. |
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date: March 23, 2022 |
||||||
|
/s/ Andrew D. Demott, Jr. |
||||||
|
Andrew D. Demott, Jr. Chief Operating Officer and Chief Financial Officer (Principal Financial Officer) |
||||||
EXHIBIT 32.1
Written Statement of the Chief Executive Officer
Pursuant to 18 U.S.C. Section 1350
Solely for the purposes of complying with 18 U.S.C. Section 1350, I, the undersigned Chief Executive Officer of Superior Group of Companies, Inc. (the “Company”), hereby certify, based on my knowledge, that the Annual Report on Form 10-K of the Company for the year ended December 31, 2021 (the “Report”) fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and that information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/ Michael Benstock
Michael Benstock
Chief Executive Officer
(Principal Executive Officer)
EXHIBIT 32.2
Written Statement of the Chief Financial Officer
Pursuant to 18 U.S.C. Section 1350
Solely for the purposes of complying with 18 U.S.C. Section 1350, I, the undersigned Chief Operating Officer, Chief Financial Officer and Treasurer of Superior Group of Companies, Inc. (the “Company”), hereby certify, based on my knowledge, that the Annual Report on Form 10-K of the Company for the year ended December 31, 2021 (the “Report”) fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and that information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/ Andrew D. Demott, Jr.
Andrew D. Demott, Jr.
Chief Operating Officer and Chief Financial Officer
Consolidated Balance Sheets (Parentheticals) - USD ($) $ in Thousands |
Dec. 31, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Accounts receivable, allowance for doubtful accounts | $ 6,393 | $ 7,667 |
| Preferred stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
| Preferred stock, shares authorized (in shares) | 300,000 | 300,000 |
| Preferred stock, shares issued (in shares) | 0 | 0 |
| Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
| Common stock, shares authorized (in shares) | 50,000,000 | 50,000,000 |
| Common stock, shares issued (in shares) | 16,127,505 | 15,391,660 |
| Common stock, shares outstanding (in shares) | 16,127,505 | 15,391,660 |
Consolidated Statements of Shareholders' Equity (Parentheticals) - USD ($) $ in Thousands |
12 Months Ended | ||
|---|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
Dec. 31, 2019 |
|
| Cash dividends declared, per share (in dollars per share) | $ 0.46 | $ 0.40 | $ 0.40 |
| Cash flow hedges, tax | $ 3 | $ 3 | $ 3 |
| Pensions, tax | 2,636 | 1,154 | 141 |
| Change in currency translation adjustment, tax | $ 0 | $ 449 | $ 23 |
Note 1 - Description of Business, Basis of Presentation and Summary of Significant Accounting Policies |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Notes to Financial Statements | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Significant Accounting Policies [Text Block] |
NOTE 1 – Description of Business, Basis of Presentation and Summary of Significant Accounting Policies:
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 its state of incorporation to Florida. Effective on May 3, 2018, Superior Uniform Group, Inc. changed its name to Superior Group of Companies, Inc.
Superior’s Uniforms and Related Products segment, through its primary signature marketing brands Fashion Seal Healthcare®, HPI®, and WonderWink®, manufactures (through third parties or its own facilities) and sells a wide range of uniforms, corporate identity apparel, career apparel and accessories that are worn by employees in the hospital and healthcare fields; retail stores; hotels; fast food and other restaurants; transportation; and the private security, industrial and commercial markets.
Superior services its Remote Staffing Solutions segment through multiple The Office Gurus® entities, including its subsidiaries in El Salvador, Belize, Jamaica, Dominican Republic, and the United States (collectively, “TOG”). TOG is primarily a near-shore premium provider of cost effective multilingual telemarketing and business process outsourced solutions.
The Promotional Products segment, through the BAMKO®, Public Identity®, Tangerine®, Gifts by Design and Sutter’s Mill brands, services customers that purchase primarily promotional and related products. The segment currently has sales offices in the United States, Brazil and Canada with support services in China, Hong Kong and India.
Basis of presentation
The accompanying consolidated financial statements of Superior included herein have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) (“U.S.” or “United States”) and the rules and regulations of the Securities and Exchange Commission (the “SEC”). The Company refers to the consolidated financial statements collectively as “financial statements,” and individually as “statements of comprehensive income,” “balance sheets,” “statements of shareholders’ equity,” and “statements of cash flows” herein.
Use of estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amount of assets, liabilities, revenue and expenses, as well as the disclosures of contingent assets and liabilities. Because of the inherent uncertainties in this process, actual future results could differ from those expected at the reporting date.
Cash and cash equivalents
The Company considers all highly liquid investments with an original maturity of three months or less at the time of purchase to be cash equivalents.
Revenue recognition
Revenue is recognized when control of the promised goods or services are transferred to our customers, in an amount that reflects the consideration that we expect to receive in exchange for those goods or services. See Note 14 for further discussion on revenue recognition.
Accounts receivable and allowance for doubtful accounts
Judgments and estimates are used in determining the collectability of accounts receivable and in establishing allowances for doubtful accounts. The Company analyzes specific accounts receivable and historical bad debt experience, customer credit worthiness, current economic trends and the age of outstanding balances when evaluating the adequacy of the allowance for doubtful accounts. Changes in estimates are reflected in the period they become known. Charge-offs of accounts receivable are made once all collection efforts have been exhausted. If the financial condition of the Company’s customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.
Accounts receivable-other
The Company purchases raw materials and has them delivered to certain suppliers of the Company. The Company pays for the raw materials and then deducts the cost of these materials from payments to the suppliers at the time the related finished goods are invoiced to the Company by those suppliers.
Cost of goods sold and shipping and handling fees and costs
Cost of goods sold for our Uniforms and Related Products segment and our Promotional Products segment consist primarily of direct costs of acquiring inventory, including cost of merchandise, inbound freight charges, purchasing, receiving and inspection costs. Cost of goods sold for our Remote Staffing Solutions segment includes salaries and payroll related benefits for agents. The Company includes shipping and handling fees billed to customers in net sales. Shipping and handling costs associated with out-bound freight are generally recorded in cost of goods sold. Other shipping and handling costs are included in selling and administrative expenses and totaled $18.8 million, $17.6 million and $14.5 million for the years ended December 31, 2021, 2020 and 2019, respectively.
Inventories
Inventories are stated at the lower of cost (first-in, first-out method or average cost) or net realizable value. Judgments and estimates are used in determining the likelihood that goods on hand can be sold to customers. Historical inventory usage and current revenue trends are considered in estimating both excess and obsolete inventories. If actual product demand and market conditions are less favorable than those projected by management, additional inventory write-downs may be required.
Property, plant and equipment
Property, plant and equipment are stated at cost, less accumulated depreciation and amortization. Major renewals and improvements are capitalized, while replacements, maintenance and repairs which do not improve or extend the life of the respective assets are expensed on a current basis. Costs of assets sold or retired and the related accumulated depreciation and amortization are eliminated from accounts and the net gain or loss is reflected in the statements of comprehensive income within selling and administrative expenses. During the year ended December 31, 2020, the Company sold a building and related assets that were previously used as a Distribution Center within our Uniforms and Related Products segment for net proceeds of $5.3 million and realized a gain on sale of $2.2 million. This sale is presented within our statements of comprehensive income as a separate line item titled “gain on sale of property, plant and equipment.” This sale was part of management’s plan to transition the HPI Distribution Center operations to the Company’s largest and most technologically advanced semi-robotic worldwide distribution center, located in Eudora, Arkansas.
Property, plant and equipment is recorded at cost and depreciated using the straight-line method over its estimated useful life as follows:
Leasehold improvements are amortized over the terms of the leases to the extent that such improvements have useful lives of at least the terms of the respective leases.
Intangible assets, net
Intangible assets consist of customer relationships, non-compete agreements and trade names acquired in previous business acquisitions.
Intangible assets as of December 31, 2021 and 2020 are summarized as follows (dollars in thousands):
Amortization expense for intangible assets for the years ended December 31, 2021, 2020 and 2019 was $4.2 million, $3.8 million and million, respectively.
Estimated future intangible amortization expense is as follows (in thousands):
Trade names:
As part of the acquisition of substantially all of the assets of HPI Direct, Inc. in 2013, the Company recorded $4.7 million as the fair value of the acquired trade name in intangible assets. As part of the acquisition of substantially all of the assets of BAMKO in 2016, the Company recorded $8.9 million as the fair value of the acquired trade name in intangible assets. As part of the acquisitions of substantially all of the assets of Public Identity and Tangerine in 2018, the Company recorded $0.5 million and $3.2 million, respectively, as the fair value of the acquired trade names in intangible assets. As part of the acquisition of CID Resources in 2018, the Company recorded $14.2 million as the fair value of an acquired trade name in intangible assets. As part of the acquisitions of substantially all of the assets of Sutter’s Mill Specialties, Inc. (“Sutter’s Mill”) and Gifts By Design, Inc. (“Gifts by Design”) in 2021, the Company recorded $1.2 million and $0.7 million, respectively, as the fair value of the acquired trade names in intangible assets. These assets are considered indefinite-lived assets, and as such, are not being amortized.
Impairment of long-lived assets
Long-lived assets, such as property and equipment, and purchased intangibles subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of the asset is measured by comparison of its carrying amount to future net cash flows the asset is expected to generate. If such assets are considered to be impaired, the impairment to be recognized is measured as the amount by which the carrying amount of the asset exceeds its fair value. There were no impairments of long-lived assets for the years ended December 31, 2021, 2020 and 2019.
Goodwill and indefinite-lived intangible assets
The Company has made acquisitions in the past that included goodwill and indefinite-lived intangible assets. Goodwill represents the excess of the cost of an acquisition over the fair value of the net assets acquired. Goodwill and indefinite-lived intangible assets such as trade names are not amortized but are subject to an annual (or under certain circumstances more frequent) impairment test in the fourth quarter based on their estimated fair value. We test more frequently, if there are indicators of impairment, or whenever such circumstances suggest that the carrying value of goodwill or trade names may not be recoverable. Examples of such events and circumstances that the Company would consider include the following:
Goodwill and indefinite-lived intangible assets are tested at a level of reporting referred to as “the reporting unit.” The Company’s reporting units are defined as each of its three reporting segments. As of December 31, 2021, goodwill of $24.4 million and $15.0 million were included in the Uniforms and Related Products segment and the Promotional Products segment, respectively. As of December 31, 2021, indefinite-lived intangible assets of $18.8 million and $14.5 million were included in the Uniforms and Related Products segment and the Promotional Products segment, respectively.
