| Price | 16.21 | EPS | 1 | |
| Shares | 15 | P/E | 18 | |
| MCap | 248 | P/FCF | 21 | |
| Net Debt | 114 | EBIT | 19 | |
| TEV | 362 | TEV/EBIT | 19 | TTM 2019-09-30, in MM, except price, ratios |
| 10-Q | 2020-09-30 | Filed 2020-10-29 |
| 10-Q | 2020-06-30 | Filed 2020-07-29 |
| 10-Q | 2020-03-31 | Filed 2020-04-30 |
| 10-K | 2019-12-31 | Filed 2020-02-20 |
| 10-Q | 2019-09-30 | Filed 2019-10-23 |
| 10-Q | 2019-06-30 | Filed 2019-07-30 |
| 10-Q | 2019-03-31 | Filed 2019-04-25 |
| 10-K | 2018-12-31 | Filed 2019-02-21 |
| 10-Q | 2018-09-30 | Filed 2018-10-25 |
| 10-Q | 2018-06-30 | Filed 2018-07-26 |
| 10-Q | 2018-03-31 | Filed 2018-05-02 |
| 10-K | 2017-12-31 | Filed 2018-02-22 |
| 10-Q | 2017-09-30 | Filed 2017-10-26 |
| 10-Q | 2017-06-30 | Filed 2017-07-27 |
| 10-Q | 2017-03-31 | Filed 2017-04-27 |
| 10-K | 2016-12-31 | Filed 2017-02-23 |
| 10-Q | 2016-09-30 | Filed 2016-10-27 |
| 10-Q | 2016-06-30 | Filed 2016-07-21 |
| 10-Q | 2016-03-31 | Filed 2016-04-28 |
| 10-K | 2015-12-31 | Filed 2016-02-25 |
| 10-Q | 2015-09-30 | Filed 2015-10-22 |
| 10-Q | 2015-06-30 | Filed 2015-07-23 |
| 10-Q | 2015-03-31 | Filed 2015-04-22 |
| 10-K | 2014-12-31 | Filed 2015-02-26 |
| 10-Q | 2014-09-30 | Filed 2014-10-23 |
| 10-Q | 2014-06-30 | Filed 2014-07-23 |
| 10-Q | 2014-03-31 | Filed 2014-04-25 |
| 10-K | 2013-12-31 | Filed 2014-02-28 |
| 10-Q | 2013-09-30 | Filed 2013-10-28 |
| 10-Q | 2013-06-30 | Filed 2013-07-26 |
| 10-Q | 2013-03-31 | Filed 2013-04-19 |
| 10-K | 2012-12-31 | Filed 2013-03-14 |
| 10-Q | 2012-09-30 | Filed 2012-10-19 |
| 10-Q | 2012-06-30 | Filed 2012-07-20 |
| 10-Q | 2012-03-31 | Filed 2012-04-20 |
| 10-K | 2011-12-31 | Filed 2012-02-24 |
| 10-Q | 2011-09-30 | Filed 2011-10-24 |
| 10-Q | 2011-06-30 | Filed 2011-07-26 |
| 10-Q | 2011-03-31 | Filed 2011-04-21 |
| 10-K | 2010-12-31 | Filed 2011-02-25 |
| 10-Q | 2010-09-30 | Filed 2010-10-21 |
| 10-Q | 2010-06-30 | Filed 2010-07-22 |
| 10-Q | 2010-03-31 | Filed 2010-04-23 |
| 10-K | 2009-12-31 | Filed 2010-02-26 |
| 8-K | 2020-10-29 | |
| 8-K | 2020-07-29 | |
| 8-K | 2020-07-02 | |
| 8-K | 2020-06-18 | |
| 8-K | 2020-05-12 | |
| 8-K | 2020-04-30 | |
| 8-K | 2020-04-03 | |
| 8-K | 2020-04-02 | |
| 8-K | 2020-03-02 | |
| 8-K | 2020-02-20 | |
| 8-K | 2019-11-04 | |
| 8-K | 2019-10-23 | |
| 8-K | 2019-09-27 | |
| 8-K | 2019-08-20 | |
| 8-K | 2019-07-30 | |
| 8-K | 2019-05-07 | |
| 8-K | 2019-05-03 | |
| 8-K | 2019-04-25 | |
| 8-K | 2019-02-21 | |
| 8-K | 2019-01-31 | |
| 8-K | 2019-01-22 | |
| 8-K | 2018-11-05 | |
| 8-K | 2018-10-25 | |
| 8-K | 2018-08-08 | |
| 8-K | 2018-08-03 | |
| 8-K | 2018-07-26 | |
| 8-K | 2018-05-03 | |
| 8-K | 2018-05-02 | |
| 8-K | 2018-05-02 | |
| 8-K | 2018-02-22 |
| Note 1 – Basis of Presentation: |
| Note 2 – Inventories: |
| Note 5 – Net Sales: |
| Note 6 – Contingencies: |
| Note 7 – Share - Based Compensation: |
| Note 8 – Income Taxes: |
| Note 11 – Covid - 19: |
| Part II - Other Information |
| EX-31.1 | ex_197526.htm |
| EX-31.2 | ex_197527.htm |
| EX-32 | ex_197528.htm |
| Balance Sheet | Income Statement | Cash Flow |
|---|---|---|
|
Assets, Equity
|
Rev, G Profit, Net Income
|
Ops, Inv, Fin
|
| UNITED STATES |
| SECURITIES AND EXCHANGE COMMISSION |
| WASHINGTON, D.C. 20549 |
| FORM |
| (Mark One) |
| QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||||
| For the quarterly period ended | |||||||
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||||
| For the transition period from ________ to __________ |
| Commission file number: |
| Exact name of registrant as specified in its charter: |
| SUPERIOR GROUP OF COMPANIES, INC. |
| State or other jurisdiction of incorporation or organization: | I.R.S. Employer Identification No.: |
