PART I

References Used

References in this Form 10-K to “the Company,” “Superior,” “we,” “our,” or “us” mean Superior Uniform Group, Inc. together with its subsidiaries, except where the context otherwise requires. Unless otherwise indicated, all share and per share information in this Form 10-K has been adjusted for all periods presented to give retroactive effect to the 2-for-1 stock split effective on February 4, 2015.

Special Note Regarding Forward-Looking Statements

CertainCertain matters discussed in this Form 10-K are "forward-looking statements"“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”“potential,” or “plan” or the negative of these words or other variations on these words or comparable terminology. Forward-looking statements in this Form 10-K may include, without limitation: (1) the projected impact of the current coronavirus (COVID-19) pandemic on our, our customers’, and our suppliers’ businesses, (2) projections of revenue, income, and other items relating to our financial position and results of operations, (2)(3) statements of our plans, objectives, strategies, goals and intentions, (3)(4) statements regarding the capabilities, capacities, market position and expected development of our business operations, and (4)(5) statements of expected industry and general economic trends.

Such forward-looking statements are subject to certain risks and uncertainties that may materially adversely affect the anticipated results. Such risks and uncertainties include, but are not limited to, the following: the impact of competition; the effect of uncertainties related to the current coronavirus (COVID-19) pandemic on the United States of America (“U.S.” or “United States”) and global markets, our business, operations, customers, suppliers and employees, including without limitation the length and scope of the restrictions imposed by various governments and success of efforts to deliver a vaccine on a timely basis, among other factors; general economic conditions,conditions, including employment levels, in the areas of the United States in which the Company’sour customers are located; changes in the healthcare, industrial, commercial, leisure retail, hotels, food service, transportation and public safetyother industries where uniforms and service apparel are worn; our ability to identify suitable acquisition targets, successfully integrate any acquired businesses, successfully manage our expanding operations, or discover liabilities associated with such businesses induring the diligence process;the price and availability of cotton and other manufacturing materials; attractingand retaining senior management and key personnel, and those risks discussed under Item 1A of this report entitled “Risk Factors.” Shareholders, potential investors and other readers are urged to consider these factors carefully in evaluating the forward-looking statements made herein and are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements made herein are only made as of the date of this Form 10-K and we disclaim any obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances.circumstances, except as may be required by law.

Overview

Superior Uniform 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. (“Superior” or the “Company”) and its state of incorporation to Florida. In 2018, the Company changed its name to Superior Group of Companies, Inc.

On July 1, 2013, the Company acquired substantially all of the assets of HPI Direct, Inc. (“HPI”), a company specializing in the design, manufacture and distribution of uniforms to major domestic retailers, foodservice chains, transportation and other service industries throughout the United States. The purchase price for the asset acquisition consisted of approximately $32.5 million in cash, and inclusive of the real estate purchase described below, the issuance of approximately 418,000 restricted shares of Superior’s common stock, the potential future payment of up to $7.2 million in additional contingent consideration through 2017, and the assumption of certain liabilities of HPI. The transaction also included the acquisition of the corporate offices and warehouse distribution facility from an entity related to HPI.

OnEffective March 8,1, 2016, the Company closed on the acquisition ofacquired substantially all of the assets of BAMKO, Inc..  The transaction had an effective date of March 1, 2016.Inc. BAMKO is a full-service merchandise sourcing and promotional products company based in Los Angeles, California. With sales offices in the United States and Brazil, as well as support offices in China, Hong Kong, and India, BAMKO serves many well-known companies and brands. The purchase price for the asset acquisition consisted of approximately $15.2 million in cash, net of cash acquired, the issuance of approximately 324,000 restricted shares of Superior’s common stock that vestsvest over a five-year period, the potential for future payments of approximately $5.5 million in additional contingent consideration through 2021, and the assumption of certain liabilities of BAMKO, Inc. The transaction also included the acquisition of BAMKO’s subsidiaries in Hong Kong, China, Brazil and England as well as an affiliate in India. Depending on the context, when using the term “BAMKO” in this Form10-K,Form 10-K, we refer either to the Company’s wholly-owned subsidiary housing the acquired business (BAMKO, LLC) or to the business acquired in the transaction, as subsequently grown through additional acquisitions.  BAMKO is a full-service merchandise sourcing and promotional products company based in Los Angeles.  With sales offices in the United States and Brazil, as well as support offices in China, Hong Kong, and India, BAMKO serves many well-known brands.

On August 21, 2017, the Company, through BAMKO, acquired substantially all of the assets of PublicIdentity,, Inc. (“Public Identity”). Public Identity is a promotional products and branded merchandise agency that provides promotional products and branded merchandise to corporate clients and universities. The purchase price consisted of $0.8 million in cash, the issuance of approximately 54,000 restricted shares of Superior’s common stock and future payments of approximately $0.4 million in additional consideration through 2020.consideration. The majority of the shares issued vestvested over a three-year period.

On November 30, 2017, BAMKO closed on the acquisition of substantially all of the assets of Tangerine Promotions, LtdLtd. and Tangerine Promotions West, Inc. (collectively, “Tangerine”“Tangerine”), a promotional products and branded merchandise agency that serves many well-known brands. Tangerine is one of thea leading providersprovider of Point-of-Purchase (POP) and Point-of-Sale (POS) merchandise in the country.merchandise. The transaction had an effective date of December 1, 2017. The purchase price for the asset acquisition consisted of approximately $7.2 million in cash, subject to adjustment, the issuance of approximately 83,000 restricted shares of Superior’s common stock that vestsvest over a four-year period, the potential for future payments of approximately $5.5 million in additional contingent consideration through 2021, and the assumption of certain liabilities of Tangerine.

Superior has realignedOn May 2, 2018, the Company acquired CID Resources, Inc. (“CID”), a Delaware corporation, which manufactures medical uniforms, lab coats, and layers, and sells its organizational structureproducts to specialty uniform retailers, ecommerce medical uniform retailers, and updated its reportable operating segmentsother retailers. The purchase price in the acquisition consisted of the following: (a) approximately $84.4 million in cash at closing, (b) the issuance of 150,094 shares of the Company’s common stock to an equity holder of CID, and (c) $2.5 million in cash as a result of changes in its business primarily related tothe cash and working capital adjustment.

Effective February 1, 2021, the Company, through BAMKO, closed on the acquisition of BAMKO effective March 1, 2016. A new Promotional Products segmentsubstantially all of the assets of Gifts By Design, Inc. (“Gifts by Design”) of Seattle, Washington. Gifts by Design is a promotional products and branded merchandise agency that has been createdestablished itself as an industry leader in developing corporate awards, incentives, and consistsrecognition programs for some of salesthe world’s biggest brands. The purchase price for the acquisition consisted of the following: (a) cash at closing, subject to customersworking capital adjustments, (b) the potential for future payment in additional contingent consideration through 2025, and (c) the issuance of promotional products. restricted shares of the Company’s common stock that vest over a five-year period.

Superior is now comprised of three reportable business segments: (1) Uniforms and Related Products, (2) Remote Staffing Solutions, and (3) Promotional Products.

Superior’s Uniforms and Related Products segment, primarily through its signature marketing brands Fashion Seal Healthcare^®, HPI Direct^® and WonderWink^®, Superior I.D.™, Worklon^®, and UniVogue^®, manufactures and sells a wide range of uniforms, corporate identity apparel, career apparel and accessories for the hospital and healthcare fields; hotels; retail; fast food and other restaurants; transportation; and the private security, industrial and commercial markets. In excess of 95% of Superior’s Uniforms and Related Products segment’s net sales are from the sale of uniforms and service apparel and directly-related products. Because the addition of the Promotional Products segment did not affect the composition of Superior’s other two segments, the Company did not restate segment information for prior periods.

SuperiorSuperior services its Remote Staffing Solutions segment through multiple The Office Gurus entities, including its direct and indirect subsidiaries in El Salvador, Belize, Jamaica, and the United States (collectively, “TOG”). TOG is a near-shore premium provider of cost effective multilingual telemarketing and total office supportbusiness process outsourced solutions.

The Promotional Products segment, through its brands BAMKO^®, Tangerine^® and PublicIdentity^®, services customers that primarily purchase promotional and related products. The segment currently has sales offices in the United States and Brazil with support services in China, Hong Kong, and India.

Products

SuperiorThe Company manufactures (through third parties or its own facilities) and sells a wide range of uniforms, corporate identity apparel, career apparel and accessories for the medical, and health, fields as well as for the industrial, commercial, leisure, and public safety markets in its Uniforms and Related Products segment. The Promotional Products segment produces and sells products for a wide variety of industries primarily to support marketing efforts.

Superior’sThe Company’s principal products are:

Uniforms and related products are typically distributed through our distribution centers in the United States. Promotional products typically are typicallyeither shipped directly from our vendors to our customers.

We do not consider salescustomers or distributed through our distribution centers in any of our segments to be highly seasonal.the United States.

For a depiction of revenuesnet sales from external customers, income before taxes on income and total assets by segment for each of the years ended December 31, 2017, 20162020, 2019 and 2015,2018, please refer to “Note 17. Operating Segment Information:”16 to our Consolidated Financial Statements included in the notesPart II, Item 8 (“Financial Statements and Supplementary Data”) (collectively referred to the consolidated financial statements in this Form 10-K.as “Financial Statements,” and individually referred to as “statements of comprehensive income,” “balance sheets,” “statements of shareholders’ equity,” and “statements of cash flows” herein).

During the years ended December 31, 2017, 20162020, 2019 and 2015,2018, uniforms and service apparel and related products accounted for approximately 77%55%, 83%63% and 94%69%, respectively, of net sales; duringsales. During the years ended December 31, 20172020, 2019 and 2016,2018, promotional and related products accounted for approximately 16%38%, 29% and 11%23%, respectively, of net sales and no other single class of product listed above accounted for more than 10% of net sales.

Services

Through the recruitment and employment of highly qualified English-speakingEnglish-speaking agents, we provide our customers with extended office support from a versatile call and contact center environment in our Remote Staffing Solutions segment. During the years ended December 31, 2020, 2019 and 2018, our Remote Staffing Solutions segment accounted for approximately 7%, 8% and 8%, respectively, of net sales.

Competition

Superior competes in its Uniforms and Related Products segment with more than three dozen firms, including divisions of larger corporations. Superior competes with national and regional manufacturers,companies, such as, ARAMARK Corporation, Cintas Corporation, Unifirst CorporationLands’ End, Inc., Medline Industries, Inc., Standard Textile Co., Inc., Careismatic Brands, Twin Hill and ARAMARK—a division of ARAMARKUniFirst Corporation. Superior also competes with local firms in most major metropolitan areas. The nature and degree of competition varies with the customer and the market. Industry statistics are not available, but weWe believe Superior is one of the leading suppliers of garments to hospitals, industrial clean rooms,retailers, hotels, motels, and food service establishments, and uniforms to linen suppliers. Superior experiences competition primarily based on breadth of products and services offered, styling and pricing. We believe that the strength of our brands and marketing, coupled with the quality of our products, allow us to compete effectively.

The market in which TOG operates has evolved into a global multi-billion dollar marketplace that is highly competitive and fragmented. TOG’s competitors in the Remote Staffing Solutions segment range in size from very small firms offering specialized services or short-term project completion to very large independent firms, and include the in-house operations of many customers and potential customers. We compete directly and indirectly with various companies that provide contact center and other business process solutions on an outsourced basis. These companies include, but are certainly not limited to, global providers such as APAC Customer Services, Convergys,Atento, Concentrix, Sitel, Atento, Sykes, Harte Hanks, and Teleperformance. TOG also competes with local entities in other offshore geographies.locations. The list of potential competitors includes both publicly traded and privately held companies.

The promotional products industry is highly fragmented. We compete with a multitude of foreign, regional, and local competitors that vary by market. Major competitors in the Promotional Products segment include companies such as BDA, Inc., HALO Branded Solutions, Inc., Staples, Inc., and BDA,InnerWorkings, Inc. We believe our creative services, product development, proprietary web platforms and our extensive global sourcing network, along with our success with major brands, will enable us to continue to be competitive and grow in this market.

Customers

The Uniform and Related Products segment has a substantial number of customers, the largestnone of which accounted for approximately 7.7%more than 10% of that segment’s 20172020 net sales. The Remote Staffing Solutions segment’s largest customer represented 17.9%14% of that segment’s 20172020 external revenues, and the largestrevenues. No customer inaccounted for more than 10% of the Promotional Products segment represented 7.6% of that segment’s 2020 net sales in 2017.sales.

BacklogResources Material to Our Business

The Uniform and Related Products segment normally completes shipments of orders from stock within one week after the receipt of the order. As of February 19, 2018, the backlog of all orders that we believe to be firm for our Uniform and Related Products segment was approximately $7.1 million, compared to approximately $6.6 million as of February 20, 2017. The Promotional Products segment typically produces custom products based upon confirmed orders. The average length of time to produce orders is four to six months. The backlog of all orders for our Promotional Products segment was approximately $25.0 million as of February 19, 2018 as compared to $12.8 million as of February 20, 2017.

Raw Materials, Working Capital and Inventory

The principal fabrics used in our Uniformsthe manufacture of finished goods for Superior's Uniform and Related Products segment are made from cotton, polyester wool, silk, synthetic and cotton-synthetic blends. The majority of such fabrics are sourced in the Far East. TheChina. If Superior or its suppliers are unable to source raw materials used in the fabrics we source from our suppliers are primarily cotton, polyester yarn, dyestuffs and chemical components of synthetic fabrics. 

Superior’s Uniform and Related Products segment markets itself to its customers as a "stock house." Therefore, Superior at all times carries substantial inventories of raw materials (principally piece goods) and finished garments, which requires substantial working capital. The segment’s principal raw materials are textile products. In 2017 and 2016, approximately 32% and 32%, respectively, of the segment’s products were obtained from suppliers located in Central America and Haiti, and approximately 28% and 31%, respectively, were sourced from or contained raw materials sourced from China. Superior does not believe that it is dependent upon any of its suppliers, despite the concentration of its purchasing from a few sources, as other suppliers of the same or similar products are readily available. However, if Superior’s Uniform and Related Products segment is unable to continue to obtain its products from Central America, Haiti and China, it could significantly disrupt Superior’s business. Because

Despite the Company manufactures and sources productsconcentration of raw material sourcing, Superior does not have a concentration of suppliers of finished goods in Central America, Haiti and China,any single country or region of the Company isworld. However, the Company’s suppliers generally source or manufacture finished goods in parts of the world that may be affected by economic anduncertainty, political conditions in those countries, including possible employee turnover,unrest, labor and other unrest and lackdisputes, health emergencies, or the imposition of developed infrastructure, as well as decisions by the U.S. government to impose or increase import duties, tariffs or other import regulations.regulations by the United States. The Company believes that its redundant network of suppliers, including its own manufacturing facilities in Haiti, provide sufficient capacity to mitigate any dependency risks on a single supplier.

TheThe Promotional Products segment relies on the supply of different types of raw materials as well as textiles, including plastic, glass, fabric and metal. The vast majority of these raw materials are principally sourced from China, either directly by BAMKO or its suppliers. If we are unable to continue to obtain our finished products from China or if our suppliers are unable to source raw materials from China, it could significantly disrupt our business. Further, we are affected by economic, political and other conditions in China or the United States, including those resulting in the imposition or increase of import duties, tariffs and other import regulations and widespread health emergencies, which could have a material adverse effect on this business segment.

Prices within the promotional products industry are directly affected by the cost of raw materials. The market for promotional products is price sensitive and has historically exhibited price and demand cyclicality. The Promotional Products segment has flexibility in its suppliers, as other suppliers of the same or similar products are widely available. Additionally, the nature of the promotional products industry is such that should specific types of raw materials undergo significant cost increases, it is possible that alternative products using different materials could be utilized for similar promotional activities. However, if cost increases cannot be entirely passed on to customers and alternative suppliers or suitable product alternatives are unavailable, profit margins could decline. Moreover, in 2017 and 2016, because approximately 67% and 59%, respectively, of the raw materials and products sourced by the Promotional Products segment came from China, economic and political conditions in China or the United States, including those resulting in the imposition or increase of import duties and other import regulations, could have a material adverse effect on this business segment.

