Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒  No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒  No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐  No ☒

The number of shares of common stock of the registrant outstanding as of April 23, 2020 was 15,314,710 shares.

TABLE OF CONTENTS

NOTE 1 – SummaryBasis of Significant Interim Accounting Policies:Presentation:

a) Basis of presentation

The condensed consolidated interim financial statements include the accounts of Superior Group of Companies, Inc. and its wholly-owned subsidiaries, The Office Gurus, LLC, SUG Holding, Superior Group Holdings, Inc., Fashion Seal Corporation, BAMKO, LLC and CID Resources, Inc.; The Office Gurus, Ltda, de C.V., The Office Masters, Ltda., de C.V. and The Office Gurus, Ltd., each a subsidiary of Fashion Seal Corporation and SUG Holding; and Power Three Web, Ltda. and Superior Sourcing, each a wholly-owned subsidiary of SUG Holding; BAMKO Importação, Exportação e Comércio de Brindes Ltda., a subsidiary of BAMKO, LLC and SUG Holding; Guangzhou Ben Gao Trading Limited, Worldwide Sourcing Solutions Limited, and BAMKO UK, Limited, each a direct or indirect subsidiary of BAMKO, LLC; and BAMKO India Private Limited, a 99%-owned subsidiary of BAMKO, LLC. All of these entities are referred to collectively as “the Company”, “Superior”, “we”, “our”,the “Company,” “Superior,” “we,” “our,” or ���us”.“us.” Effective on May 3, 2018, Superior Uniform Group, Inc. changed its name to Superior Group of Companies, Inc.  Intercompany items have been eliminated in consolidation. 

The accompanying unaudited interim financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations. Intercompany items have been eliminated in consolidation. These condensed consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018,2019, and filed with the Securities and Exchange Commission. The interim financialManagement believes that the information contained herein is not certified or audited; it reflectsfurnished includes all adjustments (consisting of onlya normal recurring accruals) whichnature that are in the opinionnecessary to fairly present our consolidated financial position, results of management, necessary for a fair statement of the operating resultsoperations and cash flows for the periods presented, stated on a basis consistent with that of the audited financial statements.indicated. The results of operations for any interim period are not necessarily indicative of results to be expected for the full year.

b) CashWe refer to the condensed consolidated financial statements collectively as “financial statements,” and individually as “statements of comprehensive income,” “balance sheets,” “statements of shareholders’ equity,” and “statements of cash equivalentsflows” herein.

The Company considersRecent Accounting Pronouncements

We consider the applicability and impact of all highly liquid investments with a maturity of three months or less at the time of purchaseAccounting Standard Updates (“ASUs”). ASUs not listed below were assessed and determined to be cash equivalents.not applicable.

c) Revenue recognition

Effective January, 2018, the Company adopted ASU 2014-09 Revenue from Contracts with Customers and all subsequent amendments to the ASU (collectively ASC 606) using the modified retrospective method to all contracts not completed as of January 1, 2018. Results for reporting periods beginning after January 1 2018 are presented under ASC 606 while comparative information for prior periods has not been restated and continues to be reported under the accounting standards in effect for those periods. The Company recorded a net change in beginning retained earnings of $11.2 million as of January 1, 2018 due to the cumulative effect of adopting ASC 606.

Revenue for our Uniforms and Related Products and Promotional Products segments is recognized when the earnings process is complete. For certain contracts with customers in which the Company has an enforceable right to payment for goods with no alternative use we have moved from a point in time model to an over time model in which we recognize revenue upon receipt of finished goods into inventory. Contract termination terms may involve variable consideration clauses such as discounts and rebates, and revenue has been adjusted accordingly for these provisions. Revenue for goods that do have an alternative use and/or that the customer is not obligated to purchase under the terms of a contract is generally recognized when the goods are transferred to the customer. Revenue is measured as the amount of consideration we expect to receive in exchange for the goods. Sales taxes, sales discounts and customer rebates are also excluded from revenue. The new standard has no cash impact and does not affect the economics of our underlying customer contracts.

Compared to the respective prior year quarter, the impact of adoption of ASC 606 was a $1.8 million reduction in revenues for the three months ended March 31, 2019, and a $3.8 million increase in revenues for the three months ended March 31, 2018. 