An entity has the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not (that is, a likelihood of more than 50%) that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events or circumstances, an entity determines it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the impairment test is unnecessary. For each of the years ended December 31, 2021, 2020 and 2019, the Company completed its testing of goodwill and indefinite-lived intangible assets and determined that the fair value of each applicable reporting unit was more than its carrying value.
Contingent Consideration
Contingent consideration relating to consideration transferred in exchange for an acquired business is recognized at its estimated fair value at the acquisition date. The contingent consideration is remeasured to fair value at each reporting date until the contingency is resolved. Any changes in fair value are recognized each reporting period in non-cash changes in fair value of estimated contingent consideration in the accompanying statements of comprehensive income.
SERP
The Company is the sponsor of an unfunded supplemental executive retirement plan (“SERP”) in which several of its employees are participants. In calculating our obligations and related expense, we make various assumptions and estimates, after consulting with outside actuaries and advisors. The annual determination of expense involves calculating the estimated total benefits ultimately payable to plan participants. Significant assumptions related to the calculation of our obligations include the discount rates used to calculate the present value of benefit obligations to be paid in the future. We review these assumptions annually based upon currently available information, including information provided by our actuaries.
Insurance
The Company self-insures for certain obligations related to employee health programs. The Company also purchases stop-loss insurance policies to protect it from catastrophic losses. Judgments and estimates are used in determining the potential value associated with reported claims and for losses that have occurred, but have not been reported. The Company’s estimates consider historical claim experience and other factors. The Company’s liabilities are based on estimates, and, while the Company believes that the accrual for loss is adequate, the ultimate liability may be in excess of or less than the amounts recorded. Changes in claim experience, the Company’s ability to settle claims or other estimates and judgments used by management could have a material impact on the amount and timing of expense for any period.
Taxes on income
Income taxes are provided for under the liability method, whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carryforwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. The calculation of the Company’s tax liabilities also involves dealing with uncertainties in the application of complex tax regulations. The Company recognizes liabilities for uncertain income tax positions based on estimates of whether, and the extent to which, additional taxes will be required. The Company also accrues interest and penalties related to uncertain income tax positions as income taxes. Refer to Note 7 for additional details.
Share-based compensation
The Company awards share-based compensation as an incentive for employees to contribute to the Company’s long-term success. The Company grants options, stock-settled stock appreciation rights, restricted stock and performance shares. The Company recognizes share-based compensation expense for all awards granted to employees, which is based on the fair value of the award on the date of grant. Determining the appropriate fair value model and calculating the fair value of stock compensation awards requires the input of certain highly complex and subjective assumptions, including the expected life of the stock compensation awards and the Company’s common stock price volatility, risk free interest rate and dividend rate. The assumptions used in calculating the fair value of stock compensation awards represent management’s best estimates, but these estimates involve inherent uncertainties and the application of judgment. As a result, if factors change and the Company deems it necessary to use different assumptions, stock compensation expense could be materially different from what has been recorded in the current period.
Other comprehensive income
Other comprehensive income (loss) is defined as the change in equity during a period, from transactions and other events, excluding changes resulting from investments by owners (e.g., supplemental stock offering) and distributions to owners (e.g., dividends).
Risks and concentrations
Financial instruments that potentially subject the Company to concentrations of credit risk include cash in banks in excess of federally insured amounts. The Company manages this risk by maintaining all deposits in high quality financial institutions and periodically performing evaluations of the relative credit standing of the financial institutions. When assessing credit risk the Company considers whether the credit risk exists at both the individual and group level. Consideration is given to the activity, region and economic characteristics when assessing if there exists a group concentration risk. At December 31, 2021, the Company had no customer with an accounts receivable balance greater than 10% of the total accounts receivable. At December 31, 2020, the Company had two customers with a combined accounts receivable balance of 23% of the total accounts receivable. At December 31, 2021 and 2020, the five largest customer accounts receivables balances totaled $29.6 million and $36.8 million, respectively, or approximately 28% and 40% of the respective total accounts receivable balances. The Uniforms and Related Products segment has a substantial number of customers, none of which accounted for more than 10% of the segment’s 2021 net sales. No customer accounted for more than 10% of the Remote Staffing Solutions segment’s 2021 external revenues. The Promotional Products segment’s largest customer represented 13% of the segment’s 2021 net sales.
The Uniforms and Related Products segment’s principal fabrics used in the manufacture of its finished goods are cotton, polyester, cotton-synthetic and poly-synthetic blends. The majority of such fabrics are sourced in China. The Promotional Products segment relies on the supply of different types of raw materials as well as textiles, including plastic, glass, fabric and metal. The vast majority of these raw materials are principally sourced from China, either directly by BAMKO or its suppliers. If we are unable to continue to obtain our raw materials and finished products from China or if our suppliers are unable to source raw materials from China, it could significantly disrupt our business. Further, the Company and the Company’s suppliers generally source or manufacture finished goods in parts of the world that may be affected by economic uncertainty, political unrest, logistical challenges (such as port strikes and embargos), foreign currency fluctuations, labor disputes, health emergencies, or the imposition of duties, tariffs or other import regulations by the United States, any of which could result in additional cost or limit our supply of necessary goods and raw materials.
Fair value of financial instruments
The carrying amounts of cash and cash equivalents, receivables and accounts payable approximated fair value as of December 31, 2021 and 2020, because of the relatively short maturities of these instruments. The carrying amount of the Company’s long-term debt approximated fair value as the rates are adjustable based upon current market conditions.
Recent Accounting Pronouncements
We consider the applicability and impact of all Accounting Standard Updates (“ASUs”). ASUs not listed below were assessed and determined to be not applicable.
Recently Adopted Accounting Pronouncements
In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting of Income Taxes”, which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. On January 1, 2021, the Company adopted this standard on a prospective basis. The Company’s adoption of this standard did not have a material impact on its financial statements.
Recently Issued Accounting Pronouncements Not Yet Adopted
In June 2016, the FASB issued ASU 2016-13, “Financial Instruments—Credit Losses (Topic 326).” The update changes the impairment model for most financial assets and certain other instruments, including trade and other receivables, held-to-maturity debt securities and loans, and requires entities to use a new forward-looking expected loss model that will result in the earlier recognition of allowance for losses. In February 2020, the FASB issued ASU 2020-2, “Financial Instruments – Credit Losses (Topic 326) and Leases (Topic 842): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 119 and Update to SEC Section on Effective Date Related to Accounting Standards Update No. 2016-02, Leases (Topic 842).” The update delayed the effective date of ASU 2016-13, “Financial Instruments—Credit Losses (Topic 326)” for Smaller Reporting Companies until fiscal years beginning after December 15, 2022. Adoption will require a modified retrospective approach beginning with the earliest period presented. The Company’s adoption of this standard is not expected to have a material impact on its financial statements.
In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848) Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” This update provides optional guidance for a limited period of time to ease potential accounting impacts associated with transitioning away from reference rates that are expected to be discontinued, such as interbank offered rates and LIBOR. This guidance includes practical expedients for contract modifications due to reference rate reform. Generally, contract modifications related to reference rate reform may be considered an event that does not require remeasurement or reassessment of a previous accounting determination at the modification date. This guidance may be applied through December 31, 2022. The Company will apply this guidance to transactions and modifications to contracts and hedging relationships that reference LIBOR.
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Note 2 - Allowance for Doubtful Accounts Receivable |
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Note 3 - Reserve for Sales Returns and Allowances |
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Note 4 - Inventories |
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Inventories consisted of the following amounts (in thousands):
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Note 5 - Property, Plant and Equipment, Net |
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Property, plant and equipment, net, consisted of the following (in thousands):
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Note 6 - Long-term Debt |
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Debt consisted of the following (in thousands):
The Company is party to a credit agreement with Truist Bank, consisting of a revolving credit facility, a term loan maturing in February 2024 (“2017 Term Loan”) and a term loan maturing in January 2026 (“2018 Term Loan”). The revolving credit facility, 2017 Term Loan and 2018 Term Loan are collectively referred to as the “Credit Facilities.”
On March 30, 2020, the Company entered into debt deferment agreements with Truist Bank to: (i) defer contractual principal and interest payments due between April 1, 2020 and June 1, 2020 under the 2017 Term Loan and 2018 Term Loan until their respective maturity dates; and (ii) defer contractual interest payments due between April 1, 2020 and June 1, 2020 under the revolving credit facility until its maturity date.
On February 8, 2021, the Company entered into a Second Amended and Restated Credit Agreement with Truist Bank (the “Credit Agreement”), pursuant to which the maximum availability under the Company’s existing revolving credit facility was increased from $75.0 million to $125.0 million and its maturity date was extended until February 8, 2026. The 2017 Term Loan and the 2018 Term Loan remain outstanding with the same amortization schedules. The floor on LIBOR for the revolving credit facility was increased from to 0.25%, but the interest rates on the revolving credit facility and the term loans were not otherwise modified. Except as described above, the covenants, events of default and substantially all of the other terms that were contained in the Company’s prior credit agreement with Truist Bank remain unchanged in the Credit Agreement.
Obligations outstanding under the 2018 Term Loan have a variable interest rate of LIBOR plus a margin of between 0.85% and 1.65% (based on the Company’s funded debt to EBITDA ratio) (0.95% at December 31, 2021). Obligations outstanding under the revolving credit facility and the 2017 Term Loan generally have a variable interest rate of one-month LIBOR (with a 0.25% floor on LIBOR for the revolving credit facility) plus a margin of between 0.68% and 1.50% (based on the Company’s funded debt to EBITDA ratio) (0.93% for the revolving credit facility and 0.78% for the 2017 Term Loan at December 31, 2021). The Company is obligated to pay a commitment fee of 0.15% per annum on the average unused portion of the commitment under the revolving credit facility. The available balance under the revolving credit facility is reduced by outstanding letters of credit. As of December 31, 2021, there were no outstanding letters of credit under the revolving credit facility.
Contractual principal payments for the 2017 Term Loan are as follows: 2022 through 2023 - $6.0 million per year; and 2024 - $3.0 million. Contractual principal payments for the 2018 Term Loan are as follows: 2022 through 2025 - $9.3 million per year; and 2026 - $3.1 million. The term loans do not contain pre-payment penalties.
