Annual Report for Fiscal Year Ending 12-31, 2025 (Form 10-K)

Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with our Financial Statements, which present our results of operations for the years ended December 31, 2025 and 2024, as well as our financial positions at December 31, 2025 and 2024, contained elsewhere in this Form 10-K. Some of the information contained in this discussion and analysis or set forth elsewhere in this Form 10-K, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. You should review the "Special Note Regarding Forward Looking Statements" and "Risk Factors" sections of this Form 10-K for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. Additionally, we use a non-GAAP financial measure to evaluate our results of operations. For important information regarding the use of such non-GAAP financial measure, including reconciliations to the most comparable GAAP measure, see the section titled "Non-GAAP Financial Measure" below.

Business Outlook

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

Contact Centers

In our Contact Centers segment (also known as The Office Gurus), which operates in El Salvador, Belize, Dominican Republic, the United States and Jamaica until its closure on June 15, 2025, we provide outsourced, nearshore and onshore business process outsourcing, contact and call-center support services to North American customers. These services are also provided internally to the Company's other two operating segments. The Office Gurus has become an award-winning business process outsourcer offering inbound and outbound voice, email, text, chat and social media support. The nearshore call-center market specifically has grown as businesses look to reduce operating costs while maintaining high-quality customer support. Nearshore operators can provide comparable service to their U.S. counterparts at a fraction of the price. 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

During 2025, the U.S. government imposed higher tariffs and/or new tariffs which impacted certain sources of the Company's materials and production. Additionally, the U.S.'s trade agreements and/or preferences with certain countries in Africa, through the African Growth and Opportunity Act (AGOA), and with Haiti, through the Haitian Hemispheric Opportunity through Partnership Encouragement Act (HOPE) and the Haiti Economic Lift Program of 2010 (HELP), expired on September 30, 2025. In February 2026, these agreements were retroactively extended until December 2026. The process and timing for receiving a refund of duties paid in the interim period between expiration and when retroactivity was granted has yet to be determined. If not renewed and/or extended after December 2026, the cost of continuing to do business in these countries likely will negatively impact our results of operations and financial position, or result in us moving sourcing and manufacturing from these countries to countries with more favorable cost structures. We will continue to monitor the status of the trade agreements and preferences involving the U.S. government and the countries in which we source and/or manufacture products. See Item 8, "NOTE 7 - Contingencies and Geographic Supply Concentrations," and "Item 1A - Risk Factors - Recently imposed tariffs may have a material adverse impact on our business."

On February 20, 2026, the United States Supreme Court ruled that the International Emergency Economic Powers Act (IEEPA) does not authorize the President to impose tariffs, effectively invalidating the tariffs imposed via that method. These IEEPA tariffs stopped being collected at 12:00 a.m. on February 24, 2026. The Supreme Court's ruling left open the questions of whether, how, and when payors of the tariffs might receive refunds. A determination of these, and other questions, could take a significant amount of time to resolve. Soon after the Supreme Court's decision, President Trump announced his intention to impose tariffs using different legal bases. Already, a new 10% tariff has been implemented under Section 122 of the Trade Act of 1974, effective as of February 24, 2026. The Supreme Court's ruling and President Trump's response add new uncertainty to global trade, including the Company's exposure to tariffs.

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

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

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

Operations

The following table provides highlights of our financial performance (in thousands, except percentages):

