| UNITED STATES |
| SECURITIES AND EXCHANGE COMMISSION |
| WASHINGTON, D.C. 20549 |
| FORM |
| (Mark One) |
| QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||||
| For the quarterly period ended | |||||||
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||||
| For the transition period from ________ to __________ |
| Commission file number: |
| Exact name of registrant as specified in its charter: |
| SUPERIOR GROUP OF COMPANIES, INC. |
| State or other jurisdiction of incorporation or organization: | I.R.S. Employer Identification No.: |
| | |
| Address of principal executive offices: | ||||||||
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| Registrant’s telephone number, including area code: | ||||||||
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| Former name, former address and former fiscal year, if changed since last report: |
| Securities registered pursuant to Section 12(b) of the Act: |
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| | | |
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 (§232.405 of this chapter) 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 | |
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| 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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
The number of shares of common stock of the registrant outstanding as of October 30, 2023 was
TABLE OF CONTENTS
| SUPERIOR GROUP OF COMPANIES, INC. AND SUBSIDIARIES |
| CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) |
| (Unaudited) |
| (In thousands, except shares and per share data) |
| Three Months Ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| Net sales | $ | $ | ||||||
| Costs and expenses: | ||||||||
| Cost of goods sold | ||||||||
| Selling and administrative expenses | ||||||||
| Goodwill impairment charge | ||||||||
| Other periodic pension costs | ||||||||
| Interest expense | ||||||||
| Income (loss) before income tax expense | ( | ) | ||||||
| Income tax expense (benefit) | ( | ) | ||||||
| Net income (loss) | $ | $ | ( | ) | ||||
| Net income (loss) per share: | ||||||||
| Basic | $ | $ | ( | ) | ||||
| Diluted | $ | $ | ( | ) | ||||
| Weighted average shares outstanding during the period: | ||||||||
| Basic | ||||||||
| Diluted | ||||||||
| Other comprehensive income (loss), net of tax: | ||||||||
| Recognition of net losses included in net periodic pension costs | $ | $ | ||||||
| Loss on cash flow hedging activities | ( | ) | ||||||
| Foreign currency translation adjustment | ( | ) | ( | ) | ||||
| Other comprehensive loss | ( | ) | ( | ) | ||||
| Comprehensive income (loss) | $ | $ | ( | ) | ||||
| Cash dividends per common share | $ | $ | ||||||
See accompanying Notes to the Condensed Consolidated Financial Statements.
| SUPERIOR GROUP OF COMPANIES, INC. AND SUBSIDIARIES |
| CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) |
| (Unaudited) |
| (In thousands, except shares and per share data) |
| Nine Months Ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| Net sales | $ | $ | ||||||
| Costs and expenses: | ||||||||
| Cost of goods sold | ||||||||
| Selling and administrative expenses | ||||||||
| Goodwill impairment charge | ||||||||
| Intangible assets impairment charge | ||||||||
| Other periodic pension costs | ||||||||
| Interest expense | ||||||||
| Income (loss) before income tax expense | ( | ) | ||||||
| Income tax expense (benefit) | ( | ) | ||||||
| Net income (loss) | $ | $ | ( | ) | ||||
| Net income (loss) per share: | ||||||||
| Basic | $ | $ | ( | ) | ||||
| Diluted | $ | $ | ( | ) | ||||
| Weighted average shares outstanding during the period: | ||||||||
| Basic | ||||||||
| Diluted | ||||||||
| Other comprehensive income (loss), net of tax: | ||||||||
| Recognition of net losses included in net periodic pension costs | $ | $ | ||||||
| Loss on cash flow hedging activities | ( | ) | ||||||
| Foreign currency translation adjustment | ( | ) | ||||||
| Other comprehensive income | ||||||||
| Comprehensive income (loss) | $ | $ | ( | ) | ||||
| Cash dividends per common share | $ | $ | ||||||
| See accompanying Notes to the Condensed Consolidated Financial Statements. |
| CONDENSED CONSOLIDATED BALANCE SHEETS |
|||||||||
| (In thousands, except share and par value data) |
| September 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| (Unaudited) | ||||||||
| 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 | ||||||||
| Deferred tax asset | ||||||||
| Intangible assets, net | ||||||||
| 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 | ||||||||
| Other long-term liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies (Note 6) | ||||||||
| 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 loss, net of tax: | ||||||||
| Pensions | ( | ) | ( | ) | ||||
| Foreign currency translation adjustment | ( | ) | ( | ) | ||||
| Total shareholders’ equity | ||||||||
| Total liabilities and shareholders’ equity | $ | $ | ||||||
| See accompanying Notes to the Condensed Consolidated Financial Statements. |
| CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY |
| THREE MONTHS ENDED September 30, 2023 AND 2022 |
| (Unaudited) |
| (In thousands, except shares and per share data) |
| Accumulated | ||||||||||||||||||||||||
| Other | ||||||||||||||||||||||||
| Additional | Comprehensive | Total | ||||||||||||||||||||||
| Common | Common | Paid-In | Retained | Income (Loss), | Shareholders’ | |||||||||||||||||||
| Shares | Stock | Capital | Earnings | net of tax | Equity | |||||||||||||||||||
| Balance, July 1, 2022 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| Common shares issued upon exercise of options and SARs, net | ||||||||||||||||||||||||
| Restricted shares issued, net of forfeitures | ( | ) | ||||||||||||||||||||||
| Share-based compensation expense | - | |||||||||||||||||||||||
| Cash dividends declared ($ per share) | - | ( | ) | ( | ) | |||||||||||||||||||
| Comprehensive income (loss): | ||||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||
| Cash flow hedges, net of taxes of $ | - | ( | ) | ( | ) | |||||||||||||||||||
| Pensions, net of taxes of $ | - | |||||||||||||||||||||||
| Change in currency translation adjustment, net of taxes of $ | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance, September 30, 2022 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| Balance, July 1, 2023 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| Common shares issued upon exercise of options and SARs, net | ||||||||||||||||||||||||
| Share-based compensation expense | - | |||||||||||||||||||||||
| Written put options | - | |||||||||||||||||||||||
| Cash dividends declared ($ per share) | - | ( | ) | ( | ) | |||||||||||||||||||
| Comprehensive income: | ||||||||||||||||||||||||
| Net income | - | |||||||||||||||||||||||
| Pensions, net of taxes of $ | - | |||||||||||||||||||||||
| Change in currency translation adjustment, net of taxes of $ | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance, September 30, 2023 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| See accompanying Notes to the Condensed Consolidated Financial Statements. |
| SUPERIOR GROUP OF COMPANIES, INC. AND SUBSIDIARIES |
| CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY |
| Nine MONTHS ENDED September 30, 2023 AND 2022 |
| (Unaudited) |
| (In thousands, except shares and per share data) |
| Accumulated | ||||||||||||||||||||||||
| Other | ||||||||||||||||||||||||
| Additional | Comprehensive | Total | ||||||||||||||||||||||
| Common | Common | Paid-In | Retained | Income (Loss), | Shareholders’ | |||||||||||||||||||
| Shares | Stock | Capital | Earnings | net of tax | Equity | |||||||||||||||||||
| Balance, January 1, 2022 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| Cumulative-effect adjustment from adoption of ASU 2016-13 | ( | ) | ( | ) | ||||||||||||||||||||
| Common shares issued upon exercise of options and SARs, net | ( | ) | ||||||||||||||||||||||
| Performance based shares issued | ||||||||||||||||||||||||
| Restricted shares issued, net of forfeitures | ||||||||||||||||||||||||
| Restricted shares issued in conjunction with acquisition of business | ||||||||||||||||||||||||
| Share-based compensation expense | - | |||||||||||||||||||||||
| Tax withheld on vesting of restricted shares and performance based shares | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
| Written put options | - | ( | ) | ( | ) | |||||||||||||||||||
| Cash dividends declared ($ per share) | - | ( | ) | ( | ) | |||||||||||||||||||
| Comprehensive income (loss): | ||||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||
| Cash flow hedges, net of taxes of $ | - | ( | ) | ( | ) | |||||||||||||||||||
| Pensions, net of taxes of $ | - | |||||||||||||||||||||||
| Change in currency translation adjustment, net of taxes of $ | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance, September 30, 2022 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| Balance, January 1, 2023 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| Common shares issued upon exercise of options and SARs, net | ||||||||||||||||||||||||
| Restricted shares issued, net of forfeitures | ||||||||||||||||||||||||
| Share-based compensation expense | - | |||||||||||||||||||||||
| Written put options | - | |||||||||||||||||||||||
| Cash dividends declared ($ per share) | - | ( | ) | ( | ) | |||||||||||||||||||
| Comprehensive income: | ||||||||||||||||||||||||
| Net income | - | |||||||||||||||||||||||
| Pensions, net of taxes of $ | - | |||||||||||||||||||||||
| Change in currency translation adjustment, net of taxes of $ | - | |||||||||||||||||||||||
| Balance, September 30, 2023 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
See accompanying Notes to the Condensed Consolidated Financial Statements.
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS |
| (Unaudited) |
| (In thousands) |
| Nine Months Ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net income (loss) | $ | $ | ( | ) | ||||
| Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Goodwill impairment charge | ||||||||
| Intangible assets impairment charge | ||||||||
| Inventory write-downs | ||||||||
| Provision for bad debts - accounts receivable | ||||||||
| Share-based compensation expense | ||||||||
| Deferred income tax benefit | ( | ) | ||||||
| Change in fair value of acquisition-related contingent liabilities | ( | ) | ||||||
| Change in fair value of written put options | ( | ) | ( | ) | ||||
| 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 (used in) operating activities | ( | ) | ||||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Additions to 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 | ( | ) | ( | ) | ||||
| Debt issuance costs | ( | ) | ( | ) | ||||
| Payment of cash dividends | ( | ) | ( | ) | ||||
| Payment of acquisition-related contingent liabilities | ( | ) | ( | ) | ||||
| Proceeds received on exercise of stock options | ||||||||
| Tax withholdings on vesting of restricted shares and performance based shares | ( | ) | ||||||
| Net cash provided by (used in) financing activities | ( | ) | ||||||
| Effect of currency exchange rates on cash | ( | ) | ||||||
| Net increase in cash and cash equivalents | ||||||||
| Cash and cash equivalents balance, beginning of period | ||||||||
| Cash and cash equivalents balance, end of period | $ | $ | ||||||
| See accompanying Notes to the Condensed Consolidated Financial Statements. |
Superior Group of Companies, Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements (Unaudited)
NOTE 1 – Description of Business and Basis of Presentation:
Description of business
Superior Group of Companies, Inc. (together with its subsidiaries, “the Company,” “Superior,” “we,” “our,” or “us”) was organized in 1920 and was incorporated in 1922 as a New York company under the name Superior Surgical Mfg. Co., Inc. In 1998, the Company changed its name to Superior Uniform Group, Inc. and 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 Branded Products segment, primarily through its signature marketing brands BAMKO® and HPI®, produces and sells customized merchandising solutions, promotional products and branded uniform programs. Branded products are manufactured through third parties or in Superior’s own facilities, and are sold to customers in a wide range of industries, including retail, hotel, food service, entertainment, technology, transportation and other industries. The segment currently has sales offices in the United States, Canada, Brazil, the United Kingdom and Colombia, with support services in China and India.
Superior’s Healthcare Apparel segment, primarily through its signature marketing brands Fashion Seal Healthcare® and WonderWink® (also referred to as “Wink™"), manufactures (through third parties or in its own facilities) and sells a wide range of healthcare apparel, such as scrubs, lab coats, protective apparel and patient gowns. This segment sells healthcare service apparel to healthcare laundries, dealers, distributors and retailers primarily in the United States.
Superior’s Contact Centers segment, through multiple The Office Gurus® entities, including subsidiaries in El Salvador, Belize, Jamaica, Dominican Republic and the United States (collectively, “TOG”), provides outsourced, nearshore business process outsourcing, contact and call-center support services to North American customers.
Basis of presentation
The accompanying unaudited financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations. Intercompany items have been eliminated in consolidation. These condensed consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, and filed with the Securities and Exchange Commission. Management believes that the information furnished includes all adjustments of a normal recurring nature that are necessary to fairly present our consolidated financial position, results of operations and cash flows for the periods indicated. The results of operations for any interim period are not necessarily indicative of results to be expected for the full year.
The Company refers to the condensed consolidated financial statements collectively as “financial statements,” and individually as “statements of comprehensive income (loss),” “balance sheets,” “statements of shareholders’ equity,” and “statements of cash flows” herein.
Reclassifications
The accompanying financial statements for the previous year contain certain reclassifications. Reclassifications only impact items within cash flows from operating activities and have no effect on reported total net cash provided by (used in) operating activities.
Written Put Options
During the second quarter of 2022, the Company entered into written put options with a former employee that, if exercised by the former employee, requires the Company to repurchase up to
Recent Accounting Pronouncements
We consider the applicability and impact of all Accounting Standard Updates (“ASUs”). There have been no new accounting pronouncements recently issued or newly effective that had, or are expected to have, a material impact on the Company’s financial statements.
NOTE 2 – Inventories:
Inventories consisted of the following amounts (in thousands):
| September 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Finished goods | $ | $ | ||||||
| Work in process | ||||||||
| Raw materials | ||||||||
| Inventories | $ | $ | ||||||
Debt consisted of the following (in thousands):
| September 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Credit Facilities: | ||||||||
| Revolving credit facility due August 2027 | $ | $ | ||||||
| Term loan due August 2027 | ||||||||
| Less: | ||||||||
| Payments due within one year included in current liabilities | ||||||||
| Debt issuance costs | ||||||||
| Long-term debt less current maturities | $ | $ | ||||||
On August 23, 2022, the Company entered into a Credit Agreement (the “Credit Agreement”) among the Company, the domestic subsidiaries of the Company, as guarantors, the lenders party thereto (the “Lenders”), and PNC Bank, National Association, as administrative agent for the Lenders (the “Administrative Agent”), pursuant to which the Lenders are providing the Company senior secured credit facilities maturing in August 2027 consisting of a revolving credit facility in the aggregate maximum principal amount of $
On May 4, 2023, the Company and its domestic subsidiaries entered into the First Amendment to its Credit Agreement with the Administrative Agent and the lenders, which (i) provides a covenant relief period through December 31, 2023, which the Company may opt to terminate during the fourth quarter of 2023 if it has a consolidated total net leverage ratio at or below
Obligations outstanding under the Credit Facilities accrue interest at a variable rate equal to the SOFR plus an adjustment between
Contractual principal payments for the term loan are as follows: remainder of 2023 - $
The Credit Facilities are secured by substantially all of the operating assets of the Company, and the Company’s obligations under the Credit Facilities are guaranteed by all of its domestic subsidiaries. The Company’s obligations under the Credit Facilities are subject to acceleration upon the occurrence of an event of default as defined in the Credit Agreement. The Credit Agreement contains customary events of default and negative covenants, including but not limited to those governing indebtedness, liens, fundamental changes, investments, restricted payments (including dividends and related distributions), liquidations, mergers, consolidations or acquisitions, affiliate transactions and sales of assets or subsidiaries. The Credit Agreement also requires the Company to comply with a fixed charge coverage ratio of at least
NOTE 4 – Periodic Pension Cost:
The Company is the sponsor of an unfunded supplemental executive retirement plan ("SERP") which includes one active participant.
