Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)

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 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, 2025.

The financial position, results of operations, cash flows and other information included herein are not necessarily indicative of the financial position, results of operations and cash flows that may be expected in future periods. See "Cautionary Note Regarding Forward-Looking Statements" below for a discussion of uncertainties and assumptions that may cause actual results to differ materially from those expressed or implied in the forward-looking statements.

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 chain, 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 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 apparel. We sell our brands of healthcare service apparel to healthcare laundries, dealers, distributors and retailers primarily in the United States. From a long-term perspective, we expect that demand for our portfolio of brands Wink®, Fashion Seal Healthcare®, its trade name CID Resources and our license of Carhartt Medical will continue to provide opportunities for growth and increased market share.

Contact Centers

In our Contact Centers segment (also known as "The Office Gurus"), which operates in El Salvador, Belize, Dominican Republic, the United States and in Jamaica until its closure on June 15, 2025, we provide outsourced, offshore and 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 grown as businesses look to reduce operating costs while maintaining high-quality customer support. Nearshore operators can provide comparable service to their U.S. counterparts at a fraction of the price. 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. See Note 11 for further discussion of the Company's acquisition on October 28, 2026, expanding its services to provide offshore operations in the Philippines.

Global Economic and Political Conditions

During 2025, the U.S. government imposed higher tariffs and/or new tariffs which impacted certain sources of the Company's materials and production. Additionally, the U.S.'s trade agreements and/or preferences with certain countries in Africa, through the African Growth and Opportunity Act (AGOA), and with Haiti, through the Haitian Hemispheric Opportunity through Partnership Encouragement Act (HOPE) and the Haiti Economic Lift Program of 2010 (HELP), expired on September 30, 2025. During the first quarter of 2026, these agreements were retroactively extended until December 2026 and the Company recorded a consolidated duties receivable within other current assets for $2.3 million through a reduction of inventory and reversal of cost of goods sold of $0.4 million. The duties receivable was primarily related to the Healthcare Apparel segment, and as of September 30, 2026 was substantially collected. In September 2026, these agreements were retroactively extended until December 2028. We will continue to monitor the status of the trade agreements and preferences involving the U.S. government and the countries in which we source and/or manufacture products. See Item 1, "NOTE 6 - Contingencies and Geographic Supply Concentrations."

In February 2026, the United States Supreme Court ruled that the International Emergency Economic Powers Act (IEEPA) does not authorize the President to impose tariffs, effectively invalidating the tariffs imposed via that method. These IEEPA tariffs stopped being collected on February 24, 2026 and the U.S. government implemented a new 10.0% tariff under Section 122 of the Trade Act of 1974, effective as of February 24, 2026, which terminated on July 24, 2026. The Supreme Court's ruling on IEEPA left open the questions of whether, how, and when payors of the tariffs might receive refunds; subsequently, the U.S. government created a system through which refunds of certain entries could be processed. The Company's accounting policy is to recognize tariff refunds (as a reduction of cost of goods sold) when the refund is probable and recognize corresponding refunds to customers (as a reduction of net sales) where contractually required or an implicit obligation exists. For the three and nine months ended September 30, 2026, the Company recorded a $3.7 million and $8.1 million, respectively, tariff refund, of which $1.9 million and $5.0 million, respectively, has been received in cash. The corresponding refunds to customers for the three and nine months ended September 30, 2026 were $2.0 million and $4.8 million, respectively. Effective July 24, 2026, the U.S. government implemented new tariffs generally ranging from 10.0% to 12.5% under Section 301 of the Trade Act of 1974.

It is uncertain how inflation and interest rates will be impacted during the remainder of this year and in future years by the imposition of tariffs and other trade-related actions or inactions. World events, such as the Russia-Ukraine War, the joint U.S.-Israeli War with Iran in 2026 and other conflicts in the Middle East, continue to negatively affect the global economy and exert significant upward pressure on the price of oil and natural gas. Additionally, civil unrest in countries where we manufacture products, like Haiti, may result in our facilities incurring damage or destruction and could interrupt our manufacturing processes and adversely affect our reputation and our relationships with our customers.