		For the Years Ended December 31,
		2025				2024				$ Change				% Change
Net sales:
Branded Products		$	361,134			$	353,314			$	7,820				2.2	%
Healthcare Apparel			115,866				119,191				(3,325	)			(2.8	%)
Contact Centers			92,520				96,949				(4,429	)			(4.6	%)
Net intersegment eliminations			(3,336	)			(3,778	)			442				(11.7	%)
Consolidated net sales			566,184				565,676				508				0.1	%
Gross margin:
Branded Products			123,712				124,723				(1,011	)			(0.8	%)
Healthcare Apparel			41,962				45,746				(3,784	)			(8.3	%)
Contact Centers			48,980				52,207				(3,227	)			(6.2	%)
Net intersegment eliminations			(1,790	)			(2,098	)			308				(14.7	%)
Consolidated gross margin			212,864				220,578				(7,714	)			(3.5	%)
Selling and administrative expenses:
Branded Products			96,067				94,384				1,683				1.8	%
Healthcare Apparel			39,550				41,149				(1,599	)			(3.9	%)
Contact Centers			42,385				42,999				(614	)			(1.4	%)
Intersegment Eliminations			(1,790	)			(2,098	)			308				(14.7	%)
Other			23,263				23,492				(229	)			(1.0	%)
Consolidated selling and administrative expenses			199,475				199,926				(451	)			(0.2	%)
Interest expense			5,143				6,358				(1,215	)			(19.1	%)
Income before income tax expense			8,246				14,294				(6,048	)			(42.3	%)
Income tax expense			1,246				2,290				(1,044	)			(45.6	%)
Net income			7,000				12,004				(5,004	)			(41.7	%)
EBITDA(1)		$	25,744			$	34,097			$	(8,353	)			(24.5	%)

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

Net Income

The Company generated net income of $7.0 million during the year ended December 31, 2025 and net income of $12.0 million during the year ended December 31, 2024. The decrease in net income during the year ended December 31, 2025 compared to the year ended December 31, 2024 was primarily due to decreases in gross margins in all three of our reportable segments, partially offset by a decrease in interest expense.

EBITDA

EBITDA was $25.7 million and $34.1 million during the years ended December 31, 2025 and 2024, respectively. EBITDA for the year ended December 31, 2025 compared to the year ended December 31, 2024 decreased primarily due to lower gross margins in all three of our reportable segments. For a reconciliation of EBITDA to net income, its most directly comparable financial measure calculated and presented in accordance with GAAP, please read "Non-GAAP Financial Measure" below.

Net Sales

Net sales for the Company increased 0.1% or $0.5 million, for the year ended December 31, 2025 compared to the year ended December 31, 2024. The increase was primarily attributable to a net sales increase in our Branded Products reportable segment.

Branded Products net sales increased 2.2%, or $7.8 million, for the year ended December 31, 2025 compared to the year ended December 31, 2024. The increase was primarily due to an additional $11.0 million in net sales attributable to 3 Point branding company we acquired in December 2024. This increase was partially offset by a net volume decrease within existing large enterprise accounts.

Healthcare Apparel net sales decreased 2.8%, or $3.3 million, for the year ended December 31, 2025 compared to the year ended December 31, 2024. The decrease in net sales was primarily due to volume decreases within existing customer accounts.

Contact Centers net sales decreased 4.6% or $4.4 million before intersegment eliminations and 4.3% or $4.0 million after intersegment eliminations for the year ended December 31, 2025 compared to the year ended December 31, 2024. The decrease in net sales versus the year-ago period reflects continued macroeconomic headwinds, which continue to contribute to client downsizing and customer attrition outpacing new customer acquisitions.

Gross Margin

Gross margin is defined as net sales less cost of goods sold. Cost of goods sold consists primarily of direct costs of acquiring inventory, including cost of merchandise, inbound freight charges, purchasing costs, and inspection costs for our Branded Products and Healthcare Apparel segments. Cost of goods sold for our Contact Centers segment includes salaries and payroll related benefits for agents. The Company includes shipping and handling fees billed to customers in net sales. Shipping and handling costs associated with out-bound freight are recorded in cost of goods sold. The cost of occupancy and operating the Company's distribution centers are included in selling and administrative expenses. Gross margin rate is defined as gross margin divided by net sales.

Gross margin rate for the Company was 37.6% for the year ended December 31, 2025 down from 39.0% for the year ended December 31, 2024. The rate decrease was primarily due to decreases in gross margins in all three of our reportable segments.