The impact of adoption of ASC 606 on our consolidated balance sheet and statement of comprehensive income as of March 31, 2019 is as follows (in thousands):

In accordance with ASC 606, the Company has recognized contract assets of $47.3 million as of March 31, 2019 for goods produced without an alternative use for which the Company has an enforceable right to payment but which have not yet been invoiced to the customer. 

The cost of goods sold associated with our ASC 606 adjustment include the cost of the garments, alterations (if applicable) and shipping costs. Selling and administrative expenses consist of sales commissions.

Revenue from our Remote Staffing segment is recognized as services are delivered.

d) Amortization of other intangible assets

The Company amortizes identifiable intangible assets on a straight line basis over their expected useful lives. Amortization expense for other intangible assets was $1.0 million and $0.8 million for the three-month periods ended March 31, 2019 and 2018, respectively.

e) Cost of goods sold and shipping and handling fees and costs

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 such as labor and overhead are included in selling andadministrative expensesand totaled $3.4 million and $2.7 million for the three-month periods ended March 31, 2019 and 2018, respectively.

f) Inventories

Inventories are stated at the lower of cost (first-in, first-out method or average cost) or net realizable value. Judgments and estimates are used in determining the likelihood that goods on hand can be sold to customers. Historical inventory usage and current revenue trends are considered in estimating both excess and obsolete inventories. If actual product demand and market conditions are less favorable than those projected by management, additional inventory write-downs may be required.

g) Accounting for income taxes

The provision for income taxes is calculated by using the effective tax rate anticipated for the full year.

h) Employee benefit plan settlements

The Company recognizes settlement gains and losses in its financial statements when the cost of all settlements in a year is greater than the sum of the service cost and interest cost components of net periodic pension cost for the plan for the year.

i) Earnings per share

Historical basic per share data is based on the weighted average number of shares outstanding. Historical diluted per share data is reconciled by adding to weighted average shares outstanding the dilutive impact of the exercise of outstanding stock options, stock-settled appreciation rights, restricted stock, and performance shares.

j) Derivative financial instruments

The Company uses certain financial derivatives to mitigate its exposure to volatility in interest rates and foreign currency. The Company records derivatives on the balance sheet at fair value and establishes criteria for designation and effectiveness of hedging relationships. On the date a derivative contract is entered into, the Company may elect to designate the derivative as a fair value hedge, a cash flow hedge, or the hedge of a net investment in a foreign operation. The Company also formally assesses, both at the hedge’s inception and on an ongoing basis, whether the derivative that is used in the hedging transaction is highly effective. For those instruments that are designated as a cash flow hedge and meet certain documentary and analytical requirements to qualify for hedge accounting treatment, changes in the fair value for the effective portion are reported in other comprehensive income (“OCI”), net of related income tax effects, and are reclassified to the income statement when the effects of the item being hedged are recognized in the income statement. The Company discontinues hedge accounting prospectively when it is determined that the derivative is no longer effective in offsetting changes in the cash flows of the hedged item, the derivative expires or is sold, terminated, or exercised, or management determines that designation of the derivative as a hedging instrument is no longer appropriate. In situations in which the Company does not elect hedge accounting or hedge accounting is discontinued and the derivative is retained, the Company carries or continues to carry the derivative at its fair value on the balance sheet and recognizes any subsequent changes in its fair value through earnings.

The nature of the Company’s business activities involves the management of various financial and market risks, including those related to changes in interest rates and foreign currency. The Company does not enter into derivative instruments for speculative purposes. The Company manages market and credit risks associated with its derivative instruments by establishing and monitoring limits as to the types and degree of risk that may be undertaken, and by entering into transactions with high-quality counterparties.           

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 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 beginning March 1, 2018 with a notional amount of $18.0 million. On May 2, 2018, in conjunction with the Amended and Restated Credit Agreement, the original swap was modified (“amended swap”) to achieve a net fixed rate of 3.05% per annum effective May 1, 2018 and the remaining notional amount was $17.5 million. As a result of the change, the Company has discontinued hedge accounting for the original swap and has elected not to designate the amended swap. Changes to the fair value of the amended swap are recorded as interest expense. 

k) Use of estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

l) Comprehensive income

Other comprehensive income (loss) is defined as the change in equity during a period, from transactions and other events, excluding changes resulting from investments by owners (e.g., supplemental stock offering) and distributions to owners (e.g., dividends). Components of comprehensive income include changes in foreign currency translation adjustments (net of tax), pension plan adjustments (net of tax), and changes in the fair value of cash flow hedges (net of tax).