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

Results of Operations

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

		For the Three Months Ended September 30,										​				​
		2026				2025				$ Change				% Change
Net sales:				​				​				​				​
Branded Products		$	92,111			$	85,095			$	7,016				8.2	%
Healthcare Apparel			30,553				31,520				(967	)			(3.1	%)
Contact Centers			24,224				22,664				1,560				6.9	%
Intersegment eliminations			(894	)			(812	)			(82	)			10.1	%
Consolidated net sales			145,994				138,467				7,527				5.4	%
				​				​				​				​
Gross margin:				​				​				​				​
Branded Products			33,509				29,629				3,880				13.1	%
Healthcare Apparel			9,978				12,126				(2,148	)			(17.7	%)
Contact Centers			12,826				11,995				831				6.9	%
Net intersegment eliminations			(487	)			(672	)			185				(27.5	%)
Consolidated gross margin			55,826				53,078				2,748				5.2	%
				​				​				​				​
Selling and administrative expenses:				​				​				​				​
Branded Products			24,961				23,501				1,460				6.2	%
Healthcare Apparel			11,303				9,779				1,524				15.6	%
Contact Centers			10,496				10,283				213				2.1	%
Intersegment Eliminations			(487	)			(672	)			185				(27.5	%)
Corporate selling and administrative expenses			5,593				5,622				(29	)			(0.5	%)
Consolidated selling and administrative expenses			51,866				48,513				3,353				6.9	%
				​				​				​				​
Interest expense, net			809				1,378				(569	)			(41.3	%)
Income before income tax expense			3,151				3,187				(36	)			(1.1	%)
Income tax expense			580				443				137				30.9	%
Net income		$	2,571			$	2,744			$	(173	)			(6.3	%)
Adjusted EBITDA(1)		$	6,707			$	7,540			$	(833	)			(11.0	%)

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

Net Income

The Company generated net income of $2.6 million and $2.7 million during the three months ended September 30, 2026 and 2025, respectively. The decrease in net income for the three months ended September 30, 2026 compared to the three months ended September 30, 2025 was due to losses in our Healthcare Apparel segment largely driven by inventory write-downs partially offset by tariff refunds.

Adjusted EBITDA

Adjusted EBITDA was $6.7 million and $7.5 million during the three months ended September 30, 2026 and 2025, respectively. The Adjusted EBITDA decrease was primarily due to losses in our Healthcare Apparel segment, partially offset by increases in earnings before income taxes in our Branded Products and Contact Centers segments. For a reconciliation of Adjusted EBITDA to net income, its most directly comparable financial measure calculated and presented in accordance with generally accepted accounting principles in the United States of America ("GAAP"), please read "Non-GAAP Financial Measure" below.

Net Sales

Net sales for the Company increased 5.4%, or $7.5 million, for the three months ended September 30, 2026 compared to the three months ended September 30, 2025. The increase was attributable to increases in net sales in our Branded Products and Contact Centers segments.

Branded Products net sales increased 8.2%, or $7.0 million, for the three months ended September 30, 2026 compared to the three months ended September 30, 2025. The increase was primarily due to volume increases within existing customer accounts, partially offset by tariff refunds to customers.

Healthcare Apparel net sales decreased 3.1%, or $1.0 million, for the three months ended September 30, 2026 compared to the three months ended September 30, 2025. The decrease was primarily due to volume decreases with existing customers, due in part to the change in a customer's financial position.

Contact Centers net sales increased 6.9%, or $1.6 million, before intersegment eliminations for the three months ended September 30, 2026 compared to the three months ended September 30, 2025. The 6.9% increase versus the prior period reflects growth from existing customers and new customer acquisitions that exceeded client attrition.

Gross Margin

Gross margin rate for the Company was 38.2% for the three months ended September 30, 2026 and 38.3% for the three months ended September 30, 2025.

Gross margin rate for our Branded Products segment was 36.4% for the three months ended September 30, 2026 and 34.8% for the three months ended September 30, 2025. The rate increase was primarily driven by a favorable shift in the mix of pricing and customers.

Gross margin rate for our Healthcare Apparel segment was 32.7% for the three months ended September 30, 2026 and 38.5% for the three months ended September 30, 2025. The rate decrease was primarily driven by $4.0 million of incremental inventory write-downs, partially offset by the benefit of $1.8 million of tariff refunds.

Gross margin rate for our Contact Centers segment was 52.9% for the three months ended September 30, 2026 and 2025.