The following table details the net periodic pension cost under the Company’s SERP for the periods presented (in thousands):
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Service cost on benefits earned during the period | $ | $ | $ | $ | ||||||||||||
| Interest cost on projected benefit obligation | ||||||||||||||||
| Recognized actuarial loss | ||||||||||||||||
| Net periodic pension cost | $ | $ | $ | $ | ||||||||||||
The service cost component is included in selling and administrative expenses in our statements of comprehensive income (loss) and the other components of net periodic pension cost are included in other periodic pension costs in our statements of comprehensive income (loss).
NOTE 5 – Net Sales:
For our Branded Products and Healthcare Apparel segments, revenue is primarily generated from the sale of finished products to customers. Revenues for our Branded Products and Healthcare Apparel segments are recognized when the performance obligations under the contract terms are satisfied. For certain contracts with customers in which the Company has an enforceable right to payment for goods with no alternative use, revenue is recognized over time upon receipt of finished goods into inventory. Revenue for goods that do have an alternative use or that the customer is not obligated to purchase under the terms of a contract is generally recognized when the goods are transferred to the customer. Revenue from the sale of personal protective equipment, including facemasks, isolation gowns, sanitizers and gloves, is generally recognized at a point in time when the goods are transferred to the customer, which typically occurs upon shipment or delivery depending on the terms of the underlying contract. The Company includes shipping and handling fees billable to customers in net sales. Shipping and handling activities that occur after the transfer of promised goods are accrued as control is transferred to the customer rather than being treated as a separate performance obligation.
For our Contact Centers segment, revenue is generated from providing our customers with contact center services. Revenue for our Contact Centers segment is recognized as services are delivered.
Revenue is measured at the amount of consideration we expect to receive in exchange for the goods or services. Variable consideration for estimated returns, allowances and other price variances is recorded based upon historical experience and current allowance programs. Contract terms may involve variable consideration clauses such as sales discounts and customer rebates, and revenue is adjusted accordingly for these provisions. Estimated amounts are included in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. The promised amount of consideration in a contract is not adjusted for the effects of a significant financing component when we expect, at contract inception, that the period between our transfer of a promised good or service to a customer and when the customer pays for that product or service will be one year or less. Sales taxes are excluded from the measurement of a performance obligation’s transaction price. Sales commissions are expensed as incurred when we expect that the amortization period of such costs will be one year or less.
The following table presents disaggregated revenue by operating segment for the periods presented (in thousands):
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Branded Products Segment: | ||||||||||||||||
| Branded products | $ | $ | $ | $ | ||||||||||||
| Personal protective equipment | ||||||||||||||||
| Total Branded Products Segment | $ | $ | $ | $ | ||||||||||||
| Healthcare Apparel Segment: | ||||||||||||||||
| Healthcare apparel | $ | $ | $ | $ | ||||||||||||
| Personal protective equipment | ||||||||||||||||
| Total Healthcare Apparel Segment | $ | $ | $ | $ | ||||||||||||
| Contact Centers Segment: | ||||||||||||||||
| Contact centers services | $ | $ | $ | $ | ||||||||||||
| Net intersegment eliminations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total Contact Centers 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):
| September 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| 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, 2022 were transferred to accounts receivable during the nine months ended September 30, 2023. 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 nine months ended September 30, 2023, $
NOTE 6 – Contingencies:
The purchase price to acquire substantially all of the assets of Sutter’s Mill Specialties, Inc. (“Sutter’s Mill”) in December 2021 included contingent consideration based on varying levels of Sutter’s Mill’s EBITDA in each measurement period from 2022 to 2024. In July 2023, management agreed to settle the remaining contingent consideration obligation associated with this acquisition for $
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 7 – Share-Based Compensation:
Share-based compensation expense is recorded in selling and administrative expense in the statements of comprehensive income (loss). The following table details the share-based compensation expense by type of award for the periods presented (in thousands):
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Stock options and SARs | $ | $ | $ | $ | ||||||||||||
| Restricted stock | ||||||||||||||||
| Performance shares | ||||||||||||||||
| Total share-based compensation expense | $ | $ | $ | $ | ||||||||||||
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.
All stock options and SARs granted prior to August 3, 2018 vested immediately when granted. Awards issued thereafter vest between and 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, as well as SARs granted in tandem with stock options, are subject to accelerated vesting under certain circumstances as outlined in the 2013 Incentive Stock and Awards Plan (the “2013 Plan”) or 2022 Equity Incentive and Awards Plan (the “2022 Plan”), as applicable.
A summary of stock option transactions during the nine months ended September 30, 2023 follows:
| Weighted Average | Aggregate | |||||||||||||||
| No. of | Weighted Average | Remaining Life | Intrinsic Value | |||||||||||||
| Shares | Exercise Price | (in years) | (in thousands) | |||||||||||||
| Outstanding, January 1, 2023 | $ | $ | ||||||||||||||
| Granted(1) | ||||||||||||||||
| Exercised | ( | ) | ||||||||||||||
| Lapsed or cancelled | ( | ) | ||||||||||||||
| Outstanding, September 30, 2023 | ||||||||||||||||
| Exercisable, September 30, 2023 | ||||||||||||||||
| (1) | The weighted average grant date fair value of stock options granted was $ |
As of September 30, 2023, the Company had $
A summary of stock-settled SARs transactions during the nine months ended September 30, 2023 follows:
| Weighted Average | Aggregate | |||||||||||||||
| No. of | Weighted Average | Remaining Life | Intrinsic Value | |||||||||||||
| Shares | Exercise Price | (in years) | (in thousands) | |||||||||||||
| Outstanding, January 1, 2023 | $ | $ | ||||||||||||||
| Granted(1) | ||||||||||||||||
| Exercised | ||||||||||||||||
| Lapsed or cancelled | ( | ) | ||||||||||||||
| Outstanding, September 30, 2023 | ||||||||||||||||
| Exercisable, September 30, 2023 | ||||||||||||||||
| (1) | The weighted average grant date fair value of SARs granted was $ |
As of September 30, 2023, the Company had $
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 or 2022 Plan, as applicable. 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 nine months ended September 30, 2023 follows:
| Weighted Average | ||||||||
| No. of | Grant Date | |||||||
| Shares | Fair Value | |||||||
| Outstanding, January 1, 2023 | $ | |||||||
| Granted | ||||||||
| Vested | ( | ) | ||||||
| Forfeited | ||||||||
| Outstanding, September 30, 2023 | ||||||||
As of September 30, 2023, 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 three 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. Expense for grants of performance shares is 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 or 2022 Plan, as applicable, except in those circumstances in which award agreements or change in control agreements specify full vesting.
A summary of performance share transactions during the nine months ended September 30, 2023 follows:
| Weighted Average | ||||||||
| No. of | Grant Date | |||||||
| Shares | Fair Value | |||||||
| Outstanding, January 1, 2023 | $ | |||||||
| Granted | ||||||||
| Vested | ||||||||
| Forfeited | ||||||||
| Outstanding, September 30, 2023 | ||||||||
As of September 30, 2023, the Company had $
NOTE 8 – Income Taxes:
The Company calculates its interim income tax provision in accordance with the accounting guidance for income taxes in interim periods. At the end of each interim period, the Company makes its best estimate of the annual expected effective tax rate and applies that rate to its ordinary year-to-date income or loss. The tax expense or benefit related to significant, unusual, or extraordinary items that will be separately reported or reported net of their related tax effect are individually computed and recognized in the interim period in which those items occur.
The computation of the annual expected effective tax rate at each interim period requires certain estimates and assumptions including, but not limited to, the expected operating income for the year and permanent and temporary differences. The accounting estimates used to compute the provision for income taxes may change as new events occur, additional information is obtained or the tax environment changes.
For the three months ended September 30, 2023, the Company recorded a provision for income taxes of $
The income tax expense and the effective tax rate for the three and nine months ended September 30, 2023 was primarily impacted by the variability in the mix of earnings across the Company’s foreign and domestic operations subject to various statutory tax rates in those jurisdictions.
The income tax benefit and the effective tax rate for the three months ended September 30, 2022 was impacted by the impairment of goodwill in the amount of $
NOTE 9 – Net Income (Loss) Per Share:
The Company’s basic net income (loss) per share is computed based on the weighted average number of shares of common stock outstanding for the period. Diluted net income (loss) per share includes the effect of the Company’s outstanding stock options, stock appreciation rights, nonvested shares of restricted stock and nonvested performance shares, if the inclusion of these items is dilutive.
The following table presents a reconciliation of basic and diluted net income (loss) per share for the periods presented:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Net income (loss) used in the computation of basic and diluted net income (loss) per share (in thousands) | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Weighted average shares outstanding - basic | ||||||||||||||||
| Dilutive common stock equivalents | ||||||||||||||||
| Weighted average shares outstanding - diluted | ||||||||||||||||
| Net income (loss) per share: | ||||||||||||||||
| Basic | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Diluted | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
Diluted weighted average shares outstanding excludes shares of common stock of
Awards to purchase
Awards to purchase
NOTE 10 – Operating Segment Information:
The Company manages and reports the following segments:
Branded Products segment: Primarily through our signature marketing brands BAMKO® and HPI®, we produce and sell customized merchandising solutions, promotional products and branded uniform programs. Branded products are sold to customers in a wide range of industries, including retail, hotel, food service, entertainment, technology, transportation and other industries. The segment currently has sales offices in the United States, Canada, Brazil, the United Kingdom and Colombia, with support services in China and India.
Healthcare Apparel segment: Primarily through our signature marketing brands Fashion Seal Healthcare® and Wink™, we manufacture (through third parties or in our own facilities) and sell a wide range of healthcare apparel, such as scrubs, lab coats, protective apparel and patient gowns. This segment sells healthcare service apparel to healthcare laundries, dealers, distributors and retailers primarily in the United States.
Contact Centers: Through multiple The Office Gurus® entities, including our subsidiaries in El Salvador, Belize, Jamaica, Dominican Republic and the United States (collectively, “TOG”), we provide outsourced, nearshore business process outsourcing, contact and call-center support services to North American customers.
Intersegment eliminations include the elimination of revenues and costs from services provided by the Contact Centers segment to the Company’s two other segments. Such costs are recognized as selling and administrative expenses in the Branded Products and Healthcare Apparel segments. Income and expenses related to corporate functions that are not specifically attributable to an individual reportable segment are presented within Other in the tables below.
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 income tax expense.
The following tables set forth financial information related to the Company’s operating segments (in thousands):
| Branded Products | Healthcare Apparel | Contact Centers | Intersegment Eliminations | Other | Total | |||||||||||||||||||
| As of and For the Three Months Ended September 30, 2023: | ||||||||||||||||||||||||
| Net sales | $ | $ | $ | $ | ( | ) | $ | $ | ||||||||||||||||
| Cost of goods sold | ( | ) | ||||||||||||||||||||||
| Gross margin | ( | ) | ||||||||||||||||||||||
| Selling and administrative expenses | ( | ) | ||||||||||||||||||||||
| Other periodic pension cost | ||||||||||||||||||||||||
| Interest expense | ||||||||||||||||||||||||
| Income (loss) before income tax expense | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||
| Depreciation and amortization | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Capital expenditures | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Branded Products | Healthcare Apparel | Contact Centers | Intersegment Eliminations | Other | Total | |||||||||||||||||||
| As of and For the Three Months Ended September 30, 2022: | ||||||||||||||||||||||||
| Net sales | $ | $ | $ | $ | ( | ) | $ | $ | ||||||||||||||||
| Cost of goods sold | ( | ) | ||||||||||||||||||||||
| Gross margin | ( | ) | ||||||||||||||||||||||
| Selling and administrative expenses | ( | ) | ||||||||||||||||||||||
| Goodwill impairment charge | ||||||||||||||||||||||||
| Other periodic pension cost | ||||||||||||||||||||||||
| Interest expense | ||||||||||||||||||||||||
| Income (loss) before income tax expense | $ | ( | ) | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Depreciation and amortization | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Capital expenditures | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Branded Products | Healthcare Apparel | Contact Centers | Intersegment Eliminations | Other | Total | |||||||||||||||||||
| As of and For the Nine Months Ended September 30, 2023: | ||||||||||||||||||||||||
| Net sales | $ | $ | $ | $ | ( | ) | $ | $ | ||||||||||||||||
| Cost of goods sold | ( | ) | ||||||||||||||||||||||
| Gross margin | ( | ) | ||||||||||||||||||||||
| Selling and administrative expenses | ( | ) | ||||||||||||||||||||||
| Other periodic pension cost | ||||||||||||||||||||||||
| Interest expense | ||||||||||||||||||||||||
| Income (loss) before income tax expense | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||
| Depreciation and amortization | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Capital expenditures | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Branded Products | Healthcare Apparel | Contact Centers | Intersegment Eliminations | Other | Total | |||||||||||||||||||
| As of and For the Nine Months Ended September 30, 2022: | ||||||||||||||||||||||||
| Net sales | $ | $ | $ | $ | ( | ) | $ | $ | ||||||||||||||||
| Cost of goods sold | ( | ) | ||||||||||||||||||||||
| Gross margin | ( | ) | ||||||||||||||||||||||
| Selling and administrative expenses | ( | ) | ||||||||||||||||||||||
| Goodwill impairment charge | ||||||||||||||||||||||||
| Intangible assets impairment charge | ||||||||||||||||||||||||
| Other periodic pension cost | ||||||||||||||||||||||||
| Interest expense | ||||||||||||||||||||||||
| Income (loss) before income tax expense | $ | ( | ) | $ | ( | ) | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||
| Depreciation and amortization | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Capital expenditures | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
NOTE 11 – Acquisition of Businesses:
Guardian Products, Inc.