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, and sales of assets. The Credit Agreement also requires the Company to maintain a fixed charge coverage ratio (as defined in the Credit Agreement) of at least and a funded debt to EBITDA ratio (as defined in the Credit Agreement) not to exceed As of December 31, 2021, the Company was in compliance with these ratios. The Credit Facilities are secured by substantially all of the operating assets of the Company as collateral, 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 Company is a party to an interest rate swap with a total notional value of $6.8 million as of December 31, 2021 pursuant to which it makes fixed payments and receives floating payments. The Company entered into the interest rate swap to offset changes in expected cash flows due to fluctuations in the associated variable interest rates. The Company’s interest rate swap expires in February 2024. The interest rate swap is designated as a hedge transaction. Changes in fair value and gains and losses on settlement on the interest rate swap are recognized in interest expense in our statements of comprehensive income. During the years ended December 31, 2021, 2020 and 2019, a gain of $0.1 million, a loss of $0.3 million and a loss of $0.2 million, respectively, was recognized on the interest rate swap.
Debt Maturity Schedule
Contractual maturities of debt (excluding interest to be accrued thereon) at December 31, 2021 are as follows (in thousands):
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Note 7 - Income Tax Expense |
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Aggregate income tax provisions consist of the following (in thousands):
The significant components of the deferred income tax (liability) asset are as follows (in thousands):
The difference between the total statutory Federal income tax rate and the actual effective income tax rate is accounted for as follows:
The Tax Cuts and Jobs Act enacted on December 22, 2017 imposed a U.S. tax on global intangible low taxed income (“GILTI”) that is earned by certain foreign affiliates owned by a U.S. shareholder. The computation of GILTI is generally intended to impose tax on the earnings of a foreign corporation that are deemed to exceed a certain threshold return relative to the underlying business investment. In accordance with guidance issued by FASB, the Company made a policy election to treat future taxes related to GILTI as a current period expense in the reporting period in which the tax is incurred. Deferred income taxes are provided on undistributed earnings of foreign subsidiaries in the period in which the Company determines it no longer intends to permanently reinvest such earnings outside the United States. The Company expects to permanently reinvest the earnings from its wholly-owned Brazilian and UK subsidiaries, and accordingly, has not provided deferred taxes on the subsidiaries’ undistributed net earnings or basis differences. The Company believes that the tax liability that would be incurred upon repatriation of the earnings from its Brazilian and UK subsidiaries is immaterial at December 31, 2021.
Only tax positions that meet the more-likely-than-not recognition threshold are recognized in the financial statements. As of December 31, 2021 and 2020, we had $0.9 million and $1.2 million, respectively, of unrecognized tax benefits, all of which, if recognized, would favorably affect the annual effective income tax rate. We do not expect any significant amount of this liability to be paid in the next twelve months. Accordingly, the balance of $0.9 million as of December 31, 2021 is included in other long-term liabilities.
Changes in the Company’s gross liability for unrecognized tax benefits, excluding interest and penalties, were as follows (in thousands):
We recognize interest and penalties accrued related to unrecognized tax benefits in the provision for income taxes. During the years ended December 31, 2021, 2020 and 2019, we recorded $0.1 million, $0.2 million and $0.2 million, respectively, for interest and penalties, net of tax benefits. During the years 2021, 2020 and 2019, we reduced the liability by $0.2 million, $0.1 million and $0.1 million, respectively, for interest and penalties due to lapse of statute of limitations. At December 31, 2021 and 2020, we had million accrued for interest and penalties, net of tax benefit.
We anticipate that it is reasonably possible that the total amount of unrecognized tax benefits could decrease by approximately $0.3 million within the next twelve months due to the closure of tax years by expiration of the statute of limitations and audit settlements related to various state tax filing positions. The earliest year open to federal examinations is and significant state examinations is |
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Note 8 - Benefit Plans |
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| Notes to Financial Statements | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Retirement Benefits [Text Block] |
Defined Benefit Plans
The Company had previously sponsored two noncontributory qualified defined benefit pension plans, providing for normal retirement at age covering all eligible employees (as defined). Effective June 30, 2013, the Company no longer accrued additional benefits for future service or for future increases in compensation levels for the Company’s primary defined benefit pension plan. Effective December 31, 2014, the Company no longer accrued additional benefits for future service for the Company’s hourly defined benefit plan. During the year ended December 31, 2021, the Company completed the termination of its two noncontributory qualified defined benefit pension plans, which were fully funded. The Company settled its obligations under the plans by providing lump-sum payments of $14.3 million to eligible participants who elected to receive them and entering into an annuity purchase contract for the remaining liability of $3.1 million. Consequently, the Company recognized a settlement charge of $7.8 million during the year ended December 31, 2021, which represents the acceleration of deferred charges previously included within accumulated other comprehensive loss, the impact of remeasuring the plan assets and obligations at termination and additional benefits from asset surpluses paid and expected to be paid to plan participants. The pension plan terminations did not require a cash outlay by the Company. As of December 31, 2021, an asset surplus of $0.4 million remained undistributed in the pension plans that were terminated.
The Company is also the sponsor of an unfunded supplemental executive retirement plan (“SERP”) in which several employees participate. The Company’s projected benefit obligation under the unfunded SERP was $15.5 million. Contributions to the plan are made in accordance with statutory funding requirements and any additional funding that may be deemed appropriate.
The following tables present the changes in the benefit obligations and the various plan assets, the funded status of the plans, and the amounts recognized in the Company’s balance sheets at December 31, 2021 and 2020 (in thousands):
The termination of the Company’s two noncontributory qualified defined benefit pension plans in 2021 resulted in a non-cash charge of $7.8 million during the year ended December 31, 2021. The pension settlement losses included in the table above resulted from lump sum pension payments made to various employees upon their retirement or termination during the periods specified. The pension settlement losses did not require a cash outlay by the Company. The pension plan termination charge is presented as a separate line in our statements of comprehensive income and the other components of net periodic pension cost are included in other periodic pension costs in our statements of comprehensive income.
Components of net periodic benefit cost related to the SERP were as follows (in thousands):
The service cost component is included in selling and administrative expenses in our statements of comprehensive income and the other components of net periodic pension cost are included in other periodic pension costs in our statements of comprehensive income. The estimated net actuarial loss for the SERP that will be amortized from accumulated other comprehensive income into net periodic benefit cost over the next fiscal year is $1.7 million.
The following table presents the weighted-average assumptions used to determine benefit obligations as of December 31, 2020 and 2021:
The following table presents the weighted-average assumptions used to determine net periodic benefit cost for years ended December 31, 2019, 2020 and 2021:
The Company does not plan to contribute any significant amounts to its defined benefit pension plans in 2022.
The following table includes projected benefit payments for the years indicated (in thousands):
Rabbi Trust
In 2013, we initiated a Non-Qualified Deferred Compensation Plan, and we have purchased life insurance contracts on the lives of designated individuals. The insurance contracts associated with the Non-Qualified Deferred Compensation Plan are also held in a Rabbi trust. The trust is the owner and beneficiary of such insurance contracts. The policies are being utilized to help offset the costs and liabilities of the Non-Qualified Deferred Compensation Plan. The cash surrender value of the life insurance contracts was $7.9 million and $5.0 million at December 31, 2021 and 2020, respectively. The cash surrender value of these policies is included in other assets in the balance sheets. The liability for participant deferrals was $7.8 million and $4.8 million as of December 31, 2021 and 2020, respectively, and is included in other long-term liabilities in the balance sheets.
Defined Contribution Plan
The Company provides a defined contribution plan covering qualified employees. The plan includes a provision that allows employees to make pre-tax contributions under Section 401(k) of the Internal Revenue Code. The plan provides for the Company to make a guaranteed match equal to 25% of each employee’s eligible contributions. The plan also provides the Company with the option of making an additional discretionary contribution to the plan each year. The Company expensed employer matching contributions of $1.6 million during each of the years ended December 31, 2021 and 2019. As a response to the COVID-19 pandemic, the Company elected not to make any discretionary contributions for the fiscal year 2019, and as a result, $1.2 million of accrued discretionary contributions as of December 31, 2019 were reversed during 2020. As a result, the Company recorded a net reversal in expense of $0.3 million relating to employer matching contributions during the year ended December 31, 2020.
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Note 9 - Leases |
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| Lessee, Operating Leases [Text Block] |
The Company primarily leases factories, warehouses, call centers, office space and equipment for various terms under long-term, non-cancelable operating lease agreements. A right-of-use asset represents the Company’s right to use an underlying asset for the lease term and a lease liability represents the Company’s obligation to make lease payments arising from the lease. The Company’s leases generally have expected lease terms of to years. In the normal course of business, it is expected that the Company’s leases will be renewed or replaced by leases on other properties. Options to renew lease terms are included in determining the right-of-use asset and lease liability when it is reasonably certain that the Company will exercise that option. Certain of the lease agreements include rental payments adjusted periodically for inflation and generally require the Company to pay real estate taxes, insurance, and repairs. The Company’s lease agreements generally do not contain any material residual value guarantees or material restrictive covenants. As of December 31, 2021, the Company had $5.8 million of operating lease liabilities ($2.1 million in other current liabilities and $3.7 million in long-term operating lease liabilities), which represents the present value of the remaining lease payments, and $8.2 million of operating lease right-of-use assets, which includes prepaid rent of $2.4 million. As of December 31, 2020, the Company had $2.7 million of operating lease liabilities ($1.1 million in other current liabilities and $1.6 million in long-term operating lease liabilities), which represents the present value of the remaining lease payments, and $3.8 million of operating lease right-of-use assets, which includes prepaid rent of $1.5 million. The depreciable-life of right-of-use assets is generally limited by the expected lease term. The Company does not have any material leases, individually or in the aggregate, classified as a finance leasing arrangement.
The components of lease cost were as follows (in thousands):
Cash flow and noncash information related to our operating leases were as follows (in thousands):
Other supplemental information related to our operating leases was as follows:
Maturities of operating lease liabilities as of December 31, 2021 were as follows (in thousands):
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Note 10 - Contingencies |
12 Months Ended |
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Dec. 31, 2021 | |
| Notes to Financial Statements | |
| Commitments and Contingencies Disclosure [Text Block] |
NOTE 10 – Contingencies:
The purchase price to acquire substantially all of the assets of BAMKO, Inc. (“BAMKO”) in 2016 included contingent consideration based on varying levels of BAMKO’s consolidated EBITDA in each measurement period through 2021. The remaining payment for the BAMKO acquisition-related contingent consideration payable is $3.4 million, which is expected to be paid in the second quarter of 2022. The purchase price to acquire substantially all of the assets of Tangerine Promotions, Ltd. and Tangerine Promotions West, Inc. (collectively “Tangerine”) in 2017 included contingent consideration based on varying levels of Tangerine’s EBITDA in each measurement period through 2021. The remaining payment for the Tangerine acquisition-related contingent consideration payable is $1.4 million, which is expected to be paid in the second quarter of 2022. The purchase price to acquire substantially all of the assets of Sutter’s Mill in 2021 included contingent consideration based on varying levels of Sutter’s Mill’s EBITDA in each measurement period from 2022 to 2024. The estimated fair value for Sutter’s Mill acquisition-related contingent consideration payable as of December 31, 2021 was $2.6 million. The total estimated undiscounted remaining payment related to this contingent consideration payable is between $2.4 million and $4.7 million. The Company will continue to evaluate this 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 materially different from the estimated value of the liability.