Gross margin rate for our Branded Products segment was 34.3% for the year ended December 31, 2025 and 35.3% for the year ended December 31, 2024. The gross margin rate decreased as compared to the prior year period due to higher product costs.

Gross margin rate for our Healthcare Apparel segment was 36.2% for the year ended December 31, 2025 and 38.4% for the year ended December 31, 2024. The gross margin rate decreased as compared to 2024, primarily due to higher product costs in 2025 and unfavorable sales product mix.

Gross margin rate for our Contact Centers segment was 52.9% for the year ended December 31, 2025 and 53.8% for the year ended December 31, 2024. The decrease in the gross margin rate was attributable to higher agent costs and unfavorable margin mix associated with the closure of our Jamaica contact center.

Selling and Administrative Expenses

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

As a percentage of net sales, selling and administrative expenses for our Branded Products segment was 26.6% for the year ended December 31, 2025 and 26.7% for the year ended December 31, 2024. The rate remained flat year over year as cost increases kept pace with increases in net sales.

As a percentage of net sales, selling and administrative expenses for our Healthcare Apparel segment was 34.1% for the year ended December 31, 2025 and 34.5% for the year ended December 31, 2024. The rate decrease as compared to the prior year period was primarily driven by a decrease in depreciation expense and lower employee related costs.

As a percentage of net sales, selling and administrative expenses for our Contact Centers segment was 45.8% for the year ended December 31, 2025 and 44.4% for the year ended December 31, 2024. The rate increase as compared to the prior year period was primarily driven by an increase in credit loss expense. Overall selling and administrative expenses were down in line with the decrease in sales and the exit of Jamaica.

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

Interest Expense

Interest expense decreased to $5.1 million for the year ended December 31, 2025 from $6.4 million for the year ended December 31, 2024. This decrease was due to a lower weighted average interest rate on those borrowings from 5.5% for the year ended December 31, 2024 to 5.1% for the year ended December 31, 2025.

Income Taxes

Income tax expense decreased to $1.2 million for the year ended December 31, 2025 from $2.3 million for the year ended December 31, 2024. The effective tax rate was 15.1% and 16.0% for the year ended December 31, 2025 and 2024, respectively. Income tax expense and the effective tax rate for the year ended December 31, 2025 and 2024 were primarily impacted by the variability in the mix of earnings across the Company's foreign and domestic operations, subject to various statutory tax rates in those jurisdictions. The effective tax rate may vary from year to year due to discrete, unusual or non-recurring items, the resolution of income tax audits, changes in tax laws, the tax impact from employee share-based payments, or other items.

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 and term loan (collectively, our "Credit Facilities") and operating leases, and fund capital expenditures, dividends, stock repurchases, any potential merger and acquisition activity and other general corporate purposes. Management believes that the combination of our current cash level, cash flows provided by operating activities and availability under the revolving credit facilities will be sufficient to satisfy the above requirements for the next twelve months.

Long-Term Liquidity

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 and non-qualified deferred compensation plan liabilities in Other Long-Term Liabilities. For additional details related to the Company's long-term contractual obligations for long-term debt see Note 5, for contractual obligations for leases see Note 14 and for contractual obligations for acquisition-related contingent liabilities see Note 7. 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. Please refer to Notes 5 and 15 to our Consolidated Financial Statements located in Item 8 of this Annual Report on Form 10-K for our contractual obligations, including schedules of future minimum payments.

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 $3.9 million and $4.4 million for the years ended December 31, 2025 and 2024, respectively.

Debt Service Obligations

In 2025 and 2024, we paid interest of $5.7 million and $5.9 million, respectively. The cost of borrowing decreased in 2025, with the weighted average interest rate on outstanding borrowings under our Credit Facilities of 5.1% at December 31, 2025 compared to 5.5% at December 31, 2024. As of December 31, 2025, the Company had undrawn capacity of $90.0 million under the revolving credit facility.