Intellectual Property

Superior owns and uses several trademarks and service marks relating to its brands that have significant value and are instrumental to its ability to market its products. Superior’s most significant trademark is its mark "Fashiontrademarks, which are critically important to the marketing and operation of Superior’s Uniforms and Related Products segment, are Fashion Seal Healthcare"Healthcare^® and WonderWink^®. For the year ended December 31, 2020, Fashion Seal Healthcare (presently registered with the United States Patent and Trademark Office until 2027). The Fashion Seal Healthcare trademark is critically important to2029) and WonderWink (presently registered with the marketingUnited States Patent and operationTrademark Office until at least 2022) represented approximately 24% and 21%, respectively, of Superior’s business, as more than 22% of Superior's products are sold undersales in that name.segment.

Seasonal Fluctuations

Our results of operations have not historically reflected material seasonal tendencies and we do not believe that seasonal fluctuations will have a material impact on us in the foreseeable future.

Effects of Compliance with Government Regulations

Trade Regulations

As disclosed above, the Company’s suppliers generally source or manufacture finished goods in parts of the world that may be affected by the imposition of duties, tariffs or other import regulations by the United States. The Company believes that its redundant network of suppliers, including its own manufacturing facilities in Haiti, provide sufficient capacity to mitigate any dependency risks on a single supplier.

The Promotional Products segment relies on raw materials that are principally sourced from China, either directly by BAMKO or its suppliers. If we are unable to continue to obtain our finished products from China or if our suppliers are unable to source raw materials from China, it could significantly disrupt our business. Further, we are affected by economic, political and other conditions in China or the United States, including those resulting in the imposition or increase of import duties, tariffs and other import regulations and widespread health emergencies, which could have a material adverse effect on this business segment.

Environmental Matters

In view of the nature of our business, compliance with federal, state, and local laws regulating the discharge of materials into the environment, or otherwise relating to the protection of the environment, has had no material effect upon our operations or earnings, and we do not expect it to have a material impact in the foreseeable future.

EmployeesHuman Capital Resources

SuperiorThe Company’s key human capital management objectives are to attract, retain and develop quality talent. To support these objectives, the Company’s human resources initiatives are designed to: keep people safe and healthy; enhance the Company’s culture; acquire and retain diverse talent; reward and support employees through competitive pay, benefits and other programs; and develop talent to prepare them for critical roles and leadership positions. In 2020, the Company deployed resources to positively impact all of these objectives. For example, we implemented substantial COVID-19-related safety measures, transitioned much of our workforce to work-from-home, expanded our recruiting efforts and strategies, amplified our total rewards packages, and provided skills, competency and compliance training to more of our team members than ever before.

As of December 31, 2020, the Company had approximately 4,600 full-time employees worldwide, which is a year-over-year increase of approximately 1,200 people. As of December 31, 2020, approximately 800 employees were employed 2,280 persons, of which 2,237in the U.S. and approximately 3,800 employees were employed in foreign countries. The Remote Staffing Solutions segment has the Company’s largest labor force at approximately 2,300 full-time employees as of December 31, 2017.2020.

Securities Exchange Act ReportsAvailable Information

The Company maintains an internet website at the following address: www.superioruniformgroup.com.www.superiorgroupofcompanies.com. The information on the Company'sCompany’s website is not incorporated by reference in this annual report on Form 10-K.

We make available on or through our website certain reports and amendments to those reports that we file with or furnish to the Securities and Exchange Commission (the "SEC"“SEC”) in accordance with the Securities Exchange Act of 1934, as amended (the "Exchange Act"“Exchange Act”). These include our annual reports on Form 10-K, our quarterly reports on Form 10-Q, our current reports on Form 8-K, and Section 16 filings, and amendments thereto, by our officers, directors and 10% shareholders. We make this information available on our website free of charge as soon as reasonably practicable after we or they electronically file the information with, or furnish it to, the SEC. We also provide electronic copies of such filings free of charge upon request.

Item 1A.     Risk Factors

Our business, operations and financial condition are subject to various risks, and many of those risks are driven by factors that we cannot control or predict. The following discussion addresses those risks that management believes are the most significant. You should take those risks into account in evaluating or making any investment decision involving the Company. Company. Additional risks and uncertainties not presently known or that we currently believe to be less significant may also adversely affect us.

Risks Relating Toto Our IndustryBusiness and Operations

Our business could be materially adversely impacted by the coronavirus (COVID-19) pandemic.

COVID-19 was declared a pandemic by the World Health Organization and the Centers for Disease Control and Prevention in March of 2020. The global spread of COVID-19 has created significant volatility and uncertainty and economic disruption. The extent to which the COVID-19 pandemic ultimately impacts our business, financial condition, results of operations or cash flows will depend on numerous evolving factors that we may not be able to accurately predict, including, without limitation: the duration and scope of the pandemic; the success in delivering and efficacy of vaccines; governmental, business and individuals’ actions that have been and will be taken in response to the pandemic (including restrictions on travel and transport and workforce pressures); the effect on our suppliers and customers and customer demand for our core products and services within certain industries such as the restaurant, transportation, hospitality and entertainment industries; the effect on our sources of supply; the impact of the pandemic on economic activity and actions taken in response; closures of our and our suppliers’ and customers’ offices and facilities; the ability of our customers to pay for our products and services; financial market volatility; commodity prices; and the pace of recovery when the COVID-19 pandemic subsides.

The spreading of COVID-19 that is impacting global economic activity and market conditions could lead to changes in customer purchasing patterns. We have seen disruptions in our customers’ businesses, including, but not limited to, our customers’ willingness and ability to spend, layoffs and furloughs of our customers’ employees, and temporary or permanent closures of businesses that consume our products and services. Prolonged periods of difficult conditions could have material adverse impacts on our business, financial condition, results of operations and cash flows.

The potential effects of COVID-19 also could impact us in a number of other ways, including, but not limited to, reductions to our revenue and profitability, costs associated with complying with new or amended laws and regulations affecting our business, declines in our stock price, reduced availability and less favorable terms of future borrowings, valuation of our pension assets and obligations, reduced credit-worthiness of our customers, and potential impairment of the carrying value of goodwill or other indefinite-lived intangible assets.

Any of these events could materially adversely affect our business, financial condition, results of operations and cash flows.

Our success depends upon the continued protection of our trademarks and other intellectual property rights and we may be forced to incur substantial costs to maintain, defend, protect and enforce our intellectual property rights.

Our owned intellectual property and certain of our licensed intellectual property have significant value and are instrumental to our ability to market our products. While we own and use several trademarks, our Fashion Seal Healthcare^® and WonderWink^® marks are critically important to our business, as approximately 24% and 21%, respectively, of our Uniform and Related Products segment’s products were sold under those names during the year ended December 31, 2020. We cannot assure that our owned or licensed intellectual property or the operation of our business does not infringe on or otherwise violate the intellectual property rights of others. We cannot assure that third parties will not assert claims against us on any such basis or that we will be able to successfully resolve such claims. In addition, although we seek international protection of our intellectual property, the laws of some foreign countries do not allow us to protect, defend or enforce our intellectual property rights to the same extent as the laws of the United States. We could also incur substantial costs to defend legal actions relating to use of our intellectual property or prosecute legal actions against others using our intellectual property, either of which could have a material adverse effect on our business, results of operations or financial condition. There also can be no assurance that we will be able to negotiate and conclude extensions of existing license agreements on similar economic terms or at all.

Our customers may cancel or decrease the quantity of their orders, which could negatively impact our operating results.

Sales to many of our customers are on an order-by-order basis. If we cannot fill customers’ orders on time, orders may be cancelled and relationships with customers may suffer, which could have an adverse effect on us, especially if the relationship is with a major customer. Furthermore, if any of our customers experience a significant downturn in their business, or fail to remain committed to our programs or brands, the customer may reduce or discontinue purchases from us. The reduction in the amount of our products purchased by customers could have a material adverse effect on our business, results of operations or financial condition.

In addition, some of our customers have experienced significant changes and difficulties, including consolidation of ownership, increased centralization of buying decisions, buyer turnover, restructurings, bankruptcies and liquidations. A significant adverse change in a customer relationship or in a customer’s financial position could cause us to limit or discontinue business with that customer, require us to assume more credit risk relating to that customer’s receivables or limit our ability to collect amounts related to previous purchases by that customer, all of which could have a material adverse effect on our business, results of operations or financial condition.

We pursue acquisitions from time-to-time to expand our business, which may pose risks to our business.

We selectively pursue acquisitions from time-to-time as part of our growth strategy. We compete with others within our industries for suitable acquisition candidates. This competition may increase the price for acquisitions and reduce the number of acquisition candidates available to us. As a result, acquisition candidates may not be available to us in the future on favorable terms.

Acquisition valuations require us to make certain estimates and assumptions to determine the fair value of the acquired entities (including the underlying assets and liabilities). If our estimates or assumptions to value the acquired assets and liabilities are not accurate, we may be exposed to losses, and/or unexpected usage of cash flow to fund the operations of the acquired operations that may be material.

Even if we are able to acquire businesses on favorable terms, managing growth through acquisition is a difficult process that includes integration and training of personnel, combining facility and operating procedures, and additional matters related to the integration of acquired businesses within our existing organization. Unanticipated issues related to integration may result in additional expense and in disruption to our operations, and may require a disproportionate amount of our management’s attention, any of which could negatively impact our ability to achieve anticipated benefits, such as revenue and cost synergies. Growth of our business through acquisition generally increases our operating complexity and the level of responsibility for both existing and new management personnel. Managing and sustaining our growth and expansion may require substantial enhancements to our operational and financial systems and controls, as well as additional administrative, operational and financial resources. We may be required to invest in additional support personnel, facilities and systems to address the increased complexities associated with business or segment expansion. These investments could result in higher overall operating costs and lower operating profits for the business as a whole. There can be no assurance that we will be successful in integrating acquired businesses or managing our expanding operations.

In addition, although we conduct due diligence investigations prior to each acquisition, there can be no assurance that we will discover or adequately protect against all material liabilities of an acquired business for which we may be responsible as a successor owner or operator. The failure to identify suitable acquisitions, successfully integrate these acquired businesses, successfully manage our expanding operations, or to discover liabilities associated with such businesses in the diligence process, could adversely affect our business, results of operations or financial condition.

In order to finance such acquisitions, we may need to obtain additional funds either through public or private financings, including bank and other secured and unsecured borrowings and/or the issuance of equity or debt securities. There can be no assurance that such financings would be available to us on reasonable terms. Any future issuances of equity securities or debt securities with equity features may be dilutive to our shareholders.

If our information technology systems suffer interruptions or failures, including as a result of cyber-attacks, our business operations could be disrupted and our reputation could suffer.

We rely on information technology systems to process transactions, communicate with customers, manage our business and process and maintain information. The measures we have in place to monitor and protect our information technology systems might not provide sufficient protection from catastrophic events, power surges, viruses, malicious software (including ransomware), attempts to gain unauthorized access to data or other types of cyber-based attacks. As cyber-attacks become more frequent, sophisticated, damaging and difficult to predict, any such event could negatively impact our business operations, such as by product disruptions that result in an unexpected delay in operations, interruptions in our ability to deliver products and services to our customers, loss of confidential or otherwise protected information, corruption of data and expenses related to the repair or replacement of our information technology systems. Compromising and/or loss of information could result in loss of sales or legal or regulatory claims which could adversely affect our revenues and profits or damage our reputation.

Failure to comply with data privacy and security laws and regulations could adversely affect our operating results and business. 

In the ordinary course of our business, we might collect and store in our internal and external data centers, cloud services and networks sensitive data, including our proprietary business information and that of our customers, suppliers and business partners, as well as personal information of our customers and employees. The secure processing, maintenance and transmission of this information is critical to our operations and business strategy. The number and sophistication of attempted attacks and intrusions that companies have experienced from third parties has increased over the past few years. Despite our security measures, it is impossible for us to eliminate this risk. 

A number of U.S. states have enacted data privacy and security laws and regulations that govern the collection, use, disclosure, transfer, storage, disposal, and protection of personal information, such as social security numbers, financial information and other sensitive personal information. For example, all 50 states and several U.S. territories now have data breach laws that require timely notification to affected individuals, and at times regulators, credit reporting agencies and other bodies, if a company has experienced the unauthorized access or acquisition of certain personal information. Other state laws include the California Consumer Privacy Act, as amended (“CCPA”). The CCPA, among other things, contains disclosure obligations for businesses that collect personal information about California residents and affords those individuals new rights relating to their personal information that may affect our ability to collect and/or use personal information. Meanwhile, several other states and the federal government have considered or are considering privacy laws like the CCPA. We will continue to monitor and assess the impact of these laws, which may impose substantial penalties for violations, impose significant costs for investigations and compliance, allow private class-action litigation and carry significant potential liability for our business. 

Outside of the U.S., data protection laws, including the EU General Data Protection Regulation (the “GDPR”), also might apply to some of our operations or business partners. Legal requirements in these countries relating to the collection, storage, processing and transfer of personal data/information continue to evolve. The GDPR imposes, among other things, data protection requirements that include strict obligations and restrictions on the ability to collect, analyze and transfer EU personal data/information, a requirement for prompt notice of data breaches to data subjects and supervisory authorities in certain circumstances, and possible substantial fines for any violations (including possible fines for certain violations of up to the greater of 20 million Euros or 4% of total company revenue). Other governmental authorities around the world have enacted or are considering similar types of legislative and regulatory proposals concerning data protection.

The interpretation and enforcement of the laws and regulations described above are uncertain and subject to change, and may require substantial costs to monitor and implement and maintain adequate compliance programs. Failure to comply with U.S. and international data protection laws and regulations could result in government enforcement actions (which could include substantial civil and/or criminal penalties), private litigation and/or adverse publicity and could negatively affect our operating results and business. 

We are subject to international, federal, national, regional, state, local and other laws and regulations, and failure to comply with them may expose us to potential liability.

We are subject to international, federal, national, regional, state, local and other laws and regulations affecting our business, including those promulgated under the Occupational Safety and Health Act, the Consumer Product Safety Act, the Flammable Fabrics Act, the Textile Fiber Product Identification Act, the rules and regulations of the Consumer Products Safety Commission, the Food, Drug, and Cosmetic Act, the rules and regulations of the Food and Drug Administration (FDA), the Foreign Corrupt Practices Act of 1977 (FCPA), various securities laws and regulations including but not limited to the Securities Exchange Act of 1934, the Securities Exchange Act of 1933, and the Nasdaq Stock Market LLC Rules, various labor, workplace and related laws, and environmental laws and regulations. Failure to comply with such laws and regulations may expose us to potential liability and have an adverse effect on our results of operations.

Shortages of supply of sourced goods or raw materials from suppliers, interruptions in our manufacturing, and local conditions in the countries in which we operate could adversely affect our results of operations.

We utilize multiple supply sources and manufacturing facilities. However, an unexpected interruption in any of the sources or facilities could temporarily adversely affect our results of operations until alternate sources or facilities can be secured. The Uniform and Related Products segment’s principal fabrics used in the manufacture of its finished goods are cotton, polyester and cotton-synthetic blends. The majority of such fabrics are sourced in China. The Promotional Products segment relies on the supply of different types of raw materials as well as textiles, including plastic, glass, fabric and metal. The vast majority of these raw materials are principally sourced from China, either directly by BAMKO or its suppliers. If we are unable to continue to obtain our raw materials and finished products from China or if our suppliers are unable to source raw materials from China, it could significantly disrupt our business. Further, the Company’s suppliers generally source or manufacture finished goods in parts of the world that may be affected by economic uncertainty, political unrest, labor disputes, health emergencies, or the imposition of duties, tariffs or other import regulations by the United States.

Our business may be impacted by non-performance by manufacturers to whom we made advance payments.

We have entered into agreements with manufacturers in which we make payments for raw materials and services in advance of the shipment and delivery of finished products. In the event that advance payments are made to manufacturers that do not have the ability to satisfy their contractual obligations due to their financial instability, geopolitical unrest or other factors, we may incur unrecoverable losses which could have a material adverse effect on our business, results of operations and financial condition.

Implementation of technology initiatives could disrupt our operations in the near term and fail to provide the anticipated benefits.

As our business grows, we continue to make significant investments in our technology, including in the areas of warehouse management, enterprise risk management and product design. The costs, potential problems and interruptions associated with the implementation of technology initiatives could disrupt or reduce the efficiency of our operations in the near term. They may also require us to divert resources from our core business to ensure that implementation is successful. In addition, new or upgraded technology might not provide the anticipated benefits, might take longer than expected to realize the anticipated benefits, might fail or might cost more than anticipated.

Failure to preserve positive labor relationships with our employees could adversely affect our results of operations.