Selling and Administrative Expenses

Selling and administrative expenses increased $3.4 million for the three months ended September 30, 2026, compared to the three months ended September 30, 2025. As a percentage of net sales, total selling and administrative expenses was 35.5% for the three months ended September 30, 2026 and 35.0% for the three months ended September 30, 2025. The rate increase was driven by an increase in selling and administrative expenses in all three of our segments.

Branded Products selling and administrative expenses increased $1.5 million for the three months ended September 30, 2026 compared to the three months ended September 30, 2025, primarily due to increased commission expense from increased gross margin. As a percentage of net sales, selling and administrative expenses was 27.1% for the three months ended September 30, 2026, down slightly from 27.6% for the three months ended September 30, 2025 driven by expense leverage from the third quarter year-over-year sales increase.

Healthcare Apparel selling and administrative expenses increased $1.5 million for the three months ended September 30, 2026 compared to the three months ended September 30, 2025, primarily due to credit loss charges resulting from the change in a customer's financial position. As a result, selling and administrative expenses as a percentage of net sales increased to 37.0% for the three months ended September 30, 2026 from 31.0% for the three months ended September 30, 2025.

Contact Centers selling and administrative expenses increased $0.2 million for the three months ended September 30, 2026 compared to the three months ended September 30, 2025 primarily due to higher employee related costs. As a result, selling and administrative expenses as a percentage of net sales decreased to 43.3% for the three months ended September 30, 2026 from 45.4% for the three months ended September 30, 2025 driven by expense leverage from the third quarter year-over-year sales increase.

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

Interest Expense, Net

Interest expense, net decreased to $0.8 million for the three months ended September 30, 2026 from $1.4 million for the three months ended September 30, 2025. This decrease was due to a lower outstanding debt balance in 2026 and a lower weighted average interest rate on borrowings, from 5.4% for the three months ended September 30, 2025 to 4.8% for the three months ended September 30, 2026.

Income Taxes

Income tax expense of $0.6 million was recognized for the three months ended September 30, 2026 compared to income tax expense of $0.4 million for the three months ended September 30, 2025. The effective tax rate was 18.4% and 13.9% for the three months ended September 30, 2026 and 2025, respectively. Income tax expense and the effective tax rate for the three months ended September 30, 2026 and September 30, 2025 were primarily impacted by the variability in the mix of earnings across the Company's foreign and domestic operations, which are subject to various statutory tax rates in those jurisdictions. 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, 2026 Compared to Nine Months Ended September 30, 2025 (in thousands)

​

​

For the Nine Months Ended September 30,

​

​

​

​

​

​

​

​

​

​

​

2026

​

​

2025

​

​

$ Change

​

​

% Change

​

Net sales:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Branded Products

​

$

281,370

​

​

$

264,216

​

​

$

17,154

​

​

​

6.5

%

Healthcare Apparel

​

​

86,385

​

​

​

87,036

​

​

​

(651

)

​

​

(0.7

%)

Contact Centers

​

​

69,571

​

​

​

70,866

​

​

​

(1,295

)

​

​

(1.8

%)

Intersegment eliminations

​

​

(2,618

)

​

​

(2,509

)

​

​

(109

)

​

​

4.3

%

Consolidated net sales

​

​

434,708

​

​

​

419,609

​

​

​

15,099

​

​

​

3.6

%

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Gross margin:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Branded Products

​

​

100,368

​

​

​

90,332

​

​

​

10,036

​

​

​

11.1

%

Healthcare Apparel

​

​

29,126

​

​

​

32,275

​

​

​

(3,149

)

​

​

(9.8

%)

Contact Centers

​

​

36,190

​

​

​

37,589

​

​

​

(1,399

)

​

​

(3.7

%)

Net intersegment eliminations

​

​

(1,405

)

​

​

(1,351

)

​

​

(54

)

​

​

4.0

%

Consolidated gross margin

​

​

164,279

​

​

​

158,845

​

​

​

5,434

​

​

​

3.4

%

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Selling and administrative expenses:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Branded Products

​

​

75,708

​

​

​

72,353

​

​

​

3,355

​

​

​

4.6

%

Healthcare Apparel

​

​

32,027

​

​

​

29,383

​

​

​

2,644

​

​

​

9.0

%

Contact Centers

​

​

30,413

​

​

​

32,816

​

​

​

(2,403

)

​

​

(7.3

%)

Intersegment Eliminations

​

​

(1,405

)

​

​

(1,351

)

​

​

(54

)