On May 1, 2022, the Company, through BAMKO, acquired substantially all of the assets of Guardian Products, Inc. (“Guardian”) of Norcross, Georgia. Guardian is a branded merchandise company that is one of the leading providers of promotional products to automotive dealers nationwide. The purchase price for the acquisition consisted of the following: (a) $
Fair Value of Consideration Transferred
A summary of the purchase price is as follows (in thousands):
| Cash consideration | $ | |||
| Restricted shares of Superior common stock issued | ||||
| Contingent consideration | ||||
| Total Consideration | $ |
Assets Acquired and Liabilities Assumed
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 Guardian based on their estimated fair values as of the effective date of the transaction (in thousands):
| Accounts receivable | $ | |||
| Inventories | ||||
| Prepaid expenses and other current assets | ||||
| Property, plant and equipment | ||||
| Intangible assets | ||||
| 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. The acquisition of Guardian was treated as an asset purchase for income tax purpose, and therefore, the resulting goodwill from this acquisition is deductible for U.S. income tax purposes. The goodwill associated with the Guardian acquisition was fully impaired during the year ended December 31, 2022 as a result of the Company’s goodwill impairment test performed during the third quarter of 2022, which was triggered by the depressed market price of the Company's common stock and corresponding significant decline in the Company’s market capitalization.
NOTE 12 – Goodwill and Intangible Assets Impairment:
Goodwill
Beginning with the second quarter of fiscal 2022, the Company realigned its reportable segments to Branded Products, Healthcare Apparel and Contact Centers. As a result of this re-segmentation, and in accordance with ASC 350, the Company performed a quantitative goodwill impairment test.
During the third quarter of 2022, the Company determined that a triggering event occurred in relation to the depressed market price of the Company's common stock and corresponding significant decline in the Company’s market capitalization. As a result, the Company performed a quantitative goodwill impairment test.
The fair value of goodwill in each impairment test was determined using a combination of an income approach, which estimates fair value based upon projections of future revenues, expenses, and cash flows discounted to their respective present values, and a market approach. The valuation methodology and underlying financial information included in the Company’s determination of fair value required significant judgments by management. The principal assumptions used in the Company’s discounted cash flow analysis consisted of (a) long-term projections of financial performance and (b) the weighted-average cost of capital of market participants, adjusted for the risk attributable to the Company and the industry in which it operates. Under the market approach, the principal assumption included an estimate of a control premium.
Based on the goodwill impairment analysis performed, the Company determined that the estimated fair values of the previous Uniforms and Related Products segment and current Branded Products segment were lower than their carrying value primarily as the result of then-current market conditions, decline in expected cash flows and/or decrease in the Company’s stock price. Consequently, the Company recorded a non-cash goodwill impairment charge of $
Intangible Assets
In conjunction with the Company’s realignment of its reportable segments, the Company began an effort to centralize certain branding and go-to-market strategies under the BAMKO brand and determined that it would no longer use certain trade names associated with branded products. The Company’s rebranding efforts resulted in a $
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited financial statements and the notes thereto included in the Condensed Consolidated Financial Statements in Part I, Item 1 (“Financial Statements”) of this report and in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2022.
Cautionary Note Regarding Forward Looking Statements
Certain matters discussed in this Form 10-Q 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 Quarterly Report on Form 10-Q may include, without limitation: (1) projections of revenue, income, and other items relating to our financial position and results of operations, including short term and long term plans for cash, (2) statements of our plans, objectives, strategies, goals and intentions, (3) statements regarding the capabilities, capacities, market position and expected development of our business operations, (4) statements of expected industry and general economic trends and (5) the projected impact of the COVID-19 pandemic on our, our customers’, and our suppliers’ businesses.
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; uncertainties related to supply disruptions, inflationary environment (including with respect to the cost of finished goods and raw materials and shipping costs), employment levels (including labor shortages) and general economic and political conditions in the areas of the world in which the Company operates or from which it sources its supplies or the areas of the United States of America (“U.S.” or “United States”) in which the Company’s customers are located; 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; 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; lingering effects of the COVID-19 pandemic, including existing and possible future variants, on the United States and global markets, our business, operations, customers, suppliers and employees, including the length and scope of restrictions imposed by various governments and organizations and the continuing success of efforts to deliver effective vaccines and boosters, among other factors; and other factors described in the Company’s filings with the Securities and Exchange Commission, including those described in the “Risk Factors” section herein and in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022. 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-Q 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.
Recent Acquisitions
On May 1, 2022, the Company, through BAMKO, acquired substantially all of the assets of Guardian Products, Inc. (“Guardian”) of Norcross, Georgia. Guardian is a branded merchandise company that is one of the leading providers of promotional products to automotive dealers nationwide. The purchase price for the acquisition consisted of the following: (a) $11.1 million in cash, (b) the issuance of 116,550 restricted shares of Superior’s common stock (the “Guardian Stock”) that vest ratably over a three-year period, and (c) estimated potential future payments of approximately $2.3 million in additional contingent consideration based on the results of the acquired business through April 2025. The Guardian Stock is subject to transfer restrictions over the three-year period following the closing of the acquisition.
Business Outlook
Superior Group of Companies, Inc. (together with its subsidiaries, the “Company,” “Superior,” “we,” “our,” or “us”) is comprised of three reportable business segments: (1) Branded Products, (2) Healthcare Apparel and (3) Contact Centers.
Branded Products
In our Branded Products segment, we produce and sell customized merchandising solutions, promotional products and branded uniform programs to our customers. As a strategic branding partner, we offer our customers customized branding solutions and strategies that generate favorable brand impressions, bolster customer retention and enhance employee engagement. Our products are sold to customers in a wide range of industries, including retail, hotel, food service, entertainment, technology, transportation and other industries. Sales volumes in this segment are impacted by a number of factors, including marketing programs of our customers and turnover of our customers’ employees, often times driven by the opening and closing of locations. From a long-term perspective, we believe that synergies within this segment will create opportunities to cross-sell products to new and existing customers.
Healthcare Apparel
In our Healthcare Apparel segment, we manufacture (through third parties or in our own facilities) and sell a wide range of healthcare apparel, such as scrubs, lab coats, protective apparel and patient gowns. We sell our brands of healthcare service apparel to healthcare laundries, dealers, distributors and retailers primarily in the United States. In 2021, the Company saw increased demand for healthcare service apparel from laundries, dealers, distributors, service hospitals and other medical facilities. However, as a result of the effects from the COVID-19 pandemic, the healthcare apparel market in 2022 was oversupplied creating a slowdown in demand. This softening of demand has continued thus far in 2023. In an effort to capture additional market share, in the first quarter of 2023 the Company launched a direct-to-consumer website and began rebranding its signature marketing brand WonderWink® to Wink™. From a long-term perspective, we expect that demand for our signature marketing brands, including Fashion Seal Healthcare® and Wink™, will continue to provide opportunities for growth and increased market share.
Contact Centers
In our Contact Centers segment (also known as “The Office Gurus”), which operates in El Salvador, Belize, Jamaica, Dominican Republic, and the United States, we provide outsourced, nearshore business process outsourcing, contact and call-center support services to North American customers. These services are also provided internally to the Company’s other two operating segments. The Office Gurus has become an award-winning business process outsourcer offering inbound and outbound voice, email, text, chat and social media support. The nearshore call-center market has experienced a period of growth as businesses look to reduce operating costs while maintaining high-quality customer support. Nearshore operators are able to provide comparable service to their U.S. counterparts at a fraction of the price. 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.
Global Economic and Political Conditions
Economic and political events over the past several years have altered the landscape in which we and other U.S. companies operate in a variety of ways. In response to inflationary pressures, the U.S. Federal Reserve has repeatedly raised interest rates, resulting in an increase in the cost of borrowing for us, our customers, our suppliers, and other companies relying on debt financing. World events, including the Russian invasion of Ukraine and the resulting economic sanctions have impacted the global economy, including by exacerbating inflationary and other pressures. In addition, the threat of a wider war in the Middle East after the Hamas terrorist attacks on Israel could affect oil prices and have other effects on the global economy. The effects and any escalation of the Israel-Hamas war, prolonged inflationary conditions, high and/or increased interest rates, additional sanctions or retaliatory measures related to the Russia-Ukraine crisis or other situations, including deteriorating or prolonged diplomatic tension between the United States and China, could further negatively affect U.S. and international commerce and exacerbate or prolong the period of high energy prices.
Prolonged or recurring disruptions or instability in the United States and global economies, and how the world reacts to those disruptions or instability, could have long-term impacts on our business. These business impacts could negatively affect us in a number of ways, including, but not limited to, reduced demand for our core products and services, reductions to our revenue and profitability, costs associated with complying with new or amended laws and regulations affecting our business, declines in our stock price, reduced availability and less favorable terms of future borrowings, valuation of our pension obligations, reduced credit-worthiness of our customers, and potential impairment of the carrying value of indefinite-lived intangible assets. Some of these impacts, such as reduced demand in our Branded Products segment related to reduced advertising spending by our customers, and reduced demand in our Healthcare Apparel segment resulting from a continuation of challenging market conditions with saturated inventory levels after the COVID-19 pandemic, have materialized, and are described in “Operations” below.
Summary of Results
Net Income (Loss)
The Company generated net income of $3.1 million during the three months ended September 30, 2023 and net loss of $12.7 million during the three months ended September 30, 2022. The increase in net income during the three months ended September 30, 2023 compared to the three months ended September 30, 2022 was primarily due to goodwill impairment charges totaling $21.5 million during the three months ended September 30, 2022 and an increase of $2.8 million in gross margin for our Branded Products segment, partially offset by an increase in income tax expense and unrealized gains of $1.8 million recognized on written put options during the prior year period. The Company generated net income of $5.2 million during the nine months ended September 30, 2023 and net loss of $34.2 million during the nine months ended September 30, 2022. The increase in net income during the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 was primarily due to goodwill and indefinite-lived intangible assets impairment charges totaling $51.5 million during the nine months ended September 30, 2022 and a decrease in inventory write-downs of $4.2 million, partially offset by increases in income tax expense, interest expense and Contact Centers selling and administrative expenses.
Adjusted EBITDA
Adjusted EBITDA (a non-GAAP financial measure) was $9.3 million and $9.7 million during the three months ended September 30, 2023 and 2022, respectively. Adjusted EBITDA during the three months ended September 30, 2023 compared to the three months ended September 30, 2022 decreased primarily due to unrealized gains recognized on written put options during the prior year period and increases in selling and administrative expenses for our Branded Products and Contact Centers segment, partially offset by an increase in gross margin for our Branded Products segment. Adjusted EBITDA was $23.6 million and $24.5 million during the nine months ended September 30, 2023 and 2022, respectively. Adjusted EBITDA during the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 decreased primarily due to an increase in Contact Centers selling and administrative expenses, partially offset by a decrease in inventory write-downs. For a reconciliation of Adjusted EBITDA to net income (loss), its most directly comparable financial measure calculated and presented in accordance with GAAP, please read “Non-GAAP Financial Measure” below.
| Operations |
| Three Months Ended September 30, 2023 Compared to Three Months Ended September 30, 2022 |
| Net Sales (in thousands): |
| Three Months Ended September 30, |
||||||||||||
| 2023 |
2022 |
% Change |
||||||||||
| Branded Products |
$ | 83,512 | $ | 86,769 | (3.8 | %) | ||||||
| Healthcare Apparel |
29,649 | 30,039 | (1.3 | %) | ||||||||
| Contact Centers |
24,121 | 23,363 | 3.2 | % | ||||||||
| Net intersegment eliminations |
(1,156 | ) | (1,468 | ) | (21.3 | %) | ||||||
| Consolidated Net Sales |
$ | 136,126 | $ | 138,703 | (1.9 | %) | ||||||
Net sales for the Company decreased 1.9%, or $2.6 million, for the three months ended September 30, 2023 compared to the three months ended September 30, 2022. The decrease was driven by net sales decreases in Branded Products and Healthcare Apparel, partially offset by an increase Contact Centers net sales.
Branded Products net sales decreased 3.8%, or $3.3 million, for the three months ended September 30, 2023 compared to the three months ended September 30, 2022. The decrease was primarily due to the timing of new branded uniform rollout programs for certain customers and customer attrition within branded uniforms.
Healthcare Apparel net sales decreased 1.3%, or $0.4 million, for the three months ended September 30, 2023 compared to the three months ended September 30, 2022. The decrease was primarily due to a decrease in demand for healthcare apparel resulting from a continuation of challenging market conditions described above under “Business Outlook – Healthcare Apparel”, partially offset by an increase in digital sales, including the launch of a direct-to-consumer website in 2023.
Contact Centers net sales increased 3.2% before intersegment eliminations for the three months ended September 30, 2023 compared to the three months ended September 30, 2022. These increases were primarily attributed to the onboarding of new customers during the last twelve months.
Gross Margin
Gross margin rate for the Company was 39.1% for the three months ended September 30, 2023 and 36.5% for the three months ended September 30, 2022. The rate increase was primarily due to an improvement in gross margin rate for our Branded Products segment, the Company's largest segment.
Gross margin rate for our Branded Products segment was 34.6% for the three months ended September 30, 2023 and 30.2% for the three months ended September 30, 2022. The rate increase was primarily driven by a favorable shift in the mix of pricing and customers and lower supply chain costs.
Gross margin rate for our Healthcare Apparel segment was 38.7% for the three months ended September 30, 2023 and 38.1% for the three months ended September 30, 2022. The rate increase was primarily driven by improved manufacturing variances from higher production volume in our Haiti facilities compared to the prior year period.
Gross margin rate for our Contact Centers segment was 55.5% for the three months ended September 30, 2023 and 59.5% for the three months ended September 30, 2022. The rate decrease was primarily due to increased employee related costs of our agents, partially offset by price increases.
Selling and Administrative Expenses
As a percentage of net sales, total selling and administrative expenses was 34.7% for the three months ended September 30, 2023 and 31.6% for the three months ended September 30, 2022. The rate increase was primarily attributed to a decrease in unrealized gains of $1.5 million relating to written put options, and increases in expense relating to acquisition contingent liabilities driven by fair market value adjustments, bad debt expense and professional services.
As a percentage of net sales, selling and administrative expenses for our Branded Products segment was 28.0% for the three months ended September 30, 2023 and 25.7% for the three months ended September 30, 2022. The rate increase was primarily due to an increase in expense of $0.6 million relating to acquisition contingent liabilities driven by fair market value adjustments, an increase in bad debt expense and lower net sales explained above.