Sources of Capital and Liquidity

Cash on Hand

As of December 31, 2025, we had $23.7 million of cash on our balance sheet, of which $16.2 million of cash was held at foreign subsidiaries. Excess cash of $8.4 million from foreign operations may generally be transferred to operations in the U.S.

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, salaries and payroll related benefits, leases and other general corporate expenditures.

In 2025, net cash provided by operating activities was $19.7 million. Cash collections from customers exceeded aggregate cash payments to vendors, lessors, employees and lenders. Collections are down from the prior year primarily related to timing of order delivery at year end.

In 2024, net cash provided by operating activities was $33.4 million. Cash collections from customers exceeded aggregate cash payments to vendors, lessors, employees and lenders primarily driven by the Company's efforts to reduce outstanding receivable balances.

Credit Facilities and Debt Activity

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

For the year ended December 31, 2025, the Company had $7.4 million of net debt borrowings, consisting of $82.0 million in payments on the revolving credit facility and $5.6 million of payments in the term loan. For the year ended December 31, 2024, the Company had $7.7 million in net debt payments, consisting of $50.0 million in payments on the revolving credit facility and $4.7 million in payments on the term loan. For the years ended December 31, 2025 and 2024, the Company had borrowings of $95.0 million and $47.0 million on the revolving credit facility, respectively. Both the debt payments and borrowings during 2025 and 2024 primarily related to the utilization of our revolving credit facility in the normal course of business.

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

Please refer to Note 5 to our Consolidated Financial Statements located in Item 8 of Part II of this Annual Report on Form 10-K for additional details on our outstanding long-term debt.

Dividends and Share Repurchase Program

During the years ended December 31, 2025 and 2024, the Company paid cash dividends of $8.9 million and $9.3 million, respectively. The Company anticipates that it will continue to pay dividends in the future as financial conditions permit.

On September 19, 2025, the Company entered into a 10b5-1 trading plan (the "Plan") for the purpose of repurchasing up to a specified number of shares of the Company's outstanding common stock (the "Repurchase Limit") in accordance with the $17.5 million share repurchase program ("Program") previously authorized by the Company's Board of Directors, which was announced by the Company on March 11, 2025. The Plan is intended to comply with Rule 10b5-1(c) under the Exchange Act. The Plan allows the Company to repurchase shares up to the Repurchase Limit commencing September 20, 2025 and ending on the earlier of the date on which the Repurchase Limit is reached or other events specified in the Plan. Repurchases of common stock under the Plan will be administered through an independent broker and are subject to certain price, market, volume and timing constraints specified in the Plan. The approximate dollar value of shares that may still be purchased under the Program is $10.1 million as of December 31, 2025. The Program may be modified, suspended or terminated at any time, without prior notice. Shares repurchased may be reissued later in connection with employee benefit plans and other general corporate purposes. Shares purchased under the Program are constructively retired and returned to unissued status. See Part II, Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Non-GAAP Financial Measure

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

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

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

		Years Ended December 31,
		2025				2024
Net income		$	7,000			$	12,004
Interest expense			5,143				6,358
Income tax expense, net			1,246				2,290
Depreciation and amortization			12,355				13,185
Intangible assets impairment charge			-				260
EBITDA		$	25,744			$	34,097

Critical Accounting Estimates

Our discussion and analysis of financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with GAAP. Our accounting policies are more fully described in Note 1 to the Financial Statements included in this Form 10-K. The preparation of the financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate the estimates that we have made. These estimates are based upon our historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Our actual results may differ from these estimates under different assumptions or conditions.

Critical accounting estimates are those estimates made in accordance with GAAP that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on our financial condition or results of operations. We believe that the following critical accounting policies and estimates have a higher degree of inherent uncertainty and require our most significant judgments.

Revenue Recognition

Revenue is measured at the amount of consideration we expect to receive in exchange for the goods or services. Variable consideration is recorded based upon historical experience. Contract termination terms may involve variable consideration clauses such as sales discounts and customer rebates, and revenue is adjusted accordingly for these provisions. Estimated amounts are included in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved.