​

​

4.0

%

Corporate selling and administrative expenses

​

​

16,818

​

​

​

17,654

​

​

​

(836

)

​

​

(4.7

%)

Consolidated selling and administrative expenses

​

​

153,561

​

​

​

150,855

​

​

​

2,706

​

​

​

1.8

%

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Interest expense, net

​

​

2,702

​

​

​

3,873

​

​

​

(1,171

)

​

​

(30.2

%)

Trade name impairment charge

​

​

2,600

​

​

​

-

​

​

​

2,600

​

​

​

100.0

%

Income before income tax expense

​

​

5,416

​

​

​

4,117

​

​

​

1,299

​

​

​

31.6

%

Income tax expense

​

​

790

​

​

​

580

​

​

​

210

​

​

​

36.2

%

Net income

​

$

4,626

​

​

$

3,537

​

​

$

1,089

​

​

​

30.8

%

Adjusted EBITDA(1)

​

$

19,207

​

​

$

17,147

​

​

$

2,060

​

​

​

12.0

%

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

Net Income

The Company generated net income of $4.6 million and $3.5 million during the nine months ended September 30, 2026 and 2025, respectively. The increase in net income for the nine months ended September 30, 2026 compared to the nine months ended September 30, 2025 was primarily due to growth in our Branded Products segment, cost savings by our Contact Centers segment and a decrease in consolidated interest expense, net, partially offset by a loss in our Healthcare Apparel segment.

Adjusted EBITDA

Adjusted EBITDA was $19.2 million and $17.1 million during the nine months ended September 30, 2026 and 2025, respectively. The Adjusted EBITDA increase was primarily due to earnings growth in our Branded Products segment and cost savings by our Contact Centers segment partially offset by an earnings loss in our Healthcare Apparel segment. For a reconciliation of Adjusted EBITDA to net income, its most directly comparable financial measure calculated and presented in accordance with generally accepted accounting principles in the United States of America ("GAAP"), please read "Non-GAAP Financial Measure" below.

Net Sales

Net sales for the Company increased 3.6% or $15.1 million, for the nine months ended September 30, 2026 compared to the nine months ended September 30, 2025. The increase was attributable to increases in net sales in our Branded Products segment, partially offset by a decline in our Healthcare Apparel and Contact Centers segments.

Branded Products net sales increased 6.5% or $17.2 million, for the nine months ended September 30, 2026 compared to the nine months ended September 30, 2025. The increase was primarily due to volume increases within existing customer accounts partially offset by tariff refunds to customers.

Healthcare Apparel net sales decreased 0.7% or $0.7 million, for the nine months ended September 30, 2026 compared to the nine months ended September 30, 2025. The decrease was primarily due to volume decreases with existing customers, due in part to the change in a customer's financial position.

Contact Centers net sales decreased 1.8% or $1.3 million, before intersegment eliminations for the nine months ended September 30, 2026 compared to the nine months ended September 30, 2025. The 1.8% decrease versus the prior year period reflects client attrition that exceeded growth from existing customers and new customer acquisitions.

Gross Margin

Gross margin rate for the Company was 37.8% for the nine months ended September 30, 2026 and 37.9% for the nine months ended September 30, 2025.

Gross margin rate for our Branded Products segment was 35.7% for the nine months ended September 30, 2026 and 34.2% for the nine months ended September 30, 2025. The rate increase was primarily driven by a favorable shift in the mix of pricing and customers.

Gross margin rate for our Healthcare Apparel segment was 33.7% for the nine months ended September 30, 2026 and 37.1% for the nine months ended September 30, 2025. The rate decrease was primarily driven by $7.1 million of incremental inventory write-downs, partially offset by the benefit of $4.0 million of net tariff refunds.

Gross margin rate for our Contact Centers segment was 52.0% for the nine months ended September 30, 2026 and 53.0% for the nine months ended September 30, 2025. The decrease in the gross margin rate was primarily attributable to higher employee related costs as compared to the prior year period.

Selling and Administrative Expenses

Selling and administrative expenses increased $2.7 million for the nine months ended September 30, 2026, compared to the nine months ended September 30, 2025. As a percentage of net sales, total selling and administrative expenses was 35.3% for the nine months ended September 30, 2026 and 36.0% for the nine months ended September 30, 2025. The rate decrease was driven by Branded Products and Contact Centers segments, partially offset by an increased rate in our Healthcare Apparel segment.