The Company is involved in various legal actions and claims arising from the normal course of business. In the opinion of management, the ultimate outcome of these matters is not expected to have a material impact on the Company’s results of operations, cash flows, or financial position. |
Note 11 - Share-based Compensation |
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| Share-based Payment Arrangement [Text Block] |
NOTE 11 – Share-Based Compensation:
In May 2013, the shareholders of the Company approved the 2013 Incentive Stock and Awards Plan (the “2013 Plan”), authorizing the granting of incentive stock options, non-qualified stock options, stock appreciation rights (“SARs”), restricted stock, performance shares and other stock based compensation. A total of 5,000,000 shares of common stock (subject to adjustment for expirations and cancellations of options outstanding from the previous plan) have been reserved for issuance under the 2013 Plan. All options and SARs have been or will be granted with exercise prices at least equal to the fair market value of the shares on the date of grant. At December 31, 2021, the Company had 2,125,120 shares of common stock available for grant of share-based compensation under the 2013 Plan.
Share-based compensation is recorded in selling and administrative expense in the statements of comprehensive income. The following table details the share-based compensation expense by type of award and the total related tax benefit for the periods presented (in thousands):
Stock Options and Stock Appreciation Rights (“SARs”)
The Company grants stock options and stock-settled SARs to employees that allow them to purchase shares of the Company’s common stock. Stock options are also granted to outside members of the Board of Directors of the Company. The Company determines the fair value of stock options and SARs at the date of grant using the Black-Scholes valuation model. Assumptions regarding volatility, risk-free interest rate, expected term and dividend yield are required for the Black-Scholes model. The risk-free interest rate is based on the yield of a U.S. treasury bond with a similar maturity to the award’s expected life. The expected life for awards granted is based on the historical exercise patterns experienced by the Company when the award is made. The determination of expected stock price volatility for awards is based on historical Superior common stock prices over a period commensurate with the expected life. The dividend yield assumption is based on the history and expectation of the Company’s dividend payouts.
The following table summarizes significant assumptions utilized to determine the fair value of stock options and SARs:
A summary of stock option transactions during the year ended December 31, 2021 follows:
Intrinsic value is the difference between the market value of our common stock and the exercise price of each stock option multiplied by the number of stock options outstanding for those stock options where the market value exceeds their exercise price. Options exercised during the years ended December 31, 2021, 2020 and 2019 had intrinsic values of $4.5 million, $1.2 million and $0.8 million, respectively. During the years ended December 31, 2021, 2020 and 2019, the Company received $2.7 million, $1.9 million and $0.3 million, respectively, in cash from stock option exercises. Current tax benefits of $0.9 million, $0.2 million and $0.1 million were recognized for these exercises during the years ended December 31, 2021, 2020 and 2019, respectively. Additionally, during the years ended December 31, 2021, 2020 and 2019, the Company received 17,365, 13,237 and 12,450 shares, respectively, of its common stock as payment of the exercise price in the exercise of stock options for 24,591, 19,232 and 33,172 shares, respectively, of its common stock. As of December 31, 2021, the Company had $0.9 million in unrecognized compensation related to nonvested stock options to be recognized over the remaining weighted average vesting period of 1.2 years.
SARs exercised during the years ended December 31, 2021 and 2020 had intrinsic values of $0.8 million and $0.3 million, respectively. There were no SARs exercised during the year ended December 31, 2019. Current tax benefits of $0.1 million were recognized for these exercises during each of the years ended December 31, 2021 and 2020. As of December 31, 2021, the Company had $0.2 million in unrecognized compensation related to nonvested SARs to be recognized over the remaining weighted average vesting period of 1.0 year.
Restricted Stock
As of December 31, 2021, the Company had $6.1 million of unrecognized compensation cost related to nonvested restricted stock grants expected to be recognized over the remaining weighted average vesting period of 3.0 years.
Performance Shares
The Company has granted performance shares, which either contain only service-based vesting conditions or service-based and performance-based vesting conditions. The service-based awards vest after the service period is met, which is generally to years. Expense for these grants is based on the fair value on the date of the grant and is being recognized on a straight-line basis over the respective service period. The performance-based awards generally vest after years if the performance and service targets are met. The Company evaluates the performance conditions associated with these grants each reporting period to determine the expected number of shares to be issued. Expenses for grants of performance shares are recognized on a straight-line basis over the respective service period based on the grant date fair value and expected number of shares to be issued. The awards are subject to accelerated vesting on a pro rata basis under certain circumstances as outlined in the 2013 Plan, except in those circumstances in which award agreements or change in control agreements specify full vesting.
As of December 31, 2021, the Company had $2.6 million of unrecognized compensation cost related to nonvested performance share grants expected to be recognized over the remaining weighted average service period of 4.1 years.
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Note 12 - Earnings Per Share |
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| Earnings Per Share [Text Block] |
The Company’s basic net income per share is computed based on the weighted average number of shares of common stock outstanding for the period. Diluted net income per share includes the effect of the Company’s outstanding stock options, stock appreciation rights, unvested shares of restricted stock and unvested performance shares, if the inclusion of these items is dilutive.
The following table presents a reconciliation of basic and diluted net income per share for the years ended December 31, 2021, 2020 and 2019:
Awards to purchase 171,522, 271,507 and 448,298 shares of common stock with weighted average exercise prices of $25.42, $19.77 and $19.73 were outstanding during the years ended December 31, 2021, 2020 and 2019, 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. |
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Note 13 - Other Current Liabilities |
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| Accounts Payable and Accrued Liabilities Disclosure [Text Block] |
Other current liabilities consisted of the following (in thousands)
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Note 14 - Net Sales |
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| Revenue from Contract with Customer [Text Block] |
For our Uniforms and Related Products and Promotional Products segments, revenue is primarily generated from the sale of finished products to customers. Revenue for our Uniforms and Related Products and Promotional Products segments is recognized when the performance obligations under the contract terms are satisfied. For certain contracts with customers in which the Company has an enforceable right to payment for goods with no alternative use, revenue is recognized over time upon receipt of finished goods into inventory. Revenue for goods that do have an alternative use or that the customer is not obligated to purchase under the terms of a contract is generally recognized when the goods are transferred to the customer. Revenue from the sale of personal protective equipment, including face masks, isolation gowns, sanitizers and gloves, is generally recognized at a point in time when the goods are transferred to the customer, which typically occurs upon shipment or delivery depending on the terms of the underlying contract. 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 Remote Staffing segment, revenue is generated from providing our customers with staffing solution services. Revenue for our Remote Staffing 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 termination 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.
The following table presents disaggregated revenue by operating segment for the periods presented (in thousands):
Contract Assets and Contract Liabilities
The following table provides information about accounts receivable, contract assets and contract liabilities from contracts with customers (in thousands):
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, 2020 were transferred to accounts receivable during the year ended December 31, 2021. 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 year ended December 31, 2021, $4.4 million of revenue was recognized from the contract liabilities balance as of December 31, 2020. |
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Note 15 - Stock Repurchase Plan |
12 Months Ended |
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| Notes to Financial Statements | |
| Stockholders' Equity Note Disclosure [Text Block] |
NOTE 15 – Stock Repurchase Plan:
On May 2, 2019, the Company’s Board of Directors approved a stock repurchase program of up to 750,000 shares of the Company’s outstanding common stock. There is no expiration date or other restriction governing the period over which the Company can make share repurchases under the program. All purchases under this program will be open market transactions. Under this program, the Company reacquired and retired 43,458 and 49,091 shares of its common stock during the years ended December 31, 2020 and 2019, respectively. The Company did reacquire and retire shares of its common stock under this program during the year ended December 31, 2021. At December 31, 2021, the Company had 657,451 shares remaining under its common stock repurchase program. Shares purchased under the common stock repurchase program are constructively retired and returned to unissued status. The Company considers several factors in determining when to make share repurchases, including among other things, the cost of equity, the after-tax cost of borrowing, the debt to total capitalization targets and its expected future cash needs. |
Note 16 - Operating Segment Information |
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| Segment Reporting Disclosure [Text Block] |
NOTE 16 – Operating Segment Information:
The Company classifies its businesses into three operating segments based on the types of products and services provided. The Uniforms and Related Products segment consists of sales to customers of uniforms and related items. The Remote Staffing Solutions segment consists of sales of staffing solutions. The Promotional Products segment consists of sales to customers of promotional products and other branded merchandise.
The Company evaluates the performance of each operating segment based on several factors of which the primary financial measures are net sales and income before taxes on income. No customer accounted for more than 10% of Company’s total net sales in 2021, 2020 and 2019. Amounts for corporate expenses are included in the totals for the Uniforms and Related Products segment.
The following tables set forth financial information related to the Company’s operating segments (in thousands):
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Note 17 - Acquisition of Businesses |
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| Business Combination Disclosure [Text Block] |
NOTE 17 – Acquisition of Businesses:
Gifts By Design, Inc.
The Company recorded $3.7 million in identifiable intangibles at fair value, consisting of $2.5 million in acquired customer relationships and $1.2 million for the brand name. The intangible assets associated with the customer relationships are being amortized for years. The brand name is considered an indefinite-life asset and as such is not being amortized. The Company recognized amortization expense on these acquired intangible assets of $0.3 million during the year ended December 31, 2021.
The difference between the fair value of the consideration transferred and the values assigned to the assets acquired and liabilities assumed was recorded as goodwill, which is primarily attributed to the assembled workforce and expanded market opportunities.
Sutter’s Mill Specialties, Inc.
On December 2, 2021, the Company, principally through BAMKO, acquired substantially all of the assets of Sutter’s Mill Specialties, Inc. (“Sutter’s Mill”) of Tempe, Arizona. Sutter’s Mill is a vertically integrated manufacturer of high quality, decorated promotional products. Sutter’s Mill has the capability to print on demand and create customized promotional programs and products for customers of any size.