Inventories

The Company at all times carries inventories of both raw materials and finished products. Inventories are stated at the lower of cost or net realizable value. Judgments and estimates are used in determining the likelihood that goods on hand can be sold to customers. Historical inventory usage, current revenue trends and market conditions are considered in estimating both excess and obsolete inventories. If actual product demand and market conditions are less favorable than those projected by management, inventory write-downs may be required, which may be material. An additional write-down in value of 5% of inventories would result in additional expense of approximately $5.0 million.

Annual Impairment Tests:

The Company performs its goodwill and indefinite-lived intangible impairment tests annually or more frequently as events or changes in circumstances warrant. The timing of the annual impairment tests was changed to August 31^st, and historically was performed during the fourth quarter. Please see Note 1 - Description of Business, Basis of Presentation and Summary of Accounting Policies - Change in Accounting Policy, which disclosure is incorporated herein by reference.

Indefinite-lived Intangible Assets:

As of August 31, 2025, the Company performed its annual impairment test for its indefinite-lived trade name intangible assets which did not result in an impairment. We conducted a quantitative assessment using the relief-from-royalty method, which we believe to be an acceptable methodology due to its common use by valuation specialists in determining the fair value of intangible assets. 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, 2025, we used the following key assumptions:

• Royalty rates of 0.75% - 3.0%;

• A tax rate of 27.0%;

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

• Assumed discount rates of 14.5% - 16.5%

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, 2025, which did not result in any goodwill impairment. In determining the fair value of our reporting unit, we used the following assumptions:

•	Expected cash flows underlying our business plans for the initial five-year period were based on a detailed, multi-year forecast performed by our BAMKO reporting unit;
•	Long-term growth rate of 3.0%; and
•	Discount rate of 14.0%

No impairments were identified during the third quarter 2025 annual goodwill and indefinite-lived intangible impairment tests. During the third quarter of 2024, the Company performed an interim impairment test on certain of its indefinite-lived trade name intangible assets within the Healthcare segment which resulted in an immaterial impairment of $0.3 million. 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.

Q4 Impairment Test

The Company identified an indicator of impairment related to the CID Resources indefinite-lived intangible asset of the Healthcare Apparel segment. A quantitative interim impairment test was performed using the relief-from-royalty method which resulted in no impairment. The assumptions used to determine the fair value of our trade name indefinite lived intangible assets as of December 31, 2025 were consistent with the annual test as of August 31, 2025, discussed above.

Income Taxes

The Company is required to estimate and record income taxes payable for federal, state and foreign jurisdictions in which the Company operates. This process involves estimating actual current tax expense and assessing temporary differences resulting from differing accounting treatment between tax and book that result in deferred tax assets and liabilities. In addition, accruals are also estimated for federal and state tax matters for which deductibility is subject to interpretation.

Deferred income taxes are provided on undistributed earnings of foreign subsidiaries in the period in which the Company determines it no longer intends to permanently reinvest such earnings outside the United States. The Company expects to permanently reinvest the earnings from its wholly-owned Brazilian and UK subsidiaries, and accordingly, has not provided deferred taxes on the subsidiaries' undistributed net earnings or basis differences. The Company believes that the tax liability that would be incurred upon repatriation of the earnings from its Brazilian and UK subsidiaries is immaterial at December 31, 2025.

Reserves are also estimated for uncertain tax positions that are currently unresolved. The Company routinely monitors the potential impact of such situations and believes that it is properly reserved. For the year ended December 31, 2025, there was no significant change in total unrecognized tax benefits. As of December 31, 2025, we had an accrued liability of $0.9 million for unrecognized tax benefits. We recognize interest and penalties associated with the unrecognized tax benefit as part of the income tax provision and include accrued interest and penalties with the related reserve in other long-term liabilities in our consolidated balance sheets.