m) Operating segments

The Financial Accounting Standards Board (“FASB”) establishes standards for the way that public companies report information about operating segments in annual financial statements and establishes standards for related disclosures about product and services, geographic areas and major customers. The Company has reviewed the standard and determined that it has three reportable segments, Uniforms and Related Products, Remote Staffing Solutions and Promotional Products.

n) Share-based compensation

The Company awards share-based compensation as an incentive for employees to contribute to the Company’s long-term success. The Company grants options, stock-settled stock appreciation rights, restricted stock, and performance shares. At March 31, 2019, the Company had 3,308,588 shares of common stock available for grant of awards of share-based compensation under its 2013 Incentive Stock and Awards Plan.

The Company recognizes share-based compensation expense, either at the date of grant or over a subsequent vesting period, which is based on the fair value of the award on the date of grant. Determining the appropriate fair value model and calculating the fair value of stock compensation awards requires the input of certain highly complex and subjective assumptions, including the expected life of the stock compensation awards and the Company’s common stock price volatility, risk free interest rate and dividend rate. The assumptions used in calculating the fair value of stock compensation awards represent management’s best estimates, but these estimates involve inherent uncertainties and the application of judgment. As a result, if factors change and the Company deems it necessary to use different assumptions, stock compensation expense could be materially different from what has been recorded in the current period.

o) Recently Adopted Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842) and July 2018, the FASB issued ASU No. 2018-10, Codification Improvements to Topic 842, Leases and ASU No. 2018-11, Targeted Improvements (collectively “Topic 842”). Topic 842 establishes a new lease model, referred to as the right-of-use (ROU) model that brings substantially all leases on the balance sheet. This standard requires lessees to recognize leased assets (ROU Assets) and lease liabilities on the balance sheet and disclose key information about the leasing arrangements in their financial statements. Leases are classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the income statement. The Company adopted Topic 842 effective January 1, 2019 using the modified retrospective transition approach that allows a reporting entity to use the effective date as its date of initial application and not restate the comparative periods in the period of adoption when transitioning to the new standard. Consequently, the requisite financial information and disclosures under the new standard are excluded for dates and periods prior to January 1, 2019. In addition, the Company elected to use a number of optional simplification and practical expedients (reliefs) permitted under the transition guidance within the new standard, including allowing the Company to combine fixed lease and non-lease components, apply the short-term lease exception to all leases of one year or less, and utilize the ‘package of practical expedients’, which permits the Company to not reassess prior accounting conclusions with respect to lease identification, lease classification and initial direct costs under Topic 842. The Company did not elect the use-of hindsight or the practical expedient pertaining to land easement; the latter not being applicable to the Company. Adoption of this new standard resulted in the recognition of $4.1 million of operating lease obligation liabilities ($1 million in other current liabilities and $3.1 million in operating lease liability) which represents the present value of the remaining lease payments of $4.6 million, discounted using the Company’s lease discount rate of 5.74% and $4.9 million of operating lease right-of-use assets, which represents the lease liability of $4.1 million adjusted for prepaid rent to $0.8 million that was previously presented within current prepaid expense and other current assets and other assets on the accompanying condensed consolidated balance sheet prior to adoption. Refer to Note 10 for the impact to the financial statements as of March 31, 2019.

In January 2017, the FASB issued ASU 2017-04, “Simplifying“Simplifying the Test for Goodwill Impairment.” ASU 2017-04 eliminates the two-step process that required identification of potential impairment and a separate measure of the actual impairment. Goodwill impairment charges, if any, would be determined by the difference between a reporting unit's carrying value and its fair value (impairment loss is limited to the carrying value). This standard is effective for annual or any interim goodwill impairment tests beginning after December 15, 2019. The Company’s adoption of this standard ison January 1, 2020 did not expected to have a material impact on the consolidated condensedits financial statements.