As a percentage of net sales, selling and administrative expenses for our Healthcare Apparel segment was 32.0% for the three months ended September 30, 2023 and 33.8% for the three months ended September 30, 2022. The rate decrease was primarily driven by reductions in overhead costs.
As a percentage of net sales, selling and administrative expenses for our Contact Centers segment was 42.4% for the three months ended September 30, 2023 and 40.7% for the three months ended September 30, 2022. The rate increase was primarily attributed to increased investment in organizational infrastructure, including personnel, to support future growth of this segment.
Goodwill Impairment Charge
During the third quarter of 2022, the Company performed a goodwill impairment analysis and determined that the estimated fair value of the Branded Products segment was lower than its carrying value primarily as the result of a decrease in the Company’s stock price. Consequently, the Company recorded a non-cash goodwill impairment charge of $21.5 million during the three months ended September 30, 2022.
Interest Expense
Interest expense increased to $2.5 million for the three months ended September 30, 2023 from $1.8 million for three months ended September 30, 2022. This increase was primarily due to an increase in interest rates on our outstanding borrowings, partially offset by $0.5 million of expense relating to the write-off of unamortized debt issuance costs associated with our former senior secured credit facility in the third quarter of 2022 and a decrease in outstanding borrowings. The weighted average interest rate on our outstanding borrowings for the three months ended September 30, 2023 was 7.4% compared to 3.1% for the three months ended September 30, 2022.
Income Taxes
Income tax expense for the three months ended September 30, 2023 compared to the three months ended September 30, 2022 increased by $4.4 million. The effective tax rate was 4.9% and 25.0% for the three months ended September 30, 2023 and 2022, respectively. The income tax expense and the effective tax rate for the three months ended September 30, 2023 was primarily impacted by the variability in the mix of earnings across the Company’s foreign and domestic operations subject to various statutory tax rates in those jurisdictions. The income tax benefit and the effective tax rate for the three months ended September 30, 2022 was impacted by the impairment of goodwill in the amount of $4.3 million. The effective tax rate may vary from quarter to quarter due to discrete, unusual or non-recurring items, the resolution of income tax audits, changes in tax laws, the tax impact from employee share-based payments, or other items.
| Nine Months Ended September 30, 2023 Compared to Nine Months Ended September 30, 2022 |
| Net Sales (in thousands): |
| Nine Months Ended September 30, |
||||||||||||
| 2023 |
2022 |
% Change |
||||||||||
| Branded Products |
$ | 244,955 | $ | 285,891 | (14.3 | %) | ||||||
| Healthcare Apparel |
85,875 | 86,895 | (1.2 | %) | ||||||||
| Contact Centers |
68,935 | 62,803 | 9.8 | % | ||||||||
| Net intersegment eliminations |
(3,704 | ) | (5,371 | ) | (31.0 | %) | ||||||
| Consolidated Net Sales |
$ | 396,061 | $ | 430,218 | (7.9 | %) | ||||||
Net sales for the Company decreased 7.9%, or $34.2 million, for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022. The decrease was primarily driven by a net sales decline in Branded Products and Healthcare Apparel, partially offset by an increase in Contact Centers net sales.
Branded Products net sales decreased 14.3%, or $40.9 million, for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022. The decrease was primarily due to decreased demand as a result of current market conditions that have tightened our customers’ advertising spending, the timing of new branded uniform rollout programs for certain customers and a decrease of $5.4 million in net sales of personal protective equipment driven by the easing of the COVID-19 pandemic. These decreases were partially offset by net sales of $11.2 million attributable to the acquisition of Guardian in May 2022.
Healthcare Apparel net sales decreased 1.2%, or $1.0 million, for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022. The decrease was primarily due to a decrease in demand for healthcare apparel resulting from a continuation of challenging market conditions with saturated inventory levels post-COVID-19 pandemic, partially offset by an increase in digital sales, including the launch of a direct-to-consumer website in the current year period.
Contact Centers net sales increased 9.8% before intersegment eliminations for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022. These increases were primarily attributed to onboarding of new customers during the last twelve months and providing expanded services to our existing customers.
Gross Margin
Gross margin rate for the Company was 37.3% for the nine months ended September 30, 2023 and 34.5% for the nine months ended September 30, 2022. The rate increase was primarily due to a decrease in inventory write-downs of $4.2 million and an improvement in gross margin rate for our Branded Products segment, the Company's largest segment. Inventory write-downs during the nine months ended September 30, 2022 included write-downs of $4.1 million on excess inventory related to personal protective equipment and discontinued styles.
Gross margin rate for our Branded Products segment was 32.8% for the nine months ended September 30, 2023 and 29.2% for the nine months ended September 30, 2022. The rate increase was primarily driven by a favorable shift in the mix of pricing and customers, lower supply chain costs and a decrease in inventory write-downs of $0.8 million.
Gross margin rate for our Healthcare Apparel segment was 37.3% for the nine months ended September 30, 2023 and 35.5% for the nine months ended September 30, 2022. The rate increase was primarily driven by a decrease in inventory write-downs of $3.4 million, partially offset by the impact of challenging market conditions and strategic efforts to right size inventory levels resulting in lower selling prices.
Gross margin rate for our Contact Centers segment was 54.2% for the nine months ended September 30, 2023 and 59.5% for the nine months ended September 30, 2022. The rate decrease was primarily due to increased employee related costs of our agents, partially offset by price increases.
Selling and Administrative Expenses
As a percentage of net sales, total selling and administrative expenses was 33.8% for the nine months ended September 30, 2023 and 30.7% for the nine months ended September 30, 2022. The rate increase was primarily attributed to expense deleverage resulting from the 14.3% decrease in Branded Products net sales, an increase in headcount to support growth in our Contact Centers segment and a decrease in unrealized gains of $1.3 million relating to written put options, partially offset by a decreases in bad debt expense, expense related to acquisition contingent liabilities and sales commission expense.
As a percentage of net sales, selling and administrative expenses for our Branded Products segment was 26.1% for the nine months ended September 30, 2023 and 23.7% for the nine months ended September 30, 2022. The rate increase was primarily due to expense deleverage on the 14.3% decrease in net sales, partially offset by a decrease in bad debt expense, a decrease in expense of $0.7 million related to acquisition contingent liabilities and a decrease in sales commission expense.
As a percentage of net sales, selling and administrative expenses for our Healthcare Apparel segment was 33.1% for the nine months ended September 30, 2023 and 34.6% for the nine months ended September 30, 2022. The rate decrease was primarily driven by reductions in overhead costs.
As a percentage of net sales, selling and administrative expenses for our Contact Centers segment was 42.8% for the nine months ended September 30, 2023 and 38.7% for the nine months ended September 30, 2022. The rate increase was primarily attributed to increased investment in organizational infrastructure, including personnel, to support future growth of this segment.
Goodwill Impairment Charge
In conjunction with the re-segmentation during the second quarter of 2022, the Company performed a goodwill impairment analysis and determined that the estimated fair value of the previous Uniforms and Related Products segment was lower than its carrying value primarily as the result of then-current market conditions, decline in expected cash flows and/or decrease in the Company’s stock price. During the third quarter of 2022, the Company performed a goodwill impairment analysis and determined that the estimated fair value of the Branded Products segment was lower than its carrying value primarily as the result of a decrease in the Company’s stock price. Consequently, the Company recorded a non-cash goodwill impairment charge of $45.9 million during the nine months ended September 30, 2022.
Intangible Assets Impairment Charge
In conjunction with the Company’s realignment of its reportable segments during the second quarter of 2022, the Company began an effort to centralize certain branding and go-to-market strategies under the BAMKO brand and determined that it would no longer use certain trade names associated with branded products. The Company’s rebranding efforts resulted in a $5.6 million impairment of indefinite-lived trade names related to its Branded Products segment during the nine months ended September 30, 2022.
Interest Expense
Interest expense increased to $7.7 million for the nine months ended September 30, 2023 from $2.7 million for nine months ended September 30, 2022. This increase was primarily due to an increase in interest rates on our outstanding borrowings, partially offset by $0.5 million of expense relating to the write-off of unamortized debt issuance costs associated with our former senior secured credit facility in the third quarter of 2022 and a decrease in outstanding borrowings. The weighted average interest rate on our outstanding borrowings for the nine months ended September 30, 2023 was 7.0% compared to 1.9% for the nine months ended September 30, 2022.
Income Taxes
Income tax expense for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 increased by $5.4 million. The effective tax rate was 6.8% and 12.9% for the nine months ended September 30, 2023 and 2022, respectively. The income tax expense and the effective tax rate for the nine months ended September 30, 2023 was primarily impacted by the variability in the mix of earnings across the Company’s foreign and domestic operations subject to various statutory tax rates in those jurisdictions. The income tax benefit and the effective tax rate for the nine months ended September 30, 2022 was impacted by the impairments of goodwill and intangible assets in the amount of $6.4 million, as well as the nondeductible portion of the goodwill impairment charge totaling $21.1 million. The effective tax rate may vary from quarter to quarter due to discrete, unusual or non-recurring items, the resolution of income tax audits, changes in tax laws, the tax impact from employee share-based payments, or other items.
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.
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. 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), to the extent available. 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 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 was $17.7 million as of September 30, 2023 and December 31, 2022. Working capital decreased to $190.7 million at September 30, 2023 from $232.8 million at December 31, 2022. The decrease in working capital was primarily due to decreases in inventory, accounts receivable, contract assets, prepaid expenses and other current assets and other accounts receivable and an increase in accounts payable. The decrease in inventory and increase in accounts payable were primarily driven by the timing of payments to vendors and a decrease in purchasing activities during the period. The decreases in accounts receivable and other accounts receivables were primarily related to decreased sales for our Branded Products segment and the collection of customer payments, including credit card payments. The decrease in prepaid expenses and other current assets was primarily due to a tax refund of $5.0 million received in the current year period that related to the Company’s U.S. 2021 federal tax return. The decrease in contract assets was primarily driven by the timing of shipments to customers and receipts from suppliers for finished goods with no alternative use within our Branded Products segment.
Material Short-Term Plans for Cash
For the remainder of the year 2023, our primary capital requirements are to maintain our operations, meet contractual obligations, fund capital expenditures, pay dividends and for other general corporate purposes. We currently anticipate that we will spend less in capital expenditures in 2023 than we spent in 2022. Management currently believes that the combination of our current cash level, cash flows provided by operating activities and availability under the revolving credit facility will be sufficient to satisfy the above requirements for the next twelve months.
Material Long-Term Plans for Cash
Beyond the next twelve months, our principal demand for funds will be for maintenance of our core business, to satisfy long term contractual obligations and the continuation of the Company’s ongoing capital expenditure program designed to improve the effectiveness and capabilities of our facilities and technology. The Company at all times evaluates its capital expenditure program in light of prevailing economic conditions. The Company’s material contractual obligations include outstanding debt, operating leases, acquisition-related contingent liabilities, unfunded supplemental executive retirement plan liabilities and non-qualified deferred compensation plan liabilities. In the first quarter of 2023, the Company’s Branded Products segment entered into a new long-term lease for a warehouse in Phoenix, Arizona with total estimated rental payments of $7.4 million. This new lease is part of management’s plan to consolidate warehousing facilities related to promotional products inventory. Management currently believes that the combination of our current cash level, cash flows provided by operating activities and availability under the revolving credit facility will be sufficient to satisfy the above requirements.
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):
| Nine Months Ended September 30, |
||||||||
| 2023 |
2022 |
|||||||
| Net cash provided by (used in): |
||||||||
| Operating activities |
$ | 59,388 | $ | (4,504 | ) | |||
| Investing activities |
(4,023 | ) | (22,423 | ) | ||||
| Financing activities |
(55,455 | ) | 37,032 | |||||
| Effect of exchange rates on cash |
97 | (132 | ) | |||||
| Net increase in cash and cash equivalents |
$ | 7 | $ | 9,973 | ||||
Operating Activities. The increase in net cash provided by operating activities during the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 was primarily attributable to decreases in cash outflows for inventory, accounts payable and income taxes and an increase in cash inflows from accounts receivable and contract assets, partially offset by a decrease in net sales and an increase in interest paid. Working capital cash changes during the nine months ended September 30, 2023 included a decrease of $18.3 million in inventory, a decrease of $6.4 million in accounts receivable and a decrease of $6.2 million in contract assets. Working capital cash changes during the nine months ended September 30, 2022 included an increase of $19.2 million in inventory, an increase of $10.2 million in contract assets and a decrease of $9.6 million in accounts payable and other current liabilities.
Investing Activities. The decrease in net cash used in investing activities during the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 was attributable to $11.1 million of cash paid for the acquisition of Guardian in 2022 and a decrease of $7.2 million in capital expenditures.
Financing Activities. The decrease in net cash provided by financing activities during the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 was primarily attributable to $47.8 million in net repayments of debt in the current year period compared to $45.2 million of net borrowings of debt in the prior year period. Excess cash generated from operating activities during the nine months ended September 30, 2023 was used to repay outstanding borrowings under the revolving credit facility.
Credit Facilities (See Note 3 to the Financial Statements)
As of September 30, 2023, the Company had $108.3 million in outstanding borrowings under its Credit Facilities (as defined below), consisting of $38.0 million outstanding under the revolving credit facility and $70.3 million outstanding under a term loan. As of September 30, 2023, the Company had undrawn capacity of $87.0 million under the revolving credit facility.
On August 23, 2022, the Company entered into a Credit Agreement (the “Credit Agreement”) among the Company, the domestic subsidiaries of the Company, as guarantors, the lenders party thereto (the “Lenders”), and PNC Bank, National Association, as administrative agent for the Lenders (the “Administrative Agent”), pursuant to which the Lenders are providing the Company senior secured credit facilities maturing in August 2027 consisting of a revolving credit facility in the aggregate maximum principal amount of $125.0 million and a term loan in the original aggregate principal amount of $75.0 million (collectively, the “Credit Facilities”), and the ability to request incremental revolving credit or term loan facilities in an aggregate amount of up to an additional $75.0 million, subject to obtaining additional lender commitments and satisfying certain other conditions.
