SUPERIOR GROUP OF COMPANIES, INC. SEC 10-K Report

Superior Group of Companies, Inc., a diversified company operating in the branded products, healthcare apparel, and contact centers segments, has released its annual 10-K report. The report highlights the company's financial performance, business operations, strategic initiatives, and the challenges it faces in the current market environment.

Financial Highlights

• Net Sales: $565.7 million, increased by 4.1% from the previous year, driven by growth across all three reportable segments.
• Gross Margin: $220.6 million, representing a gross margin rate of 39.0%, up from 37.5% in the prior year, primarily due to improved gross margin rates in the Branded Products and Healthcare Apparel segments.
• Income Before Income Tax Expense: $14.3 million, a 46.3% increase from the previous year, attributed to higher net sales and gross margins, along with reduced interest expenses.
• Net Income: $12.0 million, up 36.8% from the previous year, reflecting increased sales and improved cost management.
• Net Income Per Share - Basic: $0.75, compared to $0.55 in the previous year, indicating improved profitability per share.
• Net Income Per Share - Diluted: $0.73, compared to $0.54 in the previous year, reflecting the company's enhanced earnings performance.

Business Highlights

• Branded Products Segment: Superior's Branded Products segment, through its brands BAMKO® and HPI®, produces and sells customized merchandising solutions, promotional products, and branded uniform programs. These products are sold to a diverse range of industries including retail, hotel, food service, entertainment, technology, and transportation.
• Healthcare Apparel Segment: The Healthcare Apparel segment, featuring brands like Fashion Seal Healthcare®, Wink®, and CID Resources, manufactures and sells a variety of healthcare apparel such as scrubs, lab coats, and protective apparel. This segment primarily serves healthcare laundries, dealers, distributors, and retailers in the United States.
• Contact Centers Segment: The Contact Centers segment, operating under The Office Gurus® brand, provides outsourced, nearshore business process outsourcing, contact, and call-center support services to North American customers. This segment has operations in El Salvador, Belize, Jamaica, Dominican Republic, and the United States.
• Geographical Performance: The Branded Products segment has sales offices in the United States and Brazil, with support services in China and India, indicating a strong international presence. The Healthcare Apparel segment primarily operates in the United States.
• Recent Acquisitions: On December 4, 2024, Superior, through BAMKO, acquired substantially all assets of Cormark Inc., doing business as 3Point Brand Management, for $6.4 million. This acquisition is expected to enhance the Branded Products segment.
• Future Outlook: Superior anticipates continued growth opportunities in its Branded Products segment through synergies that allow cross-selling to new and existing customers. The Healthcare Apparel segment is expected to grow through increased demand for its signature brands. The Contact Centers segment is positioned to expand as businesses seek cost-effective customer support solutions.
• Operational Strategy: Superior focuses on leveraging its creative services, product development, and global sourcing network to remain competitive. The company aims to enhance employee engagement and customer retention through strategic branding solutions.

Strategic Initiatives

• Strategic Initiatives: Superior Group of Companies, Inc. has undertaken strategic initiatives to enhance its business segments and improve operational efficiency. The company acquired 3Point Brand Management to strengthen its Branded Products segment, focusing on expanding its promotional products and branding solutions. Additionally, the company is investing in its Contact Centers segment to capitalize on the growing nearshore outsourcing market, aiming to provide high-quality customer support at reduced costs.
• Capital Management: The company has been actively managing its capital through various measures. It reduced its long-term debt by making net debt payments of $7.7 million in 2024, including payments on its revolving credit facility and term loan. Superior Group also repurchased $7.4 million worth of its common stock under a new stock repurchase plan authorized in August 2024, which allows for up to $10 million in repurchases. The company maintained its dividend payments, distributing $9.3 million in cash dividends in 2024. Additionally, the company has a revolving credit facility with a maximum principal amount of $125 million and a term loan, both maturing in August 2027.
• Future Outlook: Looking ahead, Superior Group plans to increase capital expenditures in 2025 compared to 2024, focusing on maintaining operations and supporting potential merger and acquisition activities. The company anticipates continued dividend payments as financial conditions permit and aims to leverage its current cash levels, operating cash flows, and credit facilities to meet its capital requirements. The strategic focus will remain on expanding its core business segments and exploring new growth opportunities while maintaining a strong financial position.

Challenges and Risks

• Supply Chain Disruptions: Shortages of sourced goods or raw materials, particularly from China, could adversely affect operations. Changes in U.S. trade policy may increase import duties, impacting costs.
• Intellectual Property Risks: The company relies on trade names and trademarks, which are crucial for marketing. There is a risk of infringement claims and challenges in protecting these rights internationally.
• Customer Dependence: The potential for order cancellations or reductions by major customers could negatively impact financial results.
• Distribution Challenges: Problems with distribution systems, including cybersecurity risks, could harm inventory management and sales.
• Acquisition Risks: The pursuit of acquisitions poses integration challenges and financial risks if valuations are inaccurate.
• Cybersecurity Threats: Increasing frequency and sophistication of cyber-attacks could disrupt operations and compromise sensitive data.
• Regulatory Compliance: Non-compliance with data privacy laws, such as GDPR, could result in significant penalties and affect operations.
• Geopolitical and Economic Instability: Events like the Russian invasion of Ukraine and Middle East conflicts could exacerbate inflation and disrupt global trade.
• Manufacturing Risks in Haiti: Civil unrest and other disruptions in Haiti could impact the Healthcare Apparel segment's operations.
• Trade Regulation Changes: Alterations in trade agreements or tariffs, especially with China, could materially affect revenue and operations.
• Market Risks: The company is exposed to market risks such as foreign currency exchange rate fluctuations, which could adversely affect financial results. Additionally, interest rate changes could impact borrowing costs and overall financial performance.

SEC Filing: SUPERIOR GROUP OF COMPANIES, INC. [ SGC ] - 10-K - Mar. 11, 2025