In FebruaryAugust 2018, the FASB issued ASU 2018-02, "Income Statement - Reporting Comprehensive Income (Topic 220)2018-15, “Internal-Use Software (Subtopic 350-40): ReclassificationCustomer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract.” The update aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The update also requires an entity to expense the capitalized implementation costs of Certain Tax Effects from Accumulated Other Comprehensive Income." ASU 2018-02 allows entities to elect to reclassifya hosting arrangement over the income tax effects resulting fromterm of the Tax Cuts and Jobs Act (Tax Act) on items within accumulated other comprehensive income to retained earnings and requires additional related disclosures.hosting arrangement. This standardupdate is effective for fiscal years beginning after December 15, 20182019 and interim periods within those fiscal years, however, early adoption is permitted.may be applied prospectively or retrospectively. On January 1, 2020, the Company adopted this standard on a prospective basis. The Company’s adoption of this standard on January 1, 2019 did not have a material impact on its consolidated financial statements.

No other new accounting pronouncement recently issued or newly effective had or is expected to have a material impact on the consolidated financial statements of Superior Group of Companies, Inc. and Subsidiaries.

Effective February 28, 2017, the Company entered into a 7-year credit agreement with BB&T (the “Credit Agreement”) that provided a revolving credit facility of $35 million which was to terminate on February 25, 2022, and provided a term loan of $42 million, which matures on February 26, 2024. Both loans were based upon the one-month LIBOR rate for U.S. dollar based borrowings. Interest was payable for each loan at LIBOR (rounded up to the next 1/100^th of 1%) plus 0.75%. The Company pays a commitment fee of 0.10% per annum on the average unused portion of the commitment under the credit facility.

Effective May 2, 2018, and concurrently with the closing of the CID Resources acquisition, the Company entered into an Amended and Restated Credit Agreement, dated as of May 2, 2018 (the “Amended and Restated Credit Agreement”), with BB&T pursuant to which the Company’s existing revolving credit facility was increased from $35 million to $75 million and which provided an additional term loan in the principal amount of $85 million. No principal payments were due on the $85 million term loan prior to its maturity. The term of the revolving credit facility was extended until May 2023 and the $85 million term loan was to mature in May 2020. The Company’s existing term loan with the original principal amount of $42 million remains outstanding with a maturity date of February 2024 and with the same amortization schedule. The scheduled amortization for the $42 million term loan is as follows: 2019 through 2023 - $6.0 million per year; and 2024 - $1.5 million.

Recently Issued Accounting Pronouncements Not Yet Adopted

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments—Credit Losses (Topic 326).” The update changes the impairment model for most financial assets and certain other instruments, including trade and other receivables, held-to-maturity debt securities and loans, and requires entities to use a new forward-looking expected loss model that will result in the earlier recognition of allowance for losses. This update is effective for annual and interim periods beginning after December 15, 2019, with early adoption permitted. In August 2019, the FASB proposed an amendment to ASU 2016-13, “Financial Instruments—Credit Losses (Topic 326)” that would delay the effective date for Smaller Reporting Companies until fiscal years beginning after December 15, 2022. Adoption will require a modified retrospective approach beginning with the earliest period presented. The Company is currently evaluating the potential impact this standard will have on its financial statements.

In December 2019, the FASB Issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting of Income Taxes”, which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. This update is effective for fiscal years and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. The Company is currently evaluating this guidance to determine what impact it may have on its financial statements.

In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848) Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” This update provides optional guidance for a limited period of time to ease potential accounting impacts associated with transitioning away from reference rates that are expected to be discontinued, such as interbank offered rates and LIBOR. This guidance includes practical expedients for contract modifications due to reference rate reform. Generally, contract modifications related to reference rate reform may be considered an event that does not require remeasurement or reassessment of a previous accounting determination at the modification date. This guidance may be applied through December 31, 2022. The Company will apply this guidance to transactions and modifications to contracts and hedging relationships that reference LIBOR.

NOTE 2 – Inventories:

Inventories consisted of the following amounts (in thousands):

Debt consisted of the following (in thousands):

The Company is party to an amended and restated credit agreement (the “Credit Agreement”) with Truist Bank (formerly known as Branch Banking and Trust Company), consisting of a $75 million revolving credit facility expiring in May 2023, a term loan maturing in February 2024 (“2017 Term Loan”) and a term loan maturing in January 2026 (“2018 Term Loan”). 