Our operations rely heavily on our employees, and any labor shortage, disruption or stoppage caused by poor relations with our employees could reduce our operating margins and income. While we believe that our employee relations are good, and very few of our employees are currently subject to collective bargaining agreements, unions have traditionally been active in the U.S. apparel industry. Our workforce has been subject to union organization efforts from time to time, and we could be subject to future unionization efforts as our operations expand. Unionization of our workforce could increase our operating costs or constrain our operating flexibility.

Our business may be impacted by unforeseen or catastrophic events, including the emergence of pandemics or other widespread health emergencies, terrorist attacks, extreme weather events or other natural disasters and other unpredicted events.

The occurrence of unforeseen or catastrophic events, such as the emergence of pandemics or other widespread health emergencies (or concerns over the possibility of such pandemics or emergencies), terrorist attacks, extreme weather events or other natural disasters or other unpredicted events, could create economic and financial disruptions, and could lead to operational difficulties (including travel limitations) that could impair our ability to source and supply products and services and manage our businesses, and could negatively impact our customers’ ability or willingness to purchase our products and services.

For example, our corporate headquarters is located in Florida, which is a hurricane-sensitive area; should a hurricane occur, the possibly resulting infrastructure damage and disruption to the area could negatively affect our company, such as by damage to or total destruction of our headquarters, surrounding transportation infrastructure, network communications and other forms of communication. Some of our other locations and those of our suppliers, such as those located in the U.S., Central America and Haiti, also are exposed to hurricanes, earthquakes, floods and other extreme weather events; the damage that such events could produce could affect the supply of our products and services.

Additionally, while the extent of the impact on our business and financial condition is unknown at this time, we have been negatively affected by actions taken to address and limit the spread of the coronavirus, such as travel restrictions and limitations affecting the supply of labor and the movement of raw materials and finished products. If available manufacturing capacity is reduced further as a result of the coronavirus, it could have an increased negative affect on the timely supply and pricing of finished products.

Risks Relating to Our Industries

We face intense competition within our industryindustries and our revenue and/or profits may decrease if we are not able to respond to this competition effectively.

Customers in the uniform and corporate identity apparel, industry and in the promotional products, industryand business process outsourcing industries choose suppliers primarily based upon the quality, price and breadth of products and services offered. We encounter competition from a number of companies in the geographic areas we serve. Major competitors for our Uniforms and Related Products segment include publicly held companies such as ARAMARK Corporation, Cintas Corporation, Unifirst Corporation, as well as ARAMARK — a division of ARAMARKLands’ End, Inc., Medline Industries, Inc., Standard Textile Co., Inc., Careismatic Brands, Twin Hill and UniFirst Corporation. Major competitors for our Promotional Products segment include companies such as BDA, Inc., HALO Branded Solutions, Inc., Staples, Inc., and BDA, Inc..InnerWorkings, Inc. Major competitors for our Remote Staffing Solutions segment include companies such as APAC Customer Services, Atento, Concentrix, Sitel, Sykes, and Teleperformance. We also compete with a multitude of foreign, regional and local competitors that vary by market. If our existing or future competitors seek to gain or retain market share by reducing prices, we may be required to lower our prices, which would adversely affect our operating results. Similarly, if customers or potential customers perceive the products or services offered by our existing or future competitors to be of higher quality than ours or part of a broader product mix, our revenues may decline, which would adversely affect our operating results. In addition, our competitors generally compete with us for acquisition candidates, which can increase the price for acquisitions and reduce the number of acquisition candidates available to us.

RegionalGlobal, national or nationalregional economic slowdowns, high unemployment levels, fewer jobs, changes in tax laws or cost increases might have an adverse effect on our operating results.

Our primary products within our Uniform and Related Products segment are provided toused by workers employed by our customers and, as a result, our business prospects are dependent upon levels of employment and overall economic conditions on a global, national and regional level, among other factors. Our revenues are impacted by our customers’customers’ opening and closing of locations and reductions and increases in headcount, including from voluntary turnover and increased automation, which affect the quantity of uniform orders on a per-employee basis.

If we are unable to offset these effects, such as through the addition of new customers, (through acquisition or otherwise), the penetration of existing customers with a broader mix of product and service offerings, or decreased production costs that can be passed on in the form of lower prices, our revenue growth rates will be negatively impacted. EventsLikewise, increases in tax rates or conditionsother changes in a particular geographic area, such as adverse weather andtax laws or other factors, could also hurtregulations can negatively affect our operating results. profitability.

While we do not believe that our exposure is greater than that of our competitors, we could be adversely affected by increases in the prices of fabric, natural gas, gasoline, wages, employee benefits, insurance costs and other components of product cost unless we can recover such increases through proportional increases in the prices for our products and services. Competitive and general economic conditions might limit our ability and that of our competitors to increase prices to cover suchany increases in our product cost.

Volatility in the global financial markets could adversely affect results.

In the past, global financial markets have experienced extreme disruption, including, among other things, volatility in security prices, diminished liquidity and credit availability, rating downgrades of certain investments and declining valuations of others. In addition, global equity markets have been highly volatile recently. There can be no assurance that there will not be further change or volatility, which could lead to challenges in our business and negatively impact our financial results. The tightening of credit in financial markets adversely affects the ability of our customers and suppliers to obtain financing for significant purchases and operations and could result in a decrease in orders and spending for our products and services. We are unable to predict the likely duration and severity of any disruption in financial markets and adverse economic conditions and the effects they may have on our business and financial condition.

The uniform and corporate identity apparel and promotional products industriespromotional products industries are subject to pricing pressures that may cause us to lower the prices we charge for our products and adversely affect our financial performance.

Many of our competitors also source their product requirements from developing countries to achieve a lower cost operating environment, possibly with lower costs than our offshore facilities, and those manufacturers may use these cost savings to reduce prices. Some of our competitors have more purchasing power than we do, which may enable them to obtain products at lower costs. To remain competitive, we mustmay adjust our prices and margins from time to timetime-to-time in response to these industry-wide pricing pressures. Moreover,Additionally, increased customer demands for allowances, incentives and other forms of economic support could reduce our gross margins and affect our profitability. Our financial performance maywill be negatively affected by these pricing pressures if we are forced to reduce our prices and we cannot reduce our product costs proportionally or if our product costs increase and we cannot increase our prices proportionately.proportionally.

Increases in the price of finished goods and raw materials used to manufacture our products could materially increase our costs and decrease our profitability.

The principal fabrics used for our uniforms are made from cotton, wool, silk, syntheticpolyester and cotton-synthetic blends. The principal components in our promotional products are plastic, glass, fabric and metal. The prices we pay for these fabrics and components and our finished goods are dependent on the market price for the raw materials used to produce them, primarily cotton and chemical components of synthetic fabrics including raw materials such as chemicals and dyestuffs. These finished goods and raw materials are subject to price volatility caused by weather, supply conditions, government regulations, economic and political climate, currency exchange rates, labor costs, and other unpredictable factors. Fluctuations in petroleum prices also may influence the prices of related items such as chemicals, dyestuffs and polyester yarn.

Any increase in raw material prices increases our cost of sales and can decrease our profitability unless we are able to pass the costs on to our customers in the form of higher prices. In addition, if one or more of our competitors is able to reduce their production costs by taking advantage of any reductions in raw material prices or favorable sourcing agreements, we may face pricing pressures from those competitors and may be forced to reduce our prices or face a decline in net sales,revenues, either of which could have a material adverse effect on our business, results of operations and financial condition.

Changes to trade regulation, quotas, duties, tariffs or tariffs,other restrictions caused by the changing U.S. and geopolitical environments or otherwise, such as those with respect to China, may increasematerially harm our revenue and results of operations, such as by increasing our costs and/or limitlimiting the amount of products that we can import.

Our operations are subject to various international trade agreements and regulations, such as the Dominican Republic–Central America Free Trade Agreement (CAFTA-DR), Caribbean Basin Trade Partnership Act (CBTPA), Haitian Hemispheric Opportunity through Partnership Encouragement Act, as amended (HOPE), the Food Conservation and Energy Act of 2008 (HOPE II), the Haiti Economic Lift Program of 2010 (HELP), the African Growth and Opportunity Act (AGOA), the Middle East Free Trade Area Initiative (MEFTA) and the activities and regulations of the World Trade Organization (WTO). Generally, these trade agreements and regulations benefit our business by reducing or eliminating the quotas, duties and/or quotastariffs assessed on products manufactured in a particular country. However, trade agreements and regulations can also impose requirements that negatively affecthave a material adverse effect on our business, revenue and results of operations, such as limiting the countries from which we can purchase raw materials, or limiting the products that qualify as duty free, and setting quotas, duties and/or quotastariffs on products that may be imported into the United States from a particular country. Certain inbound products in our Uniforms and Related Products and Promotional Products segments to the United States are subject to tariffs assessed on the manufactured cost of goods at the time of import. As a result, we have had to increase prices for certain products and may be required to raise those prices further, or raise our prices on other products, which may result in the loss of customers and harm our operating performance. In addition, increased competitionresponse, in part, to tariffs levied on products imported from developing countries couldChina we have a material adverse effect onshifted some production out of China and may seek to shift additional production out of China, which may result in additional costs and disruption to our business, resultsoperations.

The countries in which our products are manufactured or into which they are imported may from time to timetime-to-time impose new quotas, duties, tariffs and requirements as to where raw materials must be purchased to qualify for free or reduced duty. These countries also may also create additional workplace regulations or other restrictions on our imports or adversely modify existing restrictions. Adverse changes in these costs and restrictions could harm our business. We cannot assure you that future trade agreements or regulations will not provide our competitors an advantage over us or increase our costs, either of which could have a material adverse effect on our business, results of operations or financial condition. Nor can we assure you that the changing geopolitical and U.S. political environments will not result in a trade agreement or regulation being altered which adversely affects our company. Specifically, the currentThe U.S. administration has voiced strong concerns about imports from countries that it perceives as engaging in unfair trade practices, andgovernment may decide to impose or alter existing import quotas, duties, tariffs or other restrictions on products or raw materials sourced from those countries, which may include China and other countries from which we import raw materials or in which we manufacture our products. Any such quotas, duties, tariffs or restrictions could have a material adverse effect on our business, results of operations or financial condition.

The apparel industry, including uniforms and corporate identity apparel, and uniform industry is subject to changing fashion trends and if we misjudge consumer preferences, the image of one or more of our brands may suffer and the demand for our products may decrease.

The apparel industry, including uniforms and corporate identity apparel, is subject to shifting customer demands and evolving fashion trends and our success is also dependent upon our ability to anticipate and promptly respond to these changes. Failure to anticipate, identify or promptly react to changing trends or styles may result in decreased demand for our products, as well as excess inventories and markdowns, which could have a material adverse effect on our business, results of operations and financial condition. In addition, if we misjudge consumer preferences, our brand image may be impaired. We believe our products are, however, in general, less subject to fashion trends compared to many other apparel manufacturers because the majority of what we manufacture and sell are uniforms, scrubs, corporate identity apparel and other accessories.

Risks Relating To Our Business

Our success depends upon the continued protection of our trademarks and other intellectual property rights and we may be forced to incur substantial costs to maintain, defend, protect and enforce our intellectual property rights.

Our owned intellectual property and certain of our licensed intellectual property have significant value and are instrumental to our ability to market our products. While we own and use several trademarks, our “Fashion Seal Healthcare” mark is critically important to our business, as more than 22% of our products are sold under that name.  We cannot assure you that our owned or licensed intellectual property or the operation of our business does not infringe on or otherwise violate the intellectual property rights of others.  We cannot assure you that third parties will not assert claims against us on any such basis or that we will be able to successfully resolve such claims.  In addition, although we seek international protection of our intellectual property, the laws of some foreign countries may not allow us to protect, defend or enforce our intellectual property rights to the same extent as the laws of the United States. We could also incur substantial costs to defend legal actions relating to use of our intellectual property or prosecute legal actions against others using our intellectual property, either of which could have a material adverse effect on our business, results of operations or financial condition. There also can be no assurance that we will be able to negotiate and conclude extensions of existing license agreements on similar economic terms or at all.

Our customers may cancel or decrease the quantity of their orders, which could negatively impact our operating results.

Although we have long-standing customer relationships, we do not have long-term contracts with many of our customers. Sales to many of our customers are on an order-by-order basis. If we cannot fill customers’ orders on time, orders may be cancelled and relationships with customers may suffer, which could have an adverse effect on us, especially if the relationship is with a major customer. Furthermore, if any of our customers experience a significant downturn in their business, or fail to remain committed to our programs or brands, the customer may reduce or discontinue purchases from us. The reduction in the amount of our products purchased by customers could have a material adverse effect on our business, results of operations or financial condition.

In addition, some of our customers have experienced significant changes and difficulties, including consolidation of ownership, increased centralization of buying decisions, restructurings, bankruptcies and liquidations. A significant adverse change in a customer relationship or in a customer’s financial position could cause us to limit or discontinue business with that customer, require us to assume more credit risk relating to that customer’s receivables or limit our ability to collect amounts related to previous purchases by that customer, all of which could have a material adverse effect on our business, results of operations or financial condition.

We pursue acquisitions from time-to-time to expand our business, which may pose risks to our business.

We selectively pursue acquisitions from time to time as part of our growth strategy. We compete with others within our industry for suitable acquisition candidates. This competition may increase the price for acquisitions and reduce the number of acquisition candidates available to us. As a result, acquisition candidates may not be available to us in the future on favorable terms.

Even if we are able to acquire businesses on favorable terms, managing growth through acquisition is a difficult process that includes integration and training of personnel, combining plant and operating procedures, and additional matters related to the integration of acquired businesses within our existing organization. Unanticipated issues related to integration may result in additional expense and in disruption to our operations, and may require a disproportionate amount of our management’s attention, any of which could negatively impact our ability to achieve anticipated benefits, such as cost synergies. Growth of our business through acquisitions will also likely require us to increase our work force and the scope of our operating and financial systems and may require us to increase the geographic area of our operations. This would increase our operating complexity and the level of responsibility for both existing and new management personnel. Managing and sustaining our growth and expansion may require substantial enhancements to our operational and financial systems and controls, as well as additional administrative, operational and financial resources. There can be no assurance that we will be successful in integrating acquired businesses or managing our expanding operations.

In addition, although we conduct due diligence investigations prior to each acquisition, there can be no assurance that we will discover or adequately protect against all material liabilities of an acquired business for which we may be responsible as a successor owner or operator. The failure to identify suitable acquisitions, successfully integrate these acquired businesses, successfully manage our expanding operations, or to discover liabilities associated with such businesses in the diligence process, could adversely affect our business, results of operations or financial condition.

In order to finance such acquisitions, we may need to obtain additional funds either through public or private financings, including bank and other secured and unsecured borrowings and/or the issuance of equity or debt securities. There can be no assurance that such financings would be available to us on reasonable terms. Any future issuances of equity securities or debt securities with equity features may be dilutive to our shareholders.

If our information technology systems suffer interruptions or failures, including as a result of cyber-attacks, our business operations could be disrupted and our reputation could suffer.

We rely on information technology systems to process transactions, communicate with customers, manage our business, and process and maintain information The measures we have in place to monitor and protect our information technology systems might not offer sufficient protection from catastrophic events, power surges, viruses, malicious malware, attempts to gain unauthorized access to data or other types of cyber-based attacks. Cyber based attacks in particular are becoming more frequent, sophisticated and damaging. Any such events could product disruptions that result in an unexpected delay in operations, loss of confidential or otherwise protected information, corruption of data, and expenses related to the repair or replacement of our information technology systems. Compromising and/or loss of information could result in loss of sales or legal or regulatory claims which could adversely affect our revenues and profits or damage our reputation.

We have significant pension obligations with respect to our employees and our available cash flow may be adversely affected in the event that payments become due under any pension plans that are unfunded or underfunded.

A portion of our active and retired employees participate in defined benefit pension plans under which we are obligated to provide prescribed levels of benefits regardless of the value of the underlying assets, if any, of the applicable pension plan. If our obligations under a plan are unfunded or underfunded, we will have to use cash flow from operations and other sources to pay our obligations either as they become due or over some shorter funding period. As of December 31, 2017, we had approximately $8.4 million in unfunded or underfunded obligations related to our pension plans, compared to $9.5 million as of December 31, 2016.

We are subject to international, federal, state and local laws and regulations and failure to comply with them may expose us to potential liability.

We are subject to international, federal, state and local laws and regulations affecting our business, including those promulgated under the Occupational Safety and Health Act, the Consumer Product Safety Act, the Flammable Fabrics Act, the Textile Fiber Product Identification Act, the rules and regulations of the Consumer Products Safety Commission and various labor, workplace and related laws, as well as environmental laws and regulations. Failure to comply with such laws may expose us to potential liability and have an adverse effect on our results of operations.