| | |
| Address of principal executive offices: | ||||||||
| | ||||||||
| |
| Registrant’s telephone number, including area code: | ||||||||
| |
| Former name, former address and former fiscal year, if changed since last report: ___________________ |
| Securities registered pursuant to Section 12(b) of the Act: |
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| | | |
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.
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).
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.
| Large accelerated filer ☐ | |
| |
| Non-accelerated filer ☐ |
| Smaller Reporting Company | |
|
|
| Emerging Growth Company | |
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
The number of shares of common stock of the registrant outstanding as of October 22, 2020 was
TABLE OF CONTENTS
| PART I - FINANCIAL INFORMATION |
| SUPERIOR GROUP OF COMPANIES, INC. AND SUBSIDIARIES |
| CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME |
| (Unaudited) |
| (In thousands, except shares and per share data) |
| Three Months Ended September 30, | ||||||||
| 2020 | 2019 | |||||||
| Net sales | $ | $ | ||||||
| Costs and expenses: | ||||||||
| Cost of goods sold | ||||||||
| Selling and administrative expenses | ||||||||
| Other periodic pension costs | ||||||||
| Interest expense | ||||||||
| Income before taxes on income | ||||||||
| Income tax expense | ||||||||
| Net income | $ | $ | ||||||
| Net income per share: | ||||||||
| Basic | $ | $ | ||||||
| Diluted | $ | $ | ||||||
| Weighted average shares outstanding during the period: | ||||||||
| Basic | ||||||||
| Diluted | ||||||||
| Other comprehensive income (loss), net of tax: | ||||||||
| Defined benefit pension plans: | ||||||||
| Recognition of net losses included in net periodic pension costs | $ | $ | ||||||
| Recognition of settlement loss included in net periodic pension costs | ||||||||
| Loss on cash flow hedging activities | ( | ) | ( | ) | ||||
| Foreign currency translation adjustment | ( | ) | ( | ) | ||||
| Other comprehensive income | ||||||||
| Comprehensive income | $ | $ | ||||||
| Cash dividends per common share | $ | $ | ||||||
| See accompanying Notes to the Condensed Consolidated Financial Statements. |
| SUPERIOR GROUP OF COMPANIES, INC. AND SUBSIDIARIES |
| CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME |
| (Unaudited) |
| (In thousands, except shares and per share data) |
| Nine Months Ended September 30, | ||||||||
| 2020 | 2019 | |||||||
| Net sales | $ | $ | ||||||
| Costs and expenses: | ||||||||
| Cost of goods sold | ||||||||
| Selling and administrative expenses | ||||||||
| Other periodic pension costs | ||||||||
| Interest expense | ||||||||
| Income before taxes on income | ||||||||
| Income tax expense | ||||||||
| Net income | $ | $ | ||||||
| Net income per share: | ||||||||
| Basic | $ | $ | ||||||
| Diluted | $ | $ | ||||||
| Weighted average shares outstanding during the period | ||||||||
| Basic | ||||||||
| Diluted | ||||||||
| Other comprehensive income (loss), net of tax: | ||||||||
| Defined benefit pension plans: | ||||||||
| Recognition of net losses included in net periodic pension costs | $ | $ | ||||||
| Recognition of settlement loss included in net periodic pension costs | ||||||||
| Loss on cash flow hedging activities | ( | ) | ( | ) | ||||
| Foreign currency translation adjustment | ( | ) | ( | ) | ||||
| Other comprehensive income (loss) | ( | ) | ||||||
| Comprehensive income | $ | $ | ||||||
| Cash dividends per common share | $ | $ | ||||||