Branded Products selling and administrative expense increased $3.4 million for the nine months ended September 30, 2026 compared to the nine months ended September 30, 2025 primarily due to increased commission expense from increased gross margin. As a percentage of net sales, selling and administrative expenses for our Branded Products segment was 26.9% for the nine months ended September 30, 2026, down slightly from 27.4% for the nine months ended September 30, 2025.

Healthcare Apparel selling and administrative expense increased $2.6 million for the nine months ended September 30, 2026 compared to the nine months ended September 30, 2025 primarily due to credit loss charges resulting from the change in a customer's financial position. As a percentage of net sales, selling and administrative expenses for our Healthcare Apparel segment was 37.1% for the nine months ended September 30, 2026 and 33.8% for the nine months ended September 30, 2025.

Contact Centers selling and administrative expense decreased $2.4 million for the nine months ended September 30, 2026 compared to the nine months ended September 30, 2025 primarily due to a $1.2 million reduction in credit loss expense incurred in the prior year period and cost reductions implemented in 2025 related to the closure of our Jamaica office. As a percentage of net sales, selling and administrative expenses for our Contact Centers segment was 43.7% for the nine months ended September 30, 2026 and 46.3% for the nine months ended September 30, 2025.

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

Interest Expense, Net

Interest expense, net decreased to $2.7 million for the nine months ended September 30, 2026 from $3.9 million for the nine months ended September 30, 2025. This decrease was due to a lower outstanding debt balance in 2026 and a lower weighted average interest rate on borrowings, from 5.4% for the nine months ended September 30, 2025 to 4.9% for the nine months ended September 30, 2026.

Intangible Assets Impairment Charge

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

Income Taxes

Income tax expense increased to $0.8 million for the nine months ended September 30, 2026 from $0.6 million for the nine months ended September 30, 2025. The effective tax rate was 14.6% and 14.1% for the nine months ended September 30, 2026 and 2025, respectively. Income tax expense and the effective tax rate for the nine months ended September 30, 2026 and 2025 were primarily impacted by the variability in the mix of earnings across the Company's foreign and domestic operations, which are subject to various statutory tax rates in those jurisdictions. The tax rate for the nine months ended September 30, 2026 was further impacted by the discrete tax benefit relating to the $2.6 million trade name impairment charge recorded in the second quarter of 2026. 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

Liquidity Analysis

Short-Term Liquidity

For the next twelve months, our primary capital requirements are for capital to maintain our operations, meet contractual obligations, primarily consisting of our revolving credit facility, term loan and operating leases, and fund any potential merger and acquisition activity, capital expenditures, dividends, stock repurchases and other general corporate purposes. Management believes that the combination of our current cash level, cash flows provided by operating activities and availability under the revolving credit facility will be sufficient to satisfy the above requirements for the next twelve months.

On August 7, 2026, the Company entered into an Amended and Restated Credit Agreement (the "2026 Credit Agreement") that refinanced the 2022 facility. The 2026 Credit Agreement provides the Company senior secured credit facilities maturing in August 2031 and 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. Please refer to Note 5 to our Consolidated Financial Statements located in Item 1 of Part I of this Quarterly Report on Form 10-Q for additional details on our refinanced debt, which disclosure is incorporated herein by reference.

Long-Term Liquidity

Beyond the next twelve months, our principal demand for funds will be for maintenance of our core business, to satisfy long-term contractual obligations, stock repurchases, any potential merger and acquisition activity and the Company's ongoing capital expenditure program designed to improve the effectiveness and capabilities of its 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, long-term pension liability, operating leases, acquisition-related contingent liabilities and non-qualified deferred compensation plan liabilities in Other long-term liabilities. 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 Requirements

Working Capital Needs

The Company 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. The Company also requires working capital to invest in new product lines and technologies.

Capital Expenditures

Capital expenditures were $2.7 million and $3.4 million for the nine months ended September 30, 2026 and 2025, respectively.

Sources of Capital and Liquidity

Cash Flows from Operations

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

For the nine months ended September 30, 2026, net cash provided by operating activities was $30.7 million. Cash collections from customers exceeded aggregate cash payments to vendors, lessors and employees, primarily driven by the Company's collection of receivable balances and by reduced inventory purchasing, which provided $0.1 million of cash in the current period compared to $10.5 million of cash outflows in the prior year period. These sources were partially offset by a $3.9 million increase in contract assets.