Shortages of supply of sourced goods or raw materials from suppliers, interruptions in our manufacturing, and local conditions in the countries in which we operate could adversely affect our results of operations.

We utilize multiple supply sources and manufacturing facilities. However, an unexpected interruption in any of the sources or facilities could temporarily adversely affect our results of operations until alternate sources or facilities can be secured. In 2017 and 2016, approximately 28% and 31%, respectively, of products for our Uniform and Related Products segment were sourced from or contained raw materials sourced from China. In 2017 and 2016, approximately 32% and 32%, respectively, of products for our Uniform and Related Products segment were obtained from suppliers located in Central America and Haiti. In 2017 and 2016, approximately 67% and 59%, respectively, of our products for our Promotional Products segment were sourced from China. If we are unable to continue to obtain our products from China, Central America and/or Haiti, it could significantly disrupt our business. Because we source products and raw materials and maintain operations in these locations, we are affected by economic and political conditions in those countries, including possible employee turnover, labor and other unrest and lack of developed infrastructure, as well as decisions by the U.S. government to impose or increase import duties or other import regulations.

Our business may be impacted by adverse weather and other unpredicted events

Our corporate headquarters is located in Florida, which is a hurricane-sensitive area. Should a hurricane occur, the possibly resulting infrastructure damage and disruption to the area could negatively affect Superior, such as by damage to, or total destruction of, our headquarters, surrounding transportation infrastructure, network communications, and other forms of communication. Some of our suppliers, such as those located in Central America and Haiti, are exposed to hurricanes and earthquakes; the damages that such events could produce could affect the supply of our products. In addition, similar disruptions to the business of our customers located in areas affected by hurricanes or earthquakes may adversely impact sales of our products.

Implementation of technology initiatives could disrupt our operations in the near term and fail to provide the anticipated benefits.

As our business grows, we continue to make significant investments in our technology, including in the areas of warehouse management and product design. The costs, potential problems and interruptions associated with the implementation of technology initiatives could disrupt or reduce the efficiency of our operations in the near term. They may also require us to divert resources from our core business to ensure that implementation is successful. In addition, new or upgraded technology might not provide the anticipated benefits; it might take longer than expected to realize the anticipated benefits; the technology might fail or cost more than anticipated.

Our Remote Staffing Solutions business is dependent on the trend toward outsourcing.

Our Remote Staffing Solutions business and growth within that segment depend in large part on the industry trend toward outsourced customer contact management services. Outsourcing means that an entity contracts with a third party, such as us, to provide customer contact services rather than perform such services in-house. There can be no assurance that this trend will continue, as organizations may elect to perform such services themselves. A significant change in this trend could have a material adverse effect on our business, financial condition and results of operations.

Risks Relating to Our Indebtedness and Retirement Plan Obligations

Our indebtedness may limit cash flow available to invest in the ongoing needs of our business.

As of December 31, 2020, our total consolidated indebtedness was $88.1 million. Our outstanding indebtedness may have negative consequences on our business, such as requiring us to dedicate a sizable portion of our cash flow from operations to the payment of debt service, reducing the availability of our cash flow to fund working capital, capital expenditures, acquisitions, dividends, stock buybacks and other general corporate purposes, and increasing our vulnerability to adverse economic or industry conditions.

Our credit agreement contains restrictions that limit our flexibility in operating our business.

Our senior secured credit agreement contains various covenants that limit our ability to engage in specified types of transactions. These covenants limit our and our restricted subsidiaries’ ability to, among other things:

•   incur additional indebtedness or issue certain preferred shares;

•   pay dividends on, repurchase or make distributions in respect of our capital stock, or make other restricted payments;

•   make certain investments;

•   sell certain assets;

•   acquire other businesses;

•   create liens;

•   consolidate, merge, sell or otherwise dispose of all or substantially all of our assets; and

•   enter into certain transactions with our affiliates.

Substantially all of the assets of the Company are pledged as collateral under our indebtedness. Our credit agreement requires compliance with certain financial ratios and covenants and satisfaction of specified financial tests. Failure to meet any financial ratios, covenants or financial tests could result in an event of default under our credit agreement. If an event of default occurs, our lender could increase our borrowing costs, restrict our ability to obtain additional borrowings under our line of credit, accelerate all amounts outstanding or enforce its interest against collateral pledged under the credit agreement.

Potential transition from LIBOR as a benchmark borrowing rate.

On July 27, 2017, the U.K. Financial Conduct Authority (the “FCA”), which regulates the London interbank offered rate (“LIBOR”), announced that the FCA will no longer persuade or compel banks to submit rates for the calculation of LIBOR after 2021. This announcement indicates that the continuation of LIBOR on the current basis is not guaranteed after 2021, and LIBOR may be discontinued or modified by 2021.

Interest rates on the Company’s current debt instruments are benchmarked against LIBOR. These debt instruments mature after December 31, 2021, which is the date at which banks are expected to stop reporting the data used to create this benchmark reference rate. It is uncertain how many or which industry participants will switch from one benchmark rate to another or whether a benchmark other than Secured Overnight Financing Rate (“SOFR”) will become prevalent. Further, the Company’s debt instruments do not currently identify an alternative benchmark rate to replace LIBOR, leaving such determination to be made if and when necessary, nor is the impact of such a change determinable. The transition to SOFR or any other benchmark rate may impact interest rates on the Company’s borrowings, including its corporate debt and interest-rate swap. If the impact is significantly adverse, the Company’s ability to service its debt or comply with its debt covenants could be jeopardized.

Further, a change from LIBOR to another indexed benchmark rate may affect companies or individuals with exposure to LIBOR with whom the Company relies upon to conduct business, such as its current banking institutions, vendors, customers, brokers/dealers, investment companies or investment advisors. Adverse impacts on any market participants on whom the Company relies to conduct business or access capital markets could significantly affect the Company’s business operations and cash flow.

We have significant retirement plan obligations with respect to our employees and our available cash flow may be adversely affected in the event that payments become due under our supplemental executive retirement plan that is unfunded.

The Company is the sponsor of an unfunded supplemental executive retirement plan (“SERP”) in which several of its employees are participants. In the event that payments become due under the SERP, we will have to use cash flow from operations or other sources to fund our obligations. As of December 31, 2020, we had $14.3 million in unfunded obligations related to the SERP.

Risks Relating to Our Common Stock

Certain existing shareholders have significant control.

At December 31, 2020, our executive officers and Directors, and certain of their family members collectively owned 35.0% of our outstanding common stock. As a result, our executive officers and Directors, and certain of their family members have significant influence over the election of our Board of Directors, the approval or disapproval of any other matters requiring shareholder approval, and the affairs and policies of our company.

Our share price may change significantly, and you may not be able to resell shares of our common stock at or above the price you paid or at all, and you could lose all or part of your investment as a result. If we sell any common stock or securities convertible into or exercisable for common stock under our universal shelf registration statement, you may be diluted.

The trading price of our common stock, as reported on the Nasdaq Stock Market, could fluctuate due to a number of factors such as those listed in “Risks Relating to Our Business” and include, but are not limited to, the following, some of which are beyond our control:

•   quarterly variations in our results of operations;

•   results of operations that vary from the expectations of securities analysts and investors;

•   results of operations that vary from those of our competitors;

•   changes in expectations as to our future financial performance, including financial estimates by securities analysts and investors;

•   announcements by us, our competitors or our vendors of significant contracts, acquisitions, divestitures, joint marketing relationships, joint ventures or capital commitments;

•   announcements by third parties of significant claims or proceedings against us; and

•   general domestic and international economic conditions.

Furthermore, the stock market has experienced extreme volatility that, in some cases, has been unrelated or disproportionate to the operating performance of particular companies. These broad market and industry fluctuations may adversely affect the market price of our common stock, regardless of our actual operating performance.

In the past, following periods of market volatility, shareholders have instituted securities class action litigation. If we were involved in securities litigation, it could have a substantial cost and divert resources and the attention of executive management from our business regardless of the outcome of such litigation.

Finally, we have recently filed with the Securities and Exchange Commission a universal shelf registration statement, pursuant to which we may offer and sell up to $120,000,000 in the aggregate of common stock, preferred stock, debt securities, warrants, units and subscription rights, and the selling shareholders may offer and sell up to 750,000 shares in the aggregate of our common stock, in each case from time to time in one or more offerings. Any such offering or sale may cause a decline in our share price and an offering by us of equity securities or securities convertible into or exercisable for equity securities may result in dilution to existing shareholders.

There can be no assurance that we will continue to pay dividends on our common stock, and our indebtedness could limit our ability to pay dividends on our common stock.

Payment of cash dividends on our common stock is subject to our compliance with applicable law and depends on, among other things, our results of operations, financial condition, level of indebtedness, capital requirements, contractual restrictions, business prospects and other factors that our board of directors may deem relevant. Our senior credit facility contains, and the terms of any future indebtedness we incur may contain, limitations on our ability to pay dividends. Although we have paid cash dividends in the past, there can be no assurance that we will continue to pay any dividend in the future.

General Risk Factors

We are subject to periodic litigation in both domestic and international jurisdictions that may adversely affect our financial position and results of operations. 

From time-to-time we may be involved in legal or regulatory actions regarding product liability, employment practices, intellectual property infringement, bankruptcies and other litigation or enforcement matters. These proceedings may be in jurisdictions with reputations for aggressive application of laws and procedures against corporate defendants. We are impacted by trends in litigation, including class-action allegations brought under various consumer protection and employment laws. Due to the inherent uncertainties of litigation in both domestic and foreign jurisdictions, we cannot accurately predict the ultimate outcome of any such proceedings. These proceedings could cause us to incur costs and may require us to devote resources to defend against these claims and could ultimately result in a loss or other remedies, such as product recalls, which could adversely affect our financial position and results of operations.

Volatility in the global financial markets could adversely affect results.

In the past, global financial markets have experienced extreme disruption, including, among other things, volatility in securities prices, diminished liquidity and credit availability, rating downgrades of certain investments and declining valuations of others. There can be no assurance that there will not be further change or volatility, which could lead to challenges in our business and negatively impact our financial results. Any future tightening of credit in financial markets could adversely affect the ability of our customers and suppliers to obtain financing for significant purchases and operations and could result in a decrease in orders and spending for our products and services. We are unable to predict the likely duration and severity of any disruption in financial markets and adverse economic conditions and the effects they may have on our business and financial condition.

Inability to attract and retain key management or other personnel could adversely impact our business.

Our success is largely dependent on the skills, experience and efforts of our senior management and other key personnel. If, for any reason, one or more senior executive or key personnel was not to remain active in our company, or if we were unable to attract and retain senior management or key personnel, our results of operations could be adversely affected.

Certain existing shareholders have significant control.Failure to achieve and maintain effective internal controls could adversely affect our business and stock price.

At December 31, 2017,Effective internal controls are necessary for us to provide reliable financial reports. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to the consolidated financial statement preparation and presentation. While we continue to evaluate our executive officers, Directors,internal controls, we cannot be certain that these measures will ensure that we implement and certain of their family members collectively owned 35.2%maintain adequate internal control over financial reporting in the future. If we fail to maintain the adequacy of our outstanding common stock. Asinternal controls or if we or our independent registered public accounting firm were to discover material weaknesses in our internal controls, as such standards are modified, supplemented or amended, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002. Failure to achieve and maintain an effective internal control environment could cause us to be unable to produce reliable financial reports or prevent fraud. This may cause investors to lose confidence in our reported financial information, which could have a material adverse effect on our stock price. 

We may recognize impairment charges, which could adversely affect our financial condition and results of operations.

We assess our goodwill, intangible assets and long-lived assets for impairment when required by generally accepted accounting principles in the United States (“GAAP”). These accounting principles require that we record an impairment charge if circumstances indicate that the asset carrying values exceed their estimated fair values. The estimated fair value of these assets is impacted by general economic conditions in the locations in which we operate. Deterioration in these general economic conditions may result in: declining revenue, which can lead to excess capacity and declining operating cash flow; reductions in management’s estimates for future revenue and operating cash flow growth; increases in borrowing rates and other deterioration in factors that impact our weighted average cost of capital; and deteriorating real estate values. If our assessment of goodwill, intangible assets or long-lived assets indicates an impairment of the carrying value for which we recognize an impairment charge, this may adversely affect our financial condition and results of operations.

If we are unable to accurately predict our future tax liabilities, become subject to increased levels of taxation or our tax contingencies are unfavorably resolved, our results of operations and financial condition could be adversely affected.

Changes in tax laws or regulations in the jurisdictions in which we do business, including the United States, or changes in how the tax laws are interpreted, could further impact our effective tax rate, further restrict our ability to repatriate undistributed offshore earnings, or impose new restrictions, costs or prohibitions on our current practices and reduce our net income and adversely affect our cash flows.

We are also subject to tax audits in the United States and other jurisdictions and our tax positions may be challenged by tax authorities. Although we believe that our current tax provisions are reasonable and appropriate, there can be no assurance that these items will be settled for the amounts accrued, that additional tax exposures will not be identified in the future or that additional tax reserves will not be necessary for any such exposures. Any increase in the amount of taxation incurred as a result of challenges to our executive officerstax filing positions could result in a material adverse effect on our business, results of operations and certain of their family members have significant influence over the election of our Board of Directors, the approval or disapproval of any other matters requiring shareholder approval, and the affairs and policies of our company.financial condition.

None.

AsThe following table describes the material facilities we owned or leased as of December 31, 2017, the Company owned or leased approximately 24 facilities containing an aggregate of approximately 957,000 square feet located in the United States, Central America, South America, Haiti and Asia, which are used for manufacturing, distribution, and office space supporting our Uniforms and Related Products, Remote Staffing Solutions, and Promotional Products segments. Our owned facilities total approximately 452,000 square feet, including our 66,000 square feet corporate headquarters in Seminole, Florida (which also houses a call center and is involved with all of our segments), and 75,000 square feet warehousing and distribution location in Alpharetta, GA (used in conjunction with our Uniforms and Related Products segment), and 43,000 square feet call center in El Salvador (which serves our Remote Staffing Solutions segment). Our principal Promotional Products locations are leased office space in Los Angeles, CA and Chicago, IL; we also lease office space for use with this segment in other countries, including Brazil, India and China. Our distribution center in Eudora, AR, which is used primarily for our Uniforms and Related Products segment, is rented for a nominal amount from a municipality providing incentives for businesses to locate in that area and may be purchased for a nominal amount.2020:

The Company has an ongoing program designed to maintain and improve its facilities. The Company'sCompany’s properties have adequate productive capacity to meet the Company’s present needs as well as those of the foreseeable future.

We are a party to certain lawsuits in the ordinary course of business. We do not believe that these proceedings, individually or in the aggregate, will have a material adverse effect on our financial position, results of operations or cash flows.

Not applicable.

PART II

The principal market on which Superior'sSuperior’s common shares are traded is the NASDAQ Stock Market under the symbol “SGC”.“SGC.”

The following table sets forth the high and low sales prices and cash dividends declared on our common stock by quarter for 2017 and 2016 as reported in the consolidated transaction reporting system of the NASDAQ Stock Market.

We declareddeclared cash dividends of $0.0875$0.40 per share in the first and second quarters and $0.095 per share in the third and fourth quarters during the fiscal year ended December 31, 2017.2020, which were paid in the first, third and fourth quarters of 2020.

We intend to pay regular quarterly distributions to our holders of common shares, the amount of which may change from time to time; however, there can be no assurances that we will in fact pay such distributions on a regular basis. Future distributions will be declared and paid at the discretion of our Board of Directors, and will depend upon cash generated by operating activities, our financial condition, capital requirements, and such other factors as our Board of Directors deem relevant.

Under our credit agreementCredit Agreement, as amended, with Branch Banking and Trust Company (“BB&T”),Truist Bank, if an event of default exists, we may not make distributions to our shareholders. The Company is in full compliance with all terms, conditions and covenants of its creditsuch agreement.

On December 29, 2014, the Board of Directors declared a 2-for-1 stock split of the Company’s common stock. The record date for the split was January 12, 2015, and the stock split became effective on February 4, 2015.

On February 20, 2018, 16, 2021, we had 153144 shareholders of record and the closing price for our common shares on the NASDAQ Stock Market was $24.37 per share.record.

Information regarding the Company’sCompany’s equity compensation plans is incorporated by reference to the information set forth in Item 12 of Part III of this Form 10-K under the section entitled “Equity Compensation Plan Information.”