On May 4, 2023, the Company and its domestic subsidiaries entered into a First Amendment to Credit Agreement with the Administrative Agent and the lenders, which (i) provides a covenant relief period through December 31, 2023, which the Company may opt to terminate during the fourth quarter of 2023 if it has a consolidated total net leverage ratio at or below 4.0 to 1.0 for the two preceding consecutive fiscal quarters; (ii) permits a maximum consolidated total net leverage ratio of 4.5 to 1.0, 4.8 to 1.0, 4.5 to 1.0 and 4.0 to 1.0 for the first, second, third and fourth quarters 2023, respectively; (iii) amends the applicable margin pricing grid to add a tier of applicable margins (2.5% for SOFR rate loans) if the consolidated total net leverage ratio is greater than 4.0 to 1.0, which tier would only apply during the covenant relief period; (iv) prohibits capital expenditures during the covenant relief period that exceed $10 million, with additional limitations imposed on a quarterly basis; (v) prohibits acquisitions and incremental loans during the covenant relief period; (vi) adds sale and leaseback transactions to the list of transactions that require the Company to use the net proceeds thereof to make a mandatory prepayment under the Credit Agreement; (vii) limits restricted payments to $20 million in any fiscal year, and no more than $10 million during the covenant relief period, with additional limitations imposed on a quarterly basis during the covenant relief period; and (viii) lowers the amount of permissible investments in non-loan party subsidiaries to $5 million during the covenant relief period.
Obligations outstanding under the Credit Facilities accrue interest at a variable rate equal to the secured overnight financing rate (“SOFR”) plus an adjustment of between 0.10% and 0.25% (depending on the applicable interest period) plus a margin of between 1.0% and 2.0% (depending on the Company’s net leverage ratio). During the covenant relief period, the applicable margin may reach 2.5% for SOFR rate loans. The weighted average interest rate on our outstanding borrowings under the Credit Facilities was 7.4% at September 30, 2023. During the term of the revolving credit facility, the Company will pay a commitment fee on the unused portion of the revolving credit facility equal to between 0.125% and 0.250% (depending on the Company’s net leverage ratio). During the covenant relief period, the commitment fee may reach 0.300%. The available balance under the revolving credit facility is reduced by outstanding letters of credit. As of September 30, 2023, there were no outstanding letters of credit under the revolving credit facility.
Contractual principal payments for the term loan are as follows: remainder of 2023 - $0.9 million; 2024 - $4.7 million; 2025 - $5.6 million; 2026 - $6.6 million and 2027 - $52.5 million. The term loan does not contain pre-payment penalties.
The Credit Facilities are secured by substantially all of the operating assets of the Company, and the Company’s obligations under the Credit Facilities are guaranteed by all of its domestic subsidiaries. The Company’s obligations under the Credit Facilities are subject to acceleration upon the occurrence of an event of default as defined in the Credit Agreement. The Credit Agreement contains customary events of default and negative covenants, including but not limited to those governing indebtedness, liens, fundamental changes, investments, restricted payments (including dividends and related distributions), liquidations, mergers, consolidations or acquisitions, affiliate transactions and sales of assets or subsidiaries. The Credit Agreement also requires the Company to comply with a fixed charge coverage ratio of at least 1.25 to 1.0 and a net leverage ratio not to exceed 4.0 to 1.0, except during the covenant relief period. The Company’s net leverage ratio (as defined in the Credit Agreement) is generally calculated as the ratio of (a) indebtedness minus unrestricted cash to (b) consolidated EBITDA for the four most recently ended fiscal quarters. As of September 30, 2023, the Company was in compliance with these ratios as the Company’s fixed charge coverage and net leverage ratios were 2.1 to 1.0 and 2.9 to 1.0, respectively.
Dividends and Share Repurchase Program
During the nine months ended September 30, 2023 and 2022, the Company paid cash dividends of $6.9 million and $6.4 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. At September 30, 2023, 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.
Critical Accounting Estimates
See Part II, Item 7, "Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Estimates" in our Annual Report on Form 10-K for the year ended December 31, 2022.
Non-GAAP Financial Measure
Adjusted EBITDA, which is a non-GAAP financial measure, is defined as net income (loss) excluding interest expense, income tax expense, depreciation and amortization expense, impairment charges and the other items described in the following sentence. The Company believes Adjusted EBITDA is an important measure of operating performance because it allows management, investors and others to evaluate and compare the Company’s core operating results from period to period by removing (i) the impact of the Company’s capital structure (interest expense from outstanding debt), (ii) tax consequences, (iii) asset base (depreciation and amortization), (iv) the non-cash charges from asset impairments and (v) gains or losses on the sale of property, plant and equipment. The Company uses Adjusted EBITDA internally to monitor operating results and to evaluate the performance of its business. In addition, the compensation committee has used Adjusted EBITDA in evaluating certain components of executive compensation, including performance-based annual incentive programs.
Adjusted EBITDA is not a measure of financial performance under GAAP and should not be considered in isolation or as an alternative to net income (loss), cash flows from operating activities or any other measure determined in accordance with GAAP. The items excluded to calculate Adjusted EBITDA are significant components in understanding and assessing the Company’s results of operations. The presentation of the Company’s Adjusted EBITDA may change from time to time, including as a result of changed business conditions, new accounting pronouncements or otherwise. If the presentation changes, the Company undertakes to disclose any change between periods and the reasons underlying that change. The Company’s Adjusted EBITDA may not be comparable to a similarly titled measure of another company because other entities may not calculate Adjusted EBITDA in the same manner.
The following table reconciles net income (loss) to Adjusted EBITDA (in thousands):
| Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
| 2023 |
2022 |
2023 |
2022 |
|||||||||||||
| Net income (loss) |
$ | 3,114 | $ | (12,719 | ) | $ | 5,215 | $ | (34,164 | ) | ||||||
| Interest expense |
2,464 | 1,794 | 7,658 | 2,676 | ||||||||||||
| Income tax expense (benefit) |
160 | (4,241 | ) | 380 | (5,042 | ) | ||||||||||
| Depreciation and amortization |
3,515 | 3,401 | 10,331 | 9,504 | ||||||||||||
| Goodwill impairment charge |
- | 21,460 | - | 45,918 | ||||||||||||
| Intangible assets impairment charge |
- | - | - | 5,581 | ||||||||||||
| Adjusted EBITDA |
$ | 9,253 | $ | 9,695 | $ | 23,584 | $ | 24,473 | ||||||||
ITEM 3. 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 secured overnight financing rate (“SOFR”). As SOFR is a relatively new reference rate with a limited history, there may or may not be more volatility than with other reference rates such as LIBOR, which may result in increased borrowing costs for the Company. A hypothetical increase in the SOFR of 100 basis points as of January 1, 2023 would have resulted in approximately $1.0 million in additional pre-tax interest expense for the nine months ended September 30, 2023. For further information regarding our debt instruments, see Note 3 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 September 30, 2023, 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 Branded 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, Colombian peso 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 transaction gains (losses) within selling and administrative expenses in our statements of comprehensive income. During the nine months ended September 30, 2023 and 2022, 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 nine months ended September 30, 2023 and 2022 included a foreign currency translation adjustment gain of $0.2 million and a foreign currency translation adjustment loss of $0.4 million, respectively.
ITEM 4. 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, Michael Koempel, 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 and as previously disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.
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.
As of December 31, 2022, management identified a material weakness relating to segregation of duties, change management and user access and within certain proprietary information technology systems of the Contact Centers segment. The Company determined that management’s review controls over these areas are not designed effectively to detect a material misstatement related to the completeness, accuracy, and presentation of the financial statements.
Notwithstanding the identified material weakness, management, including the Company’s principal executive officer and principal financial officer, have determined, based on the procedures they have performed, that the consolidated financial statements included in this Form 10-Q present fairly, in all material respects, the Company’s financial condition, results of operations and cash flows at the Evaluation Date, and for the periods presented, in accordance with U.S. GAAP.
Remediation Efforts with Respect to the Material Weakness
The Company’s management, under the oversight of the Audit Committee, has developed a plan to remediate the material weakness relating to certain proprietary information technology systems of the Contact Centers segment identified as of December 31, 2022 which includes the following measures: (i) develop information technology general controls to manage access and program changes within our proprietary system; (ii) implement processes and controls to better identify and manage segregation of duties; and (iii) design and implement additional enhanced review and monitoring controls.
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.
Changes in Internal Control over Financial Reporting
Except as discussed above under "Remediation Efforts with Respect to the Material Weakness", there were no changes in the Company’s internal control over financial reporting during the quarter ended September 30, 2023 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
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.
We are exposed to certain risks and uncertainties that could have a material adverse impact on our business, financial condition and operating results. Except as set forth below, there have been no material changes to the Risk Factors described in Part I, Item 1A-Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2022.
Our results of operations could be adversely affected by economic and political conditions globally and the effects of these conditions on our customers’ businesses and levels of business activity.
Economic and political events in the past 20 months have altered the landscape in which we and other U.S. companies operate in a variety of ways. In response to inflationary pressures, the U.S. Federal Reserve repeatedly has raised interest rates, resulting in an increase in the cost of borrowing for us, our customers, our suppliers, and other companies relying on debt financing. In light of continuing inflationary pressures, the Federal Reserve may decide to raise rates again.
World events, such as the Russian invasion of Ukraine and the resulting economic sanctions, have impacted the global economy, including by exacerbating inflationary and other pressures. In addition, the threat of a wider war in the Middle East after the Hamas terrorist attacks on Israel could affect oil prices and have other effects on the global economy. Both crises have potentially far-reaching impacts on energy and food markets and global trade.
An escalating war in the Middle East, prolonged inflationary conditions, high and/or increased interest rates, additional sanctions or retaliatory measures related to the Russia-Ukraine crisis, or other situations, could further negatively affect U.S. and international commerce and exacerbate or prolong the period of high energy prices. At this time, the extent and duration of these economic and political events and their effects on the economy and the Company are impossible to predict, but the impact on the Company’s business could be material.
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
There were no unregistered sales of equity securities during the quarter ended September 30, 2023, that were not previously reported in a current report on Form 8-K.
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 September 30, 2023.
| 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) |
||||||||||||
| July 1, 2023 to July 31, 2023 |
- | $ | - | - | ||||||||||||
| August 1, 2023 to August 31, 2023 |
- | - | - | |||||||||||||
| September 1, 2023 to September 30, 2023 |
- | - | - | |||||||||||||
| 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. |
Under our Credit Agreement, if an event of default exists, we may not make distributions to our shareholders. The Credit Agreement also contains other restrictions. See “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources – Credit Facilities.” The Company is in full compliance with all terms, conditions and covenants of such agreement.
ITEM 3. Defaults upon Senior Securities
Not applicable.
ITEM 4. Mine Safety Disclosures
Not applicable.
Not applicable.
| Exhibit No. | Description | |
| 31.1* | Certification by the Chief Executive Officer (Principal Executive Officer) pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
| 31.2* | Certification by the Chief Financial Officer (Principal Financial Officer) pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
| 32** | Certification by the Chief Executive Officer and the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
| 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). |
* Filed herewith.
**Furnished herewith.
+ Submitted electronically herewith.
Pursuant to the requirements 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.
| Date: November 6, 2023 | SUPERIOR GROUP OF COMPANIES, INC. | |
| By | /s/ Michael Benstock | |
| Michael Benstock | ||
| Chief Executive Officer | ||
| (Principal Executive Officer) | ||
| Date: November 6, 2023 | ||
| By | /s/ Michael Koempel | |
| Michael Koempel | ||
| Chief Financial Officer (Principal Financial Officer) |
||
Exhibit 31.1
CERTIFICATIONS
I, Michael Benstock, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q 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: November 6, 2023
/s/ Michael Benstock
Michael Benstock
Chief Executive Officer
(Principal Executive Officer)
Exhibit 31.2
CERTIFICATIONS
I, Michael Koempel, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q 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: November 6, 2023 |
|
|
/s/ Michael Koempel |
|
|
Michael Koempel Chief Financial Officer (Principal Financial Officer) |
Exhibit 32
Written Statement of the Chief Executive Officer and the Chief Financial Officer
Pursuant to 18 U.S.C. §1350
Solely for the purposes of complying with 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, we, the undersigned Chief Executive Officer and Chief Financial Officer of Superior Group of Companies, Inc. (the “Company”), hereby certify, based on our knowledge, that the Quarterly Report on Form 10-Q of the Company for the period ended September 30, 2023 (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)
Date: November 6, 2023
/s/ Michael Koempel
Michael Koempel
Chief Financial Officer
(Principal Financial Officer)
Date: November 6, 2023
Condensed Consolidated Balance Sheets (Unaudited) (Parentheticals) - USD ($) $ in Thousands |
Sep. 30, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Accounts receivable, allowance for doubtful accounts | $ 5,267 | $ 7,622 |
| 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) | 16,505,826 | 16,376,683 |
| Common stock, shares outstanding (in shares) | 16,505,826 | 16,376,683 |
Condensed Consolidated Statements of Shareholders' Equity (Unaudited) (Parentheticals) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Cash dividends declared, per share (in dollars per share) | $ 0.14 | $ 0.14 | $ 0.42 | $ 0.4 |
| Cash flow hedges, tax | $ 5 | $ 6 | ||
| Pensions, tax | $ 13 | 109 | $ 41 | 329 |
| Change in currency translation adjustment, tax | $ 0 | $ 0 | $ 0 | $ 0 |
Note 1 - Description of Business and Basis of Presentation |
9 Months Ended |
|---|---|
Sep. 30, 2023 | |
| Notes to Financial Statements | |
| Significant Accounting Policies [Text Block] |
NOTE 1 – Description of Business and Basis of Presentation:
Description of business
Superior Group of Companies, Inc. (together with its subsidiaries, “the Company,” “Superior,” “we,” “our,” or “us”) was organized in 1920 and was incorporated in 1922 as a New York company under the name Superior Surgical Mfg. Co., Inc. In 1998, the Company changed its name to Superior Uniform Group, Inc. and 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 Branded Products segment, primarily through its signature marketing brands BAMKO® and HPI®, produces and sells customized merchandising solutions, promotional products and branded uniform programs. Branded products are manufactured through third parties or in Superior’s own facilities, and are sold to customers in a wide range of industries, including retail, hotel, food service, entertainment, technology, transportation and other industries. The segment currently has sales offices in the United States, Canada, Brazil, the United Kingdom and Colombia, with support services in China and India.
Superior’s Healthcare Apparel segment, primarily through its signature marketing brands Fashion Seal Healthcare® and WonderWink® (also referred to as “Wink™"), manufactures (through third parties or in its own facilities) and sells a wide range of healthcare apparel, such as scrubs, lab coats, protective apparel and patient gowns. This segment sells healthcare service apparel to healthcare laundries, dealers, distributors and retailers primarily in the United States.