| See accompanying Notes to the Condensed Consolidated Financial Statements. |
| CONDENSED CONSOLIDATED BALANCE SHEETS | |||||||||
| (Unaudited) | |||||||||
| (In thousands, except share and par value data) |
| September 30, | December 31, | |||||||
| 2020 | 2019 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable, less allowance for doubtful accounts of and , respectively | ||||||||
| Accounts receivable - other | ||||||||
| Inventories | ||||||||
| Contract assets | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Property, plant and equipment, net | ||||||||
| Operating lease right-of-use assets | ||||||||
| Intangible assets, net | ||||||||
| Goodwill | ||||||||
| Other assets | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Other current liabilities | ||||||||
| Current portion of long-term debt | ||||||||
| Current portion of acquisition-related contingent liabilities | ||||||||
| Total current liabilities | ||||||||
| Long-term debt | ||||||||
| Long-term pension liability | ||||||||
| Long-term acquisition-related contingent liabilities | ||||||||
| Long-term operating lease liabilities | ||||||||
| Deferred tax liability | ||||||||
| Other long-term liabilities | ||||||||
| Commitments and contingencies (Note 6) | ||||||||
| Shareholders’ equity: | ||||||||
| Preferred stock, par value - authorized shares ( issued) | ||||||||
| Common stock, par value - authorized shares, issued and outstanding and shares, respectively. | ||||||||
| Additional paid-in capital | ||||||||
| Retained earnings | ||||||||
| Accumulated other comprehensive income (loss), net of tax: | ||||||||
| Pensions | ( | ) | ( | ) | ||||
| Cash flow hedges | ||||||||
| Foreign currency translation adjustment | ( | ) | ( | ) | ||||
| Total shareholders’ equity | ||||||||
| Total liabilities and shareholders’ equity | $ | $ | ||||||
| See accompanying Notes to the Condensed Consolidated Financial Statements. |
| CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY |
| THREE MONTHS ENDED September 30, 2020 AND 2019 |
| (Unaudited) |
| (In thousands, except shares and per share data) |
| Accumulated | ||||||||||||||||||||||||
| Other | ||||||||||||||||||||||||
| Additional | Comprehensive | Total | ||||||||||||||||||||||
| Common | Common | Paid-In | Retained | (Loss) Income, | Shareholders’ | |||||||||||||||||||
| Shares | Stock | Capital | Earnings | net of tax | Equity | |||||||||||||||||||
| Balance, July 1, 2019 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| Common shares issued upon exercise of options, net | ||||||||||||||||||||||||
| Share-based compensation expense | ( | ) | ( | ) | ||||||||||||||||||||
| Cash dividends declared ( per share) | ( | ) | ( | ) | ||||||||||||||||||||
| Common stock reacquired and retired | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
| Comprehensive income (loss): | ||||||||||||||||||||||||
| Net earnings | ||||||||||||||||||||||||
| Cash flow hedges, net of taxes of | ( | ) | ( | ) | ||||||||||||||||||||
| Pensions, net of taxes of | ||||||||||||||||||||||||
| Change in currency translation adjustment, net of taxes of | ( | ) | ( | ) | ||||||||||||||||||||
| Balance, September 30, 2019 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| Balance, July 1, 2020 | $ | $ | $ | ( | ) | $ | ||||||||||||||||||
| Common shares issued upon exercise of options, net | ( | ) | ||||||||||||||||||||||
| Share-based compensation expense | ||||||||||||||||||||||||
| Tax withheld on exercise of Stock Appreciation Rights (SARS) | ( | ) | ( | ) | ||||||||||||||||||||
| Cash dividends declared ( per share) | ( | ) | ( | ) | ||||||||||||||||||||
| Comprehensive income (loss): | ||||||||||||||||||||||||