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) (1.77% at March 31, 2020). Obligations outstanding under the revolving credit facility and the $42 million term loan2017 Term Loan generally have a variable interest rate of one-month LIBOR plus a margin of between 0.68% (3.17%and 1.50% (based on the Company’s funded debt to EBITDA ratio) (1.60% at March 31, 2019)2020). The available balance under the revolving credit facility is reduced by outstanding letters of credit. As of March 31, 2019,2020, there were no outstanding letters of credit.

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: remainder of 2020 - $3.0 million; 2021 through 2023 - $6.0 million per year; and 2024 - $3.0 million. Contractual principal payments for the 2018 Term Loan are as follows: remainder of 2020 - $4.6 million; 2021 through 2025 - $9.3 million per year; and 2026 - $3.1 million. The term loans do not contain pre-payment penalties.

On January 22, 2019, the Company entered into a First Amendment to the Amended and Restated Credit Agreement pursuant to which the existing $85 million term loan was restructured. The Company used $20 million borrowed under its existing revolving credit facilityis a party to reduce the principal amount to $65 million. The maturity date on the loan was extended to January 22, 2026 and the interest rate was lowered to a variable interest rate of LIBOR plus 0.85% (3.34% at March 31, 2019). The scheduled amortization for the $65 million term loan is as follows: 2019 - $8.5 million, 2020 through 2025 - $9.3 million per year; and 2026 - $0.8 million. The revolving credit facility, $42 million term loan and $65 million term loan are collectively referred to as the “Credit Facilities”.

The Amended and Restated Credit Agreement, as amended, 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 Amended and Restated Credit Agreement, as amended, also requires the Company to maintain a fixed charge coverage ratio of at least 1.25:1 and a funded debt to EBITDA ratio not to exceed 4.0:1. As of March 31, 2019, 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 Amended and Restated Credit Agreement, as amended.

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 (“original swap”) 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 total notional amountvalue of $18.0 million.$12.0 million as of March 31, 2020 pursuant to which it makes fixed payments and receives floating payments. The notional amount ofCompany entered into the interest rate swap to offset changes in expected cash flows due to fluctuations in the associated variable interest rates. The Company’s interest rate swap expires in February 2024. The interest rate swap is reduced by $0.3 million per month beginning April 1, 2018 through February 26, 2024. Under the terms ofnot designated as a hedge transaction. Changes in fair value and gains and losses on settlement on the interest rate swap are recognized in interest expense in our statements of comprehensive income. During the Company will receive variable interest rate paymentsthree months ended March 31, 2020 and make fixed interest rate payments2019, a loss of $0.3 million and $0.1 million, respectively, was recognized 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 were recorded in OCI, net of related income tax effects. On May 2, 2018, in conjunction with the Amended and Restated Credit Agreement, the original swap was modified (“amended swap”) to achieve a net fixed rate of 3.05% per annum effective May 1, 2018 and the remaining notional amount was $17.5 million. There were no other changes to the original swap. As a result of the change, the Company has discontinued hedge accounting for the original swap and has elected not to designate the amended swap. As of May 2, 2018, the fair value of the original swap was $0.1 million and is being amortized as interest expense over the remaining life of the amended swap. Changes to the fair value of the amended swap are recorded as interest expense. As of March 31 2019, the negative fair value of the amended swap was $0.1 million and was included in other current liabilities. 

NOTE 34 – Periodic Pension Expense:

NOTE 5 – Net Sales:

For our Uniforms and Related Products and Promotional Products segments, revenue is primarily generated from the sale of finished products to customers. Revenue for our Uniforms and Related Products and Promotional Products segments is recognized when the performance obligations under the contract terms are satisfied. For certain contracts with customers in contributions madewhich the Company has an enforceable right to payment for goods with no alternative use, revenue is recognized over time upon receipt of finished goods into inventory. Revenue for goods that do have an alternative use or that the customer is not obligated to purchase under the terms of a contract is generally recognized when the goods are transferred to the Company’s defined benefit planscustomer. The Company includes shipping and handling fees billable to customers in net sales. Shipping and handling activities that occur after the transfer of promised goods are accrued as control is transferred to the customer rather than being treated as a separate performance obligation.

For our Remote Staffing segment, revenue is generated from providing our customers with staffing solution services. Revenue for our Remote Staffing segment is recognized as services are delivered. 