Stock Performance Graph

The following graph shows a five-year comparison of the cumulative total return on $100 invested in our common stock, The NASDAQ Composite Index and The NYSE MKT Wholesale and Retail Trade Index, which is comprised of all NYSE American companies with SIC codes from 5000 through 5999.

The graph illustrates the cumulative values at the end of each succeeding fiscal year resulting from the change in the stock price, assuming a reinvestment of dividends. Over the five year period, Superior Uniform Group, Inc. stock grew to $512.74, compared to $242.29 for the NASDAQ Composite Index and $114.87 for the NYSE Wholesale and Retail Trade Index.

Issuer Purchases of Equity Securities

The table below sets forth information with respect to purchases made by or on behalf of Superior Uniform Group of Companies, Inc. or any “affiliated purchaser” (as defined in Rule 10b-18(a)(3) under the Exchange Act) of our common shares during the threethree months ended December 31, 2017.2020.

¹On August 1, 2008, the Company’s Board of Directors approved an increase to the outstanding authorization to allow for the repurchase of 1,000,000 additional shares of the Company’s outstanding shares of common stock. There is no expiration date or other restriction governing the period over which we can make our share repurchases under the program. All such purchases were open market transactions.

Item 6.          Selected Financial Data

You should read the followingThe table below presents certain selected historical consolidated financial data together with our consolidated financial statementsinformation as of and for each of the related notes and with "Item 7" - Management's Discussion and Analysis of Financial Condition and Results of Operations" includedyears in this Form 10-K.

the five-year period ended December 31, 2020. We have derived the consolidated statement of operations data for the years ended December 31, 2017, 2016,2020, 2019 and 20152018 and the consolidated balance sheet data as of December 31, 2017 2020and 20162019, from our audited consolidatedconsolidated financial statements, which are included elsewhere in this Form 10-K. We have derived the consolidated statements of operations data for the years ended December 31, 20142017 and 20132016 and the consolidated balance sheet data as of December 31, 2015, 2014,2018, 2017 and 20132016 from our audited consolidated financial statements that are not included in this Form 10K.10-K. Our historical results for any prior period are not indicative of results to be expected in any future period. The selected consolidated financial data included in the following tables should be read in conjunction with the Financial Statements and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in this Form 10-K.

The following discussion should be read in conjunction with our consolidated financial statements,Financial Statements, which present our results of operations for thethe years ended December 31, 2017, 20162020, 2019 and 2015,2018, as well as our financialfinancial positions at December 31, 2017 2020and 2016,2019, contained elsewhere in this Form 10-K. Some of the information contained in this discussion and analysis or set forth elsewhere in this Form 10-K, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. You should review the “Special Note Regarding Forward Looking Statements” and “Risk Factors” sections of this Form 10-K for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

The discussion that follows includes a comparison of the Company’s results of operations and liquidity and capital resources for the years ended December 31, 2020 and 2019. For the discussion of changes from the year ended December 31, 2018 to the year ended December 31, 2019 and other financial information related to the year ended December 31, 2018, refer to Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, of the Company’s Form 10-K for the year ended December 31, 2019. That document was filed with the United States Securities and Exchange Commission on February 20, 2020.

Recent AcquisitionsBusiness Outlook

As described in “Item 1. Business – Overview,” on March 8, 2016, the Company closed on the acquisition of substantially all of the assets of BAMKO, Inc. with an effective date of March 1, 2016.  BAMKO is a full-service merchandise sourcing and promotional products company based in Los Angeles, CA.  The purchase price for the asset acquisition consisted of approximately $15.2 million cash, net of cash acquired, the issuance of approximately 324,000 restricted shares of Superior’s common stock that vests over a five-year period, the potential future payments of approximately $5.5 million in additional contingent consideration through 2021, and the assumption of certain liabilities of BAMKO.  Depending on the context, when using the term “BAMKO” in this Form 10-K, we refer either to the Company’s wholly-owned subsidiary housing the acquired business (BAMKO, LLC) or to the business acquired in the transaction, as subsequently grown through additional acquisitions.

On August 21, 2017, the Company, BAMKO, acquired substantially all of the assets of PublicIdentity, Inc. (“Public Identity”).  Public Identity is a promotional products and branded merchandise agency that provides promotional products and branded merchandise to corporate clients and universities. The purchase price consisted of $0.8 million in cash, the issuance of approximately 54,000 restricted shares of Superior’s common stock and future payments of approximately $0.4 million in additional consideration through 2020. The majority of the shares issued vest over a three-year period.

On November 30, 2017, BAMKO closed on the acquisition of substantially all of the assets of Tangerine Promotions, Ltd. and Tangerine Promotions West, Inc. (collectively “Tangerine”). The transaction had an effective date of December 1, 2017.  Tangerine is a promotional products and branded merchandise agency that serves many well-known brands.  The company is one of the leading providers of Point-of-Purchase (POP) and Point-of-Sale (POS) merchandise in the country.  The purchase price for the asset acquisition consisted of approximately $7.2 million in cash, subject to adjustment, the issuance of approximately 83,000 restricted shares of Superior’s common stock that vests over a four-year period, the potential future payments of approximately $5.5 million in additional contingent consideration through 2021, and the assumption of certain liabilities of Tangerine.

Primarily as a result of its acquisition of BAMKO, Superior realigned its organizational structure and updated its reportable operating segments. A new Promotional Products segment has been created and consists of sales to customers of promotional products. Superior is now comprised of three reportable business segments: (1) Uniforms and Related Products, (2) Remote Staffing Solutions, and (3) Promotional Products.

COVID-19 Impact

The COVID-19 pandemic continues to affect our operations and financial performance, and likely will continue to do so for an undetermined period of time. International, federal, state and local efforts to contain the spread of COVID-19 have continued as government actions to address the situation remain in effect and new actions continue to be enacted, including safety requirements such as recommended or mandatory use of face masks and other personal protective equipment and related products, social distancing rules and guidelines, travel restrictions, temporary closures of non-essential businesses and other restrictive measures that prohibit many employees from going to work. With regard to personal protective equipment, the COVID-19 pandemic has created significant market demand from new and existing customers. In responding to the needs of our customers, we have sourced significant amounts of personal protective equipment, including face masks, isolation gowns, sanitizers and gloves, which contributed $82.7 million and $48.5 million to net sales during the year ended December 31, 2020 for our Promotional Products segment and Uniforms and Related Products segment, respectively.

However, the pandemic also had and could continue to have a number of adverse impacts on our business, including, but not limited to, additional disruption to the economy and our customers’ willingness and/or ability to spend, temporary or permanent closures of businesses that consume our products and services, additional work restrictions, and supply chains being interrupted, slowed, or rendered inoperable. Our employees and the employees and contractors of our suppliers and customers also could become ill, quarantined, or otherwise unable to work or travel due to health reasons or governmental restrictions.

We have and will continue to monitor and control our expense levels to protect our profitability. For example, on March 30, 2020, we entered into debt deferment agreements with Truist Bank (formerly known as Branch Banking and Trust Company) to: (i) defer contractual principal and interest payments due between April 1, 2020 and June 1, 2020 under the 2017 Term Loan and 2018 Term Loan until their respective maturity dates; and (ii) defer contractual interest payments due between April 1, 2020 and June 1, 2020 under the revolving credit facility until its maturity date. Additionally, we have proactively taken steps to increase available cash on hand by targeted reductions in discretionary operating expenses. Finally, we have and will continue to delay certain capital expenditures relating to non-essential projects until economic conditions begin to stabilize.

Prolonged instability in the United States and global economies, and how the world reacts to them, 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 assets and obligations, reduced credit-worthiness of our customers, and potential impairment of the carrying value of goodwill or other indefinite-lived intangible assets. The extent to which the COVID-19 pandemic ultimately impacts our business, financial condition, results of operations or cash flows will depend on numerous evolving factors that we are unable to accurately predict at this time. The length and scope of the restrictions imposed by various governments and success of efforts to deliver a vaccine on a timely basis, among other factors, will determine the ultimate severity of the COVID-19 impact on our business. However, prolonged periods of difficult market conditions could have material adverse impacts on our business, financial condition, results of operations and cash flows.

Business Outlook

Uniforms and Related Products

Historically,In our Uniforms and Related Products segment, we have manufacturedmanufacture and soldsell a wide range of uniforms, career apparel and accessories, which comprises our Uniforms and Related Products segment.accessories. Our primary products are service apparel, such as scrubs, lab coats, protective apparel and patient gowns, provided to the healthcare industry, and service apparel, such as uniforms, provided to workers employed by our customers in various industries, including retail, hotels, food service, transportation and asother industries. We sell our brands of healthcare service apparel primarily to healthcare laundries, dealers, distributors and retailers. As a result of the COVID-19 pandemic, we have seen increased demand for healthcare service apparel from laundries, dealers and distributors that service hospitals and other medical facilities. From a long-term perspective, we expect that demand for our business prospects are dependent upon levelssignature marketing brands, including Fashion Seal Healthcare® and WonderWink®, will continue to provide opportunities for growth and increased market share. Sales of employment and overall economic conditions, among other factors.  Our revenuesuniforms are impacted by our customers’ opening and closing of locations and reductions, increases, and increases in headcount. Additionally, voluntary employee turnover at our customers can have a significant impact on our business.of employees. The current economic environment in the United States is continuinghas been significantly impacted by the COVID-19 pandemic, and as a result, we have seen reduced demand for uniform apparel in many of our customers’ industries, such as the restaurant, transportation and hospitality industries. This, however, has been more than offset by demand from customers in certain retail industries, such as grocery and pharmacy customers, and healthcare. Additionally, we have sourced much needed personal protective equipment for our customers, which has also offset the declines in sales of uniform apparel to see moderate improvementcertain customers. Based on the longer-term fundamentals of our uniforms business, we anticipate that we will have growth opportunities when market conditions in the employment environmentUnited States stabilize and voluntary employee turnover has been increasing.  We also continuebegin to see an increase in the demand for employees in the healthcare sector.  These factors are expected to have positive impacts on our prospects for growth in net sales in 2018.improve.

We have continued our efforts to increase penetration of the health care market. We have been and continue to pursue acquisitions to increase our market share in the Uniforms and Related Products segment.

Remote Staffing Solutions

This business segment (also known as “The Office Gurus”), which operates in El Salvador, Belize, Jamaica, and the United States, was initially started to provide remote staffing services forsupport the Company at a lower cost structure in orderCompany’s back office needs while improving overall efficiencies and lowering operating costs. After years of consistently improving key performance indicators, lowering costs and providing exceptional service to improve our own operating results.   It has in fact enabled us to reduce operating expenses in our Uniforms and Related Products segment in areas such as order entry, cash collections, vendor payables processing, customer service, sales, and to more effectively service our customers’ needs in that segment.  We beganothers, The Office Gurus started selling remote staffingtheir services to otheroutside companies atin 2009. The Office Gurus has become an award-winning global business process outsourcer offering inbound and outbound voice, email, text, chat and social media support. Although the endCOVID-19 pandemic has generated uncertainties for our customers and their industries, we have recently seen increased demand for our services. With an environment and career path designed to attract and maintain top talent across all sites, we believe The Office Gurus is positioned well to continue growing this business. 

Promotional Products

We have been involved in the sale ofFor more than a decade, we sold promotional products on a limited basis to our existing Uniforms and Related Products customer base. While there were substantial opportunities to sell promotional products to those customers, it was not an area of focus, specialization, or expertise for over a decade. However, we lacked the scale and expertise to be a recognized name in this market prior tous. On March 1, 2016, that changed with our acquisition of substantially all of the assets of BAMKO, effective March 1, 2016.Inc. (“BAMKO”). BAMKO has been operatingmany strengths, well-developed systems, and time-tested processes that offer significant competitive advantages. With a robust back-office support platform operated out of India, direct-to-factory sourcing operations based in China, and proprietary technological platforms and programming capabilities that we believe are competitive, BAMKO is well positioned in the promotional products industry for more than 15 years and we believe that BAMKO’s strong back office and support systems located in India, China and Hong Kong, as well as their “directcontinues to factory” sourcing operations provide us with a competitive advantage. We believe that BAMKO has well developed systems and processes that can serve asbe a platform for additional acquisitions that we expect to complete in this highly fragmented market - we believe this product line is a synergistic fit with our uniform business.potential future acquisitions. We completed two additional acquisitions in this segment in late 2017.2017, as well as an acquisition in February 2021, and remain open to additional acquisitions going forward. In recent years we have seen an increase in customer orders in our promotional products business and expect growth opportunities for our core promotional products business to continue once the current market environment stabilizes. As a result of the COVID-19 pandemic, we have seen significant short-term opportunities within the personal protective equipment market. In responding to the needs of our customers, the sourcing team within the Promotional Products segment sourced much needed personal protective equipment for our customers. These opportunities led to record revenue levels for the segment during the year ended December 31, 2020, despite the downturn in the branded merchandise industry that has experienced customer budget cuts and widespread event cancellations. Additionally, in our core promotional products business we have not experienced the same downturn that many of our competitors have experienced as the increase in activities from customers in certain industries, such as the delivery service industry, has more than offset reduced activities from customers in other industries, such as the restaurant and entertainment industries. From a long-term perspective, we believe that this segment’s synergistic fit with our uniforms business will create opportunities to cross-sell the products of each of these business segments to new and existing customers. 

The Year Ended December 31, 2017 vs. 20162020 Compared to the Year Ended December 31, 2019

Operations

Net Sales

Net Sales (in thousands, except percentages):

Net sales for the Company increased 5.6%39.8% from $252.6$376.7 million in 2016for the year ended December 31, 2019 to $266.8$526.7 million in 2017.for the year ended December 31, 2020. The principal components of this aggregate increase in net sales is attributed towere as follows: (1) an increase in the acquisitions of BAMKO effective March 1, 2016, Public Identity on August 21, 2017, and Tangerine on December 1, 2017 (contributing 6.0%), increases in net sales after intersegment eliminations from our Remote Staffing Solutions segment (contributing 1.9%), partially offset by a reduction in net sales fromof our Uniforms and Related Products segment (contributing a decrease of 2.3%13.2%), (2) an increase in the net sales for our Promotional Products segment (contributing 25.1%), and (3) an increase in net sales for our Remote Staffing Solutions segment after intersegment eliminations (contributing 1.5%).

Uniforms and Related Products net sales decreased 2.7% in 2017increased 21.0%, or $49.8 million, for the year ended December 31, 2020 compared to 2016.the year ended December 31, 2019. The decreaseincrease was primarily due to increased demand for personal protective equipment, including face masks, isolation gowns, sanitizers and gloves, which contributed $44.6 million to the increase in net salessales. Additionally, market demand in this segment is attributed2020 for healthcare service apparel contributed to several factors. One of our larger customers was acquired by one of its competitors in 2016. The acquiring company was serviced by a different uniform provider that has taken over this account. We will continue to service this customer at a reduced rate. The net reduction from this customer was approximately $4.6 million. The reduction of recurring sales to this customer was partially offset by sales of remaining inventory in the second quarter. Finally, one of our large customers elected not to repeat two large promotional uniform programs that have been a part of their business for several years now. This resulted in a decreaseincrease in net sales of approximately $2.9 million.sales. These decreasesincreases were partially offset by continued market penetration and increasesdecrease in voluntary employee turnover.demand for uniform apparel experienced during 2020 primarily as a result of COVID-19.

Remote Staffing SolutionsSolutions net sales increased 28.2%16.1% before intersegment eliminations and 33.7%17.6% after intersegment eliminations in 2017.for the year ended December 31, 2020 compared to the year ended December 31, 2019. These increases arewere primarily attributed to providing continued market penetrationservices in 2017, both with respect2020 to our customer base that was expanded during 2019 and the onboarding of new and existing customers.customers in 2020.

Promotional ProductsProducts net sales increased 54.2% in 201788.0%, or $94.6 million, for the year ended December 31, 2020 compared to the period from the BAMKO acquisition date of March 1, 2016 throughyear ended December 31, 2016.2019. The increase is partially due to two additional months of sales in 2017 (contributing 23.0%), and two acquisitions in the latter part of 2017 (contributing 16.0%). The balance of the increase iswas primarily due to newthe sale of personal protective equipment, including face masks, sanitizers and gloves, which contributed $82.7 million to the increase in net sales during the year ended December 31, 2020. As a result of the COVID-19 pandemic, we have seen significant short-term opportunities within the personal protective equipment market. Additionally, continued product sales to our expanded customer acquisitionsbase during 2020 also contributed to the net sales increase. In our core promotional products business we have not experienced the same downturn that many of our competitors have experienced as the increase in activities from customers in certain industries, such as the delivery service industry, has more than offset reduced activities from customers in other industries, such as the restaurant and expanded programs with existing customers.entertainment industries.