| Net earnings | ||||||||||||||||||||||||
| Cash flow hedges, net of taxes of | ( | ) | ( | ) | ||||||||||||||||||||
| Pensions, net of taxes of | ||||||||||||||||||||||||
| Change in currency translation adjustment, net of taxes of | ( | ) | ( | ) | ||||||||||||||||||||
| Balance, September 30, 2020 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| See accompanying Notes to the Condensed Consolidated Financial Statements. |
| SUPERIOR GROUP OF COMPANIES, INC. AND SUBSIDIARIES |
| CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY |
| Nine Months Ended September 30, 2020 AND 2019 |
| (Unaudited) |
| (In thousands, except shares and per share data) |
| Accumulated | ||||||||||||||||||||||||
| Other | ||||||||||||||||||||||||
| Additional | Comprehensive | Total | ||||||||||||||||||||||
| Common | Common | Paid-In | Retained | (Loss) Income, | Shareholders’ | |||||||||||||||||||
| Shares | Stock | Capital | Earnings | net of tax | Equity | |||||||||||||||||||
| Balance, January 1, 2019 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| Common shares issued upon exercise of options, net | ( | ) | ||||||||||||||||||||||
| Restricted shares issued | - | |||||||||||||||||||||||
| Share-based compensation expense | ||||||||||||||||||||||||
| Tax benefit from vesting of acquisition-related restricted stock | ||||||||||||||||||||||||
| Cash dividends declared ( per share) | ( | ) | ( | ) | ||||||||||||||||||||
| Common stock reacquired and retired | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
| Comprehensive income (loss): | ||||||||||||||||||||||||
| Net earnings | ||||||||||||||||||||||||
| Cash flow hedges, net of taxes of | ( | ) | ( | ) | ||||||||||||||||||||
| Pensions, net of taxes of | ||||||||||||||||||||||||
| Change in currency translation adjustment, net of taxes of | ( | ) | ( | ) | ||||||||||||||||||||
| Balance, September 30, 2019 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| Balance, January 1, 2020 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| Common shares issued upon exercise of options | ( | ) | ||||||||||||||||||||||
| Restricted shares issued | - | |||||||||||||||||||||||
| Share-based compensation expense | ||||||||||||||||||||||||
| Tax benefit from vesting of acquisition-related restricted stock | ( | ) | ( | ) | ||||||||||||||||||||
| Tax withheld on exercise of Stock Appreciation Rights (SARS) | ( | ) | ( | ) | ||||||||||||||||||||
| Cash dividends declared ( per share) | ( | ) | ( | ) | ||||||||||||||||||||
| Common stock reacquired and retired | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
| Comprehensive income (loss): | ||||||||||||||||||||||||
| Net earnings | ||||||||||||||||||||||||
| Cash flow hedges, net of taxes of | ( | ) | ( | ) | ||||||||||||||||||||
| Pensions, net of taxes of | ||||||||||||||||||||||||
| Change in currency translation adjustment, net of taxes of | ( | ) | ( | ) | ||||||||||||||||||||
| Balance, September 30, 2020 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| See accompanying Notes to the Condensed Consolidated Financial Statements. |
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS |
| (Unaudited) |
| (In thousands) |
| Nine Months Ended September 30, | ||||||||
| 2020 | 2019 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net income | $ | $ | ||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Provision for bad debts - accounts receivable | ||||||||
| Share-based compensation expense | ||||||||
| Deferred income tax benefit | ( | ) | ( | ) | ||||
| Gain on sale of property, plant and equipment | ( | ) | ||||||