The purchase price of the acquisition consisted of the following: (a) approximately $10.4 million in cash at closing, subject to a working capital adjustment, (b) the issuance of 45,620 restricted shares of Superior’s common stock that vest ratably over a -year period, and (c) potential future payments of approximately $4.5 million in additional contingent consideration for calendar years 2022 through 2024 based on the results of the acquired business.
Fair Value of Consideration Transferred
A summary of the purchase price is as follows (in thousands):
Assets Acquired and Liabilities Assumed
The table below presents the allocation of the total fair value of consideration transferred, as shown above, to the acquired tangible and intangible assets and liabilities of Sutter’s Mill based on their estimated fair values as of the effective date of the transaction. The assets and liabilities of Sutter’s Mill shown below are based on our preliminary estimates of their acquisition date fair values. Our final fair value determination may be different than those shown below.
The following is our preliminary assignment of the aggregate consideration (in thousands):
The Company recorded $2.0 million in identifiable intangibles at fair value, consisting of $1.2 million in acquired customer relationships, $0.1 million for a non-compete agreement and $0.7 million for the Sutter's Mill Specialties trade name. The intangible assets associated with the customer relationships are being amortized for years and the non-compete agreement is being amortized for years. The trade name is considered an indefinite-life asset and as such is not being amortized.
The difference between the fair value of the consideration transferred and the values assigned to the assets acquired and liabilities assumed was recorded as goodwill, which is primarily attributed to the assembled workforce and expanded market opportunities. The acquisition of Sutter’s Mill was treated as an asset purchase for income tax purpose, and therefore, the resulting goodwill from this acquisition was deductible for U.S. income tax purposes. |
Significant Accounting Policies (Policies) |
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| Basis of Accounting, Policy [Policy Text Block] | Basis of presentation
The accompanying consolidated financial statements of Superior included herein have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) (“U.S.” or “United States”) and the rules and regulations of the Securities and Exchange Commission (the “SEC”). The Company refers to the consolidated financial statements collectively as “financial statements,” and individually as “statements of comprehensive income,” “balance sheets,” “statements of shareholders’ equity,” and “statements of cash flows” herein. |
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| Use of Estimates, Policy [Policy Text Block] | Use of estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amount of assets, liabilities, revenue and expenses, as well as the disclosures of contingent assets and liabilities. Because of the inherent uncertainties in this process, actual future results could differ from those expected at the reporting date. |
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| Cash and Cash Equivalents, Policy [Policy Text Block] | Cash and cash equivalents
The Company considers all highly liquid investments with an original maturity of three months or less at the time of purchase to be cash equivalents. |
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| Revenue [Policy Text Block] | Revenue recognition
Revenue is recognized when control of the promised goods or services are transferred to our customers, in an amount that reflects the consideration that we expect to receive in exchange for those goods or services. See Note 14 for further discussion on revenue recognition. |
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| Accounts Receivable [Policy Text Block] | Accounts receivable and allowance for doubtful accounts
Judgments and estimates are used in determining the collectability of accounts receivable and in establishing allowances for doubtful accounts. The Company analyzes specific accounts receivable and historical bad debt experience, customer credit worthiness, current economic trends and the age of outstanding balances when evaluating the adequacy of the allowance for doubtful accounts. Changes in estimates are reflected in the period they become known. Charge-offs of accounts receivable are made once all collection efforts have been exhausted. If the financial condition of the Company’s customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. |
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| Accounts Receivable Other [Policy Text Block] | Accounts receivable-other
The Company purchases raw materials and has them delivered to certain suppliers of the Company. The Company pays for the raw materials and then deducts the cost of these materials from payments to the suppliers at the time the related finished goods are invoiced to the Company by those suppliers. |
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| Cost Of Goods Sold And Shipping And Handling Fees And Costs, Policy [Policy Text Block] | Cost of goods sold and shipping and handling fees and costs
Cost of goods sold for our Uniforms and Related Products segment and our Promotional Products segment consist primarily of direct costs of acquiring inventory, including cost of merchandise, inbound freight charges, purchasing, receiving and inspection costs. Cost of goods sold for our Remote Staffing Solutions segment includes salaries and payroll related benefits for agents. The Company includes shipping and handling fees billed to customers in net sales. Shipping and handling costs associated with out-bound freight are generally recorded in cost of goods sold. Other shipping and handling costs are included in selling and administrative expenses and totaled $18.8 million, $17.6 million and $14.5 million for the years ended December 31, 2021, 2020 and 2019, respectively. |
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| Inventory, Policy [Policy Text Block] | Inventories
Inventories are stated at the lower of cost (first-in, first-out method or average cost) or net realizable value. Judgments and estimates are used in determining the likelihood that goods on hand can be sold to customers. Historical inventory usage and current revenue trends are considered in estimating both excess and obsolete inventories. If actual product demand and market conditions are less favorable than those projected by management, additional inventory write-downs may be required. |
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| Property, Plant and Equipment, Policy [Policy Text Block] | Property, plant and equipment
Property, plant and equipment are stated at cost, less accumulated depreciation and amortization. Major renewals and improvements are capitalized, while replacements, maintenance and repairs which do not improve or extend the life of the respective assets are expensed on a current basis. Costs of assets sold or retired and the related accumulated depreciation and amortization are eliminated from accounts and the net gain or loss is reflected in the statements of comprehensive income within selling and administrative expenses. During the year ended December 31, 2020, the Company sold a building and related assets that were previously used as a Distribution Center within our Uniforms and Related Products segment for net proceeds of $5.3 million and realized a gain on sale of $2.2 million. This sale is presented within our statements of comprehensive income as a separate line item titled “gain on sale of property, plant and equipment.” This sale was part of management’s plan to transition the HPI Distribution Center operations to the Company’s largest and most technologically advanced semi-robotic worldwide distribution center, located in Eudora, Arkansas.
Property, plant and equipment is recorded at cost and depreciated using the straight-line method over its estimated useful life as follows:
Leasehold improvements are amortized over the terms of the leases to the extent that such improvements have useful lives of at least the terms of the respective leases.
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| Intangible Assets, Finite-Lived, Policy [Policy Text Block] | Intangible assets, net
Intangible assets consist of customer relationships, non-compete agreements and trade names acquired in previous business acquisitions.
Intangible assets as of December 31, 2021 and 2020 are summarized as follows (dollars in thousands):
Amortization expense for intangible assets for the years ended December 31, 2021, 2020 and 2019 was $4.2 million, $3.8 million and million, respectively.
Estimated future intangible amortization expense is as follows (in thousands):
Trade names:
As part of the acquisition of substantially all of the assets of HPI Direct, Inc. in 2013, the Company recorded $4.7 million as the fair value of the acquired trade name in intangible assets. As part of the acquisition of substantially all of the assets of BAMKO in 2016, the Company recorded $8.9 million as the fair value of the acquired trade name in intangible assets. As part of the acquisitions of substantially all of the assets of Public Identity and Tangerine in 2018, the Company recorded $0.5 million and $3.2 million, respectively, as the fair value of the acquired trade names in intangible assets. As part of the acquisition of CID Resources in 2018, the Company recorded $14.2 million as the fair value of an acquired trade name in intangible assets. As part of the acquisitions of substantially all of the assets of Sutter’s Mill Specialties, Inc. (“Sutter’s Mill”) and Gifts By Design, Inc. (“Gifts by Design”) in 2021, the Company recorded $1.2 million and $0.7 million, respectively, as the fair value of the acquired trade names in intangible assets. These assets are considered indefinite-lived assets, and as such, are not being amortized. |
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| Impairment or Disposal of Long-Lived Assets, Policy [Policy Text Block] | Impairment of long-lived assets
Long-lived assets, such as property and equipment, and purchased intangibles subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of the asset is measured by comparison of its carrying amount to future net cash flows the asset is expected to generate. If such assets are considered to be impaired, the impairment to be recognized is measured as the amount by which the carrying amount of the asset exceeds its fair value. There were no impairments of long-lived assets for the years ended December 31, 2021, 2020 and 2019. |
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| Goodwill and Intangible Assets, Policy [Policy Text Block] | Goodwill and indefinite-lived intangible assets
The Company has made acquisitions in the past that included goodwill and indefinite-lived intangible assets. Goodwill represents the excess of the cost of an acquisition over the fair value of the net assets acquired. Goodwill and indefinite-lived intangible assets such as trade names are not amortized but are subject to an annual (or under certain circumstances more frequent) impairment test in the fourth quarter based on their estimated fair value. We test more frequently, if there are indicators of impairment, or whenever such circumstances suggest that the carrying value of goodwill or trade names may not be recoverable. Examples of such events and circumstances that the Company would consider include the following:
Goodwill and indefinite-lived intangible assets are tested at a level of reporting referred to as “the reporting unit.” The Company’s reporting units are defined as each of its three reporting segments. As of December 31, 2021, goodwill of $24.4 million and $15.0 million were included in the Uniforms and Related Products segment and the Promotional Products segment, respectively. As of December 31, 2021, indefinite-lived intangible assets of $18.8 million and $14.5 million were included in the Uniforms and Related Products segment and the Promotional Products segment, respectively.