Superior’s Contact Centers segment, through multiple The Office Gurus® entities, including subsidiaries in El Salvador, Belize, Jamaica, Dominican Republic and the United States (collectively, “TOG”), provides outsourced, nearshore business process outsourcing, contact and call-center support services to North American customers.
Basis of presentation
The accompanying unaudited financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations. Intercompany items have been eliminated in consolidation. These condensed consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, and filed with the Securities and Exchange Commission. Management believes that the information furnished includes all adjustments of a normal recurring nature that are necessary to fairly present our consolidated financial position, results of operations and cash flows for the periods indicated. The results of operations for any interim period are not necessarily indicative of results to be expected for the full year.
The Company refers to the condensed consolidated financial statements collectively as “financial statements,” and individually as “statements of comprehensive income (loss),” “balance sheets,” “statements of shareholders’ equity,” and “statements of cash flows” herein.
Reclassifications
The accompanying financial statements for the previous year contain certain reclassifications. Reclassifications only impact items within cash flows from operating activities and have no effect on reported total net cash provided by (used in) operating activities.
Written Put Options
During the second quarter of 2022, the Company entered into written put options with a former employee that, if exercised by the former employee, requires the Company to repurchase up to 207,970 shares of its common stock at fair market value (as defined in the agreement), subject to certain limitations. The written put options expire after months and contain certain quarterly maximums. During the three and nine months ended September 30, 2023, a total of 37,522 written put options expired unexercised resulting in a $0.3 million reduction in other current liabilities with an offset to additional paid-in capital. The written put options are liabilities under ASC 480, Distinguishing Liabilities from Equity, because the options embody obligations to repurchase the Company’s shares by paying cash. The original fair value of the written put options upon entering into the agreement was $3.6 million. As of September 30, 2023, the fair value of the written put options was $1.6 million. The fair value of the written put options is based directly on the Company’s stock price and included in other current liabilities in our balance sheets. The decrease in the fair value of the written put options resulted in the recognition of an unrealized gain of $0.3 million and $0.5 million during the three and nine months ended September 30, 2023, respectively. Unrealized gains and losses from changes in the fair value of the written put options are included within selling and administrative expenses in our statements of comprehensive income (loss). At September 30, 2023, the Company’s remaining repurchase obligation under the written put options was 170,448 shares of its common stock.
Recent Accounting Pronouncements
We consider the applicability and impact of all Accounting Standard Updates (“ASUs”). There have been no new accounting pronouncements recently issued or newly effective that had, or are expected to have, a material impact on the Company’s financial statements.
|
Note 2 - Inventories |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Notes to Financial Statements | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Inventory Disclosure [Text Block] |
NOTE 2 – Inventories:
Inventories consisted of the following amounts (in thousands):
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Note 3 - Long-term Debt |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Notes to Financial Statements | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Long-Term Debt [Text Block] |
Debt consisted of the following (in thousands):
On August 23, 2022, the Company entered into a Credit Agreement (the “Credit Agreement”) among the Company, the domestic subsidiaries of the Company, as guarantors, the lenders party thereto (the “Lenders”), and PNC Bank, National Association, as administrative agent for the Lenders (the “Administrative Agent”), pursuant to which the Lenders are providing the Company senior secured credit facilities maturing in August 2027 consisting of a revolving credit facility in the aggregate maximum principal amount of $125.0 million and a term loan in the original aggregate principal amount of $75.0 million (collectively, the “Credit Facilities”), and the ability to request incremental revolving credit or term loan facilities in an aggregate amount of up to an additional $75.0 million, subject to obtaining additional lender commitments and satisfying certain other conditions.
On May 4, 2023, the Company and its domestic subsidiaries entered into the First Amendment to its Credit Agreement with the Administrative Agent and the lenders, which (i) provides a covenant relief period through December 31, 2023, which the Company may opt to terminate during the fourth quarter of 2023 if it has a consolidated total net leverage ratio at or below 4.0 to 1.0 for the two preceding consecutive fiscal quarters; (ii) permits a maximum consolidated total net leverage ratio of 4.5 to 1.0, 4.8 to 1.0, 4.5 to 1.0 and 4.0 to 1.0 for the first, second, third and fourth quarters of 2023, respectively; (iii) amends the applicable margin pricing grid to add a tier of applicable margins (2.5% for secured overnight financing rate (“SOFR”) rate loans) if the consolidated total net leverage ratio is greater than or equal to 4.0 to 1.0, which tier would only apply during the covenant relief period; (iv) prohibits capital expenditures during the covenant relief period that exceed $10 million, with additional limitations imposed on a quarterly basis; (v) prohibits acquisitions and incremental loans during the covenant relief period; (vi) adds sale and leaseback transactions to the list of transactions that require the Company to use the net proceeds thereof to make a mandatory prepayment under the Credit Agreement; (vii) limits restricted payments to $20 million in any fiscal year, and no more than $10 million during the covenant relief period, with additional limitations imposed on a quarterly basis during the covenant relief period; and (viii) lowers the amount of permissible investments in non-loan party subsidiaries to $5 million during the covenant relief period.
Obligations outstanding under the Credit Facilities accrue interest at a variable rate equal to the SOFR plus an adjustment between 0.10% and 0.25% (depending on the applicable interest period) plus a margin between 1.0% and 2.0% (depending on the Company’s net leverage ratio). During the covenant relief period described above, the applicable margin may reach 2.5% for SOFR rate loans. The weighted average interest rate on our outstanding borrowings under the Credit Facilities was 7.4% at September 30, 2023. During the term of the revolving credit facility, the Company will pay a commitment fee on the unused portion of the revolving credit facility equal to between 0.125% and 0.250% (depending on the Company’s net leverage ratio). During the covenant relief period, the commitment fee may reach 0.300%. The available balance under the revolving credit facility is reduced by outstanding letters of credit. As of September 30, 2023, there were no outstanding letters of credit under the revolving credit facility.
Contractual principal payments for the term loan are as follows: remainder of 2023 - $0.9 million; 2024 - $4.7 million; 2025 - $5.6 million; 2026 - $6.6 million and 2027 - $52.5 million. The term loan does not contain pre-payment penalties.
The Credit Facilities are secured by substantially all of the operating assets of the Company, and the Company’s obligations under the Credit Facilities are guaranteed by all of its domestic subsidiaries. The Company’s obligations under the Credit Facilities are subject to acceleration upon the occurrence of an event of default as defined in the Credit Agreement. The Credit Agreement contains customary events of default and negative covenants, including but not limited to those governing indebtedness, liens, fundamental changes, investments, restricted payments (including dividends and related distributions), liquidations, mergers, consolidations or acquisitions, affiliate transactions and sales of assets or subsidiaries. The Credit Agreement also requires the Company to comply with a fixed charge coverage ratio of at least 1.25 to 1.0 and a net leverage ratio not to exceed 4.0 to 1.0, except during the covenant relief period as described above. The Company’s net leverage ratio (as defined in the Credit Agreement) is generally calculated as the ratio of (a) indebtedness minus unrestricted cash to (b) consolidated EBITDA for the four most recently ended fiscal quarters. As of September 30, 2023, the Company was in compliance with these ratios as the Company’s fixed charge coverage and net leverage ratios were 2.1 to 1.0 and 2.9 to 1.0, respectively.
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Note 4 - Periodic Pension Cost |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Notes to Financial Statements | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Retirement Benefits [Text Block] |
NOTE 4 – Periodic Pension Cost:
The Company is the sponsor of an unfunded supplemental executive retirement plan ("SERP") which includes one active participant.
The following table details the net periodic pension cost under the Company’s SERP for the periods presented (in thousands):
The service cost component is included in selling and administrative expenses in our statements of comprehensive income (loss) and the other components of net periodic pension cost are included in other periodic pension costs in our statements of comprehensive income (loss).
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Note 5 - Net Sales |
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| Notes to Financial Statements | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Revenue from Contract with Customer [Text Block] |
NOTE 5 – Net Sales:
For our Branded Products and Healthcare Apparel segments, revenue is primarily generated from the sale of finished products to customers. Revenues for our Branded Products and Healthcare Apparel segments are recognized when the performance obligations under the contract terms are satisfied. For certain contracts with customers in which the Company has an enforceable right to payment for goods with no alternative use, revenue is recognized over time upon receipt of finished goods into inventory. Revenue for goods that do have an alternative use or that the customer is not obligated to purchase under the terms of a contract is generally recognized when the goods are transferred to the customer. Revenue from the sale of personal protective equipment, including facemasks, isolation gowns, sanitizers and gloves, is generally recognized at a point in time when the goods are transferred to the customer, which typically occurs upon shipment or delivery depending on the terms of the underlying contract. The Company includes shipping and handling fees billable to customers in net sales. Shipping and handling activities that occur after the transfer of promised goods are accrued as control is transferred to the customer rather than being treated as a separate performance obligation.
For our Contact Centers segment, revenue is generated from providing our customers with contact center services. Revenue for our Contact Centers segment is recognized as services are delivered.
Revenue is measured at the amount of consideration we expect to receive in exchange for the goods or services. Variable consideration for estimated returns, allowances and other price variances is recorded based upon historical experience and current allowance programs. Contract terms may involve variable consideration clauses such as sales discounts and customer rebates, and revenue is adjusted accordingly for these provisions. Estimated amounts are included in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. The promised amount of consideration in a contract is not adjusted for the effects of a significant financing component when we expect, at contract inception, that the period between our transfer of a promised good or service to a customer and when the customer pays for that product or service will be one year or less. Sales taxes are excluded from the measurement of a performance obligation’s transaction price. Sales commissions are expensed as incurred when we expect that the amortization period of such costs will be one year or less.
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, 2022 were transferred to accounts receivable during the nine months ended September 30, 2023. 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 nine months ended September 30, 2023, $2.2 million of revenue was recognized from the contract liabilities balance as of December 31, 2022.
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Note 6 - Contingencies |
9 Months Ended |
|---|---|
Sep. 30, 2023 | |
| Notes to Financial Statements | |
| Commitments and Contingencies Disclosure [Text Block] |
NOTE 6 – Contingencies:
The purchase price to acquire substantially all of the assets of Sutter’s Mill Specialties, Inc. (“Sutter’s Mill”) in December 2021 included contingent consideration based on varying levels of Sutter’s Mill’s EBITDA in each measurement period from 2022 to 2024. In July 2023, management agreed to settle the remaining contingent consideration obligation associated with this acquisition for $0.5 million payable in the first quarter of 2024. The purchase price to acquire substantially all of the assets of Guardian Products, Inc. (“Guardian”) in May 2022 included contingent consideration based on varying levels of Guardian’s EBITDA in each measurement period through April 2025. The estimated fair value of Guardian acquisition-related contingent consideration payable as of September 30, 2023 was $1.2 million, of which $0.8 million is expected to be paid in the third quarter of 2024. In the third quarter of 2023 $0.8 million was paid for the 2022 measurement period. The total estimated undiscounted remaining payment related to this contingent consideration payable is between $1.9 million and $2.2 million. The Company will continue to evaluate the Guardian liability for remeasurement at the end of each reporting period and any changes will be recorded in the Company’s statements of comprehensive income (loss). The carrying amount of the liability may fluctuate significantly and actual amounts paid may be different from the estimated value of the liability.
The Company is involved in various legal actions and claims arising from the normal course of business. In the opinion of management, the ultimate outcome of these matters is not expected to have a material impact on the Company’s results of operations, cash flows, or financial position.
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Note 7 - Share-based Compensation |
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| Share-Based Payment Arrangement [Text Block] |
NOTE 7 – Share-Based Compensation:
Share-based compensation expense is recorded in selling and administrative expense in the statements of comprehensive income (loss). The following table details the share-based compensation expense by type of award 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.
All stock options and SARs granted prior to August 3, 2018 vested immediately when granted. Awards issued thereafter vest between and 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, as well as SARs granted in tandem with stock options, are subject to accelerated vesting under certain circumstances as outlined in the 2013 Incentive Stock and Awards Plan (the “2013 Plan”) or 2022 Equity Incentive and Awards Plan (the “2022 Plan”), as applicable.
A summary of stock option transactions during the nine months ended September 30, 2023 follows:
As of September 30, 2023, the Company had $1.2 million in unrecognized compensation cost related to nonvested stock options to be recognized over the remaining weighted average vesting period of 1.5 years.
A summary of stock-settled SARs transactions during the nine months ended September 30, 2023 follows:
As of September 30, 2023, the Company had $0.3 million in unrecognized compensation cost related to nonvested SARs to be recognized over the remaining weighted average vesting period of 1.3 years.
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 or 2022 Plan, as applicable. 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 nine months ended September 30, 2023 follows:
As of September 30, 2023, the Company had $4.1 million of unrecognized compensation cost related to nonvested restricted stock grants expected to be recognized over the remaining weighted average vesting period of 2.1 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 three 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. Expense for grants of performance shares is 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 or 2022 Plan, as applicable, except in those circumstances in which award agreements or change in control agreements specify full vesting.
A summary of performance share transactions during the nine months ended September 30, 2023 follows:
As of September 30, 2023, the Company had $2.0 million of unrecognized compensation cost related to nonvested performance share grants expected to be recognized over the remaining weighted average service period of 3.0 years.
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Note 8 - Income Taxes |
9 Months Ended |
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Sep. 30, 2023 | |
| Notes to Financial Statements | |
| Income Tax Disclosure [Text Block] |
NOTE 8 – Income Taxes:
The Company calculates its interim income tax provision in accordance with the accounting guidance for income taxes in interim periods. At the end of each interim period, the Company makes its best estimate of the annual expected effective tax rate and applies that rate to its ordinary year-to-date income or loss. The tax expense or benefit related to significant, unusual, or extraordinary items that will be separately reported or reported net of their related tax effect are individually computed and recognized in the interim period in which those items occur.
The computation of the annual expected effective tax rate at each interim period requires certain estimates and assumptions including, but not limited to, the expected operating income for the year and permanent and temporary differences. The accounting estimates used to compute the provision for income taxes may change as new events occur, additional information is obtained or the tax environment changes.
For the three months ended September 30, 2023, the Company recorded a provision for income taxes of $0.2 million, which represents an effective tax rate of 4.9%. For the three months ended September 30, 2022, the Company recorded a benefit from income taxes of $4.2 million, which represents an effective tax rate of 25.0%. For the nine months ended September 30, 2023 the Company recorded a provision for income taxes of $0.4 million, which represents an effective tax rate of 6.8%. For the nine months ended September 30, 2022, the Company recorded a benefit from income taxes of $5.0 million, which represents an effective tax rate of 12.9%.