| Change in fair value of acquisition-related contingent liabilities | ( | ) | ||||||
| Changes in assets and liabilities: | ||||||||
| Accounts receivable - trade | ( | ) | ( | ) | ||||
| Accounts receivable - other | ( | ) | ||||||
| Contract assets | ||||||||
| Inventories | ( | ) | ( | ) | ||||
| Prepaid expenses and other current assets | ( | ) | ( | ) | ||||
| Other assets | ( | ) | ||||||
| Accounts payable and other current liabilities | ||||||||
| Long-term pension liability | ||||||||
| Other long-term liabilities | ||||||||
| Net cash provided by operating activities | ||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Additions to property, plant and equipment | ( | ) | ( | ) | ||||
| Proceeds from disposals of property, plant and equipment | ||||||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Proceeds from borrowings of debt | ||||||||
| Repayment of debt | ( | ) | ( | ) | ||||
| Payment of cash dividends | ( | ) | ( | ) | ||||
| Payment of acquisition-related contingent liability | ( | ) | ( | ) | ||||
| Proceeds received on exercise of stock options | ||||||||
| Tax withholding on exercise of stock rights | ( | ) | ||||||
| Tax (provision) benefit from vesting of acquisition-related restricted stock | ( | ) | ||||||
| Common stock reacquired and retired | ( | ) | ( | ) | ||||
| Net cash used in financing activities | ( | ) | ( | ) | ||||
| Effect of currency exchange rates on cash | ( | ) | ( | ) | ||||
| Net increase (decrease) in cash and cash equivalents | ( | ) | ||||||
| Cash and cash equivalents balance, beginning of period | ||||||||
| Cash and cash equivalents balance, end of period | $ | $ | ||||||
| See accompanying Notes to the Condensed Consolidated Financial Statements. |
Superior Group of Companies, Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements (Unaudited)
NOTE 1 – Basis of Presentation:
Basis of presentation
The condensed consolidated 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, The Office Gurus Limited, Superior Uniform Arkansas LLC, Superior Uniform Group, LLC, Superior Group Holdings (IL), 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, BAMKO UK, Limited, and BAMKO Merch Inc., each a direct or indirect subsidiary of BAMKO, LLC; and BAMKO India Private Limited, a
The accompanying unaudited 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, 2019, and filed with the Securities and Exchange Commission. Management believes that the information furnished includes all adjustments of a normal recurring nature that are necessary to fairly present our consolidated financial position, results of operations and cash flows for the periods indicated. The results of operations for any interim period are not necessarily indicative of results to be expected for the full year.
We 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 flows” herein.
Recent Accounting Pronouncements
We consider the applicability and impact of all Accounting Standard Updates (“ASUs”). ASUs not listed below were assessed and determined to be not applicable.
Recently Adopted Accounting Pronouncements
In January 2017, the FASB issued ASU 2017-04, “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 on January 1, 2020 did not have a material impact on its financial statements.
In August 2018, the FASB issued ASU 2018-15, “Internal-Use Software (Subtopic 350-40): Customer’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 a hosting arrangement over the term of the hosting arrangement. This update is effective for fiscal years beginning after December 15, 2019 and 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 did not have a material impact on its financial statements.