Cost of Goods Sold

Cost of goods sold consists primarily of direct costs of acquiring inventory, including cost of merchandise, inbound freight charges, purchasing costs, and inspection costs for our Uniforms and Related Products and Promotional Products segments. Cost of goods sold for our Remote Staffing Solutions segment includes salaries and payroll related benefits for agents. The Company includes shipping and handling fees billed to customers in net sales. Shipping and handling costs associated with out-bound freight are generally recorded in cost of goods sold. Other shipping and handling costs are included in selling and administrative expenses.

As a percentage of net sales, cost of goods sold for our Uniforms and Related Products segment was 64.6% in 201765.2% for the year ended December 31, 2020 and 66.7% in 2016. The decrease as65.4% for the year ended December 31, 2019. As a percentage of net sales, iscost of goods sold remained relatively flat. The increase in cost of goods sold during the year ended December 31, 2020 compared to the year ended December 31, 2019 was primarily attributeddue to a decrease in direct product costs as a percentage ofthe net sales during 2017.increase explained above.

As a percentage of net sales, cost of goods sold for our Remote StaffingStaffing Solutions segment was 45.9% in 2017,42.6% for the year ended December 31, 2020 and 46.4% in 2016.41.3% for the year ended December 31, 2019. The percentage decreaseincrease was primarily driven by disruptions resulting from COVID-19 and costs associated with the onboarding of new customers in 2017 as compared to 2016 is primarily attributed to a decrease in the percentage of segment revenue coming from the domestic portion of our Remote Staffing Solutions segment from 29.2% in 2016 to 19.8% in 2017. The hourly rates charged for domestic services are higher than offshore services but the margin percentage earned is lower.2020.

As a percentage of net sales, cost of goods sold for our Promotional Products segment was 67.7%66.5% for the year ended December 31, 2020 and 73.6% for the year ended December 31, 2019. The percentage decrease was primarily the result of personal protective equipment sales during the year ended December 31, 2020 and differences in 2017the mix of products and 65.2% in 2016. Cost of goods sold as a percentage of revenue for this segment can fluctuate based on the service requirements of individual contracts.customers.

Selling and Administrative Expenses

Selling and administrative expenses increased 27.2%, or $29.2 million, for the year ended December 31, 2020 compared to the year ended December 31, 2019. The increase was primarily due to an increase in sales commissions and other employee compensation as a result of record sales levels during the year ended December 31, 2020, an increase in bad debt expense of $5.4 million on outstanding accounts receivable and an increase in expense of $4.2 million on acquisition related contingent liabilities primarily driven by fair market value adjustments.

As a percentage of net sales, selling and administrative expenses for our Uniforms and Related Products segment approximated 24.8% in 2016was 28.9% for the year ended December 31, 2020 and 26.4% in 2017.30.7% for the year ended December 31, 2019. The increase as a percentage of net salesdecrease was primarily due to lowerthe increase in net sales in 2017 to cover operating expenses (contributing 0.7%) and increased salaries, wages and benefits exclusive of medical costs (contributing 0.5%), higher bad debt expense due primarily to a customer bankruptcy (contributing 0.3%) and other minor increases (contributing 0.3%). These increases were partially offset by lower medical claims in 2017 (contributing 0.2%).explained above.

As a percentage of net sales, selling and administrative expenses for our Remote Staffing SolutionsSolutions segment approximated 34.2% in 2017was 36.1% for the year ended December 31, 2020 and 34.0% in 2016.37.4% for the year ended December 31, 2019. The increase as a percentage ofdecrease was primarily related to the net sales is attributed primarily to an increase in payroll related costs (contributing 3.3%), higher broker fees (contributing 1.1%), higher facilities costs and depreciation due to our expanded facility in El Salvador (contributing 2.2%) and other minor increases (contributing 3.4%). These increases were mostly offset by higher net sales to cover operating expenses (contributing 9.8%).explained above.

As a percentage of net sales, selling and administrative expenses for our Promotional Products segment were 28.4% in 2017 and 37.3% fromwas 20.5% for the BAMKO acquisition date of March 1, 2016 throughyear ended December 31, 2016. Included within these expenses2020 and 22.1% for 2017the year ended December 31, 2019. The percentage decrease was approximately $0.3 million in of expenses for acquisitions. Included within these expenses for 2016 was approximately $1.1 million of expenses associated with the BAMKO acquisition. Net of these acquisition related expenses, selling and administrative expenses would have been 27.3% of net sales in 2017 and 33.2% of net sales in 2016. The decrease is primarily related to higherthe net sales increase explained above.

Other Periodic Pension Costs
 
During the years ended December 31, 2020 and 2019, the Company recorded $0.4 million and $1.1 million, respectively, in pension settlement losses that resulted from lump sum pension payments made to cover operatingvarious employees upon their retirement or termination during the periods specified. The pension settlement losses did not require a cash outlay by the Company and did not increase the Company’s total pension expense over time, as the charge was an acceleration of costs partially offset by a higher payroll related costs (contributing 1.8%) and a lower gain on foreign currency (contributing 0.9%).that otherwise would be recognized as pension expense in future periods.

Gain on Sale of Property, Plant and Equipment

InDuring the quarteryear ended MarchDecember 31, 2017,2020, we sold our former call centera building and related assets in El Salvador inthat were previously used as a Distribution Center within our Remote Staffing SolutionsUniforms and Related Products segment for net proceeds of $2.8$5.3 million and realized a gain on sale of $1.0$2.2 million. This sale was part of management’s plan to transition the HPI Distribution Center operations to the Company’s largest and most technologically advanced semi-robotic worldwide distribution center, located in Eudora, Arkansas.

Interest Expense

Interest expense increaseddecreased to $0.8$2.0 million for the year ended December 31, 20172020 from $0.7$4.4 million for the year ended December 31, 2016.2019. This increase is attributed primarily to higher average borrowings outstandingdecrease was primarily due to the BAMKO acquisition.a decrease in LIBOR rates on our outstanding borrowings and a significant reduction in outstanding borrowings.

Income Taxes

On December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act (“Tax Act”) that instituted fundamental changes to the U.S. tax system. The Tax Act includes changes to the taxation of foreign earnings by implementing a dividend exemption system, expansion of the current anti-deferral rules, a minimum tax on low-taxed foreign earnings and new measures to deter base erosion. The Tax Act also permanently reduces the corporate tax rate from 34% to 21%, imposes a one-time mandatory transition tax on the historical earnings of foreign affiliates and implements a territorial style tax system. The impacts of these changes are reflected in the 2017 tax expense which resulted in a provisional charge of approximately $4.0 million, which is subject to adjustment given the provisional nature of the charge. This resulted in an effective tax rate higher than the statutory rate in 2017. As a result of the transition tax under The Act, the Company will no longer consider its undistributed earnings from foreign subsidiaries as indefinitely reinvested and has provided a deferred tax liability primarily for foreign withholding taxes that would be expected to apply when the Company dividends these earnings back to the United States. The effective income tax rate in 2017 was 39.4%20.3% and in 2016 was 26.4%.21.1% for the years ended December 31, 2020 and 2019, respectively. The 13.0% increasedecrease in the effective tax rate is attributedwas primarily to the Tax Act (17.1%)driven by decreases of 3.5% for state and other increases (0.1),local income taxes, net of Federal income tax benefit, and 1.5% in uncertain tax positions, partially offset by an increase in the benefitincreases of foreign sourced income (1.4%) and an increase in the excess tax benefit associated with share based2.5% for compensation (2.8%).

The Company currently expects an effective tax rate for 2018 to be slightly below the statutory rate. The effective tax rate may vary from quarter to quarter due to unusual or infrequently occurring items, the resolution of income tax audits, changes in tax laws, the tax impact from employee share-based payments, taxes incurred in connection to the territorial style tax system, or otherrelated items.

The Tax Act imposes a U.S. tax on global intangible low taxed income (“GILTI”) that is earned by certain foreign affiliates owned by a U.S. shareholder. The computation of GILTI is still subject to interpretation and additional clarifying guidance is expected, but is generally intended to impose tax on the earnings of a foreign corporation that are deemed to exceed a certain threshold return relative to the underlying business investment. In accordance with guidance issued by FASB, the Company has made a policy election to treat future taxes related to GILTI as a current period expense in the reporting period in which the tax is incurred. The company does expect to be impacted by GILTI relative to the earnings of its foreign subsidiaries in 2018 and beyond.

For further discussion of changes in the effective tax rate, refer to the Note 7 to the Consolidated Financial Statements.

Year Ended December 31, 2016 vs. 2015

Operations

Net Sales

Net Sales

Net sales for the Company increased 20.1% from $210.3 million in 2015 to $252.6 million in 2016. The aggregate increase in net sales is split between growth in our Uniforms and Related Products segment (contributing 5.8%), increases in net sales after intersegment eliminations from our Remote Staffing Solutions segment (contributing 1.1%) and the effect of the acquisition of BAMKO in our new Promotional Products segment (contributing 13.2%).

Uniforms and Related Products net sales increased 6.1% in 2016 compared to 2015. The increase in net sales is attributed primarily to our continued market penetration as well as continued increases in voluntary employee turnover in the marketplace.

Remote Staffing Solutions net sales increased 15.1% before intersegment eliminations and 20.1% after intersegment eliminations in 2016. These increases are attributed to continued market penetration in 2016, both with respect to new and existing customers.

Promotional Products net sales of $27.8 million, from the acquisition date of March 1, 2016 through December 31, 2016 represented 11.0% of consolidated net sales in 2016.

Cost of Goods Sold

Cost of goods sold consists primarily of direct costs of acquiring inventory, including cost of merchandise, inbound freight charges, purchasing costs, and inspection costs for our Uniforms and Related Products and Promotional Products segments. Cost of goods sold for our Remote Staffing Solutions segment includes salaries and payroll related benefits for agents. The Company includes shipping and handling fees billed to customers in net sales. Shipping and handling costs associated with out-bound freight are generally recorded in cost of goods sold. Other shipping and handling costs are included in selling and administrative expenses.

As a percentage of net sales, cost of goods sold for our Uniforms and Related Products segment was 66.7% in 2016 and 67.1% in 2015. The decrease as a percentage of net sales is primarily attributed to a decrease in direct product costs as a percentage of net sales during 2016.

As a percentage of net sales, cost of goods sold for our Remote Staffing Solutions segment was 46.4% in 2016, and 45.0% in 2015. The percentage increase in 2016 as compared to 2015 is primarily attributed to an increase in the percentage of segment revenue coming from the domestic portion of our Remote Staffing Solutions segment from 23.7% in 2015 to 29.1% in 2016. The hourly rates charged for domestic services are higher than offshore services but the margin percentage earned is lower.

Cost of goods sold for our Promotional Products segment was 65.2% of net sales in 2016.

Selling and Administrative Expenses

As a percentage of net sales, selling and administrative expenses for our Uniforms and Related Products segment approximated 24.8% in 2016 and 2015. Favorable factors included higher net sales in 2016 to cover operating expenses (contributing 1.5%) and a claim settlement (contributing 0.2%). These decreases were offset by increased salaries, wages and benefits exclusive of retirement plan expenses and medical costs as a result of the continuing growth in net sales (contributing 0.9%) as well as higher ongoing pension and retirement plan expense primarily as a result of lower discount rates in 2016 as compared to 2015 (contributing 0.2%), higher medical costs in the Company’s self-insured medical plan (contributing 0.3%) and other minor increases (contributing 0.3%).

As a percentage of net sales, selling and administrative expenses for our Remote Staffing Solutions segment approximated 34.0% in 2016 and 33.2% in 2015. The increase as a percentage of net sales is attributed primarily to an increase in wages and benefits to support continuing growth (contributing 2.3%) along with higher facilities costs and depreciation due to our expanded facility in El Salvador (contributing 1.4%) which was partially offset primarily by higher net sales to cover operating expenses.

Promotional Products selling and administrative expenses were $10.4 million, from the acquisition date of March 1, 2016 through December 31, 2016. Included within these expenses was approximately $1.1 million, of expenses associated with the acquisition. Net of these acquisition related expenses, selling and administrative expenses would have been 33.3% of net sales.

Interest Expense and Tax

Interest expense increased to $0.7 million for the year ended December 31, 2016 from $0.5 million for the year ended December 31, 2015. This increase is attributed primarily to higher average borrowings outstanding primarily due to the BAMKO acquisition.

The effective income tax rate in 2016 was 26.4% and in 2015 was 30.9%.  The 4.5% decrease in the effective tax rate is attributed primarily to the early adoption of ASU 2016-09 (4.4%) (See Note 1(y) to the Consolidated Financial Statements), an increase in the benefit related to federal tax credits (0.8%) and other items (0.2%) which was partially offset by a decrease in the benefit of foreign source income (0.9%).

Liquidity and Capital Resources

Overview

The CompanyManagement uses a number of standards for its own purposes in measuring itsthe Company’s liquidity, such as: working capital, profitability ratios, long-term debt as a percentage of long-term debt and equity,cash flows from operating activities, and activity ratios. The Company’sCompany’s balance sheet is very strong at this point andgenerally provides the ability to pursue acquisitions, to invest in new product lines and technologies and to invest in additional working capital as necessary. As of December 31, 2017,2020, approximately $5.8$4.4 million of our cash iswas held in our foreign subsidiaries. As a resultsubsidiaries, of the Tax Act,which $2.4 million of cash was held at foreign subsidiaries from which the Company no longer intends to permanently reinvest its historical foreign earnings and plans to repatriate the funds as needed for liquidity.

The Company’sCompany’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. Management currently believes that cash flows provided by operating activities and availability under the revolving credit facility will be sufficient to satisfy the Company’s anticipated working capital requirements for the next twelve months. The Company has proactively taken steps to increase available cash on hand by targeted reductions in discretionary cash outflows. The Company may also begin relying on the issuance of equity or debt securities.securities, and for that purpose has filed with the Securities and Exchange Commission a universal shelf registration statement (File No. 333-249760). There can be no assurance that any such financings would be available to us on reasonable terms. Any future issuances of equity securities or debt securities withconvertible into or exercisable for equity featuressecurities 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.

Balance SheetWorking Capital

Accounts receivable-trade increased 20.9% from $41.8 million on December 31, 2016Superior’s Uniform and Related Products segment markets itself to $50.6 million December 31, 2017. Approximately $6.5 millionits customers as a “stock house.” Therefore, Superior carries inventories of this increase is attributedboth raw materials and finished products, the practice of which requires substantial working capital, which we believe to acquisitions in our Promotional Products Segment. The balance of the increase is attributed primarily to higher revenuesbe common in the fourth quarter 2017 compared to 2016, partially offset by improved collection efforts.industry.

Prepaid expensesCash and other current assets increased 52.6% from $7.2cash equivalents decreased by $3.8 million on December 31, 2016 to $11.1$5.2 million as of December 31, 2017. Approximately $3.4 million of this increase is attributed to higher prepaid income taxes.

Inventories decreased 6.2%2020 from $69.2$9.0 million on December 31, 2016 to $64.5 million as of2019. Excess cash generated from operating activities during the year ended December 31, 2017.2020 was used to repay outstanding borrowings under the revolving credit facility. Working capital increased to $143.6 million at December 31, 2020 from $142.4 million at December 31, 2019. The decrease isincrease in working capital was primarily due to sales of remaining inventory to a customer which will not be replenished.

Other intangible assets increased 25.1% from $23.2 million on December 31, 2016 to $29.1 million on December 31, 2017.  This increase is attributed to other intangible assets acquired as part of the two acquisitionsincreases in 2017 of $8.2 millionaccounts receivable and inventories, partially offset by scheduled amortization.

Goodwill increased 42.3% from $11.3 million on December 31, 2016increases in other current liabilities, accounts payable and acquisition-related contingent liabilities expected to $16.0 million on December 31, 2017.  This increase is attributed to goodwill acquired as part of the two acquisitionsbe paid in 2017.

Net deferred income tax assets decreased 57.4% from $6.8 million on December 31, 2016 to $2.9 million on December 31, 2017.  This decrease is primarily attributed to the one-time tax re-measurement from the Tax Cut and Jobs Act in addition to the significant contributions to the Company’s pension plans in order to take advantage of the higher tax rate deductions in 2017.