An entity has the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not (that is, a likelihood of more than 50%) that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events or circumstances, an entity determines it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the impairment test is unnecessary. For each of the years ended December 31, 2021, 2020 and 2019, the Company completed its testing of goodwill and indefinite-lived intangible assets and determined that the fair value of each applicable reporting unit was more than its carrying value. |
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| Business Combinations Policy [Policy Text Block] | Contingent Consideration
Contingent consideration relating to consideration transferred in exchange for an acquired business is recognized at its estimated fair value at the acquisition date. The contingent consideration is remeasured to fair value at each reporting date until the contingency is resolved. Any changes in fair value are recognized each reporting period in non-cash changes in fair value of estimated contingent consideration in the accompanying statements of comprehensive income. |
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| Pension and Other Postretirement Plans, Policy [Policy Text Block] | SERP
The Company is the sponsor of an unfunded supplemental executive retirement plan (“SERP”) in which several of its employees are participants. In calculating our obligations and related expense, we make various assumptions and estimates, after consulting with outside actuaries and advisors. The annual determination of expense involves calculating the estimated total benefits ultimately payable to plan participants. Significant assumptions related to the calculation of our obligations include the discount rates used to calculate the present value of benefit obligations to be paid in the future. We review these assumptions annually based upon currently available information, including information provided by our actuaries. |
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| Insurance [Policy Text Block] | Insurance
The Company self-insures for certain obligations related to employee health programs. The Company also purchases stop-loss insurance policies to protect it from catastrophic losses. Judgments and estimates are used in determining the potential value associated with reported claims and for losses that have occurred, but have not been reported. The Company’s estimates consider historical claim experience and other factors. The Company’s liabilities are based on estimates, and, while the Company believes that the accrual for loss is adequate, the ultimate liability may be in excess of or less than the amounts recorded. Changes in claim experience, the Company’s ability to settle claims or other estimates and judgments used by management could have a material impact on the amount and timing of expense for any period. |
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| Income Tax, Policy [Policy Text Block] | Taxes on income
Income taxes are provided for under the liability method, whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carryforwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. The calculation of the Company’s tax liabilities also involves dealing with uncertainties in the application of complex tax regulations. The Company recognizes liabilities for uncertain income tax positions based on estimates of whether, and the extent to which, additional taxes will be required. The Company also accrues interest and penalties related to uncertain income tax positions as income taxes. Refer to Note 7 for additional details. |
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| Share-based Payment Arrangement [Policy Text Block] | Share-based compensation
The Company awards share-based compensation as an incentive for employees to contribute to the Company’s long-term success. The Company grants options, stock-settled stock appreciation rights, restricted stock and performance shares. The Company recognizes share-based compensation expense for all awards granted to employees, which is based on the fair value of the award on the date of grant. Determining the appropriate fair value model and calculating the fair value of stock compensation awards requires the input of certain highly complex and subjective assumptions, including the expected life of the stock compensation awards and the Company’s common stock price volatility, risk free interest rate and dividend rate. The assumptions used in calculating the fair value of stock compensation awards represent management’s best estimates, but these estimates involve inherent uncertainties and the application of judgment. As a result, if factors change and the Company deems it necessary to use different assumptions, stock compensation expense could be materially different from what has been recorded in the current period. |
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| Comprehensive Income, Policy [Policy Text Block] | Other comprehensive income
Other comprehensive income (loss) is defined as the change in equity during a period, from transactions and other events, excluding changes resulting from investments by owners (e.g., supplemental stock offering) and distributions to owners (e.g., dividends). |
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| Concentration Risk, Credit Risk, Policy [Policy Text Block] | Risks and concentrations
Financial instruments that potentially subject the Company to concentrations of credit risk include cash in banks in excess of federally insured amounts. The Company manages this risk by maintaining all deposits in high quality financial institutions and periodically performing evaluations of the relative credit standing of the financial institutions. When assessing credit risk the Company considers whether the credit risk exists at both the individual and group level. Consideration is given to the activity, region and economic characteristics when assessing if there exists a group concentration risk. At December 31, 2021, the Company had no customer with an accounts receivable balance greater than 10% of the total accounts receivable. At December 31, 2020, the Company had two customers with a combined accounts receivable balance of 23% of the total accounts receivable. At December 31, 2021 and 2020, the five largest customer accounts receivables balances totaled $29.6 million and $36.8 million, respectively, or approximately 28% and 40% of the respective total accounts receivable balances. The Uniforms and Related Products segment has a substantial number of customers, none of which accounted for more than 10% of the segment’s 2021 net sales. No customer accounted for more than 10% of the Remote Staffing Solutions segment’s 2021 external revenues. The Promotional Products segment’s largest customer represented 13% of the segment’s 2021 net sales.
The Uniforms and Related Products segment’s principal fabrics used in the manufacture of its finished goods are cotton, polyester, cotton-synthetic and poly-synthetic blends. The majority of such fabrics are sourced in China. The Promotional Products segment relies on the supply of different types of raw materials as well as textiles, including plastic, glass, fabric and metal. The vast majority of these raw materials are principally sourced from China, either directly by BAMKO or its suppliers. If we are unable to continue to obtain our raw materials and finished products from China or if our suppliers are unable to source raw materials from China, it could significantly disrupt our business. Further, the Company and the Company’s suppliers generally source or manufacture finished goods in parts of the world that may be affected by economic uncertainty, political unrest, logistical challenges (such as port strikes and embargos), foreign currency fluctuations, labor disputes, health emergencies, or the imposition of duties, tariffs or other import regulations by the United States, any of which could result in additional cost or limit our supply of necessary goods and raw materials. |
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| Fair Value of Financial Instruments, Policy [Policy Text Block] | Fair value of financial instruments
The carrying amounts of cash and cash equivalents, receivables and accounts payable approximated fair value as of December 31, 2021 and 2020, because of the relatively short maturities of these instruments. The carrying amount of the Company’s long-term debt approximated fair value as the rates are adjustable based upon current market conditions. |
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| New Accounting Pronouncements, Policy [Policy Text Block] | Recent Accounting Pronouncements
We consider the applicability and impact of all Accounting Standard Updates (“ASUs”). ASUs not listed below were assessed and determined to be not applicable.
Recently Adopted Accounting Pronouncements
In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting of Income Taxes”, which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. On January 1, 2021, the Company adopted this standard on a prospective basis. The Company’s adoption of this standard did not have a material impact on its financial statements.
Recently Issued Accounting Pronouncements Not Yet Adopted
In June 2016, the FASB issued ASU 2016-13, “Financial Instruments—Credit Losses (Topic 326).” The update changes the impairment model for most financial assets and certain other instruments, including trade and other receivables, held-to-maturity debt securities and loans, and requires entities to use a new forward-looking expected loss model that will result in the earlier recognition of allowance for losses. In February 2020, the FASB issued ASU 2020-2, “Financial Instruments – Credit Losses (Topic 326) and Leases (Topic 842): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 119 and Update to SEC Section on Effective Date Related to Accounting Standards Update No. 2016-02, Leases (Topic 842).” The update delayed the effective date of ASU 2016-13, “Financial Instruments—Credit Losses (Topic 326)” for Smaller Reporting Companies until fiscal years beginning after December 15, 2022. Adoption will require a modified retrospective approach beginning with the earliest period presented. The Company’s adoption of this standard is not expected to have a material impact on its financial statements.
In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848) Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” This update provides optional guidance for a limited period of time to ease potential accounting impacts associated with transitioning away from reference rates that are expected to be discontinued, such as interbank offered rates and LIBOR. This guidance includes practical expedients for contract modifications due to reference rate reform. Generally, contract modifications related to reference rate reform may be considered an event that does not require remeasurement or reassessment of a previous accounting determination at the modification date. This guidance may be applied through December 31, 2022. The Company will apply this guidance to transactions and modifications to contracts and hedging relationships that reference LIBOR. |
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Note 1 - Description of Business, Basis of Presentation and Summary of Significant Accounting Policies (Tables) |
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| Schedule of Property, Plant and Equipment, Useful Life [Table Text Block] |
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Note 2 - Allowance for Doubtful Accounts Receivable (Tables) |
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Note 3 - Reserve for Sales Returns and Allowances (Tables) |
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Note 4 - Inventories (Tables) |
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Note 5 - Property, Plant and Equipment, Net (Tables) |