For the nine months ended September 30, 2025, net cash provided by operating activities was $1.3 million. Cash collections from customers exceeded aggregate cash payments to vendors, lessors and employees. These cash collections were offset by cash payments including $10.5 million of cash outflows for inventory purchases. The inventory balance is up from the prior year primarily due to the sales decrease in Healthcare Apparel, as well as the timing of purchases.

Credit Facilities and Debt Activity

The Company's primary source of liquidity has been its net income and the use of credit facilities and term loans. The Company has access to a revolving credit facility with a maximum principal amount of $125.0 million and a term loan in the original aggregate principal amount of $75.0 million and the ability to request incremental revolving credit or term loan facilities in an aggregate amount of up to an additional $75.0 million, subject to obtaining additional lender commitments and satisfying certain other conditions.

For the nine months ended September 30, 2026, the Company had $33.5 million in borrowings and $63.5 million in payments on the revolving credit facility and $24.4 million in borrowings and $9.4 million in payments on the term loan.

For the nine months ended September 30, 2025, the Company had $76.0 million in borrowings and $58.0 million in payments on the revolving credit facility. For the nine months ended September 30, 2025, the Company had $4.2 million in payments on the term loan. On August 7, 2026, the Company entered into the 2026 Credit Agreement that refinanced the 2022 Credit Agreement. Please refer to Note 5 to our Consolidated Financial Statements located in Item 1 of Part I of this Quarterly Report on Form 10-Q for additional details on our refinanced debt, which disclosure is incorporated herein by reference.

In the future, the Company may continue to use credit facilities and other secured and unsecured borrowings as a source of liquidity. Additionally, the cost of the Company's future sources of liquidity may differ from the costs of the Company's sources of liquidity to date.

Dividends and Share Repurchase Program

During the nine months ended September 30, 2026 and 2025, the Company paid cash dividends of $6.6 million and $6.7 million, respectively. The Company anticipates that it will continue to pay dividends in the future as financial conditions permit.

On May 15, 2026, the Company entered into a 10b5-1 trading plan (the "Plan") for the purpose of repurchasing up to $2.4 million in shares of the Company's outstanding common stock (the "Repurchase Dollar Limit") in accordance with the $17.5 million share repurchase program previously authorized by the Company's Board of Directors, which was announced by the Company on March 11, 2025. The Plan is intended to comply with Rule 10b5-1(c) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The Plan allows the Company to repurchase shares up to the Repurchase Dollar Limit commencing May 16, 2026 and ending on the earlier of the date on which the Repurchase Dollar Limit is reached or other events specified in the Plan. Repurchases of common stock under the Plan will be administered through an independent broker and are subject to certain price, market, volume and timing constraints specified in the Plan.

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, 2025.

The preparation of our financial statements in conformity with GAAP requires the Company to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities and disclosures as of the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. There have been no material changes to the critical accounting estimates disclosed in Part II, Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" of our Annual Report on Form 10-K for the year ended December 31, 2025.

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

Interim Impairment Tests:

Indefinite-lived Intangible Assets:

An indicator of impairment related to the CID Resources indefinite-lived intangible assets was identified during the second quarter of 2026 for which a quantitative interim impairment test was performed. We conducted a quantitative assessment using the relief-from-royalty method, which we believe to be an acceptable methodology due to its common use by valuation specialists in determining the fair value of intangible assets. This methodology assumes that, in lieu of ownership, a third party would be willing to pay a royalty in order to exploit the related benefits of these assets. The assumptions that have the most significant effect on the fair value calculations are the royalty rates, projected revenue growth rates, discount rates, and terminal values. Each royalty rate is determined based on the profitability of the trade name to which it relates. The impairment was primarily driven by updated assumptions reflecting lower expected future sales and profitability of the brands.

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

• Royalty rates of 0.5% - 2.5%;

• A tax rate of 27.0%;

• A long-term growth rate of 3.0%; and

• Assumed discount rate of 17.0%.