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. In February 2020, the FASB issued ASU 2020-2, “Financial Instruments – Credit Losses (Topic 326) and Leases (Topic 842): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 119 and Update to SEC Section on Effective Date Related to Accounting Standards Update No. 2016-02, Leases (Topic 842).” The update delayed the effective date of ASU 2016-13, “Financial Instruments—Credit Losses (Topic 326)” 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):
| September 30, | December 31, | |||||||
| 2020 | 2019 | |||||||
| Finished goods | $ | $ | ||||||
| Work in process | ||||||||
| Raw materials | ||||||||
| Inventories | $ | $ | ||||||
Debt consisted of the following (in thousands):
| September 30, | December 31, | |||||||
| 2020 | 2019 | |||||||
| Credit Facilities: | ||||||||
| Revolving credit facility due May 2023 | $ | $ | ||||||
| Term loan due February 2024 (“2017 Term Loan”) | ||||||||
| Term loan due January 2026 (“2018 Term Loan”) | ||||||||
| Less: | ||||||||
| Payments due within one year included in current liabilities | ||||||||
| Debt issuance costs | ||||||||
| Long-term debt less current maturities | $ | $ | ||||||
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 $
Obligations outstanding under the 2018 Term Loan have a variable interest rate of LIBOR plus a margin of between
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 - $
The Company is a party to an interest rate swap with a total notional value of $
NOTE 4 – Periodic Pension Expense:
The following table details the net periodic pension expense under the Company’s plans for the periods presented (in thousands):
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||||||
| Service cost - benefits earned during the period | $ | $ | $ | $ | ||||||||||||
| Interest cost on projected benefit obligation | ||||||||||||||||
| Expected return on plan assets | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Recognized actuarial loss | ||||||||||||||||
| Settlement loss | ||||||||||||||||
| Net periodic pension cost after settlements | $ | $ | $ | $ | ||||||||||||
The pension settlement losses included in the table above resulted from lump sum pension payments made to various 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 that otherwise would be recognized as pension expense in future periods. The service cost component is included in selling and administrative expenses in our statements of comprehensive income and the other components of net periodic pension cost are included in other periodic pension costs in our statements of comprehensive income.
Effective on June 30, 2013, the Company no longer accrues additional benefits for future service or for future increases in compensation levels for the Company’s primary defined benefit pension plan.
Effective on December 31, 2014, the Company no longer accrues additional benefits for future service for the Company’s hourly defined benefit plan.
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 which 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 customer. Revenue from the sale of personal protective equipment, including face masks, isolation gowns, sanitizers and gloves, is generally recognized at a point in time when the goods are transferred to the customer, which typically occurs upon shipment or delivery depending on the terms of the underlying contract. 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, 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. 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.
The following table presents disaggregated revenue by operating segment for the periods presented (in thousands):
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||||||
| Uniforms and Related Products Segment: | ||||||||||||||||
| Uniforms and related products | $ | $ | $ | $ | ||||||||||||
| Personal protective equipment | ||||||||||||||||
| Total Uniforms and Related Products Segment | $ | $ | $ | $ | ||||||||||||
| Remote Staffing Solutions Segment: | ||||||||||||||||
| Remote staffing solutions services | $ | $ | $ | $ | ||||||||||||
| Net intersegment eliminations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total Remote Staffing Solutions Segment | $ | $ | $ | $ | ||||||||||||
| Promotional Products Segment: | ||||||||||||||||
| Promotional products | $ | $ | $ | $ | ||||||||||||
| Personal protective equipment | ||||||||||||||||
| Total Promotional Products Segment | $ | $ | $ | $ | ||||||||||||
| Consolidated Net Sales | $ | $ | $ | $ | ||||||||||||
Contract Assets and Contract Liabilities
The following table provides information about accounts receivables - trade, contract assets and contract liabilities from contracts with customers (in thousands):
| September 30, | December 31, | |||||||
| 2020 | 2019 | |||||||
| Accounts receivable - trade | $ | $ | ||||||
| Current contract assets | ||||||||
| Current contract liabilities | ||||||||
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. The majority of the amounts included in contract assets on December 31, 2019 were transferred to accounts receivable during the nine months ended September 30, 2020. 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 balance sheets. The increase in contract liabilities during the nine months ended September 30, 2020 was primarily attributable to new customer contracts for the sourcing of personal protective equipment within the Promotional Products segment. During the nine months ended September 30, 2020, $
NOTE 6 – 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 $
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 is not expected to have a material impact on the Company’s results of operations, cash flows, or financial position.