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Note 6 - Long-term Debt (Tables) |
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Note 7 - Income Tax Expense (Tables) |
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Note 8 - Benefit Plans (Tables) |
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Dec. 31, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Notes Tables | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Defined Benefit Plans Disclosures [Table Text Block] |
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| Defined Benefit Plan, Plan with Accumulated Benefit Obligation in Excess of Plan Assets [Table Text Block] |
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| Schedule of Net Benefit Costs [Table Text Block] |
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| Defined Benefit Plan, Assumptions [Table Text Block] |
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| Schedule of Expected Benefit Payments [Table Text Block] |
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Note 9 - Leases (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Notes Tables | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Lease, Cost [Table Text Block] |
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| Lessee, Operating Lease, Liability, Maturity [Table Text Block] |
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Note 11 - Share-based Compensation (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Notes Tables | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Share-based Payment Arrangement, Expensed and Capitalized, Amount [Table Text Block] |
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| Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions [Table Text Block] |
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| Share-based Payment Arrangement, Option, Activity [Table Text Block] |
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| Share-based Payment Arrangement, Stock Appreciation Right, Activity [Table Text Block] |
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| Share-based Payment Arrangement, Restricted Stock and Restricted Stock Unit, Activity [Table Text Block] |
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| Schedule of Nonvested Performance-based Units Activity [Table Text Block] |
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Note 12 - Earnings Per Share (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Notes Tables | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Earnings Per Share, Basic and Diluted [Table Text Block] |
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Note 13 - Other Current Liabilities (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Notes Tables | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Accounts Payable and Accrued Liabilities [Table Text Block] |
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Note 14 - Net Sales (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Notes Tables | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Disaggregation of Revenue [Table Text Block] |
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| Schedule of Accounts Receivables and Contract Assets [Table Text Block] |
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Note 16 - Operating Segment Information (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Notes Tables | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Segment Reporting Information, by Segment [Table Text Block] |
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Note 17 - Acquisition of Businesses (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Notes Tables | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Recognized Identified Assets Acquired and Liabilities Assumed [Table Text Block] |
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| Schedule of Business Acquisitions, by Acquisition [Table Text Block] |
|
Note 1 - Description of Business, Basis of Presentation and Summary of Significant Accounting Policies - Intangible Assets (Details) - USD ($) $ in Thousands |
Dec. 31, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Accumulated amortization | $ (19,930) | $ (15,625) |
| Total intangible assets | 80,350 | 74,371 |
| Trade Names [Member] | ||
| Trade names | $ 33,341 | 31,430 |
| Customer Relationships [Member] | ||
| Weighted average life (Year) | 12 years 2 months 12 days | |
| Gross carrying amount | $ 45,473 | 41,530 |
| Accumulated amortization | $ (18,809) | (14,773) |
| Noncompete Agreements [Member] | ||
| Weighted average life (Year) | 5 years 4 months 24 days | |
| Gross carrying amount | $ 1,536 | 1,411 |
| Accumulated amortization | $ (1,121) | $ (852) |
Note 1 - Description of Business, Basis of Presentation and Summary of Significant Accounting Policies - Intangible Assets (Details) (Parentheticals) |
12 Months Ended | 24 Months Ended | |
|---|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
Dec. 31, 2021 |
|
| Customer Relationships [Member] | |||
| Weighted average life (Year) | 12 years 2 months 12 days | ||
| Customer Relationships [Member] | Minimum [Member] | |||
| Weighted average life (Year) | 7 years | ||
| Customer Relationships [Member] | Maximum [Member] | |||
| Weighted average life (Year) | 15 years | ||
| Noncompete Agreements [Member] | |||
| Weighted average life (Year) | 5 years 4 months 24 days | ||
| Noncompete Agreements [Member] | Minimum [Member] | |||
| Weighted average life (Year) | 3 years | ||
| Noncompete Agreements [Member] | Maximum [Member] | |||
| Weighted average life (Year) | 7 years |
Note 1 - Description of Business, Basis of Presentation and Summary of Significant Accounting Policies - Estimated Future Intangible Amortization Expense (Details) $ in Thousands |
Dec. 31, 2021
USD ($)
|
|---|---|
| 2022 | $ 4,301 |
| 2023 | 3,504 |
| 2024 | 2,859 |
| 2025 | 2,309 |
| 2026 | 2,301 |
| Thereafter | 11,805 |
| Total | $ 27,079 |
Note 2 - Allowance for Doubtful Accounts Receivable - Allowance for Doubtful Accounts Receivable (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
|---|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
Dec. 31, 2019 |
|
| Balance at the beginning of year | $ 7,667 | $ 2,964 | $ 2,042 |
| Provision for bad debts - accounts receivable | 2,260 | 6,746 | 1,323 |
| Charge-offs | (3,653) | (2,087) | (401) |
| Recoveries | 119 | 44 | 0 |
| Balance at the end of year | $ 6,393 | $ 7,667 | $ 2,964 |
Note 3 - Reserve for Sales Returns and Allowance - Reserve for Sales Returns and Allowances (Details) - Allowance For Sales Returns 1 [Member] - USD ($) $ in Thousands |
12 Months Ended | ||
|---|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
Dec. 31, 2019 |
|
| Balance at the beginning of year | $ 3,365 | $ 2,112 | $ 1,893 |
| Provision for returns and allowances | 4,911 | 7,699 | 4,334 |
| Actual returns and allowances paid to customers | (5,640) | (6,446) | (4,115) |
| Balance at the end of year | $ 2,636 | $ 3,365 | $ 2,112 |
Note 4 - Inventories - Inventories (Details) - USD ($) $ in Thousands |
Dec. 31, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Finished goods | $ 90,395 | $ 73,979 |
| Work in process | 1,351 | 1,634 |
| Raw materials | 28,809 | 14,153 |
| Inventories | $ 120,555 | $ 89,766 |
Note 5 - Property, Plant and Equipment, Net (Details Textual) - USD ($) $ in Thousands |
12 Months Ended | ||
|---|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
Dec. 31, 2019 |
|
| Depreciation, Depletion and Amortization, Nonproduction, Total | $ 9,291 | $ 8,132 | $ 8,272 |
| Property, Plant and Equipment [Member] | |||
| Depreciation, Depletion and Amortization, Nonproduction, Total | $ 5,100 | $ 4,300 | $ 4,500 |
Note 5 - Property, Plant and Equipment, Net - Summary of Property, Plant and Equipment (Details) - USD ($) $ in Thousands |
Dec. 31, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Property, plant and equipment, gross | $ 113,994 | $ 95,963 |
| Accumulated depreciation and amortization | (64,304) | (59,319) |
| Property, plant and equipment, net | 49,690 | 36,644 |
| Land [Member] | ||
| Property, plant and equipment, gross | 3,085 | 3,085 |
| Buildings Improvements and Leaseholds [Member] | ||
| Property, plant and equipment, gross | 19,558 | 15,972 |
| Machinery, Equipment and Fixtures [Member] | ||
| Property, plant and equipment, gross | $ 91,351 | $ 76,906 |
Note 6 - Long-term Debt - Long-term Debt (Details) - USD ($) $ in Thousands |
Dec. 31, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Long-term debt, gross | $ 116,755 | $ 88,113 |
| Payments due within one year included in current liabilities | 15,286 | 15,286 |
| Debt issuance costs | 624 | 455 |
| Long-term debt less current maturities | 100,845 | 72,372 |
| Truist Bank [Member] | Revolving Credit Facility [Member] | ||
| Long-term debt, gross | 61,517 | 17,589 |
| BB&T [Member] | Term Loan Maturing February 26, 2024 [Member] | ||
| Long-term debt, gross | 15,000 | 21,000 |
| BB&T [Member] | Term Loan Maturing May 2020 [Member] | ||
| Long-term debt, gross | $ 40,238 | $ 49,524 |
Note 6 - Long-term Debt - Contractual Maturities of Debt (Details) $ in Thousands |
Dec. 31, 2021
USD ($)
|
|---|---|
| Long-Term Debt, Maturity, Year One | $ 15,286 |
| 2023 | 15,286 |
| 2024 | 12,286 |
| Long-Term Debt, Maturity, Year Four | 9,286 |
| Long-Term Debt, Maturity, Year Five | 64,611 |
| Thereafter | 0 |
| Total debt | $ 116,755 |
Note 7 - Income Tax Expense (Details Textual) - USD ($) $ in Millions |
12 Months Ended | ||
|---|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
Dec. 31, 2019 |
|
| Unrecognized Tax Benefits, Income Tax Penalties and Interest Expense, Total | $ 0.1 | $ 0.2 | $ 0.2 |
| Unrecognized Tax Benefits, Reduction Resulting from Lapse of Applicable Statute of Limitations | 0.2 | 0.1 | $ 0.1 |
| Unrecognized Tax Benefits, Income Tax Penalties and Interest Accrued, Total | 0.2 | 0.2 | |
| Significant Change in Unrecognized Tax Benefits is Reasonably Possible, Amount of Unrecorded Benefit | $ 0.3 | ||
| Domestic Tax Authority [Member] | |||
| Open Tax Year | 2018 2019 2020 2021 | ||
| State and Local Jurisdiction [Member] | |||
| Open Tax Year | 2015 2016 2017 2018 2019 2020 2021 | ||
| Other Noncurrent Liabilities [Member] | |||
| Unrecognized Tax Benefits that Would Impact Effective Tax Rate | $ 0.9 | $ 1.2 | |
Note 7 - Income Tax Expense - Income Tax Provisions (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
|---|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
Dec. 31, 2019 |
|
| Federal | $ 4,035 | $ 12,997 | $ 3,049 |
| State and local | 777 | 1,956 | 1,074 |
| Foreign | 2,033 | 486 | 502 |
| Current Income Tax Expense (Benefit), Total | 6,845 | 15,439 | 4,625 |
| Deferred tax benefit | (3,158) | (5,009) | (1,405) |
| Income tax expense | $ 3,687 | $ 10,430 | $ 3,220 |
Note 7 - Income Tax Expense - Deferred Income Tax Asset (Liability) (Details) - USD ($) $ in Thousands |
Dec. 31, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Pension accruals | $ 4,023 | $ 3,742 |
| Operating reserves and other accruals | 5,520 | 5,110 |
| Tax credits | 527 | 513 |
| Book carrying value in excess of tax basis of property | (4,814) | (2,116) |
| Book carrying value in excess of tax basis of intangibles | (5,076) | (5,780) |
| Tax effect of revenue recognition standard ASC 606 | 0 | (1,021) |
| Deferred expenses | (539) | (898) |
| Net deferred income tax liability | $ (359) | $ (450) |
Note 7 - Income Tax Expense - Income Tax Rate Reconciliation (Details) |
12 Months Ended | ||
|---|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
Dec. 31, 2019 |
|
| Statutory federal income tax rate | 21.00% | 21.00% | 21.00% |
| State and local income taxes, net of federal income tax benefit | 1.40% | 1.30% | 4.80% |
| Rate impacts due to foreign operations | (6.70%) | (4.50%) | (3.90%) |
| Changes in uncertain tax positions | (0.50%) | 0.20% | 1.70% |
| Compensation related | (1.60%) | 2.30% | (0.20%) |
| Pension termination | (1.80%) | 0.00% | 0.00% |
| R&D tax credits | (0.40%) | (0.30%) | (0.90%) |