Other assets increased 152.4% from $3.0 million on December 31, 2016 to $7.6 million on December 31, 2017.2021. The increase isin accounts receivable was primarily due to higher investmentsincreased net sales of personal protective equipment and healthcare service apparel within our Uniforms and Related Products segment. The increases in our Non-Qualified Deferred Compensation plan due to higher employee contributions to the plan. In addition, due to the significant contributions to the Company’s defined pension plans, as well as the higher returns on the plan’s investments in 2017, the fair value of the noncontributory qualified defined benefit pension plan assets exceeded the projected benefit obligations by $2.2 million in 2017.

Accountsinventories and accounts payable increased 46.2% from $13.5 million on December 31, 2016 to $19.8 million on December 31, 2017.  This increase iswere primarily duerelated to the timing of inventory purchases within our Uniforms and $3.1millionRelated Products and Promotional Products segments. The increase in accounts payable dueother current liabilities was primarily driven by new activities in 2020 relating to the two acquisitionsincreased sale of personal protective equipment within our Promotional Products and Uniforms and Related Products segments as a result of COVID-19, including increases in 2017.contract liabilities, accrued compensation and income taxes payable. The increase in the current portion of acquisition-related contingent liabilities was driven by the significant increase in earnings within our Promotional Products segment during 2020.

Cash Flows

CashOur cash flows from operating, investing and financing activities, as reflected in the statements of cash equivalents increasedflows, are summarized in the following table (in thousands):

Operating Activities. The increase in net cash provided by $4.5 million from $3.6 million on December 31, 2016 to $8.1 million as of December 31, 2017. Duringoperating activities during the year ended December 31, 2017,2020 compared to the Company generatedyear ended December 31, 2019 was primarily attributable to the receipt of payments from new customer contracts for the sourcing of personal protective equipment needed in response to COVID-19 within the Promotional Products and Uniforms and Related Products segments. Working capital cash changes during the year ended December 31, 2020 included an increase of $22.7$32.7 million in operating activities, used cashaccounts payable and other current liabilities, an increase of $9.4$29.3 million in investing activities, (including $2.9 millionaccounts receivable and an increase of proceeds from the sale of our building in El Salvador, more than offset by $4.2 million used for additions to property, plant and equipment) and $8.0 million for the two acquisitions in our Promotional Products Segment) and used $8.9$16.8 million in financing activities.inventories. Working capital cash changes during the year ended December 31, 2019 included an increase of $17.1 million in accounts receivable, an increase of $10.9 million in accounts payable and other current liabilities and a decrease in contract assets of $10.7 million.

In 2016, cash and cash equivalents increased by approximately $2.6 million.  Cash provided by operating activities was $12.0 million,Investing Activities. The decrease in net cash used in investing activities during the year ended December 31, 2020 compared to the year ended December 31, 2019 was $22.5primarily attributable to net proceeds received during the year ended December 31, 2020 of $5.3 million (including $7.3from the sale of a building and related assets that were previously used as a Distribution Center within our Uniforms and Related Products segment. This was partially offset by an increase in capital expenditures of $2.2 million used for additionsin 2020 compared to property, plant and equipment and $15.2 million for the acquisition of BAMKO) and $13.1 million was provided2019.

Financing Activities. The increase in net cash used in financing activities during the year ended December 31, 2020 compared to the year ended December 31, 2019 was primarily attributable to net repayments of $31.7 million in debt during 2020 compared to net borrowings of $1.7 million in the prior year period. Excess cash generated from operating activities during the year ended December 31, 2020 was used to repay outstanding borrowings under the revolving credit facility.

Capital Expenditures

In the foreseeable future,From a long-term perspective, the Company expects to continue its ongoing capital expenditure program designed to maintainimprove the effectiveness and improvecapabilities of its facilities. As noted in prior periods, we have invested in a new call center building in El Salvador which was completed in June 2016facilities and that almost tripled our prior capacity. We spent approximately $6.8 million ontechnology. In the El Salvador project through December 31, 2015 and approximately $3.6 million innear term, the twelve-month period ended December 31, 2016. The Company at all times evaluates itsmay continue to delay certain capital expenditure program in light of prevailingexpenditures relating to non-essential projects until economic conditions.conditions begin to stabilize.

Credit Facilities (See Note 6 to the Financial Statements)
 

As of December 31, 2020, the Company had approximately $88.1 million in outstanding borrowings under its amended and restated credit agreement (the “Credit Agreement”) with Truist Bank, consisting of $17.6 million outstanding under the revolving credit facility expiring in May 2023, $21.0 million outstanding under a term loan maturing in February 2024 (“2017 Term Loan”) and $49.5 million outstanding under a term loan maturing in January 2026 (“2018 Term Loan”). The revolving credit facility, 2017 Term Loan and 2018 Term Loan are collectively referred to as the “Credit Facilities.”

Obligations outstanding under the 2018 Term Loan have a variable interest rate of LIBOR plus a margin of between 0.85% and 1.65% (based on the Company’s funded debt to EBITDA ratio) (1.00% at December 31, 2020). Obligations outstanding under the revolving credit facility and the 2017 Term Loan generally have a variable interest rate of one-month LIBOR plus a margin of between 0.68% and 1.50% (based on the Company’s funded debt to EBITDA ratio) (0.83% at December 31, 2020). The available balance under the revolving credit facility is reduced by outstanding letters of credit. At December 31, 2020, the Company had undrawn capacity of $31.7 million under the revolving credit facility.

On March 30, 2020, the Company entered into debt deferment agreements with Truist Bank to: (i) defer contractual principal and interest payments due between April 1, 2020 and June 1, 2020 under the 2017 Term Loan and 2018 Term Loan until their respective maturity dates; and (ii) defer contractual interest payments due between April 1, 2020 and June 1, 2020 under the revolving credit facility until its maturity date. Contractual principal payments for the 2017 Term Loan are as follows: 2021 through 2023 - $6.0 million per year; and 2024 - $3.0 million. Contractual principal payments for the 2018 Term Loan are as follows: 2021 through 2025 - $9.3 million per year; and 2026 - $3.1 million. The term loans do not contain prepayment penalties.

The Credit Agreement contains customary events of default and negative covenants, including but not limited to those governing indebtedness, liens, fundamental changes, investments, restricted payments, and sales of assets. The Credit Agreement also requires the Company to maintain a fixed charge coverage ratio (as defined in the Credit Agreement) of at least 1.25:1 and a funded debt to EBITDA ratio (as defined in the Credit Agreement) not to exceed 5.0:1. As of December 31, 2020, the Company was in compliance with these ratios. The Credit Facilities are secured by substantially all of the operating assets of the Company as collateral, and the Company’s obligations under the Credit Facilities are guaranteed by all of its domestic subsidiaries. The Company’s obligations under the Credit Facilities are subject to acceleration upon the occurrence of an event of default as defined in the Credit Agreement.

On February 8, 2021, the Company entered into a Second Amended and Restated Credit Agreement with Truist Bank (the “Restated Credit Agreement”), pursuant to which the maximum availability under the Company’s existing revolving credit facility was increased from $75.0 million to $125.0 million and its maturity date was extended until February 8, 2026. The 2017 Term Loan and the 2018 Term Loan remain outstanding with the same amortization schedules. The floor on LIBOR for the revolving credit facility was increased from zero to 0.25%, but the interest rates on the revolving credit facility and the term loans were not otherwise modified. The covenants, events of default and substantially all of the other terms that were contained in the Credit Agreement remain unchanged in the Restated Credit Agreement. The Credit Facilities continue to be secured by substantially all of the operating assets of the Company as collateral, and the Company’s obligations thereunder continue to be guaranteed by all of its domestic subsidiaries. See Note 19 for further information on the Restated Credit Agreement.

Dividends and Share Repurchase Program

During the years ended December 31, 2017, 20162020 and 2015, respectively,2019, the Company paid cash dividends of $5.3 million, $4.7$6.1 million and $4.3 million.$6.0 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 Company’s outstanding common stock. There is no expiration date or other restriction governing the period over which the Company can make share repurchases under the program. All purchases under this program will be open market transactions. Under this program the Company reacquired 45,100and retired 43,458 shares of its common stock at a total cost of $0.7 million induring the year ended December 31, 2016, pursuant to its stock repurchase program.  No stock was reacquired in the years ended2020. At December 31, 2017 and 2015.

On August 1, 2008,2020, the Company’s Board of Directors approved an increase to the outstanding authorizationCompany’s remaining repurchase capacity under its common stock repurchase program to allow for the repurchase of 1,000,000 additional shares of the Company’s outstanding shares of common stock. At December 31, 2017, the Company had 216,575 shares remaining for purchase 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. We considerThe Company considers several factors in determining when to make share repurchases, including among other things, ourthe cost of equity, ourthe after-tax cost of borrowing, ourthe debt to total capitalization targets and ourthe expected future cash needs. There is no expiration date or other restriction governing the period over which we can make our share repurchases under the program. The Company anticipates that it will continue to pay dividends and that it will repurchase additional shares of its common stock in the future as financial conditions permit.

Credit Agreement

Effective July 1, 2013, the Company entered into an amended and restated 5-year credit agreement with Fifth Third Bank that made available to the Company up to $15.0 million on a revolving credit basis (the “Initial Credit Facility”) in addition to a $30.0 million term loan utilized to finance the acquisition of substantially all of the assets of HPI Direct, Inc.

Effective March 8, 2016, the Company entered into an amended and restated 5-year credit agreement with Fifth Third Bank (the “Amended Credit Agreement”) that increased its revolving credit facility from $15.0 million to $20.0 million (the “Amended Credit Facility”) and refinanced its then-existing term loan with a new $45.0 million term loan to help finance the acquisition of substantially all of the assets of BAMKO, Inc. Both loans were based upon the one-month LIBOR rate for U.S. dollar based borrowings. Interest was payable on the term loan at LIBOR plus 0.85% and on the revolving credit facility at LIBOR (rounded up to the next 1/8^th of 1%) plus 0.85%. The Company paid a commitment fee of 0.10% per annum on the average unused portion of the commitment under the Amended Credit Facility. This credit agreement was paid in full on February 28, 2017 with the proceeds from a new loan agreement with Branch Banking and Trust Company (“BB&T”).

Effective February 28, 2017, the Company entered into a new 7-year credit agreement with BB&T (the “Credit Agreement”) that provides a new revolving credit facility of $35.0 million (the “Credit Facility”) which terminates on February 25, 2022 and provides a new term loan of $42.0 million (the “Term Loan”) which matures on February 26, 2024. Both loans are based upon the one-month LIBOR rate for U.S. dollar based borrowings. Interest is payable for each loan at LIBOR (rounded up to the next 1/100^th of 1%) plus 0.75% (2.25% at December 31, 2017). The Company pays a commitment fee of 0.10% per annum on the average unused portion of the commitment under the Credit Facility. The available balance under the Credit Facility is reduced by outstanding letters of credit. As of December 31, 2017, there is $1.5 million due under the Credit Facility and no outstanding letters of credit.

The remaining scheduled amortization for the term loan is as follows: 2018 through 2023 $6.0 million per year; 2024 $1.5 million. The term loan does not include a prepayment penalty. In connection with the Amended Credit Agreement, the Company incurred approximately $0.1 million of debt issuance costs, which primarily consisted of legal fees. These costs are being amortized over the life of the Amended Credit Agreement and are recorded as additional interest expense.

The Company’s obligations under the Amended Credit Agreement are secured by substantially all of the operating assets of Superior Uniform Group, Inc. and are guaranteed by all domestic subsidiaries of Superior Uniform Group, Inc. The agreement contains restrictive provisions concerning a maximum funded senior indebtedness to EBITDA ratio as defined in the agreement (4.0:1) as defined in the agreement and a fixed charge coverage ratio (1.25:1). The Company is in full compliance with all terms, conditions and covenants of the Amended Credit Agreement.

Interest Rate Swap Agreement

In order to reduce interest rate risk on its debt, the Company entered into an interest rate swap agreement with Fifth Third Bank, N.A. in July 2013 that was designed to effectively convert or hedge the variable interest rate on a portion of its borrowings to achieve a net fixed rate of 2.53% per annum, beginning July 1, 2014 with a notional amount of $14.3 million. The notional amount of the interest rate swap is reduced by the scheduled amortization of the principal balance of the original term loan of $0.2 million per month through July 1, 2015 and $0.3 million per month through June 1, 2018 with the remaining notional balance of $3.3 million to be eliminated on July 1, 2018.  Effective at the inception of the new term loan, the fixed rate on the notional amount was reduced to 2.43%.  Effective February 24, 2017, this interest rate swap agreement was terminated. On this date the swap agreement had $0.1 million in cumulative gains in OCI which was reversed to earnings.

Effective March 3, 2017, in order to reduce the interest rate risk on its future debt, the Company entered into an interest rate swap agreement with BB&T that was designed to effectively convert or hedge the variable interest rate on a portion of its future borrowings to achieve a net fixed rate of 3.12% per annum, beginning March 1, 2018 with a notional amount of $18.0 million.  The notional amount of the interest rate swap is reduced by $0.3 million per month beginning April 1, 2018 through February 26, 2024.  Under the terms of the interest rate swap, the Company will receive variable interest rate payments and make fixed interest rate payments on an amount equal to the notional amount at that time.  Changes in the fair value of the interest rate swap designated as the hedging instrument that effectively offset the variability of cash flows associated with the variable rate, long-term debt obligation are recorded in OCI, net of related income tax effects.  As of December 31, 2017, the swap agreement had a negative fair value of $0.1 million which is presented within other current liabilities on the consolidated balance sheet. 

Long-Term Contractual Obligations

The following table sets forth a summary of our material contractual obligations as of December 31, 2017:2020 (in thousands):

Off-Balance Sheet Arrangements

The Company does not engage in any off-balance sheet financing arrangements. In particular, we do not have any interest in variable interest entities, which includeincludes special purpose entities and structured finance entities.

Critical Accounting Policies and Estimates

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

Our critical accounting estimates require our most difficult or subjective judgments or estimates about the effect of matters that are inherently uncertain. A discussion of our critical accounting estimates, the underlying judgments and uncertainties used to make them and the likelihood that materially different estimates would be reported under different conditions or using different assumptions is as follows:

Allowance for Losses on Accounts Receivable

Judgments and estimates are used in determining the collectability of accounts receivable.receivable and in establishing allowances for doubtful accounts. The Company analyzes specific trade accounts receivable and historical bad debt experience, customer credit worthiness, current economic trends and the age of outstanding balances when evaluating the adequacy of the allowance for doubtful accounts. Management judgments and estimates are used in connection with establishing the allowance in any accounting period. Changes in estimates are reflected in the period they become known. If the financial condition of the Company’s customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. An additional impairment in value of one percent5% of net accounts receivable would require an increase in the allowance for doubtful accounts and would result in additional expense of approximately $0.5$5.1 million. During the year ended December 31, 2020, bad debt expense increased by $5.4 million, which was primarily driven by the COVID-19 pandemic. The Company’s concentration of risk is also monitored and at year-end 2017, no customer(s)as of December 31, 2020, two customers had an accounta combined accounts receivable balance greater than 11.3% of receivables23% of the total accounts receivable and the five largest customer accountaccounts receivables balances totaled $14.2$36.8 million. Additionally, the Company advances funds for certain of its suppliers to purchase raw materials. The Company deducts payment for these raw materials from payments made to the suppliers upon completion of the related finished goods. The Company had a receivables balance from one of its suppliers located in Haiti totaling approximately $1.5 million at December 31, 2017. This amount is included in accounts receivable-other on the consolidated balance sheet.

Revenue Recognition

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

Inventories

Superior’sThe Company’s Uniforms and Related Products segment markets itself to its customers as a "stock“stock house."” Therefore, Superiorthe Company at all times carries substantial inventories of both raw materials (principally piece goods) and finished garments.products. Inventories are stated at the lower of cost or marketnet realizable value. Judgments and estimates are used in determining the likelihood that new goods on hand can be sold to customers. Historical inventory usage and current revenue trends are considered in estimating both excess and obsolete inventories. If actual product demand and market conditions are less favorable than those projected by management, additional inventory write-downs may be required, which may be material.