The income tax expense and the effective tax rate for the three and nine months ended September 30, 2023 was primarily impacted by the variability in the mix of earnings across the Company’s foreign and domestic operations subject to various statutory tax rates in those jurisdictions.
The income tax benefit and the effective tax rate for the three months ended September 30, 2022 was impacted by the impairment of goodwill in the amount of $4.3 million. The income tax benefit and the effective tax rate for the nine months ended September 30, 2022 was impacted by the impairments of goodwill and intangible assets in the amount of $6.4 million, as well as the nondeductible portion of the goodwill impairment charge totaling $21.1 million.
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Note 9 - Net Income (Loss) Per Share |
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| Earnings Per Share [Text Block] |
NOTE 9 – Net Income (Loss) Per Share:
The Company’s basic net income (loss) per share is computed based on the weighted average number of shares of common stock outstanding for the period. Diluted net income (loss) per share includes the effect of the Company’s outstanding stock options, stock appreciation rights, nonvested shares of restricted stock and nonvested performance shares, if the inclusion of these items is dilutive.
The following table presents a reconciliation of basic and diluted net income (loss) per share for the periods presented:
Diluted weighted average shares outstanding excludes shares of common stock of 389,915 and 455,774 for the three and nine months ended September 30, 2022, respectively, as their inclusion would have been antidilutive given the Company’s net loss.
Awards to purchase 1,198,603 and 683,499 shares of common stock with weighted average exercise prices of $15.32 and $21.37 per share were outstanding during the three months ended September 30, 2023 and 2022, respectively, but were not included in the computation of diluted net income (loss) per share because the awards’ exercise prices were greater than the average market price of the common shares.
Awards to purchase 1,158,819 and 577,478 shares of common stock with weighted average exercise prices of $15.84 and $22.17 per share were outstanding during the nine months ended September 30, 2023 and 2022, respectively, but were not included in the computation of diluted net income (loss) per share because the awards’ exercise prices were greater than the average market price of the common shares.
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Note 10 - Operating Segment Information |
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| Segment Reporting Disclosure [Text Block] |
NOTE 10 – Operating Segment Information:
The Company manages and reports the following segments:
Branded Products segment: Primarily through our signature marketing brands BAMKO® and HPI®, we produce and sell customized merchandising solutions, promotional products and branded uniform programs. Branded products are sold to customers in a wide range of industries, including retail, hotel, food service, entertainment, technology, transportation and other industries. The segment currently has sales offices in the United States, Canada, Brazil, the United Kingdom and Colombia, with support services in China and India.
Healthcare Apparel segment: Primarily through our signature marketing brands Fashion Seal Healthcare® and Wink™, we manufacture (through third parties or in our own facilities) and sell a wide range of healthcare apparel, such as scrubs, lab coats, protective apparel and patient gowns. This segment sells healthcare service apparel to healthcare laundries, dealers, distributors and retailers primarily in the United States.
Contact Centers: Through multiple The Office Gurus® entities, including our subsidiaries in El Salvador, Belize, Jamaica, Dominican Republic and the United States (collectively, “TOG”), we provide outsourced, nearshore business process outsourcing, contact and call-center support services to North American customers.
Intersegment eliminations include the elimination of revenues and costs from services provided by the Contact Centers segment to the Company’s two other segments. Such costs are recognized as selling and administrative expenses in the Branded Products and Healthcare Apparel segments. Income and expenses related to corporate functions that are not specifically attributable to an individual reportable segment are presented within Other in the tables below.
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 income tax expense.
The following tables set forth financial information related to the Company’s operating segments (in thousands):
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Note 11 - Acquisition of Businesses |
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| Business Combination Disclosure [Text Block] |
NOTE 11 – Acquisition of Businesses:
Guardian Products, Inc.
On May 1, 2022, the Company, through BAMKO, acquired substantially all of the assets of Guardian Products, Inc. (“Guardian”) of Norcross, Georgia. Guardian is a branded merchandise company that is one of the leading providers of promotional products to automotive dealers nationwide. The purchase price for the acquisition consisted of the following: (a) $11.1 million in cash, (b) the issuance of 116,550 restricted shares of Superior’s common stock (the “Guardian Stock”) that vest ratably over a -year period, and (c) estimated potential future payments of approximately $2.3 million in additional contingent consideration based on the results of the acquired business through April 2025. The Guardian Stock is subject to transfer restrictions over the three-year period following the closing of the acquisition.
Fair Value of Consideration Transferred
A summary of the purchase price is as follows (in thousands):
Assets Acquired and Liabilities Assumed
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 Guardian based on their estimated fair values as of the effective date of the transaction (in thousands):
The Company recorded $5.9 million in identifiable intangibles at fair value, consisting of $5.0 million in acquired customer relationships, $0.2 million for a non-compete agreement and $0.7 million for the Guardian Products trade name. The intangible assets associated with the customer relationships are being amortized for years, the non-compete agreement is being amortized for years and the trade name is being amortized for years.
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 Guardian was treated as an asset purchase for income tax purpose, and therefore, the resulting goodwill from this acquisition is deductible for U.S. income tax purposes. The goodwill associated with the Guardian acquisition was fully impaired during the year ended December 31, 2022 as a result of the Company’s goodwill impairment test performed during the third quarter of 2022, which was triggered by the depressed market price of the Company's common stock and corresponding significant decline in the Company’s market capitalization. |
Note 12 - Goodwill and Intangible Assets Impairment |
9 Months Ended |
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Sep. 30, 2023 | |
| Notes to Financial Statements | |
| Asset Impairment Charges [Text Block] |
NOTE 12 – Goodwill and Intangible Assets Impairment:
Goodwill
Beginning with the second quarter of fiscal 2022, the Company realigned its reportable segments to Branded Products, Healthcare Apparel and Contact Centers. As a result of this re-segmentation, and in accordance with ASC 350, the Company performed a quantitative goodwill impairment test.
During the third quarter of 2022, the Company determined that a triggering event occurred in relation to the depressed market price of the Company's common stock and corresponding significant decline in the Company’s market capitalization. As a result, the Company performed a quantitative goodwill impairment test.
The fair value of goodwill in each impairment test was determined using a combination of an income approach, which estimates fair value based upon projections of future revenues, expenses, and cash flows discounted to their respective present values, and a market approach. The valuation methodology and underlying financial information included in the Company’s determination of fair value required significant judgments by management. The principal assumptions used in the Company’s discounted cash flow analysis consisted of (a) long-term projections of financial performance and (b) the weighted-average cost of capital of market participants, adjusted for the risk attributable to the Company and the industry in which it operates. Under the market approach, the principal assumption included an estimate of a control premium.
Based on the goodwill impairment analysis performed, the Company determined that the estimated fair values of the previous Uniforms and Related Products segment and current Branded Products segment were lower than their carrying value primarily as the result of then-current market conditions, decline in expected cash flows and/or decrease in the Company’s stock price. Consequently, the Company recorded a non-cash goodwill impairment charge of $21.5 million and $45.9 million during the three and nine months ended September 30, 2022, respectively.
Intangible Assets
In conjunction with the Company’s realignment of its reportable segments, the Company began an effort to centralize certain branding and go-to-market strategies under the BAMKO brand and determined that it would no longer use certain trade names associated with branded products. The Company’s rebranding efforts resulted in a $5.6 million impairment of indefinite-lived trade names related to its Branded Products segment during the nine months ended September 30, 2022.
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Significant Accounting Policies (Policies) |
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Sep. 30, 2023 | |
| Accounting Policies [Abstract] | |
| Basis of Accounting, Policy [Policy Text Block] | Basis of presentation
The accompanying unaudited financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations. Intercompany items have been eliminated in consolidation. These condensed consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, and filed with the Securities and Exchange Commission. Management believes that the information furnished includes all adjustments of a normal recurring nature that are necessary to fairly present our consolidated financial position, results of operations and cash flows for the periods indicated. The results of operations for any interim period are not necessarily indicative of results to be expected for the full year.
The Company refers to the condensed consolidated financial statements collectively as “financial statements,” and individually as “statements of comprehensive income (loss),” “balance sheets,” “statements of shareholders’ equity,” and “statements of cash flows” herein.
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| Reclassification, Comparability Adjustment [Policy Text Block] | Reclassifications
The accompanying financial statements for the previous year contain certain reclassifications. Reclassifications only impact items within cash flows from operating activities and have no effect on reported total net cash provided by (used in) operating activities.
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| Derivatives, Reporting of Derivative Activity [Policy Text Block] | Written Put Options
During the second quarter of 2022, the Company entered into written put options with a former employee that, if exercised by the former employee, requires the Company to repurchase up to 207,970 shares of its common stock at fair market value (as defined in the agreement), subject to certain limitations. The written put options expire after months and contain certain quarterly maximums. During the three and nine months ended September 30, 2023, a total of 37,522 written put options expired unexercised resulting in a $0.3 million reduction in other current liabilities with an offset to additional paid-in capital. The written put options are liabilities under ASC 480, Distinguishing Liabilities from Equity, because the options embody obligations to repurchase the Company’s shares by paying cash. The original fair value of the written put options upon entering into the agreement was $3.6 million. As of September 30, 2023, the fair value of the written put options was $1.6 million. The fair value of the written put options is based directly on the Company’s stock price and included in other current liabilities in our balance sheets. The decrease in the fair value of the written put options resulted in the recognition of an unrealized gain of $0.3 million and $0.5 million during the three and nine months ended September 30, 2023, respectively. Unrealized gains and losses from changes in the fair value of the written put options are included within selling and administrative expenses in our statements of comprehensive income (loss). At September 30, 2023, the Company’s remaining repurchase obligation under the written put options was 170,448 shares of its common stock.
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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”). There have been no new accounting pronouncements recently issued or newly effective that had, or are expected to have, a material impact on the Company’s financial statements.
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Note 3 - Long-term Debt (Tables) |
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Note 5 - Net Sales (Tables) |
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Note 9 - Net Income (Loss) Per Share (Tables) |
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Note 10 - Operating Segment Information (Tables) |
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| Schedule of Segment Reporting Information, by Segment [Table Text Block] |
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Note 11 - Acquisition of Businesses (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Notes Tables | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Business Acquisitions, by Acquisition [Table Text Block] |
|
||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Recognized Identified Assets Acquired and Liabilities Assumed [Table Text Block] |
|
Note 1 - Description of Business and Basis of Presentation (Details Textual) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2023 |
Sep. 30, 2022 |
Jun. 30, 2022 |
|
| Unrealized Gain (Loss) on Derivatives | $ 460 | $ 1,791 | ||
| Options Held [Member] | ||||
| Derivative, Underlying Investment, Shares (in shares) | 170,448 | 170,448 | 207,970 | |
| Open Option Contracts, Expiration Period (Month) | 24 months | |||
| Derivative, Underlying Investment, Shares, Expirations in Period (in shares) | 37,522 | 37,522 | ||
| Increase (Decrease) in Derivative Liabilities | $ (300) | $ (300) | ||
| Derivative, Underlying Investment, Fair Value | 1,600 | 1,600 | $ 3,600 | |
| Unrealized Gain (Loss) on Derivatives | $ 300 | $ 500 | ||
Note 2 - Inventories - Inventories (Details) - USD ($) $ in Thousands |
Sep. 30, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Finished goods | $ 74,062 | $ 94,228 |