| Other | (0.30%) | 0.30% | (1.40%) |
| Effective income tax rate | 11.10% | 20.30% | 21.10% |
Note 7 - Income Tax Expense - Unrecognized Tax Benefits (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
|---|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
Dec. 31, 2019 |
|
| Reductions due to lapse of statute of limitations | $ (200) | $ (100) | $ (100) |
| Excluding Interest and Penalties [Member] | |||
| Balance at the beginning of year | 993 | 681 | |
| Additions based on tax positions related to the current year | 94 | 134 | |
| Additions for tax positions of prior years | 23 | 286 | |
| Reductions due to lapse of statute of limitations | (309) | (108) | |
| Balance at the end of year | $ 801 | $ 993 | $ 681 |
Note 8 - Benefit Plans - Pension Plans With Projected Benefit Obligation in Excess of Plan Assets (Details) - USD ($) $ in Thousands |
Dec. 31, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Projected benefit obligation | $ 15,654 | $ 33,115 |
| Fair value of plan assets | (546) | (18,754) |
| Underfunded (Overfunded) | 15,108 | 14,361 |
| Pension Plan [Member] | ||
| Projected benefit obligation | 131 | 18,778 |
| Fair value of plan assets | (546) | (18,754) |
| Underfunded (Overfunded) | (415) | 24 |
| Supplemental Employee Retirement Plan [Member] | ||
| Projected benefit obligation | 15,523 | 14,337 |
| Fair value of plan assets | 0 | 0 |
| Underfunded (Overfunded) | $ 15,523 | $ 14,337 |
Note 8 - Benefit Plans - Net Periodic Benefit Cost (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
|---|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
Dec. 31, 2019 |
|
| Interest cost on projected benefit obligation | $ 508 | $ 863 | |
| Service cost - benefits earned during the period | 185 | 152 | |
| Pension Plan [Member] | |||
| Interest cost on projected benefit obligation | 171 | 541 | $ 721 |
| Expected return on plan assets | (597) | (1,555) | (1,491) |
| Recognized actuarial loss | 376 | 539 | 643 |
| Settlement loss | 0 | 413 | 1,110 |
| Pension plan termination charge | 7,821 | 0 | 0 |
| Net periodic pension cost after settlements | 7,771 | (62) | 983 |
| Service cost - benefits earned during the period | 0 | 0 | |
| Supplemental Employee Retirement Plan [Member] | |||
| Interest cost on projected benefit obligation | 337 | 322 | 363 |
| Recognized actuarial loss | 1,499 | 695 | 616 |
| Net periodic pension cost after settlements | 2,021 | 1,169 | 1,096 |
| Service cost - benefits earned during the period | $ 185 | $ 152 | $ 117 |
Note 8 - Benefit Plans - Assumptions Used to Determine Benefit Obligations and Net Periodic Benefit (Details) |
12 Months Ended | ||
|---|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
Dec. 31, 2019 |
|
| Pension Plan [Member] | Corporate Segment [Member] | |||
| Benefit obligations, discount rate | 2.36% | ||
| Benefit obligations, long term rate of return | 8.00% | ||
| Benefit cost, discount rate | 2.36% | 3.12% | 4.14% |
| Benefit cost, long term rate of return | 8.00% | 8.00% | 8.00% |
| Pension Plan [Member] | Plants [Member] | |||
| Benefit obligations, discount rate | 2.21% | ||
| Benefit obligations, long term rate of return | 8.00% | ||
| Benefit cost, discount rate | 2.21% | 3.02% | 4.06% |
| Benefit cost, long term rate of return | 8.00% | 8.00% | 8.00% |
| Supplemental Employee Retirement Plan [Member] | |||
| Benefit obligations, discount rate | 2.59% | 2.36% | |
| Benefit obligations, salary scale | 3.00% | 3.00% | |
| Benefit cost, discount rate | 2.36% | 3.12% | 4.14% |
| Benefit cost, salary scale | 3.00% | 3.00% | 3.00% |
Note 8 - Benefit Plans - Projected Benefit Payments (Details) $ in Thousands |
Dec. 31, 2021
USD ($)
|
|---|---|
| 2022 | $ 233 |
| 2023 | 1,214 |
| 2024 | 606 |
| 2025 | 598 |
| 2026 | 598 |
| 2027-2031 | 4,406 |
| Pension Plan [Member] | |
| 2022 | 131 |
| 2023 | 0 |
| 2024 | 0 |
| 2025 | 0 |
| 2026 | 0 |
| 2027-2031 | 0 |
| Supplemental Employee Retirement Plan [Member] | |
| 2022 | 102 |
| 2023 | 1,214 |
| 2024 | 606 |
| 2025 | 598 |
| 2026 | 598 |
| 2027-2031 | $ 4,406 |
Note 9 - Leases (Details Textual) - USD ($) $ in Thousands |
Dec. 31, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Operating Lease, Liability, Total | $ 5,817 | $ 2,700 |
| Operating Lease, Liability, Noncurrent | 3,729 | 1,599 |
| Operating Lease, Right-of-Use Asset | 8,246 | 3,826 |
| Prepaid Rent | 2,400 | 1,500 |
| Other Current Liabilities [Member] | ||
| Operating Lease, Liability, Current | $ 2,088 | $ 1,124 |
| Minimum [Member] | ||
| Lessee, Operating Lease, Term of Contract (Year) | 1 year | |
| Maximum [Member] | ||
| Lessee, Operating Lease, Term of Contract (Year) | 8 years |
Note 9 - Leases - Lease Cost (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
|---|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
Dec. 31, 2019 |
|
| Operating lease costs | $ 2,074 | $ 2,000 | $ 1,541 |
| Short-term lease costs | 602 | 541 | 302 |
| Total lease costs | 2,676 | 2,541 | 1,843 |
| Operating cash flows – cash paid for operating lease liabilities | 1,732 | 1,425 | 1,320 |
| Non-cash – Operating lease right-of-use assets obtained in exchange for new lease liabilities | $ 4,945 | $ 243 | $ 782 |
| Weighted-average remaining lease term (in years) (Year) | 3 years 1 month 6 days | 2 years 9 months 18 days | 3 years 7 months 6 days |
| Weighted average discount rate | 4.74% | 5.61% | 5.61% |
Note 9 - Leases - Maturities of Lease Liabilities (Details) - USD ($) $ in Thousands |
Dec. 31, 2021 |
Dec. 31, 2020 |
|---|---|---|
| 2022 | $ 2,153 | |
| 2023 | 1,925 | |
| 2024 | 1,033 | |
| 2025 | 865 | |
| 2026 | 418 | |
| Thereafter | 0 | |
| Total lease payments | 6,394 | |
| Less imputed interest | 577 | |
| Present value of lease liabilities | $ 5,817 | $ 2,700 |
Note 10 - Contingencies (Details Textual) - USD ($) $ in Thousands |
Dec. 31, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Business Combination, Contingent Consideration, Liability, Current | $ 4,507 | $ 5,589 |
| BAMKO [Member] | ||
| Business Combination, Contingent Consideration, Liability, Current | 3,400 | |
| Tangerine [Member] | ||
| Business Combination, Contingent Consideration, Liability, Current | 1,400 | |
| Sutter's Mill [Member] | ||
| Business Combination, Contingent Consideration, Liability, Total | 2,600 | |
| Sutter's Mill [Member] | Minimum [Member] | ||
| Business Combination, Contingent Consideration, Liability, Current | 2,400 | |
| Sutter's Mill [Member] | Maximum [Member] | ||
| Business Combination, Contingent Consideration, Liability, Current | $ 4,700 |
Note 11 - Share-based Compensation - Shared-based Compensation Expense and the Related Tax Benefit (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
|---|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
Dec. 31, 2019 |
|
| Share-based compensation expense | $ 4,010 | $ 2,530 | $ 1,485 |
| Related income tax benefit | 760 | 286 | 262 |
| Stock Options and SARs [Member] | |||
| Share-based compensation expense | 1,420 | 1,321 | 407 |
| Restricted Stock [Member] | |||
| Share-based compensation expense | 2,241 | 777 | 835 |
| Performance Shares [Member] | |||
| Share-based compensation expense | $ 349 | $ 432 | $ 243 |
Note 11 - Share-based Compensation - Restricted Stock Transactions (Details) - Restricted Stock [Member] |
12 Months Ended |
|---|---|
|
Dec. 31, 2021
$ / shares
shares
| |
| Outstanding (in shares) | shares | 157,244 |
| Outstanding, weighted average grant date fair value (in dollars per share) | $ / shares | $ 16.84 |
| Granted (in shares) | shares | 345,015 |
| Granted, weighted average grant date fair value (in dollars per share) | $ / shares | $ 20.99 |
| Vested (in shares) | shares | (37,930) |
| Vested, weighted average grant date fair value (in dollars per share) | $ / shares | $ 21.61 |
| Forfeited (in shares) | shares | (6,163) |
| Forfeited, weighted average grant date fair value (in dollars per share) | $ / shares | $ 21.64 |
| Outstanding (in shares) | shares | 458,166 |
| Outstanding, weighted average grant date fair value (in dollars per share) | $ / shares | $ 19.51 |
Note 11 - Share-based Compensation - Performance Share Transactions (Details) - Performance Shares [Member] |
12 Months Ended |
|---|---|
|
Dec. 31, 2021
$ / shares
shares
| |
| Outstanding (in shares) | shares | 186,264 |
| Outstanding, weighted average grant date fair value (in dollars per share) | $ / shares | $ 18.28 |
| Granted (in shares) | shares | 116,405 |
| Granted, weighted average grant date fair value (in dollars per share) | $ / shares | $ 22.13 |
| Vested (in shares) | shares | (57,255) |
| Vested, weighted average grant date fair value (in dollars per share) | $ / shares | $ 17.54 |
| Forfeited (in shares) | shares | (51,891) |
| Forfeited, weighted average grant date fair value (in dollars per share) | $ / shares | $ 15.73 |
| Outstanding (in shares) | shares | 193,523 |
| Outstanding, weighted average grant date fair value (in dollars per share) | $ / shares | $ 21.50 |
Note 12 - Earnings Per Share (Details Textual) - $ / shares |
12 Months Ended | ||
|---|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
Dec. 31, 2019 |
|
| Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount (in shares) | 171,522 | 271,507 | 448,298 |
| Antidilutive Securities Excluded from Computation of Earnings Per Share, Weight Average Exercise Price (in dollars per share) | $ 25.42 | $ 19.77 | $ 19.73 |
Note 12 - Earnings Per Share - Reconciliation of Basic and Diluted Earnings Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands |
12 Months Ended | ||
|---|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
Dec. 31, 2019 |
|
| Net income | $ 29,440 | $ 41,026 | $ 12,066 |
| Weighted average shares outstanding - basic (in shares) | 15,438,849 | 15,075,134 | 14,945,165 |
| Dilutive common stock equivalents (in shares) | 652,221 | 433,286 | 321,243 |
| Weighted average number of shares outstanding during the period, diluted (in shares) | 16,091,070 | 15,508,420 | 15,266,408 |
| Basic (in dollars per share) | $ 1.91 | $ 2.72 | $ 0.81 |
| Diluted (in dollars per share) | $ 1.83 | $ 2.65 | $ 0.79 |
Note 13 - Other Current Liabilities - Accrued Expenses (Details) - USD ($) $ in Thousands |
Dec. 31, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Salaries, wages, commissions and compensated absences | $ 17,374 | $ 26,315 |
| Contract liabilities | 8,804 | 5,074 |
| Accrued rebates | 2,526 | 2,057 |
| 401K profit sharing accrual | 880 | 592 |
| Other accrued expenses | 7,317 | 9,508 |
| Other current liabilities | 38,989 | 44,670 |
| Other Current Liabilities [Member] | ||
| Current operating lease liabilities | $ 2,088 | $ 1,124 |
Note 14 - Net Sales (Details Textual) $ in Millions |
12 Months Ended |
|---|---|
|
Dec. 31, 2021
USD ($)
| |
| Contract with Customer, Liability, Revenue Recognized | $ 4.4 |
Note 14 - Net Sales - Accounts Receivable and Contract Assets (Details) - USD ($) $ in Thousands |
Dec. 31, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Accounts receivable | $ 107,053 | $ 101,902 |
| Current contract assets | 38,018 | 39,231 |
| Current contract liabilities | $ 8,804 | $ 5,074 |
Note 15 - Stock Repurchase Plan (Details Textual) - shares |
12 Months Ended | |||
|---|---|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
Dec. 31, 2019 |
May 02, 2019 |
|
| Stock Repurchase Program, Remaining Number of Shares Authorized to be Repurchased (in shares) | 657,451 | 750,000 | ||
| Stock Repurchased and Retired During Period, Shares (in shares) | 0 | 43,458 | 49,091 | |
Note 16 - Operating Segment Information (Details Textual) |
12 Months Ended |
|---|---|
Dec. 31, 2021 | |
| Number of Operating Segments | 3 |
Note 17 - Acquisition of Businesses - Purchase Price (Details) - Sutter's Mill [Member] $ in Thousands |
Dec. 02, 2021
USD ($)
|
|---|---|
| Payments to Acquire Businesses, Gross | $ 10,408 |
| Restricted shares of Superior common stock issued | 869 |
| Contingent consideration | 2,520 |
| Total Consideration | $ 13,797 |
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