NOTE 7 – Share-Based Compensation:
Share-based compensation is recorded in selling and administrative expense in the 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 (in thousands):
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||||||
| Stock options and SARs | $ | $ | $ | $ | ||||||||||||
| Restricted stock | ||||||||||||||||
| Performance shares(1) | ( | ) | ||||||||||||||
| Total share-based compensation expense | $ | $ | ( | ) | $ | $ | ||||||||||
| Related income tax benefit | $ | $ | $ | $ | ||||||||||||
| (1) | During the three and nine months ended September 30, 2019, the Company reversed $ |
Stock options and Stock Appreciation Rights (“SARs”)
The Company grants stock options and stock-settled SARs to employees that allow them to purchase shares of the Company’s common stock. Stock options are also granted to outside members of the Board of Directors of the Company. The Company determines the fair value of stock options and SARs at the date of grant using the Black-Scholes valuation model.
All stock options and SARs granted prior to August 3, 2018 vested immediately when granted. Awards issued thereafter vest either one or two years after the grant date. Employee awards expire years after the grant date, and those issued to directors expire years after the grant date. The Company issues new shares upon the exercise of stock options and SARs.
A summary of stock option transactions during the nine months ended September 30, 2020 follows:
| Weighted Average | Aggregate | |||||||||||||||
| No. of | Weighted Average | Remaining Life | Intrinsic Value | |||||||||||||
| Shares | Exercise Price | (in years) | (in thousands) | |||||||||||||
| Outstanding, January 1, 2020 | $ | $ | ||||||||||||||
| Granted(1) | ||||||||||||||||
| Exercised | ( | ) | ||||||||||||||
| Lapsed or cancelled | ( | ) | ||||||||||||||
| Outstanding, September 30, 2020 | ||||||||||||||||
| Exercisable, September 30, 2020 | ||||||||||||||||
| (1) | The weighted average grant date fair value of stock options granted was $ |
As of September 30, 2020, the Company had $
A summary of stock-settled SARs transactions during the nine months ended September 30, 2020 follows:
| Weighted Average | Aggregate | |||||||||||||||
| No. of | Weighted Average | Remaining Life | Intrinsic Value | |||||||||||||
| Shares | Exercise Price | (in years) | (in thousands) | |||||||||||||
| Outstanding, January 1, 2020 | $ | $ | ||||||||||||||
| Granted(1) | ||||||||||||||||
| Exercised | ( | ) | ||||||||||||||
| Lapsed or cancelled | ( | ) | ||||||||||||||
| Outstanding, September 30, 2020 | ||||||||||||||||
| Exercisable, September 30, 2020 | ||||||||||||||||
| (1) | The weighted average grant date fair value of SARs granted was $ |
As of September 30, 2020, the Company had $
Restricted Stock
The Company has granted restricted stock to directors and certain employees which vest at a specified future date, generally after years, or when certain conditions are met. The shares are subject to accelerated vesting under certain circumstances as outlined in the 2013 Incentive Stock and Awards Plan (the “2013 Plan”). Expense for each of these grants is based on the fair value at the date of the grant and is being recognized on a straight-line basis over the respective service period.
A summary of restricted stock transactions during the nine months ended September 30, 2020 follows:
| Weighted Average | ||||||||
| No. of | Grant Date | |||||||
| Shares | Fair Value | |||||||
| Outstanding, January 1, 2020 | $ | |||||||
| Granted | ||||||||
| Vested | ( | ) | ||||||
| Forfeited | ( | ) | ||||||
| Outstanding, September 30, 2020 | ||||||||