| Work in process | 1,465 | 401 |
| Raw materials | 29,607 | 30,347 |
| Inventories | $ 105,134 | $ 124,976 |
Note 3 - Long-term Debt - Long-term Debt (Details) - USD ($) $ in Thousands |
Sep. 30, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Long-term debt, gross | $ 108,313 | $ 156,125 |
| Payments due within one year included in current liabilities | 4,219 | 3,750 |
| Debt issuance costs | 960 | 808 |
| Long-term debt less current maturities | 103,134 | 151,567 |
| PNC Bank [Member] | Revolving Credit Facility [Member] | ||
| Long-term debt, gross | 38,000 | 83,000 |
| BB&T [Member] | Term Loan Maturing May 2020 [Member] | ||
| Long-term debt, gross | $ 70,313 | $ 73,125 |
Note 4 - Periodic Pension Cost - Net Periodic Benefit Cost (Details) - Supplemental Employee Retirement Plan [Member] - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Service cost on benefits earned during the period | $ 0 | $ 51 | $ 21 | $ 153 |
| Interest cost on projected benefit obligation | 159 | 100 | 477 | 300 |
| Recognized actuarial loss | 55 | 428 | 165 | 1,284 |
| Net periodic pension cost | $ 214 | $ 579 | $ 663 | $ 1,737 |
Note 5 - Net Sales (Details Textual) $ in Millions |
9 Months Ended |
|---|---|
|
Sep. 30, 2023
USD ($)
| |
| Contract with Customer, Liability, Revenue Recognized | $ 2.2 |
Note 5 - Net Sales - Accounts Receivable and Contract Assets (Details) - USD ($) $ in Thousands |
Sep. 30, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Accounts receivable | $ 98,289 | $ 104,813 |
| Current contract assets | 46,765 | 52,980 |
| Current contract liabilities | $ 3,092 | $ 2,213 |
Note 6 - Contingencies (Details Textual) - USD ($) $ in Thousands |
3 Months Ended | |||
|---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2024 |
Mar. 31, 2024 |
Dec. 31, 2022 |
|
| Business Combination, Contingent Consideration, Liability, Current | $ 1,321 | $ 736 | ||
| Sutter's Mill [Member] | Forecast [Member] | ||||
| Business Combination, Contingent Consideration, Liability, Current | $ 500 | |||
| Guardian Products, Inc [Member] | ||||
| Business Combination, Contingent Consideration, Liability, Current | 1,200 | |||
| Payment for Contingent Consideration Liability, Financing Activities | 800 | |||
| Guardian Products, Inc [Member] | Minimum [Member] | ||||
| Business Combination, Contingent Consideration, Liability, Current | 1,900 | |||
| Guardian Products, Inc [Member] | Maximum [Member] | ||||
| Business Combination, Contingent Consideration, Liability, Current | $ 2,200 | |||
| Guardian Products, Inc [Member] | Forecast [Member] | ||||
| Business Combination, Contingent Consideration, Liability, Current | $ 800 |
Note 7 - Share-based Compensation - Shared-based Compensation Expense (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Share-based compensation expense | $ 1,103 | $ 928 | $ 3,523 | $ 3,382 |
| Stock Options and SARs [Member] | ||||
| Share-based compensation expense | 319 | 339 | 1,018 | 1,080 |
| Restricted Stock [Member] | ||||
| Share-based compensation expense | 599 | 446 | 1,956 | 2,050 |
| Performance Shares [Member] | ||||
| Share-based compensation expense | $ 185 | $ 143 | $ 549 | $ 252 |
Note 7 - Share-based Compensation - Stock-settled Stock Appreciation Rights Transactions (Details) - USD ($) $ / shares in Units, $ in Thousands |
9 Months Ended | 12 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2023 |
Dec. 31, 2022 |
|||
| Lapsed or cancelled (in shares) | (165,998) | |||
| Lapsed or cancelled, weighted average exercise price (in dollars per share) | $ 17.99 | |||
| Stock Appreciation Rights (SARs) [Member] | ||||
| Outstanding SARS (in shares) | 320,385 | |||
| Outstanding (in dollars per share) | $ 15.23 | |||
| Outstanding SARS, weighted average remaining life (Year) | 2 years 1 month 28 days | 2 years 2 months 23 days | ||
| Outstanding SARS, aggregate intrinsic value | $ 3 | $ 69 | ||
| Granted SARs (in shares) | [1] | 51,209 | ||
| Granted SARS, weighted average exercise price (in dollars per share) | $ 12.04 | |||
| Exercised SARs (in shares) | 0 | |||
| Exercised SARS, weighted average exercise price (in dollars per share) | $ 0 | |||
| Lapsed or cancelled (in shares) | (37,860) | |||
| Lapsed or cancelled, weighted average exercise price (in dollars per share) | $ 23.62 | |||
| Outstanding SARS (in shares) | 333,734 | 320,385 | ||
| Outstanding SARS, weighted average exercise price (in dollars per share) | $ 13.79 | $ 15.23 | ||
| Exercisable (in shares) | 225,471 | |||
| Exercisable, weighted average exercise price (in dollars per share) | $ 13.47 | |||
| Exercisable SARS, weighted average remaining life (Year) | 1 year 3 months 14 days | |||
| Exercisable, aggregate intrinsic value | $ 3 | |||
| ||||
Note 7 - Share-based Compensation - Restricted Stock Transactions (Details) - Restricted Stock [Member] |
9 Months Ended |
|---|---|
|
Sep. 30, 2023
$ / shares
shares
| |
| Outstanding (in shares) | shares | 372,470 |
| Outstanding, weighted average grant date fair value (in dollars per share) | $ / shares | $ 20.45 |
| Granted (in shares) | shares | 117,025 |
| Granted, weighted average grant date fair value (in dollars per share) | $ / shares | $ 12.04 |
| Vested (in shares) | shares | (85,863) |
| Vested, weighted average grant date fair value (in dollars per share) | $ / shares | $ 15.81 |
| Forfeited (in shares) | shares | 0 |
| Forfeited, weighted average grant date fair value (in dollars per share) | $ / shares | $ 0 |
| Outstanding (in shares) | shares | 403,632 |
| Outstanding, weighted average grant date fair value (in dollars per share) | $ / shares | $ 19 |
Note 7 - Share-based Compensation - Performance Share Transactions (Details) - Performance Shares [Member] |
9 Months Ended |
|---|---|
|
Sep. 30, 2023
$ / shares
shares
| |
| Outstanding (in shares) | shares | 199,451 |
| Outstanding, weighted average grant date fair value (in dollars per share) | $ / shares | $ 20.57 |
| Granted (in shares) | shares | 94,028 |
| Granted, weighted average grant date fair value (in dollars per share) | $ / shares | $ 12.56 |
| Vested (in shares) | shares | 0 |
| Vested, weighted average grant date fair value (in dollars per share) | $ / shares | $ 0 |
| Forfeited (in shares) | shares | 0 |
| Forfeited, weighted average grant date fair value (in dollars per share) | $ / shares | $ 0 |
| Outstanding (in shares) | shares | 293,479 |
| Outstanding, weighted average grant date fair value (in dollars per share) | $ / shares | $ 18 |
Note 8 - Income Taxes (Details Textual) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Income Tax Expense (Benefit) | $ 160 | $ (4,241) | $ 380 | $ (5,042) |
| Effective Income Tax Rate Reconciliation, Percent | 4.90% | 25.00% | 6.80% | 12.90% |
| Effective Income Tax Rate Reconciliation, Impairment of Intangibles and Goodwill, Amount | $ 4,300 | $ 6,400 | ||
| Effective Income Tax Rate Reconciliation, Nondeductible Expense, Impairment Losses, Amount | $ 21,100 | |||
Note 9 - Net Income (Loss) Per Share (Details Textual) - $ / shares |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Antidilutive Securities Excluded From Computation Of Earnings Weighted Average Shares Outstanding (in shares) | 389,915 | 455,774 | ||
| Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount (in shares) | 1,198,603 | 683,499 | 1,158,819 | 577,478 |
| Antidilutive Securities Excluded from Computation of Earnings Per Share, Weight Average Exercise Price (in dollars per share) | $ 15.32 | $ 21.37 | $ 15.84 | $ 22.17 |
Note 9 - Net Income Per Share - Reconciliation of Basic and Diluted Earnings Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Net income (loss) | $ 3,114 | $ (12,719) | $ 5,215 | $ (34,164) |
| Weighted average shares outstanding - basic (in shares) | 15,992,792 | 15,806,852 | 15,954,264 | 15,739,381 |
| Dilutive common stock equivalents (in shares) | 162,563 | 0 | 178,568 | 0 |
| Weighted average shares outstanding - diluted (in shares) | 16,155,355 | 15,806,852 | 16,132,832 | 15,739,381 |
| Basic (in dollars per share) | $ 0.19 | $ (0.8) | $ 0.33 | $ (2.17) |
| Diluted (in dollars per share) | $ 0.19 | $ (0.8) | $ 0.32 | $ (2.17) |
Note 10 - Operating Segment Information - Information Related to the Operations of the Company's Operating Segments (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Net sales | $ 136,126 | $ 138,703 | $ 396,061 | $ 430,218 |
| Cost of goods sold | 82,928 | 88,066 | 248,159 | 281,667 |
| Gross margin | 53,198 | 50,637 | 147,902 | 148,551 |
| Selling and administrative expenses | 47,246 | 43,815 | 134,007 | 131,998 |
| Other periodic pension cost | 214 | 528 | 642 | 1,584 |
| Interest expense | 2,464 | 1,794 | 7,658 | 2,676 |
| Income (loss) before income tax expense | 3,274 | (16,960) | 5,595 | (39,206) |
| Depreciation and amortization | 3,515 | 3,401 | 10,331 | 9,504 |
| Capital expenditures | 380 | 4,182 | 4,023 | 11,221 |
| Goodwill, Impairment Loss | 0 | 21,460 | 0 | 45,918 |
| Impairment of Intangible Assets, Indefinite-Lived (Excluding Goodwill) | 0 | 5,581 | ||
| Operating Segments [Member] | Branded Products [Member] | ||||
| Net sales | 83,512 | 86,769 | 244,955 | 285,891 |
| Cost of goods sold | 54,588 | 60,600 | 164,492 | 202,422 |
| Gross margin | 28,924 | 26,169 | 80,463 | 83,469 |
| Selling and administrative expenses | 23,418 | 22,257 | 63,833 | 67,818 |
| Other periodic pension cost | 0 | 0 | 0 | 0 |
| Interest expense | 0 | 87 | 0 | 205 |
| Income (loss) before income tax expense | 5,506 | (17,635) | 16,630 | (15,730) |
| Depreciation and amortization | 1,452 | 1,724 | 4,826 | 4,696 |
| Capital expenditures | 86 | 2,062 | 2,093 | 5,006 |
| Goodwill, Impairment Loss | 21,460 | 25,595 | ||
| Impairment of Intangible Assets, Indefinite-Lived (Excluding Goodwill) | 5,581 | |||
| Operating Segments [Member] | Healthcare Apparel [Member] | ||||
| Net sales | 29,649 | 30,039 | 85,875 | 86,895 |
| Cost of goods sold | 18,165 | 18,609 | 53,872 | 56,066 |
| Gross margin | 11,484 | 11,430 | 32,003 | 30,829 |
| Selling and administrative expenses | 9,493 | 10,161 | 28,461 | 30,049 |
| Other periodic pension cost | 0 | 0 | 0 | 0 |
| Interest expense | 0 | 32 | 0 | 84 |
| Income (loss) before income tax expense | 1,991 | 1,237 | 3,542 | (19,627) |
| Depreciation and amortization | 1,064 | 973 | 3,014 | 2,942 |
| Capital expenditures | 115 | 498 | 641 | 1,748 |
| Goodwill, Impairment Loss | 0 | 20,323 | ||
| Impairment of Intangible Assets, Indefinite-Lived (Excluding Goodwill) | 0 | |||
| Operating Segments [Member] | Contact Centers [Member] | ||||
| Net sales | 24,121 | 23,363 | 68,935 | 62,803 |
| Cost of goods sold | 10,724 | 9,453 | 31,545 | 25,438 |
| Gross margin | 13,397 | 13,910 | 37,390 | 37,365 |
| Selling and administrative expenses | 10,224 | 9,520 | 29,502 | 24,294 |
| Other periodic pension cost | 0 | 0 | 0 | 0 |
| Interest expense | 0 | 0 | 0 | 0 |
| Income (loss) before income tax expense | 3,173 | 4,390 | 7,888 | 13,071 |
| Depreciation and amortization | 880 | 653 | 2,210 | 1,697 |
| Capital expenditures | 157 | 1,622 | 1,221 | 4,393 |
| Goodwill, Impairment Loss | 0 | 0 | ||
| Impairment of Intangible Assets, Indefinite-Lived (Excluding Goodwill) | 0 | |||
| Intersegment Eliminations [Member] | ||||
| Net sales | (1,156) | (1,468) | (3,704) | (5,371) |
| Cost of goods sold | (549) | (596) | (1,750) | (2,259) |
| Gross margin | (607) | (872) | (1,954) | (3,112) |
| Selling and administrative expenses | (607) | (872) | (1,954) | (3,112) |
| Other periodic pension cost | 0 | 0 | 0 | 0 |
| Interest expense | 0 | 0 | 0 | 0 |
| Income (loss) before income tax expense | 0 | 0 | 0 | 0 |
| Depreciation and amortization | 0 | 0 | 0 | 0 |
| Capital expenditures | 0 | 0 | 0 | 0 |
| Goodwill, Impairment Loss | 0 | 0 | ||
| Impairment of Intangible Assets, Indefinite-Lived (Excluding Goodwill) | 0 | |||
| Segment Reconciling Items [Member] | ||||
| Net sales | 0 | 0 | 0 | 0 |
| Cost of goods sold | 0 | 0 | 0 | 0 |
| Gross margin | 0 | 0 | 0 | 0 |
| Selling and administrative expenses | 4,718 | 2,749 | 14,165 | 12,949 |
| Other periodic pension cost | 214 | 528 | 642 | 1,584 |
| Interest expense | 2,464 | 1,675 | 7,658 | 2,387 |
| Income (loss) before income tax expense | (7,396) | (4,952) | (22,465) | (16,920) |
| Depreciation and amortization | 119 | 51 | 281 | 169 |
| Capital expenditures | $ 22 | 0 | $ 68 | 74 |
| Goodwill, Impairment Loss | $ 0 | 0 | ||
| Impairment of Intangible Assets, Indefinite-Lived (Excluding Goodwill) | $ 0 | |||
Note 11 - Acquisition of Businesses (Details Textual) - USD ($) $ in Thousands |
6 Months Ended | |
|---|---|---|
May 01, 2022 |
Jun. 30, 2023 |
|
| Restricted Stock [Member] | ||
| Share-Based Compensation Arrangement by Share-Based Payment Award, Award Vesting Period (Year) | 3 years | |
| Guardian Products, Inc [Member] | ||
| Payments to Acquire Businesses, Gross | $ 11,077 | |
| Business Combination, Contingent Consideration Arrangements, Range of Outcomes, Value, High | 2,300 | |
| Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Intangible Assets, Other than Goodwill, Total | 5,886 | |
| Guardian Products, Inc [Member] | Customer Relationships [Member] | ||
| Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Intangible Assets, Other than Goodwill, Total | $ 5,000 | |
| Finite-Lived Intangible Asset, Useful Life (Year) | 7 years | |
| Guardian Products, Inc [Member] | Noncompete Agreements [Member] | ||
| Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Intangible Assets, Other than Goodwill, Total | $ 200 | |
| Finite-Lived Intangible Asset, Useful Life (Year) | 5 years | |
| Guardian Products, Inc [Member] | Trade Names [Member] | ||
| Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Intangible Assets, Other than Goodwill, Total | $ 700 | |
| Finite-Lived Intangible Asset, Useful Life (Year) | 2 years | |
| Guardian Products, Inc [Member] | Restricted Stock [Member] | ||
| Business Acquisition, Equity Interest Issued or Issuable, Number of Shares (in shares) | 116,550 | |
| Share-Based Compensation Arrangement by Share-Based Payment Award, Award Vesting Period (Year) | 3 years |
Note 11 - Acquisition of Businesses - Purchase Price (Details) - Guardian Products, Inc [Member] $ in Thousands |
May 01, 2022
USD ($)
|
|---|---|
| Cash consideration | $ 11,077 |
| Restricted shares of Superior common stock issued | 2,000 |
| Contingent consideration | 1,119 |
| Total Consideration | $ 14,196 |
Note 11 - Acquisition of Businesses - Aggregate Consideration (Details) - Guardian Products, Inc [Member] $ in Thousands |
May 01, 2022
USD ($)
|
|---|---|
| Accounts receivable | $ 1,656 |
| Inventories | 621 |
| Prepaid expenses and other current assets | 272 |
| Property, plant and equipment | 15 |
| Intangible assets | 5,886 |
| Goodwill | 6,463 |
| Total assets | 14,913 |
| Accounts payable | 533 |
| Other current liabilities | 184 |
| Total liabilities | $ 717 |
Note 12 - Goodwill and Intangible Assets Impairment (Details Textual) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Goodwill, Impairment Loss | $ 0 | $ 21,460 | $ 0 | $ 45,918 |
| Impairment of Intangible Assets, Indefinite-Lived (Excluding Goodwill) | 0 | 5,581 | ||
| Uniforms and Related Products [Member] | ||||
| Goodwill, Impairment Loss | $ 21,500 | $ 45,900 | ||
| Branded Products [Member] | Trade Names [Member] | ||||
| Impairment of Intangible Assets, Indefinite-Lived (Excluding Goodwill) | $ 5,600 | |||
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