Revenue is measured at the amount of consideration we expect to receive in exchange for the goods or services. Variable consideration for estimated returns and allowances 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. The promised amount of consideration in a contract is not adjusted for the effects of a significant financing component when we expect, at contract inception, that the period between our transfer of a promised good or service to a customer and when the customer pays for that product or service will be one year or less. Sales taxes are excluded from the measurement of a performance obligation’s transaction price. Sales commissions are expensed as incurred when we expect that the amortization period of such costs will be one year or less.

Refer to Note 10 for the disaggregation of revenues by operating segment.

Contract Assets

The following table provides information about accounts receivables - trade, contract assets and contract liabilities from contracts with customers (in thousands):

Contract assets relate to goods produced without an alternative use for which the Company has an enforceable right to payment but which have not yet been invoiced to the customer. A portion of the amounts included in contract assets on December 31, 2019 were transferred to accounts receivable during the three-month periodsthree months ended March 31, 20192020. Contract liabilities relate to payments received in advance of the Company completing its performance under a contract. Contract liabilities are included in other current liabilities in our balances sheets. The increase in contract liabilities during the three months ended March 31, 2020 was primarily attributable to new customer contracts for the sourcing of personal protective equipment within the Promotional Products and 2018, respectively.Uniform and Related Products segments. During the three months ended March 31, 2020, $0.9 million of revenue was recognized from the contract liabilities balance as of December 31, 2019.

NOTE 4 - Supplemental Cash Flow Information:

Cash paid for income taxes was $0.2 million and $0.4 million, respectively, for the three-month periods ended March 31, 2019 and 2018. Cash paid for interest was $1.0 million and $0.2 million, respectively for the three-month periods ended March 31, 2019 and 2018.

During the three months ended March 31, 2019 and 2018, respectively, the Company received 11,183 and 5,863 shares of its common stock as payment of the exercise price in the exercise of stock options for 27,172 and 20,234 shares.

As a result of the adoption of ASC 606 the following amounts were recorded on January 1, 2018: $43.3 million in contract assets, a reduction in inventory of $24.9 million, an increase in accounts payable of $2.6 million, an increase in other current liabilities of $1.1 million, and an increase in deferred tax liabilities of $3.5 million.

As a result of the adoption of ASC 842 the following amounts were recorded on January 1, 2019: a $4.9 million operating lease right-of-use asset; a decrease in prepaid expenses and other current assets of $0.1 million; a reduction in other assets of $0.7 million; an increase in other current liabilities of $1.0 million; and an operating lease liability of $3.1 million.

NOTE 56 – Contingencies:

The purchase price to acquire substantially all of the assets of BAMKO, Inc. (“BAMKO”) in 2016 included contingent consideration through 2021. The estimated fair value for BAMKO acquisition-related contingent consideration payable was $2.8 million as of March 31, 2020, of which $1.1 million is expected to be paid in the second quarter of 2020. 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 through 2021. The estimated fair value for Tangerine acquisition-related contingent consideration payable was $2.7 million as of March 31, 2020, of which $0.9 million is expected to be paid in the second quarter of 2020. 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.

The Company is involved in various legal actions and claims arising from the normal course of business. In the opinion of management, the ultimate outcome of these matters willis not expected to have a material impact on the Company’s results of operations, cash flows, or financial position.

NOTE 67 – Share-Based Compensation:

In 2003, the stockholders of the Company approved the 2003 Incentive Stock and Awards Plan (the “2003 Plan”), authorizing the granting of incentive stock options, non-qualified stock options, stock appreciation rights (“SARS”), restricted stock, performance shares and other stock based compensation. This plan expired in May of 2013, at which time, the stockholders of the Company approved the 2013 Incentive Stock and Awards Plan (the “2013 Plan”), authorizing the granting of incentive stock options, non-qualified stock options, SARS, restricted stock, performance shares and other stock based compensation. A total of 5,000,000 shares of common stock (subject to adjustment for expirations and cancellations of options outstanding from the 2003 Plan subsequent to its termination) have been reserved for issuance under the 2013 Plan. All options and SARS under both plans have been or will be granted with exercise prices at least equal to the fair market value of the shares on the date of grant. At March 31, 2019, the Company had 3,308,588 shares of common stock available for grant of share-based compensation under the 2013 Plan.

Share-based compensation is recorded in selling and administrative expense in the consolidated statements of comprehensive income. The following table details the share-based compensation expense by type of award and the total related tax benefit for the periods presented:presented (in thousands):