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

Annual Impairment Tests:

Indefinite-lived Intangible Assets:

As of August 31, 2026, the Company performed its annual impairment test for its indefinite-lived trade name intangible assets, which did not result in an impairment. The estimated fair value of the CID Resources indefinite lived intangible assets exceeded their carrying value by approximately 2-4%. A decline in projected revenue or an increase in the discount rate could result in further impairment. We conducted a quantitative assessment using the relief-from-royalty method, which we believe to be an acceptable methodology due to its common use by valuation specialists in determining the fair value of intangible assets. This methodology assumes that, in lieu of ownership, a third party would be willing to pay a royalty in order to exploit the related benefits of these assets. The assumptions that have the most significant effect on the fair value calculations are the royalty rates, projected revenue growth rates, discount rates, and terminal values. Each royalty rate is determined based on the profitability of the trade name to which it relates. In determining the fair value of our trade name indefinite-lived intangible assets as of August 31, 2026, we used the following key assumptions:

• Royalty rates of 0.5% - 2.5%;

• A tax rate of 27.0%;

• A long-term growth rate of 3.0%; and

• Assumed discount rates of 15.0% - 17.0%.

Goodwill:

The discounted cash flow approach that we use for valuing goodwill as part of our impairment testing approach involves estimating future cash flows expected to be generated from the related assets, discounted to their present value using a risk-adjusted discount rate. Terminal values are also estimated and discounted to their present value. Assessing the recoverability of goodwill requires us to make estimates and assumptions about sales, operating margins, growth rates and discount rates based on our forecasts, business plans, economic projections, anticipated future cash flows and marketplace data. We performed our annual impairment test as of August 31, 2026, which did not result in any goodwill impairment. In determining the fair value of our reporting unit, we used the following assumptions:

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

• Long-term growth rate of 3.0%; and

• Discount rate of 14.5%.

Non-GAAP Financial Measure

Adjusted EBITDA, which is a non-GAAP financial measure, is defined as net income excluding interest expense, net, income tax expense, depreciation and amortization expense and impairment charges. The Company believes Adjusted EBITDA is an important measure of operating performance because it allows management, investors and others to evaluate and compare the Company's core operating results from period to period by removing (i) the impact of the Company's capital structure (interest expense from outstanding debt), (ii) tax consequences, (iii) asset base (depreciation and amortization) and (iv) impairments. The Company uses Adjusted EBITDA internally to monitor operating results and to evaluate the performance of its business. In addition, the compensation committee has used Adjusted EBITDA in evaluating certain components of executive compensation, including performance-based annual incentive programs.

Adjusted EBITDA is not a measure of financial performance under GAAP. Adjusted EBITDA should not be considered in isolation or as an alternative to net income, cash flows from operating activities or any other measure determined in accordance with GAAP. The items excluded to calculate Adjusted EBITDA are significant components in understanding and assessing the Company's results of operations. The Company's Adjusted EBITDA may not be comparable to a similarly titled measure of another company because other companies may not calculate Adjusted EBITDA in the same manner.

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

		Three Months Ended September 30,								Nine Months Ended September 30,
		2026				2025				2026				2025
Net income		$	2,571			$	2,744			$	4,626			$	3,537
Interest expense, net			809				1,378				2,702				3,873
Income tax expense			580				443				790				580
Segment depreciation and amortization			2,686				2,889				8,283				8,891
Corporate depreciation and amortization			61				86				206				266
Trade name impairment charge			-				-				2,600				-
Adjusted EBITDA		$	6,707			$	7,540			$	19,207			$	17,147

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 and (4) statements of expected industry and general economic trends.

Such forward-looking statements are subject to certain risks and uncertainties that may materially adversely affect the anticipated results. Such risks and uncertainties include, but are not limited to, the following: the impact of competition; the impact of global conflicts, such as the Russia-Ukraine War and the joint U.S.-Israeli War with Iran in 2026, oil and natural gas prices, uncertainties related to tariffs, duties, trade wars and related matters, supply disruptions, inflationary environments (including with respect to shipping costs and the cost of finished goods and raw materials), 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 chain, 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 raw materials; attracting and retaining senior management and key personnel; the Company's ability to maintain effective internal control over financial reporting; and other factors described in the Company's filings with the Securities and Exchange Commission (the "SEC"), including those risks described in Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2025 entitled "Risk Factors" and other disclosures contained therein and in this Quarterly Report on Form 10-Q for the quarter ended September 30, 2026. Shareholders, potential investors and other readers are urged to consider these factors carefully in evaluating the forward-looking statements made herein and are cautioned not to place undue reliance on such forward-looking statements. 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.