Goodwill and indefinite-lived intangible assets

The Company has made acquisitions in the past that included goodwill and indefinite-lived intangible assets. Goodwill represents the excess of the cost of an acquisition over the fair value of the net assets acquired. The Company testsGoodwill and indefinite-lived intangible assets such as trade names are not amortized but are subject to an annual (or under certain circumstances more frequent) impairment test in the fourth quarter based on their estimated fair value. We test more frequently, if there are indicators of impairment, or whenever such circumstances suggest that the carrying value of goodwill for impairment annually as of December 31st and/or when an event occurs or circumstances change such that it is more likely thantrade names may not that impairment may exist.be recoverable. Examples of such events and circumstances that the Company would consider include the following:

Goodwill isand indefinite-lived intangible assets are tested at a level of reporting referred to as "the“the reporting unit."” The Company'sCompany’s reporting units are defined as each of its three reporting segments with itssegments. As of December 31, 2020, goodwill of $24.5 million and $11.6 million were included in the Uniforms and Related Products segment of $4.1 million and $11.9 million in the Promotional Products segment.segment, respectively. As of December 31, 2020, indefinite-lived intangible assets of $18.8 million and $12.6 million were included in the Uniforms and Related Products segment and the Promotional Products segment, respectively.

An entity has the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not (that is, a likelihood of more than 50%) that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events or circumstances, an entity determines it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the impairment test is unnecessary. TheFor each of the years ended December 31, 2020, 2019 and 2018, the Company completed its assessmenttesting of the qualitative factors as of December 31, 2017goodwill and indefinite-lived intangible assets and determined that it was not more likely than not that the fair value of theeach applicable reporting unit was lessmore than its carrying value.

Contingent Consideration

The purchase price to acquire substantially all of the assets of BAMKO, Inc. (“BAMKO”) in 2016 included contingent consideration based on varying levels of BAMKO’s consolidated EBITDA in each measurement period through 2021. The estimated fair value for BAMKO acquisition-related contingent consideration payable was $5.2 million as of December 31, 2020, of which $4.3 million is expected to be paid in the second quarter of 2021. The total estimated undiscounted remaining payments related to this contingent consideration payable is between $5.4 million and $5.7 million. The purchase price to acquire substantially all of the assets of Tangerine Promotions, Ltd. and Tangerine Promotions West, Inc. (collectively “Tangerine”) in 2017 included contingent consideration based on varying levels of Tangerine’s EBITDA in each measurement period through 2021. The estimated fair value for Tangerine acquisition-related contingent consideration payable was $2.3 million as of December 31, 2020, of which $1.3 million is expected to be paid in the second quarter of 2021. The total estimated undiscounted remaining payments related to this contingent consideration payable is between $2.3 million and $2.8 million. The Company’s fair value estimate of contingent consideration is primarily derived from management’s forecasted EBITDA of each applicable entity. The Company will continue to evaluate these liabilities for remeasurement at the end of each reporting period and any changes will be recorded in the Company’s statements of comprehensive income. The carrying amount of the liabilities may fluctuate significantly and actual amounts paid may be materially different from the estimated value of the liabilities.

Insurance

The Company self-insures for certain obligations related to employee health insurance programs. The Company also purchases stop-loss insurance policies to protect it from catastrophic losses. Judgments and estimates are used in determining the potential value associated with reported claims and for losses that have occurred, but have not been reported. The Company'sCompany’s estimates consider historical claim experience and other factors. The Company'sCompany’s liabilities are based on estimates, and, while the Company believes that the accrual for loss is adequate, the ultimate liability may be in excess of or less than the amounts recorded. Changes in claim experience, the Company'sCompany’s ability to settle claims or other estimates and judgments used by management could have a material impact on the amount and timing of expense for any period.

Pensions 

The Company is the sponsor of two noncontributory qualified defined benefit pension plans, providing for normal retirement at age 65, covering all eligible employees (as defined). Periodic benefit payments on retirement are determined based on a fixed amount applied to service or determined as a percentage of earnings prior to retirement. The Company is also the sponsor of an unfunded supplemental executive retirement plan (SERP) in which several of its employees are participants. Pension plan assets for retirement benefits consist primarily of fixed income securities and common stock equities. Effective June 30, 2013, the Company no longer accrues additional benefits for future service or for future increases in compensation levels for the company’sCompany’s primary defined benefit pension plans. 

The Company’s is also the sponsor of an unfunded supplemental executive retirement plan (“SERP”) in which several of its employees are participants. Pension plan assets for retirement benefits consist primarily of fixed income securities, money market securities and common stock equities.

The Company’s pension obligations are determined using estimates including those related to discount rates and asset values. The discount rates used for the Company’s pension plans of 3.91%3.02% to 4.04%3.12% were determined based on the Citigroup Pension Yield Curve. This rate was selected as the best estimate of the rate at which the benefit obligations could be effectively settled on the measurement date taking into account the nature and duration of the benefit obligations of the plan using high-quality fixed-income investments currently available (rated AA or better) and expected to be available during the period to maturity of the benefits. The 8% expected return on plan assets was determined based on historical long-term investment returns as well as future expectations given target investment asset allocations and current economic conditions.

At December 31, 2017,2020, the Company’sCompany's projected benefit obligation under its supplemental executive retirement pension plan exceeded the fair value of the plan assets by $8.4 million and thus the plan is underfunded. The fair value of the plans assetsobligations for the noncontributory qualified defined benefit pension plans exceeded theirapproximated the fair value of the plans’ assets. The Company’s projected benefit obligationsobligation under the SERP exceeded the fair value of the plans’ assets by $2.2$14.3 million and thus the plans are overfunded.plan is underfunded. In 2017,2020, a reduction in the expected return on plan assets of 0.25% would have resulted in additional expense of approximately $0.1 million, while a reduction in the discount rate of 0.25% would have resulted in additional expense of approximately $0.1$0.2 million and would have reduced the funded status by $1.1$1.3 million for the Company’s defined benefit pension plans. Interest rates and pension plan valuations may vary significantly based on worldwide economic conditions and asset investment decisions. For additional information on our benefit plans, please refer to “Note 8 – Benefit Plans” in the notes to the consolidated financial statements included in this Form 10-K.Financial Statements.

Income Taxes

The Company is required to estimate and record income taxes payable for federal, state and foreign jurisdictions in which the Company operates. This process involves estimating actual current tax expense and assessing temporary differences resulting from differing accounting treatment between tax and book that result in deferred tax assets and liabilities. In addition, accruals are also estimated for federal and state tax matters for which deductibility is subject to interpretation. Taxes payable and the related deferred tax differences may be impacted by changes to tax laws, changes in tax rates and changes in taxable profits and losses.losses. The Tax Cuts and Jobs Act was(“Tax Act”) enacted on December 22, 2017 and has several key provisions impacting accounting for and reporting ofimposes a U.S. tax on global intangible low taxed income taxes. The most significant provision reduces(“GILTI”) that is earned by certain foreign affiliates owned by a U.S. shareholder. GILTI is generally intended to impose tax on the U.S. corporate statutory tax rate from 34% to 21% beginning on January 1, 2018. Although most provisions of tax reform are not effective until 2018, we are required to record the effectearnings of a changeforeign corporation that are deemed to exceed a certain threshold return relative to the underlying business investment. In accordance with guidance issued by FASB, the Company made a policy election to treat future taxes related to GILTI as a current period expense in the reporting period in which the tax lawis incurred. The Company was impacted by GILTI relative to the earnings of its foreign subsidiaries, and is expected to be impacted in future periods, which may be material to our financial statements. Deferred income taxes are provided on undistributed earnings of foreign subsidiaries in the period of enactment (2017). The provision for income taxes and effective tax rate in 2017 included a $4.0 million unfavorable impact from the change in tax law. The impact is due primarily to the remeasurement of our U.S. federal deferred tax assets and liabilities at the tax rate expected to apply when the temporary differences are realized/settled (remeasured at a rate of 21% versus 34% for the majority of our deferred tax assets and liabilities). The other key provision that requires recognition in the period of enactment is the one-time toll charge resulting from the mandatory deemed repatriation of undistributed foreign taxable income. In addition,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 historical foreignwholly-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 has recorded and additional deferred tax expense.UK subsidiaries is immaterial at December 31, 2020.

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 thethe year endingended December 31, 2017,2020, there was no changean increase of $0.3 million in total unrecognized tax benefits. As of December 31, 2017,2020, we had an accrued liability of $0.5$1.2 million for unrecognized tax benefits. We accrue interest and penalties related to unrecognized tax benefits in income tax expense, and the related liability is included in other long-term liabilities on the accompanying consolidatedin our balance sheet.

The Company elected to early adopt ASU 2016-09 “Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting”. The amendment requires that excess tax benefits for share-based payments be recorded as a reduction of income tax expense. The recognition of excess tax benefits in our provision for income taxes rather than paid-in-capital resulted in an income tax benefit of $1.8 million for the year ended December 31, 2017. For additional information please refer to “Note 1(y)– Recent Accounting Pronouncements” in the notes to the consolidated financial statements included in this Form 10-K.

Share-Based Compensation

The Company recognizes expense for all share-based payments to employees, including grants of employee stock options, in the financial statements based on their fair values. Share-based compensation expense that was recorded in 2017, 2016 and 2015 includes the compensation expense for the share-based payments granted in those years. In the Company’s share-based compensation strategy we utilize a combination of stock options and stock-settled stock appreciation rights (“SARS”SARs”) that fully vest on the date of grantover time and restricted shares and performance shares of common stock that vest over time or if performance targets are met. The fair value of the options and SARSSARs granted is recognized as expense on the date of grant.grant or over the service period. The Company used the Black-Scholes-MertonBlack-Scholes valuation model to value any share-based compensation. Option valuation methods, including Black-Scholes-Merton,Black-Scholes, require the input of highly complex and subjective assumptions including the risk free interest rate, dividend rate, expected term and common stock price volatility rate. The Company determines the assumptions to be used based upon current economic conditions. While different assumptions may result in materially different stock compensation expenses, changing any one of the individual assumptions by 10% would not have a material impact on the recorded expense. Expense for unvested shares of restricted stock and performance shares is recognized over the required service period. For additional information on share-based compensation and the assumptions we use, please refer to “Note 12 – Share Based Compensation” in the notes11 to the consolidated financial statements included in this Form 10-K.Financial Statements.

Item 7A.       Quantitative and Qualitative Disclosures about Market Risk

Interest Rate Risk

We are subject to market risk exposure related to changes in interest rates on our debt. Interest on our term loan and revolving credit facilityCredit Facilities are based upon the one-month LIBOR rate. In order to reduce the interest rate risk on our debt, the Company entered into an interest rate swap agreement on a portion of its borrowings. AExcluding the effect of the interest rate swap agreement, a hypothetical increase in the LIBOR rate of 100 basis points as of January 1, 20172020 would have resulted in approximately $0.4$1.0 million in additional pre-tax interest expense for the year ended December 31, 2017. See 2020. For further information regarding our debt instruments, see Note 6 to our consolidated financial statements.the Financial Statements.

Foreign Currency Exchange Risk

SalesSales to clientscustomers outside of the United States are subject to fluctuations in foreign currency exchange rates.  Approximately 1%rates, which may negatively impact gross margin realized on our sales. Less than 5% of our sales are outside of the United States. As the prices at which we sell our products are not routinely adjusted for exchange rate changes, the gross profit on our orders may be negatively affected. We cannot predict the effect of exchange rate fluctuations on our operating results. In certain cases, we may enter into foreign currency cash flow hedges to reduce the variability of cash flows associated with our sales and expenses denominated in foreign currency. As of December 31, 2017,2020, we were not engaged inhad no foreign currency exchange hedging transactions; however, if and when we do, therecontracts. There can be no assurance that our strategies will adequately protect our operating results from the effect of exchange rate fluctuations.
 

OurFinancial results of our foreign subsidiaries in the Promotional Products segment are denominated in their local currencies, which include the Hong Kong dollar, the Chinese renminbi, the British pound, the IndiaIndian rupee, the Brazilian real and the Brazilian real. ChangesCanadian 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 intercompany payablesassets and receivablesliabilities not considered to be long-termdenominated in their functional currency are reported as transactionforeign currency gains (losses) within selling and administrative expenses in our consolidated statements of comprehensive income. During the year endyears ended December 31, 2017, transaction2020 and 2019, foreign currency losses were approximately $0.1not significant. We also have exposure to foreign currency exchange risk from the translation of foreign subsidiaries from the local currency into the U.S. dollar. Comprehensive income during the year ended December 31, 2020 included a foreign currency translation adjustment loss of $1.0 million on a pre-tax basis.primarily related to exchange rate movements of the Brazilian real.

Item 8.          Financial Statements and Supplementary Data

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders Shareholders

Superior Uniform Group of Companies, Inc. and Subsidiaries:Subsidiaries

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Superior Uniform Group of Companies, Inc. and Subsidiaries (the “Company”) as of December 31, 2017 2020and 2016,2019, and the related consolidated statements of comprehensive income, shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2017,2020, and the related notes (collectively referred to as the “consolidated financial statements”). We have also have audited the Company’s internal control over financial reporting as of December 31, 2017,2020, based on criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2017 2020and 2016,2019, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2017,2020 in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017,2020, based on criteria established in Internal Control -– Integrated Framework (2013) issued by COSO.

Basis for Opinion

The Company’sCompany’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. As described in Management’s Report on Internal Control over Financial Reporting, management excluded from its evaluation of, and conclusion on, the effectiveness of the Company’s internal control over financial reporting as of December 31, 2017, both PublicIdentity and Tangerine Promotions’ internal control over financial reporting associated with total assets of $3,233,000 and $16,434,000, respectively, and total revenues of $1,777,000 and $2,659,000, respectively, included in the Company’s consolidated financial statements as of and for the year ended December 31, 2017. Based on this evaluation, management concluded that the Company’s internal control over financial reporting was effective as of December 31, 2017. Accordingly, our audit also excluded an evaluation of both PublicIdentity and Tangerine Promotions’ internal control over financial reporting. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of InternalInternal Control over Financial Reporting

A company’scompany’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the consolidated financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Adoption of New Accounting Standard

As discussed in Note 9 to the consolidated financial statements, the Company changed its method of accounting for leases as a result of the adoption of Accounting Standards Codification Topic 842, Leases effective January 1, 2019, under the modified retrospective method.  Our opinion is not modified with respect to this adoption.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgements. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Accounts Receivable - Specific Reserve

As described in Notes 1 and Note 2 to the consolidated financial statements, the Company’s allowance for doubtful accounts receivable was approximately $7.7 million as of December 31, 2020. The allowance for doubtful accounts receivable consists of a general and a specific allowance. The specific allowance component represents reserves for losses estimated to have been incurred associated with accounts receivable specifically identified by management and evaluated based on factors such as the customer credit worthiness, the age of outstanding balances, and information obtained from discussions with the customer. If, based on management’s evaluation of these factors, it is expected that a loss has been incurred on the collection of an accounts receivable balance, a specific allowance is recognized based on management’s judgment regarding the incurred losses. We identified the estimate of incurred losses on the specific allowance component of the allowance for doubtful accounts receivable as a critical audit matter.

The principal considerations for our determination that performing procedures relating to the evaluation of the allowance for doubtful accounts receivable is a critical audit matter was the significant judgment by management when determining the estimated losses incurred for accounts receivable balances with a specific reserve, which in turn led to a high degree of auditor judgment and effort in performing procedures and evaluating management’s significant assumptions related to the estimated incurred losses.

The primary procedures we performed to address this critical audit matter included:

Income Tax Provision

As described in Notes 1 and 7 to the Company’s consolidated financial statements, the Company operates in multiple jurisdictions through its wholly-owned subsidiaries. The Company services customers from operating facilities located both inside and outside the United States “U.S.”.  As a result, the Company is subject to income taxes in multiple domestic and foreign jurisdictions, each of which affect the Company’s provision for income taxes. The tax provision is an estimate based on management’s understanding of current enacted tax laws and tax rates of each tax jurisdiction. For the year ended December 31, 2020, the Company’s provision for income taxes was $10.4 million, including a deferred benefit of approximately $5.0 million.

We identified the evaluation of the Company’s deferred income tax benefit as a critical audit matter. Challenging auditor judgment and complexity was required in evaluating the accuracy of the Company’s deferred income taxes and deferred income tax benefit. There is complexity in the evaluation of the accuracy of the deferred tax assets, liabilities, and deferred tax benefit due to the significant number of deferred tax positions resulting from previous business combinations, multinational operations, application of foreign tax laws and regulations.  As a result, there is a need to involve personnel with specialized skill and knowledge.

The primary procedures we performed to address this critical audit matter included:

/s/ Mayer Hoffman McCann P.C.

We have served as the Company’sCompany’s auditor since 2013.

February 22, 2018

Clearwater, Florida

March 3, 2021